A BRIEF COLLECTION & COMPILATION OF HIGH PROFILE FINANCIAL FRAUDS
THE BERNIE MADOFF PONZI SCHEME -click
The largest Ponzi scheme in the history.A $ 50 Billion Ponzi scheme Cheating for personal gains and luxary living by false promises Over $50 Billion of funds. that was in operation for 20 years!!. Bernie Madoff owned a brokerage firm,a proprietary firm and an Investment Consultancy. Though not licenced ,he collected millions of dollors from family ,friends and other wealthy He registered a Bernard L. Madoff Investment Securities investors and started investing into a Ponzi Scheme which ultimately failed and all his as a brokerage fi rm with $200 of assets andno liabilities. invesstorslost their earnings.He pleaded guilty and without a trial was sentenced in 2009. Bernie had $5,000 dollors as working capital at that time. 150 years in prision.The onset of a major recession marked the beginning of end of Berni. Ponzi schemes are named after a scheme developed by Charles Ponzi. In 1920, Ponzi promised to double the money of investors within 45-90 days . However, he never invested the money. Instead, he deposited their money into his bank account and paid investors the promised return using new investor income. Over $50 Billion of funds were involved.
HEALTH SOUTH FRAUD -click
Fictitious Transactions and bribery by CEO Richard Scrushy. Fictitious transactions and accounts to boost the company’s earnings to show better position 1.4 Billion Dollors than what is real-Window dressing-using creative accounting methods and ultimately fraudulent Equivalent to the eanings of the company from 1996-2003. accountiong.Fraud went undetected till 2003. E&Y,auditors, also settled the shareholders’ class action lawsuit for $109 million, reaffirming their gross negligence in their audit of HealthSouth. 1.4 Billion Dollors Equivalent to the eanings of the company from 1996-2003 were lost.
THE SATYAM FIASCO-Indian Listed Company Founder chairman-Mr.Ramalinga Raju -click
Largest Fraud in the Indian Corporate Sector Mr.B.Ramalinga Raju was the founder of Satyam Computer Services in 1987. Accounts Books were "Cooked". At the beginning it employed about 50,000 employees and covered over 65 Countries. MAYTHAS Acquisition was to conceal the fraud. In 2008 the company was awarded the "Global Peacock Award" by the World Council The attempt that failed to Cover Fictitious Assets with Real ones for Corporate Governance. through the( Aborted) Deal of Maythas. Problems started in 2008 when he planned to buy Maytas properties for $1.3 billion Books were being cooked since 2004 till the Fraud is out in 2008. and a 51% stake in Maytas Infra for$300 Million. The deal was aborted on account of opposition by the Investors.Thus started the downfall of Satyam and subsequent Relevation by the chairman Mr.Ramalinga Raju bywriting a letter to SEBI chairman and stock exchanges,rvealing the fraud committed. The fraud of manipulation of books of a ccounts to show a better position than the real and thus the purported acquistion of share in Mytas and Mytas infra,to cover such gap' and "BigHole" in finances by fudging of books along with the help of PWC Auditors.The persons responsible for the massive Fraud are: 1.Mr.Ramalinga Raju-Founder Chairmam 2Mr..B.Rama Raju-Brother of Founder 3.Mr.V.Srinivas-CFO 4.S.Gopalakrishnan-PwC Auditor 5.Mr.Srinivas Talluri-PwC Auditor. 1.Inflated Cash & Bank balances(Rs.5,040Cr) 2.Accrued Interest that was non exitent 3.Under stating liablities(1,200?Crores) and over stated Debtors (Rs.about 500 Crores) 4.Wrong reporting of Revenues by about Rs.600- Crores. 5.The Employee numbers in flated by 13,000.
Fradulent accounting Methods In 2002 an internal auditor report showed use of fradulent accounting methods, to hide its declining financial condition.Its assets were inflated by 11 Million dollors with 3.8 Million dollors in fradulent accounts. The Company was purchased by xxxx communiucations. This company scandel has resulted in the introduction of Sarbane Oxely Act with sweeping business regulations since 1930s.
BRE-X MINERALS LIMITED -click
It is the Canadian Mining Company-Worst mining scandal. Bought a Purported Goldmine company in indonasia in 1993. .In 1995 the company announced the discovery of a veritable treasure chest that resulted in the company's stock soar high. However this turned out to be the worst mining scandal in Canada of all time when it was discovered the workers and miners falsified crushed core samples Because of this Bri-X stocks became worthless.
URBAN BANK -click
Economic sabatoge. It was the largest bank in the Philipines until it was closed down by the Philipines Insurance Company.Several of its officers were latter criminally charged by the economic sabatage due to their falsyfying supervision and examination of sector report to Monitor their board.Ultimately the bank was closed.
