Lucky event selected as the top ten annual business scandals in the world
Source: Fortune editorial
In ordinary years, people will remember the worst corporate scandals and the worst executive malfeasance.
In 2020, however, many people will find themselves in such a tight economy that it is hard to recall what has happened in the past 12 months.
For this reason, the editor of fortune compiled the top 10 strangest, most interesting and most eye-catching business scandals in 2020.
Nikola’s sliding door incident
Perhaps inspired by theranos, the infamous blood testing company, Nikola, a hydrogen fueled electric truck start-up, has always been a bit too much of a believer in the mantra “until it succeeds.”.
Short company Hindenburg research said in September that Nikola and its chief executive, Trevor Milton, had made a series of false propaganda about its technology, including a propaganda video showing Nikola freight trucks in running condition in 2016. This processed video actually made the trucks slide down a long slope, rather than moving by themselves.
Nikola later acknowledged the above.
However, surprisingly, the company brazenly claimed that it was not cheating, because the company described the video at that time as being used to show “in motion” vehicles, which literally had no problem, even though the driving force was gravity rather than hydrogen fuel. Nevertheless, Milton quickly resigned as chief executive.
For fans of corporate scandals, the real success of the event is that when Hindenburg released the report, GM announced a major cooperation plan with Nikola just two days ago (this time point really helped Hindenburg make a lot of money by shorting).
Under the plan, GM will become a major shareholder in Nikola and make the badger electric pickup that Nikola plans to launch. In dealing with this dishonorable matter, General Motors seems to be extremely calm, the company did not announce a direct exit from the plan until the end of November.
Nikola’s share price peaked at $79.73 in June and today is less than $17.
The collapse of wirecard
The story of wirecard is a two in one scandal.
Marcus Braun, the former chief executive, seems to think that the financial services company has $2.1 billion on its books, which he uses to whitewash his image in various activities. The company went bankrupt in June and investors lost billions of dollars.
Another scandal is that despite years of warning signals, regulators and auditors failed to spot the impending disaster.
“When you look at the scale of what has happened, wirecard is like Enron in Germany,” said Bruce Doris, a former prosecutor and President of the fraud Auditors Association
Wirecard is a well-known financial technology company in Europe, which is committed to providing mobile payment and banking services around the world. The company was founded in 1999 and nearly went bankrupt in 2002 when Braun, a former KPMG consultant, injected capital into the company and became its CEO. The company expanded, went on the market, attracted new capital and maintained growth.
Its success outpaced the growth of its financial business. Wirecard is also the pride of Germany and Europe. This seemingly thriving international company is in an important new industry dominated by Chinese and American start-ups. The rocket like growth of wirecard reached its climax in 2018, when investors gave a valuation of 24 billion euros (about 27 billion US dollars), and the company broke into the upper business circle of Germany and became one of the 30 members of the DAX stock index.
However, some things are not right.
Outsiders, especially Financial Times reporter Dan mcclum, have been discovering discrepancies in wirecard’s accounts since 2015. Wirecard always strongly denies that there are any problems with the company, but the outside world has not stopped questioning.
In 2019, the German market regulator, the German Federal monetary authority, launched an investigation, but not against wirecard, but the financial times. When Singapore police raided wirecard’s office a month later, the German federal financial regulatory authority ordered a ban on shorting wirecard shares for two months.
The situation reached a critical juncture last June when wirecard announced that 1.9 billion euros (2.1 billion dollars) on the company’s account “disappeared.”. Braun quickly resigned. The company quickly announced “a universal possibility” that the money that disappeared “does not exist.”.
Braun was arrested the next day and has been in custody. The company’s share price was 191 euros (233 dollars) at one time, and only 0.43 euros (52 cents) recently.
A report released by the European Parliament called the collapse of wirecard “a potentially significant event in European capital markets”, which should trigger retail reform in financial market regulation.
The collapse of Enron gave birth to the Sarbanes Oxley Act. If the wirecard scandal can trigger a similar reaction, it can at least help.
The financial bubble of Rui Xing coffee
Unfortunately for lucky, the luck ran out quickly.
