WARDAH RANAL1F11BCOM0002

SAIQA YOUSAFL1F11BCOM0006

RUBAB AZMATL1F11BCOM0031

WAQAS AHMAD L1F11BCOM0041

L1F11BCOM0002

Houston Natural Gas Corporation and Internorth Inc. merged in 1985 to form Enron Corporation.

Enron, headquartered in Houston, was the largest trader of natural gas and electricity in North America.

They also markets and trades other commodities, including water, paper, coal, chemicals, and fiber-optic bandwidth.

The creation of the online trading model, Enron Online, in November 1999 enabled the company to further develop and extend its abilities to negotiate and manage its trading business.

The stock increased by 56% in 1999 and a further 87% in 2000, compared to a 20% increase and a 10% decline for the index during the same years.

By December 31, 2000, Enron’s stock was priced at $83.13 and its market capitalization exceeded $60 billion, 70 times earnings and six times book value

Enron's nontransparent financial statements did not clearly detail its operations and finances with shareholders and analysts.

Its complex business model stretched the limits of accounting, requiring that the company use accounting limitations to manage earnings and modify the balance sheet to portray a favorable depiction of its performance.

From late 1997 until its collapse, the primary motivations for Enron’s accounting and financial transactions seem to have been to keep reported income and reported cash flow up, asset values inflated, and liabilities off the books.

Fastow and other executives, "...created off-balance-sheet vehicles, complex financing structures, and deals so bewildering that few people can understand them even now."

CEO OF ENRON FINANCE MANAGER

CEO Jeffrey Skilling. Skilling faces 35 counts, including

fraud, conspiracy and insider trading, on charges connected to various alleged schemes to fool investors into believing Enron was financially healthy so they could pocket millions from sales of inflated stock.

Andrew Fastow, former finance chief. In October 2002 ,98 counts of fraud,

conspiracy, insider trading, money laundering and others. Admitting to hide Enron debt and inflate profits while enriching himself with millions.

L1F11BCOM0006

Brief introduction

The firm of Arthur Andersen was founded in 1913 by Arthur Andersen and Clarence DeLany as Andersen, DeLany & Co.

The firm changed its name to Arthur Andersen & Co. in 1918.

Based in Chicago was once one of the big five accounting in 2002.

On June 15, 2002, Andersen was convicted of obstruction of justice for shredding documents related to its audit of Enron, resulting in the Enron Scandal, although later reversed in a Supreme court victory, the impact of the scandal combined with the findings of criminal complicity ultimately destroyed the firm.

Nancy Temple(Andersen Legal Dept.) and David Duncan (Lead Partner for the Enron account).After being found guilty of criminal charges relating to the firm's handling of the auditing of Enron , for bankruptcy in 2001.

The other national accounting and consulting firms bought most of the practices of Arthur Andersen.

L1F11BCOM0031

Shareholders lose $11 billion. Dynegy offered to purchase the

company at a fire sale price. When the deal fell through, Enron filed for bankruptcy on December 2, 2001 under Chapter 11 of the United States Bankruptcy Code, and with assets of $63.4 billion, it was the largest corporate bankruptcy in U.S. history.

Many executives at Enron were indicted for a variety of charges and were later sentenced to prison.

Raymond Bowen Jr., who was finance chief at Enron from the aftermath of its failure through his resignation in October 2004 agreed to pay $500,000 to settle SEC allegations that he knew or should have known some assets were grossly overvalued to falsely inflate profits.

National Westminster Bank, out of $7.3 million in a scheme engineered by former Enron finance chief Andrew Fastow. David Bermingham, Giles Darby and Gary Mulgrew were arrested in April 2004 and pleaded innocent.

Wesley Colwell, former chief accounting officer for Enron's trading unit, agreed to pay $500,000 to settle SEC allegations of manipulating earnings by using trading profits to offset massive losses in Enron's retail energy unit.

J.P. Morgan Chase and Citigroup paid nearly $300 million to settle allegations from the SEC

Enron's auditor, Arthur Andersen, was found guilty in a United States District Court.

A was convicted of obstruction of justice for shredding documents related to its audit of Enron.

The firm agreed to surrender its CPA licenses and its right to practice before the SEC on August 31, 2002.

From a high of 28,000 employees in the US and 85,000 worldwide, the firm is now down to around 200, based primarily in Chicago. Most of their attention is on handling the lawsuits and presiding over the orderly dissolution of the company.

L1F11BCOMOO41

As a consequence of the scandal, new regulations and legislation were enacted to expand the reliability of financial reporting for public companies.

One piece of legislation, the Sarbanes-Oxley Act, expanded repercussions for destroying, altering, or fabricating records in federal investigations or for attempting to defraud shareholders.

The Sarbanes–Oxley Act of 2002 ( 745, enacted July 30, 2002), also known as the 'Public Company Accounting Reform and Investor Protection Act and more commonly called Sarbanes–Oxley, that set new or enhanced standards for all U.S. Public companies boards, management and public accounting firms.

The act also increased the accountability of auditing firms to remain objective and independent of their clients.

The Enron scandal is the most significant corporate collapse in the United States since the failure of many savings and loan banks during the 1980s.

Scandal demonstrates the need for significant reforms in accounting and corporate governance in the United States, as well as for a close look at the ethical quality of the culture of business generally and of business corporations in the United States.