Waste Management – Washington---- A half-dozen former executives of Waste Management

Inc. were accused Tuesday of inflating earnings by $1.7-billion as part of an accounting fraud
scheme designed to enrich themselves and dupe shareholders. Embattled auditing firm Arthur
Andersen LLP helped perpetrate the scheme, identifying 32 "must-do" steps to cover it up, the
Securities and Exchange Commission said. Waste Management's founder and five other former
top officers were named in the lawsuit. SEC officials alleged the executives engaged in "massive
earnings management fraud" from 1992 to 1997 that ultimately cost shareholders more than $6-
billion. In Tuesday's civil complaint filed in U.S. District Court in Chicago, the SEC said Waste
Management founder Dean L. Buntrock and five other former top officers hid millions in
expenses and assigned arbitrary salvage values to assets that previously had no value. They also
did not write off the costs of unsuccessful or abandoned landfill projects, the complaint said.
According to the SEC, officials received performance-based bonuses and valuable stock options
based on inflated earnings, with several cashing in their stocks before unfavorable earnings
reports lowered share prices. In one instance, the SEC said, Buntrock even got a tax benefit by
donating inflated company stock to his college alma mater, St. Olaf College in Minnesota, to
fund a building in his name. The SEC said the scheme unraveled in late 1997, after a new CEO
ordered a review of the company's accounting practices. In 1998, Waste Management restated its
1992-1997 earnings by $1.7-billion, the largest restatement in corporate history, the SEC said.
The news sent Waste Management's stock value tumbling by more than one-third. Shareholders
lost more than $6-billion in the market value of their shares, the SEC said. Company officials
noted Tuesday that the alleged fraud took place before 1998, when Waste Management was
acquired by a Houston company. With Buntrock gone, executives at the "new" Waste
Management distanced themselves from the allegations. "We have cooperated fully with the SEC
in the investigation and do not believe that the SEC will seek any action against New Waste
Management in connection with the events detailed in the complaint," said A. Maurice Myers,
the company's chairman, president and CEO. He said Waste Management has "worked hard to
put past issues behind us, including the resolution of virtually all significant litigation relating to
the 1998 restatement." Buntrock has denied the allegations. In a lawsuit filed last month, he said
the SEC is not entitled to sue him because the allegations are based on an analysis by two former
consultants to Waste Management who are now the SEC's chief accountant and its chief
accountant in the enforcement division. "I firmly believe that, while under my watch, all of
Waste Management's financials were fairly reported and in compliance with (generally accepted
accounting principles). I was never told otherwise, either by our internal accountants or our
outside auditors," Buntrock said in a statement. The SEC has been investigating Waste
Management and Andersen for about four years. Last June, the SEC sued Andersen, alleging it
issued false and misleading audit reports that inflated Waste Management's earnings from 1993
to 1996. Andersen, which also was the auditor of collapsed Enron Corp., agreed to pay a $7-
million civil fine to settle the suit, without admitting to nor denying the allegations. The SEC
said the fine was the largest ever paid by a Big Five accounting firm in an enforcement action
brought by the market watchdog agency. Last November, Waste Management agreed to pay
$457-million to settle a class-action suit alleging its executives misled investors about its
finances two years ago to drive up the stock price. Tuesday's complaint identified Buntrock,
who was chairman and chief executive during most of the period covered, as "the driving force
behind the fraud." It also names former executives Phillip B. Rooney, James E. Koenig, Thomas
C. Hau, Herbert Getz and Bruce D. Tobecksen. All six men are contesting the allegations,
according to the SEC. The SEC has said that Andersen, which had been Waste Management's
auditor for decades, had too cozy a relationship. For decades, every chief financial officer and
chief accounting officer of Waste Management had previously worked as an Andersen auditor.
During the 1990s, 14 former Andersen employees worked for Waste Management, often in key
financial and accounting positions.