Introduction

This webliography explores accounting scandals through history. This blog pertains to future accounting students, young and old, that have an interest in this profession.

 I, Andy Legan, am an accounting major at Tarleton State University. I have an interest in numbers and a desire to become a trustworthy accountant for the public. I hope this blog will educate future accountants about the value of money and how families depend on their accountants for financial stability. 

Table of Contents

Lockheed Bribery Scandal
Mini-Scribe
Phar-Mor
Informix Corporation
Syabase
Cendiant
Waste Management
Micro Strategy
Unify Corporation
Computer Association
Xerox
Enron
AOL
El Paso Corporation
Freddie Mac
Halliburton
K-Mart
Tyco
Nortel
Lehman Brothers
Bernie Madoff

Lockheed Bribery Scandal of 1976

http://en.wikipedia.org/wiki/Lockheed_bribery_scandals


Lockheed Martin is known for the production of  the Unites States military aircraft. They have produced airplanes for over 100 years. These aircrafts are highly accurate in the time of war and have technology that no ordinary American will ever see in his or her lifetime.

Before the 1970's, Lockheed Martin's production of airplanes were the talk of the century. They upgraded the planes as new ideas and technology come across their desks. Many planes like the Model 14, L-049 Constellation and the famous P-38 used for the attack on Japan after the attack on Pearl Harbor, have brought much success to Lockheed. However, the production of the L-1011 Tri-Star airliner caused the beginning of Lockheed's financial trouble. Because of commercial failure, Lockheed fell into a debt that they could not pay. This one aircraft failure almost ruined Lockheed.

But Lockheed had an answer to their financial difficulties. They would bribe other countries to buy future production of aircrafts to keep Lockheed above water. They called on Italy, West Germany, Japan, Netherlands, and Saudi Arabia. Theses bribes add up to $22 million to government officials for the upcoming F-104 Starfighter.

West Germany's Minister of Defence, Franz Josef Strauss, received at least $10 million for the purchase of 900 F-104G Starfighter's in 1961. Investigations began in 1962 concerning the bribes from the United States to West Germany, but feel short because the paperwork was destroyed.

Next, Lockheed admitted to bribing Japan's Prime Minister Kakuei Tanaka $3 million. Tanaka arrest came on July 27, 1976 and released on a $690,000 bond. Later Tanaka was sentenced to four years in prison and later died of a stroke in 1993.

Netherlands Prince Bernhard received $1.1 million from Lockheed but denied any transactions took place. At the time of his death, interviews were watch and Bernhard admitted that he accepted money from Lockheed.

And Saudi Arabia's, Adan Khashoggi, accepted $106 million in commissions between 1970 and 1975.

Daniel Haughton, Lockheed chairman of the board, and Carl Kotchian vice chairman and president resigned on February 13, 1976. In December of 1977, Jimmy Carter signed a bill stating it is illegal for American persons and entities to bribe foreign government officials.

Mini-Scribe 1989

http://articles.latimes.com/1989-09-13/business/fi-2051_1_massive-fraud

All small businesses, large businesses, and corporations fall because of hard economic times. Some, but few, rely on the economy to improve, others rely on God to see them through, and others rely on their own understanding of how to see themselves through. That is what Mini-Scribe did. Their odd ways to improve sales is amusing.

Mini-Scribe Corporation, a computer disk drive business, falsified declining fortunes with fake financial statements indicating a 66% gain in sales. The fraud involved former managers and many personnel employees to activate this massive fraud. One example of how Mini-Scribe falsified documents, involved bricks and scrap metal. Mini-Scribe manipulated distributors believing that the freight they received were new parts. In actuality, these parts were scrap metal and obsolete. In another instance, Mini-Scribe shipped bricks and recorded this so-called freight as computer component sales.    

