Waste Management Scandal

871 Words Apr 6th, 2015 4 Pages
Waste Management, Inc. is the nation's largest waste collector (Feder). In other words, they collect and recycle garbage. They are a known brand and dominate the regions of the country and Canada where they provide services. Grownups and kids alike see their trucks and think, "Garbage". Which could sound awful, but garbage is lucrative.

In the early 1990's, Waste Management, instead of just picking up the garbage, provided garbage to their investors in the form of an accounting scandal which cost investors approximately $6 billion (Bloomberg News) and was described by Thomas C. Newkirk, associate director of the SEC's Division of Enforcement as "one of the most egregious accounting frauds we have seen" (SEC). What Mr. Newkirk is
…show more content…
The failure to record expenses proved addictive to the company as they continued the scheme by not lowering the value of property used for landfills as they were filled with waste which is a common expense item in such an operation (SEC). If Waste Management began a landfill project and for whatever reason abandoned it, recording the expenses of such would be common practice in an ethical company. They were not ethical. As anyone can guess based on the previous inclinations of the company, the expenses were simply not recorded, again inflating profits. Waste Management, unlike every other company in America, simply did not believe in expenses. If they could capitalize a cost instead, that's what occurred. Profits rose and seemingly everyone benefited.

Eventually, all such deeds came to the surface as a new CEO came on board in 1998 and ordered a complete accounting of the accounting. What was found startled the financial world but took until 2000 to finally be revealed in full. It was determined that the company had overstated earnings by $1.7 billion between 1992 and 1997, which at the time was the largest restatement in corporate history (SEC). The price of the stock fell from a high of over $50 to less than $15 per share (Finance). I cannot say this restatement affected the greater financial markets as whole but it did…

More about Waste Management Scandal