The impact of the options backdating scandal on shareholders dating rualesess
Sherron Watkins, Enron's sentinel, describes the debacle's details and warns that it could happen again. The Enron debacle was anything but simple, but what were a few of the reasons why it happened?
Nearly 5,000 were called to a massive meeting and told that the paychecks that they had recently received would be their last. In August of that year, Sherron Watkins, an Enron vice president, had sent an anonymous memo to Lay that read, "I am incredibly nervous that we will implode in a wave of accounting scandals." Of course, that's exactly what happened. (After sending the memos, she had met with Lay with no results.) Watkins was soon lauded as an "internal whistle-blower," brought before Congressional and Senate hearings to testify against her former bosses, and heralded by TIME magazine as a "Person of the Year," with World Com's Cynthia Cooper and the FBI's Coleen Rowley.
Furthermore, shareholders’ losses are directly related to firms’ likely culpability and the magnitude of the resulting restatements, despite the limited cash flow implications.
Thus, securities class actions have value beyond derivative lawsuits.
They are a stronger ex post disciplining mechanism, providing stronger deterrence against future executive fraud. Although carefully collected, accuracy cannot be guaranteed. Differing provisions from the publisher's actual policy or licence agreement may be applicable.
Enron was at one time the seventh largest company in the United States, based on Total Revenues.
It collapsed into bankruptcy without ever reporting a losing quarter.