Amid this controversy, Edward Liddy, AIG’s CEO, requested the bonus recipients to return half of the bonus amount. Some Financial Products employees decided to return their bonuses; others opted to keep their bonuses. Many affected Financial Products employees felt betrayed by AIG because of repeated reassurances of the bonus payments under contractual obligations. Subsequently, Kenneth Feinberg, the federal government’s overseer of executive compensation at AIG and other major TARP recipients, played a key role in addressing the controversy over the AIG retention bonuses. He made several controversial decisions with respect to compensating AIG’s executives.
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.
(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.
Case Study Compensation Controversies at AIG American International Group (AIG), a behemoth insurance and financial services company, became notoriously famous in early 2009 for the payment of $165 million in retention bonuses to employees in its Financial Products unitthe business unit that was instrumental in bringing AIG to its knees and necessitating the infusion of many billions of dollars in United States government bailout money, beginning in September 2008. Although the near collapse of AIG was significantly influenced by “soured trades entered into by the company’s Financial Products division,” the operations of other AIG units, such as the financial gambles of its 2,000-employee Investments unit, helped cripple the company as well. Rapidly mounting financial losses had been occurring in the Financial Products unit for some time. Consequently, AIG decided to unwind the business and shut it down. In early 2008, employees in the Financial Products unit were asked to remain with the company through the unit’s shutdown and, essentially, to work themselves out of a job.
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).
Summary of Bigger than Enron In 2001, the nation was rocked by the collapse of Enron, a multibillion-dollar corporation that employed thousands of people and had affiliations right up to and including The White House itself. With all of the fraud and mismanagement that took place under the gilded roof of Enron, the question arises as to the involvement of others in the scandal, not the least of who is the firm of Arthur Andersen. In the 1990s, more than 700 U.S. companies were forced to correct misleading financial statements as a result of accounting failures, lapses, or outright fraud. Together with Enron -- the largest corporate bankruptcy in U.S. history -- these failures have cost investors an estimated $200 billion. What went wrong?!
ACRC: CORPRORATE GOVERNANCE FAILURE AT SATYAM 1. What are the reasons for the inadequate corporate governance at Satyam? The fall of Satyam can be attributed to many causes as mentioned below: * Raju had been manipulating Satyam’s financial books for a period of seven years and the major corporate governance issue was that the Board of Directors and the auditors were unable to catch hold of the issue for so long. * Raju and his family founded a group of companies called Maytas. It was owned by his sons and to ensure billion dollar targets for Maytas, Raju inflated cash and bank balances in Satyam’s financial records.
However, the traders were fired once it was revealed that Enron's reserves were gambled away which nearly destroyed the company. After these facts were brought to light, Ken Lay denies having any knowledge of wrongdoing. Needless to say, when required to testify before the U.S. Congress on the reasons for Enron’s collapse, Ken Lay, Jeff Skilling and Andrew Fastow, sought refuge under the Fifth Amendment. Andrew Fastow, Jeffrey Skilling, and Kenneth Lay are among the most notable top-level executives implicated in the collapse of Enron’s. Kenneth Lay, the former chairman of Enron was prosecuted on 11 criminal counts of making misleading statements and fraud.
On July 22, 2002, MCI WorldCom (hereafter known as WorldCom) filed for Chapter 11 bankruptcy, the largest filing in U.S. History at the time (Beltran, 2002). It is clear that senior-level executives were holding the reigns throughout the elaborate and, what one analyst called, “incredibly elegant (Simons, 2002),” scam, intended to defraud investors and Wall Street. To someone not familiar with accounting processes, the case becomes difficult to understand. The executives were falsifying accounting entries, both creating accounting line items that did not exist and counterfeiting actual entries to inflate earnings (Boatright, p.44). The 1990s proved to be an excellent decade for WorldCom, particularly after the 1997 purchase of MCI, which was the largest national long-distance phone carrier at the time, and resulted in the largest corporate merger in the history of the United States.
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.