THE LEGAL ENVIRONMENT OF BUSINESS Essay Example | Topics and Well Written Essays - 1250 words - 1

THE LEGAL ENVIRONMENT OF BUSINESS - Essay Example The Chief Financial Officer and other senior officers are known to have misled the audit committee when it came to issues of high-risk accounting practices. Following the confusion brought about by the Enron’s complex financial statements to both the shareholders and analysts, speculations were raised enquiring on the sustainability of the company. One partnership created by Enron had allowed it to keep $600 debt off the books it availed to the government and its shareholders. The problem in the company became evident in 2001. In August the same year, Jeffrey Skilling the CEO of the company tabled his departure. His position was resumed by Lay. On March, Bethany Mclean, a Fortune Magazine writer wrote an article inquiring Enron’s ways of making money. The reality of its collapse surfaced on October 16th when the company announced a loss of $638 million in connection with its internet investment failure (Barbara, 12). The shareholders of the company filed a $40 billion c ase after the stock price fell from us$ 90.75 per share in mid-2000 nose-dived to less than 1$ by the end of November 2001. The U.S Security and Exchange Commission launched (SEC) an investigation in October. The investigation later exposed the multifaceted web of partnership specifically engineered to hide the debt (Barbara, 14). In November, it was revealed that the company had overstated its earnings for the past four years by $586 million. It was also revealed that Enron owed over $6 billion in debt by the following year. This is what led to the drastic fall of its stock prices that saw investors lose billions of money. The company agreed to repay its investors immediately. It could not come up with the money to repay the debt therefore it filed for bankruptcy in accordance with chapter 11. In pursuant of justice, many senior executive officers were brought to trial which formed a point of reckon for the many citizens whose lives had been destroy. Fastow, the then Chief Financia l Officer and his wife, Lea, pleaded guilty for the charges against them. He had been initially charged with 98 counts of money laundering, fraud and conspiracy among other crimes. He pleaded guilty to two counts of conspiracy and was sentenced to 10 years without parole in a plea bargain to testify against Lay, Skilling and Causey. His wife Lea was sentenced to year imprisonment for aiding her husband hide government income. Lay and Skilling were brought to trial in January 2006 (Barbara, 15). Skilling was convicted of 19 of 28 counts of murder. He pleaded not guilty and attributed the cause of the company’s downfall to Fastow. Lay was found guilty of 6 counts of security and wire fraud and was subjected to a total of 45 years in prison. Unfortunately, Lay passed away in July, 2006 before his sentence was scheduled. Rick Causey the then Chief Accounting Officer was charged with six wrongdoing charges for non-exposure of Enron’s financial condition during his term. He was sentenced to seven years in penitentiary after pleading guilty. Arthur Andersen was charged with impediment of justice because of destroying documents, erasing emails and files that were affiliated to his auditing firm dealings with Enron. He was found guilty and was sentenced and his company was made to surrender its CPA license in August 2002