accounting loophole / creative accounting

Global Financial Crisis
by Noah Berlatsky
Published 19 Feb 2010

It doles out grants to airports for building runways and to fishing companies to help them wipe out endangered stocks. But the Cato Institute’s report has exposed only part of the corporate welfare scandal. A new paper by the US Institute for Policy Studies shows that, through a series of cunning tax and accounting loopholes, the US spends $20bn a year subsidising executive pay. By disguising their professional fees as 203 The Global Financial Crisis capital gains rather than income for example, the managers of hedge funds and private equity companies pay lower rates of tax than the people who clean their offices.

The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business
by Richard Brooks
Published 2 Jan 2014

But to suggest that all taxpayers should stop trying to reduce bills – I’m sorry, that’s not how things operate.’‌6 Indeed it wasn’t how things operated in a world where salaries for Big 4 accountancy firm tax partners were now hitting the high hundreds of thousands on the back of tax avoidance. No area of the tax code was safe from the accountants’ loophole-detectors. So it was no surprise when the same firms that were picking apart corporate tax laws spotted the booming bonus culture as another fat meal ticket. Rich pickings Just as with corporate taxation in the 1990s, employment tax laws had been put at the service of free market capitalism.

Cobalt Red: How the Blood of the Congo Powers Our Lives
by Siddharth Kara
Published 30 Jan 2023

Every other NGO I interacted with was staffed by dedicated and principled people who put themselves at considerable risk while working on shoestring budgets to assist some of the poorest and most exploited people in the world. Aristote’s other assertion—that foreign mining companies were using accounting tricks to shortchange Gécamines on their tax payments—proved to have merit. When I mentioned Aristote’s claims to colleagues, they confirmed that foreign mining companies were suspected to use accounting loopholes to minimize their tax payments to the Congolese government. This was one of the reasons cited by the Congolese government for the trebling of tax rates on cobalt and the implementation of the supertax in 2018. Sylvestre, the same senior member of President Tshisekedi’s administration who spoke to me about anti-corruption efforts with Chinese mining contracts, pointed his finger directly at Chinese mining companies with regard to accounting irregularities: The Chinese companies have a negative impact on the Congo through tax evasion and revenue evasion.

The Climate Book: The Facts and the Solutions
by Greta Thunberg
Published 14 Feb 2023

It is solving the climate crisis while maximizing economic growth that is the hard part. So hard as to be near impossible. Since President George H. W. Bush spoke those words, our annual CO2 emissions have gone up by more than 60 per cent, turning what was then a ‘big challenge’ into an existential emergency. We have developed impressive creative accounting, loopholes, outsourcing and greenwashing PR narratives that make it seem as if real action is being taken when in fact it is not. Continued economic growth, on the other hand, has been hugely successful . . . At least for a small number of people who boast a carbon footprint the size of entire villages.

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Entire nations’ climate policies are based on this loophole. In the UK, for instance, the Selby Drax power plant is the biggest single emitter of CO2, but its biomass emissions are excluded from the UK’s national statistics. The EU would not stand a chance of reaching its climate targets without a wide use of clever creative accounting like this. In 2019, 59 per cent of the EU’s so-called renewable energy came from biomass. ‘To be perfectly blunt with you, biomass will have to be part of our energy mix if we want to remove our dependency on fossil fuels,’ the executive vice-president of the European Commission told reporters at the end of 2021.

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How can that be possible when we don’t yet have any technical solutions that can fix this crisis alone and the option of stopping doing things is unacceptable from our current economic standpoint? What are we going to do? Well, the answer is the same as always: we will cheat. We will use all those loopholes and all the creative accounting that we have conjured up in our climate frameworks since the very first Conference of the Parties, the 1995 COP1 in Berlin. We will outsource our emissions along with our factories, we will use baseline manipulation and start counting our emission reductions when it suits us best. We will burn trees, forests and biomass, as those have been excluded from the official statistics.

The Boom: How Fracking Ignited the American Energy Revolution and Changed the World
by Russell Gold
Published 7 Apr 2014

One exception was Pawel Rajszel, a young security analyst in Toronto, who issued a scathing report to his clients in April 2010, arguing that these deals put the company in significantly more debt than it cared to acknowledge. Pointing out that Enron had pioneered the VPPs a decade earlier, he wrote, “Due to what we consider an accounting loophole, Chesapeake is effectively able to hide its VPP liabilities from its balance sheet—something even Enron Oil and Gas Company did not do.” While investment professionals didn’t pay much attention to Rajszel’s prescient warning, Chesapeake’s debt-rating agencies agreed these deals should be accounted for as debt.

The Blockchain Alternative: Rethinking Macroeconomic Policy and Economic Theory
by Kariappa Bheemaiah
Published 26 Feb 2017

Accounting Jiggery Pokery Recent times have been peppered with a number of financial scandals caused by “cooking the books” and inefficient business control systems. A prime example of this was the 2001 Enron scandal, where company executives and managers, in a blatant display of rule-flouting, used accounting loopholes, special purpose entities, and false financial reporting to hide billions of dollars of debt incurred by botched deals and projects. The Enron scandal had two primary outcomes. First, it led to the passing of the Sarbanes Oxley Act (refer to Notes at the end of this chapter). Second, it showed us the difference between the reliability and the relevance of financial data.

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present
by Jeff Madrick
Published 11 Jun 2012

Fastow’s job at first was to find new ways to finance these investments, but then he was forced to find ways to plug the holes as these companies ate up cash, produced business losses, and created rising, unsustainable levels of debt. At this task, Fastow was a charming wizard. He established partnerships (special purpose entities) with outside investors, which, through accounting loopholes, enabled Enron to sell bad assets into these partnerships. The partners participated only because their investments were collateralized by soaring Enron stock. Legally, the partnerships were supposed to be managed independently of Enron, but Fastow often ran them. The sales to the partnerships were recorded as Enron profits, even though it controlled the partnerships and determined what they would buy.

The Making of Global Capitalism
by Leo Panitch and Sam Gindin
Published 8 Oct 2012

“investment”) bankers that the Keynesian commitment to full employment had “prevented London from re-establishing its position as the world’s international financial centre.”17 But when sterling was made convertible in the mid 1950s, and its weakness was fully exposed after the Suez debacle (a run on the British pound was aggravated by the US preventing the IMF from lending to the UK, leading to the temporary closure of the City’s external sterling loan market), London’s merchant bankers—the financial praetorian guard of the old empire—made a bold move to switch allegiance to the US dollar. Employing an accounting loophole in the exchange control regulations, and facilitated by the Bank of England without either approval or oversight by the UK Treasury, the City created a completely unregulated international market for the dollar.18 London’s Eurodollar market exploded at a time when capital controls were being eased in Western Europe, when the need for financing of increased trade and FDI was becoming pressing, and when the dollar famine in Europe was turning into a dollar glut.19 For its part, the US government, in the face of its new balance-of-payments problem, was increasingly reluctant to accept the massive outflow of dollars that resulted from foreigners borrowing on Wall Street.

The Man Who Broke Capitalism: How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America—and How to Undo His Legacy
by David Gelles
Published 30 May 2022

Inside GE, executives adhered to a code of omertà, resolving not to betray one another by telling the truth. And besides, Welch was hardly a sympathetic boss. If Immelt came to him with excuses, Welch would have just replaced him with someone who would do whatever it took to hit the numbers. It didn’t take long for Immelt to embrace the dark arts of creative accounting under Welch. GE’s plastic plants in Asia didn’t make their own basic materials, instead receiving them from the company’s facilities in the U.S. and Europe. But according to GE’s accounting methods, these transfers of goods from one GE plastics unit to another were reported as sales, even though no new money was being generated.

