Introduction to Sociology Garbage generally

Introduction to Sociology Garbage generally

Garbage generally was collected by municipalities or small private haulers such as Ace Scavenger, Wimp’s immediate forerunner, a Chicago-area company with 12 ruckus and 1 956 revenue of about $750,000. In that year, Ace Scavenger’s founder died, and management of the company was turned over to his 24- year-old son-in-law, Dean L. Bankrupt. Bankrupt already had experience running a family farm-implement business in his native SOUth Dakota, and his in-laws felt that although young he was the best family member to take over their refuse company.

Ace was a prosperous, well-established firm, and Bankrupt was able to take command with little difficulty. It was an exceedingly good time to join the waste-treatment industry. Not only was the national economy at the peak of its postwar prosperity, the U. S. Consumer was just then beginning to be inundated with a wave of new packaging and convenience items designed to be used once and thrown away. The nation’s production of garbage was growing much faster even than its population, and companies such as Ace Scavenger found themselves in great demand.

Throughout its early stages the company started to aggressively purchase smaller companies which were in the same industry around the country to expand. The business was going well reeve uses were increasing going into the sass’s. In 1 971 , Waste Management went public, and by 1972, the company had made 133 acquisitions with $MOM in revenue. It had 60,000 commercial and industrial accounts and 600,000 residential customers in 19 states and the provinces of Ontario and Quebec.

In the asses, Waste Management acquired Service Corporation of America (SAC) to become the largest waste hauler in the country. Waste Management brought thousands of garbage companies and increased their sales year after year but eventually they reached a plateau. They were no longer able to grow as fast because there weren’t many garbage companies left to acquire. This was the turning point where Waste Management turned to accounting tricks to make Wall Street think that the company was still growing.

This accounting fraud was perpetrated through a multitude of methods. Starting in 1 992, the company’s revenues and profits weren’t increasing fast enough to meet predetermined target goals, which would mean less money in the pockets of the executives. As a result of the failure to reach the targets, the management decided to inflate earnings by falsely eliminating and deferring current period expenses on a quarter-by-quarter basis. This was done utilizing a variety of improper accounting methods. The methods used included the following.

They avoided depreciation expenses on their garbage trucks by inflating salvage values and extending their viable lives, as well as assigning undocumented values to these figures (Markham, 2006). In addition, they also assigned arbitrary salvage values to different assets that had no prior history of salvage value. They did not acknowledge expenses in terms of the depreciation of the value of landfills that were filled with waste. And last, the company failed to establish sufficient reserves in terms of abilities in order to pay for income taxes and various other expenses.

The company used netting in order to hide around $490 million in current period operating expenses, as well as prior period accounting misrepresentations by making sure that they were offset against one-time gains on the sale of various assets. Geographic entries were used in order to shift millions of dollars around in the company’s different regional subsections in order to manipulate their income statement. They were able to modify the financial each quarter to look exactly the way they wanted them to look.

By reducing expenses and inflating earnings through artificial means, the management used so-called “top level adjustments” to change the company’s actual results to match what they wanted it to match (Rapport, 2009). These inflated earnings from prior quarters then became the basis for future earnings manipulations. Though the SEC named the whole company as being responsible, it also specifically pointed the blame on five executives. Their names were: Dean L Bankrupt, the Chairman of the Board and CEO during most of the time period; Phillip B.

Rooney, president and COO as well as CEO during a small portion of the time; James E. Koenig executive vice president and COOP; Thomas C. Ha, vice president, corporate controller, and CACAO; Herbert Get, senior vice president and general counsel; and finally, Bruce D. Dovecotes, the vice president of finance. Waste Management’s accounting manipulations are summarized as follows: Depreciation expenses on garbage trucks were distorted by assigning large amounts of residual or salvage values, while useful lives were extended beyond what was prescribed by industry standards.

Other fixed assets, which previously had no salvage values, were re-computed by assigning arbitrary elevate values. The value of the landfill sites were assigned with book values that did not conform to their reduced or degraded values as land filled with wastes. Various expenses were capitalized in order to allocate the impact of Ham’s wrong accounting practices for a period of 10 years. These were orchestrated and directed by the CEO and chairman of Ham’s Board of Directors, Dean Bankrupt, President; Phillip Rooney, COO; and James Koenig, EVE and Chief Financial Officer.

