Biggest Corporate Scandals in American History

Below are 10 of the largest corporate scandals in US history. Each of them had a profound impact on the nation's history.

• Enron Scandal (2001):

• Company: Enron Corporation

• Issue: Enron executives engaged in complex accounting fraud known as "mark-to-market" accounting to hide debt and inflate profits. They created off-balance-sheet special purpose entities to keep liabilities hidden from investors.

• Outcome: Enron declared bankruptcy, resulting in significant losses for shareholders and employees. Key executives, including CEO Jeffrey Skilling and CFO Andrew Fastow, were convicted and imprisoned. The scandal led to the dissolution of Arthur Andersen, one of the five largest audit and accountancy partnerships in the world, and the enactment of the Sarbanes-Oxley Act to improve corporate governance and financial disclosures.

• WorldCom Scandal (2002):

• Company: WorldCom, Inc.

• Issue: WorldCom executives falsified financial statements by capitalizing operating expenses, inflating assets by approximately $11 billion. This made the company appear more profitable than it was.

• Outcome: WorldCom filed for bankruptcy, the largest in U.S. history at the time. CEO Bernard Ebbers and other executives were convicted of fraud. The scandal led to increased regulatory scrutiny and reforms in corporate governance and accounting practices.

• Bernie Madoff Ponzi Scheme (2008):

• Company: Bernard L. Madoff Investment Securities LLC

• Issue: Bernie Madoff orchestrated the largest Ponzi scheme in history, promising high returns to investors and using funds from new investors to pay returns to earlier investors. The scheme defrauded individuals, charities, and institutional investors out of an estimated $65 billion.

• Outcome: Madoff was arrested and sentenced to 150 years in prison. The scandal caused widespread financial devastation for victims and led to increased regulation and oversight of investment funds and financial advisors.

• Lehman Brothers Collapse (2008):

• Company: Lehman Brothers Holdings Inc.

• Issue: Lehman Brothers heavily invested in subprime mortgages and complex financial instruments, leading to massive losses when the housing market collapsed. The firm was unable to secure a bailout or buyer and declared bankruptcy.

• Outcome: The bankruptcy triggered a global financial crisis, contributing to the Great Recession. The collapse highlighted the risks of excessive leverage and inadequate risk management in the financial industry, leading to significant reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act.

• Tyco International Scandal (2002):

• Company: Tyco International Ltd.

• Issue: CEO Dennis Kozlowski and CFO Mark Swartz embezzled over $150 million and inflated company earnings by engaging in fraudulent accounting practices.

• Outcome: Both executives were convicted and sentenced to prison. The scandal led to significant changes in corporate governance and executive compensation practices, aiming to prevent similar abuses of power.

• AIG Scandal (2008):

• Company: American International Group (AIG)

• Issue: AIG engaged in risky financial practices, particularly in the credit default swap market. When these investments soured during the financial crisis, AIG faced massive losses and liquidity problems.

• Outcome: The U.S. government provided an $85 billion bailout to prevent AIG's collapse, which would have had catastrophic consequences for the global financial system. The scandal led to increased regulation of the insurance and financial industries.

• HealthSouth Scandal (2003):

• Company: HealthSouth Corporation

• Issue: CEO Richard Scrushy and other executives falsified financial statements to meet earnings expectations, inflating earnings by $2.7 billion.

• Outcome: Scrushy was acquitted of criminal charges but faced civil penalties. Several other executives were convicted and imprisoned. The scandal led to reforms in healthcare accounting practices and increased scrutiny of financial disclosures in the healthcare industry.

• Volkswagen Emissions Scandal (2015):

• Company: Volkswagen AG

• Issue: Volkswagen installed software in diesel engines to cheat emissions tests, making vehicles appear compliant with environmental standards while emitting up to 40 times the allowed levels of pollutants.

• Outcome: Volkswagen faced billions in fines and settlements, criminal charges for executives, and significant reputational damage. The scandal prompted stricter emissions testing standards and regulations worldwide.

• Theranos Scandal (2015):

• Company: Theranos, Inc.

• Issue: Theranos, founded by Elizabeth Holmes, claimed to have developed revolutionary blood-testing technology. However, the technology did not work as advertised, and the company misled investors, patients, and doctors.

• Outcome: Theranos dissolved, and Holmes and former president Ramesh "Sunny" Balwani faced criminal charges for fraud. The scandal highlighted the importance of regulatory oversight and due diligence in the healthcare and biotech industries.

• Wells Fargo Scandal (2016):

• Company: Wells Fargo & Company

• Issue: Wells Fargo employees opened millions of unauthorized bank accounts and credit cards to meet aggressive sales targets, leading to customers being charged fees for accounts they did not authorize.

• Outcome: Wells Fargo faced billions in fines and settlements, executive resignations, and significant reputational damage. The scandal led to changes in corporate culture and sales practices, as well as heightened regulatory oversight of the banking industry.