The former CFO of Waste Management must pay more than $4 million as part of a final SEC judgment on one of the largest accounting frauds of the 1990s.
The judgment also permanently bars James Koenig from acting as an officer or director of a public company and enjoins him from future violations of the antifraud and other provisions of the federal securities laws.
Koenig, in an 11-week trial in 2006, was found guilty of all charges of securities fraud, falsifying company books and records, lying to auditors, and aiding and abetting the company’s violations.
The Securities and Exchange Commission alleged that from 1992 through 1997, Koenig and others schemed to overstate profits by $1.7 billion. The scheme was accomplished through false and misleading disclosures and various violations of generally accepted accounting principles designed to defer current-period expenses, according to the SEC.
The commission charged, for example, that the company manipulated its calculation of depreciation expense by repeatedly extending the useful lives and overstating the salvage value of its trucks and containers, thus reducing periodic depreciation expenses. The company also failed to write off impaired assets carried on its balance sheet, improperly capitalized interest and other current period expenses, understated its income tax expenses, under-accrued reserves, misapplied acquisition accounting principles, and improperly reversed reserves into income, the SEC said.
The commission previously reached settlements with the company’s outside auditor, Arthur Andersen, four of its former partners, and the founder and four other top officers of Waste Management.