Everyone was in a hurry to close deals because right after a closed deal, they got their bonuses regardless of the result of the deal. This became a problem since there were a lot of projects being made but no follow-ups. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.

2. Excessive interest by management in maintaining stock price or earnings trend through the use of unusually aggressive accounting practices

The use of mark-to-market accounting later backfired. The company's aggressive accounting had corrupted Enron's books and had allowed the company to be far too optimistic in it's assumptions about the future profits.

3. Management setting unduly aggressive financial targets and expectations for operating personnel

Enron was housed by bright and talented employees and everyone thinks they are so smart or smarter than the others that they think they could always get away with 'crime'. Jeffrey Skilling was the one responsible in implementing mark-to-market accounting in Enron. Under his management, Enron launched EnronOnline, which is an Internet based service where contracts on energy commodities could be traded with Enron. In the end, Enron could not cover the capital costs of their transactions, which is also one of the reasons that sent the company to bankruptcy.

4. Inability to generate sufficient cash flow from operations while reporting earnings and earnings growth

Cash is a necessity for any company to run and Enron mostly had paper revenue, so by the middle of 2001, they came to the conclusion that the cash crisis had struck them. In order to hide losses and fabricate earnings, Andrew Fastow created multiple SPEs. Some SPE's are Chewco, LJM1, LJM2 and Raptor. When news about the debt hiding surfaced, Enron's stock began to fall and several SPEs began to collapse as a result of the drop of Enron's stock price

Enron’ books are corrupted by using aggressive accounting and too optimistic towards company’s future profit.  Most of the revenue in Enron is in paper only, so occur of cash crisis leads the fails of the company.

2) The Enron Culture

Enron’s workplace culture is very competitive. Workers are just wants to compete but not cooperate. The incentive and the bonuses is only their aim without consider the deal or the job done. Enron create the culture that the worker always needs to focus in high performance. Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

3) Special Purpose Entity

To hide the losses and fabricate earning, Enron create multiple SPEs such as Chewco, LJM01, LJM02 and Raptor. These entities are controlled by the Enron’s employees such as Chewco was run by Kopper. This shows the Enron can disclose to these entities financial statements to depress earning and hide losses.

4) Key Player

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud.

2)The Enron Culture

Enron’s workplace culture is very competitive. Workers are just wants to compete but not cooperate. The incentive and the bonuses is only their aim without consider the deal or the job done. Enron create the culture that the worker always needs to focus in high performance. Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

3)Special Purpose Entity

Performance review committee was also a factor why employees in Enron were so aggressive. It created a culture within Enron that replaced cooperation with competition. The committee gave ratings from 1 to 5, 1 being the highest and in Enron, the 1 mark means that you will get a good sum of bonus. If you were in the lowest of 5 to 6% of this rankings, that means that you are not good enough to stay in Enron and you had to pack your things as you will lose your job anytime soon.

4)Key Player

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud

2. The Enron Culture

Enron’s workplace culture is very competitive. Workers are just wants to compete but not cooperate. The incentive and the bonuses is only their aim without consider the deal or the job done. Enron create the culture that the worker always needs to focus in high performance. Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

3. Special Purpose Entity

Performance review committee was also a factor why employees in Enron were so aggressive. It created a culture within Enron that replaced cooperation with competition. The committee gave ratings from 1 to 5, 1 being the highest and in Enron, the 1 mark means that you will get a good sum of bonus. If you were in the lowest of 5 to 6% of this rankings, that means that you are not good enough to stay in Enron and you had to pack your things as you will lose your job anytime soon.

4. Key Player

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud

Enron’s workplace culture is very competitive.  The incentive and the bonuses is their aim without follow up the done deal. Enron create the culture that the worker always needs to focus in high performance. No one want to responsible of a done deal, they just wanted to close and get bonuses.  Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

To hide the losses and fabricate earning, Enron create multiple SPEs . These entities are controlled by the Enron’s employees such as Chewco was run by Kopper. This shows the Enron can disclose to these entities financial statements to depress earning and hide losses.

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud.

       I.            Enron Company used the mark-to-market accounting method. The mark-to-market method requires estimations of future incomes when a long-term contract is signed. These estimations were based on the future net value of the cash flow costs related to the contract were often hard to predict. This means that the estimated income from projects were included in Enron’s accounting even though the money was not yet received and if there were any changes it would show up in subsequent periods. Investors were given misleading information because of the deviation in the estimations. The company’s aggressive accounting had corrupted Enron’s books and too optimistic in its assumptions about the future profit. Enron mostly had paper revenue, so by the middle of 2001, the cash crisis had stuck Enron Company and leads the downfall of Enron.

