India's biggest scams

The Satyam Computer Services fraud is neither the first nor will it be the last corporate scam to have hit India, so investors must be on guard and ask for more information before making any investment decision, says former Sebi chairman M Damodaran. Sound advice. But with corporates, brokers, banks, politicians, regulators colluding at times, many a multi-crore scam has hit India. And the saga is likely to go on. India has seen some of the most high-profile scandals where investors have lost billions of rupees just because a few people in high places could not control their greed.The Satyam Computer Services fraud is neither the first nor will it be the last corporate scam to have hit India, so investors must be on guard and ask for more information before making any investment decision, says former Sebi chairman M Damodaran. Sound advice. But with corporates, brokers, banks, politicians, regulators colluding at times, many a multi-crore scam has hit India. And the saga is likely to go on. India has seen some of the most high-profile scandals where investors have lost billions of rupees just because a few people in high places could not control their greed. Here's more about India's biggest scams... 1. Ramalinga Raju The biggest corporate scam in India has come from one of the most respected businessmen. Satyam founder Byrraju Ramalinga Raju resigned as its chairman after admitting to cooking up the account books. His efforts to fill the "fictitious assets with real ones" through Maytas acquisition failed, after which he decided to confess the crime. With a fraud involving about Rs 8,000 crore (Rs 80 billion), Satyam is heading for more trouble in the days ahead. On Wednesday, India's fourth largest IT company lost a staggering Rs 10,000 crore (Rs 100 billion) in market capitalisation as investors reacted sharply and dumped shares, pushing down the scrip by 78 per cent to Rs 39.95 on the Bombay Stock Exchange. The NYSE-listed firm could also face regulator action in the US.

61 billion) reflected in the books. He targetted smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange. and six others."I am now prepared to subject myself to the laws of the land and face consequences thereof.Ketan however had bigger plans in mind. . 3. A Special Court also sentenced Sudhir Mehta. his bull run did not last too long. His scam was exposed." Raju said in a letter to SEBI and the Board of Directors. A chartered accountant he used to run a family business. and bought shares in fictitious names. Harshad and his associates triggered a securities scam diverting funds to the tune of Rs 4000 crore (Rs 40 billion) from the banks to stockbrokers between April 1991 to May 1992. while giving details of how the profits were inflated over the years and his failed attempts to "fill the fictitious assets with real ones.40 billion) as against Rs 5. including four bank officials. Mehta has siphoned off huge sums of money from several banks and millions of investors were conned in the process.361 crore (Rs 53. Harshad Mehta's brother." Raju said the company's balance sheet as of September 30 carries "inflated (non-existent) cash and bank balances of Rs 5. He died in 2002 with many litigations still pending against him. He was later charged with 72 criminal offences. He triggered a rise in the Bombay Stock Exchange in the year 1992 by trading in shares at a premium across many segments. Harshad Mehta worked with the New India Assurance Company before he moved ahead to try his luck in the stock markets.040 crore (Rs 50." 2. However. Taking advantages of the loopholes in the banking system. Ketan Parekh Ketan Parekh followed Harshad Mehta's footsteps to swindle crores of rupees from banks. Harshad Mehta He was known as the 'Big Bull'. NH Securities. to rigorous imprisonment (RI) ranging from 1 year to 10 years on the charge of duping State Bank of India to the tune of Rs 600 crore (Rs 6 billion) in connection with the securities scam that rocked the financial markets in 1992. the markets crashed and he was arrested and banned for life from trading in the stock markets. Mehta soon mastered the tricks of the trade and set out on dangerous game plan.

