In what ways did Enron’s bankers, auditors, and attorneys contribute to Enron’s demise?
Enron is dead. The good news is that it has left behind lessons that will be remembered for long. Several factors contributed to the death of Enron. We have discussed its corporate culture and how the weak cultural fabric could not save it from untimely death. However, it is chiefly the leaders and the managers of Enron that were behind the scandal. It was not just the managers or the CEO that had corrupted the company. There were several more, many of which did not work from inside the company and who contributed to its sad demise. Apart from the managers, the bankers, auditors and attorneys of Enron had also played an active role in the notorious scandal.
How they contributed to it was through their partiality. They acted in ways that favored the management. Merrill Lynch was the primary banker of the company and it facilitated the wrong doings of Enron. It helped Enron sell its Nigerian Barges. Enron was thus able to acquire its target of $12 million which it had set for itself. This was not the only fraud where Merrill Lynch had assisted Enron but there were other deals too where it played an active role in helping the giant. In several of its fraudulent activities Enron received active help from its bankers, attorneys and auditors. However, it also came to light that Merrill Lynch had acted in this way for Enron had pressurized it.
The auditors working for Enron were Arthur Anderson LLP. It was their responsibility to ensure financial accountability of Enron. Anderson was also a major business partner and therefore it had a major involvement in the scandal. The auditor was expected to follow ethical practices and represent Enron’s financial position ethically. That was clearly not happening. The two were working together to achieve the financial targets Enron had set for itself. Anderson’s was expected to provide impartial and accurate certifications of the financial performance of the firm. Anderson was doing nothing like it was expected.
All the time it was trying to reap large benefits by assisting Enron with its nefarious work. It was cleverly concealing financial data related to Enron’s performance that could make the shareholders smell anything foul. Several of the follies the two had committed together came to light as the Congressional investigations went on. The improprieties in the Enron’s energy company’s accounting practices had been well known to the senior Enron employees and they were concerned. The auditors of Enron had also grown aware of these concerns. Its attorneys were also step in step with Enron when the scandal took place.
Vinson and Elkins who were in the position of Enron’s attorneys had helped the company seal some major deals. They provided their legal support to the deals by providing transaction opinion letters to aid those deals. Later the investigations made it clear that the deals had also played a role in the early demise of Enron. All of this resulted in the introduction of SOX which marked a turning point for the financial world.