List of corporate collapses and scandals

From Wikipedia, the free encyclopedia - View original article

 
  (Redirected from List of corporate scandals)
Jump to: navigation, search

This is a list of corporate collapses and scandals. A collapse involves a major insolvency or bankruptcy of a failure. A scandal involving allegations of unethical behavior by people acting within or on behalf of a corporation. A corporate scandal sometimes involves accounting fraud of some sort. A wave of such scandals swept many United States companies in 2002 (see list at accounting scandals).

List of major corporate collapses[edit]

The following list of corporations involved major collapses, through the risk of job losses or size of the business, and meant entering into insolvency or bankruptcy, or being nationalised or requiring a non-market loan by a government.

NameHQDateBusinessCauses
Medici BankItaly1494BankingOwned by the Medici family, it ran up large debts due to the family's profligate spending, extravagant lifestyle, and failure to control the managers, their bank went insolvent.
Mississippi CompanyFranceSep 1720ColonialismScottish economist John Law convinced the French government to support a monopoly trade venture in Louisiana. He marketed shares based on great wealth, which was highly exaggerated. A speculative bubble grew and then collapsed, and Law was expelled.
South Sea CompanyUnited KingdomSep 1720Slavery and colonialismAfter the War of Spanish Succession, the UK signed the Treaty of Utrecht 1713 with Spain, ostensibly allowing it to trade in the seas near South America. In fact, barely any trade took place as Spain renounced the Treaty, however this was concealed on the UK stock market. A speculative bubble saw the share price reach over £1000 in August 1720, but then crash in September. A Parliamentary inquiry revealed fraud among members of the government, including the Tory Chancellor of the Exchequer John Aislabie, who was sent to prison.
Overend, Gurney & CoUnited KingdomJune 1866BankingAfter Samuel Gurney's retirement, the bank invested heavily in railway stocks. It went public in 1865, but was badly affected by a general fall in stock prices. The Bank of England refused to advance money, and it collapsed. The directors were sued, but exonerated from fraud.
Friedrich Krupp AGGermany1873Steel, metalsKrupp's business over-expanded, and had to take a 30m Mark loan from the Preußische Bank, the Bank of Prussia.
DanatbankGermany13 July 1931BankingAt the start of the Great Depression, after rumours about the solvency of the Norddeutsche Wollkämmerei & Kammgarnspinnerei, there was a bank run, and Danatbank was forced into insolvency.
Allied Crude Vegetable Oil Refining CorpUnited States16 Nov 1963CommoditiesCommodities trade Tino De Angelis defrauded clients, including the Bank of America into thinking he was trading vegetable oil. He got loans and made money using the oil as collateral. He showed inspectors tankers of water, with a bit of oil on the surface. When the fraud was exposed, the business collapsed.
TexacoUnited States13 April 1987OilAfter a legal battle with Pennzoil, whereby it was found to owe a debt of $10.5 bn, Texaco went into bankruptcy. It was later resurrected and taken over by Chevron.
QintexAustralia1989Real EstateQintex CEO Christopher Skase was found to have improperly used his position to obtain management fees prior to the $1.5 billion collapse of Qintex including $700m unpaid debts. Skase absconded to the Spanish resort island of Majorca. Spain refused extradition for 10 years during which time Skase became a citizen of Dominica.
Polly PeckUnited Kingdom30 Oct 1990Electronics, food, textilesAfter a raid by the UK Serious Fraud Office in September 1990, the share price collapsed. The CEO Asil Nadir was convicted of stealing the company's money.
Bank of Credit and Commerce InternationalUnited Kingdom5 July 1991BankingBreach of US law, by owning another bank. Fraud, money laundering and larceny.
NordbankenSweden1991BankingFollowing market deregulation, there was a housing price bubble, and it burst. As part of a general rescue as the Swedish banking crisis unfolded, Nordbanken was nationalised for 64 billion kronor. It was later merged with Götabanken, which itself had to write off 37.3% of its creditors, and is now known as Nordea.
