ACC 260 Week 2 - The Enron and WorldCom Scandals - Assignment

Apr 10th, 2015
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Enron1. Which segment of its operations got Enron into difficulties?I believe that the main segment of operations that led to difficulties in Enron wasChewco. Chewco required outside equity of only three percent from an investor whichwas lacking. Then the development of LJM1 and LJM2 were used to make the Enronfinancial statements seem favorable (Brooks, 2007). There were also Enron employees,Kopper who was managing Chewco was reporting to Fastow. These employees were notlooking out for the best interest of Enron or the investors and instead were interested intheir own benefits.3. Did Enrons directors understand how profits were being made in this segment?Why or why not?It is speculated that the Enron directors did understand how the profits were being madethough it is debatable. It seems possible that Jeffrey Skilling was aware of how the profitswere being made because he was aware that Kopper was acting as manager of Chewcoand an Enron employee (Brooks, 2007). It was necessary for Enron to have an outsideinvestor of at least three percent of Chewco for Enron to reflect the Chewco activities. Itseems as though Jeffrey Skilling understood the wrongdoing but did not say anythingsince the scheme was working.5. Ken Lay was the chair of the board and the CEO for much of the time. How didthis probably contribute to the lack of proper guidance?The board acts as a check system on the CEO to make sure the company is working in theinterest of the stakeho

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