As a result, multitudes became jobless, and the trend went from bad to worse throughout the decade. these accounting anomalies was the heart of all that frauds. The accountancy profession and the role it plays came into focus. Accountants have helped in misleading the public by certifying and endorsing that the financial reports of fraudulent companies were all true and 100% correct. Investors placed their faith in the accompanying audit reports, which
(AP) Former Rite Aid Corp. chief executive Martin L. Grass was sentenced to eight years in prison Thursday for conspiring to falsely inflate the value of the company his father founded and cover up the scheme. Grass, 50, who headed up the nation's third-largest pharmacy chain in the late 1990s before being forced out in October 1999, also was fined $500,000 and given three years' probation for his role in a billion-dollar accounting fraud that sent the company's stock tumbling. Before U.S. District Judge Sylvia H. Rambo handed down the sentence, Grass apologized to Rite Aid, its stockholders and employees. "For the harm caused to them, I am truly sorry," he said. Grass was indicted by a federal grand jury two years ago.
These scandals cost investors billions of dollars when the share prices of affected companies collapsed, and shook the publics’ faith in the security markets. When examining the SOX act you can see that since 2002 many things have changed in the past eight years. Corporate governance is one of many things that have changed; Public companies must now have a totally separate audit committee composed of entirely independent directors and must contain one financial expert. Security fraud now has much more extreme punishments for those who commit or conspire to commit fraud. Since the introduction of SOX auditors of public companies must keep documentation of an audit for seven years, destruction of any documentation or evidence that someone has committed fraud is now punishable by jail time and fine.
Accounting Fraud Examination October 12, 2011 Introduction As we look back on the first decade of the 21st Century, we see that Corporate America and the Financial Markets were riddled with corruption and fraud. At the beginning of the decade we saw the likes of Enron and WorldCom become insolvent due to accounting frauds of epic proportions. The one case that stands out amongst all of them is the Bernard Madoff case, which is considered to be the largest fraud case of all time. “Madoff managed to lure billions of dollars away from huge charities, as well as wealthy individuals in both the United States and Europe by getting them to invest in his hedge fund. He did so by claiming extraordinary returns (generally in the low double digits).
Employee feedback was discouraged. Critique of Lehman’s corporate policy was not tolerated, and questioning of its risky business practices snubbed or worse, as in the case of Lehman’s “whistle blower” Matthew Lee. According to Andrew Clark of the Guardian (2010), Lee “a worried accounting executive at Lehman Brothers raised alarm about what he saw as dubious number-crunching at the doomed Wall Street Bank” (para. 1). Just one month after alerting auditors to his findings, Lee was dismissed from his role as senior vice president of the financial division citing workforce reduction.
Fial also terminated the partnership’s contracts with the independent-contractor auditors and signed many of these auditors with his new firm. The partnership terminated about 11 months after Fial wrote the letter to Steeby. Steeby brought an action against Fial, alleging breach of fiduciary duty and seeking a final accounting. Who wins? Steeby v. Fial, 765 P.2d 1081, Web 1988 Colo.App.
Throughout the 1990s by gaining other systems, Adelphia grew significantly and became one of the largest cable providers in the country (casact.org). In 1998 Adelphia had over two million subscribed customers. In 2002 Adelphia got into significant trouble when their fraudulent dealings and accounting practices go exposed. In 2005, Comcast and Time Warner Cable announced their plans to buy the assets of Adelphia Cable. The Scandal: In 2002, the Securities and Exchange Commission filed charges against Adelphia Communications Corporation; "its founder John J. Rigas; his three sons, Timothy J. Rigas, Michael J. Rigas, and James P. Rigas; and two senior executives at Adelphia, James R. Brown, and Michael C. Mulcahey, in one of the most extensive financial frauds ever to take place at a public company (sec.gov)."
Jeff Skilling served as President of Enron Energy Services for ten years, and then CEO of Enron, was indicted by the United States Securities and Exchange Commission. “In May 2006, Skilling was convicted by a jury of one count of conspiracy, twelve counts of securities fraud, five counts of making false representations to auditors, and one count of insider trading.” Skilling not only lied to auditors; he also lied to the Securities and Exchange Commission during questioning in their investigation of Enron. The Securities and Exchange Commission was calling for Skilling to be required to pay restitution to those defrauded and hurt by his schemes. The Enron fiasco called for changes in not only auditing but also an internal control of financial reporting and accounting disclosures in an effort to improve investors trust. Skilling later appealed to the United States Supreme Court for theft of honest services, change of venue and voir dori.
US History Watergate was a major political incident that occurred in the United States in the 1970s as a result of the June 17, 1972 break-in at the Democratic National Committee headquarters at the Watergate office complex in Washington, D.C. It all starts when Nixon's campaign committee sent some former CIA guys into the Watergate Complex, to bug the telephones of the Democratic national Committee Chairman. During the investigations surrounding the Watergate affair, it was discovered that Nixon was taping everything said in the Oval Office, and his trying to destroy evidence, and refusal to give up the tapes Congress subpoenaed, was what really lost him all support from his party, and supporters. Howard Baker was the VP of Senate Watergate Committee. He is Tennessee's first popularly elected Republican senator, Baker served as vice chairman of the Senate Watergate Committee.
Attorney General Elliot Richardson appointed a special prosecutor, Archibald Cox, to investigate the entire affair; Cox and his staff began to uncover widespread evidence of political espionage by the Nixon reelection committee, illegal wiretapping of citizens by the administration, and corporate contributions to the Republican party in return for political favors (Columbia, 6th Edition). In July 1973, it was revealed that presidential conversations in the White House had been tape-recorded since 1971; Cox sued Nixon to obtain the tapes, and Nixon responded by ordering Richardson to fire him (Columbia, 6th Edition). Richardson resigned instead, and his assistant, William Ruckelshaus, also refused and was himself fired. Solicitor General Robert Bork finally fired Cox in what became known as the Saturday Night Massacre (Columbia, 6th Edition). In July 1974, the U.S. Supreme Court ruled unanimously that such recordings were not privileged and Nixon announced his resignation knowing he would face impeachment if he did not.