Case 12: Enron (2001)

• Prof. Dr. Klaus Henselmann
• Dr. Stefan Hofmann

Perhaps more than any other company facing scandal in recent years, Enron stands out as the poster child for corporate fraud. The crimes of Enron’s top executives resonated the most in the public mind, and the company’s name has become synonymous with corporate malfeasance. However, compared to other accounting frauds, the Enron fraud was very complicated; it involved many complex transactions and accounting issues. U.S. Senator John Dingell commented: “What we are looking at here is an example of superbly complex financial reports. They didn’t have to lie. All they had to do was to obfuscate it with sheer complexity – although they lied, too.” The impact of the fraud was far-reaching, to say the least. It led to the bankruptcy of the once high-flying energy company in late 2001, marking one of the biggest corporate failures in U.S. history. Enron’s collapse panicked investors worldwide, leading to what one journalist described as the “biggest crisis investors have had since October 1929”. Besides, the fraud ushered in a wave of prosecutions against white-collar crime at the highest levels of American business, and it originated a strong reaction (possibly an overreaction) from the regulatory bodies as well. Thus, it is of great importance to understand what actually occurred in the Enron case.

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