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Wednesday, 26 June, 2002, 10:53 GMT 11:53 UK
Wall Street scandals at a glance
Wall Street sign
Spotlight on Wall Street
Confidence in corporate America has been shaken by a series of accounting scandals.

What started with an admission of false profits by Enron has rapidly become a rout of some of the best known names on Wall Street.

Since the Enron scandal came to light, the accounts of many large American companies have been scrutinised and many more scandals have come to light.

BBC News Online takes a look at the companies that have dominated the headlines and planted doubts about the integrity of corporate America.


WorldCom has admitted orchestrating one of the largest accounting frauds in history.

The company admitted that it had inflated its profits by $3.8bn (2.5bn) between January 2001 and March 2002.

The firm was already shrouded in scandal after the departure of its founder and chief executive, Bernie Ebbers in April.

Mr Ebbers borrowed hundreds of millions from the firm to underwrite the inflated prices he had paid for the company's own shares.


When energy giant Enron reported its third quarter results last October, it revealed a large, mysterious black hole that sent its share price tumbling.

The US financial regulator - the Securities Exchange Commission - launched an investigation into the firm and its results.

Enron then admitted it had inflated its profits, sending shares even lower.

Enron offices in Houston
Where it all began - Enron's HQ in Houston

Once it became clear that the firm's success was in effect an elaborate scam - a chorus of outraged investors, employees, pension holders and politicians wanted to know why Enron's failings were not spotted earlier.

The US government is now thought to be studying the best way of bringing criminal charges against the company.


Attention quickly turned to Enron's auditors - Andersen.

The obvious question was why did the auditors - charged with verifying the true state of the company's books - not know what was going on?

Andersen reacted by destroying Enron documents, and on 15 June a guilty verdict was reached in an obstruction of justice case.

The verdict signalled an end to the already mortally wounded accountancy firm.

This wasn't the first time Andersen's practices had come under scrutiny - it had previously been fined by the SEC for auditing work for waste-disposal firm Waste Management in the mid-1990s.

David Duncan at Congressional hearings
Andersen's David Duncan faces the music
The Andersen case raises a wider question about accounting in the US and how it might restore its reputation as the guarantor of the honest presentation of accounts.


Telecoms company Adelphia Communications filed for bankruptcy on 25 June.

The sixth largest American cable television operator is facing regulatory and criminal investigations into its accounting.

The company has restated its profits for the past two years and admitted that it didn't have as many cable television subscribers as it claimed.

The firm has dismissed its accountants, Deloitte & Touche.


In April, the SEC filed a civil suit against photocopy giant Xerox for misstating four years' worth of profits, resulting in an overstatement of close to $3bn.

Xerox negotiated a settlement with the SEC with regard to the suit.

As part of that agreement, Xerox agreed to pay a $10m fine and restate four years' worth of trading statements, while neither admitting, nor denying, any wrongdoing.

The penalty is the largest ever imposed by the SEC against a publicly traded firm in relation to accounting misdeeds.


In early June, the US District Attorney extended a criminal investigation of the firm's former chief executive, Dennis Kozlowski.

Dennis Kozlowski - the man behind the creation of the Tyco conglomerate - is charged with avoiding $1m in New York state sales taxes on purchases of artwork worth $13m.

The SEC enquiry into Tyco is understood to relate solely to Mr Kozlowski - but there are investor fears the probe could reveal accounting irregularities.

Last week, Tyco said it has filed a lawsuit against one of its former directors, Frank Walsh, for taking an unauthorised fee of $20m.

Global Crossing

Global Crossing was briefly one of the shiniest stars of the hi-tech firmament.

The telecoms network firm filed for Chapter 11 bankruptcy on 28 January.

The peculiar economics of bandwidth meant that firms could drum up the appearance of lively business by trading network access with each other.

They could effectively book revenues when in many cases no money at all changed hands.

US regulators are now looking closely at the collapse, questioning whether it is another case of a company flattering its figures.

Merrill Lynch

In this atmosphere of corporate distrust, the role of investment banks has also faced increased scrutiny.

Analysts were suspected of advising investors to buy stocks they secretly thought were worthless. The rationale for this 'false advice' was that they might then be able to secure investment banking business from the companies concerned.

Merrill Lynch reached a settlement with New York attorney general Eliot Spitzer. The settlement imposed a $100m fine upon Merrill but demanded no admission of guilt .

Under the deal, Merrill Lynch has agreed to sever all links between analysts' pay and investment banking revenues.


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