Week 1 Addendum (Corporate Implosions)

Week 1 Addendum (Corporate Implosions) - The 33 Biggest...

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The 33 Biggest Corporate Implosions. Ever. By HR World Editors on April 28, 2008 Whether it's bankruptcy, heavy competition, fraud or typical market forces, some companies are destined to fail. Some do it more spectacularly than others. And believe it or not, business debacles have occurred all over the globe for centuries. Here's our list of the . . . biggest corporate implosions ever. The 2000s [Firms in brackets have been added by the instructor.] 1. [ Lehman Brothers. Fourth largest investment firm. Founded in 1850. On 9/15/08, filed for bankruptcy. Largest bankruptcy in U.S. history. Causes: malfeasance—distorted financial statements, sub-prime mortgage losses, and naked short-selling.] 2. [Merrill Lynch. Financial services firm was forced by the U.S. government into a structured buyout by the Bank of America, September 2008, in order to avoid bankruptcy.] 3. [American International Group (AIG). The nation’s largest insurance company was take over by the U.S. government in September 2008 to avoid bankruptcy.] 4. [Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation). These two government sponsored, private companies were placed into a conservatorship by the U.S. Treasury Department on September 6, 2008 to avoid bankruptcy.] 5. Bear Stearns Companies Inc. : Bear Stearns ranks as one of the largest global investment banks, securities-trading and brokerage firms in the world. Nearly bankrupt last month, the company sold itself to JPMorgan Chase for $2 a share, or $240 million, bolstered by the Federal Reserve’s guarantee of $30 billion worth of Bear Stearns loans. The government bailout is alleged to have avoided a domino effect of similar failures in the financial world. 6. Swissair : The Swiss government owned 30 percent of the stock of this former national airline of Switzerland and major international airline. In the1990s, Swissair implemented a major expansion program called the Hunter Strategy . The spending resulted in a financial crisis for parent company SAirGroup , which was hurt by the September 11 attacks. The entire Swissair fleet was grounded in October 2001. Crossair and liquidation firm Jürg Hoss later acquired the company’s assets. Swissair officially dismantled in March 2002. 7. WorldCom/MCI Inc. : The U.S.’s second-largest long-distance phone company at the time, WorldCom/MCI filed the largest Chapter 11 bankruptcy in American history in July 2002. The company used fraudulent accounting methods, namely underreporting expenses and inflating revenues with bogus accounting entries, to hide its declining financial condition between 1999 and 2002. An internal audit uncovered approximately $3.8 billion in fraud in June 2002, and in 2003, it was estimated that the company's total assets had been inflated by around $11 billion. Verizon Communications purchased the enterprise in January of 2006 and renamed it the Verizon Business division.
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