The Biggest Stock Scandals in Recent History

Investors have suffered losses in stock scandals

There have been numerous stock scandals that have hit to news in recent years, costing investors billions of dollars. These scandals have taken the form of accounting fraud, shady practices, or false or misleading statements. It is important to understand these incidents from the past so companies can hopefully prevent these in the future and investors can invest wisely. With no way to know what is happening behind the scenes, investors must trust companies’ actions at face value, putting them at the mercy of the executives’ decisions.

Enron Stock Scandal (2001)

Enron was formed in 1985 following a merger between Houston Natural Gas Co. and Omaha-based InterNorth, Inc. Prior to the scandal, this company was the seventh-largest company in the United States by revenue. With the use of complicated accounting methods, Enron was able to keep large amounts of debt on its books. Enron used this debt to falsely show that it was more fundamentally stable than it was. It fooled many analysts and investors into investing into the company based on these false metrics. Enron also used shell companies ran by executives which recorded fictious revenues multiple times, giving them more of a stable company presence that fooled investors. Eventually, the truth surfaced. Enron’s share price fell from $90 to less than 30 cents.

WorldCom Stock Scandal (2002)

Not much time had passed since Enron’s demise before another scandal hit the investor market. WorldCom, a massive telecommunications company, began to record its operating expenses like cost of pens, paper, and other office supplies as investments for the company. WorldCom expensed the cost of these supplies for several years, resulting in a total of $3.8 billion that should’ve been reported as expenses. This trick resulted in a profit of more than $1.3 billion in 2001 for WorldCom. Once the news became apparent, thousands of WorldCom employees lost their jobs. Additionally, investors suffered as WorldCom’s stock fell from $60 to less than $1.

HealthSouth Stock Scandal (2003)

In the late 90’s, Founder and CEO of HealthSouth Richard Scrushy began instructing employees to falsify earning reports. Scrushy made HealthSouth employees inflate revenues and overstate HealthSouth’s net income. At the time, HealthSouth was one of America’s largest healthcare service providers. Unfortunately, the company would bring scandal down upon its head. William Owens, a CFO for HealthSouth also working for the FBI, taped Scrushy discussing the fraud. Then, in March of 2003, the SEC announced that HealthSouth exaggerated revenues by $2.7 billion. Because of this, HealthSouth share price fell 97% to a close of 11 cents in a single day.

Protect Your Investments with the Help of McCune Law Group

When publicly traded companies only care about the bottom line, they may harm loyal investors. MLG’s Securities Litigation lawyers are familiar with the damages investors may face in the wake of stock scandals. At MLG, our team levels the playing field and will represent the interests of investors who have been wronged to help them recover. If you believe you have been defrauded, manipulated, deceived, or scammed by these entities, contact our team. We will pursue every avenue of compensation and ensure you get the justice you deserve.

Contact MLG by completing the form or calling (909) 345-8110 today for a free consultation with our professional Securities Litigation team.

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