 

    II.            Culture of the Enron Company which is the bonuses and incentives for their employees came in bundles. Which mean that the employee’s bonuses and incentives is based on their performances. This mentality made Enron a very competitive work place. Everyone was in a hurry to close deals because right after a closed deal, they got their bonuses regardless of the result of the deal. At the end, the company was collapse because no one wanted to be responsible of a done deal, they just wanted to get their bonus. 

 

 III.            Special purpose entities are legal entities that created only to carry out a special task. In Enron’s case, the SPE were not only used to dodge the traditional accounting conventions but also they could hide their company’s losses and fabricate earning. When the news about the debt hiding surfaced, Enron’s stock began to fall and several SPEs was collapsed as a result of the collapse of Enron Company. 

 

 IV.            Enron was housed by bright and talented employees and everyone thinks they are so smart or smarter than the others. One of Enron’s employee implementing the mark-to-market accounting method in Enron. At the end, the company could not cover the capital costs of their transactions which resulted the company to bankruptcy. Besides that, some of their employees and high management were misused the company assets. They were all using the company assets for personal uses. They were also involved in conspiracy and fraud in the company in order to hide its downfall.

 

In Enron, bonuses and incentives for their employees came in bundles. Which mean that the employee’s bonuses and incentives is based on their performances. This mentality made Enron a very competitive work place. Everyone was in a hurry to close deals because right after a closed deal, they got their bonuses regardless of the result of the deal. At the end, the company was collapse because no one wanted to be responsible of a done deal; they just wanted to get their bonus. 

 

The legal entities that created only to carry out a special task. In Enron’s case, the SPE were not only used to dodge the traditional accounting conventions but also they could hide their company’s losses and fabricate earning. When the news about the debt hiding surfaced, Enron’s stock began to fall and several SPEs was collapsed as a result of the collapse of Enron Company. 

 

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud.

1) The Enron Culture

Enron’s workplace culture is very competitive.  The incentive and the bonuses is  their aim without follow up the done deal. Enron create the culture that the worker always needs to focus in high performance. No one want to responsible of a done deal, they just wanted to close and get bonuses.  Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

2) Mark-to-market accounting

The company's aggressive accounting had corrupted Enron's books and allowed the company to be far too optimistic in its assumptions about the future profits. This made Enron look financially healthy when it actually was bleeding. Misleading information was given to the investors due to the accounting system, which eventually lead to decreasing stock price when the information about this started to surface. Cash is necessity for any company to run and Enron mostly had paper revenue so by the middle of year 2001, they came to the conclusion that the cash crisis had struck them. 

3) Special purpose entities
are legal entities that created only to carry out a special task. In Enron’s case, the SPE were not only used to dodge the traditional accounting conventions but also they could hide their company’s losses and fabricate earning. When the news about the debt hiding surfaced, Enron’s stock began to fall and several SPEs was collapsed as a result of the collapse of Enron Company.
4)  Paid in stocks 

Employees at Enron were partially paid in stocks which motivated the workers to take actions that were unethical in order to raise the stock price and equivalently their own money.

Enron’s workplace culture is very competitive.  The incentive and the bonuses is  their aim without follow up the done deal. Enron create the culture that the worker always needs to focus in high performance. No one want to responsible of a done deal, they just wanted to close and get bonuses.  Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

3) Special purpose entity:
In order to hide losses and fabricate earnings, multiple SPEs were created. When news about the debt hiding surfaced, Enron's stock began to fall and several SPEs began to collapse as a result of the drop of Enron's stock price.

4) Mark-to-market accounting: The company's aggressive accounting had corrupted Enron's books and allowed the company to be far too optimistic in its assumptions about the future profits. This made Enron look financially healthy when it actually was bleeding. Misleading information was given to the investors due to the accounting system, which eventually lead to decreasing stock price when the information about this started to surface. Cash is necessity for any company to run and Enron mostly had paper revenue so by the middle of year 2001, they came to the conclusion that the cash crisis had struck them. 

Enron’s workplace culture is very competitive. Workers are just wants to compete but not cooperate. The incentive and the bonuses is only their aim without consider the deal or the job done. Enron create the culture that the worker always needs to focus in high performance. Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

To hide the losses and fabricate earning, Enron create multiple SPEs . These entities are controlled by the Enron’s employees such as Chewco was run by Kopper. This shows the Enron can disclose to these entities financial statements to depress earning and hide losses

 

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud. 

were over confidence by thinking that they could always get away with ‘crime'. 

