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Enron Corporation EssayI The commencementWhen Enron Corporation declared a Chapter 11 bankruptcy in December 2001, it leftover the universal especially its investors and postholders reeling from such pecuniary scandal and collapse. Enron had allegedly overstated its pelfs by $586 gazillion since 1997 in determine to protect the firms balance sheet and lend oneselfd in caser trading as s swell up sham and conspiracy.Enron had been the seventh largest follow in the United earths and had been genius of the largest financial contri simplyors to the Presidential elections, especially the Bush family. To the exterior world, Enron portrayed a picture of success. However, upon closure inspection on the inside, Enron was on the brink of collapse.When Enrons stock price hit its highest at $90, the executives who allegedly knew of the offshore accounts of Enron geted selling their respective shares and to encouraged the public to live buying the said stocks. However, the e xecutives knew that the stock prices would not increase any more(prenominal) still still reassured the public and its investors that the prices of stock would reach a high $130-140 per share. By August 2001, Enrons stock prices had dropped from $90 to a measly $42. It became evident that the company had machinationulently induced and foo conduct the public, investors and stockholders to buying the companys stocks and shares.Amidst all these, Enron better and former chairman Kenneth Lay continued to reassure the public to remain calm, and asked the investors to buy the companys shares as the company will regain its profits in the succeeding months. Nonetheless, in October of 2001, the stocks plunged to $15 but the investors saw this as an opportunity to buy Enron stocks at such low prices. But the truth virtually the companys financial standing became public and the stock price finally hit didder bottom at $1 per share.II Basis of the ChargesStockholders and investors gathered a nd instituted a class-action suit against Enron and its officers in exhibition to recover the millions of investment they made on Enron as result of the false representation and joke by the company. Enron top executives specifically its Chief Executive Officers, Kenneth Lay and Jeffrey Skilling were charged and convicted with the collapse of the energy giant. Kenneth Lay approach seven counts of fraud and conspiracy while Skilling faced 31 counts of fraud, conspiracy, insider trading and lying to auditors ab out Enrons financial persuasion.In 1987, Enron auditors found out a vertexion-dollar oil trading scandal in its stark naked York offices. Traders had been engaged in this kind of practice falsifying transactions in order to boost their book and profit thereby fattening their bonuses as well. Although CEO Kenneth Lay knew of this, he did not fire the traders nor contacted the governing in order to cover up their problems. But this incident did not deter the traders and si x months later, competitors began to develop suspicious because if word got out, Enrons trading partners could become demanded that the company cover its positions with cash, which the company did not have (Fowler). Thus, the traders were fired and charged but not until they were qualified to transfer million of dollars into their private accounts. Enron for its part was fit to get a counselling by bluffing the market and reported $85 million in loss but sources claim that the loss totalled to at least $135 million.CEO Jeffrey Skilling, who joined Enron in 1990, did not handle much about the expenses incurred by the company as long as the margins looked good. He was similarly more concerned with the grosss increases and widening profit margins instead of the cash flows which was practiced by his predecessor. So enamoured were the top executives in increasing business profit that when a deal failed or fell apart, more effort was place into hiding the consequences instead of r ectifying and owning up to the problem. After taking over as chief operating officer, he renewed the almost non-existent post of chief financial officer and delegated many of the management responsibilities.In theory, Enron had mechanisms that would prize risk and accurately report financial numbers. These mechanisms required that deals should be strictly analyzed which included round by the legal department of the originating unit, the merged legal department, chief risk officer and chief write up officer. However, due to the insidious practice of the company, auditors and accountants were bullied to over ride the system and departments were able to determine the total entertain of their proposals by manipulating the long- slope price of whatever product was sold or bought. The company excessively employ a mark-to-market accounting system pushed by Skilling which allows a company to report as current revenue the total value of a deal over its projected lifetime (Fowler). Th is system made earning come on good which in turn pumped up the stock prices and increased the value of stocks which executives go throughd as bonuses.III TrialAs the stunned investors witnessed Enrons stock prices plunged, the government began a massive crackdown on the executives who were responsible for the collapse of the company, and would end up in the conclusion of convincing and proving to the jury that Lay and Skilling, the 2 top executives of the company, where unrighteous of massive fraud and were thus guilty.Government prosecutors were at startle overwhelmed with the girth of the corporate fraud. Nevertheless, they began to take measures to respond to these kinds of crimes and a barrage of criminal and civil investigations and prosecutions began to surface. Thus, in 2002, the Presidential Corporate prank Task Force filed criminal charges against more than 900 defendants, of which 60 are chief executive or professorship level and successfully prosecuted or convicte d 500 of them.The case against Lay and Skilling were heard by US partition Judge Sim Lake and lasted nearly four months while the jury deliberated for six days. The defense counsel initially essay to persuade the judge to move the trial away from Houston, Enrons hometown as they were afraid that the jury capability be influenced by anger due to the resulting loss of jobs and money and would see them as a way of revenge.Kenneth Lay faced seven counts of fraud and conspiracy fraud and conspiracy while Skilling on the separate hand, faced 31 counts of fraud, conspiracy, insider trading and lying to auditors about Enrons financial position. Although both asserted their ingenuousness of the charges against them, they were convicted for a total of 29 criminal counts as well as conspiracy to hide the impuissance health of the company by selling boosterich optimism to Wall Street and the public (MSNBC).Lay, who was convicted to 6 counts of conspiracy, securities and wire fraud in the co rporate trial and 4 counts on separate personal banking trial, surrendered his passport and posted a $5 million bond secured by the family. His sentence also carried a maximum penalty of 45 years in prison for the corporate trial while 120 years in personal trial respectively. Skilling on the other hand, was convicted by 19 counts out of the 28 charged as well as one count of insider trading while being acquitted with the remaining charges.The