Phar-Mor (than can handeled) 1992

http://www.businessweek.com/stories/1992-08-23/a-scandal-waiting-to-happen

Phar-Mor drug stores initiated a quick growth of stores in very little time. Michael (Mickey) Monus was the founder and president of Phar-Mor drug stores. He established this chain of stores in 1982 with the help of David Shapira, the co-founder. Business was booming, Mr. Monus' credibility increased, and store prices were lower than other grocery and drug stores. Although, with the fame that Michael Monus received, there was trouble in the books. Mr. Shapira turned in Mr. Monus and three other businessmen for a $350 million fraud. Monus left local owners with a $200,000 debt, unpaid bills, and broken promises. This is considered the largest fraud of American corporate history. 

Informix Corporation 1996

http://www.forbes.com/forbes/1999/0726/6402246@_print.html.

Robert Finocchio joined Informix in July 1997 as the CEO. After his appointed position, Informix headed down a 14 month accounting scandal. This scandal resulted in an overstatement of $280 million, $240 million in the red, and a $3 million reported loss. However, Mr. Finnochio agreed to pay $140 million to insurers and accountants to solve the problem. Mr. Finnochio resigned as CEO and demoted to chairman. Jean-Yves Dexmier, the chief financial officer(CFO) is confident that Informix will reinstate the trust and faith of the investors.

Syabase 1997

http://www.co.uk/v3-uk/news/1992960/syabase-restate-following-japanese-accounting-scandal

Another database corporation encountered the same problem of overstatement like Informix. Syabase was exposed by a year end audit by Ernst and Young. They discovered an irregular cash account at the end of the third quarter that takes the company's financial fourth quarter below $60 million to $65 million. Unlike the Informix scandal with a worldwide affect, the Syabase scandal affects only the Japan branch of the company.  Chief executive Mitchell Kertzman states," I am angry, I am so pissed off by this. Syabase has always takes a leadership position in shaping the software's industry's revenue recognition practices." Kertzman's statement shows his desire toward truth and honesty.

Cendiant 1998

http://money.cnn.com/1998/08/27/companies/cendant_folo

"Deliberately and "fictitiously" are the words that CNN News describing the marketing fraud created by former CUC International executives. CUC merged with HFS Inc. changing the name to Cendant Corporation. Cendant Corporation is a marketing and franchising company for businesses such as Ramada hotels, Century 21 real estate, and Avis rental cars.  CUC's top executives, led by former CEO and chairman Walter Forbes, encouraged inferior employees to falsify accounting books totaling $500 million of a three year time period. These orders came from the CFO of CUC, Cosmo Corigliano, and the former comptroller Anne Pember.

Waste Management 1999 (pure trash)

http://www.mindfully.org/Industry/SEC-Sues-Waste-Management26mar02.htm

The largest citing fraud was the Waste Management scandal of 1999. This lawsuit was filed by the Securities and Exchange Commission(SEC) claiming from 1992 to 1997 that six executives from Waste Management "cooked the books." Cooking the books refers to manipulating pension plans, inflating revenues, and delaying expenses. Founder and former Chief Executive Dean Buntrock, former President and Chief Operating Officer Phillip Rooney, former Chief Financial Officer James Koenig; Thomas Hau, the former controller; Herbert Getz, the former general counsel; and Bruce Tobecksen, former vice president of finance were named in this lawsuit brought by the SEC.

Waste Management paid $457 million on a shareholder class action lawsuit, consisting of 30 individual lawsuits, for securities law violations. Moreover, Waste Management received $20 million from their auditor Arthur Andersen, who is under investigation.  Furthermore the relationship between Waste Management and Arthur Andersen was severed due to Mr. Andersen fine of $7 million, the largest amount paid by a Big Five Accounting firm.

Micro Strategy (what strategy?) 2000

http://www.nytimes.com/2000/12/15/business/microstrategy-chairman-accused-of-fraud-by-sec-html

The year 2000 brought many accounting scandals to surface. This is one of many scandals.

Chairman Michael J. Saylor, Chief Operating Officer Sanjeev K. Bansal, and Mark Lynch, Chief Financial Officer were fined $350,000 each in penalties and paid a total $1.7 million to shareholders for the recording of profits when the company was losing money. Furthermore, $8.3 million was paid to shareholders to settle civil charges. Along with the payment of penalties and money to the shareholders, Microstrategy agreed to appoint an independent director who is responsible for reporting to the SEC of any violations of changes that Microstrategy is not upholding.

