Super Financial Scams - Unveiling Seven Major Scams and Thirty Methods in Financial History

Author: Schilit
Publisher:
Publish Date: 2006-07-01
Features: Watered-down profit numbers, suspicious write-offs, hidden fees
Today, to please Wall Street, companies are increasingly using ambiguous and suspicious financial tactics, which are also becoming harder to detect. To address this, The Super Financial Scams ingeniously analyzes several famous, fraud cases in history (including the well-known Enron scandal). The book makes complex analyses accessible through various checklists, charts, and an appendix on basic accounting principles. Additionally, The Super Financial Scams teaches investors and analysts how to use the best tools and methods today to crack complex financial statements and identify early warning signs of a company’s distress.
The decade from 1991 to 2001 began with President George H. W. Bush taking office and the economy falling into a recession. Interestingly, ten years later, his son George W. Bush occupied the White House while the economy hovered precariously. However, during those intervening years, the U.S. experienced an unprecedented prosperity period that deeply affected both ordinary people and Wall Street. Unemployment rates fell to levels unseen in generations, and stock market indices were almost daily setting new records. From 1995 to 1999, the Dow Jones Industrial Average had never before seen five consecutive years of growth exceeding 20% annually. This was still just a drop in the bucket—by 1999 alone, the tech-heavy Nasdaq index surged by 94%.
Yet beneath all this glittering surface, the radars of most investors failed to detect the ominous signs of emerging financial fraud—the signals of skilled accounting scams. The start of this past decade was marked first by the exposure of the massive banking fraud at the Bank of Commerce and Credit International (BCCI), followed by reports of fraud at drug retailer PharMor, retailer Leslie Fay, and waste management company Waste Management Inc. Then, more and more companies joined the ranks of fraudsters: storms at major health maintenance organizations Oxford Health, drug retailer Rite Aid, and the notable software company MicroStrategy caused even greater pain for investors. The creative accounting tricks of "new economy" companies made the situation even worse. Investors suffered losses on an unprecedented scale. In the Cendant fraud case alone, financial damages reached $3 billion.