The rogues gallery of accounting scandals through the years
The resignation of nine Toshiba executives, including the CEO, for doctoring books places the company beside the growing rogues' gallery of corporate desperados. Here's a look at some of the most notorious.
Enron - 2001
Founded less than 20 years before it imploded, Enron sprinted to become one the world's biggest commodity and energy companies with deep political connections. The Houston company set a new standard for creative accounting practices. It buried massive losses in its profitable trading business and turned to off-balance-sheet financing vehicles to keep burgeoning debt off its books. The bad investments and debt eventually caught up with Enron, which filed bankruptcy protection and vanished. CEO Kenneth Lay was found guilty of 10 counts against him, but died before sentencing.
Tyco - 2002
Tyco's CEO Dennis Kozlowski became the singular image of excess on Wall Street, throwing a $2 million birthday party for his second wife on the island of Sardinia and spending a reported $6,000 on a shower curtain, among other accessories. Tyco paid for a good portion of it. After regulators started examining Tyco's accounting practices, the company restated nearly six years of financial results. Tyco was ordered to repay billions to investors. Kozlowski was released from prison last year.
Worldcom - 2002
Once the second-largest U.S. long-distance phone company, Worldcom was also a master of creative accounting, building up an imaginary cash pile of more than $9 billion. It may have been the worst year on record to be a Bernie when Worldcom co-founder and CEO Bernie Ebbers was sentenced to 25 years in prison and tens of thousands lost their jobs in the ensuing maelstrom. The worst year, at least, until the emergence of another Bernie not even 10 years later, Mr. Bernie Madoff.
Healthsouth - 2003
The pressure to meet Wall Street expectations can be extreme, and that was certainly the case with Healthsouth CEO Richard Scrushy. The company overstated its earnings by $2.7 billion in 2003 to satisfy analyst projections. Scrushy was fired only to become entangled in a separate scandal involving Alabama Gov. Don Siegelman, for which he was convicted on charges related to extortion and money laundering.
Satyam Computer Services - 2009
The Indian software services company's founder R. Ramalinga Raju confessed in January 2009 to inflating company assets by exaggerating cash balances, booking fake interest, overstating debt and understating liabilities. The company was taken over by the Indian government, and former executives faced criminal charges. Satyam and its accountants settled with the SEC, agreeing to pay $16 million in penalties.
Elan Corp. - 2002
The Irish drugmaker was living the dream, transforming itself from a fledgling research operation into a massive pharmaceutical player, eating up biotech companies and eventually booking close to $2 billion in revenue. That dream ended amid a global economic slump, a closer look at the books and a near collision with bankruptcy amid an accounting scandal and the failure of its key trial research into curing Alzheimer's disease.
Royal Dutch Shell PLC - 2004
One of the world's premier oil companies asked shareholders for forgiveness after it was forced to reduce the estimates about its oil reserves, then do it again, and again, and again. Shell eventually downgraded its proven reserves by 4.47 billion barrels, or 23 percent. Resignations of Chairman Philip Watts, Walter van de Vijver, head of exploration and production, and Chief Financial Officer Judy Boynton soon followed, along with a lot of unwanted attention from regulators in the U.S. and Europe.
Qwest Communications - 2002
The Securities and Exchange Commission opened an inquiry into the company's accounting practices in April and within two months, CEO Joe Nacchio was out the door. By the fall, Qwest restated $531 million in improperly recognized revenue, erased $358 million in earnings and was forced to book nearly $11 billion in related charges. More than a dozen Qwest executives and managers were targeted by SEC civil lawsuits or criminal charges.
Bristol-Myers Squibb Co. - 2006
The company took the hard sell to a new level, unloading a whole mess of its best-selling drugs on wholesalers with some attractive incentives. As it turns out, generic versions of the drugs that were flooding the market meant that everyone's medicine cabinet had been stuffed and, according to monitors, so were the company's revenue figures. CEO Peter Dolan was fired at the insistence of the federal monitor overseeing settlement charges in an ensuing accounting scandal.
American International Group Inc. - 2005
Former chairman Maurice "Hank" Greenberg agreed to pay $15 million years after he was ousted from the New York company, for what regulators called "numerous improper accounting transactions" that inflated financial results for a half decade. Those transactions included shell companies used to conceal underwriting losses that ran into the millions. The company settled with the U.S. for $800 million in repayments and fines.