Open Access. Powered by Scholars. Published by Universities.®

Law Commons

Open Access. Powered by Scholars. Published by Universities.®

Series

Enron

Discipline
Institution
Publication Year
Publication

Articles 1 - 30 of 45

Full-Text Articles in Law

Addressing The Auditor Independence Puzzle: Regulatory Models And Proposal For Reform, Martin Gelter, Aurelio Gurrea-Martinez Jul 2020

Addressing The Auditor Independence Puzzle: Regulatory Models And Proposal For Reform, Martin Gelter, Aurelio Gurrea-Martinez

Research Collection School Of Law

Auditors play a major role in corporate governance and capital markets. Ex ante, auditors facilitate firms’ access to finance by fostering trust among public investors. Ex post, auditors can prevent misbehavior and financial fraud by corporate insiders. In order to fulfill these goals, however, in addition to having the adequate knowledge and expertise, auditors must perform their functions in an independent manner. Unfortunately, auditors are subject to conflicts of interest by, for example, providing non-audit services or the mere fact of being hired and paid by the audited company. Therefore, even if auditors act independently, investors have reason to think ...


Deferred Prosecution And Non-Prosecution Agreements And The Erosion Of Corporate Criminal Liability, David M. Uhlmann Jan 2013

Deferred Prosecution And Non-Prosecution Agreements And The Erosion Of Corporate Criminal Liability, David M. Uhlmann

Articles

On April 5, 2010, a massive explosion killed twenty-nine miners at Massey Energy's Upper Big Branch mine near Montcoal, West Virginia. Following the explosion, President Barack Obama vowed that the U.S. Department of Labor would conduct "the most thorough and comprehensive investigation possible" and work with the U.S. Department of Justice ("Justice Department" or the "Department") to address any criminal violations. Later in the month, the President and Vice President flew to West Virginia to eulogize the victims and comfort their families. It was the nation's worst coal mining disaster in forty years. The tragic loss ...


A Transactional Genealogy Of Scandal: From Michael Milken To Enron To Goldman Sachs, William W. Bratton, Adam J. Levitin Jan 2013

A Transactional Genealogy Of Scandal: From Michael Milken To Enron To Goldman Sachs, William W. Bratton, Adam J. Levitin

Faculty Scholarship at Penn Law

Three scandals have reshaped business regulation over the past thirty years: the securities fraud prosecution of Michael Milken in 1988, the Enron implosion of 2001, and the Goldman Sachs “ABACUS” enforcement action of 2010. The scandals have always been seen as unrelated. This Article highlights a previously unnoticed transactional affinity tying these scandals together—a deal structure known as the synthetic collateralized debt obligation involving the use of a special purpose entity (“SPE”). The SPE is a new and widely used form of corporate alter ego designed to undertake transactions for its creator’s accounting and regulatory benefit.

The SPE ...


The Social Cost Of Financial Misrepresentations, Urska Velikonja Jan 2012

The Social Cost Of Financial Misrepresentations, Urska Velikonja

Faculty Scholarship

Policy makers, regulators, and academics have traditionally looked for the harm from securities fraud in the easy-to-study financial markets. However, by doing so, they have missed the significantly larger social welfare losses caused by securities fraud that fall outside financial markets. False financial disclosures, which are the most common variant of securities fraud, distort real economic decisions that firms, their rivals, suppliers, vendors, lenders, and workers make, thus distorting markets for inputs and outputs. When the fraud is revealed, every party affected makes costly adjustments. Many fraud-committing firms file for bankruptcy. Their rivals face doubts, called contagion. All firms must ...


Placebo Ethics, Usha Rodrigues, Mike Stegemoller Mar 2010

Placebo Ethics, Usha Rodrigues, Mike Stegemoller

Scholarly Works

While there are innumerable theories on the best remedy for the current financial crisis, there is agreement on one point, at least: increased transparency is good. We look at a provision from the last round of financial regulation, the Sarbanes Oxley Act of 2002 (SOX), which imposed disclosure requirements tailored to prevent some of the kinds of abuses that led to the downfall of Enron. In response to Enron's self-dealing transactions, Section 406 of SOX required a public company to disclose its code of ethics and to disclose immediately any waivers from that code the company grants to its ...