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The company had greater reach than ever before and had all the outward trappings of success, including its enormous market capitalization. But what Wall Street analysts really cared about was GE’s ability to consistently meet or beat their expectations, something that was accomplished largely through the creative accounting at GE Capital. It couldn’t last forever, and breaking the run of infinite expansion and endless earnings growth was going to be hard. But in the aftermath of 9/11, Immelt had a chance. With the markets rattled and investors reassessing their portfolios, he had a unique opportunity to reset GE.

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Not long after leaving GE, he confided in magazine editor Tina Brown, telling her how much he loved living at the top of the Trump International, the gold-hued monolith that GE Capital and Trump developed in the mid-1990s. As he looked out the window at night and saw the sparkling lights of Manhattan encircling Central Park, he told Brown, “I felt I had the world by the ass.” FIVE Rotten Apples “Terrible excesses” Under pressure to produce endless growth, GE began bending the rules. Creative accounting became the norm, and the company’s sprawling finance operations were sufficiently vast and complex to blind regulators to the misdeeds, at least for a time. And GE wasn’t alone. In the last years of the twentieth century and the first years of the twenty-first, a slew of major corporations were engaged in similarly dubious practices.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Eleventh Edition)
by Burton G. Malkiel
Published 5 Jan 2015

Appraising the Counterattack Implications for Investors 7. HOW GOOD IS FUNDAMENTAL ANALYSIS? THE EFFICIENT-MARKET HYPOTHESIS The Views from Wall Street and Academia Are Security Analysts Fundamentally Clairvoyant? Why the Crystal Ball Is Clouded 1. The Influence of Random Events 2. The Production of Dubious Reported Earnings through “Creative” Accounting Procedures 3. Errors Made by the Analysts Themselves 4. The Loss of the Best Analysts to the Sales Desk, to Portfolio Management, or to Hedge Funds 5. The Conflicts of Interest between Research and Investment Banking Departments Do Security Analysts Pick Winners? The Performance of the Mutual Funds The Semi-Strong and Strong Forms of the Efficient-Market Hypothesis (EMH) A Note on High-Frequency Trading (HFT) Part Three THE NEW INVESTMENT TECHNOLOGY 8.

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Many businesses were managed not for the creation of long-run value but for the immediate gratification of speculators. When Wall Street’s conflicted sell-side analysts looked for high short-term forecasted earnings to justify outlandishly high stock prices, many corporate managers willingly obliged. And if aggressive earnings targets proved hard to meet, “creative accounting” could be used so that not only the published street estimates but even the “whisper numbers” could be surpassed. One spectacular example was the rise and subsequent bankruptcy of Enron—at one time the seventh-largest corporation in America. The collapse of Enron, where over $65 billion of market value was wiped out, can be understood only in the context of the enormous bubble in the New Economy part of the stock market.

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There were many villains in this morality tale: the fee-obsessed underwriters who should have known better than to peddle all of the crap they brought to market; the research analysts who were the cheerleaders for the banking departments and who were eager to recommend Net stocks that could be pushed by commission-hungry brokers; corporate executives using “creative accounting” to inflate their profits. But it was the infectious greed of individual investors and their susceptibility to get-rich-quick schemes that allowed the bubble to expand. And yet the melody lingers on. I have a friend who built a modest investment stake into a small fortune with a diversified portfolio of bonds, real estate funds, and stock funds that owned a broad selection of blue-chip companies.

Makers and Takers: The Rise of Finance and the Fall of American Business
by Rana Foroohar
Published 16 May 2016

“It just opened up this huge span of bonus pay which was not for performance. I had written a lot about this before, that it was largely phony,” Stiglitz says. “I argued very strongly during the 1990s that the whole stock option pay trend caused a lot of incentives for nontransparency, and that it was directly responsible for what I call creative accounting. The financial sector used this creative accounting not just to deceive the market but also to avoid paying the taxes that they should have paid.” This view is backed by economists like Thomas Piketty and Emmanuel Saez, who’ve tallied the massive increase in pretax personal income claimed by the top 1 percent since then.44 That increase, their research shows, is linked to growing inequality (which requires greater government payouts to the poor) and slower economic growth, thanks to flat salaries for the majority of Americans.

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Buoyed by his successes, Wriston told the Street that he wanted his bank’s earnings to grow at 15 percent a year, rather than the usual single digits; this would necessitate keeping less capital on hand and taking on more leverage.46 To encourage employees to do whatever it took to hit that target, Citi also changed its compensation structure and began awarding stock options based on the value of its shares (which of course encouraged even greater risk taking and creative accounting to hide bad assets on income statements).47 None of it worried Wall Street’s million-dollar banker. Wriston had a dream—one that Sandy Weill would realize many years later. He wanted his institution to become a one-stop shop that would supply any financial product—from mortgages to securities to deposit accounts to trading platforms—to businesses and individuals.

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“Financialization has polluted the entire physical investment process, the labor markets, and the innovation cycle of firms,” says Andrew Haldane, the chief economist of the Bank of England and one of the deepest thinkers on the topic of financialization today. “The damage it inflicts on investments in physical and human capital [meaning factories and workers] is hugely important, because that’s what slows down growth.”14 THE RISE OF CREATIVE ACCOUNTING Shareholder activism by people like Carl Icahn and the sort of buybacks being done by Apple and other large public firms are currently one of the best windows into the rise of finance. Back in the 1960s and ’70s, companies invested about 40 percent of each additional earned or borrowed dollar into the real economy.15 All that changed in the Reagan era.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing
by Burton G. Malkiel
Published 10 Jan 2011

Appraising the Counterattack Implications for Investors 7. HOW GOOD IS FUNDAMENTAL ANALYSIS? The Views from Wall Street and Academia Are Security Analysts Fundamentally Clairvoyant? Why the Crystal Ball Is Clouded 1. The Influence of Random Events 2. The Production of Dubious Reported Earnings through “Creative” Accounting Procedures 3. Errors Made by the Analysts Themselves 4. The Loss of the Best Analysts to the Sales Desk, to Portfolio Management, or to Hedge Funds 5. The Conflicts of Interest between Research and Investment Banking Departments Do Security Analysts Pick Winners?—The Performance of the Mutual Funds Can Any Fundamental System Pick Winners?

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Many businesses were managed not for the creation of long-run value but for the immediate gratification of speculators. When Wall Street’s conflicted sell-side analysts looked for high short-term forecasted earnings to justify outlandishly high stock prices, many corporate managers willingly obliged. And if aggressive earnings targets proved hard to meet, “creative accounting” could be used so that not only the published street estimates but even the “whisper numbers” could be surpassed. One spectacular example was the rise and subsequent bankruptcy of Enron—at one time the seventh-largest corporation in America. The collapse of Enron, where over $65 billion of market value was wiped out, can be understood only in the context of the enormous bubble in the New Economy part of the stock market.

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There were many villains in this morality tale: the fee-obsessed underwriters who should have known better than to peddle all of the crap they brought to market; the research analysts who were the cheerleaders for the banking departments and who were eager to recommend Net stocks that could be pushed by commission-hungry brokers; corporate executives using “creative accounting” to inflate their profits. But it was the infectious greed of individual investors and their susceptibility to get-rich-quick schemes that allowed the bubble to expand. And yet the melody lingers on. I have a friend who built a modest investment stake into a small fortune with a diversified portfolio of bonds, real estate funds, and stock funds that owned a broad selection of blue-chip companies.

