6 Well-Known Cases Of Corporate Crime
/Corporate crime often goes unnoticed by the general public, concealed behind the facade of positive marketing efforts and the like.
Make no mistake, however, not a single country is immune to the greed and corruption that plagues the highest levels of the corporate world.
From the collapse of Enron to the Volkswagen "Dieselgate" scandal, these well-known cases of corporate crime serve as a harsh reminder that no company is above the law.
Let us delve into the seedy underbelly of corporate America and examine some of the most infamous cases of corporate crime to date.
What Is Corporate Crime?
Corporate crime refers to illegal or unethical actions committed by corporations or individuals within a corporation.
Furthermore, LY Lawyers define corporate crime in more detail as a type of white-collar crime wherein individuals use their corporate position to engage in illicit criminal activity.
These actions can range from financial crimes such as fraud and embezzlement to environmental crimes that violate a community's health and safety regulations.
While business accidents are commonplace, when there's an intent behind the wrongdoing, it constitutes a crime. These activities are deemed illegal and can be punished under criminal law in the form of incarceration or a bail amount.
Despite these punitive measures, corporate crime continues to be a major issue in many countries. Below are some famous cases of these in action.
6 Well-Known Cases Of Corporate Crime
1. Enron Collapse
One of the most infamous cases of corporate crime in recent history is the Enron scandal.
The impact was so great that the term "Enronomics" was conceived shortly after, a word that referred to the practice of hiding bad assets and crippling debt from the public.
The company's top executives—CEO Kenneth Lay and CFO Andrew Fastow—were found guilty of manipulating the company's financial statements. Through their interference, they inflated their company's stock price and concealed the actual expenses.
The poor corporate governance and unethical culture at Enron led to its eventual reputational downfall. Billions of dollars were lost, thousands of employees were laid off and the former top executives were left facing jail time.
2. Volkswagen’s Dieselgate
The car industry was rocked in 2015 by the Volkswagen “Dieselgate” scandal.
In 2015, a colossal scandal erupted when it was revealed that Volkswagen had installed illegal software in millions of its diesel-powered cars to manipulate emissions tests.
The company had falsely advertised these vehicles as having lower emissions than they actually did, resulting in adverse environmental harm.
Volkswagen was fined billions of dollars and several of its executives faced criminal charges.
3. BP Oil Spill
Another well-documented case of corporate crime was the 2010 BP oil spill in the Gulf of Mexico.
A Deepwater Horizon oil rig explosion released millions of barrels of oil into the ocean and brought damage to the reefs and coastal waters near Mexico and the southern US.
This accidental spillage had resounding repercussions not only on the oil industry but also on the local tourism and fishing industry. Furthermore, the environmental damage was immeasurable, causing catastrophic destruction to the local sea life and ecological equilibrium in the area.
BP was found to have ignored warning signs and failed to implement proper safety procedures, leading to the disaster. The company was eventually fined billions of dollars for its role in the spill.
4. Worldcom Accounting Scandal
Worldcom's accounting scandal entailed a heinous combination of deceiving investors and shareholders, masking expenses, and embellishing profits—ultimately leading to the tech giant's fall from grace in 2002.
The scandal involved the manipulation of the company's financial statements to hide billions of dollars in expenses and inflate the company's profits.
The scheme was carried out by the company's top executives, CEO Bernard Ebbers and CFO Scott Sullivan. In a nutshell, it involved the creation of a series of false accounting entries and the misclassification of expenses.
While many businesses have switched up their figures before, the scale in which Worldcom did this was groundbreaking. This scandal had a significant impact on the telecommunications industry and resulted in a loss of billions of dollars and the retrenchment of thousands.
Bernie Madoff Ponzi Scheme
Bernie Madoff, a Wall Street executive, managed to deceive the world for decades with his massive and sophisticated Ponzi scheme that netted him $65 billion.
For the uninitiated, a Ponzi scheme is a fraudulent investment scheme in which returns are paid to earlier investors using the investments of newer investors, rather than from any actual profits.
Madoff's scheme was particularly elaborate, full of fake account statements and a web of complex financial transactions that made it difficult for authorities to track down.
When the fraud was revealed, Madoff was arrested and eventually sentenced to 150 years in prison. It remains one of the largest financial frauds in history, perhaps second to Charles Ponzi himself.
5. ImClone Insider Trading
You may know Martha Stewart as your television home cook, but in the early 2000s, she was at the centre of a major insider trading scandal with a biotech company called ImClone.
The story goes that stockbroker Peter Bacanovic had tipped Martha Stewart to sell her stock in the company immediately, the reason being that the company's experimental cancer drug had failed to get approval from the FDA.
Martha Stewart proceeded to sell her shares before the news was made public, and as a result, avoided significant losses in value while also gaining $230,000.
The Securities & Exchange Commission was suspicious of the transaction and brought her to court while procuring evidence. She ended up facing 5 months of jail time.
