Scheme

In the 1990's, Waste Management was the largest garbage company in the world. But Waste Management had a dirty secret.  Its accounting was nastier than its landfills. 

Jamie Petrone was in charge of purchasing computer equipment for Yale's school of business. Petrone was making a fortune, until someone noticed she was buying a lot more electronics than the school needed. What was she doing with all those iPads? The feds decided to follow her and find out.

The largest pest control company in the world, Rollins Inc., was accused of manipulating reserves to boost profits. When Rollins achieved its earnings target by just one penny not once but twice, the SEC smelled a rat.

Finding a good controller isn't easy.  You probably don't want someone who embezzled money from their last two employers.  “What?!?” you're probably thinking. "No one would hire someone as controller if they stole millions of dollars from their previous employers.”  That's what I used to think, until I heard the story of Peter Suk Lee.

Puda Coal raised over $100 million from U.S. investors.  But suddenly there was a problem: did Puda actually own the subsidiary Shanxi Coal?  Someone claimed Puda's board chair had secretly transferred the subsidiary to himself.  Had Puda's subsidiary literally been stolen? 

One of the most difficult things about starting a business is getting clients. You need to work hard to get customers to say “yes”. But what if you didn't have to get customers to say “yes”? What if you just sent them a bill? “Don't be ridiculous,” you're probably thinking, “companies aren't going to pay you just because you send them a bill." But hold that thought, as I've got a story to tell.

David Brooks had taken a small company on the verge of bankruptcy and turned it into one of the world's largest manufacturers of bulletproof vests. Those vests were used by U.S. soldiers, so Brooks was hailed as an American hero. But, problems with the company's accounting for inventory was just the tip of the iceberg.

Take-Two Interactive was forced to restate its financials 3 times in a span of just 5 years. Each time you thought it was over, Take-Two ended up in the news again. And the company’s founder was right in the middle of it.

The story of Cobalt involves a former associate of the Wolf of Wall Street, and a Ponzi scheme run by a convicted fraudster. Then, Donald Trump got involved.

In the early 2000’s, Interpublic Group was a successful advertising firm with over $6 billion in annual revenue.  Interpublic had dominated the ad industry for decades and had a stellar reputation.  But the company’s public image was about to change.  In 2002, Interpublic was forced to restate its financials going all the way back to 1997.  In 2002 alone, the company had overstated its profit by 496%.  Executives blamed the problem on poor internal controls, & said it was an honest mistake.  But the SEC began an investigation… and the results were shocking.  Had the company committed ANOTHER fraud, right after the first one?

Nevin Shapiro had what many would consider a great life.  He drove nice cars, had a beautiful home in Miami Beach, and spent his nights partying with famous athletes like Shaquille O’Neal.  Shapiro was living the high life, and people assumed his high-roller lifestyle was funded by his business, Capitol Investments.  But Shapiro’s business hadn’t conducted operations in years.  The money was actually coming from investors…who didn’t realize that their money was being used to pay old investors.  That’s right, it was a Ponzi scheme… a $900 million dollar Ponzi scheme.

Satish Gabhawala convinced the city of Harvey to raise $14 million from bond issuances to construct a hotel and 24-hour diner. However, 5 years later the buildings were never finished. Where had the 14 million gone?

When you think of high-growth companies you probably don’t think of life insurance, but Equity Funding Corporation of America was the exception.  The company reported strong growth for nearly a decade, culminating in a record profit in 1973.  But just a few weeks later the firm imploded.  It seems the company wrote insurance policies… for people who didn’t exist.  And it wrote so many fake policies that the fraud wouldn’t have been possible but for a relatively new invention: the computer.

In 1998, American Bank Note spun off part of its business in an IPO.  Investors were excited; American Bank Note had been making products to prevent counterfeiting since the 18th century.  This was a chance to invest in a company with a long tradition, and that made products which prevented fraud. But just 6 months after the IPO, the company said it needed to restate its financials.  A company that had been created to prevent fraud had lied about its revenue.  The stock price dropped 80% in just two days, and investors lost millions. The company’s executives were put on trial and convicted, but then…nothing happened…for an entire decade.  Would these con artists ever face justice?

Electronic Game Card had created an innovative new product. Sales were growing and the company was profitable. But there was something not quite right about the company…

In March of 2002, Adelphia was the 6th largest cable TV provider in the U.S.  But then the company made one tiny financial disclosure…and within 3 months it was bankrupt. 

In 2013, Homex was the largest real estate development company in Mexico. But just one year later Homex was bankrupt, and under investigation by the SEC.