1. waste managment scandle 1998

Wast Management scandle 1998

1. Waste management scandal (1998) Ahsan Mehmood MSBA-006 Tanzeela Fareed MSBA-007 Muhammad Naveed MSBA-008 Hina Arif MSBA-010

2. Waste management corp. Waste Management Inc. was a corporation in North America Focused on waste management and environmental services (collecting , recycling and cleaning) Founded by Dean Buntrock and Wayne Huizenga in 1894 and went public in 1971 Generating about $82 million Acquired more than 20000 companies 250 local divisons,40 regional offices and 9 area offices

3. Case study Waste Management, Inc. experienced many fraudulent crimes within its company between the years of 1992 and 1997. S enior officers at Waste Management, Inc ., began to engage in fraudulent activities involving the company’s accounting books. Officers which included were Dean Buntrock (Founder and CEO) $16.9 million Phillip Rooney (Former President) $9.2 million Thomas Hau ( CAO) $ 600,000 James Koenig ( CFO ) $ 900,000 Herbert Getz (General Counsel ) $ 450,000 Bruce Tobecksen (Vice President of Finance ) $400,000 .

4. Accounting trickery Avoiding depreciation expenses by assigning and inflating salvage values and extending the useful lives of garbage trucks that the company owned. Waste listed the work life of a dumpster as 15–20 years, while the industry norm was 12 . Every Waste asset , from the dumpster to the engineering plant, had its working life stretched . Same technique was applied to 137 landfills. So depreciation and startup capital costs can be spread over a longer time Increased environmental reserves to avoid irrelevant operating expenses.

5. Improperly capitalizing a variety of expenses, this would defer expenses paid on the books. Used geography entries to move millions of dollars between the various line items on their income statement . In 1998, Waste Management, Inc. restated its 1992-1997 earnings by $1.7 billions, which made it the largest restatement in history.

6. INVOLVEMENT OF AUDITOR WMC hired Arthur Andersen for the audit. He founded errors, proposed adjustments but the officers refused to make those adjustments and methods in which they could be fixed T hey bribed Arthur and involved him too in that scam. I ssued unqualified opinion in the audit report and wrote off the accounting errors over time in order to conceal the frauds.

7. What went wrong WMC did wrong things because it refused to concede that it was no longer a hot growth company Dodgy accounting was the symptom, not the cause It was management failure because management concentrated too much on the appearance of the business and not on the business itself Obsessed with it’s stock price Attempt to meet the predetermined earnings Officers compensation was tied to the earnings

8. How was it solved Key to WM turnaround was shareholders We described Governance as a set of relationships between three groups – the management, the directors, and the shareholders. In this relationship, management has vastly more power than any other group . So shareholders started 2 resolution Banning directors from accepting consulting or other fees from the company Management was not fully attuned to shareholder’s interest Lens setup “intranet” a private website to share and disseminate information

9. Recommendation Proper communication between Ownership(shareholder) and control(management). No CEO should stay more than 10 years Not every company can manage diversification Full time manager should not sit on more than two outside boards Auditor should not have cozy relationship with management Focus on performance not on high profit