4 Business Scandals So Terrible They Deserve Their Own Award
In movies like Wall Street and The Wolf of Wall Street, we see corporate scandals unfold. The antagonist often rises and falls over the course of a two- or three-hour film, and we’re able to see what’s going on around him — his home life, upbringing, or any other factors that may contribute to his downfall.
In real life, scandals make big news. The core components of a real-life scandal — money, sex, naivety, and greed — are similar to those in a movie, but of course, in real life there’s no acting, and those involved must live with their actions, well, forever.
Over the past few decades, we’ve been witness to gross misconduct in several industry sectors, particularly the financial sector. Of course, these misdeeds reflect the actions and behaviors of only a relative few, but these scandals have left a bad taste in the mouths of many consumers. Countless corporate scandals have taken place over the past few decades – some have shocked us, some have angered us, and others have made us question what we thought we knew.
To help in the effort to eradicate scandals, why not highlight some past injustices? To give such recognition, we’re issuing scandal awards.
1. Award for Best-Known Scandal: The Charles Ponzi Scheme
Just about everyone has heard of the Ponzi scheme, which is named after Charles Ponzi, who reportedly made $250,000 per day in the late 1910s. Today, $250,000 in 1919 dollars is worth $3,442,919, just to give an idea of the kind of money Mr. Ponzi was making.
According to his biography, Ponzi had the bright idea to send money to people in other countries, who would turn around and buy IRCs, or international reply cards, and send them back to him. Ponzi would then exchange the IRCs for stamps, which were worth more than the cost of the IRCs. He would then sell the stamps for a profit.
Once he found out he could make good money with his IRC idea, he began to seek investors, and he promised them huge returns in a short period of time. He was successful in finding people to invest. However, instead of paying investors with profits, he paid them with other investors’ money. He ended up serving 14 years behind bars.
2. Award for Intolerance: The Early ’90s Denny’s Scandal
Many people may be thinking the scandal award for intolerance should go to Donald Sterling, and it was a close call. But if we think back a little further, we may remember the Denny’s scandal and the mass impact it had.
Denny’s is known for more than reasonably priced foods and its $2, $4, $6, and $8 value menu. In the early 1990s, the company settled for $54 million when it was the center of several incidences of alleged racism. A New York Times report from 1994 reads, “more than 4,300 claims were filed as part of the class-action suits asserting that the company had treated black customers worse than whites.”
Such treatment included forcing black customers to prepay for meals, or making the payment system different for black and white customers. The restaurant also allegedly made black customers wait longer to be seated, or it would not seat them at all.
“In one instance, a black Federal judge from Houston and his wife who had been traveling for 18 hours said they were forced to wait at a Denny’s in Yreka, Calif., for almost an hour as white teen-agers taunted them and referred to them as [the “n” word]” according to The New York Times. “In another case, six black Secret Service agents assigned to President Clinton’s detail were refused a table at a Denny’s in Annapolis. Md., while their white Secret Service colleagues were seated and served.”
Denny’s, of course, is still around, and the company never acknowledged the existence of any racist policies or practices on a corporate or companywide level. In a nutshell, the diner chain asserted that although it paid settlements, it believes these incidents were random events, as opposed to the results of any discriminatory policy.
3. Celebrity Scandal Award: Martha Stewart’s Insider Trading
This scandal certainly brought insider trading to the surface. Much of the nation was shocked that Martha Stewart could be involved in something like this.
Stewart own shares of ImClone Systems, a biopharmaceutical company. Martha sold her shares of ImClone on December 27, 2001, just one day before the FDA announced its denial of ImClone’s cancer drug, Erbitux. The day after the announcement, the company’s stock price dropped substantially, but because Martha had already sold her shares, she didn’t lose out like many other investors did.
Sound a bit fishy? Well, the SEC thought it did, and she was charged and convicted of “four counts of obstructing justice and lying to investigators about a well-timed stock sale,” according to CNN.
4. Award for Huge Investor and Employee Losses: Worldcom and Enron Scandals
The early 2000s was a time when corporate scandals were making headlines left and right. Worldcom’s bankruptcy resulted in huge investor losses, as did Enron’s “cooking of its books.” These scandals are widely known, even to those outside of the business and financial world.
There was a time when both Worldcom and Enron were receiving accolades for business practices. At one point, Enron’s stock traded for as much as $85 per share. After the fraud situation, prices plummeted down to around 30 cents per share. Thousands of employees lost their jobs and these cases became prime examples of how the actions of few can have a ripple effect on millions of people.