 
 2. Bonuses and Incentives
- In Enron, bonuses and incentives in form of cash or stock options came in bundles, only if you were good enough and if you were considered one of the moneymakers. This mentality made Enron a very competitive work place. Everyone was in a hurry to close deals because right after a closed deal, they got their bonuses regardless of the result of the deal. This became a problem since there were a lot of projects being made but no follow-ups. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.

- Performance review committee was also a factor why employees in Enron were so aggressive. It created a culture within Enron that replaced cooperation with competition. The committee gave ratings from 1 to 5, 1 being the highest and in Enron, the 1 mark means that you will get a good sum of bonus. If you were in the lowest of 5 to 6% of this rankings, that means that you are not good enough to stay in Enron and you had to pack your things as you will lose your job anytime soon.

 
 3. Special Purpose Entity
- In order to hide losses and fabricate earning, Andrew Fastow created multiple SPEs. Some SPE's are Chewco, LJM1, LJM2 and Raptor. When news about the debt hiding surfaced, Enron's stock began to fall and several SPEs began to collapse as a result of the drop of Enron's stock price. For an SPE to legal, they have to satisfy 3 requirements, which are (1) at least 3% of the equity come from outside investors, (2) the entity could not be controlled by Enron and (3) Enron was not liable for any loan or liabilities. An internal investigation of the SPEs showed they were not independent since they were run by Enron employees. Hence, they need to disclose in Enron’s financial statements depressing earnings and debt levels severely. 

4. Key Players
- Jeffrey Skilling was the one who implemented mark-to-market accounting in Enron. Under his management, Enron launched EnronOnline, which is an Internet based service where contracts on energy commodities could be traded with Enron. In the end, Enron could not cover the capital costs of their transactions, which also one the reasons that caused the company to bankruptcy.

- Andrew Fastow was the Chief Financial Officer of Enron who was the mastermind of the Special Purpose Entities like LJM1, LJM2, and so on in Enron. He made the complicated financial structures so that Enron could hide their losses and debts.

- Rebecca Mark was the head of the failed businesses of Enron, which were Enron International and Azurix. Some of the projects were the $3 billion power plant in Dabhol, India and the expensive acquisition of Wessex Water. She also used the Enron Jet with her trips around the world. One excutive even mentioned that whenever Mark attends a meeting, it costs the company for at least $60000.

- The Chairman and CEO of Enron, Kenneth Lay also contributed to Enron’s bankruptcy. Aside from straying away from the business because he was too busy socializing, he and his family misused the company assets. At one point, they were all using the company jets for personal travels. He was also involved in conspiracy and fraud in the company in order to hide its downfall.

Coincidentally, but not inconsequentially, the U.S. economy during the 1990s was experiencing the longest bull market in its history. Enron’s corporate leadership, Lay excluded, comprised mostly young people who had never experienced an extended bear market. New investment opportunities were opening up everywhere, including markets in energy futures. Wall Street demanded double-digit growth from practically every venture, and Enron was determined to deliver.

In 1996 Skilling became Enron’s chief operating officer. He convinced Lay the gas bank model could be applied to the market for electric energy as well. Skilling and Lay traveled widely across the country, selling the concept to the heads of power companies and to energy regulators. The company became a major political player in the United States, lobbying for deregulation of electric utilities. In 1997 Enron acquired electric utility company Portland General Electric Corp. for about $2 billion. By the end of that year, Skilling had developed the division by then known as Enron Capital and Trade Resources into the nation’s largest wholesale buyer and seller of natural gas and electricity. Revenue grew to $7 billion from $2 billion, and the number of employees in the division skyrocketed to more than 2,000 from 200. Using the same concept that had been so successful with the gas bank, they were ready to create a market for anything that anyone was willing to trade: futures contracts in coal, paper, steel, water and even weather.

Perhaps Enron’s most exciting development in the eyes of the financial world was the creation of Enron Online (EOL) in October 1999. EOL, an electronic commodities trading Web site, was significant for at least two reasons. First, Enron was a counterparty to every transaction conducted on the platform. Traders received extremely valuable information regarding the “long” and “short” parties to each trade as well as the products’ prices in real-time. Second, given that Enron was either a buyer or a seller in every transaction, credit risk management was crucial and Enron’s credit was the cornerstone that gave the energy community the confidence that EOL provided a safe transaction environment. EOL became an overnight success, handling $335 billion in online commodity trades in 2000.