The accused created a fictitious cooperative society of cobblers to take advantage of government loans through various schemes. The Reserve Bank of India (RBI) refused banking status to CRB and he was in the dock. and Kishore Signapurkar of Milano Shoes were arrested for creating several leather co-operative societies which did not exist.His dealings revolved around shares of ten companies like Himachal Futuristic. Daya of Dawood Shoes. a broker is allowed a loan of only Rs 15 crore (Rs 150 million). Silverline. Aftek Infosys and Padmini Polymer. son of a former Sheriff of Mumbai. Ketan alongwith his associates also managed to get Rs 1. DSQ Software. his good days did not last long. after 1995 he received several jolts. He first launched the finance company CRB Capital Markets. bonds and debentures. SBI was one of the banks to be hit by his huge defaults 5. The money was transferred to companies that never existed. They availed loans of crores of rupees on behalf of these fictitious societies. HFCL. Lupin Laboratories. In 1994 CRB Mutual Funds raised Rs 230 crore and Rs 180 crore came via fixed deposits. Pentamedia Graphics and Satyam Computer (K-10 scrips).200 crore (Rs 12 billion). Bhansali also succeeded to to raise about Rs 900 crore from the markets. . C R Bhansali The Bhansali scam resulted in a loss of over Rs 1. The scam was exposed in 1995.000 crore from the Madhavpura Mercantile Co-operative Bank. Cobbler scam Sohin Daya. was the main accused in the multi-crore shoes scam. It became difficult for Bhansali to sustain himself. CRB Capital Markets raised a whopping Rs 176 crore in three years. Rafique Tejani of Metro Shoes. However. Global TeleSystems. Zee Telefilms. There was evidence of price rigging in the scrips of Global Trust Bank. Bhansali tried borrowing more money from the market. Zee Telefilms. followed by CRB Mutual Fund and CRB Share Custodial Services. 4. This led to a financial crisis. SSI Ltd. According to RBI regulations. He ruled like a financial wizard 1992 to 1996 collecting money from the public through fixed deposits. Ketan borrowed Rs 250 crore from Global Trust Bank to fuel his ambitions.

2005).93 times.899.368.99 times and the non-institutional portion by 12.04 times and the non-institutional portion was oversubscribed 40.853 afferent accounts for cornering 2. . The retail portion was oversubscribed 2.86 times and the non-institutional portion by 19.134 billion) public offer (Aug 19-23.713.34 crore (Rs 14.294 shares representing 2.681 billion) IPO (Oct 7-14. The retail portion was oversubscribed 3. Dinesh Dalmia Dinesh Dalmia was the managing director of DSQ Software Limited when the Central Bureau of Investigation arrested him for his involvement in a stocks scam of Rs 595 crore (Rs 5.IPO Scam The Securities and Exchange Board of India barred 24 key operators. and Bank of Bahrain and Kuwait were also charge sheeted. Key operators used a total of 12. The retail portion was oversubscribed 6. Suzlon Energy Ltd's Rs 1. from operating in the stock market and banned 12 depository participants from opening fresh accounts for their involvement in the Initial Public Offer scam. Jet Airways's Rs 1.3 crore (Rs 18. Dena Bank.65 crore (Rs 4. including Indiabulls and Karvy Stock Broking.27 times.52 per cent of the total number of shares allotted to retail investors.050 shares representing 2. Saraswat Co-operative Bank. Bank of Oman. It also banned 85 financiers from capital market activities. Key operators used 1186 fake accounts for cornering 20.963 billion) public issue (September 23-29. The retail portion was subscribed 2. 2004).36 times and the non-institutional portion by 39.Officials of the Maharashtra State Finance Corporation.306 billion) public issue (Jan 27-Feb 5 2004).09 per cent of the total shares allotted to retail individual investors.71 per cent of the total number of shares allotted to retail investors.14 crore (Rs 53. Development Credit Bank. National Thermal Power Corporation Ltd's Rs 5.15 times.73 times and the non-institutional portion by 11. 6.692 fictitious accounts to corner 323.496. Tata Consultancy Services's Rs 4.5 times. A lone key operator used 2541 afferent account for cornering 127.95 billion).47 crore (Rs 47. Key operators used 14. Citibank. 2004). 7.22 times.619 'benami' accounts to corner 261.3 per cent of the total number of shares allotted to retail investors.993 billion) public offer (Feb 18-24.750.74 per cent of the total number of shares allotted to retail individual investors. Key operators used 21. 2005).023 shares representing 3. Patni Computer System Ltd's Rs 430.730 shares representing 1.901 shares repersenting 0. The retail portion was oversubscribed 9.

