Investors have lost close to $200 billion in the past half-dozen years in earnings restatements and stock meltdowns following audit failures. And the pace seems to be accelerating. Between 1997 and 2000, the number of restatements jumped 100%, from 116 instances to 233.
BAUSCH AND LOMB, OCT. 23, 1995
A BusinessWeek investigation uncovers multiple accounting abuses by Bausch & Lomb, sparking a Securities & Exchange Commission investigation. The company later admitted that it had overstated income by $17.6 million and settled a shareholder lawsuit for $42 million.
RITE AID, NOV. 11, 1999
KPMG resigns as auditor for Rite Aid (RAD
), saying it cannot rely on the drug chain's numbers. Almost a year later, Rite Aid announced that it had overstated revenues for fiscal 1998 and 1999 by over $1 billion. In August, the company settled a suit with shareholders, but the SEC is still investigating.
CENDANT, DEC. 7, 1999
Cendant agrees to pay $2.83 billion to shareholders after internal audits revealed CUC International--which merged with HFS to form Cendant in 1997--inflated income by $500 million through fraud and accounting errors. Cendant later accepts a $335 million settlement from CUC auditor Ernst & Young.
SUNBEAM, MAY 15, 2001
The SEC files suit against Albert J. Dunlap and four other former Sunbeam (SOC
) executives, alleging accounting fraud. Earlier, auditor Arthur Andersen settled a shareholder suit for $110 million, while Dunlap settles for $15 million in January, 2002.
WASTE MANAGEMENT, JUNE 19, 2001
Arthur Andersen agrees to pay a $7 million fine after the SEC charges it with issuing false and misleading reports on behalf of Waste Management. The reports overstated income from 1992 to 1996 by more than $1 billion. Andersen also paid part of a $229 million settlement with shareholders.
ENRON, DEC. 2, 2001
Enron files the largest bankruptcy petition in U.S. history amid revelations of off-balance-sheet partnerships headed by company execs and other accounting irregularities. Six weeks earlier, Enron had restated earnings back to 1997, lopping off almost $600 million in profits.
SUPERIOR BANK, DEC. 10, 2001
The Pritzker family agrees to pay the FDIC $460 million without admitting liability after the failure of Superior Bank. The prominent Chicago family had been part-owners of Superior. Meanwhile, regulators begin investigating possible miscalculations of the bank's assets.
DOLLAR GENERAL, JAN. 15, 2002
Shares of Dollar General drop 13% after the company reduced earnings for the past three years by almost $200 million. The retailer took a fourth-quarter, 2000, charge of $162 million to settle shareholder suits over its accounting missteps.
Corrections and Clarifications
"Accounting failures aren't new--just more frequent," the timeline graphic accompanying "Accounting in crisis" (Special Report, Jan. 28), misidentified the lawsuit Ernst & Young settled for $335 million. The suit they settled was with shareholders. They are still in litigation with Cendant.
Get BusinessWeek directly on your desktop with our RSS feeds.
Add BusinessWeek news to your Web site with our headline feed.
Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.
To subscribe online to BusinessWeek magazine, please click here.
Copyright 2002 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
