International scams
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International scams



Gives indetail idea about 3 major scams i.e Bre-x minerals scam, Lehman brothers and Enron.

Gives indetail idea about 3 major scams i.e Bre-x minerals scam, Lehman brothers and Enron.



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  • - Alt-A loans (made to borrowers without full documentation).

International scams International scams Presentation Transcript

  • International scamsPresented by- Mukta chugh Naazneen Noor Pooja Raisinghani Deepak Singh Dinesh Tulsiani Jasmine Arul
  • Scam?
  • Types of scams National scams International scams
  • List of scams • Enron • WorldCom • Adelphia • Global Crossing • Bre-x Minerals • Xerox • Qwest • Lehman brothers • 2G scam • Common wealth games scam • Fodder scam • Satyam scam • Telgi scam • Harshad Mehta scam • Ketan parekh securities scam
  • About Bre-x Minerals • Mining company • Founded by David walsh in 1989 • Group of Canadian companies based in Calgary, alberta • Involved in a major scandal
  • Timeline of Scandal • May 1988- shares trading at 0.3 dollars • 1992-1993:- ⁻ John Felderhof became new vice chairman. ⁻ He suggests exploration in busang, Indonesia ⁻ Hired Geologist Michael de Guzman as project manager. • 1993-1995:- ₋ During initial stages company claimed promising results ₋ Stock price increased to $14.87 ₋ claimed gold to be 30 million ounces ₋ stock price increased to $5o
  • Continue… • 1996: ₋ Started trading at Toronto stock exchange at $180 ₋ Networth reaches 6 billion ₋ Gold estimated to be 39 million ounces
  • Mysterious story of Bre-x • Positive intervention of government. • 1997- Insignificant amounts of gold. • Smartly using false gold samples. • Usage of gold dust. • Destroying all the records.
  • • Shares plunges to $2.80 • False Suicide of Michael D’Guzman. • Vanishing easily.
  • Question unanswered??? • Was it a fair ending? • What about the investors?
  • Suggestions What can be done to stop such scam??
  • Montgomery Hendry Lehman New York USA Richard S. Alabama Emanuel Lehman Fauld jr USA (1850) Mayer Lehman, HISTORY OF LEHMAN BROTHERS FOUNDER HEAD QUATERS CEO
  • How big is Lehman Brothers? • Prominent Investment bank in Wall Street. • Huge Diversion • Investment banker
  • 2008 •Lehman became Layman
  • Initialization of Crisis • Federal reserve chairman lowers interest rate to 1%. • Banks on Wall St. started taking loan form Federal at 1% other countries like China, Japan, Middle east also gave loans to banks on Wall St. • Banks started leverages. The Weekend that changed wall street
  • why did Lehman brothers collapse? • Lehman Brothers was a big player in the mortgage- backed securities market • Most exposed banks to the US sub-prime mortgage market. •It became bankrupt as a large part of their loan portfolio comprised of loans for buying real estate. •It had a bank debt of $613 billion, $155 billion in bond debt, and assets worth $639 billion.
  • Lehman Takeovers North America Asia Division
  • The Beginning It all begins with… Houston Natural Gas = a gas utility headquartered in Houston, TX. + InterNorth Inc. = (1979) Large Energy company based in Omaha, NE. Specialized in Natural Gas pipelines, and also a force in plastics, coal and petroleum exploration and production. 1985: Merger between InterNorth and HNG. 1986: Company run by former HNG CEO Kenneth Lay.
  • Enron- The company • World wide leading energy concern • fusion of two major gas providers. • Largest gas provider in Britain and America. • Active in 40 nations with a sales volume of 140 billion US$.
  • Enron’s Products • Enron Online : Petrochemical, Plastics, Power, Pulp & Paper, Steel, Weather Risk Management. • Oil & LNG Transportation. • Broadband. • Principal Investments. • Risk Management for Commodities. • Energy transportation and upstream services. • Capital and risk management services. • Energy and commodities services, etc.
  • Enron Before its bankruptcy Fortune magazine chose Enron as it’s “Best Managed and Most Innovative company” #1 – Quality of Management #2 – Employee Talent Chosen “the most innovative company” for 6 years in a row.
  • Enron’s Surge to the top • From Energy to Trading • Mark-to-Market accounting • Special purpose Entity • A new Strategy • Skilling’s plan
  • Enron Scandal- From Riches to Rags So what went wrong???
  • Mark to Market accounting “Enron was in charge of putting any possible number of earnings (manipulation) and the technique became a generator of huge earnings.”
  • SPECIAL PURPOSE ENTITIES (SPE’s)  SPE’s reflect a common financing technique for companies. Companies can cut their risk by moving assets into separate partnerships that can be sold to outside investors.  Accounting rules-> SPE´s legally isolated from the company that created it. ENRON´s CASE  Losing money assets were sold to partnerships  Listed as earnings.  Hide and to manipulate cash flows
  • Enron’s Use of Special Purpose Entities
  • BU 667 June 13 2006 Pump and Dump • During Enron’s fall, executives would encourage employees and investors to buy more stock, telling them the company would rebound, while selling large amount of Enron stock themselves. • By Enron’s collapse • Skilling made over $200M in Enron stock • Lay made over $300M in Enron stock
  • The “Smartest Guys in the Room” Kenneth lay Jeffrey Skilling Andrew Fastow The key Players… Then were said to be “ THE GUILTIEST GUYS IN THE ROOM”
  • •Provided multi million dollars •Security analysts recommended “strong buy” Investment banks and commercial banks •Paid substantial fees to CRA’s •Provided good investment ratings. Credit Rating Agencies
  • Aftermath of Enron’s Bankrupcy • 4500 employees lost their jobs • 60 billion dollars went for a toss • Citizens trust in the system was destroyed. • worst stock value loss in peaceful times. • The rules for company financial reporting were drastically sharpened: Sarbanes-Oxley Act(2002).
  • What could Enron have done to prevent what happened? An ethical corporate culture
  • In Brief about Arthur Andersen • Founded in December 1913 by Arthur Anderson and Clarence DeLany • By 2000: -85000 employees -350 offices in 84 countries -Top 5 accounting firm -1,00,000 clients including government and MNC’s. • Provided auditing and accounting services
  • •Historical background  company started in 1913 in Chicago named as Andersen, Delany & Co. After Denlay left, company was renamed as Arthur Andersen & Co 1930’s- public companies to submit their financial statements to independent auditor 1947 Andersen died and Leonard Spacek became the new CEO •Company Development Opened international offices in 1950 In 1954 they launched computer consulting business In 1960 they made huge profits In 1970s Consulting business expanded By 1979 half of its worldwide fees came from consulting Arther andersen Andersen consulting
  • Accounting Scheme
  • Enron&AA • Enron was Andersen’s second largest client. • Provided both external auditing and Consultations. • unethical methods used by AA • Blind fold by their own will. • Funeral of documents. • Bankrupcy of both companies.
  • Thankyou