Cooking the Books Quiz | Corporations

Quiz Answer Key and Fun Facts

1. In 2001, this Houston-based energy corporation filed the largest bankruptcy reorganization in U.S. history at the time. Executives Kenneth Lay and Jeffrey Skilling, among others, utilized complex financial transactions to misrepresent earnings and hide massive debt. Name this company.

Answer: Enron Corporation

Enron shareholders lost over $70 billion dollars as the company's stock share price dropped from $90 to mere pennies from the beginning of the exposed scandal to the eventual and inevitable bankruptcy filing. Thousands of employees lost jobs and many lost their entire retirement savings.

Kenneth Lay was convicted of numerous charges related to securities fraud, but died of a heart attack before he was sentenced. Jeffrey Skilling was also convicted and was sentenced to 24 years, 4 months.

2. This corporation was one of the largest cable television companies in the U.S. before its bankruptcy filing in 2002. Founded by John Rigas and headquartered in Pennsylvania, the company's bankruptcy was the result of internal corruption and fraud, including over $2 billion of debt that was hidden off the balance sheet. Name this company.

Answer: Adelphia Communications Corporation

Adelphia Communications, a publicly traded company, had over 15,000 employees and 5 million customers prior to filing for bankruptcy. John Rigas was the majority owner of the NHL's Buffalo Sabres and the NFL's Tennessee Titans stadium was named Adelphia Coliseum.

Federal prosecutors proved that John Rigas employed fraudulent accounting methods to steal $100 million of corporate money for his own personal use. He was convicted of multiple counts of fraud and sentenced to 15 years in prison. John's son, Timothy, was also complicit in the plot and received 20 years.

3. In 2014, this financial corporation agreed to a $16 billion settlement with the U.S. government which at the time was the largest settlement between the U.S. government and a private corporation in history. It was pursuant to the corporation misrepresenting the quality of mortgage loans that were sold to investors. Name this company.

Answer: Bank of America Corporation

Bank of America acknowledged to the U.S. Department of Justice that it knowingly sold billions of dollars of residential mortgage-backed securities with key facts of loan quality withheld from investors. These illicit business practices occurred in the years leading up to the 2008 financial crisis, considered the worst financial crisis since the Great Depression.

Bank of America has paid a total of over $90 billion dollars in legal fines and settlements related to the 2008 financial crisis.

4. In 2000, this New York City-based software corporation received a class-action lawsuit from shareholders, accusing the company of misstating more than $500 million in revenue over a three-year period. The Securities and Exchange Commission concurred with the shareholders, resulting in a huge fine for the corporation and lengthy jail time for the CEO. Name this company.

Answer: Computer Associates International, Inc.

Computer Associates International, Inc., now known as CA Technologies, fraudulently recorded fictitious and premature revenue in order to artificially inflate its stock price. The scandal resulted in $225 million restitution paid to shareholders as well as numerous executives convicted of fraud charges.

Former CEO and Chairman, Sanjay Kumar, received a 12-year prison sentence.

5. Founded in 1984, this Alabama-based corporation was one of the largest healthcare services companies in the U.S. In 2003, the corporation's founder and CEO, Richard Scrushy, was charged with accounting-related fraud by the Securities and Exchange Commission. Name this company.

Answer: HealthSouth Corporation

HealthSouth Corporation's CEO Richard Scrushy was indicted in 2003 by the U.S. Department of Justice on 85 counts of conspiracy, money laundering, securities fraud and wire fraud, although was acquitted. He did lose the civil trial and was ordered to pay an astounding $2.8 billion in restitution.

Separately, in 2005, Richard Scrushy was indicted on 30 counts including bribery of Alabama's governor when attempting to secure a seat on the state board that regulates hospitals. Scrushy was sentenced to 84 months.

6. In 2008, this investment firm's founder and chairman was arrested in the largest financial fraud in U.S. history and the largest Ponzi scheme in world history. He used his firm to defraud investors with false financial investment returns and reporting. Name this company.

