The Notorious Schemes
"He that sells what isn't his'n, must buy it back or go to prison" --Short-seller adage
Wikipedia list of corporate scandals and collapses throughout history, globally.
Pre-2oth Century Stock scandals
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20th CEntury 'stock swindles'
- 1929: Chase National Bank, 1929
- Chairman Albert Wiggin profited a total of $4M (now worth about $50M) by depriving shares in bank, leading to stock market collapse that greatly added to the famous Wall Street crash, culminating in the Great Depression. Although trading was NOT illegal then, Wiggin later resigned from post due to outside public pressure.
- 1980s: Guinness affair, 1980s
- Four men--Gerald Ronson, Ernest Saunders, Jack Lyons, and Anthony Parnes--allegedly attempted to balloon the price of Guinness shares, in order to facilitate a 'takeover bid' for rival beverage company Distillers. The entire quartet was convicted of false accounting and theft.
- In a shady plea, Ernest Saunders managed to halve his jail sentence with claiming that he had Alzheimer's disease, and he became first person in medical history to ever recover from the mental condition.
- 1986: ZZZZ Best Incorporated, estimated loss = $100M
- In this infamous Ponzi scheme, high schooler Barry Minkow, the owner of this business, declared that this company would develop into the "General Motors of carpet cleaning." He generated over 10,000 fake documents and sales receipts to form a multi-million corporation. Minkow earned more than $4M to lease and renovate office building in San Diego. After the scandal was publicized in December 1986, he had profited over $200M dollars. This was and is still largely regarded as one of the greatest examples of accounting fraud of all time.
- Ultimately, Minkow was convicted and sentenced to 25 years in prison.
- Early 1990s: Albanian Pyramid
- After 40 years of being subject to Communist rule, Albania finally left behind that era. Citizens at the time were quite unaware about investment fraud. As a result of this lack of knowledge, the private sector blossomed--“fund companies” prompted public to invest in stocks, by offering a 30% return monthly. Albanian citizens sold houses, livestock, and belongings to invest in such empty funds. The scheme inally collapsed but stripped over ⅔ of the national population of a grand total of an astounding $1.5B. This was the most widespread pyramid scheme in history, impacting highest number of victims.
- 1996: Centennial Technologies Incorporated
- Emanuel Pinez served as CEO of this former Wall Street Company, and management reported that company garnered $2M in revenue from PC memory cards. In actuality, the company shockingly shipped fruit baskets to customers instead of providing returns, and employees forged fake documents under the guise of recording sales. On the NYSE, stock prices for the firm skyrocketed an astronomically unbelievable 451% to $55.50 per share.
- The SEC noted that from April 1994 to December 1996, Centennial Technologies over-reported earnings by $40M; stating that they had reaped profits of $12M while the real losses totaled about $28M. Stock fell to below $3 per share.
- 1997: Bre-X Minerals
- This Canadian company’s Indonesia gold property was advertised to contain over 200 million ounces of the rich metal. Their stock price escalated to $280, peaked with market capitalization of $4.4B. But on March 9. 1997, the mine was revealed as fraudulent; Bre-X's stock fell to pennies.
- Late 1990s: HealthSouth (listed as HLS on NYSE)
- CEO and founder Richard Scrushy ordered employees to inflate revenues and overreport net income, essentially falsifying earnings reports. Before the scandal, HealthSouth was one of the nation’s largest healthcare service providers, growing and purchasing other healthcare-related firms. By late 2002, Scrushy apparently sold HealthSouth shares that were worth $75 million, then later released an earnings loss. An independent law firm deduced and concluded that sale NOT directly related to loss, but that investors ignored warning. In March 2003, the SEC reported that the company inflated revenues by $1.4B. CFO William Owens collaborated with the FBI to tape Scrushy discussing the fraud. Soon, stock nosedived from $20 to 45 cents in one day. CEO Scrushy was acquitted of a total of 36 counts of fraud but finally convicted on charges of bribery. This guy Scrushy organized political contributions of $500K to secure a position on the hospital regulatory board.
21st century Stock cheats
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