There are reasons that films like Wall Street and Risky Business came out in the market heyday of the 1980s: it was a decade built on shaky finances and high risk ventures. Coupled with the glamour of upper class lifestyles, these characteristics defined the Baby Boomer generation, as former campus radicals entered the workforce, had families and embraced a more capitalistic, free market philosophy. Not surprisingly, there were many incidences of financiers taking advantage of the market. Truth was often stranger than fiction.
4 Amazing 1980s Accounting Fraud Cases
- While still in high school, Barry Jay Minkow founded ZZZZ Best, a successful carpet-cleaning and restoration company. Or at least that is what it looked like. The enterprise was actually a front to attract money for a Ponzi scheme. When it collapsed in 1987, it cost investors $100 million. At the time, it was one of the largest financial scams in American history. Even today, this story serves as a profound and sobering example of accounting fraud.
- A predecessor to Bernie Maddoff, Minkow’s schemes make two appearances on our list. (Technically, this second case didn’t take place in the 1980s, but it was certainly inspired by similar themes.) In any event, it looked like Minkow had turned his life around in prison, becoming a pastor and fraud investigator. But in 2011, Minkow admitted to driving down the stock prices of Lennar, a homebuilding company. He went back to prison for five years, where investigators found that he defrauded his own church. A judge added five years to his sentence and ordered him to pay $612 million in restitution. Many people consider Minkow to be a poster child for 1980s excess.
- Barlow Clowes ran a “bond washing” operation, which purportedly purchased and sold gilt-edged government bonds to create tax advantages. Its approximately 18,000 customers believed their investments were risk-free. However, most of the money actually went to fund the company founder’s exorbitant lifestyle. Eventually, the British Department of Trade and Industry investigated the company and found it owed about 190 million pounds. Many victims lost their entire life savings. The state convicted Clowes of fraud and sentenced him to 10 years in prison.
- The Australian merchant bank, Nugan Hand Bank, went under in 1980 after Francis John Nugan, one of its founders, committed suicide. This resulted in a major scandal. Many news agencies suggested the bank was involved in illegal activities, and soon after, the government indicted another founding member (Michael Jon Hand) and two bank employers for allegedly destroying records.
Although issues like Ponzi schemes are now less common—or at least tend to happen on a smaller scale—there are still thousands of laws that address fraud. If you or someone you loved faces serious fraud charges, you need a seasoned, qualified attorney to explain your rights and protect you from the extreme consequences of the charges, like massive fines and jail time. Call our team for a private consultation.