ACCOUNTING

SCAMS
SATYAM COMPUTERS
 On 7 January 2009, company Chairman
Ramalinga Raju resigned after notifying
board members and the
Securities and Exchange Board of India
(SEBI) that Satyam's accounts had been
falsified
 Raju confessed that Satyam's balance
sheet of 30 September 2008 contained:
 inflated figures for cash and bank
balances of Rs 5,040 crore (US$ 1.04
billion) (as against Rs 5,361 crore (US$
 1.1 billion) crore reflected in the books).
 an accrued interest of Rs. 376 crore (US$
 77.46 million) which was non-existent.
 an understated liability of Rs. 1,230 crore
(US$ 253.38 million) on account of funds
was arranged by himself.
 an overstated debtors' position of Rs. 490
crore (US$ 100.94 million) (as against Rs.
 2,651 crore (US$ 546.11 million).
SATYAM SAGA
"What started as a marginal gap
between actual operating profit and the
one reflected in the books of accounts
continued to grow over the years. It has
attained unmanageable proportions as
the size of company operations grew
significantly (annualized revenue run
rate of Rs 11,276 crore (US$ 2.32 billion)
in the September quarter of 2008 and
official reserves of Rs 8,392 crore (US$
 1.73 billion)).The aborted Maytas
acquisition deal was the last attempt to
fill the fictitious assets with real ones. It
was like riding a tiger, not knowing how
to get off without being eaten.”
WORLDCOM
 WorldCom was one of the world's largest
telecommunications companies with 20
million customers and 80,000 employees.
 US telecommunications giant WorldCom
dug its own grave by manipulating its
financial records during the 1990s.
 This led to its bankruptcy with about $40
billion in debt and a $3.85 billion
accounting scandal. The company's CFO
Scott Sullivan who cooked up the books
was fired. CEO Bernie Ebbers also had to
resign following the scam.
 The company which dealt with about half
of the world's Internet traffic, was charged
with fraud by the US Securities and
Exchange Commission in 2002.
 The company owed banks around the
world about $4.5 billion and US insurers'
estimated exposure stood at $5.4 billion.
Trading in WorldCom Group shares,
which peaked at more than $64 in 1999,
was halted, it crashed to 9 cents a share.
XEROX CORPORATION

 Founded in 1906, Xerox Corporation is a

global document management company
which manufactures and sells a range of
color and black-and-white printers,
multifunction systems, photo copiers and
digital production printing presses.
 Xerox was found guilty of accounting
irregularities to the tune of $3 billion in
2002.
 The Securities and Exchange Commission
(SEC) filed a civil suit against Xerox for
misstating four years of profits.
 Xerox, however, negotiated a settlement
with the federal regulatory agency. As part
of the agreement, Xerox agreed to pay a
$10 million fine and agreed to restate four
years' of trading statements.
 KPMG was the company's auditor.
ENRON
 The Enron scandal sent shock waves across
the globe.
 Enron's growth was remarkable, in 15 years
it grew to be America's seventh largest
company with 21,000 employees in more
than 40 countries.
 The Fortune magazine named Enron
"America's Most Innovative Company" for
six consecutive years. Little did the world
know what was cooking in the company's
balance sheet.
 Enron misappropriated profits, it tactfully
hid debts to offer a rosy picture of the
company�s accounts. Enron's recorded
assets and profits were inflated, or even
wholly fraudulent and non-existent.
 ENRON
 The Enron fraud raised several questions about the accounting practices of
many corporations throughout the United States.

 The key players in the Enron scandal were Andrew Fastow, former chief
financial officer who orchestrated the scam was fired. Enron's former chief
executive and chairman Kenneth Lay and David Duncan, Enron's chief auditor
at Andersen also played a role in the scam.

 The scam led to Enron filing for bankruptcy.

