WASTE MANAGEMENT INC.

PRESENTED BY:
PRINCE BHARTI (17028)
AASTHA MITTAL (17066)
 Introduction
 Founded in 1971 by Wayne Huizenga and Dean Buntrock
 Its network include 367 collection operation, 346 transfer operations, 293
active landfill disposal site, 146 recycling plant, 111 beneficial use landfill gas
projects and six independent power production plants.
 It offers services in the United States, Canada, and Puerto Rico to nearly 21
million customers.
 The company has the largest trucking fleet with in the waste industry with
26000 collection and transfer vehicles.
 The Fraud of 1992-97
 There was an attempt to meet predetermined earnings targets
 by expanding profits and pushing down or foregoing expenses.
 Revenues were not increasing as fast as they should have been. chief officers
recognized this and began to commit fraudulent activitiesin order for their
financial statements to state what they wanted them to state.
 Officer compensation was tied to the earnings that the company produces. If
Waste Management, Inc. were to struggle in falling short of their earnings
target, it would endanger the officers of the company.
 What Did They Do
Refused to record expenses
Avoided Depreciation necessary to write off the
Expenses on their garbage costs of unsuccessful and
truck abandoned landfill
development projects.

Assigned arbitrary salvage Establishing inflated

values to other assets that environmental reserves
previously had no salvage (liabilities) in connection
value. with acquisitions

Improperly capitalizing a
variety of expenses, and
Failed to record expenses
failing to establish
for decreases in the value
sufficient reserves
of landfills as they were
(liabilities) to pay for
filled with waste.
income taxes and other
expenses.
 Who All were Involved
Dean L. Buntrock Phillip B. Rooney James E. Koenig Thomas C. Hau

• Founder, CEO, • President and • executive vice • vice president,

Chairman of Chief operating president and corporate
Board of officer, Director chief financial controller, and
Directors • ensured that officer chief
• set Earnings required write- • responsible for accounting
Targets offs were not executing the officer
• directed recorded scheme • principal
Accounting • overruled • ordered the technician for
changes to accounting destruction of the fraudulent
make the decisions damaging accounting
targeted • reaped more evidence • devised many
earnings than $9.2 • misled the "one-off"
• announced the million in ill- company's audit accounting
company's gotten gains committee and manipulations
phony numbers. internal to deliver the
accountants targeted
• withheld earnings
information • carefully
from the crafted the
outside auditors deceptive
disclosures
 Set an annual budget
with earning targets

How They Did It

Used top level
adjustments to reduce
expenses and inflate
earnings

Made false and

misleading statements
about the company

Used accounting
manipulations known as
“netting” and
“geography” to make
the results appear
better than what they
were actually
 What is an accounting fraud?
 Accounting frauds, or majorly corporate accounting scandals, are
political and business scandals which arise with the disclosure of
misdeeds by trusted executives of large public corporations.

 Such misdeeds typically involve complex methods, sometimes with the

cooperation of officials in other corporations or affiliates.

 In public companies, this type of “creative accounting” can amount to

fraud and investigations are typically launched by government oversight
agencies.
 Ways to Commit Accounting Fraud
 Using or misdirecting funds

 Overstating revenues

 Understating expenses

 Overstating the value of corporate assets

 Under reporting the existence of liabilities

 Accounting Standards Violated

 AS 1
Disclosure of Accounting policies

 AS 6
Depreciation Accounting

 AS 10
Accounting for Fixed Assets
 Role of Auditors in the scam
 Auditor- Arthur Anderson
 Arthur Anderson found error in Waste Management Inc.’s accounting books
 Proposed adjustments and methods in which they could be fixed
 Waste Management Inc. refused to make the adjustments, bribed Arthur
Anderson
 Arthur Anderson issued unqualified opinions, wrote off accounting errors over
time
 Auditors earned additional fees through “special work” shown in the books
under the heads ‘accounting work’ and ‘non-audit consulting fees’
 How did the scam become public?
 A new CEO hired in 1997 ordered a review of the accounting practices of the
company.
 Led to discovery of overstatement of $1.7 billion in earnings between the
years 1992 and 1997.
 It was the largest restatement known at that point in the history.

Year Ending Originally As restated (in Percentage

reported (in thousands) Overstated
thousand)
31 Dec 1992 $ 850,306 $ 739,686 14.95
31 Dec 1993 $ 452,776 $ 288,707 56.83
31 Dec 1994 $ 784,381 $ 627,508 25
31 Dec 1995 $ 603,899 $ 340,097 77.57
31 Dec 1996 $ 192,085 $ (39,307) 100+
 Effects of the fraud
 Shareholders lost $6 billion
 Stock prices dropped by more than 33%
 Had to pay $457 million to shareholders in class action suit
 In 1998, it was bought and merged with a smaller company, USA Waste
Services Inc.
 Arthur Anderson fined $7 billion
 In 2005, fraud accounting lawsuit against the executives settled for $31
million
 Banned from serving as officers or directors of a public company
 Waste Management Inc. at present

 Largest waste collection corporation in North America

 Leading provider of Integrated Environmental Solutions in the country
 Provides employment to more than 50,000 people
 Has a customer base of more than 20 million people
 Is one of the biggest recycler’s of the states