Marc-Presentation


 * The mechanics of the fraud** (8 minutes / 7 slides)

While Enron's balance sheet seemed perfectly all right – until just before its collapse – it actually was the result of elaborate “window-dressing”, i. e. measures meant to deceive any investor or authority. The measures took the form of so-called special purpose entities or SPEs. They were set up to hide the worsening financial situation of the whole company and to enrich some people, who personally benefited from the fraud. The system worked as follows: Enron transferred non-profitable assets and debt to the SPEs. Those SPEs were not consolidated, i. e. did not appear on the balance sheet (just like the respective assets and debt). Additionally, money that was invested by external investors was counted as debt to the SPE but equity to Enron. Eventually, Enron had to consolidate its SPEs retroactively which decisively worsened its past and current financial statements and was a major factor in its sudden downfall.

Sources: "Report of Investigation by the Special Investigative Committee of the Board of Directors of Enron Corp." (available [|here]) New York Times:[|1] [|2] http://www.time.com/time/business/article/0,8599,201871,00.html Enron annual report 2000 [|The Houston Chronicle]


 * Arthur Andersen** (2 minutes / 2 slides)

Arthur Andersen was initially hired by Enron to check and confirm the validity of its financial statements. In order not to endanger lucrative consulting contracts with Enron, Andersen showed less scrutiny in auditing the financials. Even while the authorities were already investigating Enron (or perhaps even because of that), Enron executives ordered the mass-destruction of documents related to Enron. The [|parent company] has almost ceased to exist.

Sources: investopedia.com: [|1] [|2] http://query.nytimes.com/gst/fullpage.html?res=9A00EFD81338F935A25752C0A9649C8B63&sec=&spon=&pagewanted=all http://www.manager-magazin.de/unternehmen/artikel/0,2828,190780,00.html http://www.time.com/time/business/article/0,8599,194573,00.html http://www.time.com/time/magazine/article/0,9171,1001698,00.html http://www.manager-magazin.de/unternehmen/artikel/0,2828,201097,00.html


 * SOX** (... minutes / ... slides) ->Claudia

The [|Sarbanes-Oxley-Act] (or SOX) increases corporate responsibility for fraudulent activities, requires stricter disclosure within company financial statements and steps up enforcement measures to counter such actions. The impact on business in the US is a contentious issue. Most commentators stress its negative impacts as it significantly raises the costs involved in setting up the respective control systems. Another issue concerns non-US companies and the question to what extent they establish or keep operations in the USA.

Sources: [| www.sarbanes-oxley.com] "Der Sarbanes-Oxley Act" (in: FinanzBetrieb 2002)

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