Pricewaterhouse Cooper's auditors have a possibility of charges brought against them because of the approval Microstrategy's false increase in profits. This approval resulted in restatement of Microstrategy's true earnings.

Unify Corporation 2000

http://www.sec.gov/litigation/litreleases/lr17522.htm

Unify corporation, located in Sacramento, California, is yet another database management software company, committed fraudulent activity by recognizing revenue in barter and contingency transactions. Former CEO Gholamreza (Reza) Mikailli, 49, of Sara toga, Calif., and former CFO Gary L. Pado, 38, of Sacramento, Calif. received a complaint from the SEC indicating from May 1999 to May 2000, the two executives recorded fradulent revenue under the GAAP(general accepted accounting principles).  This activity involved Mikalli and Pado "roundtripping", a non-agreement between Unify and their customers to repay funds they were given. In some instances, Unify provided money to customers with the expectation of investment, however the money purchased Unify products. In other instances, Unify contracted with so-called Funded Development Agreement for services. These companies provided no services and the funds were used to purchase Unify products. This fradulent activity resulted in an overstatement of amounts ranging from 61% to 150 %. In the end, Mikalli and Pado were charged with criminal securities fraud.

Xerox (copycat) 2000

http://www.wsws.org/en/articles/2002/07/xero-j01.html

Xerox, a name well known for copy machines, charged by the SEC for deceiving the public between the years of 1997 to 2000. The Securities and Exchange Commission issued a $10 million penalty and restatements from the years 1997 to 2000. During this time Xerox misled and betrayed investors by disguising the company's correct operating performance.

Xerox's manipulative schemes brought the attention and investigation of the SEC. The first method of deceit called the "cookie jar" menthod, stored revenue off of the balance sheet. When funds were short for a current period, the "cookie jar" was dipped into to accomodate the difference so investors would believe Xerox's revenues were meeting the expectations of Wall Street.

The second method, the larger of the two methods, recorded an accerelation in short-term equipmen rentals. Theses revenues were documented as long-term leases meaning the entire value can be recorded as revenue only in the first year of agreement. Short-term rental revenues are documented throughout the agreed contract and revenues expire on the expiration date.

Senior management divised the two schemes that cost Xerox $10 million in penalties. However, since the SEC investigation in 2002, stock prices fell from $60 a share in 1999, the highest the company has been at, to $7 a share.

  

Enron 2001

Video website: www.youtube.com Title: Enron Scandal (Emmy Award)

Watching this short video angers me. I know that all things on the internet are not true, but how can people differentiate what is right from wrong. After listening to the tapes, it angers me to know that people in this world are so greedy that the welfare of others does not concern them.

http://www.wisegeek.com/what-is-enron.htm

Enron's story of deception is unforgettable. Enron started in 1985 with a merger of two natural gas companies. At that time, Kenneth Lay was the Chief Executive of Enron. In the early 1990's, Enron was considered one of the most powerful and wealthiest corporations in the world. With government deregulation of power utilities, Enron was allowed huge profits during the 1990's. This opened many possibilities for Enron to expand. Soon they were involved in electric power production, paper production, oil by-products, internet, and shipping. However, behind large success is a flaw. This flaw was Jeffrey Skilling and Andrew Fastow.

Skilling and Fastow soon conjugated a plan to hide business losses from stockholders and the public. To sustain the image of increase revenues, Enron created a plan consisting of creative accounting, fraud, and control of information. The California blackout raised many questions concerning the success of Enron and how true the company's ethics were.

In 2001, the SEC began their own investigation and soon removed Skilling and Fastow from their positions. Investors and stockholders left Enron forcing the company to file bankruptcy. Kenneth Lay died in 2006 before he was sentenced, Arthur  Anderson
accounting firm shut down, and Skilling and Fastow were still in prison in 2010.

