Uncovering fraud: famous Forensic Accounting cases that rocked the world

This rise in demand is the reason that more and more experienced Forensic Accountants and Auditors as well as graduates are looking to transition into this exciting field. If you can combine traditional (forensic) accountancy skills, with auditing and investigative skills, plus in-depth knowledge of the law, read on to learn more about the kind of cases you may be involved in.

Here, we dive into some of the most famous (or infamous) fraud cases from around the world:

(1) The Enron Scandal

You’ve likely heard of Enron because it’s famous for one of the biggest corporate frauds in history. As the seventh-largest energy/utilities company in the USA, it’s no wonder that the Houston-based organisation’s fraudulent activity is so well-known. Despite achieving financial success throughout the 1990s, the company filed for bankruptcy in December 2011, shortly after instances of fraud came to light.

The Enron scandal involved a complex web of accounting tricks and off-the-books partnerships that allowed the organisation to hide billions of dollars in debt from investors and regulators. Several top executives, including former CEO Jeffrey Skilling and CFO Andrew Fastow, faced criminal charges for hiding trading losses and fabricating financial records which falsified the business’ success.

Skilling was sentenced to 24 years imprisonment and Fastow was ordered to pay $23.8m given a 10-year sentence in exchange for testifying against other Enron execs.

(2) The Tesco Accounting Scandal

It may be surprising to hear that even a retail giant like UK supermarket Tesco doesn’t have a fraud-free history. In 2014, forensic accountants uncovered evidence that proved Tesco executives were inflating profits by overstating income and understating costs. The inaccurate financial reporting was found to have been happening over a number of years in order to boost share prices and executive bonuses. The result was huge fines from UK regulators, as well as criminal charges for several senior executives linked with the scandal. Plus, a massive £2billion was wiped off Tesco’s share price in a day.

(3) Bernie Madoff’s Ponzi Scheme

As Bernard Lawrence "Bernie" Madoff demonstrated, you don’t have to be part of a large corporate to commit large-scale financial crime. Bernie Madoff is notorious for his Ponzi scheme which has been coined one of the largest financial frauds ever committed by an individual. Madoff was an American financier who used his investment firm to defraud thousands of investors out of billions of dollars over the course of decades. Charged for money laundering, securities fraud and several other felonies, Madoff was eventually sentenced to 150 years in prison for his crimes. He died in prison aged 82 in 2021.

(4) The Tyco International Scandal

Tyco International was another large-scale corporate fraud case involving improper accounting practices that allowed top executives to pocket millions in bonuses without properly disclosing them to shareholders or regulators. At its peak in the early 2000s, Tyco was a $40 billion revenue business. It started out in the premier security solutions market and following its success diversified into other sectors.

Former CEO Dennis Kozlowski and CFO Mark Swartz took advantage of the company’s success. They offered a number of employee low or no interest loan schemes but used the proceeds to fund their own lavish lifestyles. They concealed the inappropriate spending of hundreds of millions as they enjoyed yachts, fine arts, jewellery, luxury homes and personal investments.

Kozlowski and Swartz were both convicted on multiple counts of grand larceny, securities fraud, and other charges related to their roles in the scandal.

(5) Royal Bank of Scotland Mis-selling

In 2008, the Royal Bank of Scotland was found to have deliberately mis-sold complex financial products to customers. This led to a massive scandal that cost the bank billions of pounds and caused them to seek a bailout from the British government.

The mis-selling was uncovered by forensic accountants who attributed the crime to negligent or unethical behaviour by RBS employees. Several were subsequently fired, with many executives facing criminal prosecution as well.

(6) The Barclays Bank Fraud Case

RBS isn’t the only UK bank that’s made headlines for fraudulent activity. The Barclays Bank fraud case involved a group of bankers at the organisation who were accused of manipulating LIBOR (The London Inter-Bank Offered Rate) rates in order to increase their profits from trading activities.

A team of forensic accountants were able to uncover evidence that showed how these bankers had been engaging in fraudulent activities for years, resulting in billions of dollars in losses for customers and shareholders alike.

(7) WorldCom Securities Fraud

WorldCom was another enormous corporate fraud discovered in 2002. It was revealed that the company had been hiding billions in expenses from investors and regulators by improperly classifying them as capital expenditures instead of operating costs. Several top executives were charged with securities fraud as a result.

Former CEO Bernard Ebbers received a 25-year prison sentence for his role in the scandal. He died in 2020, just one month after his early release.

(8) HealthSouth Corporation

HealthSouth Corporation, which changed its name to Cision in 2018, was a healthcare services provider whose former CEO Richard Scrushy was accused of inflating earnings by $2 billion. It was revealed that the swindle took place between 1996 and 2002 through fraudulent accounting practices such as recording fictitious sales transactions and misstating assets on its balance sheet.

Scrushy was eventually acquitted, but five other executives pleaded guilty or were convicted on various charges related to their involvement in the sham.

(9) New York Pharmacy Owners’ Covid-19 Money Laundering

The COVID-19 pandemic is a very recent event that led to a spike in fraudulent activity. In both the US and UK, an uplift in fraudulent domestic and corporate insurance claims was noted. 

One such case that made headlines was that of New York pharmacy owners, Arkadiy Khaimov and Peter Khaim who were found guilty of conspiracy to commit money laundering. It was revealed that Khaimov and Khaim created a complex plan to submit millions of dollars-worth of false claims to Medicare before laundering the proceeds.

The two men are expected to be sentenced mid 2023 and could face up to 20 years imprisonment.

These are just some examples of corporate fraud, but there are many more out there waiting to be uncovered! 

Ready to find your next Forensic Accounting role? Apollo Solutions is placing first-class forensic talent cross-sector, including Management Consultancies, Accountancy Firms, Private Equity, Banks, Insurance and In-house. Get in touch to talk about how we could help you.