Answer: Bernard L. Madoff Investment Securities LLC

Bernard L. Madoff was sentenced to the maximum 150 years in prison for a litany of felonious crimes including securities fraud and money laundering in the nearly $65 billion Ponzi scheme.

Madoff stated that he did not make a single legitimate investment with his clients' money since the Ponzi scheme began in 1991. He instead deposited all of the money into his personal bank account. In order to help hide the deception, his firm would only issue fraudulent paper statements to clients, nothing was available to his clients electronically.

7. Calling it one of the most egregious accounting frauds ever seen, the Securities and Exchange Commission filed a lawsuit in 2002 against the founder and other executives of this garbage and trash services corporation. The corporation had revenues inflated by nearly $2 billion to meet earnings targets. Name this company.

Answer: Waste Management, Inc.

The fraud at Waste Management, Inc. was discovered when a new CEO reviewed the financial records and discovered earnings were misstated between 1992 through 1997. A representative from the Securities and Exchange Commission stated that the executives staging the fraud "cooked the books, enriched themselves".

Investors lost $6 billion when the corporation's stock crashed as a result of the earnings restatement.

8. In 2002, Dennis Kozlowski, CEO, and Mark Swartz, CFO, were indicted on racketeering charges related to unauthorized corporate bonuses and falsified expense accounts at this conglomerate of electronic and medical supplies, and security systems. The executives fraudulently reaped over $150 million and spent it lavishly on themselves. Name this company.

Answer: Tyco International

Tyco International agreed to pay $2.9 billion in a class action settlement related to the fraud. Both Dennis Kozlowski and Mark Swartz received lengthy prison sentences as they were convicted of grand larceny, falsifying business records, securities fraud and conspiracy.

These two criminals notoriously spent their illicit gains in luxurious fashion. In one instance, Kozlowski manipulated Tyco to pay $1 million towards his wife's birthday party on the island of Sardinia, which included an ice sculpture replica of Michelangelo's David.

9. This large drugstore chain had thousands of stores at the time its CEO, Martin Grass, was forced out of the company in 1999. While the corporation's stock price soared in the late 1990s, he was using bogus accounting maneuvers in order to boost corporate earnings by $1.6 billion. Name this company.

Answer: Rite Aid Corporation

Rite Aid Corporation's sweeping accounting scandal cost investors millions in vanished stock value. Between 1999 and 2001, the stock price declined in value by over 90%. At the time, the earnings restatement was the largest ever recorded by a U.S. corporation.

Martin Grass was sentenced to 8 years in prison. He was the son of the company's founder.

10. This U.S. telecommunications giant, now known as MCI, Inc., reported assets $11 billion higher than the actual value from 1999-2002. Multiple executives were charged with crimes, including the ringleader - CEO Bernard Ebbers. Name this company.

Answer: WorldCom

WorldCom was one of the largest fraud and bankruptcy scandals in U.S. history. One of the methods used to increase earnings was capitalizing, instead of properly expensing, its telephone line costs.

CEO Bernard Ebbers was sentenced to 25 years in federal prison. He possessed an estimated net worth of $1.4 billion at the height of his corporate fraud in 1999, including his ownership in a marina, a golf course and thousands of acres of real estate. After he settled his civil cases related to the fraud, his net worth was estimated at $50,000.

Source: Author Scallop44

This quiz was reviewed by FunTrivia editor stedman before going online.
Any errors found in FunTrivia content are routinely corrected through our feedback system.

Cooking the Books Trivia Quiz

Cooking the Books is an idiom regarding falsification of business records primarily to achieve financial gains. The chefs in this quiz were involved in some of the biggest corporate accounting scandals in U.S. history!

NEXT>

NEXT>

NEXT>

NEXT>

NEXT>

NEXT>

NEXT>

NEXT>

NEXT>