Table of Contents

1.0 Background Of The Company...................................................................3

2.0 Issues..............................................................................................4
3.0 The Main Players Of The Fraud.................................................................5
4.0 Specific Accounting Manipulations Involved....................................................7
5.0 The Person Disclosed The Scandal...............................................................8
6.0 The Penalties......................................................................................9
7.0 Recommendations To Avoid Such Scandal In Future.........................................11
References...............................................................................................12
1.0 BACKGROUND OF THE COMPANY

Waste Management Inc. is a company in North America that provides waste and
environmental services. It was founded by Larry Beck in 1894 and become a leader in the
industry. The company headquartered in Downtown Houston, Texas. The operations
involved managing air and gas, environmental and groundwater protection as well as
environmental engineering. It is providing solid waste management services including
collection, transfer, resource recovery and disposal services for commercial, industrial,
municipal and residential customers. Other services include recycling services and
removal of methane gas from sanitary landfill facilities for use in electricity generations
as well as hazardous and chemical waste services.

The company went to public during after 133 acquisitions on 1971 and $82M in revenue
were made make it as the largest waste hauler in the country. This company offered
environmental services to almost 20 million customers in America, Canada as well as
Puerto Rico. Waste Management soon took the position of becoming "North Americas
largest residential recycler." It was able to handle and manage more than 8.5 million tons
of materials included plastic, metal, glass, electronics and paper at 128 different facilities.

However, Waste Management Inc. did unfortunately go through a massive financial fraud
between the years of 1992-1997 that was committed by six senior officers namely Dean
L. Buntrock, Phillip B. Rooney, Thomas C. Hau, Herbert Getz, James E. Koenig and
Bruce D. Tobecksen. Company involved in accounting scandal that led to a major drop in
stock price and replacement of top executive
2.0 ISSUES

On March of 2002, the SEC filed sued against the company founder and five top
executives for perpetrating a massive financial fraud lasting more than 5 years. It claimed
that the company engaged in a systematic scheme to falsify and misrepresent financial
results between 1992 and 1997. Company used accounting manipulations known as
netting and geography.

Netting allowed the company to eliminate $490 million in current period accounting
misstatements by offsetting them against unrelated one-time gains on the sale or
exchange of assets.

Geography allowed the company to move tens of thousands of dollars between various
line items on the income statement to make the financial statements appear as
management wanted.
3.0 THE MAIN PLAYERS OF THE FRAUD

In Waste Management (WM), the parties that responsible for the fraud were including its
founder, Dean L. Buntrock, together with his five former senior officers. They are Philip
B. Rooney, the president and chief operating officer, director, and CEO for a portion of
the relevant period; James E. Koenig, executive vice president and chief financial officer;
Thomas C. Hau, vice president, corporate controller, and chief accounting officer;
Herbert Getz, senior vice president, general counsel, and secretary; and Bruce D.
Tobecksen, vice president of finance.

Dean L. Buntrock, who was also the chairman of the board of directors and chief
executive officer during most of the relevant period was said to be the driving force or the
main player of the fraud as he set the earnings targets and encouraged the culture of
accounting corruption, which lead him to create some accounting changes to achieve the
targeted earnings. He was also the one who revealed the companys false phone numbers.
In the mean time, he was also known as a successful, charitable entrepreneur with few
contributions. However, the contributions or money sources were actually taken from the
company. There was a time when he presented himself as a pillar of the community, for
instance, he enriched himself with a tax benefit by donating inflated company stock to his
college alma mater to fund a building in his name. This happened about ten days before
certain of the accounting irregularities first became public. As the primary beneficiary, he
acquired more than 16.9 million dollars which include the money gained from
performance-based bonuses, retirement benefits, charitable giving, and selling company
stock while the fraud was occurred.

