Nodody Won Essay

AbstractWhen the Arthur Andersen LLP/Enron turd surfaced in 2001, there was oft muddiness as to whom committed what crime and how umpteen employees were essendi solelyy involved. later the facts and distressing charges were final exam, the install custodyt of events selects sense the union of twain companies, the adjust up of the participating executives, and finally the end of the capital hinge upon. The loss lead of two companies used deception to make an abundant amount of m bingley and gain power status (Thomas 2002). Christopher Bergland verbalize it stovepipe when he wrote, Karma is a throwing board and the long-term shame and anxiety of cheating will ultimately negate the short-term gains of victory, . This definitely held true(a) for the employees who were disgraced at the conclusion of the legal proceedings they may turn over had more money than they take, and they ultimately scattered(p) in the end.The pedigreeThe joining between Arthur Anders en LLP and Enron was a brotherhood in any case good to be true . The relationship started in 1986 when Enron hired the history level Arthur Andersen LLP to perform original invoice, allowing the zip caller-out to appear more aright on paper than it really was . Enron lot started put massive amounts of money in fussy intent Entities to generate capacious amounts of revenues. peculiar(prenominal) Purpose Entities are creative ship mode for companies to more efficiently give the sack debt, plainly they also make it tougher for investors to describe a callers certain debt movie . Company BackgroundsBoth companies were strengthened on determination, dedication, and threatening build. The founder, Arthur Andersen, who was orphaned at the age of 16, worked as a mailboy during the mean solar day and attended school at night. By the age of 23, he became the youngest CPA in Illinois. A mere five eld later he started his own method of be firm . The selfsame(prenom inal)(p) mind shape Andersen possessed in his teen long clipping carried all over to his adult life.He cognize the key to his business succeeding was by promoting justice and sound inspects . Enron was founded on the same characteristics plus a few others pride, arrogance, and greed. visual senseneth send precious to have the outsizest money fashioning company he could and succeeded by thrust for deregulation of the power industry. In 1985, Mr. specify took advantage of the governments ending to let gas prices fluctuate/ muck up with the streams of the market. By doing this, Enron grew from 10 billion to 65 billion in assets in 16 old age . Lay had visions of what he wanted Enron to be and then sold them to his mental faculty. strike it BigIn order for a new idea to be successful, a leader with self-assurance and confidence moldiness be bounty. Mr. Lay found these qualities present in Jeffrey Skilling and hired him as a Chief Executive Officer. Skilling believed i n the natural selection of the fittest. He had an opinion that money is the provided incentive that motivated tribe and he acquired a competitive, ruth slight, and cutthroat workplace. Skilling implemented the slaying Review Committee. Performance Review Committee, or PRC, is an employee evaluation system which graded workers from 1-5, 5 creation the lowest and resulting in discharge from the company. The Enron staff knew it better as come in and yank . One employee who was a trader was quoted aspect, if I can get a $5 jillion bonus for stepping on just aboutones toes, Ill stump on their throat .Both companies worked hard to build a report. Andersen expected all of his staff to be honest and invariably to put the clients ask in front of their own docket unless it involved falsifying documentations. Early in the companys beginning, Mr. Andersen was faced with a moral decision c at a timerning fabricating records for a client. Andersen, with his impartiality intact, refused .The firm continued with the think sequential and talk straight tradition afterward the death of Andersen and through the transition of promoted employee Leonard Spacek .With Spacek at the realizes, the company continued to thrive morsel remaining committed to the regimented care style of the founder . Offices were opened throughout the United States, then ultimately rough the world. At this point, the firm started consulting as fountainhead as offering audits. Under Spaceks supervision, Arthur Andersen LLP became one the most prominent account statement firms labeling them as one of the Big louvre . The company grew so immensely that Spacek had to turn down clients.Enron had the same developth rant as Andersen. In a few short geezerhood, the company became the seventh largest corporation. It was touted as existence direct by the best and the brightest . Ken Lay, Cliff Baxter, Jeff Skilling, and Lou Pi were men who thought they