Reflecting on Enron and lessons learned

When I first started teaching fraud at the university level about 20 years ago, I had no idea that I was about to be handed a case study like no other. A few months later the now-infamous accounting scandal at Enron hit the headlines, and the once-celebrated energy firm collapsed in disgrace soon thereafter.

Enron’s name has become synonymous with corporate fraud across the globe, and its downfall still provides valuable lessons for CFEs. On the 20th anniversary of the company’s bankruptcy, the U.S.’s largest at the time, Fraud Magazine looks back on those events with a cover story by Sherron Watkins, the former vice president at Enron’s mergers and acquisitions group, who courageously blew the whistle on its shady accounting practices. She examines how a company once lauded by business experts deceived the public and what still needs to be done to avoid future Enrons.

“Illusion,” the word used by Watkins, is an apt description of Enron’s financial statements. As in the classic film, “The Wizard of Oz,” Enron’s former CEO and founder Ken Lay and his replacement Jeffrey Skilling told everyone to ignore the men behind the curtain. In this case, it was a multibillion-dollar sleight of hand.