Waste Management Scandal Essay

The Tyco scandal of 2002 was one of the biggest cases of corporate fraud and corruption that helped lead to the creation of the Sarbanes-Oxley Act. At the center of the scandal is Dennis Kozlowski, Mark Swartz, and Mark Belnick. Among them and members of associated businesses, multiple crimes, including accounting fraud, larceny, embezzlement, and bribery, were committed. The U.S. Securities and Exchange Commission (SEC) released a statement on September 12, 2002 in which it stated the following: Kozlowski and Swartz granted themselves hundreds of millions of dollars in secret low interest and interest-free loans from the company that they used for personal expenses. They later caused Tyco to forgive tens of millions of dollars they owed the

The major conspiracy was uncovered by Manhattan District Attorney, Robert Morgenthau, who was investigating Kozlowski for income tax evasion for some fine art work that he had purchased. As Morgenthau kept digging into the record keeping of Tyco and Kozlowski, it was determined that there were other situations that had occurred, such as a 10 million dollar loan that was totally forgiven by Tyco, and all interest was billed to the corporation. It became apparent on January

Between the years 2000 and 2002 there were over a dozen corporate scandals involving unethical corporate governance practices. The allegations ranged from faulty revenue reporting and falsifying financial records, to the shredding and destruction of financial documents (Patsuris, 2002). Most notably, are the cases involving Enron and Arthur Andersen. The allegations of the Enron scandal went public in October 2001. They included, hiding debt and boosting profits to the tune of more than one billion dollars. They were also accused of bribing foreign governments to win contacts and manipulating both the California and Texas power markets (Patsuris, 2002). Following these allegations, Arthur Andersen was investigated for, allegedly,

A few of their unethical decisions included to not properly dispose

However, due to Arthur Anderson’s relationship with Enron and downfall of Enron, many companies including Freddie, switched their auditors. The fraud was uncovered in 2002 and released to the public, when Freddie Mac’s new auditor, Price Water Cooper House (PWC), started auditing the books. Outcome of violations:Due to the inflated performance reported by Freddie Mac, the shareholders confidence in investing into the company was boosted. The stock prices of the company rose attracting more investors. This was clearly done by manipulating the books and therefore, company was charged with the violations by SEC. The managers of Freddie structured the transactions to alter financial reports that mislead stakeholders about underlying economic performance of the company. “Because Freddie Mac did not correctly account for derivatives transactions intended to hedge against changes in interest rates, the transactions had to be revalued quarterly at their market price, or ''marked to market,'' and included on Freddie Mac's income statement. The value of those transactions changed, while the value of the underlying asset that created the interest rate risk did not.” (The New York Times, November, 2003).Reflections:The top executives involved in the scandal of “Managed Earnings” were David Glenn (COO), Vaughan Clarke (CFO) and Leland Brendsel (CEO). Both CEO and CFO along with general counsels Dean and Dossani ended up

With so much power within the organization of their business, both men had the ability to commit fraud. Because of their position within the company, they misstated revenues and mislead investors. Revenue recognition

As if this massive failure wasn’t enough, the company attempted and successfully profited at the average Americans expense. The CFO and two other senior executives sold at least $2 million worth of stock only weeks prior to news breaking that one of the largest data breaches in history had occurred.

Waste Management, Inc. (NYSE:WM) is the leading provider of comprehensive Waste Management and environmental services in North America. It is established in 1971 and headquartered in Houston, Texas. In 2014, its total number of employees reached up 42,700 with a revenue of $ 13.99 Billion (Wikipedia 2015). The company provides private and commercial waste services, including collection, transfer, recycling and resource recovery, and disposal services.

From all of this their revenues fell short of expectations and response in Washington was crazy. On June 26th, the U.S. Securities and Exchange Commission charged the company with huge accounting fraud and fleetly obtained the court order excepting the company from controlling its payments to past and current executives.

Inflated sales, profit margins, and account receivables, while failed to disclose direct competition from entities related to its chairman.

