pervasive enough to make the statements as misleading as they were. As accountants Andersen had an obligation to be neutral in examining the company's financial statements, and making sure that all financial transactions were duly reported. Therefore we should question Andersen's motive to accept such manipulated accounts. The reason been simple, they were paid $52 million last year, hence not only were they been paid for auditing work and consulting services but their role was also 'to make Enron profits and stock prices appear much more attractive than they really were' and therefore become an accomplice in Enron's fraudulent projects.' (Enron was a corporate icon)An interesting aspect in Enron's account was that Andersen was paid more for consulting than for the actual auditing. This on itself is suspicious, as it can be suggested that the money that was been used to bribe them, was appearing as consulting fees in Enron's accounts. Therefore Andersen found them in this agreement with Enron. Enron 'evolved from being a company with rather dull set of physical assets in a regulated market into a financially sophisticated risk management company that shaped its own trading environment.'(SEP) This was achieved by investing in a large number of risky projects and so the problem arose when its investments and new markets were not proving to be as successful as they thought they would be. Therefore Enron found itself in a precarious situation where they found themselves dependent on their continuing management credibility and creditworthiness. As a result they ended up resorting to the manipulation of financial statements. The first major fraud was 'Enron's executives' apparent use of Special-Purpose Entities (SPEs) to deceive shareholders and to enrich themselves.' (Accounting issues at Enron) in other words Enron was applying for the loan through the SPEs meaning that these debts would not appear on their financial statements. Not only was this but investors willing to accept a lower interest rate because to them it appeared that the repayment of their loan was a sure thing, since the SPE would have no other debt. Consequently Enron found itself in a situation where they needed to increase the number of SPEs to keep moving debt off the balance sheet and so began using its own stock as collateral. This resulted in the SPEs recording as an increase in Enron's stock as income, which would thereby allow Enron to increase income by utilizing the equity method of accounting' (Accounting lssues at Enron). $30 million in profits on investments in Enron SPEs transactions was the result of this fraud. Profits generated from the SPEs were been used in order to structure off-balance sheet treatment of assets and liabilities, meaning that Enron was able to carry such transactions because of the fact that the accounting standards had not kept pace with new techniques in off-balance sheet financing. This meant that off-balance sheet items were been used to keep liabilities of its books. All this was possible because Enron managed its SPEs by making sure that at least one SPE investor had put up at least 3% of the SPE's equity. According to the US GAAP this meant that the company could contribute the rest and still qualify for off-balance sheet treatment. In the 1990s Enron began to take many of its assets and liabilities off its reported balance sheet, because they continued using off-balance sheet vehicles to access capital and to reduce risk. As long as they followed various accounting rules in would not have to reveal many details about these financings. The nontransparent financial statements and Enron lied about its profits and was accused of a lot of dark dealings including misrepresent earnings and modify the balance sheet and show wrong
information in the company's accounts. When all the deception and all the issues rose, it led to the bankruptcy of the company.
was overturned. Chief Justice William Rehnquist wrote the opinion for the court, and was joined by
all associate justices.
In the court's view, the instructions allowed the jury to convict Andersen without proving that the firm knew it had broken the law or that there had been a link to any official proceeding that prohibited the destruction of documents. The instructions were so vague that they "simply failed to convey the requisite consciousness of wrongdoing," Rehnquist wrote. "Indeed, it is striking how little culpability the instructions required." Rehnquist's opinion also expressed grave skepticism at the government's definition of "corrupt persuasion" persuasion with an improper purpose even without knowing an act is unlawful. "Only person s conscious of wrongdoing can be said to 'knowingly corruptly persuade,' " he wrote. Although the decision vacated Andersen's felony conviction, as of 2011 Andersen has not returned as a viable business even on a limited scale.