The Ten Most Famous Corporate Money Scams

Over the last two decades, corporations emerged as financial powerhouses driving much of the economy and causing many scandals. Many listed committed money scams that affected millions of people in the United States. The lack of prosecution against those who participated in these crimes and the ongoing economic recession contributed the public demanding thorough investigations into possible corporate fraud and stricter policies to prevent it.

Ten Corporate Money Scams from the Last 20 Years

1. Waste Management Inc.           

In 1998, the Securities and Exchange Commission (SEC) found the several senior executives of Waste Management Inc. in Houston, Texas guilty of money scams by misrepresenting the company’s earnings through lying on financial documentation. In the end, they reported in over $1.17 billion in earnings that never occurred in an effort to maintain their jobs, salaries, and lifestyles. The company traded publicly so they knowingly misled their shareholders into investing millions of dollars that disappeared when the shares plummeted. The Founder and CEO, president, and three vice presidents settled the lawsuit filed by shareholders for $457 million. The SEC also fined the auditors, the Arthur Andersen Company, $7 million for their role in the cover-up. A. Maurice Meyers, the new CEO, and others discovered what happened and reported his findings to the SEC. He also started an anonymous tip line for employees to inform the company of any fraud in the future.

2. Enron Corporation
   

Another company based in Houston, Texas, the Enron Corporation caused such a scandal in 2001 their name is now synonymous with corporate money scams. Enron provided commodities and energy services in Texas, along with being a publicly traded company with thousands of employees. Through the help of the Arthur Anderson Company, again, the founder and first CEO, Kenneth Lay, the second CEO, Jeffrey Skilling, and the Chief Financial Officer, employed loopholes and poor fiscal documentation to cover up the debt from failed projects and deals. This resulted in shareholders losing $74 billion dollars, thousands of employees losing their jobs, and both investors and employees losing their retirement funds. The inflated stock prices caused concern, but the scam was revealed by an Enron employee, Sherron Watkins. Enron filed for bankruptcy, Skilling received a 24-year prison sentence, and Lay died before his jail time.

3. WorldCom
   

WorldCom, now known as MCI, Inc., is a telecommunication company operating nationally and headquartered in Ashburn, Virginia. Bernie Ebbers, the CEO, orchestrated one of the most famous money scams prior to being caught after filing bankruptcy in 2002. He forged financial records and overestimated the value of different acquisitions and profits. An internal audit discovered a loss of almost $80 billion dollars between 2000 and 2002 and rather than the $10 million earnings they reported. This led to 30,000 jobs being lost and investors losing $180 billion. Ebbers was fired and sentenced to 25 years in prison. This inspired Congress to pass the Sarbanes-Oxley Act for the largest overhaul of business regulation since mid-1930.

4. Tyco International Ltd.
   

Tyco International Ltd. is a security systems corporation operating out of Princeton, New Jersey.  The CEO, Dennis Kozlowski, and Chief Financial Officer, Mark Swartz, stole money from the company through illegal stock sales and fraudulent loans being masked as benefits and executive bonuses. The SEC and District Attorney of Manhattan discovered their money scams after suspicious activity involving the personal use of company funds, including the CEO throwing  his wife a $2 million island birthday bash, and the forgiving of large personal loans. They stole about $150 million dollars and overvalued the company’s income by around $500 million. The pair received an 8-25 year sentence and investors sued the company for almost $3 billion. 

5. HealthSouth

HealthSouth is the largest health care company traded publicly and provider of rehabilitation hospitals in the United States. The SEC initially investigated the CEO, Richard Scrushy, when he sold stocks in HealthSouth, totaling $75 million, one day prior to the company posting a significant loss. The SEC accused him of money scams, fabricating transactions and falsifying record books to inflate the earnings of HealthSouth by $1.4 billion. A court found him innocent of the charges, but in 2009 HeathSouth investors sued him for $2.8 billion in fraud and succeeded.

6. Freddie Mac
   

Freddie Mac, originally the Federal Home Loan Mortgage Corporation, stood trial and conviction in 2003 for one of the most famous corporate money scams after Enron. The mortgage-financing company received federal backing and did not pay state or local taxes. The SEC investigated Freddie Mac and found the President, David Glenn, CEO Leland Brendsel, ex-Chief Financial Officer, Vaughn Clarke, and other high-level executives guilty of understating and inflating earnings of $5 billion. The president, CEO, and ex-CFO were fired and the company was forced to pay fines of $125 million.

7. American Insurance Group

The American Insurance Group, AIG, is a global insurance company operating out of New York and conducting business in over 100 countries. In 2005, the SEC, the Justice Department, and the New York Attorney General found the company, under CEO Hank Greenberg, informed traders to overvalue stock prices, encouraged clients to insure with companies that rewarded AIG, and recorded loan funds as profits. This resulted in $3.9 billion of fraudulent earnings. Greenberg never faced conviction and AIG settled with four different pension funds for $840 million and with the SEC for $1.74 billion total for their money scams.

8. Lehman Brothers

The Lehman Brothers is an international financial services corporation that filed for bankruptcy in 2008. This led to the discovery of money scams performed by the company’s senior executives and auditors, Ernst and Young, and contributed greatly to the global financial crisis. Lehman Brothers disguised $50 billion of assets as profits by pretending to sell them to banks in the Cayman Islands with the promise of repurchase. The SEC could not prosecute the company due to lack of evidence. 

9. Bernard L. Madoff Investment Securities, LLC
   

Bernard L. Madoff Investment Securities, LLC, is an investment firm founded by Bernie Madoff. He and fellow executives conducted one of the biggest Ponzi money scams in the U.S. He swindled investors by paying their returns from their own money or other investors’ money and not profits. This led to the loss of $65 million in fraud. Madoff was caught in 2008 when his sons reported his fraudulent dealing to the SEC, resulting in a prison sentence of 150 years and restitution fines of $170 billion.

10. Saytam Computer Services

Saytam Computer Services was a global IT service company from India that traded publicly in the United States. The founder and chairman, Rambling Raju, and his brother fabricated earnings, margins, and retirement plans that fraudulently increased their earnings by $1.5 billion. Raju and others were caught when he resigned and confessed the scam to Saytam’s board of directors in 2009. The brothers were charged, but never convicted since the Central Bureau of Investigation did not file with the court in time.