Virender. Hulda Properties and Trades Ltd. 8. and Powerflow Holding and Trading Pvt Ltd. in the name of New Vision Investment Ltd. He is today famous (or infamous) for being he man behind one of India's biggest scams. He was also involved in the duty-drawback scam to the tune of Rs 43 crore (Rs 430 milion) in India.exported bicycle parts during 1995-96 to Russia and Hong Kong by heavily over invoicing the value of goods for claiming excess duty draw back from customs. Abdul Karim Telgi acquired a stamp paper license from the Indian government and began printing fake stamp papers. Telgi bribed to get into the government security press in Nashik and bought special machines to print fake stamp papers. which was later clarified by the CBI as an exaggerated figure. it was initially pegged to be Rs 30.Dalmia's group included DSQ Holdings Ltd. The CBI said that five companies. Ravinde and Narinder -. whose directors were the four Rastogi brothers -.Subash. . The fake stamp racket involving Abdul Karim Telgi was exposed in 2000. UK.000 employees and 123 bank accounts in 18 cities. Dalmia resorted to illegal ways to make money through the partly paid shares of DSQ Software Ltd. 1.71 billion). Abdul Karim Telgi He paid for his own education at Sarvodaya Vidyalaya by selling fruits and vegetables on trains. 9. and unallotted shares in the name of Dinesh Dalmia Technology Trust.Virendra Rastogi Virendra Rastogi chief executive of RBG Resources was charged with for deceiving banks worldwide of an estimated $1 billion. The loss is estimated to be Rs 171.30 crore (13 million) shares of DSQ Software Ltd had not been listed on any stock exchange.000 crore (Rs 300 bilion).33 crore (Rs 1. Telgi's networked spread across 13 states involving 176 offices. Investigation showed that 1. The Telgi case is another big scam that rocked India. In 1994.

000 shares of Cyberspace between September 25.8 million) from the company through a circuitous route for possible rigging the Cyberspace counter. The High Court asked the company to sell its properties and repay its investors. 2000. and September 25. UTI had purchased 40.and a stockbroker Rakesh G Mehta. Sanjay Agarwal Home Trade had created waves with celebrity endorsements. Arvind Johari was arrested in connection with the case. Subramanyam. He was finally arrested. The company's directors and their relatives had misused the investors' money to buy properties.10. were arrested in connection with the 'UTI scam'. Kapur and Basu had changed their stance on an investment advice of the equities research cell of UTI.3 million) from Rakesh Mehta when there were no buyers for the scrip.300 persons had fallen into Goyal's trap.10 billion). The officals were paid Rs 50 lakh (Rs 5 million) by Cyberspace to promote its shares. The promoter of Cyberspace Infosys. 2000 for about Rs 3.M M Kapur and S K Basu -. Uday Goyal Uday Goyal. Several criminal complaints were filed with the Economic Offences Wing. He also received Rs 1. He swindled a whopping Rs 600 crore (Rs 6 billion) from more than 25 cooperative banks. . 11. But Sanjay Agarwal's finance portal was just a veil to cover up his shady deals. The UTI Scam Former UTI chairman P S Subramanyam and two executive directors -. The plantation scam was exposed when two investors filed a complaint when they failed to get the promised returns. Goyal conned investors to the tune of over Rs 210 crore (Rs 2. was yet another fraudster who cheated investors promising high returns through plantations. 12.33 crore (Rs 33. managing director of Arrow Global Agrotech Ltd.18 crore (Rs 11. The CBI said it was the conspiracy of these four people which resulted in the loss of Rs 32 crore (Rs 320 million). The market price was around Rs 830. Over 43.