MIRANT
 Mirant also created a storm with accounting malpractices,
however after a six-year legal battle, the company
managed to come clean on the alleged fraud.
 Shareholders had alleged that the company had rigged
prices to earn more profits and push up stock prices. The
company reports high growth by inflating energy prices
illegally, it was alleged.However, the court turned down
their complaints.
 Mirant made its foray in California in 1999 as Southern
Energy Inc. In September 2000, Mirant became an
independent company.
 In two years it grew to become the 13th largest owner of
power generation plants in the US. It also marketed
commodities like electricity, natural gas, coal and
oil.Mirant shareholders in their compliant said that that
Mirant illegally manipulated California energy prices in
2000 and 2001.
 Mirant's stock crashed to less than $4. The company was
found to overstate its assets and liabilities. The company
eventually went bankrupt.
TIME WARNER
 Time Warner executives were proved guilty of
fraudulently inflating the company's online advertising
revenues by more than $1 billion between 2000 and 2002.
 The executives agreed to settle the civil charges brought
by the Securities and Exchange Commission by paying a
total of about $8 million as penalty. They also agreed to
return the gains they received.
 David Colburn, Eric Keller, Jay Rappaport and James
MacGuidwin. MacGuidwin wwere found guilty in May
2008.
 Time Warner Inc. agreed to pay regulators $300 million to
settle fraud charges related to online advertising deals in
2005.
 In 2002, shareholders filed a fraud suit against AOL Time
Warner alleging that the company had manipulated its
advertising revenues.
BANK OF CREDIT AND
COMMERCE INTERNATIONAL
 Bank of Credit and Commerce International
 The Karachi-based Bank of Credit and Commerce
International (BCCI) was founded by Agha Hasan Abedi.
The company was registered in Luxembourg and had
operations in 78 countries with over 400 branches, and
assets of over $20 billion.
 It soon became the world's 7th largest private bank in
terms of assets. However, it later hit the headlines for the
wrong reasons.
 In 1991, a scam of over $20 billion was unearthed. The
bank faced several charges of money laundering, bribery,
supporting terrorism, arms trafficking and tax evasion,
smuggling, illegal immigration.
 It was also found to be involved in illegal purchases of
banks and real estate. The bank was nicknamed 'Bank of
Crooks and Criminals International'.
MC AFEE
 The US Securities and Exchange Commission
(SEC) has slapped an unusually heavy fine on
McAfee for inflating its revenues during the
dot.com era.
 The SEC has stated that between 1998 and 2000
specifically, McAfee overstated its revenues by
$622 million, and that for 1998 alone revenues
were hiked 131 percent, or $562 million.
 In order to settle the embarrassing episode
quickly, the company has agreed to stump up $50
million as punishment for the mis-statements,
though it has not admitted to the charges in a
formal way.
 The money will be distributed between McAfee
shareholders reckoned by the SEC to have
suffered as a result of the drop in the company’s
market capitalisation when it announced its need
to re-state revenue.
CRB CAPITAL
CRB Capital Markets Limited
(1996)

Amount Involved: Rs 1200 crore

 Type of Fraud: Chairman Chain Roop
Bhansali, was accused of siphoning
off Rs 12 billion in the CRB scam.
CRB was accused of using its SBI
accounts to siphon off bank funds,
claiming it was encashing interest
warrants and refund warrants.
 Impact: The Unit Trust of India and
the Gujarat government also incurred
losses.
AIG
AIG was founded in 1919 in
Shanghai, China by Cornelius
Vander Starr, it went to public in
1969. It is a major American
Insurance Corporation based in
New York City with 116,000
employees.
 Allegations:
 The company maintained lucrative
payoff agreements, soliciting
rigged bids for insurance contracts
and inflated financial position by
$2.7 billion in 2005.
TYCO
 Tyco international was a global
manufacturing company founded in
1960. Its operational headquarters is in
Princeton, New Jersey. With 118,000
employees it is composed of security
services

 , safety products, fire protection

services, flow control, electrical and
metal products.
 Allegations:
 CEO Dennis Kozlowski and former
CFO Mark H. Swartz were accused of
the theft of $600 million from the
company in 2002.
HEALTH SOUTH
CORPORATION
 Health South Corporation was
founded by Richard M. Scrushy in
1984 in Birmingham, Alabama, USA
to offer healthcare services. The
company has 22,000 employees and
operates 100 Inpatient Rehabilitation
Hospitals. Though the company’s
accounts are falsified since 1996, the
scandal came into exposure in 2003.
 Allegations:
 The company’s income was overstated
by as much as 4700 percent and $1.4
billion was inflated to meet the
expectations of investors.