Welcome to our Presentation

Department of Accounting & Information Systems (2 nd Batch)

University of Barisal
A presentation on Corporate scandal

By group no: 05
Group members

ID Number1 Name

13 AIS 002 Sarmin Akter Mitu

13 AIS 018 Shariful Islam
13 AIS 029 Sabina Akter

13 AIS 038 Ranu Mondal

13 AIS 040 Shuvankar Halder

13 AIS 046 Md. Zebon hossain
13 AIS 081
Rafiq-Al-Azad
What is Scandal?

An incident or event that disgraces or

damages the reputation of the persons
or organization involved.
Corporate Scandal
Corporate Scandal?

Set of questionable, unethical, and/or

illegal actions that a person or persons
within a corporation engage in.
History of Corporate Scandal

 Early 1900’s: Charles Ponzi

Ivar Krueger
 1920’s: Samuel Insull
 1940’s: Richard Whitney
 1960’s: GE, Westinghouse
 1970’s: Investors Overseas Services

Robert Vesco
History of Corporate Scandal

1980’s
Ivan Boesky Insider Trading
$100 million – 3 years
Michael Milken Securities Fraud
10 years
Charles Keating Savings & Loans
Investors lost $200 million
Is there any relationship between
Corporate Scandal and Audit?
Causes of Corporate Scandal
Auditor’s Fraud
Agency Problem
Inefficient management
Tendency to gain Speculative profit
Lack of government regulations

Auditor
Impact of Corporate Scandal
or who are the sufferer

Mainly the stakeholder including

General Employees
Customers

Third Parties
Government
The world’s biggest
Corporate Scandal
Enron Scandal
 Key Players

 CEO: Jeffrey Skilling

 Chairman of the Board: Ken Lay
 Enron

 February 2000
Fortune magazine chooses Enron
as it’s “Best Managed and
Most Innovative company”
 Enron

 August 2000: Stock at $73 billion

 March 2001: FY2000 revenues at
$100 billion
 Sep 16, 2001: “Buy more shares”
 October 2001: Enron pays its
regular dividend
 Enron

 October 16, 2001

$618 million 3rd Qtr Loss
$1.2 billion reduction in
shareholder equity
 October 31, 2001
SEC upgrades inquiry into a
formal investigation
 Enron

 December 2, 2001
Enron files for bankruptcy
4,000 employees fired
 20,000 workers lose their jobs
 $73 billion in stock value - gone
 Enron – What Happened?

“Enron apparently, with the approval or advice

of its accountants, auditors and lawyers,
used thousands of off-the-book entities to
overstate corporate profits, understate
corporate debts, and inflate Enron’s stock
price.”
Who was affected?
 Some Enron shareholders lost their life savings.
 Enron left behind 31 billion dollars worth of debt.
 Around 21,000 people lost their jobs.
 Most lost their pension plans.
 Others such as Clifford Baxter, former Vice
Chairman of Enron, committed suicide.
 Investors were crushed as shown in the chart.
 The entire nation was affected because this scandal
opened the door to new tough laws.
Corporate Scandal and Bangladesh
 Hallmark-Sonali Bank Loan Scam

Was a scam perpetrated by the largest state owned

Commercial Bank(SOCB) of Bangladesh , Sonali Bank
by giving a loan of BDT 3400(almost USD 454
million) using scam documents between 2010 and
2012.
 How this Scam occurred?

The loan scam occurred when one branch of

Sonali Bank illegally gave out $344 million in
loans, including nearly $344 million to Hall
mark group, a textile business.
Tanvir Mahmud, Hallmark’s MD, connived with
a branch manager to issue fraudulent letters
of credit to fictitious companies.
 Destiny 2000 Ltd.

Key members:

Chairman:
Lt General (retd) M Harun-Ar-Rashid

Managing Director:
Rafiqul Amin  

Started Business at December,2000. as a

Multilevel marketing company.
 commenced its journey with only 12 members
in 2000 ended up comprising 39 business
concerns in 2012.
 Of them, 26 had their activities,
 and the remaining 13 were just recorded in
official documents.
 Destiny Scandal
 It laundered totally about Tk. 5114 crore.
 Of which it’s top officials laundered
Tk.3,285.26 crore.
How Destiny 2000 Ltd. Cheated

o Money Laundering and illegal banking.

o Fake tree plantation project.
o Illegal insurance company.
o Fake Airplane Company.
o Many fake enterprises of Destiny
Tactics of Destiny

 Assurance of large amount of profit & additional

commission.
 Gaining the credibility of the clients
 Large amount of advertisement.
Profit Strategy of Destiny
 Causes of Destiny Scandal
 Without government Monitoring.
 Bangladesh Bank
 Ministry of Finance

 Not being proper implementation of audit.

 Inadequate understanding of the investors’
 Corruption
 A weak regulatory framework.
 A weak regulatory Implementation.
 Political Consequence
Impact of Destiny Scandal

 4.8 million Clients.

 3.5 million agents.
 And the overall economy of Bangladesh.
How to avoid Corporate Scandal

 Strict Laws
 Government regulations
 Proper Monitoring by
 BB
 Ministry of Finance
 BSEC
 Other government authorities
How to avoid Corporate Scandal

 Increasing internal audit

 Reducing Agency Problem
 Increasing awareness of Shareholders
 Everyone Should follow business ethics.
 Warning!!
“I see in the near future a crisis approaching that unnerves me
and causes me to tremble for the safety of my country. As a
result of the war, corporations have been enthroned, and an
era of corruption in high places will follow, and the money
power of the country will endeavor to prolong its reign by
working on the prejudices of the people until all wealth is
aggregated in a few hands, and the Republic is destroyed. I
feel at this moment more anxiety for the safety of my country
than ever before, even in the midst of war.”
--- Abraham Lincoln, 1864
Impact of CS in our economy

Public Confidence
Foreign Investors or companies
Conclusion

Until such time as we effectively address these

problems, our economy will continue to be
vulnerable
Thanks All
Any questions?