Twenty-Eight Words: Enforcing Corporate Fiduciary Duties Through Criminal Prosecution Of Honest Services Fraud, Lisa L. Casey Jan 2010

Twenty-Eight Words: Enforcing Corporate Fiduciary Duties Through Criminal Prosecution Of Honest Services Fraud, Lisa L. Casey

Journal Articles

This article examines the federal government's growing use of 18 U.S.C. § 1346 to prosecute public company executives for breaching their fiduciary duties. Section 1346 is a controversial but under-examined statute making it a felony to engage in a scheme "to deprive another of the intangible right of honest services." Although enacted by Congress over twenty years ago, the Supreme Court repeatedly declined to review the statute, until now. In 2009, Justice Antonin Scalia pointed to the numerous interpretive questions dividing the federal appellate courts and proclaimed that it was "quite irresponsible" to let the "current chaos prevail ...


Keynote Address: The Role Of Lawyers In The Global Financial Crisis, Steven L. Schwarcz Jan 2010

Keynote Address: The Role Of Lawyers In The Global Financial Crisis, Steven L. Schwarcz

Faculty Scholarship

In recent articles, the author has argued that the global financial crisis can be attributed in large part to three causes — conflicts, complacency and complexity — as well as to a type of tragedy of the commons. This article, which comprised the keynote address for the 2010 Corporate Law Teachers Association Conference, will focus on the failure of market observers, including corporate lawyers, to foresee or act on critical correlations that might have prevented, or at least mitigated, the crisis. Although conflicts, complacency, complexity and the tragedy of the commons can help to explain this failure, the goal will be less ...


Slides: Environmentally Friendly Drilling Systems Program (Efd), Rich Haut Oct 2009

Slides: Environmentally Friendly Drilling Systems Program (Efd), Rich Haut

Best Practices for Community and Environmental Protection (October 14)

Presenter: Rich Haut, Houston Advanced Research Center

23 slides


The Real Reason Why Businesses Make Bad Decisions, Nancy B. Rapoport Jan 2009

The Real Reason Why Businesses Make Bad Decisions, Nancy B. Rapoport

Scholarly Works

This book review examines Professor Jonathan Macey's latest book on corporate governance, and it uses Professor Macey's analysis to explain the latest rash of corporate scandals.


Lessons From Enron - And Why We Don't Learn From Them, Nancy B. Rapoport Jan 2009

Lessons From Enron - And Why We Don't Learn From Them, Nancy B. Rapoport

Scholarly Works

This article discusses why even the smartest of people can make boneheaded decisions, and it suggests that the only way to avoid future Enrons is to take into account the cognitive mistakes that humans tend to make.


Ending Excessive Speculation In Commodity Markets: Legislative Options, Michael Greenberger Jan 2008

Ending Excessive Speculation In Commodity Markets: Legislative Options, Michael Greenberger

Congressional Testimony

No abstract provided.


Energy Speculation: Is Greater Regulation Necessary To Stop Price Manipulation? Part Ii., Michael Greenberger Jan 2008

Energy Speculation: Is Greater Regulation Necessary To Stop Price Manipulation? Part Ii., Michael Greenberger

Congressional Testimony

No abstract provided.


Corporate America Fights Back: The Battle Over Waiver Of The Attorney-Client Privilege, Michael L. Seigel Jan 2008

Corporate America Fights Back: The Battle Over Waiver Of The Attorney-Client Privilege, Michael L. Seigel

UF Law Faculty Publications

This Article addresses a topic that is the subject of an on-going and heated contest between the business lobby and its lawyers, on the one side, and the U.S. Department of Justice on the other. The fight is over federal prosecutors' escalating practice of requesting that corporations accused of criminal wrongdoing waive their attorney-client privilege as part of their cooperation with the government. The Department of Justice views privilege waiver as a legitimate and critical tool in its post-Enron battle against white collar crime. The business lobby views it as encroaching on corporations' fundamental right to protect confidential attorney-client ...


Stoneridge Investment Partners V. Scientific-Atlanta: The Political Economy Of Securities Class Action Reform, Adam C. Pritchard Jan 2008

Stoneridge Investment Partners V. Scientific-Atlanta: The Political Economy Of Securities Class Action Reform, Adam C. Pritchard

Articles

I begin in Part II by explaining the wrong turn that the Court took in Basic. The Basic Court misunderstood the function of the reliance element and its relation to the question of damages. As a result, the securities class action regime established in Basic threatens draconian sanctions with limited deterrent benefit. Part III then summarizes the cases leading up to Stoneridge and analyzes the Court's reasoning in that case. In Stoneridge, like the decisions interpreting the reliance requirement of Rule 10b-5 that came before it, the Court emphasized policy implications. Sometimes policy implications are invoked to broaden the ...


