Enron Corporation was once one of the world's largest electricity and natural gas traders. Enron filed for Chapter 11 bankruptcy protection in late 2001 amid allegations of accounting fraud and violations of federal securities laws. According to Sauel Greengard in Workforce Management (2004), Enron has reduced its workforce from 25,000 to 600. Enron now hopes to file a plan of reorganization in bankruptcy that might pay creditors 20 cents on the dollar. This reorganization will have no effect on stockholders whose once prized shares of Enron stock are now selling for a few pennies a share. Greengard adds that many of the 600 remaining employees are reluctant to admit where they work for fear of negative reactions. The indictments and trials of former Enron executives continues to fuel the fire of anger among who, in some cases, lost their life savings as a result of Enron's management teams decision to commit fraud (Greengard, 2004, 19).
Heather Timmons, Emily Thornton, and Lorraine Woellert in Business Week (2003) suggest that there is always pressure on senior managers to look for ways to manipulate accounting rules in order to report more sales and higher profits. Aggressive accounting techniques can be used to enhance earnings, but there is a limit to how far accounting rules can be bent. Enron executives did not bend the rules, they broke them. The key to bending without breaking these rules can be likened to understanding the difference between tax avoidance and tax evasion. Tax avoidance is lawful; it is something the tax code allows. Tax evasion is unlawful and individuals found guilty of tax evasion are subject to criminal penalties. Dressing up a company's financial condition is allowed provided the company does not cross the line between financial manipulation and accounting fraud.
According to Timmons, Thornton, and Woellert, as bad as the decision was to commit accounting fraud, it was an even greater shock to...