Corporate Fraud/Misdemeanor - Public Domain - Global lessons

A list of global examples of Corporate Fraud/Midemeanors

1). Olympus Corporation


In late 2011, Olympus fired its newly appointed British president, precipitating a scandal that wiped 75% off the company’s stock market valuation. The scandal culminated in admission by the company that some of its board members had engaged inone of the biggest and most durable loss-concealing scamsin the history of corporate Japan.

When Michael Woodford took over as CEO of Japanas Olympus Corp. last year, he could hardly foresee that within a year he would uncover a massive fraud at the company, investigate it, be fired for investigating it, try to make acomebackto take control of Olympus and see its Chairman arrested for being a part of the fraud. Such is the life of Mr. Woodford.

According to Bloomberg, Tsuyoshi Kikukawa, and four others were arrested for suspected violation of Japanas Financial Instruments and Exchange Act. Woodford was fired on October 14 and the Tokyo headquarters were raided by Japanese officials in search of information related to hiding investment losses of the company since the 1990as. Those arrested are accused of inflating takeover costs of Gyrus Group Plc (traded on London Stock Exchange) and three other Japanese companies. The overall effect of the scheme was to boost the value of goodwill and then write it down over years to cancel out losses that were kept off Olympusas balance sheet. The fraud timeline virtually covers the 10 years in which Kikukawa was Chairman (he resigned last year).

2). Xerox Accounting Scandal


The SECchargedthat the change in how Xerox applied accounting principles not only violated GAAP, but was intentionally designed to fool Wall Street into believing the new management team was working wonders, exceeding Wall Street’s expectations nearly every quarter from 1997 through 1999.

The SEC further charged that theaccounting irregularitiesincreased fiscal year 1997 pretax earnings by $405 million, 1998 pretax earnings by $655 million, and 1999 pretax earnings by $511 million (in each quarter of each year, earnings wereinflatedjust enough to exceed the Wall Street’s First Call Consensus EPS).

The SEC also alleged that Xerox’s senior managementwas awareof, either by directing or approving, the accounting actions that were taken for the purpose of what management called “closing the gap” to meet revenue and profit goals.

The headline says it all “We Have Never Seen Anything Like Bill Ackman’s Dizzying Takedown Of Herbalife”

A must read presentation, love the way all the dots are connected together…

A good read on how JSW promoters want to skim profit from listed entity in the name of brand building.

Presently I am reading a book. Financial shenanigans. By Howard M Schilit

It has plenty of examples of the ways corporates use to cheat /mislead investors

Presently I am reading a book. Financial shenanigans. By Howard M Schilit

It has plenty of examples of the ways corporates use to cheat /mislead investors

I don’t understand… after going through this presentation, i was convinced that the company was bogus and a complete peer to peer marketing scheme fraud… and this was way back in 2012… i expected company not even to be found today but i was surprised … its not only listed but seems like it didn’t suffer much… its at a better valuations that what it used to be. Which makes me question if too much of analysis is actually paralysis?

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as of now, Ackman seems to have closed his shorting position and losses have been huge! Sometimes, we may not be able to understand the exact underlying model of the business, and might compare its numbers against the traditional models which we normally see, and can end up arriving at wrong conclusions.

Wirecard AG Fraud - Repeat of Satyam ?

The Munich-headquartered Company and German payments giant Wirecard AG’s shares plunged more than 60% on 18.06.2020 as it postponed its annual results once again and said auditors could not confirm the existence of 1.9 billion euros ($2.1 billion) in cash on its balance sheet.

  • Wirecard said auditor EY couldn’t find the cash balances, which represent roughly a quarter of its balance sheet.
  • It warned that failure to provide its financial statements by Friday could mean 2 billion euros in loans “terminated.”
  • The German payment firm’s shares cratered immediately after the news, falling more than 60%.
  • There were indications that “spurious balance confirmations” had been made by a trustee to “deceive the auditor and create a wrong perception of the existence of such cash balances,”

Wirecard says it cannot rule out 'fraud of considerable proportions’

“The Wirecard management board is working intensively together with the auditor towards a clarification of the situation,” the firm said. It added that failure to provide its 2019 financial statements by Friday could result in loans of around 2 billion euros being “terminated.”

The Financial Times has published a series of reports on its investigation into Wirecard’s accounting practices. According to those reports, which began back in January 2019, Wirecard’s Singapore office tried to inflate revenue through forged and backdated contracts. Another story in October claimed that Wirecard’s staff appeared to conspire to inflate sales and profits at subsidiaries in Dubai and Dublin and mislead EY.

Wirecard says missing $2 billion never existed. Its stock is down 85% in 3 days

Scandal-hit German payments firm Wirecard has said the €2 bn missing from its accounts simply may not exist.

Wirecard’s chief executive quit as the search for the missing cash hit a dead end in the Philippines.

On Sunday the central bank of Philippines said none of the money appears to have entered the country’s financial system.

The German company also said it was withdrawing its financial results for 2019 and the first quarter of 2020.

Wirecard: Missing cash probably doesn’t exist

Shares in Wirecard (WCAGY) has lost more than 85% over three trading sessions — wiping out $12.5 billion in market value — since EY, its auditor refused to sign off the company’s accounts.

“The Management Board of Wirecard assesses on the basis of further examination that there is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion EUR do not exist,” the company said in a statement.

The missing money accounts for around a quarter of its total balance sheet.

Wirecard says missing $2 billion never existed. Its stock is down 85% in 3 days

Founded in 1999, Wirecard was once considered one of the most promising tech firms in Europe. It processes payments for consumers and businesses, and sells data analytics services. The company, which has nearly 6,000 employees in 26 countries around the world, reported revenues of over €2 billion ($2.2 billion) in 2018, or more than four times the figure from 2013.

Wirecard runs vital but little-noticed technology that connects online merchants, consumers and the banking system**. It has long attracted attention from hedge funds that have questioned its accounting, and some of those funds profited last week from Wirecard’s plunge.**

We had a role to play in uncovering what Wirecard did in India, we’d then shared with our German principal Acatis.

My colleague @siddthomas and I share what we found in a video below.

The video is also interesting because it shows how an experienced investor (not me :slight_smile: ) used ground work and concluded that Wirecard can’t be making the money it says it does.

Here is the link to the video:

The talk is in German with English subtitles, and we shared what we found from 4:43 onwards. We shared our specific findings in greater details to the German media; though I do think the German regulator was many years too slow to act.


An Indian at the centre of a global conglomerate’s financial fraud!

Excellent case study on accounting fraud, corporate misgovernance, auditor collusion/oversight.

Some interesting snippets:

  • Company debt of $2 billion actually turned out to be more than $6 billion
  • Big 4 (E&Y) company auditor with former partners on the board of company getting ESOPs
  • US based short seller Muddy Waters research report from Dec 2019 triggered the collapse of this conglomerate
  • Stock price collapse of 100% in 3 months
  • Spectacular failure where 2 companies which were part of FTSE 100 and FTSE 250 indices (UK stock exchange) - being part of these indices meant lot of ETF money flowing into them

Was posted by - @dhruvbhim initially, reposting it here.

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Small-time Kochi investor in battle to reclaim Rs 1,448.5 crore stake in Udaipur-based firm- The New Indian Express