In the end, between Arthur Andersen and Enron, 90,000 employees lost their jobs due to someone else's greed. Enron employees lost $2 billion dollars while the stockholders lost another $70 million.

AOL 2002

http://www.huffingtonpost.com/2002/05/19/ex-aol-time-warner-execut_n_102548.html

AOL, a widely known name for Internet services, merged with Time Warner, the world's largest media company, in 2000 when Internet connections were at its peak. In the years 2000 to 2002 eight executives falsified advertising revenues by $1 billion. Four executives, James MacGuidwin, controller of the media company and three others, David Colburn, Eric Keller, Jay Rappaport, who were in business affairs, have agreed to pay civil charges issued by the Securities and Exchange Commission(SEC), totaling $8 million in fines and ill-gotten gains. The other four executives, John Michael Kelly, chief financial officer, Joseph Ripp, ex-chief financial officer of the AOL division, Steven Rindner, a former senior executive of business affairs unit, and Mark Wovsaniker, former head of accounting policy were waiting pending charges.

In 2004 and 2005, Time Warner paid $300 million settlement for civil fraud charges with the SEC and $210 million to the Justice Department to resolve criminal securities charges. Time Warner restated three years of financial statement and agreed for an independent examiner to look over the books.

In the end, AOL separated its advertising business, their four executives paid their fines, and two executives, James MacGuidwin and David Colburn, were barred for ten years from accepting any director or officer positions with other companies.

El Paso Corporation 2002

http://www.nytimes.com/2002/11/22/business/suit-in-texas-says-el-paso-contrived-energy-trades.html

Round-trip and wash trade are falsifying revenue through fake sales. In a legal summary, these are trades that occur when corporations create a buy and sale transaction, with the same price and terms, to increase revenue and trading volumes.

In April of 2000, El Paso Corporation, Duke Energy and Reliant Energy, with three other companies, created International Exchange to compete with Enron online in the new online trading. International Exchange primary purpose was to compete with Enron. Competition became a race for the highest revenue. Although El Paso denied any wrongdoing, Duke Energy admitted to round-trip trading but Reliant did not comment whether they committed any illegal trading. However, records show that Duke was involved in the trading with El Paso along with Reliant. These trades resulted in a $1.1 billion revenue for El Paso.

When Enron collapse, El Paso's shares dropped and the truth came out about El Paso's ignoring the accounting rules. El Paso's hope was like any other company, to increase the amount per share. Also, El Paso was accused of keeping $1.9 billion in debts that related to a partnership named Chapparel. In the end, executives said proper accounting rules were followed in the partnership and stand by the argument of El
Paso innocence in the accusation of round-trip fraud.

Freddie Mac 2002

http://www.nbcnews.com/id/21027918/ns/business-us_business/t/freddie-mac-settles-accounting-fraud-charges/


Owning homes is a great privilege for any single or married person. When Freddie Mac had to pay $50 million in civil securities fraud charges, the majority of homeowners became concerned about their loans. What is going to happen? Do we have to move? Will our interest rate and monthly payment increase? To lose a home whether it be through a foreclosure or through an accounting scandal, is a difficult time in anyone's life.

In June of 2003, Freddie Mac exposed their accounting scandal that started in 2000 through 2002. The misstated earnings totaled $5 billion which the majority of the earnings were underreported to meet the expectations of Wall Street. The executives behind this scandal were David Glenn, former president and chief operating officer, Vaughen Clark, former chief financial officer, ad two former senior vice presidents, Robert Dean and Nazir Dossani. These four executives agreed to pay $515,000 in civil fines and restitution fees of $275,548.

Halliburton 2002

www.nytimes.com/2004/08/06/business/suit-accuses-halliburton-of-fraud-in-accounting.html

Many of the blogs that are posted about accounting scandals are interesting. The amazement in CEO's, CFO's, financial controllers, etc. reporting or not reporting funds, is unnecessary. Eventually these corporate officers are arrested or fined and sometimes both.

