“Bankruptcy and liquidation of companies in USA”

United states of America is one of the top investment destinations. It has a business -friendly
environment that is enriched by extra-ordinary infrastructure, groundbreaking technologies,
and highly skilled workforce. The country’s diversity and openness encourage all types of
business to be innovative – and flourish.

According to the Annual Fortune Global 500 list published by the Fortune magazine for the
fiscal year ended on or before March 31,2020, retail giant Walmart was ranked first, and
popular ecommerce platform Amazon was ranked ninth. In addition to this, according to the
list of Top 10 largest companies by market capitalization as of November 3,2020 US tech
giant Apple was ranked first and other US companies – Amazon, Microsoft, Alphabet
Facebook, and Berkshire Hathaway were ranked among the top 10. [ CITATION Wor211 \l
1033 ]

Regardless of all these, jaw – dropping facts, US history has encountered numerous
corporate failures. In 2019, there were 22,780 cases of business bankruptcy filed all over the
country. [ CITATION sta21 \l 1033 ]

This article lists some of the classic corporate blunders in the US history.

De Angelis’ Allied crude oil company

The history of corporate failure dates back to 1960’s. De Angelis’ Allied crude oil company
took out bank loans by keeping its inventory of soybean oil as guarantee. However, the trader
Anthony De Angelis, filled the containers with predominantly with water and asserted that he
had 175 million value of salad oil. A whistle blower revealed this to American Express which
was one of the company’s largest lenders. Before long, Allied crude vegetable oil company
filed for bankruptcy.

Lincoln savings and Loan Association

The Lincoln savings and Loan Association was the noteworthy bank collapse since the Great
depression. It shattered in the wake of the Keating Five Scandal. The catastrophe costed $160
billion. The downfall of Lincoln savings and Loan Association was the priciest savings and
loan disaster of the 1980s.

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Enron

During the 1990s, Enron was one of the country’s most pioneering companies. The company
reached remarkable heights but ultimately failed. When it stated bankruptcy in 2001, it was
the greatest bankruptcy filing in U.S history. Poor governance practices, unethical behavior
of the senior executives, conflict of interests and accounting frauds paved the way for the
failure of Enron.

Enron’s stock price plummeted from $90per share in mid-2000 to less than $1 per share at the
end of 2001. Because of this significant drop, shareholders lost around $11 billion. And
Enron revised its financial statement for the previous five years and uncovered that there was
$586million in losses. The failure of Enron is the best example for Greed should never trump
common sense and decency.

Arthur Andersen

Accounting firm Arthur Andersen which was one of the five largest audit and accountancy
partnerships in the world, was the auditor of Enron. It involved in the Enron scandal. Soon
after the declaration of bankruptcy by Enron in 2001, Arthur Andersen failed in 2002.
Destruction of documents and correspondence related to the Enron engagement by
Andersen’s employees added fuel to the fire. After 89 years in business, Arthur Andersen
informed the SEC it would no longer audit public companies.

WorldCom

WorldCom was one of the world’s largest telecommunications companies. The WorldCom
scandal transpired in the summer of 2002 and shook the Wall Street. To conceal the reduced
revenue growth and drop in stock price, CEO Bernie Ebbers manipulated the financial
reports. Apart from this, WorldCom categorized operating expenditures as long-term capital
investments and reported for $500 million on computer expenses with no documents to
support. At the end of the day, these alterations made the company look more valuable.
However, SEC was not convinced with statement produced by WorldCom. After an internal
audit, WorldCom confessed that it inflated its profits.

Lehman brothers

The subprime mortgage crisis led to the failure of Lehman brothers. At the time of its
collapse, it was the nation’s fourth- largest investment bank. Lehman brothers filed for

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bankruptcy in September 2008 with 639$ billion in total assets and 613 billion in debts. The
failure of the Lehman brothers can be ascribed to a range of factors ranging from ambiguous
accounting practices, use of high-leverage business model, immoral management practices
and excess investment in risky unsecured investments.

To make the long story short, bankruptcy and liquidation of companies in USA are
outgrowths of manipulations, poor corporate governance practices, ethical issues, conflict of
interest and so on. Important business professions such as Attorneys, Auditors, Accountants,
and financial analysts should perform their gatekeeper duties accordingly to prevent such
scandals and to keep the economy up and running.

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(Word count- 765 words)

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References
AMADEO, K. (2021, May 31). Lehman Brothers Collapse. Retrieved from the balance:
https://www.thebalance.com/lehman-brothers-collapse-causes-impact-4842338

Cunningham, G. , & Harris, J. (2006). ENRON AND ARTHUR ANDERSEN:THE CASE OF THE CROOKED E
AND THE FALLEN A. Global Perspectives on Accounting Education, pp. 27-48.

Li, Y. (2010). The Case Analysis of the Scandal of Enron. International Journal of Business and
Management, 37-41.

Olya, G. (2020, November 12). Enron and the 24 Other Most Epic Corporate Downfalls of All Time.
Retrieved from Go Banking Rates: https://www.gobankingrates.com/money/business/most-
epic-corporate-downfalls/

statista Research Deparment . (2021, January 20). Annual number of business bankruptcy cases filed
in the United States from 2000 to 2019. Retrieved from statista :
https://www.statista.com/statistics/817918/number-of-business-bankruptcies-in-the-
united-states/

World’s Largest Companies 2020. ( 2021, June 30). Retrieved from GLOBAL FINANCE :
https://www.gfmag.com/global-data/economic-data/largest-companies