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Essay on Sarbanes-Oxley Law
It all began with Enron. On October 16, 2001, Enron stunned Wall Street by announcing that it had a $618 million net loss for the third quarter and would reduce shareholder equity by $1.2 billion. October 16 was a Tuesday. On Wednesday, the SEC opened an inquiry and made a written request for information from Enron officials. Friday, Enron notified its auditor, Arthur Andersen, that the SEC had initiated an inquiry into Enron’s financial accounting practices. Four days after that, Andersen’s Enron engagement team began wholesale destruction of Enron-related documents.
Andersen and its lead partner on the Enron audit team now stand convicted of obstruction of justice, four former Enron executives have pled guilty to fraud charges, Enron’s Chief Financial Officer is under indictment and awaiting trial on ninety-eight counts of fraud and related offenses, Enron is bankrupt, and civil and criminal investigations continue to examine Enron’s complex accounting practices and byzantine financial schemes.
Fascinating in its own right, the Enron-Andersen saga enjoyed prominent front page coverage in major papers for an extended period of time. In the beginning, it was widely assumed that the Enron scandal was an anomaly. But it soon became clear that this was anything but an isolated case of financial accounting fraud at a major corporation. Enron’s record largest bankruptcy in United States history was soon eclipsed by WorldCom, whose less sophisticated accounting fraud led to a larger restatement of earnings, a larger bankruptcy filing, and equally far-reaching civil and criminal investigations.
Federal and state regulators have since initiated fraud investigations involving dozens of corporations, including Adelphia, HealthSouth, McKesson, Tyco, and Qwest. To date, some ninety corporate owners, executives, and employees have been criminally charged, and the investigations are ongoing. The enforcement net has also expanded to include detailed scrutiny of how investment banks and investment advisers may have contributed to these scandals....
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