Today's multi-billion dollar financial scandals- how they happened, what's next - and how to avoid being victimized by the next WorldCom!
Beyond accounting fraud - The most wide-ranging expose of the profound corruption infecting today's public markets.
Specific techniques investors can use to avoid tomorrow's financial catastrophes in the making.
Exclusive interviews with dozens of the world's leading experts on markets and market reform, including former SEC Chair Arthur Levitt and NY Attorney General Eliot Spitzer.
Millions of investors have already been victimized by the scams that were Enron and Worldcom. And it's not over. Millions more will be victimized by tomorrow's mega-billion-dollar financial catastrophes.
This is the first comprehensive, "no-sacred-cows" guide to today's financial scandals - and to protecting your assets from tomorrow's. Unlike previous books, Corporate Cheats is utterly comprehensive- it isn't just about the Internet or telecom bubble, or Enron, or accounting fraud, or crooked CEOs and "see-no-evil" boards, or dishonest analysts and investment houses- it's about all of these, and more.
Reuters equity editor Martin Howell draws on more than 50 exclusive interviews with experts in every facet of the market- leading short sellers such as James Chanos who saw the Enron disaster coming; long-time market reform advocates such as Former Federal Reserve chair Paul Volker, market psychologists, even private detectives.
Above all, Corporate Cheats is about protecting your own hard won assets - since you can't rely on anyone else to do it for you.
1. Sages and Charlatans- Avoiding the Fads, the Buzz, the Rip-Offs, and the Merely Dumb
- If You Can't Understand, Don't Invest
- Friends and Family Don't Like a Company's Products
- A Product or Company Is Hyped by Wall Street, the Media, and Others
- On Wall Street, the Game Is Usually Rigged Against the Small Investor
- The Motivation of an Adviser Making a Recommendation Is Suspect
- Price Means Everything - A Great Company's Stock May Be Too Expensive
- Don't Get Caught Out by the Latest Fad; It Probably Won't Last
- If You See Major Funds Are Shunning a Stock, There's Usually Good Reason
- Avoid Companies That Are Too Reliant on One or Two of Anything
- Diversify or Bust- Too Much Money in One Stock May Ruin You
- Ejecting at the 11th Hour
- A Company Files for Chapter 11 Bankruptcy Protection
- The SEC Launches a Full-Scale Probe into Possible Securities Fraud
- The CEO or Another Top Company Official Is Arrested
- A Company's Shares Are Delisted by a Stock Market Such As the NYSE
- A Company Does a Reverse Stock Split to Remain Listed
- A Company Is Facing a Large Number of Class-Action Lawsuits
- A Prominent Short Seller Has a Company in His or Her Sights
2. Pipedreams and Big Lies
- When You Find the Big Lie, Everything Else Crumbles Around It
- A Whiz-Bang Device Is Loved by Tech-Geeks, but the Masses Are Unenthusiastic
- The Technology Is Great, but Its Price Is Too High for the Mainstream
- If a Technology Is Said to Transform the World, It Is Being Over-Hyped
- Journalists Are Often Wrong in Predicting the Success of a Deal or Product
- When Money Is Easy to Raise, Be Alert for Companies Doomed to Fail
- A Product Is Only Set to Reach a Niche, but Hopes Are Ramped Higher
- First Company to Market May Not Be the One to Succeed with a Product
- Technology Becomes Obsolete and Companies Can Easily Burn Up
- Be Wary of Chasing the Prices of IPOs Soon After They Start Trading
3. The Superstar CEO - Celebrities, Showmen, and Destroyers
- The Quitter- When a CEO Leaves without an Explanation
- When There Is Family Control, the Rights of Others May Be Trampled On
- Beware the Worst Combo of All- An Aggressive CEO and a Compliant CFO
- The CEO Bullies Everyone
- The CEO Hypes a Company's Performance and Prospects
- A CEO Is Caught Making Misleading Statements
- When a CEO Is Abusive, It May Be a Sign of Major Problems
- A CEO Is Built Up As the New Star Who Is Going to Fix Everything
- When Senior Management Includes the Company's Former Auditors
- When the CEO Is Known Best for Destroying Jobs and Slashing Costs
- A CEO Known Best As a Serial Acquirer Rather Than a Builder
- A CEO Who Blames Others for a Company's Ills
- An Executive with a Dubious History- Beware Repeat Offenders
- When Executives Buy Homes in Bankruptcy Havens Such As Florida
4. Jets, Parachutes, and Stealth Wealth- Pay for Performance or Pay for Plundering
- CEO Compensation Is Not Linked Closely with Performance
- When Stock Options Are Handed to Executives Like There's No Tomorrow
- When Top Executives Own Very Little of Their Company's Stock
