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Waste Management Inc. Accounting Scandal in 1998

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by

Sally Zaghloul

on 30 October 2013

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Transcript of Waste Management Inc. Accounting Scandal in 1998

Sally Zaghloul S00012418
ACCT 413
Dr. James Goodpasture
31st October 2013
What will be discussed?
Brief History
Events of the fraud
How it could have been prevented?
Major effects on shareholders
Conclusion
Waste Management Inc. Accounting Scandal in 1998
History
Waste Management Inc. was found in 1968 by Dean Buntrock & Wayne Huizenga.
The company generated $5.5 million revenue in their first year of operation.
Waste Management became public in 1971.
Their sales doubled in a period of five years reaching $2 billion in 1985.
In the late 1980s Waste Management emerged the recycling industry.
In the early 1990s Waste Management Inc. became the leading company in its industry
Events of the fraud
Buntrock wanted to reach predetermined earnings.
Inflating income by $1.7 billion:
Failing to report depreciation expense for the company’s garbage trucks
Capitalizing their expenses
Failing to establish proper reserves to pay for income tax.
Stock price went very high
Pocketed money through bonuses and unjustified compensations up to $29 million.
Bribed Arthur Andersen LLP.
How it could have been prevented?
Eliminate three main factors:
Incentive
Opportunity
Attitude
Reaching predetermined earnings
Enrich themselves.
Top executives
Weak board of directors.
Reach high profit regardless.
Benefit the company & shareholders.
Effects of the fraud
Shareholders: Lost $6 billion
New board of directors
Arthur Andersen was fined $7 million
Conclusion
Ethical standards are the most important element in the success of any entity
In 2008 Waste Management was considered one of the most ethical companies
Full transcript