13.
Explanation
Here are some examples of recent corporate frauds and the methods used to commit them:
1. Enron (2001): Enron, once one of the largest energy companies in the world, engaged in accounting fraud to overstate profits and hide debt. They used Special Purpose Entities (SPEs) to keep debt off their balance sheets, creating a false picture of financial health. This eventually led
to the company’s bankruptcy and the loss of billions of dollars for investors.
2. WorldCom (2002): WorldCom orchestrated one of the largest accounting scandals in history. They inflated profits by improperly booking expenses as capital expenditures. This fraudulent accounting practice led to the overstatement of the company’s assets by around $11 billion.
3. Bernie Madoff Ponzi Scheme (2008): Bernie Madoff ran a massive Ponzi scheme, promising consistent high returns to investors. Instead of investing the money, he used new investors’ funds to pay returns to earlier investors, creating the illusion of a profitable operation. The
scheme collapsed when he could no longer attract enough new investors to pay off earlier ones.
4. Volkswagen Emissions Scandal (2015): Volkswagen installed software in their diesel vehicles that manipulated emissions test results to meet environmental standards. In reality, these vehicles emitted pollutants far above the legal limits, deceiving regulators and consumers.
5. Wells Fargo Fake Accounts Scandal (2016): Wells Fargo employees opened millions of unauthorized bank and credit card accounts in customers’ names to meet sales targets and earn bonuses. This unethical practice resulted in hefty fines and damaged the bank’s reputation.
6. Theranos (2016): Theranos, a health technology startup, claimed to have developed revolutionary blood-testing technology. However, it was later revealed that the technology did not work as advertised. The company engaged in fraudulent practices to attract investors and partnerships, ultimately leading to its downfall.
7. Wirecard (2020):Wirecard, a German fintech company, was involved in a massive accounting scandal where it claimed to have over €1.9 billion in cash that did not exist. The company’s executives were accused of fabricating financial statements to inflate the company’s value.
These examples highlight various forms of corporate fraud, including accounting manipulation, Ponzi schemes, false claims, and regulatory violations. In each case, the perpetrators used deceptive practices to mislead investors, regulators, and the public, resulting in significant financial losses and legal consequences.