BP5 Ch2 - Public outrage grows, governance credibility...

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Enron Bankruptcy December 2, 2001 Arthur Andersen Court Case Winter/Spring 2002 WorldCom Restatement June 25, 2002; Bankruptcy July 21, 2002 Sarbanes-Oxley Act Signed July 30, 2002 SEC Regulations Stock Exchange Guidance Public outrage grows, governance credibility falls
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$ 20.00
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Bank $251.4 Non-cash 132.0 Investors 0.1 BARCLAYS BANK PLC KOPPER & DODSON’s Company DODSON Companies ENRON JEDI CHEWCO
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SPE SCHEME PURPOSE IMPACT Chewco/JEDI Syndicated investment Off balance sheet liabilities hidden ($628 million) Revenues recognized early Profits on own shares LJM Provided market for assets Artificial profits Off balance sheet liabilities hidden Equity overstated ($1.2 billion) LJM1/Rhythms Investment “hedge” Unrecognized losses ($508 million) LJM2/Raptors Investment “hedge” Unrecognized losses ($544 million)
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INVESTMENT RETURN, IN MILLIONS OTHER, IN MILLIONS A. Fastow $25,000 $ 4.5 in 2 mo. $30 + stock options M. Kopper 125,000 10.0 incl. Dodson $2 in fees B. Glisan 5,800 1.0 K. Mordaunt 5,800 1.0
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BLEW TO ACTION SUBSEQUENTLY Cliff Baxter, Vice Chair Lay None Exercised $32 million in stock options, just agreed to testify to Congress, found shot dead in his car—an apparent suicide—on Jan. 25, 2002 McMahon, Treasurer Fastow None Reassigned, later returned as CEO Kaminski, Risk Mgr. Fastow None Continued Sherron Watkins Lay None Discussed with Skilling and asked Vinson & Elkins to review
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Lou Pai Chairman, Enron Xcelerator $353.7 million Ken Lay Chairman 101.3 Rebecca Mark-Jusbasche Director 79.5 Ken Harrison Director, Portland General Electrics 75.2 Kenneth Rice Chairman, Enron Broadband 72.8 Jeffrey Skilling Director (former CEO) 66.9 Mark Frevert Vice Chairman 50.3 Stanley Horton Global Chairman 45.5 Joseph Sutton Vice Chairman 40.1 J. Clifford Baxter Vice Chairman 35.2 Joseph Hirco CEO, Enron Broadband 35.2 Andrew Fastow Chief Financial Officer 30.5
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Outside Law Firm SPEs CEO: Lay, Skilling
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BP5 Ch2 - Public outrage grows, governance credibility...

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