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Essay / Research Paper Abstract
This 5-page paper discusses the legalities and culture of Enron Corp., and how these added to its failure. Bibliography lists 2 sources.
Page Count:
5 pages (~225 words per page)
File: AS43_MTenrlegal.doc
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Unformatted sample text from the term paper:
of the lot. There are many reasons why Enron has emerged as the poster child of dubious accounting and legal practices; Enron was supposed to be a positive example of
how "new economy" businesses would function. Instead, this "new economy" business went down in flames, taking thousands of employees and investors with it.
Could Enron have been structured differently to avoid the activities in which it engaged? Should it have been? Definitely. The different ways in which Enron was structured, as an organization,
have been written about extensively. One of those structures were partnerships (also known as special purpose entities, or SPEs) overseen by Enron
CFO Andrew Fastow (Smith and Emshwiller, 2003). The purpose of these partnerships, also called LJM1 and LJM2 were to buy Enrons poorly performing stocks to bolster the companys financial reporting
(Smith and Emshwiller, 2003). There were other SPEs as well, known as Raptors and, in one case, as Chewco (Smith and Emshwiller, 2003).
There is nothing wrong with special purpose entities as a whole - most companies have used them to buy poorly performing assets or to take on debt for a major
corporation. But to avoid conflict of interest, SPEs are supposed to be run by outsiders who have no involvement in the main company.
Fastows SPEs were structured in such as way that, on the surface, he didnt seem to have a direct involvement with them. However, as more probing went on, it was
found that he actually had a large ownership role, especially in LJM1 and LJM2 - an ownership role that Enrons board of directors apparently okayed (Smith and Emshwiller, 2003).
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