When millions, or even billions, of dollars are up for grabs, some individuals are willing to play dirty to get their hands on them. Below, World Finance examines five of the biggest financial scandals ever to take place.
Charles Ponzi
In 1919, Charles Ponzi, an Italian immigrant living in Boston, came up with a scheme to get rich that involved purchasing international reply coupons for a low price abroad and then selling them for profit in the US.
He convinced numerous investors to back him, despite the fact his business was racking up huge debts as a result of logistical difficulties and mounting overheads. In what is now a well-known trick, Ponzi simply used the funds provided by new investors to pay existing backers (and himself). Although not the first example of this type of scam, its notoriety gave birth to the term ‘Ponzi scheme’.
Enron
Fortune magazine named the Texas-based energy business Enron the most innovative company in corporate America for six straight years between 1995 and 2000. By November 2001, however, its share price had plummeted to less than $1 following the discovery of hidden debt worth billions. Following this, the company had no other option but to declare itself bankrupt.
Worldcom
Worldcom took Enron’s title as the largest corporate bankruptcy in US history just a year later. Altogether, more than $7bn in ‘accounting errors’ were found to have greatly inflated the company’s assets. Worldcom’s former chief executive Bernard Ebbers was subsequently sentenced to 25 years in prison for his part in the scandal and has since been dubbed one of the most corrupt CEOs of all time.
Bernard Madoff
As the head of his own Wall Street investment firm, Bernard Madoff masterminded the biggest Ponzi scheme of all time, defrauding investors of an estimated $64.8bn. It’s believed that the scam could have been in place as early as the 1980s, but fell apart after the 2008 financial crisis. In December of that year, Madoff confessed to his sons that his business was just “one big lie” and they subsequently turned him into the authorities. Madoff received a sentence of 150 years in prison.
Lehman Brothers
The collapse of Lehman Brothers is an enduring symbol of the late-2000s financial crisis. The financial services firm had been in existence for more than 150 years, but its use of cosmetic accounting tricks was exposed by the subprime mortgage crisis, and the bank was forced to file for bankruptcy. The failure of what was, at the time, the fourth-largest investment bank in the US had severe ramifications for the global economy.