Based on the inflated revenues, top officials of Waste Management earned for themselves hefty amounts of insemination packages comprising substantial profit share bonuses, basic salaries, enhanced retirement benefits, and stock options, which were all practically derived from money infused by investors. While formal investigations were going on in 2002, top officials of WHOM started cashing in on their stock options, which started the downward trend of HAM’S stock price to more than 33%. In addition, The COOP ordered the destruction of important documents to obstruct investigations. Http://accounting. Emasculate. Com The People Who was behind the Scandal Dean L. Bankrupt was considered to be the main mastermind Enid the scandal. As CEO and Chairman of the Board, he is the one who was responsible for setting many of the earnings targets, creating the culture of accounting fraud in the company, as well as directly requesting for many of the accounting discrepancies that were necessary in order to create the falsified earnings. He was also the public face who announced all of the company’s fake earnings to the general public and to investors.

Even during his years of fraud, he was masquerading in the public eye as a successful entrepreneur, making large charitable donations, perhaps using some of the anis that he “earned” through the fraudulent activities (Clansman, 2009). Nonetheless, he presented himself as a charitable man in his company. Even just ten days before some of his company’s accounting practices became public; he donated a large amount of company stock to his college alma mater to fund a building in his name. As the primary benefactor from the fraud, he obtained more than $16. Million in false income from Waste Management due to the inflated income statements leading to performance- based bonuses, retirement benefits, and selling some company stock options during 1992 to 1997 (Clansman, 2009). Phillip B. Rooney, as COO during most Of the time, was responsible for expanding Waste Managements core solid waste operations and making it more profitable. He had complete control over the company’s largest subsidiary. As COO, he helped to make sure that the write-offs of bad assets were not recorded. In some cases, he even overruled various accounting decisions that could have had a negative effect on operations.

In total, he was able to gain $9. 2 in personal gains from, once again, performance-based bonuses, retirement benefits, and company stock options. James E. Koenig was the main ho was mainly responsible for the accounting fraud’s execution, as the Chief Financial Officer. He made sure to directly advocate for the destruction and shedding of any evidence that would expose their practices, personally misled the company’s audit committee and internal accountants, and withheld information from the outside auditors. All in all, he received around $900,000 in income from his actions. Thomas C.

Ha was the main technician for the accounting misrepresentation. He created a variety of “one off” accounting practices that utilized the sales of one time gains to cover up for actively performing assets. This played a major part in helping the company to falsely reach their target earnings. His profit from this scheme was around $600,000. As the Vice President of Finance, Bruce D. Dovecotes was Mr.. Kenning’s assistant in terms of devising various schemes. He was an accounting expert who started to handle many of the accounting practices that Thomas Ha started to create in 1994.

His personal reward for his actions was $400,000. Herbert Get, the senior vice president and Waste Management’s general counsel, personally gave his blessings for the majority f the company’s fraudulent practices, acquiring $450,000 in total income (Clansman, 2009). No one served Jail time. Waste Management’s top management left with millions of dollars and these were the amounts: Arthur Andersen Background Arthur Andersen ALP was an accounting firm with an extensive history. During 1 913, Northwestern University accounting Professor Arthur Andersen and Clarence De Lana formed Andersen, De Lana & Co.

Several years later, in 191 8 Delaney left and the company changed its name to Arthur Andersen. During that period the company developed a philosophy that focused on alluding a solid corporate culture among all Andersen employees. Arthur Andersen the person has been recognized as an important innovator of his professional period. Andersen’s goals were set beyond standard practices of accounting, and his business approach was strongly related to auditing. He was known for encouraging his employees to “think straight and talk straight. Arthur Andersen died in 1947, during that period his firm almost experienced a closed down. However, Leonard Spaces, a disciple of Andersen, convinced the company’s partners to remain together despite financial uncertainty, and became the managing partner. Arthur Andersen Corporation moved to the top of its profession during Space’s term. It obtained worldwide growth and opened its first international offices during the 1 95(Yes. Furthermore, in 1979 it surpassed 1 ,OHO partners and became the world’s biggest business services firm.