Philip B. Rooney was in charge of building the profitability of the company's core solid
waste operations. He was also the one who had overall control on companys largest
subsidiary. He overruled the accounting decisions which negatively affected the
operations and directed that required write-offs were not recorded. Just like Buntrock,
Rooneys acquirements also came from the same sources, which worth 9.2 million
dollars.
James E. Koenig, who had a primary responsibility on scheme implementation has
ordered that damaging evidence should be destructed. Besides misleading the companys
audit committee and internal accountants, he also refused to give information to the
external auditors. Due to his fraudulent acts, he gained more than 900,000 dollars.

The vice president, Thomas C. Hau acted as the principal technician for the fraudulent
accounting. Hau made many one-off accounting manipulations, as well as deceptive
disclosures in order to achieve the targeted earnings. From his fraud actions, he earned
over 600,000 dollars.

The vice president of finance, Bruce D. Tobecksen, was an accounting expert who was
also acted as Koenigs right-hand man. He was the one who helped handling Haus
overflow in 1994. His fraud acts have made him acquired over 400,000 dollars.

The last person behind this fraud was the companys general counsel and senior vice
president, none other than Herbert Getz. He profited for over 450,000 dollars, thanks to
his fraudulent disclosures of the company.
4.0 SPECIFIC ACCOUNTING MANIPULATIONS INVOLVED

Waste Managements financial statements were considered by The Securities and

Exchange Commission (SEC) as part of garbage that the company has managed all this
while. The company even paid Andersen Accounting firm in 1997 to review its financial
records, with the results presented as Proposed Adjusting Journal Entries. Through five
years, the books of the company were actually made to conform to targeted projections
through manipulated accounting practices. In addition, a reserve account was maintained
as a stand-by account to absorb the adjustments during internal or external audit
examinations. However, the purpose for the reserve account became questionable to
investigators later on.

Specifically, the accounting manipulations involved in this company were all about
misreporting the accounting methods for the depreciation and amortization expenses. The
first misreporting was about depreciation expenses on garbage trucks. The company has
assigned large numbers of unused or recovered values, while the useful ones were
extended more than what have been prescribed the industry standards.

Secondly, the company has re-computed other fixed assets which previously had no
salvage values. This has been done by assigning the arbitrary salvage values on those
assets. WM has also assigned book values on the landfill sites, which did not comply with
their reduced or degraded values as the lands were full of wastes.

Those parties behind these fraud acts have directed to capitalize various expenses in order
to allocate the impact of the companys wrong accounting practices. This occurred for a
period of 10 years. Impacted from the inflated revenues, they have all earned large
amounts of compensation packages which consist of bonuses, basic salaries, enhanced
retirement benefits, and stock options. The packages were practically derived from the
money infused by the investors. In addition, the CFO ordered the destruction of important
documents to obstruct investigations.
5.0 THE PERSON DISCLOSED THE SCANDAL

David P. Steiner a CEO of Waste Management who took charge of the company in 1997
he ordered a review of the company's accounting practices in 1997. After restating the
financial statements, it came to the managements attention that the financial statements
had misstated its pre tax earnings by approximately $1.7 billion .When a new CEO took
charge of the company in 1997, In 1998 Waste Management restated its 1992-1997
earnings by $1.7 billion, making it the largest restatement in history
6.0 THE PENALTIES

The Securities and Exchange Commission announced, on August 26, 2005, at the United
States District Court for the Northern District of Illinois entered final judgments as to
defendants Dean L. Buntrock, Phillip B. Rooney, Thomas C. Hau, and Herbert A. Getz.

The Judgments permanently bar Buntrock, Rooney, Hau, and Getz from acting as an
officer or director of a public company and enjoin them from violating, or aiding and
abetting violations of, Sections 10(b) and 13(a) of the Securities Exchange Act of 1934,
Rules 10b-5, 12b-20, 13a-1, and 13a-13 promulgated thereunder, and Section 17(a) of the
Securities Act of 1933. The Judgment as to Hau additionally enjoins him from aiding and
abetting violations of Section 13(b)(2)(A) of Exchange Act, and from violating Exchange
Act Rules 13b2-1 and 13b2-2.

