|
||||||
|
|
|
|
|
|
|
|
|
 |
 |
 |
 |
|
|
Wall Street
scandals at a glance
BBC
News, August 14, 2002
Spotlight on Wall Street Confidence
in corporate America has been shaken to the core by a series of accounting
scandals. What
started with an admission of false profits by Enron at the end of 2001, has
rapidly become a rout of some of the best known names on Wall Street during
2002. The
US financial watchdog has said that all firms must now certify the accuracy
of their accounts. WorldCom WorldCom
has admitted orchestrating one of the largest accounting frauds in history. In
June 2002, the company admitted it had inflated its profits by $3.8bn (£2.5bn)
between January 2001 and March 2002. Two
months later it confessed its accounting errors were almost double the level
previously reported - taking the total to more than $7bn. The
firm was already shrouded in scandal after the departure of its founder and
chief executive, Bernie Ebbers in April. Mr
Ebbers borrowed hundreds of millions from the firm to underwrite the
inflated prices he had paid for the company's own shares.
Enron When
energy giant Enron reported its third quarter results last October, it
revealed a large, mysterious black hole that sent its share price tumbling. The
US financial regulator - the Securities Exchange Commission - launched an
investigation into the firm and its results, prompting Enron to admit it had
inflated its profits. Once
it became clear that the firm's success was in effect an elaborate scam - a
chorus of outraged investors, employees, pension holders and politicians
wanted to know why Enron's failings were not spotted earlier. The
US government is now thought to be studying the best way of bringing
criminal charges against the company.
Andersen Attention
quickly turned to Enron's auditors - Andersen. The
obvious question was why did the auditors - charged with verifying the true
state of the company's books - not know what was going on? Andersen
reacted by destroying Enron documents, and on 15 June a guilty verdict was
reached in an obstruction of justice case. The
verdict signalled an end to the already mortally wounded accountancy firm.
Adelphia Telecoms
company Adelphia Communications filed for bankruptcy on 25 June. The
sixth largest American cable television operator is facing regulatory and
criminal investigations into its accounting. John
Rigas, the 77-year old founder and his two sons have been arrested, charged
with "looting Adelphia on a massive scale". The
company has restated its profits for the past two years and admitted that it
didn't have as many cable television subscribers as it claimed.
Xerox
In
April, the SEC filed a civil suit against photocopy giant Xerox for mis-stating
four years' worth of profits, resulting in an overstatement of close to
$3bn. Xerox
negotiated a settlement with the SEC with regard to the suit. As
part of that agreement, Xerox agreed to pay a $10m fine and restate four
years' worth of trading statements, while neither admitting, nor denying,
any wrongdoing. The
penalty is the largest ever imposed by the SEC against a publicly traded
firm in relation to accounting misdeeds.
Tyco In
early June, the US District Attorney extended a criminal investigation of
the firm's former chief executive, Dennis Kozlowski. Dennis
Kozlowski - the man behind the creation of the Tyco conglomerate - is
charged with avoiding $1m in New York state sales taxes on purchases of
artwork worth $13m. The
SEC enquiry into Tyco is understood to relate solely to Mr Kozlowski - but
there are investor fears the probe could reveal accounting irregularities.
Global Crossing
Global
Crossing was briefly one of the shiniest stars of the hi-tech firmament. The
telecoms network firm filed for Chapter 11 bankruptcy on 28 January. The
peculiar economics of bandwidth meant that firms could drum up the
appearance of lively business by trading network access with each other. They
could effectively book revenues when in many cases no money at all changed
hands. US
regulators are now looking closely at the collapse, questioning whether it
is another case of a company flattering its figures.
Qwest Hot
on the heels of Global Crossing came broadband giant Qwest. The
Denver-based telecoms firm was already under a criminal investigation when
it admitted that it would restate its profits. It
too has improperly accounted for about $1.16bn (£740m) in sales of optical
capacity on its network, as well as sales of communications equipment. It
claims it is still solvent, but there are worries over whether banks will
cut off its funding. Merrill Lynch In
this atmosphere of corporate distrust, the role of investment banks has also
faced increased scrutiny. Analysts
are suspected of advising investors to buy stocks they secretly thought were
worthless in order to secure lucrative deals. Merrill
Lynch reached a settlement with New York attorney general Eliot Spitzer. The
settlement imposed a $100m fine upon Merrill but demanded no admission of
guilt . Under
the deal, Merrill Lynch has agreed to sever all links between analysts' pay
and investment banking revenues. 12
more Wall Street investment firms are under investigation for laws related
to the conduct of their securities analysts.
FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Action on Aging distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
|
