Question

What two companies that have been guilty of ethics-based malfeasance related to financial management and determine why their comeuppance was deserved.

Answer 1

1. Enron Case: Enron was an energy company which was very successful in the 1990's. It had become the wall street's darling in no time. But greed and quick money took over the ethos of the company. It started marking to market its revenues i.e, It estimated revenues on the assumption of realizing them in the future with our actually receiving it. It reflected all its revenues in the profit and loss account. As such profits soared and so did share prices without any actual receipts. Eventually it never realized this money leading to heavy loss and erosion of market capitalization, shaking the exchanges and economy. As a consequence of this irregularity, the auditors and chief financial executives were charged with federal prosecution and the company was winded up. Having done a severe damage to the economy and to have belied the trust of the stakeholders the company did deserve such a treatment.

2. Freddie Mac Scandal: Soon after the Enron case, this famous case of the home mortgage lender shoom the economy. It misstated close to $5 billion as earnings and underreported them to earn Wall street appreciation. The company executives were fired and it paid close to $50 million as fines and penalties. Such penalty was well deserved for the fact the company being a financial institution betrayed public trust at large and left gaping holes in the financial market.