Fraud

10F8W2_FSAAC_624-Fraud Accounting

Waste Management Fraud

Executive Summary

Top Officers of Waste Management Inc. were involved in perpetrating a massive financial fraud by cooking the books and presenting a false picture to the investors. The Senior Officers involved in the fraud were:

1. Dean L. Buntrock

2. Phillip B. Rooney

3. James E. Koenig

4. Thomas C. Hau

5. Herbert Getz

6. Bruce D. Tobecksen

These Officers presented a rosy picture of the financials to the investors by inflating the revenue, deflating the expenses, improperly capitalized many expenses, did not record depreciation charge, etc. They misrepresented financials specifically from 1992 to 1997 and inflated the company’s profit by $1.7billion. Investors were duped with good financial position of the company and when the fraud was revealed to the world, they lost more than $6 billion of their wealth. The officers were aided by their Auditors, Arthur Anderson LLP, which gave a clean and unqualified audit report to them. An action was taken against them also for not highlighting the fraud that was being cooked by falsifying the company’s financials and issuing unqualified reports.

Institutes, government and other accounting bodies have now come up with various laws and requirements which public companies are required to adhere to. These steps have been taken to ensure that such frauds do not occur in future.

Corporate Environment

The corporate environment is designed in such a way that top officers of the company are benefitted on the basis of performance of the company. Their corporate position, status, salary, perks and other non monetary benefits are influenced by their company’s performance. The better the performance of the company, the more viable position the officers get to enjoy. Because of this, the officers try to present good financial results to the shareholders. At times, top officers including Chairman, Chief Executive Officer and Chief Financial Officer...