By Janet L. Molinaro

An ODU accounting professor has turned the spotlight on Enron, the defunct Texas gas and oil company, as a teaching tool for business students exploring abuses of financial reporting standards. Professor Abdel M. Agami said he chose Enron as the topic of a research paper because it reveals on many levels the disastrous consequences of corrupt accounting practices. Enron’s manipulation of financial reporting rules and its attempts at covering up its losses eventually led to a complete downgrade of its stock value, followed by bankruptcy and the company’s collapse. Employees’ jobs as well as their retirement savings were casualties of Enron’s demise.

Enron and the business climate that prevailed in the 1990s are ripe for classroom study, Agami says in his paper titled “What Lessons Can We Learn from Enron's Collapse? A Case Study,” published in the latest edition of Southeast Case Research Journal. He has used the case study for graduate students in his Seminar in Financial Accounting. Now that it is published, he hopes other faculty can use it in their financial reporting, finance and business ethics courses.

The paper presents four main subject areas, complete with questions and recommended approaches for classroom discussion. Areas include accounting standards, management ethics, auditor actions and financial analysts’ allegiances in the face of suspected abuses.

Interest in Enron persists to this day, more than three years after its president, Kenneth Lay, resigned the last of his positions in February 2002.

A documentary released in theaters recently, “Enron: The Smartest Guys in the Room,” uses the company’s own in-house video, along with footage from testimony before Congress and interviews with former employees, to document the unraveling of the once-mighty company.

The movie depicts management optimistically predicting its ability to recover its financial footing while, in parallel events, Enron’s chief financial officer resigned in July 2001, followed in August 2001 by its president and CEO, Jeffrey Skilling, who stepped down after hurriedly selling $200 million of his stock before the company collapsed. Enron chairman Lay agreed to become president and CEO in August 2001 when Skilling departed. While Enron’s may have been the most spectacular collapse, Agami’s research cites other companies that have stretched financial reporting rules to paint a rosy picture of their financial health.