It surpassed all other accounting frauds, because the need to hide its true financial conditions was not just a matter of hiding losses borne out of failed business projections.
September 30, Executives Uncertainties Financial Statements. It also raises additional questions about the roles played by former Chief Executive Jeffrey Skilling and former Chief Financial Officer Andrew Fastow in setting up such structures.
During the early s, the Enron unit run by Mr. One of the Cactus entities, known as the Cactus Hydrocarbon III Production Payment Trust, was structured as an SPE and was part of a complex structure that appears to have held several hundred million dollars of off-balance-sheet debt.
They carried an interest rate and holders received payments on a monthly basis, presuming there were sufficient funds available after paying the Class A certificate holders. After looking over copies of some Cactus documents, Charles Mulford, an accounting professor at the Georgia Institute of Technology, questioned whether the structure would meet SPE accounting rules.
GE viewed the certificates as debt instruments, company spokesman John Oliver said. But, this person added, the Cactus transactions were thoroughly vetted by company lawyers and its outside auditor, Arthur Andersen LLP.
Fastow declined to comment. Need Legal Help Regarding Executives?Enron’s Questionable Transactions 1. The special purpose entities (SPEs) got Enron into trouble. 2. It is debatable whether Enron’s directors knew how profits were being made through the SPEs. Enron's questionable transactions on pp 1.
Which segment of its operations got Enron into difficulties? 3. Did Enron's directors understand how profits were being made in this segment? Why or why not? 5. Ken Lay was the chair of the board and the CEO for much of the time.
How did this probably contribute to the lack of proper governance? These two financial institutions provided Enron a total of $ billion in borrowed funds from to by way of 26 transactions, channeled to two of Enrons fake companies, Mahoria and Yosemite.
Another Fastow venture was setting up and operating partnerships called related party transactions to do business with Enron. In the process of allowing Fastow to set and run these very lucrative private partnerships, Enron’s board and top management gave Fastow .
Enron incorporated “mark-to-market accounting” for the energy trading business in the mids and used it on an unprecedented scale for its trading transactions. Enron was a U.S.
energy-trading and utilities company that perpetuated one of the biggest accounting frauds in history.