Bernie Madoff

Within the last decade there have been many problems with scams and crooks in the business world. Every couple of months it seems that there are new problems in the United States, let alone the entire world. People continue to find new ways of destroying our trust in humankind. For some reason, people believe they deserve money or objects more than someone else. The news is littered everyday with new ways people have stolen money from somewhere. There are many ethical questions that need to be asked to the people that are doing the stealing. There have been recent problems with organizations from large companies to small businesses to even the government. I would like to discuss some of these recent struggles that people seem to have with following a moral code of ethics. Some of the largest scandals I have heard about within the last decade date from the Enron scandal to the Bernie Madoff scandals that are still being felt today.

The first, and probably most well known, scandal of the decade involved Enron. Enron was a large energy company. The scandal that involved Enron and Arthur Anderson was discovered in October of 2001. In only the first nine months of that year, Enron reported an increase of $37.9 billion in revenues. These year-by-year increases were unprecedented for any industry, including the energy industry. The reason it looked as though Enron had large revenues was because of the accounting loopholes, special purpose entities, and poor financial reporting used by the accountants both in Enron and Arthur Anderson. They were able to hide billions of dollars of debt that arose from failed projects and deals. Andrew Fastow, the CFO, was able to mislead both Enron's board of directors and the audit committee in charge of auditing Enron's books. These are the people that should have been able to catch and stop the actions before they became too large. Fastow was also able to convince Arthur Anderson to ignore all of the illegal activity that was going on in the company. After the illegal activities were discovered in October of 2001, it took all of a month for Enron's stock price to drop from $90 per share to less than $1. This plummet caused people to lose $11 billion. The plummet also caused Enron to file for Chapter 11 bankruptcy. After the bankruptcy, there were trials held for the people who committed so many financial crimes. In the end, sixteen people pleaded guilty for crimes committed at the company, and five others, including four former Merrill Lynch employees, were found guilty at trial. Arthur Anderson, one of the five largest accounting firms at the time was dissolved, and was charged with and found guilty of obstruction of justice for shredding the thousands of documents and deleting e-mails and company files that tied the firm to its audit of Enron.

This was one of the worst financial crimes ever committed. The cause of all of this was greed. The people of Enron just continued to want more and more and more. While they were already very wealthy, they felt they needed more money. Their greed in the end was their downfall. They were able to get away with stealing money for a little while, but when the numbers started to look ridiculous for a long period of time, people began to get more suspicious. Between December 2001 and April 2002, the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services held numerous hearings about the collapse of Enron. These hearings and the corporate scandals that followed Enron led to the passage of the Sarbanes-Oxley (SOX) Act on July 30, 2002. The Act was made almost specifically for the Enron case. The major points of the SOX Act were the exact actions taken by Enron during their scandalous times. There were three main provisions of the Sarbanes-Oxley Act that were made mainly because of the Enron fiasco. The first was the establishment of the Public Company Accounting Oversight Board to form rules and standards for the preparation of audit reports. Secondly, public accounting firms were restricted from providing any non-auditing services when auditing a company. Finally, firms' relationships with unconsolidated entities had to be explained more thoroughly in the financial disclosures. Therefore, although Enron was a major scam that caused many people to lose jobs and money, there were some good things that came from it. The SOX Act is now in place to stop future companies from running the same scam Enron did. While the government and these boards wanted to trust companies, they realized they could not trust anyone when it came to these large amounts of money. They needed to put in laws that were part of codes of ethics.

Within the last couple years, there have been many problems with the United States' economy. A large reason the economy has been as bad as it is, is because of the loss of integrity of banks in America. These banks have been greedy and have ended up hurting many people. The banks have been loaning people money who are not able to pay the loans back. The banks then sold the loans to other banks or financial institutions. The banks that bought the loans would be on the hook for them when people could not make their payments. This was allowing the original banks to make a maximum profit. The original banks received money for the loans whether or not people would fully pay back the loans.

These events alone bring up many ethical questions. It is the banks job to make loans to people that need it, but they must make sure the people are able to pay the money back. By selling the bad loans to other banks, they were putting the banks in risk. The banks were very dishonest with these new banks that are now losing money. They

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