Examples of Corporate Malfeasance

by Victoria Duff, studioD Google

Corporate malfeasance is a broad term that describes major and minor crimes that might be committed by officers of a corporation. These can be attempts to defraud investors by issuing false financial reports, or they can be instances of corporate espionage. Corporate malfeasance can take the form of knowingly polluting air and water resources, or it can affect employees through subtle discrimination against certain race, gender or age characteristics.

Financial Deception

In October 2001, Enron Corp. disclosed a quarterly loss of $618 million -- a shock to the financial markets, considering how bright Enron's future had previously seemed. As the full extent of the financial scandal unfolded, it became clear that Enron had been hiding significant corporate losses through the use of creative accounting, under the advice of its auditor, the Arthur Andersen accounting firm. In fact, Arthur Andersen found itself in its own scandal for shredding incriminating documents pertaining to its advisory and auditing of Enron. Issuing deceptive financials and conspiring to obstruct justice by hiding or destroying documents are both serious crimes.

Securities Fraud

Executives at Enron, seeing the financial difficulty the company was entering, promoted Enron stock to the employees and the public investment marketplace. They presented a glowing picture of the company's prospects and, as the stock hit high market prices as a result of their stock promotion campaign, sold their holdings. Then-president Jeffrey Skilling sold $47 million of his stock in Enron with full knowledge of the financial mess that was about to break, avoiding millions of dollars in loss when the markets learned the news and drove the stock price down. Lying about the financial condition of a public company, with the intent to profit from sale of stock, is securities fraud.

Mortgage Crisis

In April, 2010, the U.S. Securities and Exchange Commission charged Goldman Sachs with securities fraud for failing to disclose that hedge fund investor, John Paulson, had chosen the bonds backing a collateralized debt obligation that Goldman was selling to its customers. The CDO would be a successful investment if the bonds backing it would gain in value, but Paulson chose them because he felt they were likely to default and was planning to aggressively short them, making it likely that they would lose value anyway. As of June 2011, the case has yet to be resolved.


In 1984, methyl isocyanate gas, or MIC, toxic substance used in the making of pesticides, leaked from a tank at the Union Carbide plant in Bohpal, India. The gas was so toxic that it immediately killed between 3,500 and 15,000 people in the area and another 50,000 died later or became ill from the affects of the gas, according to Indian official estimates. A 1997 American University case study found "the Bhopal disaster was the result of a combination of legal, technological, organizational, and human errors . . . safety standards and maintenance procedures at the plant had been deteriorating and ignored for months." Union Carbide declared Chapter 11 bankruptcy, eventually agreed to a $470 million settlement against a $3 billion lawsuit and was acquired by Dow Chemical.

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