Carrian GroupHong Kong1993Real estateAccounting fraud. An auditor was murdered, an adviser committed suicide. The largest collapse in Hong Kong history.
Barings BankUnited Kingdom26 Feb 1995BankingAn employee in Singapore, Nick Leeson, traded futures, signed off on his own accounts and became increasingly indebted. The London directors were subsequently disqualified, as being unfit to run a company in Re Barings plc (No 5).
Long-Term Capital ManagementUnited States23 Sep 1998Hedge fundAfter purporting to have discovered a scientific method of calculating derivative prices, LTCM lost $4.6bn in the first few months of 1998, and required state assistance to remain afloat.
Equitable Life Assurance SocietyUnited Kingdom8 Dec 2000InsuranceThe insurance company's directors unlawfully used money from people holding guaranteed annuity rate policies to subsidise people with current annuity rate policies. After a House of Lords judgment in Equitable Life Assurance Society v Hyman, the Society closed. Though never technically insolvent, the UK government set up a compensation scheme for policyholders under the Equitable Life (Payments) Act 2010.
HIH InsuranceAustralia15 March 2001InsuranceIn early 2000, after increase in size of the business, it was determined that the insurance company's solvency was marginal, and a small asset price change could see the insurance company become insolvent. It did. Director Rodney Adler, CEO Ray Williams and others were sentenced to prison for fraudulent activity.
Pacific Gas and Electric CompanyUnited States6 April 2001EnergyAfter a change in regulation in California, the company determined it was unable to continue delivering power, and despite the California Public Utility Commission's efforts, it went into bankruptcy, leaving homes without energy. It emerged again in 2004.
One.TelAustralia29 May 2001TelecommsAfter becoming one of the largest Australian public companies, losses of $290m were reported, the share price crashed, and it entered administration. In ASIC v Rich[1] the directors were found not to have been guilty of negligence.
WorldComUnited States21 July 2001TelecommsAfter falling share prices, and a failed share buy back scheme, it was found that the directors had used fraudulent accounting methods to push up the stock price. Rebranded MCI Inc, it emerged from bankruptcy in 2004 and the assets were bought by Verizon.
EnronUnited States28 Nov 2001EnergyDirectors and executives fraudulently concealed large losses in Enron's projects. A number were sentenced to prison.[2][3]
Chiquita Brands IntUnited States28 Nov 2001FoodAccumulated debts, after a series of accusations relating to breaches of labour and environmental standards. It entered a pre-packaged insolvency, and emerged with similar management in 2002.[4]
KmartUnited States22 Jan 2002RetailAfter difficult competition, the store was put into Chapter 11 bankruptcy proceedings, but soon re-emerged.
Adelphia CommunicationsUnited States13 Feb 2002Cable televisionInternal corruption. The Directors were sentenced to prison.[3][5]
Arthur AndersenUnited States15 June 2002AccountingA US court convicted Andersen of obstruction of justice by shredding documents relating to Enron scandal.
Bre-XCanada2002MiningAfter widespread reports that Bre-X had found a gold mine in Indonesia, the stories were found to be fraudulent.
ParmalatItaly24 Dec 2003FoodThe company's finance directors concealed large debts.
MG Rover GroupUnited Kingdom15 April 2005AutomobilesAfter diminishing demand, and getting a £6.5m loan from the UK government in April 2005, the company went into administration. After the loss of 30,000 jobs, Nanjing Automobile Group bought the company's assets.
Bayou Hedge Fund GroupUnited States29 Sep 2005Hedge fundSamuel Israel III defrauded his investors into thinking there were higher returns, and orchestrated fake audits. The Commodity Futures Trading Commission filed a court complaint and the business was shut down after the directors were caught attempting to send $100m into overseas bank accounts.
