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Case Study: Enron

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Case Study 1: Enron

The story of Enron is one of corporate greed and intense competition. Former Enron executive Jeffrey Skilling appears to be the person that created such competition between employees. He created a system where employees are ranked every six months, the employees ranked in the bottom 20% were forced out of the company. This ranking system led to a belief that high performance meant everything to the company. Ethical behavior was falling by the wayside at Enron and top executives either failed to notice it, or were too blinded by the stacks of money they were collecting to care. Sherron Watkins was a vice president at Enron. At the time she had been employed there eight years. It was at this time she was given the task of finding some assets to sell off. Watkins was quite possibly the first person to become concerned by Enron’s shoddy accounting practices. What she found was that many of Enron’s transactions were unclear at best, and most of them appeared to be backed only by their deflating stock. Concerned about what she saw she took her concerns to Mr. Ken Lay. Lay assured her that her concerns would be looked into by Vinson & Elkins, the company’s law firm. However, it appears that Vinson & Elkins quickly dismissed any concerns brought forward by Watkins. In fact, the law firm may have helped structure some of Enron’s special-purpose partnerships. The law firm never did claim liability, but did pay $30 million to Enron for contributing to Enron’s inevitable collapse. The Merrill Lynch Company also faced scrutiny in the Enron investigations. The SEC and federal prosecutors questioned the validity of a transaction between Merrill Lynch and Enron. “It was thought that Merrill Lynch went ahead with a deal that could be construed as aiding and abetting Enron’s fraudulent manipulation of its income statement.”...

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