were unstoppable. These ruthless leaders took large risks in order to make money. They were weakness miserably, only when Ken Lay account otherwise to the public. He said in news conferences that Enron was thriving and prospering because of his staffs willingness to take risks. With the growing of both firms, it was pellucid that structural qualifyings were needed. Structural Changes at AndersenThe client load for Andersen was be advent too much for just one company. It was evident that balancing the commitment to auditing while adding a consulting practice was so much of a struggle that Arthur Andersen LLP decided to create a nonher(prenominal) division at heart the company. In the mid-1980s, the legal age of Andersens revenues were being generated from the consulting fees, but were mute being dispersed with the history face . This caused a strain between the two parties. The consultants felt since they were contributing more to the company their salaries should be increased.The only solution was to fa lsify the stream organizational structure and create two divisions. Andersen Consulting along with Arthur Andersen LLP became subunits of Andersen world(a) transcription . Spacek, like his predecessor, was a leader who want to be seen by his staff, was well sure of business dealings, and continued to encourage honesty. creation decentralized allowed the decision- reservation to be made by the divisions, branches, departments, or subsidiaries . Both parts of Andersen Worldwide Organization could operate however they chose and make their own decisions, including which clients they took on. Ultimately, it was the accounting division that took on Enron. How the Two Companies FitEnron officials knew that Andersen had made some questionable decisions in the past and were coming off of a quiet typeface that involved some creative accounting . Andersen fit the profile that Skilling knew he needed in order for his visions to work. With Andersen being shared up into two divisions, Spac ek could not control what was cash in ones chipsing in both sides of the firm. Lay, on the other hand, knew exactly what his executives were doing . Enronhired the accounting firm to make the energy company to appear more powerful on paper than it really was . Enron Corporation started investing massive amounts of money in Special Purpose Entities to generate huge amounts of revenues.Special Purpose Entities are creative ways for companies to more efficiently raise debt, but they also make it tougher for investors to decipher a companys actual debt exposure . They were also using mark-to-market to book capability future profits regardless of actual money. Profits were whatever Enron said they were found on hypothetical future assess or HFV. Mike Muckleroy, a actor Enron executive, warned Mr. Lay of the risks associated with betting on the crude market, but Lay did not change any policies or procedures. In fact, he approved of the current behaviors. Lay sent out a memo to his e xecutives saying to go up the good work. As long as money was being made, he chose to ignore the scoundrellyy. The money ride came to a sudden halt in 2001.For or so sixteen age, Arthur Andersen LLP would audit Enrons financial statements. Not only would the accounting firm provide external audit services, but also handle the inherent auditing processes as well. As Enrons revenues dramatically increased year after year, the paperwork and audit information had to match accordingly. Enron needed Arthur Andersens employees to make the visual parallel happen and compensated them millions of horse signs for their services. At one time, Arthur Andersen LLP had approximately one hundred people charge distinctively to Enron. There had become such(prenominal)(prenominal) a significant amount of work that accounting offices were designated for the accounting employees and staff was transferred to Enrons headquarters in Houston. take downtually, the responsibility of Enrons Chicago an d London locations were added to their caseloads making Enron one of Arthur Andersen LLPs largest clients worldwide . Pump-n-DumpTop leaders in both firms were making an indecent amount of money. An anonymous tip was granted to authorities about former death chair of Enron, Louis Borget. It was said he had taken over three million dollars of corporate monetary resource and put it into his own account, and that was just the beginning. Enron describe a loss in the triad quarter hire at the same time as a simplification of stockholder equity. Former CEO Jeff Skiing, current CEO Kenneth Lay, and other executives started to sell large amounts of Enron stock as prices dropped from $90 to less than a dollar this practice was called pump-n-dump . This fascinate allowed top executives to push the stock prices up then cash in their multimillion dollar options.Lou Pi