German Jordanian University
Business Ethics (316)
Lecturer: Mr. Montaser Tawalbeh

Case Study

Enron: Were They the Crookedest Guys in the Room?

Case Summary

Enron has become the classic case on business ethics. Enron formed after the merger of Internorth Incorporated and Houston Natural Gas in 1985. On January 1, 1987, as part of the merger agreement, Ken Lay became the new CEO. In 1990, Ken Lay hired Jeffrey Skilling from McKinsey and Company as the Head of Enron Finance. By 1995, Enron had become the largest independent natural gas company in the United States. In 1997, Skilling became president and Chief Operating Officer at Enron. Ken Lay’s goal was for Enron to have the same brand recognition as AT&T.

Enron’s long
On January 9, 2002, the Justice Department confirmed it has begun a criminal investigation. On January 23, 2002, Ken Lay resigned as CEO but remained on the board. On February 4, 2002, Lay resigned from the board. On March 14 2002, former Enron auditor, Arthur Andersen, was indicted for destroying Enron-related documents. Later, the firm was convicted of obstruction, sentenced to probation and fined $500,000. On October 2, 2002, Andrew Fastow was charged with fraud and agreed to ten years in jail in return for co-operating with the government. On May 1, 2003, Fastow’s wife Lea was also charged with fraud and was sentenced to one year in jail. On February 19 2004, Skilling was indicted on fraud charges. On July 8, 2004, Ken Lay was charged with fraud and insider trading. On January 30, 2006, the trial of Ken Lay and Jeff Skilling started. On May 25, 2005, Ken Lay and Jeff Skilling were found guilty of conspiracy and fraud.

Questions for Thought

1- Who are the Major Players in the Enron Scandal?

2- Discuss the facts and then analyze them indicating the ethical dilemma/s in this case?

3- What are “cookie jar” reserves? Explain Enron’s use of this concept.

4- Identify as many stakeholders as you can in this case. For each, explain how they were affected by the events surrounding the demise of Enron.

5- Summarize the main points of this case in one succinct