- If a Company Rewards Failure by Re-Pricing Stock Options
- If a Company Rewards Failure by Lowering Compensation-Linked Targets
- Executives Making Money for Themselves from Company Business
- When a Company Forgives Large Loans Made to Senior Executives
- Big Payments Are Made to Executives for Their Work on a Takeover
- When Boards Hand Out Massive Severance Packages to Failed Executives
- Executives Retire with Huge Packages, Including Costly Perks
- Companies with Golden Parachutes for Any Kind of Takeover
- If a CEO Is Protected by a Contract Even if Convicted of a Crime
- When a CEO's Perks Are Excessive and Costly
- When a Company Pays for Private Jet Travel, Clubs, and Agents' Fees
- If an Executive Is a Philanthropist with Shareholders' Money
- When Executives Bail Out of Their Company's Stock
5. Caffeine Badly Needed- Sleepy, Inept, and Tainted Boards
- Sudden Unexplained Resignation of a Director from a Board
- When the Board Rarely Meets
- When "Independent Board" Means the CEO's Grocer Is a Director
- Boards Lacking Outside Directors Who Are Respected Business Figures
- Companies in Which the Chairman and the CEO Are the Same Person
- Professional Directors Who Are Keener on Collecting Fees Than Aiding Shareholders
- Boards That Have a Large Number of Long-Serving and Elderly Directors
- Too Many Academics and Ex-Politicians May Lead to an Uncritical Board
- A Compensation Committee in the CEO's Pocket Lacks Independence
- Cross-Board Memberships Can Lead to Conflicts of Interest
- Directors Who Don't Own Much of Their Company's Stock
- When a Company Hits Low Points in Corporate Governance Rankings
- Audit Committees That Don't Take Responsibility for Policing Auditors
6. Growing Mushrooms- The Art of the Opaque, Sneaky, and Buried
- A Press Release That Buries the Net Earnings Figure
- A Press Release Begins with a Questionable Measurement of Profit
- When the Earnings Table Is Produced in a Creative or Confusing Manner
- If the Press Release Omits a Cash-Flow Statement or Balance Sheet
- When the Company Treats One-Time Charges As if They Aren't Real Money
- The Upbeat Tone of a CEO's Comments Is Not Matched by Performance
- If a Company Has Had a History of Over-Optimistic Forecasts
- A Company Doesn't Include Accounting Policy Details in Its Press Release
- Stock Options Accounting Policy and Its Impact Are Not Fully Explained
- Too Much of the Wrong Kind of Disclosure Can Bury Vital Information
- When a Company Says It Has Changed Its Revenue Recognition Policies
- Hidden Announcements of a Probe by the Government or a Regulator
- Disclosure of Major Litigation Problems or Reserves for a Settlement
- When a Board or CEO Treats an Annual Meeting with Contempt
- When a Company Tries to Bury Bad News on or Just before a Holiday 110 When a Company Doesn't Hold Conference Calls
- If a Call Is So Controlled That Probing Questions Are Not Addressed
- When the Press Is Barred from an Annual Meeting
- If a Company Delays Publishing Financial Results without Good Explanation
- If a Normally Talkative Company Official Suddenly Clams Up
- When Drug Companies Spin and Obfuscate the Results of Drug Trials
7. Culture of Greed- Sports Stadiums, Shooting the Messenger, and Rank and Yank
- When a Company Abruptly Transforms Its Corporate Strategy
- If a Company Fires a Whistleblower or Faces a Suit from a Whistleblower
- A Company Cuts Research and Other Spending for the Future
- A Company Doesn't Handle a Crisis Directly or Quickly and Allows It to Fester
- A Company Hides Behind Anti-Takeover Devices and Ignores Votes to Change
- When Companies Are Legally Incorporated in Unusual Places
- A Company That Buys a Stadium, a Sports Team, or Their Naming Rights
- The Edifice Complex- Lavish HQs Can Signal Waste and Excess
- Companies That Treat Staff Ruthlessly May Signal a Screwed-Up Culture
- Companies Confronting Rather Than Talking to Pressure Groups
- When Unexplained Events Cast Doubt on an Entire Investment Story
About Martin Howell
Martin Howell is editor-in-charge of equities coverage for Reuters America, Inc. He has directed much of Reuters' corporate news coverage in the United States in the past three years, including coverage of the Enron scandal, the Internet bubble and Wall Street deception.
For the past 17 years, he has written, reported and edited business news throughout United States, Europe, Asia and Australia, and managed news teams on all these continents. Before joining Reuters, he worked for Bloomberg News for six years and spent more than two years at AP-Dow Jones.
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