Dollars and Sense: How We Misthink Money and How to Spend Smarter
by Dr. Dan Ariely and Jeff Kreisler
Published 7 Nov 2017

Even though it is irrational, mental accounting, just like corporate accounting, can be useful if used judiciously. Budget categories can help us plan our finances and control our spending. But, just like corporate accounting, mental accounting is not a panacea, because it still offers a lot of gray area. Just as some companies exploit loopholes with “creative accounting,” so do we with our flexible spending logic. We mismanage our money when we don’t use any categories, but even when we do use them, we then tweak the classification of our expenditures. We change the rules and we make up stories that fit our whims. Mark Twain describes one such instance of creative manipulation of rules.

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When this happens—which isn’t all the time, but often enough—we’re rewarding good behavior with bad behavior that directly undermines the good. Saving an extra $100 one week is a good start, but celebrating the saving by spending $50 on something we wouldn’t have purchased otherwise—like a dinner or a gift—doesn’t help our overall finances. Another way we engage in creative accounting is known as INTEGRATION. This is when we rationalize that two different expenses are actually one by basically assigning the smaller expense to the same category as the larger one. This way, we can fool ourselves into believing we’re suffering just one big purchase, which is less psychologically draining than one large and one small purchase.

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See price of free French Laundry, The, 29 frequent-flyer miles, 204–5 fudging made up rules, 54, 55 future as point of focus, 129, 130 gambling, 3–6, 45–46 gambling with casino chips, 4, 5–6, 76, 84 gift cards, 76–77, 84 Gilovich, Thomas, 46 Gino, Francesca, 164–65 global warming, 246 government and transparency, 145 greenwashing, 160–61 Gross, Sam, 254 Groupon offers and relativity, 33 hands-on ownership, 117–18 happy endings, 65, 66–67, 76 healthcare decisions, end-of-life, 121 hedonic evaluation, 206–7 helmets and the helmet law, 68–69 herding and anchoring, 99 Hershfield, Hal, 228 Hollywood sequels and remakes, 176–77 honeymoon experience, 61–65, 69–71, 75 housework by couples, 147–48 human nature assigning meaning to a price, 198–200 and bargains, 21–24, 30–31 comparing ourselves to others, 38–39 and expectations, 170–71 making the easy choice, 33, 34, 35–36 and mental accounting, 48–49 and optical illusions, 25–27 psychological mistakes, 5–6 rationality vs., 47–48 responses to perceived unfairness, 131–34, 135–39 Ten Financial Sins, 52 tunnel vision, 11–12 See also feelings and emotions human resources (HR) office, 228–29 Ikea effect, 116 illusion of wealth, 249–51 I’m Telling You for the Last Time (Seinfeld), 68–69 infomercials, 126 integrative creative accounting, 55–56 internal vs. external anchors, 106 investments bonds, 125 dilution of pain of paying management fees, 83 ignoring your portfolio, 249 and loss aversion, 123–25 stock market, 123–25, 169 sunk costs, 126–30 wine as investment, 57–58 iPad pricing, 104 irrational valuations, 16–18 Ivester, Douglas, 137 JC Penney “sales” on high priced items, 21–24 Jobs, Steve, 104 Johnson, Ron, 22–23 Jones, George, 3–6, 84 Karlan, Dean, 232 Kayak.com, 145 Kenya, mobile money-saving system experiments in, 242–44 King, Cheryl, 149–52 Kreisler, Jeff and artisanal moonshine, 159–60 benefits of Princeton education, 176 campaign speech for fifth-grade student council, 256 and consumption vocabulary, 157–58 Dr.

After the New Economy: The Binge . . . And the Hangover That Won't Go Away
by Doug Henwood
Published 9 May 2005

But from the point of view of the consumer, the $100 premium, say, over the price of a modest unbranded shoe is money that could have been spent on other goods or services. It seems like a massive waste of money, but any beHever in freedom of reHgion wouldn't want to gainsay the spiritual experience of purchasing and wearing cleverly branded footwear. Lev's point 3 is almost too insubstantial to refrite; how can even the most creative accountant put a monetary value on a "smarter" way of doing business? But point 4 is a beaut: monopoly is spun as something to celebrate, at least by the accountant's concept of celebration. No longer 20 After the New Economy would the claim of monopoly position attract the interest of regulators or the antitrust division of the Justice Department: it'd be something to boast about on the balance sheet.

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But, fantasy aside, all the exotic instruments and strategies still depended on a troublesome physical world; to have the telecoms bandwidth to trade, Enron also built a big network to fulfill demand that was never demanded. It's not easy to overthrow matter if you're trying to make a profit. You can turn to creative accountants to help you out, but not forever. Almost the only real money Enron ever made was by manipulating California's electricity market during that state's 2001 blackout crisis, but that didn't last very long, and it wouldn't be a very inspiring case study for the Harvard Business School. Enron is also a fine illustration of the transformation over the last twenty years in how corporations are run.

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Business Week's annual surveys of executive pay prove year after year that there's no relation at all between compensation and corporate performance. And in seriously troubled companies, where profits were invented by clever accountants, there was no incentive to blow the whistle. Instead, the incentive was the opposite, to experiment more aggressively with creative accounting and keep it quiet. Not that the options game was wholly without payoff. For companies, options have several charms: they substitute for cash salaries, offer big tax deductions, and allow heavy users to overstate their profits, since options need not be accounted for as an expense. Such 1990s highfliers as AOL, Viacom, Lucent, and Cisco would have reported earnings 25-75% lower than they did in the late 1990s had accounting standards required honesty And options helped reduce the IRS bill: Microsoft saved more than $2 billion on taxes in 2000 thanks to options; Cisco, $1.4 billion; Enron, $390 million (Henry and Conlin 2002).

Wall Street Meat
by Andy Kessler
Published 17 Mar 2003

Worldcom, Global Crossing, and Qwest kept reporting decent revenues, and met analyst expectations. Their stocks were dropping, but not as fast as dotcoms, as telecom revenues provided a cushion to the downdraft. It turned out that many telecom companies were just lying through their teeth. They employed the worst form of creative accounting—they were just swapping revenues with each other. “I’ll buy $300 million of capacity from you if you buy $299 mil- Wall Street Meat lion of capacity from me. Investors will never know.” Despite a fancy name, Indefeasible Rights of Use or IRUs, they were pure bullshit. These swaps were fluff used to distract investors from what was really going on: prices were collapsing and analyst expectations were way too high.

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Gary Pilgrim showed the way, but the momo virus infected the entire market. Al Harrison, the “state your conclusions upfront” portfolio manager at Alliance Capital in Minneapolis, was someone whom I respected a lot. He fell under the spell and chased Enron shares, another company employing creative accounting, all the way down. Anyone who bought Global Crossing, or Drugstore.com, or Excite@Home, or Enron had a gambling problem. They were quacking, too. Investors Anonymous for everybody. 224 Spitzer Fixer · · · What was billed as the “Great Wall Street rip off” became big news. Investors saw their 401K retirement plans wiped out.