Emanuel Pinez. Barry Minkow was only a teenager at the time! He was sentenced to 25 years in prison. The Biggest Stock Scams Of All Time by Investopedia Staff Editors' Note: The information included here is accurate as of September. ZZZZ Best went public in December of 1986. we put faith in the investing world. Minkow appeared to be building a multi-million dollar corporation. In this case. but he did so through forgery and theft. these shareholders had no way of knowing what was really happening as they were being tricked into investing. Understanding how disasters happened in the past can help investors avoid them in the future. • ZZZZ Best Inc. 1986 . With that in mind.000 phony documents and sales receipts without anybody suspecting anything. try to look at them from a shareholder's standpoint. but words often associated with money and fortune are "cheat. Investing in a stock takes a lot of research." "steal. Co-operative banks and brokers acted in collusion in abid to make easy money at the cost of the hard earned savings of millions of Indians." Who among us hasn't "accidentally" taken two $500 bills from the Monopoly bank. even the Public Provident Fund (PPF) was affected. Sanjay Agarwal. Some of these cases are truly amazing." and "lie.the company was really shipping fruit • . eventually reaching a market capitalization of more than $200 million. Amazingly. Just as we trust our friends. But these assumptions can be disastrous..In December 1996. 1996 .Barry Minkow. Unfortunately. Minkow shelled out more than $4 million to lease and renovate an office building in San Diego. 2007.The government securities (gilt) scam of 2001 was exposed when the Reserve Bank of India checked the acounts of some cooperative banks following unusual activities in the gilt market. A sum of about Rs 92 crore (Rs 920 million) was missing from the Seamen's Provident Fund. but it also requires us to make a lot of assumptions. and that management is competent and honest. posited that this carpet cleaning company of the 1980s would become the "General Motors of carpet cleaning". He created more than 10. we'll look at some of the all-time greatest cases of companies betraying their investors. For example. Nandkishore Trivedi and Baluchan Rai (a Hong Kongbased Non-Resident Indian) were behind the Home Trade scam. the CEO of Centennial Technologies. we assume reported earnings and revenue figures are correct. Ketan Sheth (a broker). Centennial Technologies Inc. It is unfortunate. Although his business was a complete fraud designed to deceive auditors and investors.. and his management recorded that the company made $2 million in revenue from PC memory cards . or forgotten at least once to pay $5 back to a friend? Chances are you were never called on it because your friends trusted you. the owner of this business.

1997. WorldCom.70.Not long after the collapse of Enron.which should all be recorded as expenses for the fiscal year in which they were incurred . Eventually. The stock price for Bre-X skyrocketed to a high of $280 (split adjusted). in 2001. Enron. In fact. WorldCom recorded operating expenses as investments. was said to be the richest gold mine ever. Over 20. As Enron fell. • Bre-X Minerals. The major losers were the Quebec public sector pension fund. basically imploded after David Duncan. with a 'b') worth of normal operating expenses . essentially recording one dollar of revenue multiple times. Through some fairly complicated accounting practices that involved the use of shell companies. the equities market was rocked by another billion-dollar accounting scandal. 2001 – Prior to this debacle. it took down with it Arthur Andersen. the shell companies.8 billion (yes. the company reported profits of $12 million when it really lost about $28 million! The stock plunged to less than $3. and the share price dove from over $90 to less than $0. based on revenue. But the employees then created fake documents to appear as though they were recording sales.tens of thousands of them lost their jobs. The fiasco at Enron made the phrase "cook the books" a household term once again. Apparently. which lost $45 million. In total $3. Enron.were treated as investments and were recorded over a number of years. run by Enron executives. According to the Securities and Exchange Commission (SEC). Centennial overstated its earnings by about $40 million. its business was becoming increasingly unprofitable. which was reported to contain more than 200 million ounces. Additionally. The next ones to feel the betrayal were the investors who had to • • . thus creating the appearance of incredible earnings figures.S. Enron was able to keep hundreds of millions worth of debt off its books. making millionaires out of ordinary people overnight. At its peak. WorldCom reported profits of around $1. Telecommunications giant WorldCom came under intense scrutiny after yet another instance of some serious "book cooking". Doing so fooled investors and analysts into thinking this company was more fundamentally stable than it actually was. Centennial's stock rose 451% to $55. Andersen.This Canadian company was involved in one of the largest stock swindles in history. and the stock tumbled to pennies shortly after. between April 1994 and December 1996. Its Indonesian gold property.baskets to customers. Amazingly. Who suffered the most in this deal? The employees .3 billion. the company felt that office pens. the complex web of deceit unraveled. Bre-X had a market capitalization of US$4. the seventh largest company in the U. the fifth leading accounting firm in the world at the time.000 investors lost almost all of their investment in a company that was once considered a Wall Street darling. Enron's chief auditor.4 billion. pencils and paper were an investment in the future of the company and therefore expensed (or capitalized) the cost of these items over a number of years. 2002 . when the gold mine proved to be fraudulent. which lost $100 million and the Ontario Municipal Employees' Retirement Board. Enron's auditor. 1997 .50 per share on the New York Stock Exchange (NYSE). the Ontario Teachers' Pension Plan. ordered the shredding of thousands of documents. which lost $70 million. But the party ended on March 19. a Houston-based energy trading company was. This little accounting trick grossly exaggerated profits for the year the expenses were incurred. recorded fictitious revenues.

