Top 5 Infamous Accounting Frauds in US History

Written by admin at 05:15:am on 3rd May, 2010

Accounting frauds or corporate accounting frauds are political and business scandals that occur due to the misdeed of trusted executives of large public corporations. These misdeeds includes activities like complex methods of misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of corporate assets or underreporting of the existing liabilities. These frauds actually happen to be a tip of ice- berg and represent catastrophic failure of the system. Below are some of the famous Accounting frauds of the United States which devastated the organizations by large.

  1. ZZZ Best: A company run by Barry Minkow an American religious leader and ex-convict was doing very good business during 1980s however collapsed by 1987 costing investors nearly an estimated $100 million. He was convicted of fraud and several other offenses and sentenced for 25 years in prison. Presently, he is pastor of the Community Bible Church in San Diego. Now, he is considered as an expert on Fraud.
  2. MiniScribe: It was a disk storage Products Company founded in at Longmont, Colorado in 1980 and grows up into developing voice coil motor designs and became bankrupt in 1990. MiniScribe’s failure was centered on one of the first major accounting scandals in the computer industry, when it lost a supply contract with IBM’s PC division in 1985. It falsified its sales records for several years and was discovered in year 1989.
  3. Phar-Mor: It was a US chain of discount drug stores, located in Youngstown, Ohio, founded by Michael I. Monus and David S. Shapira in 1982. In 1992, when the company had grown to over 300 stores and 25,000 employees, Monus and his CFO Patrick Finn were charged for fraud as they hide losses and moved about $10 million from Phar-Mor to the World Basketball League that Monus had founded. Due to this Phar-Mor had to file for bankruptcy protection and eventually closed down 55 stores and fired 5, 000 employees.
  4. Cendant Corporation: It was a New York-based provider of business and consumer services, especially in the real estate and travel industries. The last CEO of Cendant was Henry Silverman. The company was running quite well when, disastrously, in 1998 Henry Silverman led company into a disastrous merger with CUC International, a direct marketing company where company lost approximately $14 billion, with their stock went down to the rate of $12 from $41.
  5. HealthSouth Corporation: Located at Birmingham, Alabama is one of the largest healthcare services providers in the United States are recognized for its rehabilitation services. It has more than 200 facilities in United States and Puerto Rico. The company was involved in a famous corporate accounting scandal in which its Chief Executive Officer,   Richard M. Scrushy, was accused of falsely reporting grossly exaggerated company earnings to meet up with the expectations of its stock holders.
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