Plea Bargaining's Survival: Financial Crimes Plea Bargaining, A Continued Triumph In A Post-Enron World, Lucian E. Dervan Jan 2007

Plea Bargaining's Survival: Financial Crimes Plea Bargaining, A Continued Triumph In A Post-Enron World, Lucian E. Dervan

Law Faculty Scholarship

This article examines the war on financial crimes that began after the collapse of Enron in 2001. Although many believed that the reforms implemented following this scandal led to greater prosecutorial focus on financial crimes and longer prison sentences, an analysis of data from 1995 through 2006 reveals that little has actually changed. The statistics demonstrate that the government's focus on financial crimes has not increased and prison sentences for fraud have remained stagnant. How could this be the case? It is this author's hypothesis that although prosecutors could have chosen to use new statutes and amendments to ...


Conflicts Of Interest And Corporate Governance Failures At Universal Banks During The Stock Market Boom Of The 1990s: The Cases Of Enron And Worldcom, Arthur E. Wilmarth Jr. Jan 2007

Conflicts Of Interest And Corporate Governance Failures At Universal Banks During The Stock Market Boom Of The 1990s: The Cases Of Enron And Worldcom, Arthur E. Wilmarth Jr.

GW Law Faculty Publications & Other Works

The re-entry of commercial banks into the securities business transformed U.S. financial markets during the 1990s. The Gramm-Leach-Bliley Act of 1999 (GLBA) removed most of the legal barriers that had separated commercial and investment banking since 1933. GLBA allows commercial banks to become universal banks by affiliating with securities firms and insurance companies. In large part, GLBA ratified the securities underwriting powers that commercial banks gained during the 1990s, based on a series of orders issued by federal regulators and federal courts.

By 2000, the top ten global underwriters of securities included three U.S. banks, three foreign banks ...


Still 'Ain't No Glory In Pain': How The Telecommunications Act Of 1996 And Other 1990s Deregulation Faciliated The Market Crash Of 2002, André Douglas Pond Cummings Sep 2006

Still 'Ain't No Glory In Pain': How The Telecommunications Act Of 1996 And Other 1990s Deregulation Faciliated The Market Crash Of 2002, André Douglas Pond Cummings

Faculty Scholarship

This article investigates the various flaws inherent in two short-sighted Congressional enactments, The Telecommunications Act of 1996 and the Commodities Futures Modernization Act of 2000 (CFMA). The article concludes that the Telecommunications Act and the CFMA, together with various 1990s deregulation legislation, led in large part to the collapse of the U.S. capital markets in 2002.

The article continues a comprehensive review undertaken in the recently published Ain't No Glory In Pain: How the 1994 Republican Revolution, the Private Securities Litigation Reform Act of 1995 and Certain 1990s Deregulation Contributed to the Collapse of the Unites States' Capital ...


What's Wrong With Being Creative And Aggressive?, W. Bradley Wendel Apr 2006

What's Wrong With Being Creative And Aggressive?, W. Bradley Wendel

Cornell Law Faculty Publications

When I tell people that I am a law professor specializing in legal ethics, they usually have one of two reactions: “Legal ethics—that’s an oxymoron!” or “I bet you always have a lot to do.” The second reaction is the more interesting of the two, because it rightly implies that legal ethics is a fascinating field, in part because lawyers are always thinking of new ways to get into trouble. Many run-of-the-mill lawyer disciplinary cases involve simple wrongdoing, such as stealing from client funds, which does not present conceptually interesting issues. Contemporary high-profile legal ethics scandals, by contrast ...


