Know the numbers that drive your business

Sure, we all know of Enron and Satyam – millions of dollars’ worth of debt and losses guised as profits and revenue with the help of “creative accounting” tactics. We also know that the end victim for almost every corporate finance scandal since the last century has been the stakeholders involved – the employees who couldn’t figure out what was going on and the shareholders/investors who lost their earning and savings forever. As sad as it may sound, these scandals have repeatedly acted as a somber reminder that the knowledge of finance and money, at least at the very basic level, is an absolute necessity for every professional and investor. Here’s a look at interesting accounting scandals across the world that have largely escaped the popular eye.



CRB Capital Markets, India –  One of the largest financial scandals in the country by sheer scale and scope, CRB Capital Markets, set up by C.R. Bhansali, had a staggering 133 subsidiaries for the siphoning of funds from thousands of investors. Clever and creative accounting methods were then employed to create falsified records of transactions that enabled the companies to transfer a total of approximately 600 crores (remember that this was the 1990s) while hiding it from the investors and employees. The founder was also awarded a Ph.D and published a book about “Making The Difference” At the end of it, CR Bhansali was arrested by the CBI from Hong Kong and sent to prison.


Adelphia – Adelphia Communications Corporation, the sixth largest cable service provider in the USA, was an industry behemoth and widely revered until it’s infamous accounting scandal came to the fore in 2002. The Rigas family had falsified transactions and created dummy corporations to hide the massive debts that the they had taken in the name of Adelphia communications for their own luxurious lifestyles that included, among other things, a world class 18-hole private golf course, several private jets and a majority shareholding in the NHL team Buffalo Sabres. At the end of it, stakeholders were given the shock treatmet with the revelation of previously hidden 2.3 billion dollars in debt, loaned to the Rigas family and guaranteed by Adelphia. John Rigas, the founder was sentenced to 15 years in prison and his son, Tim Rigas, to 20 years. The company filed for bankruptcy in 2002.


Gazprom, Russia – One of the rare state run enterprises to make it to this list, Gazprom is the world’s largest natural gas producer. Founded in 1989 with the Soviet Ministry of Gas Industry into a corporation, Gazprom has faced several accusations of asset stripping- the act of taking control of a company and then selling off it’s assets for personal gain. Over the past decade, Gazprom has faced several lawsuits over bribery and corruption as well. In 2011, it showed investments of 40 billion dollars with almost zero production increase since then. Several private capital funds have sued the company for misappropriation of funds. However, being a government subsidiary, it is still active in operations.


Toshiba, UK – You name it, they make it. Toshiba is a Japanese business group that makes everything from nuclear reactors, microchips, laptops to home appliances. April 2015 saw the unearthing of the massive accounting fraud to state false earnings that had been made over a period of six years on the insistence of Toshiba’s senior management. At the end of it, more than 10, 000 personnel are expected to lose their jobs or be forced into voluntary retirement. This $1.3 bn accounting scandal sent shockwaves among the Japanese business and investor community, resulting in a projected   operating loss of $ 4.5 billion and forcing CEO Hisao Tanaka to resign in disgrace.


BCCI, Pakistan – The Bank of Credit and Commerce International, a bank set up in Pakistan in the 1970s was one of the most infamous banking institutions in history. Through the 1970s and 1980s, it was the banker to dictators, drug lords and shady arms dealers. In fact, such was the widespread money laundering carried out by this ‘financial institution’ that it took investigations and legal suits across seven countries to force it to shut shop. The BCCI had, within a decade, become the world’s seventh largest private bank within a decade of commencing its operations. Among the many charges brought about against the bank were fraudulent loans, lending it’s shareholders money to buy its own shares to artificially raise the stock prices, illegally acquiring the First American Bank, the list goes on and on. Charges are still being brought against the bank in the present day, more than 20 years after the bank closed down.


Computer Associates, USA – A classic example of top management work culture causing the rest of the organization to fall from grace, the $3.3 bn fraud at Computer Associates led to a payout of $ 225 mn to shareholders as restitution, forced the resignation and consequent imprisonment of then-CEO Sanjay Kumar for 12 years, and such vagaries in earning reporting as “the 35 day month”, “the three-day window” and “the flash period”. The mechanism for the fraud was fairly simple- Keep the books open even after the end of the quarter and book the subsequent contracts revenues to the current quarter. At the end of it, of course, were more than a thousand laid off employees who had no clue what had hit them.


Talentedge, India’s Leading Online Education Technology platform, in collaboration with KPMG, the ‘Big Four’ global audit corporation, is proud to announce the launch of it’s Finance for Non Finance Professionals program. This short and intensive program aims to provide all the necessary training to learners to help them understand and decipher financial statements and processes of any business entity.

Source Credits: – Websites of: The Wall Street Journal, The Economist, ICMR, The New York Times, Wikipedia, Securities and Exchange Commission, CNBC, The Guardian-UK, Wharton School of Business, Forensic Global