Chad Ducharme
Macroeconomics

What do Enron, Tyco, and World-com have in common
Intro
The purpose of this work is to show you what happens when you try to cheat the system. the reason the government does audits and checks for so many frauds is because people nowadays will do whatever it takes to make a little extra money. What these companies did not only hurt themselves in the long run but hurt the millions of workers and families that were connected with them.
The Companies Enron was formed in 1985 by two gas companies, Houston Natural Gas and Nebraska InterNorth.Enron incurred massive debt and, as the result of deregulation, no longer had exclusive rights to its pipelines. In order to survive, the company had to come up with a new and innovative business strategy to generate profits and cash flow. To try to fix this Enron came up with the idea of becoming a “gas bank” to try to fix its problems. They would buy gas from a network of suppliers and sell it to a network of consumers, contractually guaranteeing both the supply and the price, charging fees for the transactions and assuming the associated risks. This became so successful that they decided to apply this to other things instead of just gas like, coal, paper, steel, water and even weather. In 2001 CEO Kenneth Lay retired and named Jeffrey Skilling president and CEO of Enron. On October 16th 2001 They reported their first quarterly loss in over four years and went downhill until the company filed for bankruptcy on December 2 2001.

Tyco labs originally started in the 19060’s working for the government. then in 1964 it went public and had three main branches; Fire protection, Electronics, and Packaging. After going public the companies focus became mostly on profits. In 1993 they branched into the Healthcare industry and eventually were the second largest producer of medical devices in the United States. One of the first red flags popped up in January, 2002. Tyco had forgiven a $19 million, no-interest loan to Kozlowski(CEO) in 1998 and had paid his income taxes on the loan. He was living the High live spending share holder money and finally resigned on June 2 2002.Kozlowski’s successor at Tyco replaced 220 of the firm’s 250 top managers and all board members who had served under Kozlowski had resigned by 2003. WorldCom Came to be in 1995 after being originally known as Long distance discount company. It became a well known company after the merger of them and MCI Communications in 1998. At this point they became the second largest communications company in the United States. In 1999 they almost made a deal with Sprint to merge which would make them the largest company, but it was pressured by the US Department of Justice not to go through in fear of creating a monopoly. This caused a major decline of WorldCom stock. CEO Bernard Ebbers persuaded the board of directors to give him loans and guarantees of over $400 million, hoping that he would cover his margin calls. Instead he used it to finance his other businesses and hobbies, and was finally fired as CEO in April 2002. By July 2002 they had filed for bankruptcy and it was estimated that the company inflated their assets by about $11 billion.

The costs The fraud that These major companies committed is just ridiculous. They would lie about not only the costs they had but would also overstate the amount of profit that they were receiving. “Kozlowski and Swartz both resigned in the summer of 2002. On June 17, 2005, a Manhattan jury found both men guilty of stealing more than $150 million from Tyco.” (Kenny 1) During 2001, CEO of WorldCom Bernard Ebbers, persuaded WorldCom's board of directors to provide him corporate loans and guarantees totaling more than $400 million. (Business and Finance 1) Now in Enron’s case they were cooking their books big time. They would show earnings that were unreal in order to get more people to invest in them. These companies were doing whatever it took to get themselves money but it ended up coming back to bite them in the future wen they were found out.

The Outcome Each company had there share of people that were involved but most of the people got what they deserved.Even though Jeffrey Skilling claimed to know nothing of Enron’s scandals he was still found guilty and is currently serving out a twenty-four year sentence. “Ex-Tyco CEO Dennis Kozlowski received 8-1/3 to 25 years in prison Monday for his part in stealing hundreds of millions of dollars from the manufacturing conglomerate. Judge Obus also ordered Kozlowski and Swartz to pay $134 million back to Tyco, and Kozlowski was fined $70 million and Swartz $35 million bringing total fines and restitution to $239 million.(Wong 1) David Myers also received up to one year and a day in prison but the reason his sentence was way shorter than any of the other people from the other major scandals was that he owned up to his mistakes early and was very cooperative with the government.
Conclusion
It greatly disgusts me what these major CEO’s did and this scandal is something that will haunt them for the rest of their lives. In my opinion all of the people involved with these occurrences are people that should not be in the business world. The only guy I still have any respect for is former World-com controller because he took responsibility right away for his actions. It really liked what he told the judge, he said, “As I teach my children what is right and what is wrong, I've got to acknowledge that I did something that was not just wrong, but horribly wrong,”(Cosgrove-Mather 1) This all goes to show that you can only cheat the system for so long before it comes back to bite you.

Bibliography
Cosgrove-Mather, Bootie. "Former WorldCom Exec Gets Prison." CBSNEWS. CBS, 10 Aug. 2005. Web. 1 Dec 2011. .

Kenny, Jack. "NHBR: 30 years and counting: Tyco scandal and its aftermath ." All Business. New Hampshire Business Review, 28 0ct 2008. Web. 1 Dec 2011. .

Wong, Grace. "Kozlowski gets up to 25 years ." CNNMoney.com. CNNMoney, 19 Sept. 2005. Web. 1 Dec 2011. .

"WorldCom Scandal: A Look Back at One of the Biggest Corporate Scandals in U.S. History." Business and Finance. yahoo, 8 Mar. 2007. Web. 1 Dec 2011.