Tyrone Abrahams
Dr. Rossing
ACC 202
10/13/18
Waste Management’s $1.7 Billion Scheme
Waste Management was founded by Larry Beck in 1894. Waste Management is an
environmental company that provides the best disposal and recycling solutions in America. In
1992, Dean Buntrock, acting CEO of Waste Management, created an earnings target for his
company to meet. As time passed, Buntrock realized that Waste Management’s revenue was not
growing fast enough to meet his set earnings targets, so he and quite a few employees committed
multiple fraudulent crimes within the company’s books over the span of the next five years.
The first of these crimes was inflating the value of the company’s garbage trucks in order
to avoid the year-end depreciation expenses. The next crime was company personnel refrained
from recording the necessary expenses that would show the devalue in the company’s landfill,
which would lead to less total expenses to be paid out. The third crime was the increase in
company environmental reserves in order to avoid operating expenses, which deleted about $490
million in operating expenses. The fourth crime was the creation of salvage values to asset
accounts that didn’t even exist in the first place, doing so would increase the residual value of an
asset. The final crime was the company used geography entries in order to move millions of
dollars between the assorted line items on the company’s income statement; the false profits
were moved into their retained earnings, and there was no liability increase on the financial
statement.
This case involved several accomplices in order to pull off the scheme. The leader was
Dean Buntrock. He was the one who devised the plan in the first place. Buntrock fathered the
fraudulent accounting culture in his company and personally directed some of the accounting
changes in order to meet the set earnings target. James Koenig, Waste Management’s CFO, acted
as Buntrock’s right-hand man. Koenig was responsible for the eradication of all evidence and
was able to mislead the company’s audit committee and internal accountants. The third
accomplice was Phillip Rooney, Waste Management’s former president. Rooney assured that the
necessary write-offs were not recorded in the books and would even overrule any accounting
decision that would lead to a negative impact on the company’s operations. Thomas Hau, Waste
Management’s CAO, was the technician for the fraudulent accounting. Hau formulated many
different accounting manipulations in order to showcase the expected target earnings. Herbert
Getz, Waste Management’s General Counsel, over saw that operation and was paid $450,000 for
his cooperation. Lastly, Arthur Andersen was Waste Management’s longtime auditor. The
relationship between he and Buntrock seen as very lax. Andersen would repeatedly issue
unqualified audit reports on Waste Management’s false and very misleading financial statements.
Buntrock was able to keep the scheme under wraps, until a new CEO was appointed to
his company. Upon his induction, the new CEO wanted a report of the company’s accounting
practices. The report he received showed the restatement of the company’s financial statement’s
ranging from 1992 to present 1997. In February of 1998, Waste Management filed its restated
the financial statements acknowledging that it had misstated its pre-tax earnings by about $1.7
billion, the largest amount in corporate history. When the news of the fraud became public,
Waste Management’s shareholders lost $6 billion in market value of their investments. The
company’s stock fell 33% after the fraud became public. The Court mandated that four of the
men: Dean Buntrock, Philip Rooney, Thomas Hau, and Herbert Getz were barred from having an
officer or director role in a public company and had to pay a combined $30 million in fines.
Individually, Buntrock had to pay $19,447,670, Rooney had to pay $8,692,738, Hau had to pay
$1,578,890, Getz had to pay $1,149,756, and Andersen had to pay $7 million.
Works Cited
1) Eichenwald, Kurt. “Waste Management Executives Are Named in S.E.C. Accusation.”
The New York Times, The New York Times, 27 Mar. 2002,
www.nytimes.com/2002/03/27/business/waste-management-executives-are-named-in-
sec-accusation.html.
2) Ellrich, David, et al. “The Waste Management, Inc. 1998 Fraud Scandal.” Ellrich, Neal,
Smith & Stohlman, P.A., 20 Sept. 2017, ensscpa.com/waste-management-inc-1998-fraud-
scandal/
3) RI, Sara. “Waste Management Inc. Scandal.” Prezi.com, Prezi, 21 Dec. 2015,
prezi.com/bp9udnnr2ogf/waste-management-inc-scandal/.
4) SEC, The. “Waste Management Founder, Five Other Former Top Officers Sued for
Massive Fraud.” Waste Management Founder, Five Others Sued for Massive Fraud, 26
Mar. 2002, www.sec.gov/news/headlines/wastemgmt6.htm.
5) Spiceland, J. David, et al. Financial Accounting. McGraw-Hill Education, 2018. Pages
334-336