The start-up coffee chain was founded in October 2017. It is obvious that it has replaced Starbucks with a rapid development trend and become China’s largest ready to grind coffee giant in early 2020. However, the company’s subsequent confession of accounts fraud shows that the company’s dream of caffeine fever, that is, to make tea drinkers love coffee, is basically a mirage.
As China’s youngest and hottest so-called Unicorn start-up, Beijing based Ruixing advertises itself as a technology company rather than a coffee business company.
Lucky attracts people to book takeout and delivery drinks through its mobile app. The company has introduced a large number of discounts and “free” coupons, reducing the price of its drinks to about one-third of the market price. Like any good start-up, executives value growth more than profit.
For a while, the strategy worked. By the end of 2018, a little more than a year after its establishment, lucky has more than 2000 stores, and private investors have given a valuation of $2 billion.
As of May 2019, the company has raised $561 million and is listed on NASDAQ at a valuation of $4.2 billion. In early 2020, after lucky was considered to have taken the crown of China’s coffee market from Starbucks (4500 lucky and 4300 Starbucks by the number of stores), its valuation reached an all-time high of $12 billion.
Then there were accusations of fraud.
Ruixing initially denied the January 31 report of muddy water, a well-known us short company, accusing Ruixing of counterfeiting sales.
However, a few weeks later, on April 2, lucky confessed that $310 million in revenue was fraud, accounting for a large part of its disclosed revenue in 2019. Ruixing admitted exaggerating the figure, delisting its shares and restructuring its leadership team.
In December, lucky settled with the securities and Exchange Commission for $180 million.
In a statement, Ruixing’s recently appointed chairman and CEO, Guo Jinyi, said the deal “reflects our cooperation and remedial measures to enable the company to continue to implement its business strategy.” He added that the company “is committed to building a strong internal financial control system and will adopt best practices in the area of compliance and corporate governance.”
Twitter security error
On the afternoon of July 15, 2020, a series of well-known twitter accounts, including those of Alan musk, Kim Kardashian and Barack Obama, seemed a little strange, and they all sent out a simple bitcoin scam.
Twitter had to shut down all tweets from verified accounts, while it was scrambling to find security holes.
Is it Russia’s elite hacker team that hijacked these accounts? Or a North Korean agent with a national background? None of them.
The real culprit is Graham Ivan, a bored teenager in Florida. He and several friends teased an employee of twitter over the phone and asked him to disclose the authentication information needed to reset his account password and email address.
Clark was arrested weeks later and is awaiting trial.
“It’s the oldest of San Francisco’s security tricks,” says torrell Barker, chief executive of social security
Twitter has begun to limit the number of employees with such rights and has taken other measures to enhance security. The company also released a comprehensive report on how the incident happened. Tobak said the move helped raise awareness of many companies in this area and improved their training to prevent further “social transformation” hacking. “It’s the first line of defense.”
Tesla boycotts blockade
Tesla, the electric car maker, is well ahead of expectations in 2020. It started with a much better than expected first quarter revenue before the new epidemic, and then the company squeezed into the S & P 500.
However, CEO Alan Musk’s response to California’s efforts to control the outbreak of the new coronavirus has dimmed the company’s aura.
The first round of resistance occurred in April, when Tesla tried to resist the blockade order by calling on employees to return to its Fremont secret service plant, but was stopped by Alameda County officials.
A few days later, in the April revenue conference call, which announced the amazing results of the quarter, musk shocked a group of investors and analysts by describing the California blockade order as “fascist”.
Then, the fact that 300000 Americans died in the new epidemic made that statement even worse.
On May 9, Tesla filed a lawsuit to get rid of the blockade order, and argued that the order was in conflict with Alameda County’s statement that Tesla was classified as a “necessary enterprise”. A few days later, however, Tesla resumed production without a license.
Alameda County officials seemed to give in to Musk’s liberal resistance and announced on May 13 that they would approve Tesla’s plan to restart the factory, but Tesla had already restarted before that.
Later, some people said there were potential safety hazards in the factory environment, including lax enforcement of mask wearing requirements, and Tesla’s employees later detected positive for the new coronavirus.
