World's biggest financial scam. This presentation would give you all the information about the people who are engaged in the scam and they manipulated their data from balance sheet. How culprits were sent behind bars and what were the changes in Law that were done after this scam. For more understanding of case i will recommend to see the movie " Enron- The smartest guy in the room"(2005)

2. CONTENTS
• INTRODUCTION
• THE SCAM
• KEY PLAYERS
• LOOPHOLES
• AFTERMATH
• PUNISHMENTS/ TRIALS
• CHANGES IN LAW
• IMPLICATIONS
• CONCLUSION
2Bhavan's Usha And Lakshmi Mittal Institute Of Management

3. ENRON
• An American energy, commodities and service company based in Houston, Texas.
• Formed in 1985 following a merger between Houston Natural Gas Co. And Inter North Inc.
• Became the largest seller of natural gas in North America by 1992.
• At its peak, Enron was America's seventh largest corporation.
• Between 1990 and end of 1998 Enron's stock price increased 311%.
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4. WHAT WAS THE SCAM?
• The scam is basically about fraudulent financial reporting.
• Jeffrey Skilling, used accounting loopholes, special purpose entities, and poor financial
reporting to increase cash flows & hide billions of dollars in debt from failed deals and
projects.
• Chief Financial Officer Andrew Fastow along with Enron's board of directors and audit
committee exploited the accounting practices.
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Bhavan's Usha And Lakshmi Mittal Institute Of Management

5. Kenneth Lee Lay
• Founded Enron in 1985
• Became CEO and Chairman next
year
• Key figure in the deregulation of
the US energy market.
Jeffrey Keith Skilling
• Joined Enron in 1990
• Became President and COO in
1996
• Succeeded Lay as CEO in 2001
• Implemented Mark-to-Market
accounting in Enron.
• Launched Enron Online
Andrew Stuart Fastow
• Former Chief Financial Officer
(CFO)
• Prepared complicated financial
structures.
• Mastermind behind various
SPE’s (Special Purpose Entities)
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6. LOOPHOLES
ARTHUR ANDERSON LLP
Oversaw Enron’s accounting practices and shredded most important documents.
SPECIAL PURPOSE ENTITIES
Used to hide debts and overestimate its equity.
MARK-TO-MARKET
Records estimations of future incomes when a long-term contract is signed.
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7. AFTERMATH
• Enron had losses of $591 million and had $628 million in debt by the end of 2000.
• Dec. 2, 2001, Enron had filed for bankruptcy. Shares closed at $0.26.
• The bankruptcy affected at least 21,000 Enron employees.
• Nearly $2 billion in pension funds were lost.
• Four years before the declaration of bankruptcy shareholders lost $74 billion.
• Arthur Anderson LLP was dissolved and Enron suspended from NYSE.
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8. PUNISHMENTS/ TRIALS
Fastow was charged with 98 cases of fraud, money laundering, insider trading, and
conspiracy. Pleaded guilty to two charges of conspiracy and was sentenced to ten years.
Skilling was convicted of 19 of 28 cases of securities fraud. Sentenced to 24 years and 4
months in prison.
Lay was convicted of all 6 counts of securities fraud. Sentenced to 45 years in prison.
Arthur Andersen was charged with and found guilty of shredding the thousands of documents
and deleting e-mails and company files relating to audit of Enron. Was put out of business.
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9. SARBANES-OXLEY ACT
•PCAOB- provide independent oversight of
public accounting firms.
•Section 303
•Section 401
•Section 802
• In June 2002, the NYSE announced a
new governance proposal, which was
approved by the SEC in November
2003.
• The Financial Accounting Standards
Board (FASB) substantially raised its
levels of ethical conduct.
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10. IMPLICATIONS
• The biggest change brought about is the Sarbanes-Oxley act.
• Accounting regulations be altered to prohibit ownership of both auditing and consulting
services by the same accounting firm.
• Protections for whistleblowers who bring improper behavior to public attention.
• Attentiveness of directors and in the truthfulness and integrity of executives.
• Changes in academia to train accountants in ethics and changing accounting procedures.
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11. CONCLUSION
• The Enron scandal is not only a story about complex accounting but also about the people involved.
• Misleading information was given to the investors due to faults in accounting system.
• Enron scandal shook the perception of Enron being a well monitored and ethical company.
• The scandal made the authorities realize the importance of ethics and importance of internal control.
• From this case we can learn that it is equally important to create a series of checks and balances from
both in-house and third parties.
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12. 12
Presented by:-
Harish Kumar Sharma (04)
Prarthana Vats (11)
V. Arjun (13)
Aditya Jaju (21)
Ankit Bounthiyal (24)
Sahal Rizvi (29)
Marcus B. Jacob (32)
Mohit Kumar (57)
Nitesh Nandi (58)
Bhavan's Usha And Lakshmi Mittal Institute Of Management