In early 2002. 2002 . During his reign as CEO. These funds were smuggled out of the company. The information came to light when CFO William Owens. without shareholder approval. working with the FBI. when Scrushy reportedly sold HealthSouth shares worth $75 million. Is there a moral to this story? Sure. an infamous $6. 2003. . CEO and founder Richard Scrushy began instructing employees to inflate revenues and overstate HealthSouth's net income.5 million shares of unauthorized Tyco stock for a reported $450 million. diversify. • Tyco International (NYSE: TYC). The repercussions were swift. who was reported as one of the top 25 corporate managers by BusinessWeek. At the time. An independent law firm concluded the sale was not directly related to the loss. but was later convicted on charges of bribery. the CEO was acquitted of 36 counts of fraud. manufacturing electronic components.20.4 billion. allowing him to ensure a seat on the hospital regulatory board. Dennis Kozlowski. experiencing rapid growth and acquiring a number of other healthcare related firms. which in turn costs investors/taxpayers even more money. Kozlowski received $170 million in low-to-no interest loans. siphoned hordes of money from Tyco in the form of unapproved loans and fraudulent stock sales. but were eventually convicted and sentenced to 25 years in jail. Apparently. HealthSouth (NYSE: HLS).000 shower curtain and a $2 million birthday party for his wife. but with thousands of public companies in North America. Kozlowski used the funds to further his lavish lifestyle. diversify. These scammers can pick a lifetime's worth of garbage and not even come close to repaying those who lost their fortunes. Before the scandal.Accounting for large corporations can be a difficult task especially when your boss instructs you to falsify earnings reports. Amazingly. the scandal slowly began to unravel and Tyco's share price plummeted nearly 80% in a sixweek period. The executives escaped their first hearing due to a mistrial.45 in a single day. but investors should have taken the warning.With WorldCom having already shaken investor confidence. as it plummeted from more than $60 to less than $0. Kozlowski and Belnick arranged to sell 7. Those convicted of fraud might serve several years in prison. the company was one of America's largest healthcare service providers. which included handfuls of houses. usually disguised as executive bonuses or benefits. In the late 1990s. The SEC works hard to prevent such scams from happening. it is nearly impossible to ensure that disaster never strikes again.000. Tyco was considered a safe blue chip investment. prior to releasing an earnings loss. • Conclusion The worst thing about these scams is that you never know until it's too late. The first sign of trouble surfaced in late 2002. 2003 . the executives at Tyco ensured that 2002 would be an unforgettable year for stocks. healthcare and safety equipment. Along with CFO Mark Swartz and CLO Mark Belnick. Always invest with care and diversify.watch the gut-wrenching downfall of WorldCom's stock price. The scandal unfolded in March. as the stock fell from a high of $20 to a close of $0. taped caught Scrushy talking about the fraud. Scrushy arranged political contributions of $500. when the SEC announced that HealthSouth exaggerated revenues by $1.

Stock market scandals are woven into the fabric of our culture. but instead remain mere speed bumps on your path to financial independence The Top Ten Most Outrageous Stock Market Scams of all Time • Scams occur in the stock market every day. Jeffrey Royer. 9. Stock Exchange Hoax of 1814. The true culprit was never found. and then try to extort funds from them in exchange for not releasing the info. Word spread quickly and people celebrated by driving up the price of stocks on the London Stock Exchange. Anthony Elgindy and the corrupt FBI agent. . and it was also revealed that someone had engaged in a plot to profit from this erroneous news. The only problem was that the news was soon discovered to be a hoax. Elgindy would also inform the companies that he possessed this information. Lord Thomas Cochrane was eventually fingered as the culprit. where he still is today. On February 21. However. Eventually the FBI caught on to their scheme and Elgindy ended up receiving 11 years in jail. Here is a guy who built up a large following in the late 90's by exposing overvalued stocks and then subsequently short-selling them for profit. a man in a British military uniform showed up in an inn on the coast of the English channel and pronounced that Napoleon had been killed and the Napoleonic Wars were now over. He had a corrupt FBI agent on his payroll. they would short the stock (bet that it would fall) and then disseminate the confidential information in order to create weakness in the stock. these are the TRULY outrageous stock market scams. who would log into government databases using his credentials and try to dig up confidential information that they could use to manipulate the stock market. The scams that when you hear about them.Maintaining a well-diversified portfolio will ensure that occurrences like these don't run you off the road. One of the first instances of stock market manipulation. starting from the least outrageous (but still outrageous) 10. but he was later pardoned by the King after it was determined that he was not involved. you say to yourself "How did they ever think that they would get away with this?" Here is my top ten list. 1814. if the CEO of a company had a criminal investigation against him ongoing. For instance.

