international scams

International scamsPresented by-

Mukta chughNaazneen Noor

Pooja RaisinghaniDeepak Singh

Dinesh TulsianiJasmine Arul

Scam?

Types of scams

National scams International

scams

List of scams

• Enron

• WorldCom

• Adelphia

• Global Crossing

• Bre-x Minerals

• Xerox

• Qwest

• Lehman brothers

• 2G scam

• Common wealth games scam

• Fodder scam

• Satyam scam

• Telgi scam

• Harshad Mehta scam

• Ketan parekh securities scam

About Bre-x Minerals• Mining company• Founded by David walsh in 1989• Group of Canadian companies based in Calgary, alberta• Involved in a major scandal

Timeline of Scandal• May 1988- shares trading at 0.3 dollars• 1992-1993:- ⁻ John Felderhof became new vice chairman. ⁻ He suggests exploration in busang, Indonesia⁻ Hired Geologist Michael de Guzman as project manager.• 1993-1995:-₋ During initial stages company claimed promising results₋ Stock price increased to $14.87₋ claimed gold to be 30 million ounces₋ stock price increased to $5o

Continue…

• 1996: ₋ Started trading at Toronto stock exchange at $180₋ Networth reaches 6 billion₋ Gold estimated to be 39 million ounces

Mysterious story of Bre-x

• Positive intervention of government.• 1997- Insignificant amounts of gold. • Smartly using false gold samples.• Usage of gold dust.• Destroying all the records.

• Shares plunges to $2.80• False Suicide of Michael D’Guzman. • Vanishing easily.

Question unanswered???

• Was it a fair ending?

• What about the investors?

Suggestions

What can be done to stop such scam??

Montgomery Hendry Lehman New York USA Richard S. Alabama Emanuel Lehman Fauld jr USA (1850) Mayer Lehman,

HISTORY OF LEHMAN BROTHERSFOUNDED FOUNDER HEAD

QUATERS CEO

How big is Lehman Brothers?

• Prominent Investment bank in Wall Street.

• Huge Diversion

• Investment banker

2008

• Lehman became Layman

Initialization of Crisis

• Federal reserve chairman lowers interest rate to 1%.• Banks on Wall St. started taking loan form Federal at 1%

other countries like China, Japan, Middle east also gave loans to banks on Wall St.• Banks started leverages.

The Weekend that changed wall street

SUBPRIME MORTGAGE

CONTINUE..

why did Lehman brothers collapse?• Lehman Brothers was a big player in the mortgage-backed securities market • Most exposed banks to the US sub-prime mortgage market.•It became bankrupt as a large part of their loan portfolio comprised of loans for buying real estate.•It had a bank debt of $613 billion, $155 billion in bond debt, and assets worth $639 billion.

FILING FOR BANKRUPTCY

Lehman Takeovers

North America

Asia Division

The BeginningIt all begins with…

Houston Natural Gas = a gas utility headquartered in Houston, TX.

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InterNorth Inc. = (1979) Large Energy company based in Omaha, NE. Specialized in Natural Gas pipelines, and also a force in plastics, coal and petroleum exploration and production.

1985: Merger between InterNorth and HNG.

1986: Company run by former HNG CEO Kenneth Lay.

Enron- The company

• World wide leading energy concern

• fusion of two major gas providers.

•  Largest gas provider in Britain and America. 

• Active in 40 nations with a sales volume of 140 billion US$. 

Enron’s Products

• Enron Online : Petrochemical, Plastics, Power, Pulp & Paper, Steel, Weather Risk Management.

• Oil & LNG Transportation.

• Broadband.

• Principal Investments.

• Risk Management for Commodities.

• Energy transportation and upstream services.

• Capital and risk management services.

• Energy and commodities services, etc.

Enron Before its bankruptcyFortune magazine chose Enron

as it’s “Best Managed and

Most Innovative company”

#1 – Quality of Management

#2 – Employee Talent

Chosen “the most innovative company” for 6 years in a row.

Enron’s Surge to the top

• From Energy to Trading• Mark-to-Market accounting• Special purpose Entity• A new Strategy• Skilling’s plan

Enron Scandal- From Riches to RagsSo what went wrong???

Mark to Market accounting

“Enron was in charge of putting any possible number of earnings (manipulation) and the technique became a

generator of huge earnings.”

SPECIAL PURPOSE ENTITIES (SPE’s)

SPE’s reflect a common financing technique for companies. Companies can cut their risk by moving assets into separate partnerships that can be sold to outside investors.

Accounting rules-> SPE´s legally isolated from the company that created it.

ENRON´s CASE

Losing money assets were sold to partnerships Listed as earnings. Hide and to manipulate cash flows

Enron’s Use of Special Purpose Entities

BU 667June 13 2006

Pump and Dump

• During Enron’s fall, executives would encourage employees and investors to buy more stock, telling them the company would rebound, while selling large amount of Enron stock themselves.

• By Enron’s collapse• Skilling made over $200M in Enron stock• Lay made over $300M in Enron stock

The “Smartest Guys in the Room”

Kenneth lay Jeffrey Skilling Andrew Fastow

The key Players…

Then were said to be “ THE GUILTIEST GUYS IN THE ROOM”

• Provided multi million dollars

• Security analysts recommended “strong buy”

Investment banks and

commercial banks

• Paid substantial fees to CRA’s

• Provided good investment ratings.

Credit Rating Agencies

Aftermath of Enron’s Bankrupcy

• 4500 employees lost their jobs• 60 billion dollars went for a toss• Citizens trust in the system was destroyed.• worst stock value loss in peaceful times.• The rules for company financial reporting were

drastically sharpened: Sarbanes-Oxley Act(2002). 

What could Enron have done to prevent what happened?

An ethical corporate culture

In Brief about Arthur Andersen

• Founded in December 1913 by Arthur Anderson and Clarence DeLany• By 2000: -85000 employees -350 offices in 84 countries -Top 5 accounting firm -1,00,000 clients including government and MNC’s.• Provided auditing and accounting services

•Historical background

company started in 1913 in Chicago named as Andersen, Delany & Co.

After Denlay left, company was renamed as Arthur Andersen & Co

1930’s- public companies to submit their financial statements to independent auditor

1947 Andersen died and Leonard Spacek became the new CEO

•Company Development

Opened international offices in 1950

In 1954 they launched computer consulting business

In 1960 they made huge profitsIn 1970s Consulting business

expanded By 1979 half of its worldwide

fees came from consulting

Arther

andersen

Andersen consultin

g

Accounting Scheme

Enron&AA• Enron was Andersen’s second largest client.• Provided both external auditing and Consultations.• unethical methods used by AA• Blind fold by their own will.• Funeral of documents.• Bankrupcy of both companies.

Thankyou