Ain't No Glory In Pain': How The 1994 Republican Revolution And The Private Securities Litigation Reform Act Contributed To The Collapse Of The United States Capital Markets, André Douglas Pond Cummings Feb 2006

Ain't No Glory In Pain': How The 1994 Republican Revolution And The Private Securities Litigation Reform Act Contributed To The Collapse Of The United States Capital Markets, André Douglas Pond Cummings

Faculty Scholarship

Ain't No Glory In Pain recalls the deregulatory legislation adopted by the 104th Congress in 1995 and 1996, including the shareholder lawsuit limiting Private Securities Litigation Reform Act (PSLRA) and connects several of those measures with the historic corporate malfeasance that marked the capital market collapse of 2001-02. I propose, in the face of recent calls for further efforts to deregulate crucial industries and further hamstring shareholder lawsuits, that Congress and the SEC work together to reject certain provisions of the PSLRA and act in ways to ensure investor protection in this post-Enron/WorldCom environment.


Enron And The New Disinterestedness - The Foxes Are Guarding The Henhouse, Nancy B. Rapoport Jan 2005

Enron And The New Disinterestedness - The Foxes Are Guarding The Henhouse, Nancy B. Rapoport

Scholarly Works

Discussion of the 2005 amendments to the U.S. Bankruptcy Code as those changes relate to conflicts of interest of investment bankers.


Realizing The Promise Of Restructuring The Electricity Market, Richard J. Pierce Jr Jan 2005

Realizing The Promise Of Restructuring The Electricity Market, Richard J. Pierce Jr

GW Law Faculty Publications & Other Works

In this contribution to a symposium on restructuring the U.S. electricity market, I summarize the peaks and valleys that have characterized the restructuring process over the past two decades. I begin by describing the reasons why I joined with a group of other academics twenty years ago in an effort to restructure the U.S electricity market. The market was characterized by large, well-documented structural and operational maladies; it had performed poorly for over a decade; its basic characteristics were consistent with increased reliance on market forces as an effective governance mechanism; and, our recent success in restructuring analogous ...


From Gregory To Enron: The Too Perfect Theory And Tax Law, Christopher H. Hanna Jan 2005

From Gregory To Enron: The Too Perfect Theory And Tax Law, Christopher H. Hanna

Faculty Journal Articles and Book Chapters

Although financial writers have been using magic terms in describing tax law (and accounting reporting), do such terms and theories really have a place in the law? This Article will show that there is a connection between magic and tax law. In a sense, tax lawyers are magicians in that they are able to structure transactions in a manner to minimize taxes, in many cases, to the complete bewilderment of their clients. Tax lawyers are constantly striving to structure transactions in ways that will withstand scrutiny from both the government and the courts. Experienced and well-informed tax lawyers know, however ...


The Jurisprudence Of Enron: Professionalism As Interpretation, W. Bradley Wendel Aug 2004

The Jurisprudence Of Enron: Professionalism As Interpretation, W. Bradley Wendel

Cornell Law Faculty Publications

Jurisprudence can seem like a formidably esoteric field, with conceptual arguments carried on at a high level of abstraction, seemingly remote from the concerns of practicing lawyers. In fact, it is impossible to ignore jurisprudence when thinking about the role of lawyers in the wave of financial accounting scandals exemplified by the collapse of Enron. The Enron case is not about ethics so much as it is about the interpretation and application of a complex scheme of legal norms to innovative business transactions. The lawyers believed they were taking a legitimate, albeit aggressive interpretive attitude toward the law, by structuring ...


The Jurisprudence Of Enron: Professionalism As Interpretation, W. Bradley Wendel Aug 2004

The Jurisprudence Of Enron: Professionalism As Interpretation, W. Bradley Wendel

Cornell Law Faculty Working Papers

Jurisprudence can seem like a formidably esoteric field, with conceptual arguments carried on at a high level of abstraction, seemingly remote from the concerns of practicing lawyers. In fact, it is impossible to ignore jurisprudence when thinking about the role of lawyers in the wave of financial accounting scandals exemplified by the collapse of Enron. The Enron case is not about ethics so much as it is about the interpretation and application of a complex scheme of legal norms to innovative business transactions. The lawyers believed they were taking a legitimate, albeit aggressive interpretive attitude toward the law, by structuring ...


Worker Ownership In Enron's Wake - Revisiting A Community Development Tactic, Peter R. Pitegoff Jan 2004

Worker Ownership In Enron's Wake - Revisiting A Community Development Tactic, Peter R. Pitegoff

Faculty Publications

Worker ownership of business enterprise has long been touted as a vehicle for community economic development. Employee stock ownership plans in leveraged buy-outs, ESOPs and broad-based stock options in going concerns, and worker cooperatives in selected sectors - the experience has varied widely in goals, method, and outcome.