The world of technology opened up the Internet, and the IPO market for technology and broadband communications companies started to take off. In January 2000 Enron announced an ambitious plan to build a high-speed broadband telecommunications network and to trade network capacity, or bandwidth, in the same way it traded electricity or natural gas. In July of that year Enron and Blockbuster announced a deal to provide video on demand to customers throughout the world via high-speed Internet lines. As Enron poured hundreds of millions into broadband with very little return, Wall Street rewarded the strategy with as much as $40 on the stock price—a factor that would have to be discounted later when the broadband bubble burst. In August 2000 Enron’s stock hit an all-time high of $90.56, and the company was being touted by Fortune and other business publications as one of the most admired and innovative companies in the world.

Enron incorporated “mark-to-market accounting” for the energy trading business in the mid-1990s and used it on an unprecedented scale for its trading transactions. Under mark-to-market rules, whenever companies have outstanding energy-related or other derivative contracts (either assets or liabilities) on their balance sheets at the end of a particular quarter, they must adjust them to fair market value, booking unrealized gains or losses to the income statement of the period. A difficulty with application of these rules in accounting for long-term futures contracts in commodities such as gas is that there are often no quoted prices upon which to base valuations. Companies having these types of derivative instruments are free to develop and use discretionary valuation models based on their own assumptions and methods.

The Financial Accounting Standards Board’s (FASB) emerging issues task force has debated the subject of how to value and disclose energy-related contracts for several years. It has been able to conclude only that a one-size-fits-all approach will not work and that to require companies to disclose all of the assumptions and estimates underlying earnings would produce disclosures that were so voluminous they would be of little value. For a company such as Enron, under continuous pressure to beat earnings estimates, it is possible that valuation estimates might have considerably overstated earnings. Furthermore, unrealized trading gains accounted for slightly more than half of the company’s $1.41 billion reported pretax profit for 2000 and about one-third of its reported pretax profit for 1999.

In the latter part of the 1990s, companies such as Dynegy, Duke Energy, El Paso and Williams began following Enron’s lead. Enron’s competitive advantage, as well as its huge profit margins, had begun to erode by the end of 2000. Each new market entrant’s successes squeezed Enron’s profit margins further. It ran with increasing leverage, thus becoming more like a hedge fund than a trading company. Meanwhile, energy prices began to fall in the first quarter of 2001 and the world economy headed into a recession, thus dampening energy market volatility and reducing the opportunity for the large, rapid trading gains that had formerly made Enron so profitable. Deals, especially in the finance division, were done at a rapid pace without much regard to whether they aligned with the strategic goals of the company or whether they complied with the company’s risk management policies. As one knowledgeable Enron employee put it: “Good deal vs. bad deal? Didn’t matter. If it had a positive net present value (NPV) it could get done. Sometimes positive NPV didn’t even matter in the name of strategic significance.” Enron’s foundations were developing cracks and Skilling’s house of paper built on the stilts of trust had begun to crumble.

In order to satisfy Moody’s and Standard & Poor’s credit rating agencies, Enron had to make sure the company’s leverage ratios were within acceptable ranges. Fastow continually lobbied the ratings agencies to raise Enron’s credit rating, apparently to no avail. That notwithstanding, there were other ways to lower the company’s debt ratio. Reducing hard assets while earning increasing paper profits served to increase Enron’s return on assets (ROA) and reduce its debt-to-total-assets ratio, making the company more attractive to credit rating agencies and investors.

Enron, like many other companies, used “special purpose entities” (SPEs) to access capital or hedge risk. By using SPEs such as limited partnerships with outside parties, a company is permitted to increase leverage and ROA without having to report debt on its balance sheet. The company contributes hard assets and related debt to an SPE in exchange for an interest. The SPE then borrows large sums of money from a financial institution to purchase assets or conduct other business without the debt or assets showing up on the company’s financial statements. The company can also sell leveraged assets to the SPE and book a profit. To avoid classification of the SPE as a subsidiary (thereby forcing the entity to include the SPE’s financial position and results of operations in its financial statements), FASB guidelines require that only 3% of the SPE be owned by an outside investor.

