Waste Management founder denies allegations in SEC lawsuit

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Posted 7:55AM on Wednesday, March 27, 2002

WASHINGTON - The founder and former head of Waste Management Inc. denies government allegations that he and five former top executives of the giant trash hauler misled stockholders for years -- or that the company's auditor, embattled Arthur Andersen LLP, inaccurately reported on the company's finances. A half-dozen former executives of Waste Management, including Dean L. Buntrock, were accused Tuesday of inflating earnings by $1.7 billion as part of an accounting fraud scheme designed to enrich them and dupe shareholders. In a civil lawsuit, the Securities and Exchange Commission said Andersen, which is embroiled in a document-shredding controversy with Enron Corp., helped perpetrate the Waste Management scheme, identifying 32 "must-do" steps to cover it up. SEC officials alleged the executives engaged in "massive earnings management fraud" from 1992 to 1997 that ultimately cost shareholders more than $6 billion. In a statement, Buntrock denied the allegations. "I firmly believe that, while under my watch, all of Waste Management's financials were fairly reported and in compliance with (generally accepted accounting principles)," he said. "I was never told otherwise, either by our internal accountants or our outside auditors." In a lawsuit filed last month, he said the SEC is not entitled to sue him because the allegations are based on an analysis by two former consultants to Waste Management who are now the SEC's chief accountant and its chief accountant in the enforcement division. In Tuesday's civil complaint filed in U.S. District Court in Chicago, the SEC said Buntrock and five other former top officers hid millions in expenses and assigned arbitrary salvage values to assets that previously had no value. They also did not write off the costs of unsuccessful or abandoned landfill projects, the complaint said. According to the SEC, officials received performance-based bonuses and valuable stock options based on inflated earnings, with several cashing in their stocks before unfavorable earnings reports lowered share prices. In one instance, the SEC said, Buntrock even got a tax benefit by donating inflated company stock to his college alma mater to fund a building in his name. The SEC said the scheme unraveled in late 1997, after a new CEO ordered a review of the company's accounting practices. In 1998, Waste Management restated its 1992-1997 earnings by $1.7 billion, the largest restatement in corporate history, the SEC said. The news sent Waste Management's stock value tumbling by more than one-third. Shareholders lost over $6 billion in the market value of their shares, the SEC said. Company officials noted Tuesday that the alleged fraud took place before 1998, when Waste Management was acquired by a Houston company. "We have cooperated fully with the SEC in the investigation and do not believe that the SEC will seek any action against New Waste Management in connection with the events detailed in the complaint," said A. Maurice Myers, the company's chairman, president and CEO. The SEC has been investigating Waste Management and Andersen for about four years. Last June, it sued Andersen, alleging it issued false and misleading audit reports that inflated Waste Management's earnings from 1993 to 1996. Andersen agreed to pay a $7 million civil fine to settle the suit, without admitting to or denying the allegations. Last November, Waste Management agreed to pay $457 million to settle a class-action suit alleging its executives misled investors about its finances two years ago to drive up the stock price. ------ On the Net: Securities and Exchange Commission: http://www.sec.gov Waste Management: http://www.wm.com Arthur Andersen LLP: http://www.andersen.com