Waste Management Fraud
Waste Management, Inc. today is dedicated to serving our communities by collecting and disposing of garbage and recycling. Over the years they have had to deal with a rise of issues such as environmental and global warming. Waste Management has also tried to reduce its waste collections while turning any valuable resources it can into clean and renewable energy. Waste Management has been around since the late 1800’s, and is a holding company that has all its daily operations conducted through its subsidiaries. Since there are relatively few garbage disposal companies around, Waste Management has been able to grow and advance into a huge corporation that has built an employee base of 45,000. And with any growing company, there is always the potential for individuals to want to take advantage of the company’s profits. Most companies will face some type of fraud in their existence, but the level to which it will happen remains to be seen. Waste Management was unfortunately the victim to a massive fraud scheme involving its accounting records. Executives were accused of inflating earnings by as much as $1.7 billion. The scheme was designed to scam the shareholders while the executives took all the profits for themselves. And for more than five years, during 1992 to 1997, it worked. The fraud at Waste Management started out with six executives manipulating the company’s financial results to meet predetermined earning targets. According to the SEC report the company’s predetermined profits and revenues were not meeting targets so the executives instead started to improperly eliminate and defer current period expenses to inflate earnings. Netting, which is a method that is used to move funds around and carry balances over to the next period. About $490 million was eliminated using this method. The money was funneled to other “one-time” gains that were reported in the financials as sales or exchange of assets. Waste Management had some very sneaky but smart people executing these transactions and the executives that perpetrated the fraud were: Dean L. Buntrock, who was founder, chairman of the Board of Directors and chief executive officer. He was accused of stealing almost $17 million from the company. Phillip B. Rooney, who was president, chief operating officer, director and CEO, was accused of stealing more than $9 million. James E. Koenig, who was executive vice president and chief financial officer, was accused of stealing a little more than $950,000. Thomas C. Hau, who was vice president, corporate controller and chief accounting officer, was accused of stealing $640,100. Herbert Getz, who was senior vice president, general counsel and secretary, was accused of stealing $472,500. And finally Bruce D. Tobecksen, who was vice president of finance, was accused of stealing a little more than $400,000. These men were ultimately responsible for defrauding hundreds of investors and changed their own lives forever. The executives were very smart in how they resorted to defrauding the company. They used a number of accounting practices to achieve this. The most common practices used were avoiding depreciation expenses and extending the useful life of assets. They failed to record expenses for decreases in value of landfills when they got filled up with waste. They also failed to record expenses for costs associated with unsuccessful landfill development projects. The executives also improperly capitalized a number of expenses and failed to establish sufficient reserves to pay for taxes and other expenses. Each year the executives had to prepare an estimated annual budget for expected earnings for the next year. So when they would compare estimations with actual results they would adjust whatever needed to be adjusted to make the earnings seem they had been achieved as planned. The problem was that when they had originally manipulated the earnings the first year, it created a chain reaction where they had to...
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