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I’m not so sure. 246 Index Activision, 165 Alexander, Margo, 12, 22, 27–28, 38, 60, 81, 85, 86 offsite analyst meetings, 51, 77–78 Alexander, Pam, 184, 218 Alexander Ogilvy, 184 “All American Research Analyst poll,” 25, 48 Alliance Capital, 224 Alliance Management, 43, 47 allocating capital, 90 Ally, Steve, 30, 67, 141 alternate pay phone companies, 37–38 Amazon.com, 174–75, 181, 186–87 AMD, 45, 144 American Electronics Association, 62 American Superconductor, 137 America Online, 105, 156, 178, 218 Amerindo, 168 analyst(s), 8, 234–40 banking, 107–8 basics of, 24–26 boutique, 109 conference calls and, 37–38 after crash of October 1987, 72 “dialing for dollars” and, 47 industry immersion and, 27 institutional clients and, 23 investment bankers and, 241–42 press coverage and, 48 ranking, by Institutional Investor, 25, 46–48 reputation and, 231, 237–41, 244 small cap, 148 types of, 32 visits to accounts by, 47 written reports and, 47–48 Apple Computer, 16–17, 158 Armstrong, Michael, 216 Arrowwood, 51, 77 Ashton-Tate, 82–83 athletes, on Wall Street, 67–68 Index Atlantic Crossing, 213 AT&T, 7, 33, 59, 212, 216–17 automated trading systems, 72 Avid, 162–63 ax in a stock, 35, 112 ax syndrome, 209–18 bankers, technology, 137 banking analysts, 107–8 banking fees, 90 Barlage, Jim, 17 Barnes and Noble Booksellers, 174 Be, Inc., 206 Beard, Anson, 89, 109 Bell Labs, 7 Berens, Rod, 84–87 Berkowitz, Jeff, 202–3 Bezos, Jeff, 174 Biggs, Barton, 24–25, 92, 123–24, 125, 126, 127, 129, 145, 152–53 Blodget, Henry, 181–85, 214–16, 218, 225–26, 231 Blum, Scott, 207 Boesky, Ivan, 56 Bogle, John, 172 bonus pool, 90 Boston Company, 103 Boucher, David, 141–42, 243 boutique analyst, 109 Boutros, George, 170 Brady, Bill, 139–40, 157, 170, 223 Bright Lights, Big City (McInerney), 39–40 248 Broadcast.com, 177–78 Brooke, Paul, 129, 143 bulge bracket firms, 108, 221 bull market(s), 50–69 takeovers, buyouts and, 53 Burroughs Corporation, 56 Business Week, 216 Buy.com, 180, 207–8 “buying it off the box,” 196–97 buy-side firms, 25 Callahan, Dennis, 73, 150, 215 Cantor Fitzgerald, 67 capital, allocating, 90 Carroll, Jim, 72 Carroll, Paul, 67 Case, Steve, 156 Cashin, Art, 42 C-Cube Microsystem, 165 CDMA, 204–5 Chinese Wall, 94, 216, 221 chip industry, 26–27 CIBC Oppenheimer, 182 Cirrus Logic, 93 Cisco, 102, 105, 126 Citigroup, 216 Citron, Jeff, 197–98, 199 Clark, Jim, 156, 165–67 Clark, Mayree, 226 CMGI, 168 CNBC, 64, 181 Colonna, Jerry, 203–4 commissions, 72, 90 compensation, on Wall Street, 90 Index Compuserve, 36 conference calls, 37 conferences, 119 Contel, 39 convertible bonds, 91 Cordial, Steve, 126 Cornell, Robert (Bob), 5–16, 20, 26–30, 72, 79, 85, 155, 167 Cowan, Ollie, 31, 53 Cramer, Jim, 182, 183, 200, 202–3 crash of October 1987, 71 creative accounting, 219 CS First Boston, 1, 179–80, 190, 223 Cuban, Mark, 178 Cuhney, Adam, 79–80 Curley, Jack, 129–30, 140, 156 Cushman, Jay, 129–30, 132 Dale, Peter, 85, 92, 96, 108, 110 Data Resource Inc. (DRI), 39 D’Auria, Henry, 65 day traders, 198 Dean Witter, 174 derivatives, 91 Deutsche Bank, 169–70, 174, 178–79 “dialing for dollars,” 47 Dickey, Richard, 95, 100, 102, 112, 135, 141–42, 230 Digital Equipment, 67 Diller, Barry, 154 Diller, Jim, 83–84, 126–27 discount rate, 20–21 Doerr, John, 109, 174 Doherty, Matt, 67–68 dotcom companies, 173–74, 180 meltdown of, 213–14 Drexel Burnham, 53, 104 Drugstore.com, 180, 224 earnings, future, 20–21 earnings reports, 92, 124 Ebbers, Bernie, 38, 212, 220, 226, 227 Eddy, Tom, 137–38 Eisenstat, Al, 158 Electronic Communications Networks (ECNs), 72, 198 Enron, 224, 229 equity salesmen, 50 Erickson, Stein, 131 Esber, Ed, 82 Excite, 168 Excite@Home, 224 Exodus Communications, 175–76 Fidelity Magellan fund, 59 fighting, on Wall Street, 68 First Jersey Securities, 82 Fisher, Dick, 101, 130 Flatiron Partners, 203 FNN (Financial News Network), 64 Foremost-Knudsen, 15 249 Index 401K retirement plans, 225 Fram, Jonathon, 11 Gams, Ed, 36–37 Gassee, Jean-Louis, 17, 206 gate arrays, 19 Gates, Bill, 100–101, 128 Gaudette, Frank, 128 General Electric, 81, 173 GeoCities, 178, 203 Gerhardt, Clark, 126 Gilder, George, 204–6 Glaser, Rob, 156, 175 Global Crossing, 219, 220, 224 Goldman Sachs, 101, 109, 130, 139, 175–77 Broadcast.com and, 177–78 IPOs and, 168–69 TheStreet.com and, 201–2 Yahoo!

Reinventing Capitalism in the Age of Big Data
by Viktor Mayer-Schönberger and Thomas Ramge
Published 27 Feb 2018

when bookkeepers get creative: “Creative” accounting has been associated with spectacular bankruptcies and scandals, ranging from those befalling National City Bank (now Citibank, see “Stock Exchange Practices: Report of the Committee on Banking and Currency” [the Pecora Commission Report], 73rd Congress, 2nd Session, report no. 1455, June 6, 1934, https://www.senate.gov/artandhistory/history/common/investigations/pdf/Pecora _FinalReport.pdf; for further details, see http://www.senate.gov/artandhistory/history/common/investigations/Pecora.htm) and drug company McKesson & Robbins (which faked purchase orders and inflated inventory, see Michael Chatfield, “McKesson & Robbins Case,” in Michael Chatfield and Richard Vangermeersch, eds., History of Accounting: An International Encyclopedia [New York: Garland Publishing, 1996], 409–410) in the twentieth century to a string of high-profile cases at the turn of the millennium, including those of WorldCom (see Justin Kuepper, “Spotting Creative Accounting on the Balance Sheet,” Forbes, March 25, 2010, http://www.forbes.com/2010/03/25/balance-sheet-tricks-personal-finance-accounting.html), Chiquita Brands, HealthSouth (see Michael J. Jones, Creative Accounting, Fraud and International Accounting Scandals [Chichester, England: John Wiley, 2011]), Enron (David Teather, “Billions Still Hidden in Enron Pyramid,” Guardian, January 30, 2002, https://www.theguardian.com/business/2002/jan/30/corporatefraud.enron2; Malcolm S.