Musk seems to want to prove that he can not only devote himself to the fight against climate change, but also quietly play the villain in James Bond movies. He told employees that if they are worried about health and safety, they can stay at home, but then sent termination letters to some employees who stay at home.
At the end of 2019, McDonald’s CEO Steve eastbrook was fired for pornographic text messages with his subordinates, which the company called a voluntary relationship at the time.
“Given the company’s values, I agree with the board’s decision that it’s time to leave,” eastbrook said in an email to employees at the time
Since then, things have become more chaotic.
In August, McDonald’s filed a lawsuit against eastbrook, claiming that it had sexual relations with three female McDonald’s employees a year before being fired from the company, and approved the issuance of hundreds of thousands of dollars in shares to one of them.
McDonald’s also said eastbrook had hidden evidence during the initial investigation and removed mail from his mobile phone. In view of the so-called new findings, McDonald’s believes that these led to the company’s decision to dismiss eastbrook, and eastbrook should return his severance payment.
Eastbrook countered that McDonald’s was aware of the stock award and had information about eastbrook’s other relationships when negotiating his severance payment.
The lawsuit is still in progress, but it is clear that McDonald’s is willing to disclose its family scandals in a way rarely seen in the U.S. business community at a time when McDonald’s is trying to draw a line with its former chief executive.
Fraud in compensation protection program
In terms of the vast majority of indicators, this huge program, which is called the compensation protection program and worth 670 billion US dollars, is the largest small business assistance program in the history of the United States, and also a milestone in the federal government’s response to the epidemic. Many small business owners in the United States have been devastated by the epidemic.
However, nine months after its launch as part of the $2.2 trillion coronavirus aid, relief and economic security act, the project quickly became synonymous with the most critical shortcomings of government intervention waste, corruption and fraud. Critics say it all stems from the mismanagement and lack of transparency of the trump administration.
There are many cases of fraud in the compensation protection program, from fake Florida government departments claiming to have received more than $8 million in government funds to Texas men claiming to have squandered nearly $1 million in compensation protection program funds to invest in cryptocurrency.
These cases seem to be just the tip of the iceberg. It has been claimed that even without billions of dollars, hundreds of millions of dollars of taxpayer funds may be fraudulently misappropriated through the compensation protection program, and the government supervision department has also acknowledged the possibility of “widespread potential fraud and abuse”.
The trump administration itself claims that the project has successfully distributed more than $520 billion to about 5.2 million U.S. enterprises, enabling many companies to save jobs and pay workers during the severe economic downturn. But even if it is legal, there are obvious loopholes in the project.
According to the data recently released by the small business association, more than half of the funds for compensation protection projects go to less than 5% of the recipients, and more than a quarter go to less than 1% of the recipients. In this one-sided fund distribution project, large listed companies with sufficient funds become the beneficiaries.
In addition, there is sufficient evidence that many small businesses, which are owned by ethnic minorities (especially those affected by the epidemic), fail to obtain the funds they need through the project. At the same time, wealthy celebrities and connected politicians find that getting the money they need is like searching for something.
As one government regulator put it: “fundamentally speaking, the trump administration’s project is not only poorly designed, but also poorly run.”
Wells Fargo Bank
Is Wells Fargo the biggest commercial scandal in 2020? Isn’t that 2016?
In fact, to be precise, the scandal began in 2016. Four years later, the scandal has become more and more serious, which deserves our special achievement award in business scandal, and therefore occupies a place in our list.
The scandal began on September 8, 2016, when news came that Wells Fargo had created more than 2 million fake accounts and would pay a $185 million fine. The astonishing discovery immediately made headlines, and weeks later, several congressional committees held hearings, and chief executive John Stumpf abruptly retired. With the fines paid and the leadership replaced, the trouble seemed to be solved quickly, but it was not.
Let’s fast forward to 2020: in January, Stumpf agreed to pay the office of the Comptroller of the currency a $17.5 million fine for his role in the scandal, while the office issued a $37.5 million fine to five other former executives.