Under Fastow’s leadership, Enron took the use of SPEs to new heights of complexity and sophistication, capitalizing them with not only a variety of hard assets and liabilities, but also extremely complex derivative financial instruments, its own restricted stock, rights to acquire its stock and related liabilities. As its financial dealings became more complicated, the company apparently also used SPEs to “park” troubled assets that were falling in value, such as certain overseas energy facilities, the broadband operation or stock in companies that had been spun off to the public. Transferring these assets to SPEs meant their losses would be kept off Enron’s books. To compensate partnership investors for downside risk, Enron promised issuance of additional shares of its stock. As the value of the assets in these partnerships fell, Enron began to incur larger and larger obligations to issue its own stock later down the road. Compounding the problem toward the end was the precipitous fall in the value of Enron stock. Enron conducted business through thousands of SPEs. The most controversial of them were LJM Cayman LP and LJM2 Co-Investment LP, run by Fastow himself. From 1999 through July 2001, these entities paid Fastow more than $30 million in management fees, far more than his Enron salary, supposedly with the approval of top management and Enron’s board of directors. In turn, the LJM partnerships invested in another group of SPEs, known as the Raptor vehicles, which were designed in part to hedge an Enron investment in a bankrupt broadband company, Rhythm NetConnections. As part of the capitalization of the Raptor entities, Enron issued common stock in exchange for a note receivable of $1.2 billion. Enron increased notes receivable and shareholders’ equity to reflect this transaction, which appears to violate generally accepted accounting principles. Additionally, Enron failed to consolidate the LJM and Raptor SPEs into their financial statements when subsequent information revealed they should have been consolidated.

The second factor that cause Enron collapse is its culture. Enron’s bonuses and incentive in form of cash and stock optios came in bundles. This makes why Enron is a very competitive workplace. And due to hitting targets, its employees just only wanted to close the deal, only, without responsible for it after that. 

The third factor that cause Enron collapse is Special Purpose Entity (SPE). Enron created multiple SPE as to hide their debt in those entity. When news about debt hiding surfaced, Enron’s stock began to fall and several SPEs began to collapse as a result of the drop of Enron’s stock price.

The forth factor that cause Enron collapse are the key people. They think that they are so smart until they could manage to get away with “crime”.

 

-The company used the market-to-market accounting to hide their financial loses. The use of it eventually backfired them. Enron's aggressive accounting ruined their books and had caused Enron to be very confident on their forecast about the future incomes In the mid of 2001, they came to the conclusion that the cash crisis had struck them.

 

2.     The culture

-Although Enron's compensation and performance management system was designed to retain and reward its most valuable employees, the system contributed to a dysfunctional culture that became obsessed with short-term earnings to maximize bonuses. This made Enron a competitive workplace. Because of targets, their workers only wanted to close the deal, without being liable for it.

 

3.     Special Purpose Entity

limited partnerships or companies created to fulfill a temporary or specific purpose to fund or manage risks associated with specific assetss. Enron created multiple SPE as to hide their debt in those entity. When news came out, their stock price started to drop.

 

4.     Key People

Jeffrey Skiling, former President, and COO and some of the other key players ,they think that they are so smart until they could manage to get away with “crime”.

 

 

 

 

 

When Enron switch to mark-to-market accounting, it can gave Skilling and his company the financial reporting license to perpetuate fraud. However, the biggest problem for Enron may be cash flow differences in the long-term sales contract when they are immediately recognized. Although mark-to-market accounting can be recognition of income suddenly increases revenues and profits, but does not necessarily bring cash. Businesses cannot operate solely on taxes, and they must also generate cash.

2. Enron Culture

Enron provides the bonuses and incentives in the form of cash or stock options came in bundles, if only the employee was good enough and considered one of the moneymakers. Because of the mentality in Enron, everyone in the company was rushing to close deal as right after a closed deal, the employees will get their bonus based on the deal result. Since there were a lot of projects that being made, there no follow-ups that led to problem. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.

3. Special Purpose Entity

In order to hide losses and fabricate earnings, Andrew Fastow created multiple SPEs. The internal of the SPEs showed they were not independent since they were run by Enron employees like LJM run by Andy Fastow while ChewCo was run by Kopper. Hence, they had to disclose in Enron’s financial statements depressing earnings and debt level severely.

4.   Key players of Enron

Jeffrey Skilling was the one responsible in implementing mark-to-market accounting in Enron. Under his management, Enron launched EnronOnline, which is an Internet based service where contracts on energy commodities could be traded with Enron. In the end, Enron could not cover the capital costs of their transactions, which is also one of the reasons that sent the company to bankruptcy.

Andrew Fastow was the CFO of Enron who was the mastermind of the SPEs in Enron. He made the complex financial structures so that Enron could hide their losses and debts.

Rebecca Mark was the head of the failed businesses of Enron, which were Enron International and Azurix. Some of her projects were the $3 billion power plant in Dabhol, India and the expensive acquisition of Wessex Water. She also used the Enron Jet with her trips around the world. One executive even mentioned that whenever Mark attends a meeting, it costs the company at least $60,000 which would just cover her transportation.

Kenneth Lay, the Chairman and CEO of Enron, was staying away from the business and busy socializing. He and his family also misused the company assets. At one point, they were all using the company jets for personal travels. He was also involved in conspiracy and fraud in the company in order to hide its downfall.