Halliburton's fraud started in 1998 and ended in 2001. During this time Halliburton's chief executive, David J. Lesar, Douglas Foshee, former CFO, Gary Morris, retired CFO, and Robert Muchmore Jr., former controller, are the accused in this fraud. The interesting part of this fraud involves former Vice President Dick Cheney.  Mr. Cheney was the chief executive for two years at Halliburton. The S.E.C did a thorough investigation on Mr. Cheney and found nothing. They stated that Mr. Cheney's conduct was "proper in all aspects."

In order for Halliburton to achieve this fraud, a former employee stated that she was told to do "whatever it took" to meet Wall Street's financial expectation from superiors of Kellogg Brown and Root. K.B.R is an engineering and construction unit that over billed services, overstated accounts receivable, and understated accounts payable.

The lawsuit filed by the S.E.C resulted in a settlement of $7.5 million with Halliburton, and Mr. Muchmore.  Despite the proof of  many schemes committed by Halliburton, they called the lawsuit abusive and a way to smear the company's name. In addition to the charges filed by the S.E.C., the Justice Department investigated overbilling for government services in Balkans. The Justice Department and the S.E.C. are investigating a project set up by Halliburton involving Nigeria. The accusations are illegal payments under the Foreign Corrupt Practices Act. There was no further development on this investigation in August 2004.

K-Mart 2002

http://weeklymba.blogspot.com/2010/01/kmart-accounting-scandal-html

This is the blog that I have chosen for this entry.

http://www.marketwatch.com/story/sec-charges-8-in-24-million-kmart-fraud-from-2001

So far, writing about these scandals have a similar outline of companies fined  large amounts of money. They normally involve CFO's, CEO's, financial controllers and other executives. The K-Mart scandal involved eight vendors charged with bloating profits in the 2001 fiscal year.

K-Mart reported increase in the profit margins by reducing the cost of goods for five vendors. The vendors were Pepsi Cola Pepsi Cola division, Eastman Kodak, Coca-Cola, and Pepsi Cola Frito Lay division. Major retail companies contract out space for big name vendors. For example, Coca-Cola's investors, presidents, and top executive present a contract to the retail company such as Wal-Mart for an allotted shelf space to sell the their product. Wal-Mart's top executives review the cost and either agree on the proposed amount of or negotiate on settle on a different price. This price allows vendors to keep the shelves full for the customer and if the contract is broken, then removal of the product comes from the retail company until a new contract is agreed.

In 2001, K-Mart  reported they made $219 million which breaks down to 48 cents a share This made them look good even if it was one penny ahead of Wall Street's expectation. However, K-Mart became dependent on the vendor allowances to carry the company from one fiscal year to another. Eventually, there scheme caught up with them and K-Mart filed bankruptcy on January 22, 2002. At that time, this was known as the largest retail bankruptcy ever recorded.


K-Mart's executives, John P. Orr, terminated in February 2001, and Michael K. Frank, terminated in May 2002, did not have to pay fines prior to there terminations. Abbood, on the other hand, left voluntarily and paid $50,000 in civil fines.

Former vice president and general manager of Eastman Kodak, Darrell Edquist, paid a $55,000 civil fine but SEC did not report any fines from Edquist. Former National sales director, David C. Kirkpatrick, of Coca-Cola paid no fines either through civil or to the SEC. Neither did David N. Bixler, a former national sales director of PepsiCo's Pepsi-Cola division did not pay fines civilly or to the SEC. Randall M. Stone, a former national account manager for PepsiCo's Frito-Lay division did pay $30,000 in civil fines Thomas L. Taylor, a former director of sales for PepsiCo's Frito-Lay division paid 25,000 civil fine.

Eastman Kodak, Pepsi Cola and Coca Cola did cooperate through the investigation even though Kirkpatrick was fired.

Accounting is a trust profession. People put his or her trust in an accountant to ensure that the money invested will grow a profit for a company or for them. What is discouraging about crooked accountants, seems to fall on all accountants everywhere. Trustworthy accountants, in the public mind, are hard to find.

