Corporate Scandal

1. Welcome to our Presentation

2. Department of Accounting & Information Systems (2nd
Batch)
University of Barisal

3. A presentation on Corporate scandal
By group no: 05

4. Group members
ID Number1 Name
13 AIS 002 Sarmin Akter Mitu
13 AIS 018 Shariful Islam
13 AIS 029 Sabina Akter
13 AIS 038 Ranu Mondal
13 AIS 040 Shuvankar Halder
13 AIS 046 Md. Zebon hossain
13 AIS 081
Rafiq-Al-Azad

5. What is Scandal?
An incident or event that disgraces or
damages the reputation of the persons
or organization involved.

6. Corporate Scandal

7. Corporate Scandal?
Set of questionable, unethical, and/or
illegal actions that a person or persons
within a corporation engage in.

8. History of Corporate Scandal
 Early 1900’s:Early 1900’s: Charles PonziCharles Ponzi
Ivar KruegerIvar Krueger
 1920’s: Samuel Insull1920’s: Samuel Insull
 1940’s:1940’s: Richard WhitneyRichard Whitney
 1960’s:1960’s: GE, WestinghouseGE, Westinghouse
 1970’s:1970’s: Investors Overseas ServicesInvestors Overseas Services
Robert VescoRobert Vesco

9. 1980’s1980’s
Ivan BoeskyIvan Boesky Insider TradingInsider Trading
$100 million – 3 years$100 million – 3 years
Michael MilkenMichael Milken Securities FraudSecurities Fraud
10 years10 years
Charles KeatingCharles Keating Savings & LoansSavings & Loans
Investors lost $200 millionInvestors lost $200 million
History of Corporate Scandal

10. Is there any relationship between
Corporate Scandal and Audit?

11. Causes of Corporate Scandal
Auditor’s Fraud
Agency Problem
Inefficient management
Tendency to gain Speculative profit
Lack of government regulations
Auditor

12. Impact of Corporate Scandal
or who are the sufferer
Mainly the stakeholder including
General Employees
Customers
Third Parties
Government

13. The world’s biggest
Corporate Scandal
Enron ScandalEnron Scandal

14. Key PlayersKey Players
 CEO: Jeffrey Skilling
 Chairman of the Board: Ken Lay

15.  February 2000February 2000
Fortune magazine chooses EnronFortune magazine chooses Enron
as it’s “Best Managed andas it’s “Best Managed and
Most InnovativeMost Innovative company”company”
EnronEnron

16.  August 2000: Stock at $73 billionAugust 2000: Stock at $73 billion
 March 2001: FY2000 revenues atMarch 2001: FY2000 revenues at
$100 billion$100 billion
 Sep 16, 2001: “Buy more shares”Sep 16, 2001: “Buy more shares”
 October 2001: Enron pays itsOctober 2001: Enron pays its
regular dividendregular dividend
EnronEnron

17.  October 16, 2001October 16, 2001
$618 million 3$618 million 3rdrd
Qtr LossQtr Loss
$1.2 billion reduction in$1.2 billion reduction in
shareholder equityshareholder equity
 October 31, 2001October 31, 2001
SEC upgrades inquiry into aSEC upgrades inquiry into a
formal investigationformal investigation
EnronEnron

18.  December 2, 2001December 2, 2001
Enron files for bankruptcyEnron files for bankruptcy
4,000 employees fired4,000 employees fired
 20,000 workers lose their jobs20,000 workers lose their jobs
 $73 billion in stock value - gone$73 billion in stock value - gone
EnronEnron

19. Enron – What Happened?Enron – What Happened?
““Enron apparently, with the approval or adviceEnron apparently, with the approval or advice
of its accountants, auditors and lawyers,of its accountants, auditors and lawyers,
used thousands of off-the-book entities toused thousands of off-the-book entities to
overstate corporate profits, understateoverstate corporate profits, understate
corporate debts, and inflate Enron’s stockcorporate debts, and inflate Enron’s stock
price.”price.”

