SEC Sues Ex-Waste Management Execs
Tue Mar 26, 2:15 PM ET
WASHINGTON (Reuters) - Federal securities regulators on Tuesday sued the founder of trash hauler Waste Management Inc. and five other former top executives, accusing them of a "massive" fraud to inflate profits by $1.7 billion to meet earnings targets.
The Securities and Exchange Commission (news - web sites) lawsuit filed in Chicago charged founder and former Chairman Dean Buntrock, ex-President Phillip Rooney, former Chief Financial Officer James Koenig and other executives with falsifying Waste Management's financial results between 1992 and 1997.
The civil complaint also claimed the executives were aided by long-time auditor Andersen, already indicted by the U.S. Justice Department (news - web sites) for its role in the collapse of energy giant Enron Corp. .
The alleged conduct of the former Waste Management executives "was driven by greed and a desire to retain their corporate positions and status in the business and social communities," said SEC lawyer Thomas Newkirk.
"For years, these defendants cooked the books, enriched themselves, preserved their jobs and duped unsuspecting shareholders."
Waste Management shares were off 0.41 percent at $26.79 in afternoon trading on the New York Stock Exchange (news - web sites). The stock had been down by more than $1 after the SEC suit was announced.
Buntrock, the company's founder, was the "driving force" behind the alleged fraud, the SEC said. Each year, he, Rooney and others prepared an annual budget in which they set earnings targets for the upcoming year, according to the complaint.
The revenues were not growing fast enough to meet the targets, so the defendants resorted to improperly eliminating and deferring current expenses to inflate earnings, it was alleged.
Rooney, the former president, said in a statement: "The allegations against me are unjustified and unfair." "I will fight the lawsuit and I fully expect to be vindicated."
Attorneys for Buntrock, and Koenig, the ex-CFO, did not immediately return calls seeking comment.
A spokeswoman for the Houston, Texas-based company said the SEC probe related to an investigation involving "old" Waste Management, which merged with USA Waste Services Inc. in 1998.
"We are a new Waste Management," said Sarah Voss. "We have a new senior leadership team in place."
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