Tyco 2002

http://money.cnn.com/2005/06/17/news/newsmakers/tyco_trialoutcome/

Aside from other accounting scandals that have dealt with falsifying books, increasing revenues without the funds, purposely reporting false allowances for vendors, etc. This scandal involves stealing money from the Tyco corporation. In other words, this case involves the need for greed.

Tyco's former CEO Dennis Kozlowski and ex-CFO Mark Swartz were found guilty  of stealing hundreds of millions of dollars from the company. Kozlowski and Swartz were sentenced to 15 to 30 years in prison. This verdict came as a shock to the family and the defendants but not to Tyco employees. Kozlowski and Swartz maintain that they committed no crime.

 The jury evenly divided, six men and six women, took 11 days for the final verdict. They gave the guilty verdict for Kozlowski and Swartz on 22 of 23 counts of grand larceny and conspiracy, falsifying records and violating business law. Kozlowski and Swartz maintain that the directors and auditors of Tyco knew of the bonus transactions occurring and approved them. Five former Tyco directors were called in to testify. Each one of them said they knew nothing of the transaction's. This either indicates that the former directors were lying or they really did not know what was going on. However, the defense attorney had a difficult time convincing the jurors that Kozlowski and Swartz were innocent because there was no paper trail left behind for the defense attorney prove their innocence.

Kozlowski and Schwartz ran the company from the 1990's through 2002. During this time, they were accused of taking $120 million of company bonuses, taking advantage of the employee loan program, and misrepresenting the financial condition to the investors. Kozlowski threw a $2 million party for his wife and  purchased a $6,000 shower curtain with company funds. What kind of shower curtain costs that amount of money?

The verdict devastated Kozlowski's wife and daughter. While Kozlowski maintains his innocence, his wife was in shock and crying. His daughter buried her face in shame and disappointment. This is a hard blow to take, however, consequences are tough to accept.

I am going to speak honestly on this accounting scandal. I have bitter sweet emotions about this case. I am glad that the conspirators in this scandal were prosecuted and sent to prison. However, I feel for the families that have to endure this shocking out outcome of this case. These men were a husband and father. What were these men thinking? These cases need to be wise indications of stupidity. If something is done in the dark, it will eventually come to light.

Nortel Networks Corporation (Nortel) 2003

http://en.wikipedia.org/wiki/Nortel

http://www.theregister.co.uk/2007/03/12/sec_charges_nortel_four_with_accounting_fraud/


The fraud started in 2000 when Mary Anne Pahapill, ex-assistant controller and Douglass Beatty, ex-controller, deceived cash reserves, claim an increase in revenue to satisfy Wall Street and "fattened" their pocket books. But that was not enough for Pahapill and Beatty. They brought in Frank Dunn, ex-CFO and CEO at the Canadian telecoms equipment maker, to their scheme. In order for Nortel to meet the companies requirements, Dunn, Beatty and Pahapill reversed some revenue entries but fell short of Wall Street expectations at the end of 2000. In summary of the year 2000, Pahapill stole the money but at the end of 2000,they realized that Nortel's books were short so they had to decided to fix the problem by reversing revenue recordings. But wait, it gets better.

In 2002 and early 2003, all the executives set aside a total of $451 million in two accounts for safe keeping. However, these funds were used to cover the gap between the company's performance and Wall Street's expectation.  As if that was not enough for the executives to commit fraud. This time they brought in Michael Gollogy, ex-controller, to the scheme of things but left Pahapill. I guess she had enough. The trio men decided to dip onto secret funds, again for their benefit of looking smart. They released $490 million to boost earnings, fake profits and pay senior managers their bonuses.

Through all of the reinstating of accounting statements, Dunn and Beatty blame internal controls to save themselves. However, the SEC knows that reinstating accounting statements for many years prior to 2003, was not a fluke. This intentional act of fraud cost the four executives their jobs. All four executives charged with violating and/or aiding and abetting violations of the antifraud, reporting, books and records, internal controls and lying to auditors provisions of the federal securities laws(The Register, 12, March, 2007). Dunn, Beatty, and Gollogy, were fired in 2004. Pahapill left in 2005.

