Garbage giant Waste Management’s founder and his top aides were charged yesterday with cooking the books to inflate profits by $1.7 billion.
The Securities and Exchange Commission accused the former executive team of staging a “massive fraud” for five straight years – with help from its auditor Arthur Andersen – in order to meet earnings targets and reap bonuses, among other benefits.
The SEC said founder and former Chairman Dean Buntrock, his former Chief Financial Officer James Koenig and three other former executives falsified company results between 1992 and 1997.
“It is one of the most egregious accounting frauds we have seen,” said SEC attorney Thomas Newkirk.
Waste Management wasn’t charged in the fraud, and only its predecessor company was at the center of the alleged scam.
Separately, Waste Management had fired Andersen just last week to distance itself from the auditor’s indictment and role in the Enron-collapse scandal.
The alleged accounting scandal at Waste Management, and Andersen’s role in helping create phony ledgers, have been under investigation by regulators for four years.
Andersen has already paid the SEC a $7 million civil fine over the scam – the largest ever imposed on an accounting firm by the SEC – and Waste Management paid $457 million last year to settle a class-action over the cooked books.
The alleged fraud came to light five years ago after a new CEO ordered a review of financial records. As a result, Waste Management restated its earnings for 1992 through 1997 by $1.7 billion – the largest restatement in corporate history, the SEC said.
Investors lost $6 billion when the company’s stock crashed from the restated earnings.
Buntrock and his group at Waste Management were “driven by greed and a desire to retain their corporate positions and status in the business and social communities,” said the SEC’s Newkirk.
“For years, these defendants cooked the books, enriched themselves, preserved their jobs and duped unsuspecting shareholders.”
Waste Management said the SEC case involves the “old” Waste Management, which merged with USA Waste Services in 1998.
“We have cooperated fully with the SEC in this investigation,” said Waste Management spokesperson Sarah Voss.
The SEC said Andersen helped Waste Management’s former executives find 32 “must-do” steps to cover up cooked books.
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Down in the dumps
The Securities and Exchange Commission yesterday slapped six former Waste Management execs wth a massive civil-fraud suit. What they accused the trash haulers of doing:
* Inflating profits by $1.7 billion
* Failing to report expenses on the financial statements and postponing costs from 1992 to 1997
* Filing false accounts with the help of auditor Arthur Andersen
* Illegally pocketing $28.5 million from the scheme