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merchants in Florence were required to maintain: Ibid., 35. annual audit, conducted by Cosimo himself: Ibid., 37–38. trying to embezzle monies: See Crosby, The Measure of Reality, 204; Soll, The Reckoning, 37–38. Wedgwood transformed the information flows: Soll, The Reckoning, 117–131. when bookkeepers get creative: “Creative” accounting has been associated with spectacular bankruptcies and scandals, ranging from those befalling National City Bank (now Citibank, see “Stock Exchange Practices: Report of the Committee on Banking and Currency” [the Pecora Commission Report], 73rd Congress, 2nd Session, report no. 1455, June 6, 1934, https://www.senate.gov/artandhistory/history/common/investigations/pdf/Pecora _FinalReport.pdf; for further details, see http://www.senate.gov/artandhistory/history/common/investigations/Pecora.htm) and drug company McKesson & Robbins (which faked purchase orders and inflated inventory, see Michael Chatfield, “McKesson & Robbins Case,” in Michael Chatfield and Richard Vangermeersch, eds., History of Accounting: An International Encyclopedia [New York: Garland Publishing, 1996], 409–410) in the twentieth century to a string of high-profile cases at the turn of the millennium, including those of WorldCom (see Justin Kuepper, “Spotting Creative Accounting on the Balance Sheet,” Forbes, March 25, 2010, http://www.forbes.com/2010/03/25/balance-sheet-tricks-personal-finance-accounting.html), Chiquita Brands, HealthSouth (see Michael J.

Reinventing the Bazaar: A Natural History of Markets
by John McMillan
Published 1 Jan 2002

In 1997–1998, the Chicago Bulls and the New York Knicks had payrolls 2.5 times larger than those of the Los Angeles Clippers and the Milwaukee Bucks.22 This variation occurred because of exemptions: for example, a team may match outside offers made to its players. The true gap, however, is probably much larger than published salaries indicate, because of creative accounting, deferred payments, and unreported payments. “We have spent substantial hundreds of thousands of dollars of the owners’ money,” said NBA commissioner David Stern, “to make sure that the agreement is lived up to by the owners themselves.”23 The salary cap means that small-market teams can, and do, win the basketball championship.

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“I don’t think so, but it’s very strange, isn’t it, very mysterious that such discrepancies in cost would arise, considering there were so many smart people here working on the bidding.”13 Why does dango persist, and why is the construction industry so hard to reform? Reported profit data provide no evidence that the firms involved benefit greatly. Doubtless some of the profits from dango make their way into the pockets of the firms’ owners and are hidden by creative accounting, but most do not. The firms must try so hard to earn the monopoly profits that they end up with little net gain. Firms use up resources in competing for monopoly profits. Much of the excess profits that dango’s high prices generate are bid away in the competition for political favor; they end up in the hands of the politicians.

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Without rules designed to give shareholders reliable information about a company, investors would be reluctant to hand over their money to firms. Even with rules in place things can go awry. The Enron scandal of 2001–2 underlined the need for mechanisms to constrain managers from abusing their trust. Hiding behind creative accounting, Enron’s executives enriched themselves at their shareholders’ expense. A modern economy is almost incomprehensibly complex. Transactions require the cooperation of large numbers of people and may take years to come to fruition. Markets need a well-designed superstructure to enable them to handle such complexity.

Boom and Bust: A Global History of Financial Bubbles
by William Quinn and John D. Turner
Published 5 Aug 2020

Simultaneously, an emerging culture of tying executive pay to a company’s share price created an incentive for companies to overstate earnings, often through the use of creative accounting.58 Before 1998, there had never been more than 60 earnings restatements in a single year in the United States; in 164 THE DOT-COM BUBBLE 1998 there were 96, in 1999, 204, and in 2000, 163. As a result, investors were led to believe in the 1998–2000 period that profits were rising, but when future revisions were taken into account, they had in fact been steady or falling.59 This practice culminated in the collapse of Enron in 2001, when it emerged that the $60 billion energy firm had used creative accounting to fraudulently hide substantial losses.

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For example, in September 1889 the Victoria Freehold Bank changed its name to the British Bank of Australia.44 Scottish newspapers teemed with advertisements from these companies, offering unusually high interest on deposits.45 But these deposits were being used merely to pay off other maturing debts.46 This ultimately turned these land-boom companies into Ponzi schemes. Several companies, such as those associated with Sir Matthew Davies, the speaker of the Victorian Parliament, engaged in creative accounting practices, paid dividends out of capital or borrowed funds, and used company funds to keep their share price from falling.47 Of course, these zombie banks could only survive for so long. Between 1889 and mid-1891, the only major institution to fail was the Premier Permanent Building Association of Melbourne.

Ethics in Investment Banking
by John N. Reynolds and Edmund Newell
Published 8 Nov 2011

Since then a number of high-profile and highly damaging incidents have also raised ethical concerns over finance. These include the liquidation of the Bank of Credit and Commerce International (BCCI) amid allegations of fraud; the bankruptcies of Enron and WorldCom, which were associated with “creative accounting” – the deliberate manipulation of accounts to obscure the true financial position of these firms – and also with fraud; the activities of rogue trader Nick Leeson, which brought about the collapse of Barings Bank, the UK’s oldest merchant bank; Robert Maxwell’s alleged misappropriation of the Mirror Newspaper Group’s pension fund; the German FlowTex scandal, where non-existent machinery had been sold; and the Credit Lyonnais crisis in the early 1990s, following a disastrous expansion strategy and a failure of risk controls.

