You’re likely familiar with some of the top financial fraud scandals in the U.S., as headlines on the highest profile cases were splashed across the papers and online news channels. As a reminder to stay constantly vigilant about these schemes and protect against falling victim to one, here are the top fraudulent plots that have taken place in recent years.
Bernie Madoff:
As a wealthy, respected financier, Madoff implemented a Ponzi scheme to bilk investors out of $65 billion over several years. A Ponzi fraudster lures money by guaranteeing returns considerably higher than other investments. Madoff used the funds from new investors to pay off the returns promised to those who had been involved in the plan for longer; however, no profit was actually made by those who participated. Madoff pocketed some of the extra cash and used other funds to expand operations.
Enron:
One of the biggest financial fraud scandals in history was engineered by accountants at Enron or contracted by the company through Anderson Accounting. The foundation of the scam was the trading of gas and oil products, wherein investors were led to believe that the energy commodities were heavily traded. In truth, bogus companies were created by Enron to show profits instead of what they really were: bad debts.
When the SEC discovered irregularities in the company’s required financial statements in 2001, the agency dug deeper into a full audit examination. The action prompted Enron executives to dump their stock options, resulting in stock prices diving from $90 to $36.88 per share. The company filed for bankruptcy protection in December 2001, leaving more than 4,000 workers without a job and robbing them of retirement benefits.
AOL Time Warner:
When AOL acquired Time Warner, clashes in the accounting departments surfaced almost immediately. It was amidst these disagreements that the business and accounting methods began to unravel. Early on in the internet boom, AOL dominated the scene by providing free services to customers, which was made possible by advertising channels. Investors flocked to AOL TW stock and it became a common practice to enhance revenues to keep prices high.
Some of the unlawful accounting methods included recognizing revenues that should have been left off financial statements and entering into barter deals that were reported as cash sales, to the tune of $30 million. Of course, stock prices remained high because of improperly recognized revenues. When the SEC got involved to investigate the shady deals and accounting fraud, AOL TW stock dropped a staggering 85%. The AOL leadership that had been in control of the merged company was removed and Time Warner top executives were ushered in.
Of course, this is just a short list of the biggest financial fraud scandals. To be sure, the SEC, FBI and other government agencies stay quite busy investigating crooks and shysters in their attempts to scam unsuspecting victims. The best way to protect yourself is to recognize the red flags and consult with forensic accounting professionals with questions or concerns about your own financial interests.
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If you are looking for a professional and reliable financial crimes investigator, Veriti Consulting provides forensic accounting and fraud investigation services for individuals and businesses across the United States. Call 855-232-4410 or send your questions via email.
