-------------------------------------------------
Enron Case
Introduction
To explain the Enron’s scandal, it is important to replace the context of the story. Enron was an energy company, operating almost exclusively in America. The company was based in Houston, Texas. The company was founded in 1985 and directed by Kenneth Lay, CEO of Enron.
The company was very successful indeed, in 1995, Enron has been considerate as the world’s leading company. Moreover, from 1993 to 2000, Enron was listed in the Fortune 500 as the 7th most innovative company with revenue superior to $ 100 billion. And finally, in 2001, Enron is the largest energy group operating mainly in the United States.
The scandal started in 1997 with the beginning of partnerships called LJM (LJM was an acronym of Lay’s family’s members). Those partnerships turned out to be fake, and the loans made to Enron’s were perceived as sales. The accountant of the company, Watlkins, is the whistleblower, the one who reveal the scandal.
In October 2001, Enron’s recorded a loss of $618 million and in December of the same year, Enron declared the bankruptcy.
Question 1: Relative risks of substantial intangible assets
First, the substantial intangible assets of Enron are: intellectual property, talent to innovate, financial acumen and finally the reputation. We can say that the value of intangible assets is more variable than the value of tangible assets. The risk of intangible assets is higher than the risk of tangible assets because the company can’t sell these assets on a secondary market so they might not be liquidated at a reasonable price.
The examples of decreasing value of intangible assets of Enron are: reputation of Enron could change; Enron could lose patent and after a scandal, the brand could have a bad image.
Question 2: Phrases « train crash » and « house of cards »
In order to describe Enron’s collapse, the commentators used the phrases “train crash” and “house of cards”.
The expression