AutoRecovery save of White Collar Crime a Form of Occupational Fraud.doc

A second response to enrons support of the clinton

Info icon This preview shows pages 21–23. Sign up to view the full content.

A second response to Enron’s support of the Clinton administration can be found in a trip made to India in 1995 by then-U.S. Secretary of Commerce Ron Brown and Ken Lay. The two men traveled to India to oversee the signing of the loan agreement by the Dabhol Power Company with the U.S. Export-Import Bank and the “independent” U.S. government agency, Overseas Private Investment Corporation (OPIC). Later in 1995, when the $3 billion Dabhol project was in jeopardy due to local political opposition, then-U.S. Energy Secretary, Hazel O’Leary issued a warning to India that any actions in opposition to the Enron backed project would discourage future foreign investment. According to Emad Mekay of the India Resource Center (2003), Enron, “…regularly and aggressively called on staff from the Treasury, the State Department, the Office of the U.S. Trade Representative, and the World Bank to meet with foreign officials to favorably resolve its problems and disputes with their governments” (p. 1). In the end, the Dabhol Project turned out to be a financial disaster, both for Enron and the Indian Maharashtra state in which it was located (McLean and Elkind, 2003, pp. 79-83). This, however, did little to deter Enron and its political game playing as evidenced by the continual lobbying pressure they placed on U.S. government officials to arrange deals and help settle international disputes between Enron and nations like Turkey, Argentina, and Brazil (Mekay, pp. 1-2). Regarding Enron’s connection to the federal government, Tyson Slocum, a research director with Public Citizen, a U.S.-based consumer group, stated (2003), “Enron, for its
Image of page 21

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

WHITE COLLAR CRIME 22 size, flexed an enormous amount of political muscle…Enron used its money and connections to distort government policies in a way that gave it free rein to cheat consumers (pp. 1-2). The Fall of Enron In a way, Enron went bankrupt for the same general reason that all companies go bankrupt: they invested in projects that proved too risky and, in turn, they were unable to keep up with the debt obligations of the firm (Niskanen, 2005, p. 2). This does little, however, to explain the specific reasons why Enron became the largest company to file for bankruptcy in U.S. history. Although many will point to Enron’s abuse of accounting and disclosure policies such as mark-to-market accounting, utilization of SPE’s to hide debt, and using inadequately capitalized subsidiaries and SPE’s for “hedges” to reduce earnings volatility as the primary causes for bankruptcy, these abuses were merely symptomatic of a larger problem at Enron: identity crisis. What eventually brought Enron to its knees was the incompatibility of two competing ideological systems relating to how Enron was to operate as a company and make its money. The compensation structure at Enron fostered a culture of narcissism that rewarded individuals such as Chief Financial Officer (CFO) Andrew Fastow for creating illegal schemes like Chewco to hide Enron’s mounting debt and, ironically, provided generous kickbacks for doing so.
Image of page 22
Image of page 23
This is the end of the preview. Sign up to access the rest of the document.
  • Fall '13
  • white collar, Enron Corporation

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern