Lehman Brothers and its collapse was at the center of a political debate during the Financial Crisis which was based on theories of conspiracy, lessons being taught, and public pressure that was tied to political motives on the part of the Fed. There is no doubt that the downfall of investment bank Lehman Brothers was a major contributing factor to the Financial Crisis. There is however doubt regarding exactly why this financial institution was allowed to collapse and what specifically the ramifications were for the financial system as a whole. In the middle of March, 2008, the Federal government working with J. P. Morgan Chase bailed out Bear Sterns, however only several months later in September of the same year, Lehman Brothers was left to file for bankruptcy after the Federal government declined to rescue them. This inconsistency on the part of the government and the Federal Reserve contributed to the uncertainty which the Financial Crisis fostered.
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.
With a pay package that included more than seven million shares and options, Dunlap stood to make more than $200 million personally if he could keep Sunbeam's stock price flying. In the spring of 1998, when Dunlap and his team ran out of tricks, Sunbeam corrected its books, declared bankruptcy, and the stock price plunged from $53 at its peak to just pennies today. In an ominous harbinger of the Enron scandal, the SEC discovered that Andersen accounting documents had been destroyed. In the case of Waste Management -- which in 1998 issued the largest corporate restatement before Enron -- the company had exaggerated its earnings by $1.7 billion. The SEC's investigation found a long-running cover-up -- not just by Waste Management, but by Andersen as well.
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).
The Royal Bank of Scotland: The Bank That Ran Out of Money Executive Summary This memo provides an analysis and evaluation of the rise and downfall of the Royal Bank of Scotland (RBS) in the period 2000-2008, with special attention to its corporate governance. Fred Goodwin, who was CEO of RBS during these years, can be regarded as the key person that determined the bank’s strategy until the bail-out by the government in 2008. From the RBS case, it becomes clear what importance a well-functioning Board of Directors has. An internal, critical and independent view of strategic decisions is found to be essential for the performance of an extremely complex organization such as RBS. 1.
Staff Analysis Statement of the Problem Kate Stark, the electric utilities analyst at First Equity Securities Corporation (FESC), on the May 5, 1994, received an alert from Merrill Lynch regarding FPL Group Inc. (FPL), one of the companies she follows. Merrill Lynch’s utilities analyst has decided to downgrade FPL’s stock due to its dividend payout being extremely high (in excess of 90% in 1993) for the unstable and more competitive business environment. Three weeks prior to this alert, Stark issued a report on FPL stating FPL should “hold” its dividend at $2.48 or increase it slightly. Coincidently, FPL’s stock fell 6% after this report was issued; however, Stark was not sure this fall in stock was due to the report she issued. Since Stark has received the alert from Merrill Lynch she is questioning her recommendation to hold; moreover, Stark must take the effect her recommendation will have on FPL’s stock prices into consideration before altering her recommendation to sell or buy or maintaining her current hold recommendation.
Last July 2012, a new financial fraud came out and hit the news headline, déjà vu, perhaps of other famous scandals, but not. This time a medium size financial institutions, name “ Peregrine Financial Group Inc” accused of shortfall of funds for around $200 million, where its CEO, Russell Wasendorf managed to misstated financial record for over 20 years, and finally in July 2012 filed for Bankruptcy. This particular case raises the questions of the role of controlling agencies , these last two hold a percentage of responsibility in this case. How PFG could managed to forge bank documents and financial record for such a long time, the clear response is the lack of controls and oversight. This has become a major problem over the last financial scandals as well.
According to Gupta & Herman (2010) the financial services industry went through stressful period due to the collapse of the U.S. Real-Estate and as well as the subprime mortgage crisis. The net effect was that market values fell, consumers spending dropped and the country was in a deep recession. In 2007 under pressure to remain competitive, Bank of America launched mobile banking services as an extension of online banking services. This paper will examine and analyze the strategic issues and problems faced by Bank of America.
* Satyam was blacklisted by the World Bank for a period of eight years on grounds of data theft and bribing bank officials. * Consequently, five independent directors resigned from the board, shortly after the announcement of the Maytas acquisition. * In 2009, the share price of Satyam fell to an all time low of 78 %. * Satyam’s employees faced a bleak future as they were not assured of salaries in 2009. * Ultimately, the company ceased to exist on its own and was taken over by Tech Mahindra.
The irregular accounting practices, including manipulating stock prices, caused Enron to have to file bankruptcy in December of 2001 (Thomas, 2002). The scandal is the most significant corporate collapse in the United States since the failure of many savings and loan banks during the 1980s (Hanson, 2002). Enron collapsed for many reasons. .Among the many reasons were the lack of attention shown by members of the Enron board of directors to the books financial entities and the lack of truthfulness by management about the health of the company and its business operations (Hanson, 2002). The firm’s senior managers had engaged in fraud for an extended period through a scheme in which partnerships owned by the managers could receive payment for goods and services never provided to Enron.