World's Biggest Accounting Scams

The Satyam scam is the biggest fraud to hit India Inc. Across the globe, there have been several cases of fraud over the years.

In all cases, the top management has colluded to inflate accounts, manipulate prices and take investors for a ride. Here's a look at the world's biggest accounting frauds.

Bank of Credit and Commerce International

The Karachi-based Bank of Credit and Commerce International (BCCI) was founded by Agha Hasan Abedi. The company was registered in Luxembourg and had operations in 78 countries with over 400 branches, and assets of over $20 billion.

It soon became the world's 7th largest private bank in terms of assets. However, it later hit the headlines for the wrong reasons.

In 1991, a scam of over $20 billion was unearthed. The bank faced several charges of money laundering, bribery, supporting terrorism, arms trafficking and tax evasion, smuggling, illegal immigration.

It was also found to be involved in illegal purchases of banks and real estate. The bank was nicknamed 'Bank of Crooks and Criminals International'.

WorldCom

WorldCom was one of the world's largest telecommunications companies with 20 million customers and 80,000 employees.

However, the US telecommunications giant WorldCom dug its own grave by manipulating its financial records during the 1990s.

This led to its bankruptcy with about $40 billion in debt and a $3.85 billion accounting scandal. The company's CFO Scott Sullivan who cooked up the books was fired. CEO Bernie Ebbers also had to resign following the scam.

The company which dealt with about half of the world's Internet traffic, was charged with fraud by the US Securities and Exchange Commission in 2002.

The company owed banks around the world about $4.5 billion and US insurers' estimated exposure stood at $5.4 billion. Trading in WorldCom Group shares, which peaked at more than $64 in 1999, was halted, it crashed to 9 cents a share. WorldCom's auditor was KPMG.

Xerox

Founded in 1906, Xerox Corporation is a global document management company which manufactures and sells a range of color and black-and-white printers, multifunction systems, photo copiers and digital production printing presses.

Xerox was found guilty of accounting irregularities to the tune of $3 billion in 2002.

The Securities and Exchange Commission (SEC) filed a civil suit against Xerox for misstating four years of profits.

Xerox, however, negotiated a settlement with the federal regulatory agency. As part of the agreement, Xerox agreed to pay a $10 million fine and agreed to restate four years' of trading statements.

KPMG was the company's auditor.

Enron

The Enron scandal sent shock waves across the globe.

Enron's growth was remarkable, in 15 years it grew to be America's seventh largest company with 21,000 employees in more than 40 countries.

The Fortune magazine named Enron "America's Most Innovative Company" for six consecutive years. Little did the world know what was cooking in the company's balance sheet.

Enron misappropriated profits, it tactfully hid debts to offer a rosy picture of the company?s accounts. Enron's recorded assets and profits were inflated, or even wholly fraudulent and non-existent.

The Enron fraud raised several questions about the accounting practices of many corporations throughout the United States.

The key players in the Enron scandal were Andrew Fastow, former chief financial officer who orchestrated the scam was fired.

Enron's former chief executive and chairman Kenneth Lay and David Duncan, Enron's chief auditor at Andersen also played a role in the scam.

The scam led to Enron filing for bankruptcy. The scandal also forced one of the biggest accounting firms, Arther Andersen to shut shop.

Mirant

Mirant Corp also created a storm with accounting malpractices, however after a six-year legal battle, the company managed to come clean on the alleged fraud.

Shareholders had alleged that the company had rigged prices to earn more profits and push up stock prices. The company reports high growth by inflating energy prices illegally, it was alleged.

However, the court turned down their complaints.

Mirant made its foray in California in 1999 as Southern Energy Inc. In September 2000, Mirant became an independent company.

In two years it grew to become the 13th largest owner of power generation plants in the US. It also marketed commodities like electricity, natural gas, coal and oil.

Mirant shareholders in their compliant said that that Mirant illegally manipulated California energy prices in 2000 and 2001.

Mirant's stock crashed to less than $4. The company was found to overstate its assets and liabilities. The company eventually went bankrupt.

In 2006, the company surfaced again, after the charges against the company were proved wrong.

Time Warner Inc

Time Warner executives were proved guilty of fraudulently inflating the company's online advertising revenues by more than $1 billion between 2000 and 2002.

The executives agreed to settle the civil charges brought by the Securities and Exchange Commission by paying a total of about $8 million as penalty. They also agreed to return the gains they received.

David Colburn, Eric Keller, Jay Rappaport and James MacGuidwin. MacGuidwin wwere found guilty in May 2008.

Time Warner Inc. agreed to pay regulators $300 million to settle fraud charges related to online advertising deals in 2005.

In 2002, shareholders filed a fraud suit against AOL Time Warner alleging that the company had manipulated its advertising revenues.