Enron

[Zer0G]

<font face="Verdana, Arial" size="2">The accounting for a global trading company like Enron is mind-numbingly complex. But it's crucial to learning how the company fell so far so fast, taking with it the jobs and pension savings of thousands of workers and inflicting losses on millions of individual investors. At the heart of Enron's demise was the creation of partnerships with shell companies, many with names like Chewco and JEDI, inspired by Star Wars characters. These shell companies, run by Enron executives who profited richly from them, allowed Enron to keep hundreds of millions of dollars in debt off its books. But once stock analysts and financial journalists heard about these arrangements, investors began to lose confidence in the company's finances. The results: a run on the stock, lowered credit ratings and insolvency.</font>

http://www.time.com/time/business/article/0,8599,193520,00.html


Yes, this is real.

 

[lucky1]

... companies named after star wars characters?!

 

[graham]

The shell corporations with creative names is normal practice, it's about tax treatment and liability. It's the accounting irregularities, and document shredding that doesn't make much sense. It raises the issue of ethical walls in the treatment of a company's accounting, and operations. With Andersen acting as both internal and external auditor, the potential for something like this was certainly increased. The fees are just too attractive to responsibly satisfy both sides. It'll probably result in some criminal convictions, and cost the head personnel at Andersen their jobs. Weird.

 

[graham]

<font face="Verdana, Arial" size="2">Originally posted by lucky1:
... companies named after star wars characters?!</font>

you have to call it something, and it's only there for the purpose of structure (tax implication, legal liability chain), and the flow of money and assets. If the choice is between Boba Fett Inc., and 1308765 Ontario Inc., I'll take Fett.