NEW YORK – The stories have the juicy elements of an episode of Dynasty: villainous, greedy patriarchs, crooked accountants and snitches, all hungry for money, power and even revenge.
But the plots aren’t unfolding in the pages of The National Enquirer. These days, they’re the stuff of newspaper business sections and money magazines.
“It certainly does make for interesting reading,” said corporate ethics expert Curtis Verschoor, a research professor at DePaul University’s school of accountancy.
Indeed, the rash of corporate scandals in America has turned business articles from dry, just-the-facts stories to salacious soap opera-esque drama.
“It’s like ‘Corrupt Lifestyles of the Rich and Famous,’” said Lawrence Mitchell, author of Corporate Irresponsibility: America’s Newest Export. “Just like that kind of garbage on TV and magazine racks, it sells. It brings business news to a mass audience.”
The deluge of corporate scandals has caused many to wonder whether 1990s wealth and prosperity led modern-day company execs to become greedier and more corrupt.
But some experts say dishonest business practices have existed for ages – they just weren’t reported as often as they are in the current climate.
“People have put companies and analysts and accountants under more scrutiny,” said Verschoor. “It’s had a devastating effect and has been blamed for a considerable amount of the downturn in the last few months.”
Here’s a glimpse of some of the sexiest, most scandalous stories heating up the business pages:
Enron
The energy giant collapsed late last year after an SEC investigation revealed that executives had misled investors about stock values and earnings and formed inappropriate partnerships to hide its $1 billion in debt. Further revelations about the company’s influence over the Bush administration’s energy policies, since Enron was the Bush campaign’s top contributor, also fueled the scandal. Enron had allegedly been pushing for energy deregulation.
Stock values plummeted steadily after news of the deception broke, and the company soon issued the largest bankruptcy filing in history. Senate hearings into the debacle included testimony from resigned Enron CEO Kenneth Lay and whistleblower Sherron Watkins, an Enron vice president who had approached Lay about financial improprieties and questionable partnerships months before the collapse. Enron’s accounting firm, Arthur Andersen, also crumbled for its part in deliberately concealing the energy company’s financial problems.
Tyco
Chief Executive Officer Dennis Kozlowski, an avid Harley-Davidson motorcycle collector whose motto was “money is the only way to keep score,” helped turn Tyco, a small manufacturer, into a $36 billion giant selling anything from ADT burglar alarms to plastic garbage bags and medical supplies.
But Kozlowski, who cut tens of thousands of jobs during his 10-year tenure, was indicted earlier this month on charges of tax evasion for neglecting to pay sales tax totaling $1 million on several pieces of artwork, including pricey paintings by Monet and Renoir, valued at about $13 million. He abruptly resigned.
The conglomerate’s troubles deepened last week as evidence surfaced that company money was used to buy houses and art for some of the firm’s executives without informing shareholders. That revelation led to a more extensive criminal probe into the company’s illegal activities.
Global Crossing
Ex-CEO Gary Winnick, a former associate of junk-bond magnate Michael Milken, hid the fiber-optic network company’s financial troubles from investors and employees while he and other execs got rich by selling off the ailing company’s stock for about $1.5 billion total.
In the years since he founded Global Crossing in 1997, Winnick flaunted his wealth and connections, buying five company jets and a $92 million Bel Air estate and gloating about the litany of important people he knew. After the company’s earning losses and debt mounted and product demand fell short, it filed for bankruptcy in January.
An SEC probe determined that Global Crossing’s accounting practices were improper. The FBI also launched an investigation into whether company execs beefed up revenues by using swap transactions that were almost worthless.
ImClone
The FBI arrested the biotech company’s Chief Executive Sam Waksal at his home last week on insider trading and criminal conspiracy charges. Waksal, whose name frequently graced gossip pages and society columns, is accused of selling millions of dollars worth of stock and tipping off family and friends to do the same after learning the Food and Drug Administration planned to reject the firm’s experimental cancer drug.
He is out of prison on $10 million bail and has thus far pleaded the Fifth Amendment in Senate hearings.
Home decorating diva Martha Stewart, a former girlfriend of Waksal, reportedly was among those who sold thousands of shares of stock in the days before the drug, Erbitux, was officially rejected by the FDA.
Qwest Communications International
Amid allegations of shady accounting practices and astronomical debt, the fourth-largest local phone company forced out its brash, lavishly paid CEO Joseph Nacchio this week. Media reports say Qwest’s board of directors forced the defiant executive to resign, while shareholders, employees and analysts applauded the move.
The firm’s stock plunged from more than $60 a share to a measly $4 after information emerged about questionable accounting procedures, regulatory troubles, shoddy performance and growing debt. The SEC is currently investigating Qwest’s accounting practices.
Sotheby’s, Christie’s
Sotheby’s resigned CEO and president Dede Brooks, an Ivy League-educated, society matron and tough businesswoman, helped put the auction house’s ex-chairman and owner A. Alfred Taubman behind bars by testifying against him in the antitrust trial.
Brooks placed the blame for the price-fixing scheme squarely on New York society big wig Taubman, who was slapped with a year-long prison sentence and a $7.5 million fine in April. It was never clear why Brooks herself went along with the plan.
Taubman, a former shopping-mall entrepreneur from Detroit, was convicted of colluding with Sotheby’s only rival, Christie’s, in fixing prices to keep them high — matching each other’s commission fees and essentially forming a price monopoly.
Taubman conspired with Christie’s English chairman Anthony Tennant, who has refused to come to the U.S. for trial, to overcharge sellers in 1992 and 1995, preventing them from bargaining down. Taubman alone was found responsible for overcharging $43.8 million over six years. The scam left a black mark on the elite auction house industry.
WorldCom
Hit with accusations that he took $366 million in personal loans out of company money, WorldCom Chief Executive Bernie Ebbers resigned in April as the SEC began digging into the once-soaring telecommunications company’s dubious accounting practices.
The loss of Canadian-born Ebbers, a brash executive who built the long-distance reseller into a global company serving 65 countries, dealt a critical blow to the Clinton, Mississippi-based company. WorldCom stock has taken a nose-dive and its bonds were given a “junk” rating by Standard & Poor’s, which took the No. 2 long-distance telecom firm off the S&P500 Index this week.
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