The end came when an earthquake in Japan sent the value of one of Leeson's positions tumbling. He has now turned to God and is deeply religious. The company's lack of rules and regulations when it came to their star trader eventually led to their downfall. estimated that there were 70 million ounces of gold in the Busang deposit. Bre-X had "salted" the samples by placing shavings from gold jewelry in with the core samples to maintain the allusion of a massive gold deposit. The chairman of Recruit. Bre-X's independent consulting company. Bre-X. Company officers were embezzling funds. The company borrowed fake offices to maintain their image. dead geologists who might not really be dead. The Bre-X story resembles a Hollywood movie. A massive scandal in Japan. 6. ordinary 16 year old but he's not. if the trade went poorly. Used an "error account" to hide his trading losses. sparking many lawsuits and books written about the topic. Bought the Busang plot of land in 1993. valuing Minkow personally at over $100 million dollars. Was. The stock collapsed and went into bankruptcy. he would hide it in this "error account" that was marked "88888. including all of Leeson's previous losses. This "company" grew to a company with over 1400 employees who specialized in insurance restoration cleaning. The man who single-handedly brought down Barings Bank. and Leeson engaged in increasingly speculative trades to try and gain the money back. He actually runs a carpet cleaning company called "ZZZZ Best Inc. The company was winning "big" contracts (from Mob families) and Barry was driving a Ferrari and living in a mansion. the company went public and temporarily had a market value of over $200 million. 5. Nick Leeson. Hiromasa Ezoe. the UK's oldest investment bank (at the time). The company was simply a massive Ponzi scheme." out of his garage. As you may guess. Meet Barry Minkow. Minkow was sentenced to 25 years in prison. and the company was declared insolvent. resulting in a total loss for Barings of over 800 million pounds. but served 7 1/2. You may think that he's just a normal. Others speculated that it might be as much as 200 million ounces. at one time. Life was good. Recruit Scandal. Was apparently sitting on the largest gold deposit in the world at their Busang site in Indonesia. he made sure that everyone knew about it. Thousands upon thousands of documents were forged to maintain the appearance of a thriving business. Leeson fled and was eventually captured. offered shares in a Recruit subsidiary named Recruit Cosmos to many different . corrupt governments and disgraced company officials in exile. raising money from new investors to pay off old ones. and Minkow and eleven others were indicted on 54 different counts of fraud. and in 1995 announced that they had discovered significant amounts of gold. In 1986. If a trade went well. a company with a total capitalization of over $6 billion dollars.8." The error accounts losses reached 200 million pounds. ZZZZ Best Inc. The company tried issuing fake press releases to stave off worried investors. the company was nothing more than a huge hoax. The company quickly collapsed. 7. Not bad for a teenager! However. Kilborn Engineering. the entire thing turned out to be a massive fraud.

