Lessons Learned from Fall of Enron Informing MBA Classes at University at Buffalo

BUFFALO, N.Y. -- Two former Enron employees -- 1996 graduates of the University at Buffalo's MBA program -- will discuss lessons learned from the ongoing Enron investigation and its long-term impact on business practices during a panel discussion sponsored by the MBA program in the University at Buffalo School of Management.

The panel discussion is only one example of how the UB School of Management and its faculty are bringing lessons from Enron into the classroom.

Husband and wife Jeff and Judy Gray, recently laid off from executive positions at Enron in Houston, will headline "Enron: What and Why it Happened and Its Impact on Business" at 7 p.m. on March 21 in the Drama Theater in the Center for the Arts on UB's North (Amherst) Campus. The event will be free and open to the public. Seating will be limited to 375 attendees.

The discussion will feature insights from two faculty members in the UB School of Management: SUNY Distinguished Teaching Professor Ronald Huefner, chair of the Department of Accounting and Law, and Lawrence Southwick, Jr., associate professor of finance and managerial economics. Lewis Mandell, UB professor of finance and managerial economics, will moderate the discussion.

Jeff Gray was an associate in Enron's financial trading, industrial organizations and public affairs divisions from July 2000 to December 2001. Judy Gray served as director of human resources for Enron's Energy Outsourcing unit from May 2000 to February 2002.

David Frasier, assistant dean and director of the UB MBA program, said the School of Management and its faculty are bringing lessons from Enron into the classroom in several ways. Panel moderator Mandell, for example, regularly uses developments in the Enron case as a teaching tool in his MBA-level Strategic Financial Management and Value Creation course.

MBA students in the Economics for Managers course taught by Isaac Ehrlich, chair of the UB Department of Economics and Baker Professor of American Enterprise, are analyzing the

"moral hazards" that led to scandals or bankruptcies suffered by Enron and other companies in the recent past, such as Sunbeam, Lucent, Rite Aid and Cendant.

"The issues are complex, but the big question for students is 'who will save us from Enronitis?,'" says Ehrlich. "Do we need more regulations and stiffer penalties or will market forces be enough to correct the situation and prevent future occurrences?"

Evelyn Patterson, assistant professor of accounting and law, cautiously refers to Enron and the role of outside auditor, Andersen, in her graduate and undergraduate accounting courses.

"I keep telling my students, the facts are not in and thus we cannot judge who has been engaged in wrong doing," Patterson says. "However, on the face of it, Enron illustrates that similar events repeat themselves -- only the names change. This is most evident in my Advanced Accounting course where we read and discuss audit cases, including those that involve fraud."

And Catherine Maritan, assistant professor of management science and systems, will use Enron to bring to life abstract issues of corporate governance and individual responsibility in her in Strategic Management course.

"We'll discuss how governance mechanisms, such as boards of directors, executive compensation and institutional investors, can contribute to value creation and prevent value loss," says Maritan. "I expect it to be of particular interest this semester given the high-profile example of value loss provided by Enron."

Jeff and Judy Gray are 1996 graduates of the UB MBA program, and Jeff Gray is returning to UB in the fall to complete his final year of law school and a doctoral degree in economic geography.

Their experiences at Enron will be the backdrop for the panel discussion on what went wrong at the energy company as it relates to financial disclosure, accounting practices, employee relations, corporate governance and the role of auditors and boards of directors.

"Enron is a major new economy event, with far-reaching regulatory implications," said Jeff Gray. "It is important for MBA students to understand the potentially destructive effects of market imperfections associated with poor market transparency."

"Enron succumbed to the dark side of unrestrained ambition and arrogance," he added.

The event is being organized by UB MBA students Jason Jankowiak and Chris Hart-Nova, who say their fellow students will benefit from an analysis of the underlying causes and after effects of the Enron scandal.

"We've all heard the CNN sound-bite version of the story," said Jankowiak. "But it's more helpful for MBA students to understand what went on behind closed doors at Enron so that we're prepared to make informed and ethical decisions during our own careers."

Hart-Nova added: "A lot of our regular coursework involves historic business cases. We wanted to create an opportunity for students to learn from an emerging case that could have a huge effect on American business practices."

For more information about attending the Enron panel discussion, call the UB MBA office at (716) 645-3204.