1. Backgorund Info (before scandal)2. Brief Overview of scandal3. Who was affected?4. What alternatives were available?5. What is company’s present state?

Waste Management, the largest for profit waste collection agency in the United States, is based out of Houston, TX. They occupied over %40 of the market of trash collecting and were only growing in size and power.

However, from 1992 to 1997, the founder of WM and five other head executives inflated profits from WM by erroneously lengthening the expected life of trucks and raising their salvage value as well as failing to record decreases in income as landfills filed with waste. The SEC (Securities and Exchange committee) discovered this fraud when a new CEO did a proper audit on the company. After this audit, WM restated their profit by $1.7 billion, the largest restatement in history.

This accounting scandal profited the six fraudsters with over $29 million in ill-gotten gains. Also, after the news of WM’s fraud was released, WM’s stock plummeted 33% leaving investors with a total of over $6 million lost. Waste management has also had to settle various lawsuits with each lawsuit costing upwards of $400 million and $200 million.

WM could have avoided this scandal by being honest in their dealings. They should have done the right thing and been honest in reporting their revenue. They could have also admitted what that had done was wrong and attempted to make restitution for the damage they had caused.

Since then, Waste Management has been under different management and has regained much of the respect they once had. However, even though WM has recovered financially, the memory of their fraud will always linger in the back of people’s minds.

http://www.aicpa.org/InterestAreas/AccountingEducation/Resources/DownloadableDocuments/wastemanage.ppt

http://www.sourcewatch.org/index.php/Waste_Management

http://www.sec.gov/news/headlines/wastemgmt6.htm