Company Background Latest Developments
Adelphia Communications (April 2002) Members of the Rigas family were arrested and accused of looting the company through the collection of $3.1 billion in off-balance-sheet loans backed by Adelphia. Inflated capital expenses to hide debt. SEC has brought a civil suit and Adelphia is considering selling its assets to raise cash. John Rigas, company founder, and two of his sons were arrested July 24 for fraud. New CEO Erland Kailbourne is trying to raise cash to pay off debt without selling cable systems. Stock delisted by Nasdaq in June.
AOL Time Warner (July 2002) AOL inflated sales by booking barter deals and ads it sold on behalf of others (eBay) as revenue to keep its growth rate up so as not to jeopardize upcoming purchase of Time Warner. DOJ ordered the preservation of documents and COO Robert Pittman resigned. Shares have fallen 60%.
Arthur Andersen (November 2001) Shredding documents related to auditing of client Enron following launch of SEC enquiry into Enron. Leader of Houston office, David Duncan, was fired for allegedly speeding up the shredding process. Duncan admitted to obstruction of justice and testified on behalf of the government. Andersen was found guilty on June 15 by a Texas jury of obstruction justice. The firm will cease auditing public forms by August 31 and is facing massive employee defections.
Bristol-Meyers Squibb (July 2002) Inflated 2001 revenue by $1 billion by forcing wholesalers to accept more inventory than they can sell in order to get it off of the manufacturer's books. Earnings will be reduced by 61 cents per share in an attempt to get inventory back to acceptable size by 2003.
CMS Energy (May 2002) Executing "round-trip" trades to artificially boost energy trading volume. Appointed Thomas J. Webb, a former Kellogg's CFO, as its new CFO, effective in August.
Dynegy (May 2002) Executing "round-trip" trades to boost trading volume and cash flow. Was once set to take over Enron. In May Chuck Watson, Dynegy's CEO, resigned after being with the company since its creation in 1985. Currently undergoing a re-audit, it is expected that Dynegy may fall as much as $400 million short of its $1 billion projected cash flow for 2002.
Enron (October 2001) Boosted profits and hid debts totaling over $1 billion by improperly using off the books partnerships. Manipulated the Texas power market and bribed foreign governments to win contracts abroad. Filed for bankruptcy December and CEO Kenneth Lay resigned in January. Michael J. Kopper pleaded guilty to charges of conspiracy to commit wire fraud and money laundering, crimes that arose from his dealings with partnerships that ultimately led to Enron's financial collapse. Mr. Kopper also settled a civil case brought by the Securities and Exchange Commission and agreed to turn over to the government $12 million that was obtained through criminal activity.
Global Crossing (February 2002) Engaged in network capacity "swaps" with other carriers to inflate revenue. Shredded documents related to accounting practices. Filed for bankruptcy January 28. Chairman, Gary Winnick cashed out $734 million before the collapse. Congress is examining role that company's accounting firms played in its bankruptcy.
Halliburton (May 2002) Improperly booked $100 million in annual construction cost overruns before customers agreed to pay for them. They are facing at least 10 securities-fraud law suits following disclosure that the SEC is investigating theory accounting policies. Vice President Dick Cheney is the former CEO (1995-2000). Cheney sold nearly $40 million in Halliburton stock when he left company, when stock was selling at $50 per share; it now is $13.20 a share.
ImClone Systems (June 2002) Being investigated by a congressional committee to see if ImClone correctly informed investors that the Food and Drug Administration had declined to accept for review its key experimental cancer drug, Erbitux.
Former CEO Samuel Waksal was arrested June 12 on insider trading charges related to Erbitux. 		Federal investigators are looking into whether Martha Stewart used insider information about the cancer drug when she sold 4,000 ImClone shares one day before the FDA said it would reject the drug. Federal investigators are negotiating with a Merrill Lynch & Co. trading assistant in which he could receive immunity from prosecution in exchange for testimony against Stewart.
Kmart (January 2002) Anonymous letters from people claiming to be Kmart employees allege that the company's accounting practices are intended to mislead investors about its financial health. Filed for the biggest retail bankruptcy in January. Was supposed to complete a "stewardship review" by Labor Day but will not actually be finished with it until the end of the year.                                                  
Merck (July 2002) Recorded $12.4 billion in consumer-to-pharmacy co-payments that Merck never collected. IPO registration approved; delayed.
Peregrine Systems (May 2002) Overestimated $100 million in sales by improperly recognizing revenue from third-party resellers. Said it will restate results dating back to 2000. Slashed nearly 50% of its workforce to cut costs and is danger of being delisted from the Nasdaq.                                                  
Qwest Communications International (February 2002) Inflated revenue using network capacity "swaps" and improper accounting for long-term deals. CEO Joseph Nacchio is undergoing a criminal investigation for selling $300 million of company stock and has been forced out by Quest's board. The company will restate sales for 2000-2002 and hopes to make a settlement with the SEC while selling assets to avoid defaulting on $27 billion of debt.
Tyco (May 2002) Ex-CEO Dennis Kozlowski indicted for tax evasion. SEC investigating whether company was aware of his actions because there was possible improper use of company funds and related-party transactions as well as improper merger accounting practices. Kozlowski resigned June 3. Tyco will not certify its financial results until an internal investigation is completed.                                                  
WorldCom (March 2002) Overstated cash flow by booking $3.8 billion in operating expenses as capital expenditures and gave founder Bernard Ebbers $400 million in off-the-books loans. Filed for the nation's biggest even bankruptcy on July 21. Ebbers resigned in April and his involvement into the accounting fraud is being investigated. Former CEO and Controller criminally charged with fraud.
Xerox (June 2002) Falsifying financial results for five years leading to a boost in income of $1.5 billion. SEC charges that Xerox used "accounting tricks" to defraud investors. Xerox agreed to pay $10 million and to restate its financials back to 1997.