was the leader for Enron Energy go at the time and after he sold his stock using this method, he made profited $250 mi llion . Selling of this much stock gained attention of the U.S. Securities and Exchange management which led to an investigation. It was apparent that a divorce, a trial, and probably prison time was in the near future for Arthur Andersen LLP and Enron leaders who were involved. No case what the import of the trial was termination to be, the once impeccable Arthur Andersen and powerhouse Enron were goddamn companies because the damage had already been done. Crumbling CompaniesAndersens company, once led by an honest, visible leader who was filled with integrity by making ethical choices was now being led by greedy, selfish executives who saw dollar signs instead of morals. Andersens reputation was ruin and finding clients was going to be neighboring to impossible because of the publicity the scandal received. David Duncan who was accountable for the Enron audit, was fired by Arthur Andersen LLP for mass demolition of Enron documents and Enron relieved Arthur Andersen LLP of all accounting and auditing duties . Even though Arthur Andersen pled not guilty to the charges brought against them, the final decision of the courts was Arthur Andersen LLP was found guilty of obstacle of justice and received five years probation, had to pay a $500,000 fine, lost their freedom in the state of Texas, and ceased their auditing services. Resulting in a waste loss of business organisation and over 7,000 workers had to find new jobs .More people were affected by Enrons outcome than that of Arthur Andersens. After the investigation, Enron filed bankruptcy, over 20,000 people lost jobs, many officials served a prison sentence, and shareholders lost tens of billions of dollars . As officials dug deeper into the scam, recovered documents and many of the testimonies revealed many banks were guilty as well. camber employees detailed how the banks engineered fake transactions to keep billions of dollars of debt off Enrons balance shred and create the illusion of increa sing earnings and operating cash flow . As a result, stricter accounting laws regarding audits were later passed by the SEC .ConclusionIn this seat, having a leader who exhibits good judgment, morals, ethical conduct, and integrity can strengthen an alliance within a work place. When Arthur Andersen and Leonard Spacek were the supervisors, Arthur Andersen LLP was a major company with a flawless reputation that was completely shattered by a few employees who did not exemplify such characteristics as the former leaders. Arthur Andersen LLP split into two separate divisions, which I think was the put move because the company was growing and the current staff could not handle the clientele load. In order for the split to work, though, both units needed supervisors like what the company was founded on managers who could be trusted and held accountable. If I was a partner in Andersen and realized what was being committed, I would have tried to put an end to it.Maybe if someone had the common sense to stand up for what was right, many jobs could have been saved and investors money would not have been lost. Enron, on the other hand, was dishonest from the beginning and it was only a matter of time before the leaders were caught of ill-use doings. Enron, in my opinion, was being led by the inspiring leaders with excellent leadership skills and work ethics they just did not have the morals to go with it. Mr. Borget was the jump to get caught Ken Lay was sensible of Borgets actions, but ignored it because he was not incriminated or even surmise yet, but as history reveals, his time was coming .Finally several years later, Lay and his associates received their forthcoming. In the 2001 trial, Ken Lay was charged with 11 venomous acts. Jeff Skilling was sentenced to prison and to this day still claims he did nothing wrong, Cliff Baxter committed felo-de-se before he was to appear in court, and Lou Pi lost 6 million in an insurance policy from the corporation, but never saw any cast out time .Had Andersen Worldwide Organization declined on Enrons business proposal, the accounting firm may have continued to grow and possibly dominate the numbers world. From my point of view, this scandal was a lose-lose situation to everybody involved, from entry level positions all the way up to Chief Executive Officers. Enron became a major power-house in sixteen years and only took 24 days to give out and go bankrupt . A devastating ending to both firms several criminal charges were filed against numerous employees, hearings were held, and the companies which were built on want and drive were destroyed and are no longer are in existence. In this case, nobody won.ReferencesAnswers. (2012). 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