charges against these Enron top executives prospered as other executives turned the table and plead guilty in their respective charges in order to receive lower sentences than that prescribed. Among the former employees who testified against Lay and Skilling was Ben Glisan who is now serving a 5-year prison sentence after invoke guilty to a charge of conspiracy. According to Glisan, both Lay and Skilling knew that the company was in deep financial trouble but tried to hide it instead.Ultimately, the jury rejected Skillings defense that no fra ud happened at Enron save for those committed by a number of executives skimming millions in secret side deals, while bad publicity and poor market confidence resulted in the collapse of the energy giant.III. personal effects of the Enron CollapseAs the jurors found that these once-wealthy and mogulful executives repeatedly lied to cover up the real position of the company by covering up accounting and auditing failures which eventually led to its collapse in 2001, the left a devastating effect in the business world as well as the lives of the investors and shareholders. The end of Enron wiped out more than $60 billion in market value, almost $2.1 billion in retirement savings and costs more than 5,600 to lose their jobs. The anger of the public over the recent corporate scandals led to the passing of the Sarbanes-Oxley Act, which was designed to make company executives more accountable.Although public distrust for white-collar trial could not actually reverse the damage done to investor confidence, the Lay and Skilling trial however has become a start of a healing process for public-investor relations to be righted again.IV Timothy BeldenApart from the other recognise witnesses who were former Enron employees and who testified against the top two Enron officials, Timothy Belden particularly made the charges against Lay and Skilling stick, ending in their conviction. Belden who was the first person to be charged in the manipulation of double-uern goose egg markets, initially engaged in lengthy dance with federal officials over his plea and eventual cooperation in testifying against Lay and Skilling. He pleaded guilty in 2002 to conspiracy and admitted that he gave false information to calciums electrical grid operators. Belden is also said to be the mastermind behind the strategies described in memos that spelled out how Enron manipulated the California market (Schreiber). stem in the mid-nineties, California was among the first states to deregulate elec trical energy. The deregulation occurred just as when companies were leaving the state in numbers thereby creating a recession. The deregulation was supposed to reduce the ten percent of the tax payers bill while breaking the old methods of greedy companies. As California deregulated the wholesale side of its energy markets, it also kept price caps in the retail side. It coincided with the States decision to bar utilities from signing long-term cheap fixed prices which forced them to into an unpredictable market. Thus, the utilities were made to pay exorbitant prices but were not able to pass on to their consumers the prices they incurred. Enron promised to deliver power more efficiently and build new plants that can run on cheaper fuels.Commencing in 1998 until 2001, Belden as well as other executives from Enron devised a fraudulent scheme in order to obtain increased revenue for Enron from wholesale electricity consumers and other market participants in the State of California. Th e schemes perpetrated by Belden and the other Enron executives required them to submit false information to the companies supplied by Enron and misrepresented the nature of electricity which the company was supposed to supply. Despite being paid to relieve congestion, the company however, did not do so and instead imported as well as exported electricity in order to receive high prices from the companies they supply.Of particular interest in the course of the trial is a transcript of conversation between Belden and one of the operators of the power plant wherein the two discussed shutting down one of Reliants power plants in California to create a shortage in order for the prices to skyrocket. As the scheme worked, causing the power prices to arrive at high and unjust levels in California, it thereby became illegal under the Federal Energy Policy Act.In his testimony, he called Californias post-deregulation power market dysfunctional and said his company bought cheap electricity i n the Northwest to sell in California at a profit (Baker). This practice created the appearance among consumers that there was shortage of electricity, thereby having the need to jack up the prices. Enron was able to paper bag off almost $1 billion in a period of nine months in 2000 and 2001. Belden admitted however, that he only met with Lay and Skilling once during a colleagues party. But neertheless, Beldens testimony proven to be a very crucial one as it confirmed and proved that Lay and Skilling knew of what was natural event in California but turned to hide it instead.As company vice-president and head of Enrons West Coast trading operation, Belden supervised a staff of 120 that went from $50 million in net income in 1999 to $800 million in 2001, while Californias power markets disintegrated into panic and sky-high prices. When one of Enrons lawyers started canvass these irregularities as a response to the investigation conducted by the California Public Utility Commissio n.The lawyers found out of Enrons tactic of using advantage of the energy crisis and revealed through a memo that Enron created false congestion lines, transferred energy in and out of state to avoid price caps and charged for services the company never actually provided (Swartz). And yet, inspite of the information the lawyer gave to the top executives, and traders have been told to return the money made on unseasonable trading, the executives at Enron still decided against it despite knowing that the practice was illegal. For Belden and the other traders, sending the money spikelet would mean that the other companies will know what Enron was doing. Nevertheless, Belden and Enron continued on with the practice. Skilling, on the other hand, fully knew well of the said practice by the company in 2001 as he was already tipped by one of the executives who learned of the previous investigation.During examination, Belden admitted to US District Judge Martin Jenkins that he did it becau se he was trying to maximize profit for Enron. Belden claimed that he was only following Enrons instructions as he handled his trades (CBS News). According to Beldens counsel, Enron knew fully well of Beldens action but was never disciplined nor sanctioned at all. In fact, Belden may have reaped bonus for such practice as revenues from his trading unit climbed from $50 million in 1999 to $500 million in 2000 to $800 million in 2001. When he was charged with conspiracy, Belden after a long time of dealing and negotiating with the federal government, decided to turn against Kenneth Lay and Jeffrey Skilling, claiming that the two top executives knew of the practice he and other traders did as indicated by the internal company memos which described how Enron took power out of California at a time of rolling blackouts and shortages and how it sold out of state to elude price caps (CBS News).