 

Lehman Brothers ("Repo 105") 2008

http://www.wealthdaily.com/articles/lehman-brothers-enron-accounting-gimmicks/2375

When Enron caused stockholder's to lose $70 million, Enron employees lost $2 billion, and 90,000 employees lost their jobs because of Arthur Anderson and his deceptive ways, that should be an indication to other accounting firms to learn from falsifying losses and revenues. However, Lehman Brothers thought that they could fool the system again with the intention of filing for the largest bankruptcy in U.S. history. Now is this negligence or fraud? Here are the facts.

Negligence is defined as not paying attention or a lack of concern for another person or situation. Fraud, on the other hand, is an intentional act caused by an individual willfully to commit a crime.  Did the Lehman Brothers commit fraud or negligence? This is one question that has been ask. In other words, no one wants to claim facts as they really are.

For 18 months, the examiner of the Lehman Brother's case, looked through 10 million e-mails, 20 million documents, and typed a report of 2,200 pages. This scheme is named "Repo 105"  and this is how it works. Lehman would contact banks in the Cayman Islands and agree on terms for a repurchase agreement. In the meantime, Lehman would "sell" toxic assets to another bank claiming to buy the assets back. Instead they kept the money and recorded the money as a sale instead of a loan. This helped their asset figures and cancel out their debt figures. Eventually, their scheme caught up with them and the "books" or balance sheet recorded $50 billion more than actual cash on hand. They had nothing.

With this blog is a video on the webpage.

Bernie Madoff 2008 (Ponzi Scheme)

http://en.wikipedia.org/wiki/Madoff_investment_scandal


This scandal does not compare to the others that are listed in this blog. When Bernie Madoff admitted that his firm had been operating a Ponzi scheme for years, millions of people were stunned. This includes his wife, Ruth, and his two sons, Mark and Andy. His own brother, Peter, denies knowing anything about the secretive scheme that Bernie thought up. Bernie Madoff's Ponzi scheme affected 4,800 investors and $65 billion lost that belong to multiple charities, banks, middle class hard working people, and celebrities. Such celebrities were Kevin Bacon and wife Kyra Sedgewick, Zsa Zsa Gabor, John Malkovich, and Steven Spielberg.

Bernie Madoff , a former NASDAQ chairman and founder of the Bernard L. Madoff Investment Securities LLC, admitted to the largest accounting scandal in history. On December 11, 2008, Mr. Madoff sons alerted authorities of their father's Ponzi scheme that estimated to $65 billion in fraud money. Madoff was arrested and sentenced to 150 years in prison with $170 billion in restitution.

In court, Madoff confessed that he started his scheme in the early 1990's. As the economic recession hit, Madoff wanted to satisfy his clients by reporting to his investors that their money was profiting. However, Madoff took his clients money, put it into his own account at Chase Manhattan Bank, provided a withdrawal statement to his clients, upon request, and convinced them that they were profiting from their investment. The client's money, of course, collected no interest.

Madoff was born in Queens, New York and known to many as a quiet, nice, sweet man who could do no wrong. However, Bernie as up to his neck in debt and numerous fraudulent activity. Bernie stole from employment benefit plan, committed securities, wire, mail, and investment advisor fraud and other illegal "so-called" investments.

Bernie's scams affected more than his clients loss or money but affected their lives. Many clients lost all of their life savings, retirement, and material items such as homes and automobiles. But the greatest lost of all is life, Three of Bernie's clients committed suicide because of the tremendous financial strain that they suffered.  Rene'-Thierry Magon de la Villehucht, of New York City and founder of Access International Advisers LLC, slit his wrist because he felt responsible for the decision of investing with Bernie Madoff after being warned of Bernie's suspicious money transactions. William Foxton, a British soldier, shot himself in a park in Southampton England. He lost his entire family's savings. But the hardest suicide to accept was that of Mark Madoff, Bernie's oldest son. Mark ousted his father, along with Andy his younger brother, to authorities concerning Bernie's scam. Mark could not handle what his father had done to Mark, his family and thousands of other across the globe. Mark consumed himself with the media and finally hung himself.