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Index ABACUS, 7, 16–17, 46, 63–4, 68, 73, 78 Abrahamic faiths Christianity, 52–4 Islam, 54–5 Judaism, 56 abuse market, 14, 70, 75, 84–8 personal, 159 of resources, 127–8 abusive management practices, 157 abusive trading, 93 adult entertainment, 56 advisers financial, 109 investment banking, 111 sell-side, 107, 111–13 trusted, 108–9, 125 advisory fees, 119, 124 advisory markets, 73 agents, 65 aggressive behaviours, 118–19 Alpha International, 9 American Bar Association, 19 Anderson, Geraint “CityBoy”, 8 Anglican Communion, 53 Anglicanism, 53 annual general meeting (AGM), 29, 54 Aquinas, Thomas, 34, 37 Aristotle, 34 Arjuna, 57 attrition rate, 132 authorisation, informal, 81, 98 BAE Systems, 48 bait and switch, 102–3, 158 bank debt, 82–3, 120 banking regulations, 16 Bank of America, 16 Bank of Credit and Commerce International (BCCI), 12 Bank of England, 25 Barclays Capital, 139 Bar Council, 19 Bayly, Daniel, 8 Bear Stearns, 5, 16, 76 beauty parade, 110 behaviours aggressive, 118–19 discriminatory, 129–31 of Hedge fund, 12 investment banking, 3 management, 131–2 market, 71 misleading, 86 unethical, 68 virtuous, 37 Benedict XVI, Pope, 6, 52 Bentham, Jeremy, 36 Bernanke, Ben S., 96 Besley, Tim, 42 Beyond the Crash (Brown), 4 Bhagavad Gita, 57 bid price, 64 big cap, 65, 85 black box approach, 114 Blackstone Group, 20 Blankfein, Lloyd, 47, 63–4, 68, 78 bluffing, 113 Boesky, Ivan, 12 bonds government, 23 investment grade, 118 junk, 118 bonus pools in public ownership, 136–9 Bootle, Roger, 4 Bribery Act 2010, 129 British Academy, 42 Brown, Gordon, 4, 135 Buddhism, 57 bullying, 159 170 Index business ethics of fiduciary duties, 27 of financial crisis, 12–32 within governments, 59 of market capitalism, 12–14 of regulation, regulatory changes and, 18–21 of religion, 51–62 of shareholders, 27–9 strategic issues with, 30–1 Business Ethics Center, 56 Business Judgment Rule, 20 Business Standards Report, 46 buy recommendation, 115 capitalism market, 12–14 modern, 54 see also casino capitalism capital markets, 155 advisory markets vs., 73 conflicts of interest in, 112–14 cardinal virtues, 37 Caritas in Veritate (Benedict), 6, 52 cash compensation, 132, 134 casino capitalism emergence of, 43 in investment banking, 3 speculative, 16, 93 categorical imperative, 34, 59, 69 Caterpillar, 48 Central Finance Board of the Methodist Church (CFB), 54, 59 chief executive officer (CEO), 116 Christianity, 52–4 Anglican Communion, 53 Methodist Church, 53 Roman Catholic Church, 53 Christian Old Testament, 34 Church Investors’ Group (CIG), 135 Church of England, 9, 53, 58 Citigroup, 19, 112 claiming credit, 134 clients confidential information, 120 conflicts of interest, 105–10 171 duty of care, 105 engagement letters, 122–3 fees, 115–18 financial restructuring, 119–20 hold-out value, 120–1 honesty, 101–5 margin-calls, 121 practical issues, 110–15 promises, 100–1 restructuring fees, 121–2 syndication, 118–22 truth, 101–5 Code of Ethics, 47–50, 147–51 for Goldman Sachs business principles, 46 in investment banking, 47–9 Revised, 47 collatoralised debt obligations (CDOs), 30, 42, 75 command economies, 13 commercial banking, 19–21, 25 communication within markets, 88 Companies Act 2006, 27 compensation cash, 132, 134 defined, 132 for employees, 135 internal issues on, 8 for junior bankers, 136 levels of, 132–3, 138 objectivity of, 144 political issues with, 6, 137 restrictions on, 10 competitors, 113 compliance corporate, 20 danger of, 20 frameworks for, 68, 146 regulatory, 18 requirements of, 6 confidential information, 120 conflicts of interest, 105–10, 158 with capital markets, 109–10 with corporate finance, 107–8 personal, 47 with pre-IPO financing, 110 with private equity, 110 172 Index conflicts of interest – continued reconciling, 68–70 of trusted advisers, 108–9 consequentialist ethics, 36–7, 42 corporate compliance, 20 Corporate/Compliance Social Responsibility (CSR), 7 corporate debt, 17 corporate entertainment, 128–9, 159 corporate finance, 107–8 Corporate Sustainability Committee, 152 Costa, Ken, 9 Cox, Christopher, 96–7 creative accounting, 12 credit crunch, 17 credit default swap (CDS), 71 credit downgrade, 17, 76 Credit Lyonnais, 12 creditors, restricted, 121 credit rating, 75–7 calculating, 76 inaccurate, 5 manipulating, 75, 156, 158 unreliability of, 17 credit rating agencies, 76 Crisis and Recovery (Williams), 53 culture, 46, 136, 151 customers, 69 Daily Telegraph, 84 Debtor in Possession finance (DIP finance), 80 debts bank, 82–3, 120 corporate, 17 junior, 118 rated, 77 senior, 118 sovereign, 17 deferred equity, 5 deferred shares, 133 Del Monte Foods Co., 107 deontological ethics, 34–6 stockholders, 41–2 trust, 40–1 derivative, 27, 30 dharma, 63–4 Dharma Indexes, 57 discounted cash flow (DCF), 27 discount rate, 27 discriminatory behaviour, 129–31 distribution, 15, 35, 66 Dodd–Frank Wall Street Reform and Consumer Protection Act, 25 dotcom crisis, 94 dotcom stocks, 17 Dow Jones, 55–6 downgrade credit, 17, 76 defined, 76 multi-notch, 17, 76 duties, see rights vs. duties duty-based ethics, 66–8 duty of care, 105 Dynegy, 8 Earnings Before Interest Tax Depreciation and Amortisation (EBITDA), 27 economic free-ride, 5, 21 economic reality, 137 effective tax rate (ETR), 140 emissions trading, 14 employees, compensation for, 135 Encyclical, 52 engagement letters, 122–3, 159 Enron, 8, 12, 17, 20, 76 enterprise value (EV), 27 entertainment adult, 56 corporate, 128–9, 159 sexist, 159 equity deferred, 5 private, 2–3, 12, 110 equity research, 88–9, 113–15 insider dealing and, 83–4 ethical behaviour, 38–9 Ethical Investment Advisory Group (EIAG), 53, 58 ethical investment banking, 145–7 ethical standards, 47 Index ethics consequentialist, 36–7, 42 deontological, 34–6 duty-based, 66–8 exceptions and, effects of, 89–90 financial crisis and, 4–8 in investment banking, 1 in moral philosophy, 1 performance and, 8–10 rights-based, 66–8 virtue, 37–8, 43–4 see also business ethics; Code of Ethics Ethics Helpline, 48 Ethics of Executive Remuneration: a Guide for Christian Investors, The, 135 European Commission, 89 European Exchange Rate Mechanism (ERM), 17 exceptions, 89 external regulations, 19, 31 fair dealing, 45 Fannie Mae, 43 Federal Home Loan Mortgage Corporation, 43 Federal National Mortgage Association, 43 fees, 115–18 advisory, 107, 116 restructuring of, 121–2 2 and 20, 13 fiduciary duties, 27–8 financial advisers, 109 Financial Conduct Authority (FCA), 26 financial crisis, business ethics during CDOs during, 90 CDSs during, 90 ethics during, 4–8, 12–34 investment banking and, necessity of, 14–15 market capitalism, 12–14 necessity of, 14–15 non-failure of, 21 positive impact of, 18 problems with, 15–17 reality of, 16 speculation in, 91 173 Financial Crisis Inquiry Commission, 76 Financial Policy Committee (FPC), 25 financial restructuring, 119–20 Financial Services Modernization Act, 19 Financial Stability Oversight Council, 25 firm price, 67 Four Noble Truths, 57 Freddie Mac, 43 free-ride defined, 26 economic, 5, 21 in investment banking, 24 FTSE, 55 Fuhs, William, 8 General Board of Pension and Health Benefits, 54, 59 German FlowTex, 12 Gift Aid, 141 Glass–Steagall Act, 19 Global Settlement, 113 golden parachute arrangements, 133 Golden Rule, 35, 150 Goldman Sachs, 7, 16, 45, 63 Business Principles, 45–6 charges against, 78 Code of Business Conduct and Ethics, 45, 68 Code of Ethics for, 47–8 Goldsmith, Lord, 27 government, 59 business ethics within, 60 guarantees of, 24 intervention by, 22–3 government bonds, 23 greed, 4–5 Green, Stephen, 8–9 gross revenues, 59 Hedge fund behaviour of, 12 failure of, 21 funds for, raising, 2 investment fund, as type of, 3 rules for, 133 174 Index Hennessy, Peter, 42 Her Majesty’s Revenue and Customs (HMRC), 140–1 high returns, 28, 110 Hinduism, 56–7 Hobbes, Thomas, 36 hold-out value, 120–1 honesty, see trust hospitality, 128–9 hot IPOs, 94 hot-stock IPOs, 94 HSBC, 9, 28, 152 Ijara, 55 implicit government guarantee, 22–3 Independent Commission on Banking, 25 inequitable rewards, 6 informal authorisation, 81, 98 Initial Public Offering (IPO), 7 of dotcom stocks, 17 hot, allocation of, 94 hot-stock, 94 insider dealings, 83–4, 155 equity research and, 83–4 ethics of, 66, 70 laws on, 84 legal prohibition on, 82 legal restrictions on, 10 legal status of, 82 legislation on, 74 restrictions on, 83 rules of, 82, 90 securities, 70 insider trading, 12 insolvency, 24–5 institutional greed, 4 integrated bank, 28 integrated investment banking, 2, 30, 67, 106, 108 interest payments, 59–60 interest rate, 60 internal ethical issues, 126–43 abuse of resources, 127–8 corporate entertainment, 128–9 discriminatory behaviour, 129–31 hospitality, 128–9 management