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

The company continued to establish power plants and

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at higher prices. The company continued to establish power plants and operate gas lines, pioneered innovative trading products which modernized the utilities industry and by the year 2000 its annual revenues increased from $9 billion in 1995 to $100 billion and ranked as the seventh largest company of Fortune 500. In reality, Enron Co. created only the illusion to be a profitable and thriving company made it possible by masterfully designed accounting schemes, unethical acts by traders and the creation of fictitious partnerships. For this reason its reported collapse by the end of 2001, shocked the world and the trading markets. Enron’s collapse revealed its fraudulent activities. For example it came to light that Enron’s legal affairs managed by Vinson & Elkins law firm was responsible for the creation of ‘strategic and unlawful partnerships” and that Arthur Andersen
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WHITE COLLAR CRIME 9 LLP being Enron’s auditor contributed to cover complicated accounting schemes. By the time bankruptcy was announced the price of the company dropped as only pennies per share reducing stockholders’ equity to $1.2 billion dollars. The chart on the following page demonstrates the quick drop the company’s share price took between early 2000 and late 2001. Modus Operandi of White-Collar Crimes Two individuals with vastly different leadership styles and management strategies were competing for the upper management position left open at the resignation of Richard Kinder, who was Enron’s president until 1996. Two charismatic leaders and candidates were Jeffrey Skilling and Rebecca Mark and each employed a different approach: Skilling was a proponent of the asset light strategy, while Rebecca Mark was a firm believer in the philosophy of investing in areas such as energy, water, and telecommunications with heavy infrastructure development. She pursued high-dept high-risk projects on the belief that return of investments was a long-term process that needed to be cultivated and realized over time. So Mark pursued a business strategy that involved the acquisition and development of capital-intensive and high-debt projects such as the Dabhol power project in India. After the building of that that pipe line, India could not afford to pay Enron for the power it produced and today that line is a ruin. Yet the company paid multimillion dollar bonuses to executives based on profits that actually were never earned. Jeffrey Skilling – President
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WHITE COLLAR CRIME 10 Jeffrey Skilling captivated Kenneth Lay interest and became the new President of Enron in 1987. Jeffrey Skilling’s business model was based on a GasBank light asset strategy which involved the creating a commodity that the market was willing to trade with stock and bonds and freeing Enron from the physical bound that gas pipelines created. Hence, transforming energy into a commodity Enron would be the intermediate for gas purchases, sales and deliveries. In this regard, Skilling spotted an opportunity to develop new markets and his strategy model required
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