Big Corporate Fraud Scandals of the Last Two Decades

By October 15, 2013Corporate Investigation

Big Corporate Fraud Scandals of the Last Two Decades

There is something deceptively innocent about the term ‘white-collar crime‘. Compared to blue-collar crimes such as assault, white-collar crimes may seem trivial and harmless, and in truth, a few of them are. But there have been many cases of high corporate fraud cases that were so daring in scale, the resultant ripples went on to affect thousands of employees, (and in some cases the nation’s economy). The following are some of the biggest corporate fraud scandals that have occurred in the last two decades.

The Bernie Maddoff Scandal

No talk about corporate fraud scandals would be complete without a reference to the Maddof scandal. In 2008, the world woke up to the news that Maddoff, a respected financer, stockbroker, and investment advisor had in fact been pulling off the world’s largest Ponzi scheme. Bernard L. Maddoff Investment Securities was an investment firm that appeared to post amazing returns. However, it turned out, what Maddoff was really doing was paying investors with the investment of others. In total, the scheme involved up to $65 billion, conned from some of the most intelligent people in the world. Maddoff was so good at hiding the scheme that an earlier SEC investigation failed to detect it. The scheme was uncovered when Maddoff finally confessed to his sons, who in turn reported him to the SEC. Maddoff was arrested the next day and after a lengthy trial, sentenced to 150 years in prison.


HealthSouth is a public traded health care company, considered one of the largest in the U.S. with rehabilitative hospitals spread across more than two-dozen states. In 2003, the company got involved in a corporate fraud scandal, one that involved the fraudulent practice of cooking the account books, done on an incredible scale. To boost the reputation of the company, then CEO Richard Scrushy had his accountants make up numbers to boost the firms earning. Between 1996 and 2003, the company posted an extra $1.4 billion that did not exist. The fraud was revealed when the SEC noticed that the CEO had engaged in irregular stock sales. Richard Scrushy was fired as CEO, and criminal charges were filed against him (though he was later acquitted of all criminal charges).

Waste Management Inc Scandal

Based in Texas, Waste Management Inc is an environmental waste control company. In 1998, the company got involved in a fraud scandal. According to reports, backed by company founder and CEO Arthur Andersen, Waste Management Inc faked its earnings by increasing the depreciation time length of their equipment and plant. The fraud was only discovered after the company appointed a new CEO who requested an audit. Andersen ended up settling a shareholders suit to the tune of $457 million, and paid the SEC a $7 million fine.

Lehman Brothers Scandal

In 2007, Fortune magazine voted Lehman Brother’s “The most admired securities firm.” It turned out to be ominous. 12 months later, the company was caught in a corporate scandal as it was revealed that the seemingly successful firm was actually up to $50 billion in debt, hidden in its books. The Lehman scandal was not discovered during an investigation. It only became known after the company filed for bankruptcy.


Enron Scandal

The Enron scandal is one of the biggest corporate frauds to have occurred in the last two decades. It involved Enron, a Houston-based energy and commodities company. Enron was considered to be so successful that the Forbes named it the most ‘innovative company’ for six straight years. And then in 2001 things rapidly fell apart. For years, the company had been keeping huge debts off the official books. But things came to a head when Sherron Watkins, Vice President of Corporate Development at the company, revealed their deception. Things unraveled very quickly after that, leading investors to lose faith in the company. The company’s shares dropped from $90 to less than a $1 causing shareholders to lose close to $74 billion. In the end, the company was forced to file for bankruptcy.

WorldCom Scandal

Barely 12 months after the Enron Scandal, the U.S. learned about another large corporate fraud scandal involving WorldCom, a telecommunication company. An internal audit revealed that the company CEO Bernard Ebbers had inflated the company’s assets by up to $11 billion. One of the ways he did this was falsifying accounting entries. The discovery led to the layoff of 30,000 employees, and ended up costing investors as much as $180 billion. As for Ebbers, he was found guilty and sentenced to jail for 25 years.

American Insurance Group Scandal

AIG is a multinational insurance corporation. In 2005, it was revealed the Hank Greenberg, the CEO, had been complicit in a $3.9 billion fraud case, by booking loans as revenue and working with traders to inflate the company’s stock price. The fraud was discovered during SEC investigations. However, some industry experts believe the exchange commission was steered in the direction of the company by a whistle blower. Regardless of what triggered the investigation, the fraud was uncovered and Greenberg fired. AIG was forced to settle with the SEC for $10 million. AIG also paid $2 billion as settlements to other pension funds.


Tyco is a New Jersey blue-chip Swiss security company. In 2002, it was revealed that the company CEO and former CFO, Dennis Kozlowski and Mark Swartz had inflated the company’s income by half a billion, and also stolen $150 million from the accounts. They did this by siphoning money via false stock sales and unapproved loans. It was the SEC who uncovered their embezzlement. The commission had noticed questionable accounting practices from the company and, together with the office of the Manhattan DA, decided to conduct investigations. Both men were charged and sentenced to jail for 8 to 25 years.

The Bottom Line

Managing the books of a multimillion-dollar corporation is very complex, which is why many CEOs and company owners are able to get away with corporate fraud. However, every now and then the tides turn, and they are left with a huge deficit to explain to the SEC, investors, and court.

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