behaviour, 131–2 remuneration, 132–9 tax, 139–41 internal review process, managing, 134 investment banking, 94 casino capitalism in, 3 Code of Ethics in, 47–9 commercial and, convergence of, 20–1 defined, 2 ethics in, 1 free-ride in, 24 integrated, 2, 30, 67, 108, 112 in market position, role of, 65–6 moral reasoning and, 38 necessity of, 14–15 non-failure of, 19–20 positive impact of, 18 recommendations in, 94–7 sector exclusions for, 58–9 investment banking adviser, 121 investment banking behaviours, 3 investment banking ethics committee, 151–3 investment bubbles, 95 investment fund, 3 investment grade bonds, 118 investment grade securities, 76 investment recommendations, 94 investments personal account, 128, 156 principal, 15, 28 proprietary, 29 IRS, 140 Islam, 54–5 Islamic banking, 6, 54–5 Jewish Scriptures, 34 Joint Advisory Committee on the Ethics of Investment (JACEI), 54 JP Morgan, 16 Judaism, 56 junior bankers, 139 junior debt, 118 junk bond, 118 “just war” approach, 38 Index Kant, Immanuel, 35, 69 karma, 57 Kerviel, Jérôme, 44, 80 Krishna, 57 Law Society, 19 Lazard International, 9 leading adviser, 41 Leeson, Nick, 12, 44, 81 legislative change, 25–6 Lehman Brothers, 5–6, 15, 21, 23, 31, 43, 76 lenders, 26, 131 lending, 59–60 leverage levels of, 25 over, 75, 80, 119 Levin, Carl, 17, 63–4, 68 light-touch regulations, 4 liquidity market, 95 orderly, 25 withdrawal of, 24 loan-to-own, 80 Locke, John, 34 London Inter-Bank Offered Rate (LIBOR), 23 London School of Economics, 43 London Stock Exchange, 65, 71, 84 long-term values, 147 Lords Grand Committee, 27 LTCM, 23 lying, 101 MacIntyre, Alasdair, 38 management behaviour, 131–2 margin-calls, 121 market abuse, 14, 70, 75, 86–8, 155 market announcements, 88 market behaviours, 74 market capitalism, 12–14 market communications, 88 market liquidity, 95 market maker defined, 65–7 investment bank as, 66 primary activities of, 65 175 market manipulation, 75 market position, role of, 104 market rate, 117 markets advisory, 73 capital, 73, 117–18, 158 communication within, 88 duties to support, 71–2 primary, 103 qualifying, 70, 82 secondary, 103 market trading, 41 Maxwell, Robert, 12 Meir, Asher, 56 mergers and acquisitions (M&As), 41, 79 Merkel, Angela, 93 Merrill Lynch, 8, 16 Methodism, 53 Methodist Central Finance Board, 59 Methodist Church, 54 Midrash, 56 Milken, Michael, 12 Mill, John Stuart, 36 Mirror Newspaper Group, 12 misleading behaviours, 86, 105 mis-selling of goods and services, 77–9, 155 modern capitalism, 54 moral-free zones, 31 moral hazard, 22, 70 moral philosophy, 1 moral reasoning, 38 moral relativism, 38–9, 49, 68 Morgan Stanley, 47 multi-notch downgrade, 17, 79 natural law, 34, 37 natural virtues, 37 necessity of investment banking, 14–15 New York Stock Exchange (NYSE), 65, 71 New York Times, 8 Noble Eightfold Path, 57 Nomura Group Code of Ethics, 47 normal market trading, 71 Northern Rock, 43 176 Index offer price, 64 off-market trading, 71–3, 90, 155 Olis, Jamie, 8 on-market trading, 70–1 oppressive regimes, 61 option value, 121 Orderly Liquidation Authority, 25 orderly liquidity, 25 out-of-pocket expenses, 127–8 over-leverage, 75, 80, 119, 158 overvalued securities, 155 patronage culture, 131, 142 Paulson, Henry M., 86 Paulson & Co., 78 “people-based” activity, 67 P:E ratio, 27 performance, 8–10 personal abuse, 159 personal account investments, 128, 156 personal account trading, 128 personal conflicts of interest, 45 pitching, 102, 159 Plato, 37 practical issues, 110–15 competitors, relationships with, 113 equity research, 113–15 pitching, 111 sell-side advisers, 111–13 pre-IPO financing, 110 prescriptive regulations, 31, 145 price tension, 79, 113 primary market, 103 prime-brokerage, 2 principal investment, 15, 28 private equity, 2–3, 12, 110 private trading, 94 Project Merlin, 133, 141 promises, 100–1 proprietary investment, 29 proprietary trading, 15, 25, 66, 150, 155 Prudential Regulation Authority (PRA), 26 public ownership, bonus pools in, 136–9 “pump and dump” strategy, 86 qualifying instruments, 70, 87 qualifying markets, 70, 82 quality-adjusted life year (QALY), 36 Quantitative Easing (QE), 23 Queen Elizabeth II, 42 Qu’ran, 54 rated debt, 77 rates attrition, 132 discount, 27 interest, 60 market, 117 tax, 140 rating agencies, 76 Rawls, John, 35, 136 recognised exchanges, 71 Regal Petroleum, 84 regulations banking, 16 compliance with, 28 external, 19, 31 light-touch, 4 prescriptive, 31, 145 regulatory changes and, 18–20 securities, 114 self, and impact on legislation, 19 regulatory compliance, 18 religion, business ethics in, 51–62 Buddhism, 56 Christianity, 52–4 Governments, 59 Hinduism, 56–7 interest payments, 59–60 Islam, 54–5 Judaism, 56 lending, 59–60 thresholds, 60 usury, 59–60 remuneration, 132–9 bonus pools in public ownership and, 136–9 claiming credit, 134 ethical issues with, 142–3 internal review process, managing, 134 1 Timothy 6:10, 135–6 Index research, 156 resources, abuse of, 127–8 restricted creditors, 120 restructuring of fees, 121–2 financial, 119–20 syndication and, 118–22 retail banks, 16 returns, 28, 156 Revised Code of Ethics, 47 right livelihood, 57 rights-based ethics, 66–8 rights vs. duties advisory vs. trading/capital markets, 73 conflict between, reconciling, 68–70 duty-based ethics, 66–8 off-market trading, ethical standards to, 71–2 on-market trading, ethical standards in, 70–1 opposing views of, 63–74 reconciling conflict between, 68–70 rights-based ethics, 66–8 Roman Catholic Church, 52 Royal Dutch Shell, 85 Sarbanes–Oxley Act, 20 Schwarzman, Stephen, 20 scope of ethical issues, 7–8 secondary market, 103 sector exclusions for investment banking, 58–9 securities investment grade, 76 issuing, 103–5 overvalued, 155 Securities and Exchange Commission (SEC), 7, 16 Goldman Sachs, charges against, 78 rating agencies, review by, 77 short-selling, review of, 96–7 securities insider dealing, 70 securities mis-selling, 77–9 securities regulations, 114 self-regulation, 19 sell recommendation, 115 177 sell-side advisers, 107, 111–13 Senate Permanent Subcommittee on Investigations, 46 senior debt, 118 sexist entertainment, 159 shareholders, 27–9 shares, deferred, 133 Shariah finance, 55 short-selling, 94–7, 154–5 Smith, Adam, 14, 35–6 social cohesion, 53 socially responsible investment (SRI), 56 Société Générale, 44, 80 solidarity, 53 Soros, George, 17 South Sea Bubble, 90 sovereign debt, 17 speculation, 91–4, 155 in financial crisis, 93 traditional views of, 91–3 speculative casino capitalism, 16, 91 spread, 21 stabilisation, 89 stock allocation, 94–7 stockholders, 41–2 stocks, dotcom, 17 Strange, Susan, 43 strategic issues with business ethics, 30–1 syndication, 119 and restructuring, 118–22 systemic risk, 24–5 Takeover Panel, 109 Talmud, 56 taxes, 139–41 tax optimisation, 158 tax rates, 140 tax structuring, 140 Terra Firma Capital Partners, 79, 112 Theory of Moral Sentiments, The (Smith), 14 3iG FCI Practitioners’ Report, 51 thresholds, 60 1 Timothy 6:10, 135–6 178 Index too big to fail concept, 21–7 ethical duties, and implicit Government guarantee, 22–3 ethical implications of, 26–7 in government, 22–3 insolvency, systemic risk and, 24–5 legislative change, 25–6 Lehman, failure of, 23 systemic risk, 24–5 toxic financial products, 5 trading abusive, 93 emissions, 14 insider, 12 market, 41 normal market, 71 off-market, 71–83, 90, 155 on-market, 70–1 personal account, 128 private, 94 proprietary, 15, 25, 66, 150, 155 unauthorised, 7 “trash and cash” strategy, 86 Travellers, 19 Treasury Select Committee, 26 Trinity Church, 53 Trouble with Markets, The (Bootle), 4 trust, 40, 53 trusted adviser, 108–9, 125 truth, 101–5 bait and switch, 102–3 misleading vs. lying, 101 securities, issuing, 103–5 2 and 20 fee, 13 UBS Investment Bank, 9 unauthorised trading, 7, 80–1, 155 unethical behaviour, 68 UK Alternative Investment Market, 89 UK Business Growth Fund, 133 UK Code of Practice, 141 UK Independent Banking Commission, 4, 22 United Methodist Church, 54, 59 United Methodist Investment Strategy Statement, 59 US Federal Reserve, 24, 25 US Financial Crisis Inquiry Commission, 4 US Open, 126 US Senate Permanent Subcommittee on Investigations, 64, 73 US Treasury Department, 132 universal banks, 2, 21, 28, 67 untoward movement, 85 usury, 59–60 utilitarian, 84 utilitarian ethics, 49, 84, 139 values, 9, 46, 119–21, 148 Vedanta, 57 victimless crime, 82 virtue ethics, 37–8, 43–4 virtues, 9, 34 virtuous behaviours, 37 Vishnu, 57 Volcker, Paul, 25 Volcker Rule, 2, 25 voting shareholders, 29 Wall Street, 12, 19, 53 Wall Street Journal, 20 Wealth of Nations, The (Smith), 14 Wesley, John, 53 Wharf, Canary, 18 Williams, Rowan, 53 Wimbledon, 127 WorldCom, 12, 17, 20, 76 write-off, 80 zakat, 55 zero-sum games, 118–22 