This Article reflects on the continued utility of worker ownership as a component of community development and calls attention to contrasts with conventional corporate governance and goals. Rather than an end in itself or just another way of doing business, worker ownership can be a vital element of a broader job creation, community ...


Dr. Jekyll & Mr. Skilling; How Enron's Public Image Morphed From The Most Innovative Company In The Fortune 500 To The Most Notorious Company Ever, Nancy B. Rapoport, Jeffrey D. Van Niel Jan 2004

Dr. Jekyll & Mr. Skilling; How Enron's Public Image Morphed From The Most Innovative Company In The Fortune 500 To The Most Notorious Company Ever, Nancy B. Rapoport, Jeffrey D. Van Niel

Scholarly Works

In this article, we explore the hypothesis that Enron's financial releases were so complex and misleading that no one could have predicted its rapid downfall, and we find that, contrary to our hypothesis, a number of people were contradicting Enron's own rosy view of itself long before the middle of 2001. We then talk about the ways in which Enron became part of the public consciousness, far beyond what it had done merely as a business entity.


Enron, Titanic, And The Perfect Storm, Nancy B. Rapoport Jan 2004

Enron, Titanic, And The Perfect Storm, Nancy B. Rapoport

Scholarly Works

In this article, I explore the contention of Jeffrey Skilling, former Enron CEO, that Enron's debacle was due to a perfect storm of events. I reject his contention, arguing instead that Enron's downfall was more like Titanic's - hubris and an over-reliance on checks and balances led to Enron's downfall. I then explore how character (especially of those at the top of an organization) can lead to Enron-like disasters, and I talk about how cognitive dissonance can lead to very smart people making very stupid decisions. I end with some musings about how lawyers can learn from ...


Was Arthur Andersen Different? An Empirical Examination Of Major Accounting Firm Audits Of Large Clients, Theodore Eisenberg, Jonathan R. Macey Jan 2004

Was Arthur Andersen Different? An Empirical Examination Of Major Accounting Firm Audits Of Large Clients, Theodore Eisenberg, Jonathan R. Macey

Cornell Law Faculty Publications

Enron and other corporate financial scandals focused attention on the accounting industry in general and on Arthur Andersen in particular. Part of the policy response to Enron, the criminal prosecution of Andersen eliminated one of the few major audit firms capable of auditing many large public corporations. This article explores whether Andersen's performance, as measured by frequency of financial restatements, measurably differed from that of other large auditors. Financial restatements trigger significant negative market reactions and their frequency can be viewed as a measure of accounting performance. We analyze the financial restatement activity of approximately 1,000 large public ...


"Tax Services" As A Trojan Horse In The Auditor Independence Provisions Of Sarbanes-Oxley, Matthew J. Barrett Jan 2004

"Tax Services" As A Trojan Horse In The Auditor Independence Provisions Of Sarbanes-Oxley, Matthew J. Barrett

Journal Articles

This article argues that the failure of the Sarbanes-Oxley Act of 2002 (SOx) to prohibit auditors for public companies from also providing tax services to audit clients or their executives and selling tax shelters to anyone remains a Trojan horse that threatens both the investing public and the auditing profession. Although SOx enacted several reforms designed to enhance auditor independence, the legislation and implementing regulations that the Securities and Exchange Commission (SEC) subsequently promulgated allow an auditor for a publicly traded company to provide tax services to the company as long as the audit committee preapproves the engagement.

As the ...


Derivatives And The Bankruptcy Code: Why The Special Treatment?, Franklin R. Edwards, Edward R. Morrison Jan 2004

Derivatives And The Bankruptcy Code: Why The Special Treatment?, Franklin R. Edwards, Edward R. Morrison

Faculty Scholarship

The collapse of Long Term Capital Management (LTCM) in Fall 1998 and the Federal Reserve Bank's subsequent efforts to orchestrate a bailout raise important questions about the structure of the Bankruptcy Code. The Code contains numerous provisions affording special treatment to financial derivatives contracts, the most important of which exempts these contracts from the "automatic stay" and permits counterparties to terminate derivatives contracts with a debtor in bankruptcy and seize underlying collateral. No other counterparty or creditor of the debtor has such freedom; to the contrary, the automatic stay prohibits them from undertaking any act that threatens the debtor ...