Whistleblower for Enron

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Enron started as a Houston-based pipeline company in 1985. It successfully lobbied for deregulation of electrical power markets which allowed it to be a middleman by signing contracts to buy and sell electricity and natural gas and making money on each end. After profiting from energy trading, Enron began to design contracts called derivatives whereby customers could insure themselves against risks, such as higher interest rates, energy costs, currency conversion changes, and even weather changes. As the derivatives became more complex, partnerships or “special purpose entities” were created to hold them which kept debt from showing up on Enron’s financial statements. Their liabilities kept growing and on October 16, 2001, Enron announced a $638 million loss for the third quarter. On November 8, 2001 the company announced that it had overstated earnings by $586 million over the prior four years and it was responsible for up to $3 billion in obligations. At the time of its filing, Enron was the largest accounting fraud in history, which led to its Chapter 11 bankruptcy on December 2, 2001. Sherron Watkins was the former vice president for the Enron Corporation. She was the whistleblower who exposed the illegal accounting fraud that took place within Enron. She began working for Enron in 1993 and in 2001 she worked directly for the Chief Financial Officer, Andrew Fastow. She worked closely with the financial records, which is how she discovered the accounting fraud. Upon this discovery she privately notified Ken Lay who was the CEO of Enron to warn him that the company was in danger of collapsing, due to accounting fraud. Her intentions were to bring the company out of debt and not allow it to go bankrupt. The warnings went unheard and were brushed under the rug. Shortly after warning Mr. Lay the fraudulent behavior was exposed. This was the end of

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