Mahamudul Hasan ID:UG01-23-10-072 Section:23 (C) Dept - of Business Administration State University of Bangladesh

Mahamudul Hasan Free Powerpoint Templates ID :UG01-23-10-072 Section:23(c) Dept.
of Business Administration State University of Bangladesh
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Page 1
Welcome to my presentation
About on
Fraud at Waste Management
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Who Was Involved? Free Powerpoint Templates

Dean L. Buntrock - Waste Management's founder, chairman of the Board of Directors, and chief executive officer during most of the relevant period; Phillip B. Rooney - president and chief operating officer, director, and CEO for a portion of the relevant period; James E. Koenig - executive vice president and chief financial officer; Thomas C. Hau - vice president, corporate controller, and chief accounting officer; Herbert Getz - senior vice president, general counsel, and secretary; and Bruce D. Tobecksen - vice president of finance.
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When
1992 to 1997 the former executives cooked the company's books to meet predetermined earnings targets.
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How was the Fraud perpetrated?

Refused to record expenses necessary to write off the costs of unsuccessful and abandoned landfill development projects Established inflated environmental reserves (liabilities) in connection with acquisitions so that the excess reserves could be used to avoid recording unrelated operating expenses Improperly capitalized a variety of expenses Failed to establish sufficient reserves (liabilities) to pay for income taxes and other expenses
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How was the Fraud perpetrated? (contd)

The Company's revenues and profits were not growing fast enough to meet targets, so management inflated earnings by improperly eliminating and deferring current period expenses. Employing a multitude of improper accounting practices to achieve this objective, management:
Avoided depreciation expenses on their garbage trucks by both assigning unsupported and inflated salvage values and extending their useful lives Assigned arbitrary salvage values to other assets that previously had no salvage value
Failed to record expenses for decreases in the value of landfills as they were filled with waste
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How was the Fraud perpetrated? (contd)

Waste Management used netting to eliminate approximately $490 million in current period operating expenses and accumulated prior period accounting misstatements by offsetting them against unrelated one-time gains on the sale or exchange of assets. They used geography entries to move tens of millions of dollars between various line items on the Company's income statement to, in Koenig's words, "make the financials look the way we want to show them."
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How was the fraud uncovered?

The scheme unraveled in mid-1997, after a new CEO ordered a review of the company's accounting practices. In 1998, Waste Management restated its 1992-1997 earnings by $1.7 billion, the largest restatement in corporate history (as of March 2002).
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Why Was This Fraud So Important?

Some believe that Andersen would have survived Enron if not for the blatant acts at Waste Management. The WSJ stated in an article that the Waste Management scandal stood out among the numerous accounting scandals breaking in the news.
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How did Management fare? Free Powerpoint Templates

Management profited handsomely from their fraud, receiving performance-based bonuses based on the Company's inflated earnings, retaining their high-paying jobs, and receiving stock options. Some also received enhanced retirement benefits based on the improper bonuses and/or lucrative employment contracts.
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Who Was Hurt?

Waste Management's shareholders (other than the defendants who sold Company stock and thus avoided losses) lost over $6 billion in the market value of their investments when the stock price plummeted by more than 33%.
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How Much Was Taken?

$18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0

Buntrock Rooney Koenig Hau Getz Tobecksen $16,917,761 $9,286,124 $951,005 $640,100 $472,500 $403,779
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How Compensation Compares Free Powerpoint Templates

Comparative CEO Compensation
Non-Performance Performance
2001
Waste Management Allied Waste Difference 6.08% 12.00% 5.92%
1996
18.17% 7.27% 10.90%
2001
93.92% 88.00% 5.92%
1996
81.83% 92.73% 10.90%
Execs had less incentive to secure the future Why the shift?
Avoid corporate looting Conform to the status quo
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Mahamudul Hasan ID:UG01-23-10-072 Section:23 (C) Dept - of Business Administration State University of Bangladesh

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Mahamudul Hasan ID:UG01-23-10-072 Section:23 (C) Dept - of Business Administration State University of Bangladesh

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Mahamudul Hasan Free Powerpoint Templates ID :UG01-23-10-072 Section:23(c) Dept.

of Business Administration State University of Bangladesh

Free Powerpoint Templates

Free Powerpoint Templates

Who Was Involved? Free Powerpoint Templates

Free Powerpoint Templates

How was the Fraud perpetrated?

How was the Fraud perpetrated? (contd)

How was the Fraud perpetrated? (contd)

How was the fraud uncovered?

Why Was This Fraud So Important?

How did Management fare? Free Powerpoint Templates

Who Was Hurt?

How Much Was Taken?

$18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0

How Compensation Compares Free Powerpoint Templates

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