During 1 989, it formed a separate consulting practice, from which Andersen Worldwide became the umbrella company for both firms. However, in 1997 Andersen bid for independence and finally in 2000 the split between Arthur Andersen and Andersen Consulting was agreed upon. The final day Of operations for the firm was August 30, 2002. Arthur Andersen Relations with Waste Management Arthur Andersen was Waste Managements’ auditor for decades, according to The SEC Andersen had too cozy of a relationship with Waste Management. For decades every officer of Waste Management had previously worked as an Andersen auditor.

During the 1 9905, fourteen former Andersen employees worked for Waste Management often in key financial and accounting positions. Arthur Andersen helped perpetrate the scheme, identifying thirty-two “must-do” steps to cover it up, and assisting as well as turning a blind eye to the obviously fraudulent results according to The SEC. The SEC sued Anderson alleging it issued false and misleading audit reports that inflated Waste Management’s earnings from 1993-1996. Anderson, which also was the auditor of collapsed Enron Corp.. Agreed to pay a seven million civil fine to settle the suit, without admitting to or denying the allegations. The SEC said the fine was the largest ever paid by a Big Five accounting firm in an enforcement action brought by the market watch dog agency. In addition, three audit partners were personally fined as well. Some analysts have stated that if the Waste Management scandal never occurred, than Andersen loud have been able to survive the Enron scandal. According to the SEC, Arthur Andersen was also directly responsible for the fraudulent accounting.

Initially, during a company audit, Waste Management’s accounting firm, Arthur Andersen, claimed that there were a variety of improper accounting practices. Dutifully doing your job, they gave the management of Waste Management a report entitled, “Proposed Adjusting Journal Entries,” in which they highlighted aspects of Waste Management’s balance sheet that needed to be changed in order to not understate their expenses by overstating their earnings. Waste Management’s officials decided to ignore the suggestions, as they were deliberately making these mistakes.

In response to Andersen’s report, they held a meeting with Andersen in which they came to a mutual agreement and understanding that Andersen would begin to write Off and cover up many Of the deliberate accounting mistakes that were being made over a ten year period, as well as to change its accounting practices only starting in future periods (Markham, 2006). The SEC, rightfully so, decided that this agreement constituted an agreement of fraud, in terms of it being an agreement to cover up past scrappiness, as well as to commit future misrepresentations.

Because Arthur Andersen’s audit fees were set at a capped price, Waste Management officials offered them the ability to earn even more fees through what they deemed as being “special work (Clansman, 2009). ” The main job of an auditor is to ensure an organization IS using accurate and honest accounting practices and Arthur Andersen failed to do so. The scheme was uncovered in the middle of 1 997 after the new CEO of the company, A Maurice Myers, ordered a complete review of all of the company’s accounting practices. Based on their internal review, the new management decided to restate its earnings from 1992 to 1997 by $1. Billion. This was the largest restatement in the corporate history of the United States, as noted by the SEC. At the time, Myers released a statement stating that, “We have cooperated fully with the SEC in the investigation and do not believe that the SEC will seek any action against New Waste Management in connection with the events detailed in the complaint (Rapport, 2009). The Shareholders Losses The actions of Waste Management’s upper management had a variety of did-ranging effects. Besides contributing to Arthur Andersen’s eventual collapse, the group who immediately suffered major losses was its shareholders.

The company lost over $6 billion in stock value, as the stock price fell by more than 33% after the scandal was announced (Markham, 2006). In addition, the new management that took over Waste Management in 1 998 had to deal With a negative stigma, even though they fully cooperated with the SEC and weren’t involved in the previous management’s actions. Waste Management Inc. , in 2005, agreed to pay $26. 8 million to cover the sorority of the costs of the settlement that the former guilty executives made with the SEC. In 2001 , the company paid $457 million in order to settle a class-action lawsuit in regards to securities violations.

The reason why Waste Management choose to settle and pay $26. 8 million towards the settlement with the SEC is because their legal bills and fines had already totaled $37 million, as they were required by law to pay for the executive’s legal fees (Clansman, 2009). The cost of continuing a long, drawn out trial with the Securities and Exchange Commission was estimated to be around 532. 5 million. The fraud committed by Waste Management Inc. , unfortunately is not the exception, but for a time period, it seemed to be extremely commonplace.

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