Whether it’s Bernie Madoff’s $65 billion Ponzi scheme or the failure of Lehman Brothers—both of which had major repercussions for the global economy—financial scandal is a reminder that trust in our financial markets can be shattered by greed and corruption. The lessons of these historical scandals can help us foster more transparent, ethical financial systems.
For example, we should encourage financial institutions and companies to cultivate cultures of ethics and transparency and promote whistleblower protections so employees feel comfortable reporting wrongdoing. But we also need to understand that even the best reforms cannot completely prevent fraud and abuse. Greed and dishonesty will continue to be a persistent force that requires vigilance and accountability from all of us.
WorldCom, for example, inflated earnings by hiding line costs to make the company look more profitable than it actually was. The scam ultimately led to the company being forced to restate its earnings and lost millions of dollars for shareholders.
Then there’s the Enron scandal in 2001. The energy company kept huge debts off its balance sheet, which resulted in investors losing $74 billion and thousands of workers and retirees losing their pensions and savings.
Fortunately, some individuals were able to get their lives back together after the fraud was exposed. A few philanthropies like the Picower Foundation, the Chais Family Foundation, and the Betty and Norman F. Levy Foundation were hit particularly hard.