Business Law 1 9 12 This class is all about business ethics employers are looking for good ethics o Make the right decisions from an ethical standpoint Gordan Gecko Greed is good Speech Full Quality YouTube video from class Folks that allowed greed to change the way of their life Movie History and Downfall of Enron Arthur Major accounting firm Movie title Enron The Smartest Guys in the Room Movie based on INSIDER TRADING o Same thing that Martha Stewart was indicted for Lost jobs leadership of company and some are in prison for their actions Look for o Major players in the movie o Common themes Notes from the movie bankrupt Common themes Driving motivation for leaders practices put in place by Enron o Practices employed for guys who were trying to capitalize on misrepresentation o How were they making money on making Enron look like it was making money o Enron took 10 years to go from 10 million to 65 million in assets but took 24 days to go o Suicide of Cliff Baxter Enron employee o Who was responsible for the downfall on Enron o Enron was the nations 7th largest corporation worth 70 million dollars o Ken Lay and Jeff Skilling The Smartest Men in the Room o Insiders sold off 1 billion of their stock in the preceding months of the bankruptcy o Artificial appearance of the story o 20 000 employees had lost jobs 2 billion of pensions disappeared o Deregulation pushed Ken lay to develop Enron Getting government out of the energy business o 1987 Oil traders made bets for Enron if the price of oil would rise or fall Win or lose Enron would always win o Anonymous tip from the company to Louis Borguett offshore accounts stolen money falsified bank records diverted company profits to personal accounts destroying company records Traders were not fired Enron said PLEASE KEEP MAKING US MILLIONS and encouraged them to gamble more Traders then gambled away the money but they concealed it and saved the company s reputation o Ken Lay s biggest money maker was behind bars then he met Jeff Skilling a man with big ideas Big idea finding a new way to deliver energy Transform energy into financial instruments that could be traded like stocks and bonds o Enron was approved for Mark to Market Accounting Allowed Enron to book future profits on day a deal was signed Enron s profits could be whatever Enron said they were Company was left open to manipulation o The company was ranked and bottom 15 of employees were eliminated each year o Skilling portrays himself differently than he actually is Was a nerd but transformed himself lost weight got LASIK tried to be someone he is not o Guys with Spikes Salesman of the group Guy that was out selling deals to other companies Ken Rice Baxter Lou Pai Chinese guy CEO of EES always loved money fascination with strippers Left Enron with 250 million dollars more than anyone else Had a mysterious presence there o Kept making it seem like the company was a profitable place so they were still making money from year to year o Enron built a plant in India but the people in India could not pay for the power o Enron merged with Portland General Electric PGE Gave them run over electricity and natural gas o Skillling created the Enron illusion Deceived analysts they believed anything Enron told them o Jan 2000 Enron teamed up with Blockbuster Stock went up 34 in 2 days The technology didn t work and the deal collapsed But because of mark to market the deal made 53 million The executives started selling their stock Baxter Lay Skilling Rice o Titanic Analogy Titanic bumped into icebergs at full speed and maintained full speed and the captain did nothing The captain in Enron s case Ken Lay o Andy Festa Gators who lead them into Fraud CFO of Enron still trying to keep the stock price up by deals on the side Conflict of interest business against each other also working for LJM while working for Enron while they do o LJM o Skilling 95 bankers invested in LJM many big investment banks Checks and balances supposed to be in place but no one said anything because they were being paid out 2001 became very volatile would come to work disheveled Knew on the outside Enron looked great but it was crumbling underneath his He knew we were in a massive hole he was truly worried yet he was still trying to keep the stock price up o April 17 2001 Analysts called out Skilling for Enron not being able to produce a balance sheet Skilling called the reporter an asshole on the phone Enron Energy Service was going bankrupt o California Enron Blackouts Enron wanted to experiment in California with deregulation Cali passed a bill allowing for the deregulation of electricity Tim Belton ran west coast trading desk Firm believer in free markers Spent hours looking California s strict laws and found loopholes to make money Tapes were found of recordings of Enron talking about California o Priority making Traders found that by shutting down power plants they could push prices a lot higher and make more money told public it was down for maintenance o They also bet on the price of energy that it would go up which made them more money o Unethical cost California 30 billion dollars in one year If deregulation collapsed Enron would collapse Ken Lay was friends with Bush when he was inaugurated and met with VP Cheney to express his views about keeping deregulation in place People working at Enron knew it was doing bad employees had nightmares Erratic behavior of its CEO Skilling stock falling Summer 2001 Skilling announced his resignation convinced everyone it was for personal reasons Aug 2001 Ken Lay took over as CEO Fastow had gambled Enron s future hoping its stock would never fail Carol Watkins worked under Fastow him and found these discrepancies o The Ship is Sinking o SEC launched investigation of Enron Investors began to worry that millions in profits were actually losses Arthur Anderson began destroying Enron files when Ken Lay was assuring everyone accounting practices had no irregularities everything was fine Destroyed 1 ton of paper in 1 day The day after a Press conference where Ken Lay said Andrew Fastow was 100 ethical he was fired and found he had stolen 45 million from Enron o Dec 2 2001 Enron declared Bankruptcy Everyone fired had 30 min to leave the building o Jan 25 2002 after 7 weeks of bankruptcy Cliff Baxter committed suicide Left suicide note about having no pride o 2004 Skilling Ken Lay were arrested for insider trading and conspiracy to commit fraud Paid attorneys 23 million o Anderson s
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