Fraud Magazine editor Dick Carozza did an interview with Sherron Watkins, the internal [tag]whistleblower[/tag] who started raising hell at [tag]Enron[/tag] when she started discovering problems with the numbers. He asked Sherron why the Enron [tag]fraud[/tag] happened… whether management lost its way or whether the company was destined for problems. Sherron’s answer:

Many experts summarize “what happened” at Enron using two words, greed and arrogance. An accurate summary, I agree, but it fails to help others learn from Enron’s demise. How did greed and arrogance run amok at Enron? How did a company’s culture breed not only corruption from its own employees but also disreputable behavior from the outside auditors, lawyers, consultants, and lenders?

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What happened? It was a complete breakdown in moral values. But the scary part is that the breakdown was not done by outright intention but more by small steps in the wrong direction.

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Enron’s leaders set the wrong tone, so did Arthur Andersen’s leaders. [Arthur Andersen was Enron’s external auditor.] In the end, both companies put revenues and earnings above all else – the means by which those earnings were generated did not matter. Were laws broken? Yes. Were lives devastated by it? Yes.