In 2002 the Securities and Exchange Commission filed a lawsuit against six top executives at Waste Management Inc. for fraudulent financial reporting for the years 1992 through 1997. The fraud was perpetrated by six of Waste Management’s executives, including its founder, Dean Buntrock. Other executives involved included Phillip Rooney, James Koenig, Thomas Hau, Herbert Getz, and Bruce Tobecksen. Each of these men held high authority positions within the company such as COO, CEO, CAO, CFO, Executive VP, and VP of Finance. Buntrock was the architect of the fraud. He laid the foundation for its occurrence by creating extreme pressure to meet unrealistic earnings targets and encouraging misstatements of financial information to meet those targets. …show more content…
This was where top management gathered to set targets for each year. When the actual results didn’t meet the targets, the executives took it into their own hands and made their own adjustments. The majority of the fraudulent adjustments were in result of attempts to meet Buntrock’s unrealistic earnings targets. These adjustments included earnings manipulations such as income smoothing by deferring expenses. Other deceptive accounting included failure to recognize depreciation, capitalizing expenses, failure to recognize declining value of landfills, and many other fraudulent practices. Buntrock benefited greatly from the fraud, receiving almost $17 million in illegal gains by selling company stock and receiving retirement benefits. The other executives received the following in various forms of benefits: Rooney $9.2 million, Koenig $900,000, Hau $600,000, Tobeckson $400,000, and Getz …show more content…
Despite the heightened laws and regulations in the accounting industry at that time, there were still ways to get around the law and deceive auditors and the public. Additionally, the executives overstated earnings by almost $2 billion dollars, which was the largest restatement in history at the time. When the fraud became public knowledge, Waste Management’s stock plummeted over 33%, costing shareholders’ losses of over $6 billion. This case presents an egregious crime and demonstrates how easy it is for management to collude and conceal fraud to mislead investors and the public. Even with stricter laws in place, fraud and white collar crime can still occur and can go undetected for years. Furthermore, the case presents an egregious crime due to the involvement of the external auditors from Arthur Andersen. The auditors acted unprofessionally and unethically when they made the agreement with Waste Management. They were required by auditing standards to report the fraudulent activities and to issue the appropriate opinion that accurately represents the company’s financial statements, yet they helped conceal the fraud instead. If the auditors were acting ethically and professionally they would’ve reported the fraud immediately, and that agreement would’ve never been conceived. This could’ve potentially prevented investors from losing billions of