Academic journal article Journal of the International Academy for Case Studies

Waste Mangement, Inc

Academic journal article Journal of the International Academy for Case Studies

Waste Mangement, Inc

Article excerpt

INTRODUCTION:

Working for his family farm in South Dakota provided Dean Buntrock with the business savvy needed to manage and grow a company. The 1950s knew a different method of garbage disposal than we do today; to take care of disposal needs, small companies, like Ace Scavenger a small Chicago garbage disposal company, existed in towns and cities all around the country. In the 1950s Ace Scavenger came under the control of 24-year-old Dean Buntrock. As time progressed, and waste increased, growing concerns for a healthy environment led to the Solid Waste Disposal Act of 1965. This act imposed costly health and safety standards prompting Ace Scavenger and another small disposal company in Florida to merge into Waste Management Inc., in 1968.

The company went public in 1971 with the sale of 320,000 shares and, subsequently, purchased 75 disposal companies throughout the nation. Over the next 20 years, Waste Management experienced 36% average annual growth in revenue and 36% annual growth in income. Although solid waste was the company's core specialty, it also branched out into other reas of the waste industry. In 1976 when concerns about the hazardous effect of toxic waste began to surface, Waste Management grabbed hold of the toxic waste industry by acquiring numerous hazardous waste landfills. As concerns increased, approval for new landfills became increasingly difficult to obtain. This boosted the value of existing toxic waste landfills, the majority of which were under the control of Waste Management boosting their stock price significantly.

In 1977, Waste Management began contracting with foreign countries to expand international disposal and sanitation services. These countries included Saudi Arabia, Australia, Buenos Aires, Hong Kong, Venezuela, as well as some European countries. Waste Management fiirther expanded offerings when it dove into the recycling business in the late 1980s. By 1991, it was the largest collector of recyclable materials in the United States. By purchasing the controlling share of Wheelabrator in 1990, the company expanded its presence in the incineration market. All of these ventures allowed the Company to grow from $16 million in revenue in 1971 to more than $7.5 billion in revenue in 1991.

GLORY TO GLOOM IN THE TRASH BUSINESS

The Waste Management empire began to suffer in the early 1990s. Its international ventures and other non-core divisions began performing poorly. There was trouble brewing on the domestic front as well; its core North American solid waste business was suffering from intense competition, excess landfill capacity, increased landfill regulation, and high public Tsensitivity to environmental health. All of these factors increased the cost of operating landfills making it more difficult and expensive for Waste Management to operate and expand.

Regulation left more room to shrink than grow in the hazardous waste industry as well. Chemical Waste Management, the hazardous waste subsidiary of Waste Management, began to struggle in early 1991. Competitor Browning-Ferris, the second largest waste disposal company in the nation, also felt the pangs of chemical waste ventures and cut its hazardous waste subsidiary in April 1990. The deteriorating conditions of the waste industry led analysts to question the earnings potential of Waste Management. Despite all of these issues, Buntrock and the top management assured the public that the analysts were wrong, and projected a positive image to investors through the use of controversial and fraudulent accounting practices.

THE AUDITORS

With the intention of going public, Waste Management Inc. hired Arthur Andersen (AA) as its auditor in 1968 and retained them as the audit firm all during the fraudulent years of 1992 to 1997. In fact, from 1968 to 1997 every CFO and CAO in Waste Management had previously worked as an auditor at Andersen. Beginning in 1991, the AA engagement partner assigned to the audit of Waste Management was Robert Allgyer, due to his highly regarded client service skills. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.