The Société Générale Banking Scandal -click
Jerome Kerviel ,rouge trader and The Banking scandal. Duran is a rouge traderwho tripped the world's financial markets due to his unauthorised trading in securities by using the bank's computers. The fraud came to light when the Bank tried to mask the fraud by unwinding his trades; This resulted in panic all over the Atlantic causing decline in European Markets. This scandal Resulted in $ 4.9 Billion Euros losses to the socity funds.
Inter bank manipulations It is one of the worlds largest banks.It has hammerred by scandal involving Involvement of CEO Bob Diamond and his subsequent resignation. Inter Bank Rates manipulation where banks made each other money at highrates. The company owned up to the allegations that they manipulated the inter bank offer rate which involved in trillion of dollors of contracts and derivatives. The CEO Bob Diamond resigned and the compan was asked to pay $450/ Million.
Unlawfl acts Personal Manager ,Klaus-Joachim Gebauer, procured prostitutes for firm's labour representatives in the interest of the company.it is no surprise Volkswagon came under heavy fire. The unlawful acts have brought the company disrepute and bad publicity.
STANFORD FINANCIAL -click
Missue of money kept in trust $7.0 Billion Ponzi scheme that left several investors penniless even after 5 years of the fraud. Stanford International Bank in Antigua, which was owned by Texas financier R. Allen Stanford. Some 25,000 investors bought in good fath certificates of deposit from Stanford.However these monies were put in hedge funds and lost. About $8.0billion was lost.
LANCE ARMSTRONG- OF LIVESTRONG. FOUNDATION -click
Doping Confessions Lanes doping confessions effected the whole oganisation Being a Tour de France champion may loose title Lance Armstrong had several million dollors investment in SRAM,American Bicycle components and manufacturer. Being a Tour de France champion may loose title and sponsorships.
Tyco isa diversified manufacturing and service company involved in Fire safety and protection systems,electronic security servicess Medical products and engineered procuts and services. CEO and CFO stealing money as executive compensation at shareholders expense. The CEO spent 2.0 Million dollors birthday bash to his wife on a medeteranian Island. its CEO Dennis Kozlowski and CFO Mark H. Swartz were found guilty of stealing $600 million. by improper accounting practices and misleading investors. From 1996 through 2002 there was violation of Federal Security Laws and acquired 700 companies pursuant In its plan to become aglobal,diverssified manufacturing and service congloromate. Kozlowski became an executive officer of Tyco, and, in 1997, became Tycos Chairman. Kozlowski resigned his positions with Tyco in June 2002 and was subsequently indicted by a New York State grand jury.On June 17th 2005 ,a New York State Jury found Kozlowski guilty of twenty two of the twentu three counts against him. The company overstated its operating income by an aggregate amount of one Billion dollors. Failed to disclose millions of dollors of executive compensation, executive indebtedness, and related party transactions.
Biggest accounting fraud-painstakingly made accounting Fraud. The Accounting Disaster. It became Jack Of all Trades-Gas,trading futures in Gas, Derevatives,trading in commodities,dot.Com business. Houston,Texas, based energy ,Commodities and services company .Shares dropped from $90 to 0.50$ in October 2001.Filed for Bankruptacy in 2001. Enron employed approximately 20,000 staff with revenues of about $101 Billion. Named America's "Most innovative company"for six consequitive years by Fortune. Enron's assets and profits were inflated or even wholly non existenet and fradulent. In 2001, followed by then CEO Jeffrey Skilling’s resignation was a disclosure of losses incurred by Enron 1st time in 4 years. Furthermore, the losses incurred were to the tune of $586 million which included re-adjustment of earnings since 1997.Relationship with Bankers: Questionable relationship between Enron and bankers Citigroup and J.P Morgan Chase also contribute to the downfall of Enron. In exchange of the potential profits from IB services, the banks had lend money to Enron and promote it’s derivates and securities. The Fall of Enron shook the entire US economy and it’s global perception of ethics.Corporate and Auditing Accountability, Responsibility, and Transparency Act of 2002 or Sarbanes-Oxley Act came in 2002. Many of Enron's recorded assets and profits were inflated or even wholly fraudulent andNonexistent. Debts and losses were put into entities formed "offshore" that were not included in the company's financial statements, and other sophisticated andarcanefinancial transactions between Enron and related companies were used to eliminateunprofitable entities from the company's books.The fraud has resulted in $30Million self-dealings by CFO $700 Million Net earnings disappeared $1.2 Billion shareholders equity disappeared About $4.1 Billion in hidden assets.
Bribery & Corruption SIEMENS AG and the Greek Govt. were underfire for bribing and corruption Bribes may be to the tune of $100 Million. which involved deal for security systems in 2004 SummeOlympic Games at Athens .
HELWETT PACKKARD -click
Spying scandal-Phone tapping at the behest of its chair woman-Patricia Dunn. The Helwett Packkard Scandal allegdely carried out at the behest of its chair woman petrusia Dan.She contracted a team of independent security experts to investigate some board members and several journalists by tapping their phone records.It backfired and resulted in Don's resignation and suceeded by CEO Mark Heard.
