Corporate Fraud (West's Encyclopedia of American Law)
On October 16, 2001, Enron, the seventh largest corporation in the U.S., announced a $638 million loss in third-quarter earnings. On November 8, 2001, the company publicly admitted to having overstated earnings for four years by $586 million and to having created limited partnerships to hide $3 billion in debt. As investors lost confidence in the company, Enron stock, which had been worth as much as $90 per share in 2000, plummeted to less than $1 per share. Thousands of Enron employees lost their jobs and retirement savings, which had been invested in corporate stock through a 401(k) retirement plan. Banks and lenders lost millions of dollars in loans made to Enron based on the fraudulent earnings reports.
Enron Corporation started as a pipeline company in Houston, Texas, that delivered gas at market price. Over the next 15 years, Enron expanded into an energy power broker that traded electricity and other commodities, such as water and broadband INTERNET services. Enron became one of the nation's most successful companies, employing 21,000 people in more than 40 countries. The senior executives at Enron attributed their success to their corporate strategy, which was to be light in assets but heavy in innovation.
The innovative business practices of overstating profits and concealing debt increased the company's stock...
(The entire section is 2154 words.)
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