Waste Management Scandal Dean Buntrock established Waste Management, Inc. in 1968. Its main purpose is to pick recycling and garbage up from residential housing and businesses. WM also disposes of the garbage in landfills. It has grown to be the largest garbage disposal company in the U.S. today. This company has managed to survive “one of the most egregious accounting frauds we have seen” said Thomas C. Newkirk of the SEC.
This accounting scandal lasted from 1992 to 1997 and was the result of numerous improper expense adjustments to inflate Waste Management’s earnings. They also incorrectly recorded liabilities, depreciation, salvage value of assets and the useful life of those assets to meet projected earnings. Buntrock was
As time progressed, the magnitude of overstatement drastically increased. In 1992, the percentage overstated was 14.9% and in 1995 the percentage overstated was 77.6%. In the last year of the scandal (1996) Waste Management actually netted a loss of $39,000,000 but after the “top level adjustments” they made over $190,000,000.
During a change in management during July of 1997, the new CEO requested a review of the accounting practices of Waste Management which showed the fraudulent activity. This led to the restatement of the financial statement of the past five years. It also caused the scandal to go public and the former top level managers to be prosecuted. In the end, they had to pay a total of over $30 million in fines and barred Buntrock, Rooney, Hau and Getz from ever being an officer or director of a public company. None of them served time in jail since the case was settled outside of the courtroom. Arthur Andersen LLP seemed to only get a slap on the wrist by being censured by the SEC and received a small fine compared to that of the top level managers of Waste Management.
Waste Management somehow recovered from this catastrophe. The new management, including A. Maurice Myers, has drastically changed the way things are done at Waste Management. He made sure the employees were all happy which included a change the payroll system and improved benefits. He also asked the customers for their feedback and changed to fit their needs.