The Judgments also require payment of over $30 million in total, comprised of $16.4
million in disgorgement, $10.4 million prejudgment interest, and $4 million in civil
penalties. The disgorgement includes approximately $6.3 million in earnings-based
performance bonuses from all settling defendants, $5.9 million in Buntrock and Hau's
retirement benefits based upon the earnings-based bonuses, $3.5 million in losses avoided
by Buntrock and Rooney from selling stock during the fraud, and $700,000 in tax
benefits realized by Buntrock from gifting stock that was inflated by the fraud. The
breakdown of the monetary relief is as follows:

Buntrock - $19,447,670 total, comprised of $10,708,032 in disgorgement,

$6,439,638 of prejudgment interest, and a $2,300,000 civil penalty;
Rooney - $8,692,738 total, comprised of $4,593,764 in disgorgement, $2,998,974
of prejudgment interest, and a $1,100,000 civil penalty;
Hau -$1,578,890 total, comprised of $641,866 in disgorgement, $507,024 of
prejudgment interest, and a $430,000 civil penalty; and
Getz - $1,149,756 total, comprised of $472,500 in disgorgement, $477,256 of
prejudgment interest, and a $200,000 civil penalty.
Additionally, Getz agreed to settle a related Rule 102(e) administrative proceeding to be
instituted by the Commission by consenting to the entry of an order suspending him from
appearing or practicing before the Commission as an attorney for five years.
7.0 RECOMMENDATIONS TO AVOID SUCH SCANDAL IN FUTURE
REFERENCES
1. Congress, U. (2012, April 5). The Securities Act of 1933. Retrieved from
https://www.sec.gov/about/laws/sa33.pdf
2. Kieso, D., & Warfield, W. (2011). Intermediate accounting (Fourteenth Ed.). USA: John
Wiley & Sons.
3. Waste Management Founder, Five Other Former Top Officers Sued for Massive Fraud.
(2002, March 26). Waste Management Founder, Five Others Sued for Massive Fraud.
Retrieved from http://www.sec.gov/news/headlines/wastemgmt6.htm
4. Broome, C. (2014). Waste Management Case Study Examination of Fraud. Retrieved
from Academia.edu:
https://www.academia.edu/11993800/Waste_Management_Case_Study_Examination_of_
Fraud
5. Cantoria, C. S. (2010, December 30). Unraveling the Details of 10 High-Profile
Accounting Scandals. Retrieved from Bright Hub:
http://www.brighthub.com/office/finance/articles/101200.aspx

6. Ren, S. (2013, March 26). Waste Management Inc. Retrieved from Prezi.com:
https://prezi.com/r0cfsrtgaiwe/waste-management-inc/

7. TJeffre. (2005). Fraud at Waste Management . Retrieved from Powershow.com:

http://www.powershow.com/view/1463-
ZTdiM/Fraud_at_Waste_Management_powerpoint_ppt_presentation

8. Judge Enters Final Judgment Against Former CFO of Waste Management, Inc. Following
Jury Verdict in SEC's Favor. (2008, January 3). Press Release: ; 2008-2; Jan. 3, 2008.
Retrieved May 20, 2014, from http://www.sec.gov/news/press/2008/2008-2.htm

9. SEC. (2005, August 29). Dean L. Buntrock, Phillip B. Rooney, James E. Koenig, Thomas
C. Hau, Herbert A. Getz, and Bruce D. Tobecksen: Lit. Rel. 19351 / August 29, 2005.
Dean L. Buntrock, Phillip B. Rooney, James E. Koenig, Thomas C. Hau, Herbert A. Getz,
and Bruce D. Tobecksen: Lit. Rel. 19351 / August 29, 2005. Retrieved May 20, 2014,
from http://www.sec.gov/litigation/litreleases/lr19351.html