BARINGS BANK click
Employee Negligence. Oldest Merchant bank in the city of London and Founded by the German born Bearing family. This bank handled Queens personal accounts and also the financier of Napolenic wars.. Thee bank collapsed in 1995 due to one of its employees negligence who squandered 827 million pounds in speculative investment in future contracts at bank's Singapore Office.
SWISS AIR click
Poor expansion programme. Grounded in 2001 due to poor expansion pogramme that resulted in financial crisis and also effected its parent company which was effected by September 2001 attacks.Entire swiss fleet was grounded and offcially dismantled and in 2002 latter acquired by Cross Air.
Questionable Accounting practices by the Italian Company. It is a tiny leadig global producer of ultra hot temperature Milk and other feeds.its founder Calistotanzi was accused of questionable accounting practices in 2003 .He was selling credit link notes of the company and diverting the finds elsewhere. 14 Billion dollors deficit was discovered.
ARTHUR ANDERSEN -click
Certified independent Auditors Involved with Enron Scandal, Arther Anderson was one of the world's five leading accounting firms.Was paid $2Million in 2000 for non audit related matters.They assisted ENRON to set up partnerships and in turn Special Purpose Entities-SPEs for their accounting manipulations.Voluntarily relinquished licence resulting in loss of 5000 jobs in corporate rebranding.
DEUTSCHE BANK SCANDAL click
Spying on directors and snooping on personal lives of its investors. Dois Bank AG is General Global Banking & Financial Services Company.They were caught spying not only on its board of directors but alsdo on the personal life of its investors.It is also the largest foreign dealer in the world. it has presense in Europe,Us ,Asia Pacific and the emerging markets.In 2006 it hasbecome paranoid when it hiredc an external detective agency to snoop on contacts between board members and a Munich based media magnet Leokursh and his associates.
MARTHA STEWARTS click
Insider Trading,Obstruction of justice. Steward is a household name as a business magnet,author and Magazine publisher. she has been very successsful to numerous best selling books.However she got entangled in Incon insider traing in 2002 and was indided on nine counts of securities fraud and obstruction of Justice.However she has bounced back and regained her company in 2012.Martha steward was indided on nine counts of securities fraud and obstruction of justice.
BEARN STEARNS COMPANIES INC. click
Banking security fraud Biggest bailout by the Government. one of the biggest and largest Global Investment US Govt.bailouts of banking securities and brokerage firms. The firm before it went bankrupt was sold out to JP Morgan chase for $2/ per share.
BANCO INTERCONTINENTAL- BANINTER. click
Fraudulent book keeping and political corruption in 2003. The 2nd biggest privately held commercial bank in the Domican Republic. Frauds and political corruption in 2003 resulted in the Domican Republic go to go on a steep decline as fradulent book keeping and political influence by the administration of the former president xxxxMeyya resulted in a 2.2 billion dollor deficit or 12-15% of the country's GDP.
ADELPHIA COMMUNICATIONS CORP click
Internal Corruption & Security Violations Extravagant Life styles by family memebers. Violations of The Racketeer Influenced and Corrupt Organizations Act.Breach of dutties and abuse of Control, Fradulent conveyance and corporate assets convertions. Pensulvynia based company was ranked as the 5th largest cable company in the US before it filed for bankruptacy in 2002 due to internal corruption. The founders were charged with security violations .John and Timothy Rigas were sentenced to 15-20 years in prison -while other officers were also indited.It is a family business.Manipulation of books and stocks prices. The former Adelphia chairman and his son Tim Rigas, Adelphia's former CFO. The Rigases, who were convicted on charges of wire and securities fraud in 2004, began serving their prison terms at a jail in North Carolina in 2007. In November 2011, they were transferred to Allenwood. John Rigas, isn't scheduled to be released from Allenwood until January 2018. Tim Rigas is scheduled to be released in June 2022.
GLOBAL CROSSING LIMITED click
Personal Loans by four CEOs. In terms of of assets the company bankruptacy can be considered to be the 7th largest falling in the American history.The debt was 12.4 Billion dollors was amassed by four CEOs where each was given 23 Million dollors as personal loans which were ultimately firgiven.In 2004 however the company showed improved margin and ultimately bounced back.
HIH Insurance click
False and misleading statements by director Rodler. Breach of good faith as director. Its corporate downfall can be considered the largest in Australian History. It was the 2nd largest Insurance company until it entered into provisional liquidation in 2001.It in curred losses totalling to Australian 5.3 Billion dollors, when its director Rodney Adler was sentenced to 4.6 yrs in jail time for obtaining money by false and misleading statements and privy to discharges of DDs as Director in good faith.Incurred over $5 Billion Australian dollors in losses.
Freddie Mac (2003) click
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.