Question

Question 1

Banks such as Merrill Lynch took part in the accounting fraud by :

Designing and implementing "arbitrage" opportunities for Enron in Texas.

Purchasing debt laden power barges in Nigeria and then selling them back to Enron.

Taking power plants offline to create artificial shortages of power in Washington.

All of these

Question 2

The collapse of Enron was made worse for employees because

Enron executives encouraged employees to invest all their 401K's in Enron stock.

Much of their compensation was in Enron stock.

When the company collapse was imminent the executives sold their stock while preventing employees from being able to sell theirs so they lost everything.

All of these

Question 3

The only Wall Street analyst who did not recommend Enron stock was

promoted for being the only one to give the right prediction.

a whistle blower who made Enron's fraud public.

bribed into changing his recommendation for $3 million in Enron stock.

fired by his employer when Enron threatened to cut off business ties with them.

Question 4

Which of the following is the only business to make money for Enron?

Indian power plants.

California electricity trading.

A trading market in weather.

Video on demand through Blockbuster.

Question 5

The executive whose division lost 1 billion dollars while he racked up $250 million in compensation thereby quitting the company to marry a stripper.

Ken Lay

Andy Fastow

Jeff Skilling

Lou Pai

Answer 1

Ans 1. Option 2 is correct. Purchasing debt-laden power barges in Nigeria and then selling them back to Enron.

On request of Enron that was an American energy company, Merrill Lynch entered into two fraudulent transactions with it in the year 1999. The bank bought an interest in Nigeria's power barges for about $28 Million of which $21 million was financed directly by the Enron company and the Merrill Lynch paid nothing. And then it was sold to LJM2 that was controlled by Enron with the bank receiving the return with no negotiable price for the deal.

Ans 2. Option 4 is correct. All of these.

The employees were encouraged to invest in their 401K plan into the company's stock. There were also employees who were the shareholders of the company. This means a huge amount of their compensation was invested in the Enrons stocks. And when the employees started feeling anxious about things, they were prohibited from selling their stocks that led to the employees losing everything when the company went bankrupt.

Ans 3. Option 4 is correct. Fired by his employer when Enron threatened to cut off business ties with them.

John Olson, a veteran energy analyst was the only analyst who refused to kowtow to the power and force of the Enron company. He didn't provide the desired buy rating that the company wanted and thus become the victim of Enron's attack as they forced the Merrill Lynch & company to fire him.

Ans 4. Option 2 is correct. California electricity trading.

The method of buying at less cost in one place and selling at high price at other places was used by the Enron company. The mandated caps in California for energy or power were kept low which was bought by Enron at a low cost. After that, they used to sell power at a higher price in other states. Therefore, they made much profits through this scheme.

Ans 5. Option 4 is correct. Lou Pai.

He is a Chinese-American businessman and the former CEO of Enron. He was named as the real mystery man in the Enron scandal. He compensated $250 million for the loss of $1 billion that was made by his division and left the company before the scandal took place. He then divorced his wife and married a stripper. But he again disappeared from spotlight after selling off the colorado that he bought after leaving the company.