Did you hear about the 5,300 Wells Fargo employees who were fired for wrongly opening 1.5 million accounts? They would move customers’ money and information into new accounts without their consent.
Have you heard about some of the juiciest and largest corporate scandals? In this article, you’ll discover some of the most shocking scandals, if it didn’t happen you wouldn’t believe it was true. Read on to discover these malicious accounting scandals.
1. Bernie Madoff Scandal (2008)
Let’s begin our list with the Bernie Madoff Scandal, which involved the Bernie L. Madoff Investment Securities LLC. This was a wall street investment firm started by Bernie Madoff. He tricked investors for $64.8 billion.
Those involved were Bernie Madoff, his accountant David Friehling, and Frank DiPascalli. Investors were paid returns from their money or from other investors than an actual profit.
Madoff got caught because he told his sons his plans, and they reported him. Madoff was arrested the next day. He received 150 years in prison and $170 billion restitution. Friehling and DiPascalli received prison time as well.
2. Waste Management Scandal (1998)
CEO Dean L. Buntrock of the Houston-based Waste Management company, along with top executives and The Arthur Andersen Company who were auditors were involved. They reported $1.7 billion in false earnings.
They increased the depreciation time length for their property, equipment, and plant on their balance sheets. The new CEO and management team had gone through the books and caught what was going on. It was a class-action lawsuit for $457 million. Arthur Andersen was fined $7 million.
Scandals can happen no matter how large or small. Do you know what a CPN is? Are cpn numbers illegal? You won’t want to miss finding out.
The HealthSouth scandal was organized by the CEO, Richard Scrushy. They came up with fake transactions and accounts in order to boost the company’s profit. They embezzled $1.4 billion which they claimed to be the company’s earnings from 1996-2003.
He was convicted in June 2006 of bribery charges toward Alabama’s governor to have a seat on the medical regulatory board.
Enron, an energy company, filed for bankruptcy in 2001 after being accused of a large accounting fraud of $78 billion in stock market value. It led to the collapse of Arthur Andersen, and the passing of the Sarbanes-Oxley Act of 2002.
There was a class action settlement of $7.185 billion. The former president, Jeff Skilling, received a 24-year sentence.
When the company was created by a merger of CUC International and HFS, a decade long accounting fraud was found. It cost estimators at least $19 billion. Securities class action lawsuits agreed to more than $3 billion. Former chairman Walter Forbes received 12 years and seven months in prison. He also had to pay $3.275 billion.
6. Fannie Mae
In 2006, Fannie Mae paid $400 million to settle charges of false financial statement from 1998-2004. December 2011, the SEC had a civil suit that charged 3 of the former top executives with securities fraud. They misled investors about the extent of their higher-risk mortgage loans during the financial crisis.
In 2008, the government took control of Fannie Mae.
7. Tyco International
The CRO Mark Swartz, and CEO Dennis Kozlowski received more than $150 million in false bonuses and loans from 1996-2002. Currently, they’re both in jail. Class action lawsuits cost the company $3.2 billion.
8. Adelphia Communications Corp
Adelphia Communications Corp was considered one of the largest cable companies in the U.S. before proclaiming bankruptcy because of internal corruption. They received a $2.3 million debt and the founders received securities violations. Timothy and John Rigas received a 15-20 year prison sentence, and 5 offices were indicted.
They had been doing a cash-management system where they placed funds to other family-owned companies.
9. Qwest Communications
Qwest’s stock dropped in 2002 because of an accounting fraud that spanned many years. The SEC and DOJ received a letter with all of the details of what was going on. The CEO Joseph Nacchio had to give up $44 million for insider trading and then went to jail.
There was a class-action lawsuit that added $400 million.
10. Barings Bank
Barings Bank was a bank in London which was formed by the German Baring family. They actually controlled the Queen’s personal bank. They collapsed in 1995 when Nick Leeson who was one of the bank’s employees lost $1.3 million through investing over 3 years.
He tried covering it up by manipulating records. He was then charged with fraud and forgery, and sentenced to 6 1/2 years in prison.
WorldCom had been using fraudulent accounting methods to hide their financial condition. They were inflated by $11 billion, and $3.8 billion in fraudulent accounts. Later, they were bought by Verizon Communications and named Verison Business Division.
Who hasn’t heard about Facebook or the scandal involved? If you haven’t, in 2018 it was found that over 87 million Facebook users’ data was sent to a company called Cambridge Analytica who was a political consulting firm.
Facebook later admitted they knew what Cambridge Analytica had been doing with the data, and did nothing. Mark Zuckerberg then had to meet with U.S. Congress several times along with the European Union. Stocks and faith in Facebook have gone down since.
In 2005, Volkswagen’s bribery affair was all across in headlines. Executives in the company were using incentives to secure contracts and business relationships. Over the course of 5 years, there were many investigations, resignations, and convictions that occurred.
Famous Corporate Scandals
There were and are numerous corporate scandals that happen, and these corporations think they’re protected until they’re not. These are some of the biggest scandals, but sadly they won’t be the first or the last.
Would you like to read about legalities in businesses to avoid being a scandal? Check out our other articles.