Greed has many faces

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: story best known of a corporate feeding its greed through financial and accounting manipulations. A severe cash crunch forced the company to layoff 17,000 workers. The financial crisis forced WorldCom to file for reorganisation under chapter 113 of the Bankruptcy Code in July 2002. The company changed its name to MCI and paid $750 million to the cheated investors.

Company: Xerox

Year: 2000

Scandal: Falsifying financial results for five years and boosting income by $1.5 billion.

Money Involved: $1.5 billion

Sequence of events: Confronted with declining revenue during the late 1990s that should have led to lower than expected earnings reports-thereby reflecting the true nature of the company’s deepening problems, Xerox decided to cook the books. Executives at the company apparently calculated the exact amount that would have to be altered in order to allow the company to just meet or slightly exceed “first call consensus” expectations on Wall Street, which are determined prior to a company’s release of earnings data.

Impact: Xerox agreed to pay a $10 million and to restate its financials dating back to 1997 but not before laying off thousands of workers.

Company: AOL TimeWarner

Year: 2002

Scandal: AOL inflated sales by booking barter deals and ads it sold on behalf of others as revenue to keep its growth rate up and seal the deal. The company also boosted sales via “round-trip” deals (a company selling an unused asset to another company while at the same time agreeing to buy back the same or similar assets at about the same price) with advertisers and suppliers.

Money Involved: $49 million

Sequence of events: Just before and after AOL’s merger with Time Warner in January 2001, top executives at the internet company used tricks and bogus transactions to inflate the value of AOL stock while liquidating their shares in a selling frenzy to enrich themselves to the tune of $936 million. The scheme began in the period leading up to the merger when AOL executives engaged in “falsifications” to create a “grossly distorted” e-commerce advertising business that pumped up AOL stock prices, according to the complaint. The advertising deals included swaps with other Internet companies that AOL misleadingly counted as revenues or transactions involving AOL’s own funds that were provided to purported customers.