White collar crimes are the crimes are nonviolent financially motivated crimes. Typical white collar crimes are fraud, bribery, industrial espionage, etc. In October 2001 the Enron company was involved into the ethnical and criminal scandal. The company’s CEO and CFO developed schemes of hiding billions of dollars from stakeholders, as well as from the tax department. This paper is devoted to one of the most famous white collar crimes in the world. The first part of the paper will contain the brief overview of the scandal. In the second part of the research paper, I will analyze the case, whereas in the third part of the paper, I will analyze white collar crimes in Enron. The second and third part will differ significantly. The Enron company white collar crime is a difficult issue that complies of criminal and ethnic, and economic issues. Hence, I will devote separate parts of the research paper to all these issues. The second part of the research paper I will devote to ethnic and economic side of the case, whereas in the third part of the research paper I will review the case from criminal point of view.
The case is rather difficult because it includes several issues: economic, ethnic and criminal. On the other hand, it makes the case interesting to research and discuss. There has been many researches conducted on this case. Even nowadays, more than ten years later, researchers keep on studying the case. In my opinion, the main concern of all the researches is to understand why CEO and CFO of the company developed this scheme.
The problem rose not only insides the company, but also the company authorities had problems with stakeholders. Stakeholders were not only those who worked at the company, but also the company had signed partnership contracts with other companies. When the problem of corruption, as well as the cultural problem, became known to public, the company had several problems with stakeholders. Later it has been revealed that those partnership programs were not legal because the company earned much money for comparing cheap products. That is why when the corruption and cultural problem rose, it was clear that the Enron company was cheating its customers about the legality of their work. In my opinion, this influenced the company reputation and did not add any respect from journalists.
As it has been already mentioned above, the main value of the company was the quality of its product. Every employee was to perform his or her work according to the highest standards the company put. From the moral point of view, it resembled more the way of living of slaves in the period of the Rome Empire, because the authorities of the company were aimed on earning money and they did not care about the wealth of its workers. From the moral point of view, the society would not accept such a situation; that is why the company was hiding the conditions of work and the process of evaluating the work of employees. Moreover, it is not as legal as it might seem. Though, the law of the United States of America establishes that a working week should last no more than forty hours, and it might seem that the company does not violence any of the laws; however, the law states nothing about the amount of work a person should perform. That is why, I claim that the actions of the company were illegal.
The Enron scandal influenced the attitude of stakeholders to the company. First, the company did not pay any attention to the employees’ needs. It was obvious from the very beginning that the company would fall with such attitude to the employees. On the other hand, the company did not take into account the stakeholders’ desires. Another problem is that the company used to relocate its resources. Such relocations were not listed correctly and confused stakeholders.
The Enron scandal is an ethnical one. One sees that the unfair moral attitude to the employees. In my opinion, the globalization did contribute greatly into the scandal. The point is that from the very beginning the Enron company was willing to become the leading in the industry. Because of the globalization process the management of the company used to exploit employees’ work. In my opinion, globalization became one of the factors that lead to the crisis.
Unfortunately the company did not response to the crisis correctly. When the company fell, the company management decided not to respond to the crisis. In the situation it was the worst solution. First, the company should have apologized before the employees and stakeholders. Secondly, the management of the company should have explained the situation. Moreover, mass media played a significant role in the scandal. In the first days of the scandal many analytical articles appeared. All of the articles were rather critical and the authors did not approve the Enron management actions. The mass media influenced greatly people’s opinion.
Unfortunately, the managers did nothing to change the situation that reigned in the company for several years. Moreover, the situation became worse with every years. Besides, the managers of the company decided not to find a solution and proclaim bankruptcy.
White-collar crime is the type of crime, which is allocated by the offender’s belongingness to a number of persons acting as representatives of government, business, officers and officials. The term has been consumed by criminologist Edwin Sutherland. Also this term defines called fictitious economy (which is part of the informal economy), which refers to illegal activities employed in the formal economy agents associated with hidden redistribution of legal income. This type of crime include fraud in the economy, corruption, industrial espionage, tax evasion, false bankruptcy and others. Among all the types of crimes that may have the greatest causes economic damage to modern society.
The white collar crime that took place in the Enron company, was one of the most serious white collar crimes. Both directors were sentenced to prison. They were accused on fraud, bribery, money laundering and several other economic crimes. However, employees and stakeholders were damaged the most in this case. They all have lost their money. Hence, the main idea was to make sure that such crime is not committed again. There are several ways to ensure this. First, top managers of the company, as well as the directors of the company’s branches all over the country or the world should be independent people without any interest in getting money. This will allow if not avoid fraud and bribery, but to decrease its level. Another way to ensure that such crime does not happen again is to check the company’s payment transactions rather often. Obviously, the company’s managers or directors may create fake accounts to ensure secure transactions. However, specialists are able to track even such fake accounts. On the other hand, the company’s directors may claim that such actions are illegal. According to the American law, it is illegal to track other people’s activity. In this case, the company should report to the tax department on the amount of money received and spent. This will help legally track the company’s finance.
After the Enron case was tried, the government of the United States of America adopted the law called Sarbanes-Oxley Act. The Act significantly tightens the requirements for financial reporting and its preparation process - the result of numerous corporate scandals involving unscrupulous managers of large corporations. The law applies to all issuers - in this case: for all companies whose securities are registered by the Securities and Exchange (SEC) - regardless of the place of registration and the company (that is, on whether the securities are traded on the New York Stock Exchange, NASDAQ, or any other U.S. market, whether registered as a debt in the U.S. (with or without listing) belong to any of passing registration for issue of securities in the United States.
In accordance with the Act, the government:
- creates a new regime for the control and regulation of financial activities;
- there are significant changes in the management and disclosure requirements for the open joint stock companies. Under the Act, every public company must be established the Audit Committee. The main articles of the Act are:
- Corporate Code of Conduct;
- Sign all reports with the U.S. stock market by (CEO) and CFO;
- Prohibition of loans and advances to directors and officers of the company;
- Deprivation of directors and officers of the right to remuneration or incentive securities;
- Undue influence on auditors;
- protection of whistleblowers;
- Reducing the time for reporting;
- Supervision over the accounting and auditing.
Jeffrey Skilling, the former CEO and present COO of the company, was sentenced to twenty four years in prison. I suggest that such sentence is fair. The point is that after the fraud committed by the top managers of the company, ordinary employees suffered because they had been left without any retirement money. The same goes for stakeholders: they lost much money. On the other hand, CEO and the founder of the company Kenneth Lay was plead not guilty. During the trial, he claimed that he was influenced by those, who were around him. He was CEO in the company when the crisis crushed. Hence, he was the one to be responsible for the fraud, for all the actions taken by his employees.
This research paper was devote to the issue of crisis in Enron company. In the research paper, I have given a brief overview of the case, as well as analyzed it from different points of view. The case is rather difficult; however, it is interesting, as well. The case consists of several issues: there are ethnic, economic and criminal issues. To be able to understand all the peculiarities of the case, I have outlined all the issues. In the research paper, I have shown that, in my opinion, the sentences were not rather fair. However, the aftermath of the Enron white collar crime case were positive. The Sarbanes-Oxley Act has been adopted, which influenced positively on the modern policy against financial crimes.
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