BUS203 Business Law I Chapter 7

 The Crooked E: The Movie

Enron: Movie Essay 

This week you will watch the movie Enron.

You will then write an essay. 3 FULL pages 12pt font double space. Title page, reference page, citations throughout.

In the essay, research the history of Enron.

Talk about the company.

What did they do wrong?

How did they misrepresent the company?

At the beginning and the closing of Enron watch carefully about details on the big screen. What did you see?

Hint. Look at the signs.

How does the movie make you feel knowing what Enron did to thousands and thousands of workers lost their jobs? Over 4,000 Enron employees were let go when they closed. The AFL-CIO said that over 28,500 workers have lost their jobs from Enron, WorldCom, and accounting firm Arthur Andersen alone.

Enron Essay

 

               With Enron the company was a scam at no point during any of it could you see a profitable company. What you saw was using catchy speeches to say a lot of nothing about a company that had no actual business. The moment he went to orientation and the talk about “virtual assets” and he kind of like had the look on his face like what is that. It should have raised a red flag about the company. Basically Enron was like a shell company that had its hands in all sorts of different energy platforms but they never actually where profitable they would bid contracts and undercut businesses to be the lowest bidder and get the pipeline and then build it very cheaply and not in a safe way. But they also allowed hedging at the same time as buying different resources.

              Enron also focused on weather derivatives in terms of hedges against financial losses related to adverse weather conditions verses hurricanes and such. During the movie they talked about bankruptcy protection derivatives which they offered to companies in case the company for some reason failed collecting billions of premiums from different companies but in reality offering them no protection since all of Enron’s profits where inflated by the future prospect of future revenue’s during that interview where the question was made about seeing the books and the company replied that it wasn’t a requirement by the FDIC at the time so they didn’t have to produce them.

               Some of what the movie portrayed through such as all of the female employee’s being stripers likely was just opinionated information. But within the same token if you worked for a company that you couldn’t actually see valid data that it was a profitable company wouldn’t you question it yourself or wonder a bit cause your selling products and derivatives that the company isn’t built to handle. Also if you knew the company was a scam wouldn’t you take steps to find a better job that wouldn’t hurt your career or reputation as an employee?

            The signs at the beginning of the movie all pointed to positive motivational impressions about being innovative and all positive. Then at the end of the movie it pointed to being a scam and fraud and that they were greedy. But often when something seems too good to be true its likely a scam no perfect company exists that just keeps making profit and doesn’t suffer some sort of issues. Even take a company like Google that seems indestructible when they made their fiber business it was a total wash for a long time but for a company like google they make subsidiaries that don’t effect the main business aspect that way if it doesn’t work out they could just sell off and liquidate the dead wood.

          The SEC was accused in the Enron case for not noticing that it was a scam but even in the case with today’s meme stock craze we can see that the SEC really doesn’t do its job to protect the retail investors. It can be a bit of lobbying from the government or the potential money that can be made or just that they aren’t for the general public since most investments have all the secret derivatives being planned as company’s fail and people make money.  They claim to be there for the retail investors but often when something happens or investigation wise they there after the money has been lost and after the fallout has happened. The FDIC isn’t any better considering that it has no actual money to protect anyone and those funds must come from somewhere such as the retail investors via taxes. Looking at our banking falls really shows that they really have no power. Printing more money to recover the money people lost is the same as creating new inflation.

                  It’s sad that the Enron case lead to thousands of people losing their jobs but they should have picked up on the fact that the company was based on bad practices because I don’t understand how people working for a company like Enron don’t have any issues with the business model or when the numbers don’t make sense. Even the companies I choose to invest in I always put a lot of effort into to make sure that I’m not putting my money into a scam or a company that is inflating its profits or one that isn’t a very good company. Not to mention I never put all investments tied into a single stock or investment.

                I’m sure when it comes to other companies there are ones doing negative things like inflating earnings at times or making things look better than they are. The banking system actually does that itself by reporting numbers based on the value of the assets at the purchase price not by the actual value after the market downturns. So companies will continue the same bad Enron habits and even with laws set in place we see that money and influence can buy anything. It’s really a shame because we ourselves could be affected by these bad practices if we choose to invest in them ourselves.

            But the best advice to learn is never get tied to one company when it comes to investing or throw your complete life savings tied into one thing. And derivatives can be a risky investment as can be seen with the 2008 recession and Enron and there’s many other examples in the history of business. It’s better to invest in tangible assets over virtual ones. But if you do decide to go that route never throw your life savings into those investments. And don’t be hopping for that lottery ticket win like GME. Growth overtime and dividends are a much safer way to build your value on companies that you look into and trust.

Unit 7 Discussion Question on The Crooked E

Collaborate on what you thought of "The Crooked E"

It was interesting though the moment that he walked in for the first orientation and heard the term "virtual assets" I would have likely not have started throwing investment money at Enron. Also as he started noticing inconsistencies with the data and profits and even during the press releases no actual data or numbers where used at all. If it was me I and I was working there I wouldn't have been investing in the place I worked. But even in terms of investments it's always a good idea to never have your eggs in one basket. When he noticed that the profits that people were making based on future profits that alone should have been a red flag too since the future of any company isn't set in stone things affect companies, inflation, shipping problems, war, cost of material increases. There's a diverse number of factors that affect any business. Also banking on any company's stock to keep increasing isn't really viable any company can still go out of business if management isn't doing enough or other companies make the move to compete in a way that the company can't fight against. A perfect example is Sears which went out of business after being in 131 years the stock grew to over $140 a share but now the holding company is worth around 10 cents. Mismanagement can happen with any company but for Enron it was a complete scam and everyone involved knew including the government but they knew when to pull out money which is what the average investor doesn't know. So all the positives and seeing growth in stock gets people caught up in the point to make it big. Just like the meme stocks people keep dumping money into buying stocks with no future in a hope that it can be like a lottery ticket and they can win big.