If there is one theme to rival terrorism for defining the last decade-and-a-half, it would have to be corporate greed and malfeasance. Many of the biggest corporate accounting scandals in history happened during that time. Here’s a chronological look back at some of the worst examples.

Waste Management Scandal (1998)

  • Company: Houston-based publicly traded waste management company
  • What happened: Reported $1.7 billion in fake earnings.
  • Main players: Founder/CEO/Chairman Dean L. Buntrock and other top executives; Arthur Andersen Company (auditors)
  • How they did it: The company allegedly falsely increased the depreciation time length for their property, plant and equipment on the balance sheets.
  • How they got caught: A new CEO and management team went through the books.
  • Penalties: Settled a shareholder class-action suit for $457 million. SEC fined ArthurAndersen $7 million.
  • Fun fact: After the scandal, new CEO A. Maurice Meyers set up an anonymous company hotline where employees could report dishonest or improper behavior.

Enron Scandal (2001)

  • Company: Houston-based commodities, energy and service corporation
  • What happened: Shareholders lost $74 billion, thousands of employees and investors lost their retirement accounts, and many employees lost their jobs.
  • Main players: CEO Jeff Skilling and former CEO Ken Lay.
  • How they did it: Kept huge debts off balance sheets.
  • How they got caught: Turned in by internal whistleblower Sherron Watkins; high stock prices fueled external suspicions.
  • Penalties: Lay died before serving time; Skilling got 24 years in prison. The company filed for bankruptcy. Arthur Andersen was found guilty of fudging Enron’s accounts.
  • Fun fact: Fortune Magazine named Enron “America’s Most Innovative Company” 6 years in a row prior to the scandal.

WorldCom Scandal (2002)

  • Company: Telecommunications company; now MCI, Inc.
  • What happened: Inflated assets by as much as $11 billion, leading to 30, 000 lost jobs and $180 billion in losses for investors.
  • Main player: CEO Bernie Ebbers
  • How he did it: Underreported line costs by capitalizing rather than expensing and inflated revenues with fake accounting entries.
  • How he got caught: WorldCom’s internal auditing department uncovered $3.8 billion of fraud.
  • Penalties: CFO was fired, controller resigned, and the company filed for bankruptcy. Ebbers sentenced to 25 years for fraud, conspiracy and filing false documents with regulators.
  • Fun fact: Within weeks of the scandal, Congress passed the Sarbanes-Oxley Act, introducing the most sweeping set of new business regulations since the 1930s.

Tyco Scandal (2002)

  • Company: New Jersey-based blue-chip Swiss security systems.
  • What happened: CEO and CFO stole $150 million and inflated company income by $500 million.
  • Main players: CEO Dennis Kozlowski and former CFO Mark Swartz.
  • How they did it: Siphoned money through unapproved loans and fraudulent stock sales. Money was smuggled out of company disguised as executive bonuses or benefits.
  • How they got caught: SEC and Manhattan D.A. investigations uncovered questionable accounting practices, including large loans made to Kozlowski that were then forgiven.
  • Penalties: Kozlowski and Swartz were sentenced to 8-25 years in prison. A class-action lawsuit forced Tyco to pay $2.92 billion to investors.
  • Fun fact: At the height of the scandal Kozlowski threw a $2 million birthday party for his wife on a Mediterranean island, complete with a Jimmy Buffet performance.

HealthSouth Scandal (2003)

  • Company: Largest publicly traded health care company in the U.S.
  • What happened: Earnings numbers were allegedly inflated $1.4 billion to meet stockholder expectations.
  • Main player: CEO Richard Scrushy.
  • How he did it: Allegedly told underlings to make up numbers and transactions from 1996-2003.
  • How he got caught: Sold $75 million in stock a day before the company posted a huge loss, triggering SEC suspicions.
  • Penalties: Scrushy was acquitted of all 36 counts of accounting fraud, but convicted of bribing the governor of Alabama, leading to a 7-year prison sentence.
  • Fun fact: Scrushy now works as a motivational speaker and maintains his innocence.

Freddie Mac (2003)

  • Company: Federally backed mortgage-financing giant.
  • What happened: $5 billion in earnings were misstated.
  • Main players: President/COO David Glenn, Chairman/CEO Leland Brendsel, ex-CFO Vaughn Clarke, former senior VPs Robert Dean and Nazir Dossani.
  • How they did it: Intentionally misstated and understated earnings on the books.
  • How they got caught: An SEC investigation.
  • Penalties: $125 million in fines and the firing of Glenn, Clarke and Brendsel.
  • Fun fact: 1 year later, the other federally backed mortgage financing company, Fannie Mae, was caught in an equally stunning accounting scandal.

American International Group (AIG) Scandal (2005)

  • Company: Multinational insurance corporation.
  • What happened: Massive accounting fraud to the tune of $3.9 billion was alleged, along with bid-rigging and stock price manipulation.
  • Main player: CEO Hank Greenberg.
  • How he did it: Allegedly booked loans as revenue, steered clients to insurers with whom AIG had payoff agreements, and told traders to inflate AIG stock price.
  • How he got caught: SEC regulator investigations, possibly tipped off by a whistleblower.
  • Penalties: Settled with the SEC for $10 million in 2003 and $1.64 billion in 2006, with a Louisiana pension fund for $115 million, and with 3 Ohio pension funds for $725 million. Greenberg was fired, but has faced no criminal charges.
  • Fun fact: After posting the largest quarterly corporate loss in history in 2008 ($61.7 billion) and getting bailed out with taxpayer dollars, AIG execs rewarded themselves…

Source: www.accounting-degree.org