One of the biggest companies in China was taken down. Tang raised over 45 billion yuan over a 4 year period without regulatory approval. The grand-daddy of all scams. A company with incredible political connections. Basically. with many of these politicans stepping down after being disgraced. through the purchase of warrants in companies that were about to be taken over and other beneficial self-dealings that would enrich him. he paid dearly for his involvement in this scandal. 3. You have all of the elements. Ezoe offered unlisted shares of Recruit Cosmos at bargain basement prices to politicians. Enron. Milken pioneered the use of high-yield debt (or junk bonds) to help finance corporate takeovers and corporate raids. who would buy shares in the company and then receive a kickback for doing so. Speaking of Boesky. The fallout was swift. and the dominoes began to fall. Gerald Ronson. which would allow them to take over Distillers. Basically the scheme was this: inflate the price of Guinness shares by buying as many Guinness shares of they possibly could. The chairman of NTT was also involved. Guinness fronted money to various "investors". Michael Milken. use the shares as collateral for loans and send more money into his company's. 4. Tang Wanxin. and billions upon billions of dollars were involved. Not only that.prominent politicians including the Prime Minister. Known as the "Junk Bond King". including Ivan Boesky. Formally one of the richest men in China. maintain the price and then use the inflated market cap to take over Distillers. Many company executives were in on this scam to defraud the Chinese public. The "Guinness Four". The seventh-largest company in the United States at the time. Thousands of employees with their life savings tied up on the stock. He was more fond of enriching himself though. The scandal rattled Japan and helped lead to a major slowdown of the country's economy. business leaders and journalists in an attempt to curry favor. The shares eventually went public and sky-rocketed in value. Word of these "deals" between Ezoe and the others soon leaked out. and many more thousands with exposure to the . A darling of the stock market. a much larger company. Jack Lyons and Anthony Parnes were charged with using company money to try and artificially inflate the stock price of the company. Guinness Fraud. 1. former Prime Minister and Chief Cabinet Secretary. This scandal roiled global financial markets that were already shaky at the time. he played a major role in China's largest ever stock scandal. Milken was another in our list who abused his privileges and power. Milken built up a net worth of over a billion dollars. The merger was eventually completed. but Tang also rigged the prices of three listed companies that his company owned so that he could inflate the share prices. as he used his knowledge of forth-coming acquisitions to enrich himself and his cronies. one of the richest men in China fell from grace. It is said that the movie "Wall Street" is largely based upon Boesky and Milken. although the fallout was great once this insider scheme was uncovered. Certainly worthy of a number two spot on this list. Ernest Saunders. When Ivan Boesky was taken down. 2. he ratted out Milken and the entire house of cards came toppling down.

This one had it all. Company officials were using shell companies to hide hundreds of millions of dollars in debt. a former employee of Internet Wire. None of these names sound too significant until you see the names of the companies that own them: FleetBoston. In the summer of 2000. The Top Twelve Stock Market Scams of the Last Twelve Years • The title is self-explanatory. Whistle-blowers. and to inflate profits.06 before quickly recovering. Top market makers agree with regulators to pay a $240 million dollar penalty for trading abuses. Goldmans Sachs and Bear Stearns. The Emulex Press Release Hoax. including trading ahead of customers and other violations including "interpositioning. Billions upon billions were lost. Mark Jakob. CEO Compensation . Books. now a student at El Camino Community College. He was quickly caught. 10. 2004. Here are the top 12 scams since 1995: 12." Market makers involved in this settlement included LaBranche & Company. Fired company officials with only six months of service at a company walking away with millions of dollars in . Congressional hearings. shredded company documents and was eventually taken down. These market makers took advantage of the antiquated system of trading on the NYSE and exploited their customers for their own benefit. Enron truly signalled the end of the "boom era" in the United States stock market. Company officials were creating shell companies in order to enrich themselves as well through lucrative side deals. and was certainly the most outrageous stock market scam of all when you consider all of the elements involved. Fleet Specialist and Leeds & Kellogg. Arthur Andersen. sentenced to 44 months in jail and had to forfeit his gains. February.stock either directly or indirectly. used his connections and knowledge of Internet Wire to fudge the press release through the standard screening procedures. Market Maker Gouging. The stock tumbled as low as $43 from the previous day's close of $113. The multi-billion dollar company was mostly smoke and mirrors. one of the largest accounting firms in the US. 11. that its CEO was resigning and that it was restating its previous quarter earnings to a loss. Movies. Mark Jakob. sent out a fake press release stating that Emulex was under investigation by the SEC. Jakob ended up profiting almost $250k from the scam.CEO's of publicly traded companies making tens of millions of dollars per year in compensation. plus pay an extra $103k in fines.