Wells Fargo agreed in February to pay $3 billion to resolve federal criminal and civil investigations into the scandal. “Given the alarming scale, scope and duration of Wells Fargo’s illegal activities, this amount is reasonable,” said Andrew Murray, the U.S. prosecutor
In November, Stoff agreed to pay the SEC a $2.5 million fine. The SEC also sued Gary Tolstoy, who was the head of Wells Fargo’s retail banking business during the creation of the fake account.
These are just the main developments of the event in 2020. In the meantime, the scandal has become more serious than minor.
The bank found that it had created 3.5 million fake accounts instead of 2 million. It also found that it charged more than 800000 car loan customers insurance fees that they did not need or even knew (a fine of $1 billion and a class action settlement of about $400 million).
The most serious loss is that the Federal Reserve banned Wells Fargo’s assets from exceeding its $1.95 trillion level at the end of 2017 in 2018, which is unprecedented. This is also the main reason why Wells Fargo’s performance is far lower than that of S & P 500 and several other big banks (JPMorgan Chase, Bank of America, Huaqi) after the scandal.
Wells Fargo’s February settlement with the judiciary included an extended prosecution agreement, subject to the bank “continuing to cooperate with further investigations by the government.”.
Four years later, the epic scandal is far from over.
EBay attacks users
Ecommerce, an online retail blog, in August 2019 INA and David Stein, the founders of bytes, have been harassed in various ways: strange threats mailed to their homes, including a bloody pig mask, live spiders and cockroaches, pornographic photos and a Book mourning a couple; expensive late night pizza takeout orders; and Craigslist ads for hip parties and home sales The address is the address of the couple.
The couple living in nadik, Massachusetts, reported the incidents to police.
It wasn’t until the couple discovered that someone was driving to monitor and track them that the police began to have clues. According to the Wall Street Journal, the two different cars are rented by eBay employees. The criminal investigation found that there has been hostility within eBay to the two bloggers, who sometimes criticize eBay in their reports.
According to an FBI statement, Steve vimo, the former chief communications officer of eBay, read an ecommerce bytes post on the salary of Devon WEINIG, the then CEO of eBay, in April 2019, and then sent a message to WEINIG saying, “we’re going to kill her.”
This lady is talking about the author, ina Stein.
WEINIG and vimo left the company in September 2019.
In a summary of the scandal earlier this year, fortune’s Aron pulisman wrote that eBay pointed out in a statement that “although winnig was not authorized to engage in harassment activities, his blog’s” inappropriate communication “was” one of many reasons that led him to leave the company. ”
In a separate statement obtained by Peng Bo, eBay said that “neither the company nor any of its existing employees have been charged” and that eBay “received a notice from law enforcement in August 2019 that its security personnel carried out suspicious actions against a blogger who reported on the company and his husband.”
The company said that in September 2019, “all employees involved were fired.”.
Investigators found that the gang planning the incident used prepaid debit cards, disposable mobile phones, anonymous email accounts and VPN software to conceal their identity and delete information records.
In September, four of the six individuals alleged to be involved in the case admitted to being involved in the incident and soon pleaded guilty to conspiracy to Internet tracking and bribery of witnesses.
In theory, Carlos Ghosn boarded the high-speed train from home to Tokyo on December 29, 2019 (where he faced charges of financial irregularities and was released on free bail).
However, it was not until early January that full details of Ghosn’s escape from what he called “the manipulated Japanese judicial system” began to appear in major media reports. Taking the train should be the first step in his escape to Lebanon, and it seems to copy Hollywood movies. With the help of a former Special Forces officer, Ghosn hid in a box used to transport audio equipment, boarded a private plane bound for Istanbul, then transferred to a small plane and arrived in Beirut (he has a home in Lebanon and does not have to face Japanese extradition provisions).
What’s the most surprising thing about Ghosn’s adventures? That is, in January, many of us naively thought that this was bound to be the business story of the year 2020. (Fortune Chinese)
By David Z. Morris，Geoff Colvin，Robert Hackett，Aaron Pressman，Beth Kowitt，Rey Mashayekhi，Lydia Belanger，Lee Clifford
Translator: Feng Feng
Checked by: Xia Lin