Top 10 Corporate Scandals Ever

  • By: Staff Editor
  • Date: June 11, 2015
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Top 10 Corporate Scandals Ever

Corporate scandals, whether focused on corruption, bribery or accounting fraud, tend to have a significant impact on the economy. Some of the foremost accounting scandals of all time have astounded the financial world with their consequences. Most corporate scandals target investors, leading them to falsely believe that the company’s financial situation is better than it actually is.

Here is a look at some of the top corporate scandals of all the time.

Madoff Investment Scandal - Bernard Madoff's $65 billion Ponzi scheme was exposed in 2008 when he confessed to his sons about the scheme. It is the largest accounting fraud in the U.S. history. One of the major reasons Madoff went undetected for decades despite multiple reports to the SEC about suspicions of a Ponzi scheme is because he was a highly respected, well-established and esteemed financial expert. He helped launch the NASDAQ stock market and served a term as its chair. Moreover, unlike other Ponzi schemes, he didn't lure investors with unbelievable returns but offered them moderate returns.

Enron Scandal - The Enron scandal, revealed in October 2001, ultimately led to the bankruptcy of the Enron Corporation, a Houston-based commodities, energy and service corporation. As a result of Enron’s collapse, thousands of employees and investors lost their retirement accounts, and many employees lost their jobs. Before its failure, Enron grew from nowhere to be America's seventh largest company, with nearly 21,000 employees in more than 40 countries. Thanks to its accounting frauds, Enron made history as one of the most remarkable bankruptcy stories ever.

Tyco Fraud - Tyco manufacturers a wide variety of products, from electronic components to healthcare products. In 2002, CEO Dennis Kozlowski and former CFO Mark Swartz were found guilty of stealing over $150 million funds through unapproved loans and fraudulent stock sales. This money was smuggled out of the company disguised as executive bonuses or benefits. Both these executives were sentenced to 25 years in jail.

HealthSouth Scandal - In March 2003, the SEC accused CEO Richard M. Scrushy of HealthSouth Corporation, the nation's largest provider of outpatient surgery, diagnostic and rehabilitative healthcare services, of a $1.4 billion accounting fraud. In 1996, Scrushy allegedly instructed the company's senior officers and accountants to falsify earnings reports in order to meet investors’ expectations and it continued for seven years until 2003 when SEC indicted him.

WorldCom Scandal - WorldCom, now known as MCI, was at one time the second-largest long distance phone company in the U.S. Nowadays, it is best known for a huge accounting scandal that led to the company filing for bankruptcy in 2002. WorldCom executives used fraudulent accounting methods to disguise its decreasing earnings to maintain the price of WorldCom’s stock. Former CEO Bernard Ebbers has been sentenced to 25 years for fraud, conspiracy and filing false documents with regulators.

Lehman Brothers Scandal - In September 2008, Lehman brothers failed and filed for bankruptcy. At the time of collapse, Lehman was the fourth-largest U.S. investment bank with 25,000 employees worldwide. It was the largest bankruptcy in history - larger than General Motors, Washington Mutual, Enron, and Worldcom combined, consequently, triggering the worldwide financial crisis. There were claims of accounting fraud against Lehman executives and its auditors, Ernst & Young, but SEC didn't prosecute due to lack of evidence.

Waste Management Scandal - Waste Management Inc. is a Houston-based publicly traded waste management and environmental services company .SEC accused the waste management founder and five other former top executives in 2002 of massive financial fraud. They manipulated the company's financial results to meet predetermined earnings targets.

Fannie Mae - Fannie Mae was fined $400 million by SEC in 2006 for manipulating financial statements from 1998 through 2004. Again, in December, 2011, six Fannie Mae executives were charged by the U.S. Securities and Exchange Commission with securities fraud. In 2013 the Los Angeles Times reported that a former foreclosure specialist at Fannie Mae has been charged but pleaded not guilty for accepting a kickback from an Arizona real estate broker in a Santa Ana Federal court.

Qwest Communications - Qwest Communications International, Inc. was a large U.S. telecommunications carrier. Qwest's stock traded as high as $64 in 2000 before dipping in 2002 to less than $1 because of securities fraud and other violations of the federal securities laws. Between 1999 and 2002, Qwest announced unrealistic revenue projections and then issued false and misleading statements to the public about the company’s financial condition. SEC and DOJ investigations were prompted by a whistleblower letter.

American International Group (AIG) Scandal - American International Group, Inc. (AIG) is an American multinational insurance corporation with more than 88 million customers in 130 countries. In 2005, AIG was sued because the company overstated their financial numbers and was hiding a loss of more than $11 billion. The CEO and many other senior executives were found guilty of improper accounting and insurance transactions.

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