For as long as corporations have existed, so have corporate scandals. While company leaders are often to blame, it takes a complicit accounting and finance team to make them happen. Here’s a look back at some of the biggest A&F scandals of the last two decades.
1998: Waste Management
When a new CEO took over Waste Management, a publicly traded company, he ordered his team to comb through the books. What they found made national headlines. The founding CEO, his management team and his auditing company, Arthur Andersen had colluded to report $1.7 billion in fake earnings.
2001: Enron
This commodities, energy and services corporation made the news when a whistleblower alerted regulators to some confusing, and extremely murky accounting practices. The firm was hiding debt from bad deals and inflating the price of its stock. The company eventually went bankrupt, resulting in $74 billion in losses, including employee retirement accounts.
2002: Worldcom
This former telecommunications company inflated its assets by as much as $11 billion by underreporting line costs and inflating revenues with fake accounting entries. The fraud was ultimately uncovered by the internal accounting team. 30,000 employees ended up losing their jobs and investors lost $180 billion. This scandal is what led to the passage of the Sarbanes-Oxley Act that same year, one of the most sweeping regulatory reforms the country had seen since The Great Depression.
2005: American Insurance Group
The SEC discovered that AIG was rigging bids, manipulating stock prices and engaging in accounting fraud to the tune of $3.9 billion. AIG didn’t actually learn its lesson after paying billions of dollars in fines. In 2008, after posting the biggest corporate loss in history and receiving a federal bailout, company executives collected $165 million in bonuses.
2008: Lehman Brothers
Many Americans know where they were when they heard about Lehman Brothers, because the firm’s bankruptcy was the first in the downward spiral that led to the Great Recession. Lehman and their auditing company, Ernst and Young, hid over $50 billion in loans by reporting them as sales by selling toxic assets to banks in the Caymans with the promise to buy them back.
2016: Wells Fargo
This national bank charged customers $1.5 million in fees for accounts they never opened. Wells-Fargo sales reps and managers made 565,000 false credit card applications, sometimes closing the accounts as quickly as they were given credit for opening them. This misconduct stretches back at least to 2005, but was not fully exposed until 2016.
The Integrity Of Your Business’s Finances
Sarbanes-Oxley had a major impact on US corporations that included: formation of the Public Company Accounting Oversight Board, standards for auditor independence, corporate responsibility and executive responsibility, detailed financial disclosure and balance sheet reporting, reducing conflicts of interest, fraud accountability, enhancement of penalties for white-collar crimes and more. However, laws like this have not stopped corporate malfeasance and “colorful” accounting practices among US businesses.
Keeping your business on the right side of the law has a lot to do with the people you put in place. A rogue leadership is often the source of trouble, but it takes collusion from the staff to see it through. Building a team of talented and ethical A&F professionals could be the key to keeping your business out of the headlines.
“At CSS, we pride ourselves in vetting Accounting and Finance candidates to understand their integrity and zero tolerance for being asked to cook the books. Consider adding interview questions to your process so we can team up on growing your department with long term quality!” Says Evan Violette, Sales Manager of the Professional Staffing Group at CSS.
If your company is seeking top accounting and finance talent, or you want to improve your accounting and finance hiring processes, contact the expert accounting and finance recruiters at Contemporary Staffing Solutions today.