During the time of falsifying balance sheets and income statements, the managers were the ones that received the majority of the bonuses, 12.8 million dollars each. Basically, the liabilities were placed as revenues because at this time, Nortel’s stock was plummeting, leaving the manager’s hopeless. Manipulating the financial statements, overstating revenues triggered the extra bonuses for the Dunn, Gollogy and Beatty. A key example includes at one point, Nortel had 189 million dollars of liabilities, but only showed 80 million dollars of liabilities, converting the rest to revenues. During the same time period of the scandal, the business’s stock was still decreasing in value as each year passed. While stocks were decreasing in price, Nortel’s false profitability, made it seem as if they were still a profitable business, but simply was not. When the three main managers were trialed, the external auditors, Touche and Deloitte, were fired for not providing accurate financial statements and holding them back from the accounting firm during the period of the scandal. The second scandal, includes Nortel using bill and hold transactions. When a product is sold, the revenue that is earned cannot be recorded, unless the customer gives the seller permission to, which would be a bill and hold transaction. Nortel, having other plans, did the bill and hold transaction continuously by their own will.

The “crisis of credibility” largely arose from the number of companies that restated their previously issued financial statements as a result of accounting irregularities and fraud. Especially responsible were the very visible Enron and WorldCom fraud cases. Both companies filed for bankruptcy and constituted the largest companies in American history to do so. The extent of the accounting irregularities and fraud being investigated and disclosed brought into question the effectiveness of financial statement audits. In addition, the criminal conviction of Arthur Andersen, LLP, one of the then Big 5 accounting firms, on charges of

As with other disciplines, all personnel in the accounting profession ought to uphold high standards of professional ethics. All firms ought to conduct their affairs with due regard to the welfare of the parties involved, the economy, and the interests of the public in general. As such, auditors and accountants ought to be ambassadors of transparency and accountability and their conduct must indicate as much. In the wake of the housing bubble, the integrity of the accounting profession came into question amid claims by observers that key professional services firms such as Deloitte Touché, PricewaterhouseCoopers (PwC), KPMG, and Ernst & Young were colluding with their client firms to perpetuate 'deceptive accounting' in a way that the financial position of the client-firm appeared more stable and progressive. This helped the global financial crisis along. Amid the crisis, world economies tanked causing the fall of major economic giants. The unprecedented collapse of Lehman Brothers, American International Group (AIG), General Motors, WorldCom, Enron, Fannie Mae and Freddie Mac nearly took the global economy down with it. In light of emerging studies, corporate malfeasance was one of the leading causes for the collapse. All firms ought to conduct their affairs with due regard to the welfare of the parties involved, the economy, and the interests of the public in general under

The fraud was committed by generating assets out of operating expenses and inflating revenues to continue reporting double-digit revenue growth and false statement of stock prices. WorldCom 's fraudulent, false and improper action of its line cost expenses, was not disclosed to its investors. WorldCom did not disclose to its investors, or elsewhere, that it had executed such changes in its procedures of accounting for line cost expenses. As a result of these fraudulent, false and improper accounting manipulations, “WorldCom materially overstated its earnings as well as its assets and materially

Beginning in the 1980s, many jurisdictions started to seek third-party alternatives to provide public service under the pressure for cost savings and the call for government efficiency. Private organizations are known for their expertise in specific fields – if leverage private sector know-how well, it can bring success to public sector – high quality public services can be delivered with lower costs. Therefore, public organizations can concentrate on solving critical tasks when they contract out the mundane work to private sector. Outsourcing waste management is one of the effective privatization solutions for public organizations given its easy-to-measure nature, and it continues to be popular among local governments. Nevertheless, the success of privatizing government services is not guaranteed. If not manage privatization well, it could result in increased costs, organization structure and culture change or legal liabilities. In addition, take advantage of privatizing public services redefines the nature of government service and governance as it creates a partnership between private and public sector. With the rapid pace of technology development and the obligation of government to spend taxpayer’s money strategically, privatizing government services has gained unstoppable momentum.