The Enron and WorldCom scams


#1. The segment that set Enron in difficulties was your LJM1. That SPE was your worst of most four SPE's. This one experienced no independant investor that may put up the 3% that they needed for the controlling buyer, where CHEWCO would work as being a counterparty accounting to the U> S> suggestions. Enron currently owned 97% of CHEWCO, where if they happen to have a controlling investor, the profits from CHEWCO would go directly to Enron's possessions. Later, they did not look for a controller entrepreneur, and developed another SPE, which was LJM2. The problems in LJM1 even now was right now there that damaged LJM2. Arthur Anderson, the auditor to get Enron, proceeded to go ahead and approved of this SPE, realizing that the economical statements had to be restated. The LJM1 presented the market intended for assets which made bogus profits off the balanced linen, liabilities were hidden, and the equity was overstated simply by 1 . 2 billion. Along with LJM1 and LJM2, CHEWCO was making profits to get Enron getting into syndicated opportunities, which demonstrated that the harmony sheets were off by liabilities that were hidden by 628 mil. The profits were acknowledged early and Enron was making profits by themselves shares. #3. The panel of owners was unable to rely on the information that they were receiving from Enron and Arthur Anderson. They possibly could not count on the companies procedures, because they knew afterwards that they weren't getting implemented. The panel trusted the actual received, but they failed to understand their role that included a challenge and compliance cycle, which often, they had dependable too much even though the red flags were flying. The board would get pay offs with cash, limited stocks, phantom stock products, and stock options. The total fairness compensation of Enron's panel members was 350, 500, so they will not speak and reveal the problems within the organization. #5. When Lay was confronted with a letter from Sherron Watkins, stating that the governance regulation and business...


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