Question

Case 7

In the fall of 2001, Enron, the eighth largest corporation in the United States, declared bankruptcy unexpectedly, and investors lost approximately $60 billion. From your reading about this famous case, did Enron’s bankruptcy involve fraud? If so, what type?

Answer 1

Yes, Enron has committed one of the largest securities fraud in the history of of United States and it was forced to file bankruptcy due to that fraud.

The nature of fraud was involving that Enton has done a whole lot of window dressing, in which it has concealed a large amount of debt in its books of accounts and they were concealed in partnership with other companies along with fraudulent accounting and illegal loans.

Their group of entities which were secretory funded by the Enron and they purchased electricity generating windmill from Enron and selling them with profits going to Enron officials and their families so it can be said that it was a Major Nexus between various key officials in order to cheat the shareholders of the company by window dressing of the books of accounts and that led company into a bankruptcy.

The chief executive officer of enron was highly corrupt and he was responsible for concealing the debt off, the books of enron,so he was clearly involved in the fraud as he has doctored books and misled the board of director and the auditors about the liabilities of the company and he has played an important role in defrauding the investors.

The type of fraud was concealment of relevant informations from investors in order to inflate the profits of the company.