Accounting Scandals
$2.65 billion. That is the amount the investment Citigroup agreed, less than a year ago, to pay to investors who had bought stock and bonds in the telecommunications giant WorldCom before its bankruptcy filing two years ago. If the adage that 'crime does not pay' is not always true, it is certainly valid when estimating the tremendous cost the WorldCom and Enron investing and accounting scandals have cost employees, investors, shareholder, and ordinary consumers. (Morgenstern, 2004)
The Citigroup settlement was the second-largest amount ever paid to settle a securities class action. It was the largest settlement ever granted by a bank, brokerage firm or auditor to settle a fraud case brought about by investors alleging that they had been deliberately mislead to buy securities issued by an outside corporation. Citigroup denied that it violated any laws when encouraging investment in WorldCom. Rather, it stated that it agreed to the arrangement to eliminate the uncertainties, burden and expense of litigation. (Morgenstern, 2004) Citigroup's chief executive, Charles O. Prince, described fighting the litigation as a "roll of the dice" and noted that the bank faced legal claims of as much as $54 billion in the WorldCom matter. (O'Brien, 2004)
Lest the $2.65 billion award settlement seem excessive, recall that the New York State retirement fund alone lost $300 million in its WorldCom investments. (Morgenstern, 2004) Under the terms of the settlement, Citigroup will have to make a payment of $2.65 billion, or $1.64 billion after tax, to the settlement class. The settlement class "consists of all persons who purchased or otherwise acquired publicly traded securities of WorldCom during the period from April 29, 1999 through and including June 25, 2002,"...
In this case, it was a $4.9 billion bank account. However, credit would have been granted against an asset like that. Finding such an account did not exist, banks would have wanted their money back, and Parmalat would not have had it. This would be grounds to take the company into insolvency, especially if somebody at Parmalat was counting on that account to pay off its debts. 4. These fraudulent
Financial Scandals and Management Financial Management Management Financial Actions, Controls, and Decisions Financial Scandals and Management Following the rise of financial scandals in the recent past, external and internal audits are carried out to review the management's financial controls and actions, and keep tab of the outside and internal auditors. However, despite the best efforts, accounting scandals like the Cendant Corporation's $300 million bogus revenue indicate that external auditors and managers are not doing
The deregulation was forced through by legislators to whom Enron paid out massive contributions..." (Levy, 2005) The fraud was primarily comprised of "cooking the books to make it look as if the company's finances were consistently rosy, so that share prices would steadily keep rising." (Levy, 2005) More than 30 individuals have received criminal charges since 2001 connected to their dealing with Enron which incidentally "was just one of several
Fannie Mae Scandal Fannie Mae is the second largest government sponsored U.S. financial institution engaged in mortgage finance after Citigroup Inc. An investigation lasting for eight long months by the Office of Federal Housing Enterprise Oversight or OFHEO revealed massive manipulation of earnings that have been engineered to fulfill Wall Street expectations and smooth volatility in earnings from one quarter to next quarter. The revelations deserve quick corrective action announced by
Enron could engage in their derivative trading strategy with no fear of government intervention because derivative trading was specifically exempted from government regulation. Due in part to a ruling by the Commodity Futures Trading Commission's (CFTC) chairwoman, Wendy Graham, derivatives remained free of regulatory oversight. Ms. Graham, wife of Texas senator Phil Graham, made this ruling 5 weeks before resigning as chairwoman of the CFTC and joining the Enron Board
Steps were also taken to organize a stock market in Lahore (Burki, 1999, pp.127-128). Also organized during this period were the Pakistan Industrial and Credit Investment Corporation (PICIC) and the Industrial Development Bank of Pakistan (IDBP), both of which were important to industrial development, obtaining "large amounts of capital from the World Bank, the former for investment in large industries, the latter in relatively smaller enterprises" (Burki, 1999, p. 128). This
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