Actually Kinda Clever

Upon reading “The Biggest Stock Scams of All Time” (an ambitious title, perhaps), I decided to update my non-existent knowledge of these scams and failures—including the 2008 business failures.

Holy crap.

I know, I’m so late to the party. I get the housing market failure. As Elf says, it’s not rocket science.

But when Enron occurred (2001), I was a junior in high school, immersed in the IB program, and only cared about grades and college, not about the business/financial world. Reading up on Enron and WorldCom/MCI (who blatantly put expenses on the books as income) was only the start. (MCI was taken down by a little team of auditors working in secret at night who uncovered the $3.8 billion USD in fraud. Seriously.)

Then came Arthur Andersen, the auditing company that participated in the fraud of Enron. They exist online now as a single-page presence, created in Visual Studio 6.0 with no tracking code. They don’t even care who visits. Or about lower-casing their HTML tags.

According to Wikipedia:

From a high of 28,000 employees in the US and 85,000 worldwide, the firm is now down to around 200 based primarily in Chicago. Most of their attention is on handling the lawsuits and presiding over the orderly dissolution of the company.

They also forked into Accenture, and I have a friend who works for them. Kinda weird.

That somehow got me to Drexel Burnham Lambert, who went toe-to-toe with then-US Attorney of southern New York Rudy Giuliani and lost. What’s cool about Drexel? They created the junk bond market and backed hostile takeovers by creating the concept of the “highly confident letter“.

Not “cool” like “something to admire”, but “cool” like “something to marvel at.” They had guts and lousy ethics, and it speaks to our state as a people/society that these companies and people feel they need (or want) to things like these.

Where things went from awing to gripping was when I got to the Lehman Brothers. So where was I in 2008 as the markets were crashing? Erm… still not very interested in the financial world. I knew more about these cascading failures, but everything in the media was so garbled and TV-news-y, and I’m still not one to read/watch the news every day. Wikipedia is great for looking back.

So why are these more exciting? Because of the timeline. The articles go from <old-fashioned voice>In 1844, 23-year-old Henry Lehman, the son of a cattle merchant, emigrated to the United States from Rimpar, Bavaria,</old-fashioned voice> to:

  1. “In the first half of 2008”
  2. “In August 2008”
  3. “On August 22, 2008”
  4. “on September 9”
  5. “The next day”
  6. “September 11”
  7. “On September 17”

Day by day, blow by blow. I don’t think the Wikipedia writers are trying to be dramatic, but the rapid-fire nature of the happenings (and the super-quick liquidation/acquisition of the Lehman Brothers) makes for fascinating reading. Similar collapses, of course, occurred in several companies that year, but Lehman Brothers is a good case in point.

The book cooking these companies pulled off may not be clever in and of itself, but getting everyone to go along with it, getting auditors to turn a blind eye (or contribute), and getting the public to buy into their façades is nothing to sneeze at.