20. Who was affected?Who was affected?
 Some Enron shareholders lost their life savings.Some Enron shareholders lost their life savings.
 Enron left behind 31 billion dollars worth of debt.Enron left behind 31 billion dollars worth of debt.
 Around 21,000 people lost their jobs.Around 21,000 people lost their jobs.
 Most lost their pension plans.Most lost their pension plans.
 Others such as Clifford Baxter, former ViceOthers such as Clifford Baxter, former Vice
Chairman of Enron, committed suicide.Chairman of Enron, committed suicide.
 Investors were crushed as shown in the chart.Investors were crushed as shown in the chart.
 The entire nation was affected because this scandalThe entire nation was affected because this scandal
opened the door to new tough laws.opened the door to new tough laws.

21. Corporate Scandal and Bangladesh

22. Hallmark-Sonali Bank Loan Scam
Was a scam perpetrated by the largest state owned
Commercial Bank(SOCB) of Bangladesh , Sonali Bank
by giving a loan of BDT 3400(almost USD 454
million) using scam documents between 2010 and
2012.

23. The loan scam occurred when one branch of
Sonali Bank illegally gave out $344 million in
loans, including nearly $344 million to Hall
mark group, a textile business.
Tanvir Mahmud, Hallmark’s MD, connived with
a branch manager to issue fraudulent letters
of credit to fictitious companies.
How this Scam occurred?

24. Destiny 2000 Ltd.
Started Business at December,2000. as a
Multilevel marketing company.
Key members:
Chairman:
Lt General (retd) M Harun-Ar-Rashid
Managing Director:
Rafiqul Amin

25.  commenced its journey with only 12 members
in 2000 ended up comprising 39 business
concerns in 2012.
 Of them, 26 had their activities,
 and the remaining 13 were just recorded in
official documents.

26.  It laundered totally about Tk. 5114 crore.
 Of which it’s top officials laundered
Tk.3,285.26 crore.
Destiny Scandal

27. o Money Laundering and illegal banking.
o Fake tree plantation project.
o Illegal insurance company.
o Fake Airplane Company.
o Many fake enterprises of Destiny
How Destiny 2000 Ltd. Cheated

28. Tactics of Destiny
 Assurance of large amount of profit & additional
commission.
 Gaining the credibility of the clients
 Large amount of advertisement.

29. Profit Strategy of Destiny

30. Causes of Destiny Scandal
 Without government Monitoring.
 Not being proper implementation of audit.
 Inadequate understanding of the investors’
 Corruption
 A weak regulatory framework.
 A weak regulatory Implementation.
 Political Consequence
 Bangladesh Bank
 Ministry of Finance

31.  4.8 million Clients.
 3.5 million agents.
 And the overall economy of Bangladesh.
Impact of Destiny Scandal

32. How to avoid Corporate Scandal
 Strict Laws
 Government regulations
 Proper Monitoring by
 BB
 Ministry of Finance
 BSEC
 Other government authorities

33.  Increasing internal audit
 Reducing Agency Problem
 Increasing awareness of Shareholders
 Everyone Should follow business ethics.
How to avoid Corporate Scandal

34. Warning!!
“I see in the near future a crisis approaching that unnerves me
and causes me to tremble for the safety of my country. As a
result of the war, corporations have been enthroned, and an
era of corruption in high places will follow, and the money
power of the country will endeavor to prolong its reign by
working on the prejudices of the people until all wealth is
aggregated in a few hands, and the Republic is destroyed. I
feel at this moment more anxiety for the safety of my country
than ever before, even in the midst of war.”
--- Abraham Lincoln, 1864

35. Impact of CS in our economy
Public Confidence
Foreign Investors or companies

36. Conclusion
Until such time as we effectively address these
problems, our economy will continue to be
vulnerable

37. Thanks All

38. Any questions?