RefcoUnited States17 Oct 2005BrokeringAfter becoming a public company in August 2005, it was revealed that Phillip R. Bennett, the company CEO and chair, had concealed $430m of bad debts. Its underwriters were Credit Suisse First Boston, Goldman Sachs, and Bank of America Corp. The company entered Chapter 11 and Bennett was sentenced to 16 years prison.
Bear StearnsUnited Kingdom14 Mar 2008BankingBearn Stearns invested in the sub-prime mortgage market from 2003 after the US government had begun to deregulate consumer protection and derivative trading. The business collapsed as more people began to be unable to meet mortgage obligations. After a stock price high of $172 a share, it was bought by JP Morgan for $2 a share on 16 March 2008, with a $29bn loan facility guaranteed by the US Federal Reserve.
Northern RockUnited Kingdom22 Feb 2008BankingNorthern Rock had invested in the international markets for sub-prime mortgage debt, and as more and more people defaulted on their home loans in the US, the Rock's business collapsed. It triggered the first bank run in the UK since Overend, Gurney & Co in 1866, when it asked the UK government for assistance. It was nationalised, and then sold to Virgin Money in 2012.
Lehman BrothersUnited States15 Sep 2008BankingLehman Brothers' financial strategy in from 2003 was to invest heavily in mortgage debt, in markets which were being deregulated from consumer protection by the US government. Losses mounted, and Lehman Brothers was forced to file for Chapter 11 bankruptcy after the US government refused to extend a loan. The collapse triggered a global financial market meltdown. Barclays, Nomura and Bain Capital purchased the assets which were not indebted.
AIG[3]United States16 Sep 2008InsuranceOut of $441 billion worth of securities originally rated AAA, as the US sub-prime mortgage crisis, unfolded AIG found it held $57.8 billion of these products. It was forced to take a 24 month credit facility from the US Federal Reserve Board.
Washington MutualUnited States26 Sep 2008BankingFollowing the sub-prime mortgage crisis, there was a bank run on WaMu, and pressure from the FDIC forced closure.
Royal Bank of Scotland GroupUnited Kingdom13 Oct 2008BankingFollowing the takeover of ABN-Amro, and the collapse of Lehman Bros, RBS found itself insolvent as the international credit market seized up. 58% of the shares were bought by the UK government.
ABN-AmroNetherlandsOct 2008BankingAfter a takeover battle between Barclays and RBS, which RBS won, ABN-Amro was found to be heavily indebted due to the sub-prime mortgage crisis. It was split and taken under government ownership by the UK and Netherlands.
NortelCanada14 Jan 2009TelecommsFollowing the 2007-2008 financial crisis, and allegations over excessive executive pay, demand for products dropped.
Anglo Irish BankRepublic of Ireland15 Jan 2009BankingAfter the financial crisis of 2007-2008, the bank was forced to be nationalised by the Irish government.
ArcandorGermany9 June 2009RetailAfter struggling to maintain business levels at its brand names Karstadt and KaDeWe, Arcandor sought help from the German government, and then filed for insolvency.
SchleckerGermany23 Jan 2012RetailAfter continual losses mounting from 2011 Schlecker, with 52,000 employees, was forced into insolvency, though continued to run.
DynegyUnited States6 July 2012EnergyAfter a series of attempted takeover bids, and a finding of fraud in a subsidiary's purchase of another subsidiary, it filed for Chapter 11 bankruptcy. It emerged from bankruptcy on 2 October 2012.

List of scandals without insolvency[edit]

See also[edit]

Notes[edit]

  1. ^ [2009] NSWSC 1229
  2. ^ a b Jerry W. Markham, A financial history of modern U.S. corporate scandals: from Enron to reform 
  3. ^ a b c d e f g h i j Cohen, Jeffrey R., Ding, Yuan, Lesage, Cédric and Stolowy, Hervé (August 1, 2008), Managers' Behavior in Corporate Fraud, SSRN 1160076 
  4. ^ 'Chiquita files bankruptcy under pre-arranged plan' (11 November 2001) USA Today
  5. ^ a b c d e f g h i j k l m n o p Penelope Patsuris (26 August 2002), The Corporate Scandal Sheet, Forbes 
  6. ^ Miriam Hechler Baer (2008), "Corporate Policing and Corporate Governance: What Can We Learn from Hewlett-Packard's Pretexting Scandal", University of Cincinnati Law Review 77 (523) 

Further reading[edit]

External links[edit]