I mean. Buy a high-flying Internet stock in the morning. These three were addicted to their extravagant lifestyle. Along with CFO Mark Swartz and CLO Mark Belnick. The stock. 8. Because of mutual fund and index fund exposure. containing over 200 million ounces of gold in Indonesia. that saw their shares plunge over 80% in just a few short weeks. 5. Tyco was a darling of Wall Street. 6.00 on the New York Stock Exchange. At its peak. these daytrading chat rooms quickly lost their appeal. which made the "book-cooking" seem even more unbelievable. Eventually they were caught and convicted to 25 years in jail. which was completely bogus.compensation. For a time. and they charged an arm and a leg for their day-trading recommendations. which grossly exaggerated total profits. Daytrading was a huge business. and thousands lost their investments in the company. Can you see the pattern here? The entire gold mine story was bogus. the three pilfered hundreds of millions of dollars from the company and its shareholders by issuing themselves unauthorized loans and unauthorized stock sales. Was a giant company. Was purported to own the richest gold mine ever. and the stock price evaporated overnight. As shareholders in these companies. and in some cases. Most people followed the stock market religiously. Most people. Core samples were falsified. 9. as was company officer Dennis Kozlowski. this is OUR money that they are pilfering. sell it in the evening for a quick five digit gain. which was an 800 pound gorilla at one time and a seemingly bulletproof investment. plus tens of thousands of . when in fact they were shipping fruit baskets to their customers and falsifying sales invoices. Eventually the SEC caught up with them and found that the company had overstated earnings by $40 million dollars. the stock completely collapsed. intoxicated by the allure of easy money trading high-flying Internet stocks. Worldcom. In the late '90s. and used these ill-gotten funds to fuel their lifestyles. The company reported millions of dollars in sales of PC memory cards. their operators were either fined and sanctioned by the SEC or sent to jail for trading infractions. Supposed profits turned into losses and the company went up in smoke. tumbled from $60 to pennies per share. In 1997. Tyco. In 2001. When the dot-com bubble popped.3 billion dollars. Centennial Technologies. how could such a massive company make such stupid mistakes? The company recorded operating expenses as investments in the company. and quite a few people decided to dip their toes into the water and try trading on their own. Traded as high as $55. Bre-X had a capitalization of over $4 billion dollars. tens of thousands of people lost money due to the Worldcom hoax. and the Busang site in Indonesia turned out to be worthless. CEO compensation will become a big issue. started to day-trade. The main victims in all of this were the shareholders. Day-Trading Chat Rooms. 7. Bre-X. Eventually. Chat rooms such as Tokyo Joe and Anthony Elgindy's room quickly became very popular. the company reported a profit of $1. but the entire company was built on smoke and mirrors in the form of forged company documents.

Everyone had their hands dirty. Another case of a company engaging in deception to make their earnings reports seem much better than they actually were. recorded Scrushy talking about the deception on tape.000 in your account. and they slid this rule in when no one was paying any attention. Forget the fact that it's your money. now working with the FBI. Through the elaborate usage of shell companies and offshore companies." BS. Healthsouth. you are not allowed to daytrade more than 3 times in 5 days if you have less than $25. Enron cooked its books to hide debt and multiply their earnings. but certain company officials also enriched themselves personally. and many people lost their retirement savings. .people lost their jobs. 4. The stock was crushed when the allegations came to light." The PDT is meant to neuter small-time daytraders and make it very difficult for them to trade their own money how they see fit. The Pattern Daytrader Rule. 3. television stations such as CNBC for breathlessly hyping Internet stocks. big brokerages upgrading and pushing dot com stocks on their customers while privately calling the companies worthless in internal memos. 1. Dot Com Boom 1. big brokerages again for underwriting companies that they knew had no chance of ever making money just so they could bank their huge underwriting fees. Scrushy also sold shares of the company just before a major loss was announced. 2. Forget the fact that you could be profitable on every trade. The scandal eventually came to light when CFO William Owens. Enron.A massive fraud that was perpetrated on the public. and many thousands lost their life savings. big brokerages once again for allowing their analysts to issue outlandish price targets with no real justification. Enron was a huge mess. The stock price fell from $90 down to pennies a share. The extent of the fraud was far-reaching and millions lost money. and since these big brokers sit on the boards of the NYSE and NASDAQ. and the media in general for not having the intestinal fortitude to critically analyze the dot com bubble for fear of alienating their readers. Was once one of the top 10 biggest companies in the United States. A ridiculously stupid rule instituted by the SEC once the Internet bubble had popped. Big brokers were getting their heads handed to them by companies such as E-Trade and Ameritrade. CEO Richard Scrushy instructed employees to inflate revenues and overstate income. the government for not giving the SEC the proper resources to investigate all of the shenanigans that were taking place at the time.0 . taking down accounting firms and sending multiple people to jail in the process. The big brokers implemented this rule to protect their retail trading business. they proposed the "Pattern Daytrader Rule. The SEC instituted this rule to "protect people from themselves. Basically. Not only they do this to make their earnings reports look better. big brokerages again for upgrading these POS stocks so that they could earn more fees underwriting the worthless companies' secondary offerings. trading from $20 down to pennies in just one trading session.