Top 10 Corporate Frauds of the 20-21st Century
There has been a tremendous increase in the number of corporate frauds during the last century. These frauds have been found to have spirally effected the incomes and savings of common man. Losses of in billions is the outcome of such fraudulent corporate sector. So more and more stringent rules and regulations are getting developed against these corporate practices and accounting business. Let us find about the top 10 corporate frauds which have shaken the base of corporate firms.
The Enron collapsed in the year 2001. From a company worth $63.4 billion, it collapsed to a bankruptcy reorganization. This emerged as a sudden trauma to the general public. It was considered that Enron’s failure was actually the failure of the accounting, leading to the subsequent dissolution of Arthur Anderson. Arthur Anderson was one of the largest accounting farms in the world. The value in the stocks fell from $83.01 (in the early days of 2001) to $0.01 (in October 2001). More than 15,000 corporate employees lost their savings in the stock.
- Bernie Madoff
Bernie Madoff was sentenced 150 years of imprisonment. This was considered to be the maximum sentence one would have ever been convicted. And in the history of corporate fraud this conviction was an ultimate shock. He showed falsified profits to his clients to run an amazing scheme by name “Ponzi”. He showed them false profit reports out of the money invested by his clients. The actual net fraud was calculated between $14-$17 billion by the SEC authorities.
- Subprime Mortgage Crisis
The above crisis was not involved in a single corporate. The crisis had led to the demise of many other corporates. The influence of the Subprime Mortgage crisis can be still felt in the US and Europe. It had caused so many banks and finance firms to close down. It had an extremely adverse effect on the financial institutions. The result of this crisis has led to reformation of the rules and regulations in the finance sector on a large scale.
This is an ongoing real estate and finance crisis. The crisis was triggered by a sudden rise in mortgage delinquencies and dramatic foreclosures in the United States. Its effects were observed globally affecting global corporate market.
- Satyam Computers
Mr. Ramalinga Raju, the former CEO of Satyam Computers declared that the profits of Satyam Computers were overstated for many years. This declaration disclosed the biggest corporate scam in India. It showed a fraud of above 7,000 crore Indian rupees based on inflated bank figures and understated liabilities.
One of largest corporate failure in the Us was declared on 21st July in the year 2002. On this date, Worldcom filed for bankruptcy under Chapter 11. It was also an accounting scandal that accounted for about $ 11 billion. It seemed that the working of Worldcom was masked by a false portrait of profits and margins. But it could emerge out of bankruptcy in the year 2004 with $5.7 billion in debt and $ 6 billion in cash.
- Barlow Clowes
Barlow Clowes was involved in the largest corporate scandals in the English Land. The company started declining when it was disclosed that it’s co-owner, Peter Clowes had spent more than $100 million from his client’s money on private items. The gradual decline resulted in the complete collapse of the company knowing that the client’s money was spent on private air crafts, luxury yachts and cars. During 1980s, a gilts management service controlled millions of pounds from the client’s funds.
Daewoo used to be known as the largest corporate firm in Korea before it dismantled in the year 1999. It’s inefficient financial management led to the collapse of the firm. The worldwide financial crisis and the increasing labor unrest also added to the factors of failure. The collapse resulted in a loss of billions of dollars and led to a political crisis.
- Fannie Mae & Freddie Mac
Out of the $ 12 trillion mortgages in the USA, more than half of these mortgages were owned by Fannie Mae & Freddie Mac. This was the scenario before these two companies collapsed in the year 2008. On 7th September in the year 2008, James Lockhart, Director, Federal Housing Finance Agency (FHFA), announced –
“Fannie Mae and Freddie Mac were being placed into conservatorship of the FHFA”
The action is “one of the most sweeping government interventions in private financial markets in decades”.
AIG was an American Insurance Company. It went into a mode of crisis in the year 2008. Their credit rating were downgraded, which made them unable to access any funds to overcome the crisis. Once AIG was the largest company in the world. It’s financial losses and fraudulent activities led to its downfall.
Phar-Mor had more than 300 stores employing more than 25,000 employees in the year 1992. It had established itself as a discount drugstore which ran successful chain of business units throughout the US. It aimed at larger merchandise but small profits. But later the owners were accused of deceptive inventories, fudged data and large scale embezzlement in the year 1992. They had hidden their losses allegedly and had transferred about $10 million to the World Basketball League from Phar-Mor. They even burrowed multi-millions from banks and similar institutions on the premise of its unusually rapid growth financially. They did this based on deceptive data and inventoryng. But actuality, this cash was burrowed to pay off their suppliers. So Phar-Mor had to file for bankruptcy protection. It closed about 55 stores and firing more than 5,000 employees.