Always Day One: How the Tech Titans Plan to Stay on Top Forever
by Alex Kantrowitz
Published 6 Apr 2020

In this new knowledge economy, companies hired people not simply for what they could do physically, but for what they knew. The transition to the knowledge economy caused managers to start rethinking the old factory approach. Striking fear into your employees, it turned out, wasn’t a great way to harness their brain power. Treating them with kindness and respect, however, could net smarter marketing plans, creative accounting solutions, and successful customer service interactions in return. In his 1960 book, The Human Side of Enterprise, MIT lecturer Douglas McGregor put his finger on this shift in philosophy, splitting the different management approaches into two categories: Theory X and Theory Y. Theory X, the old, factory style, starts with the belief that people are lazy, will do whatever they can not to work, and are best managed with constant supervision and unmerciful punishment.

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Theory Y, the approach McGregor spotted as it came into focus in the 1960s, starts with the belief that people are self-motivated and will perform best when treated well. Theory Y is still religion inside many successful companies today, a guiding force in an era of workplace yoga and free snacks. In today’s economy, though, things are changing once again. Computers are starting to produce the marketing plans, creative accounting solutions, and customer service interactions Theory Y was meant to elicit. And they don’t care about perks. So it’s time to think about what’s next. I’m not going to propose a Theory Z. The last person who did, Dr. William Ouchi, developed a Theory Z to explain Japan’s economic success in the 1980s.

Posh Boys: How English Public Schools Ruin Britain
by Robert Verkaik
Published 14 Apr 2018

So in 1980 the Conservative Party set about bringing back a form of direct grant under an initiative which would provide funding for the education of a few poor, bright students at the top public schools. Between 1980 and 1997, more than 75,000 children from state schools benefited from the assisted-places scheme (though some of the parents managed to overcome the means-testing barrier by creative accounting). Eighty per cent of these students went on to attend university, with 15.6 per cent ending up at an elite institution like Oxford or Cambridge. By 2012, four out of ten assisted-place pupils were earning £90,000 a year or more and even those who didn’t go to university were in solidly middle-class occupations with a good income.

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Parents who are already paying inflation-busting fees don’t want to pay more, no matter how noble the cause. Funds for bursaries must come from endowments and donations. Lenon says it would be ‘quite dangerous to let too many unworthy parents through the net’ because fee-paying parents would feel they were subsidising the pupils whose families had the more creative accountants. This leaves many schools relying on donations, which have not been so generous in recent years. At Eton, annual donations have fallen by £600,000 in 2016–17, down to £5.2 million from £5.8 million. Many Old Etonians and public school alumni profess themselves fed up with the begging-bowl approach, feeling plagued by phone calls, emails and letters asking for cash to maintain buildings and subsidise pupils.

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Private school fees might be paid by a big company on behalf of its senior executives, so that the schooling of the chief executive’s children becomes another perk, or benefit in kind, that escapes full taxation. And pension funds can be deployed to further cut the costs because parents can make use of their pension by taking a quarter tax free when they reach fifty-five. With all these charitable tax breaks and such creative accounting, rich families can hugely reduce the cost of their children’s school fees. The schools still get paid and the only person to take a hit is the taxman. For decades some of Britain’s wealthiest families have exploited these tax loopholes. The issue was first publicly called into question in 1969 by the Newsom Commission on private education reform.

The Paradox of Choice: Why More Is Less
by Barry Schwartz
Published 1 Jan 2004

Forty dollars may be a lot to spend for a way to fill Friday evening, but not much to spend to find a mate. In sum, just how well this $40 night at the concert satisfies you will depend on how you do your accounting. People often talk jokingly about how “creative” accountants can make a corporate balance sheet look as good or as bad as they want it to look. Well, the point here is that we are all creative accountants when it comes to keeping our own psychological balance sheet. Frames and Prospects KAHNEMAN AND TVERSKY HAVE USED THEIR RESEARCH ON FRAMING and its effects to construct a general explanation of how we go about evaluating options and making decisions.

Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives
by Satyajit Das
Published 15 Nov 2006

Rusnak even kept his forged documentation on his PC in a file called ‘Fake Docs’. 05_CH04.QXD 17/2/06 144 4:22 pm Page 144 Tr a d e r s , G u n s & M o n e y National Australia Bank In 2004, a group of currency option dealers lost $360 million. The traders used incorrect rates and false transactions to hide losses. These are only the known losses – the known knowns. There are losses that are never reported, hidden in reserves and by other creative accounting. In 1998, I was talking to the head of trading for a bank. ‘Thank God for the Asian You have no idea what we crisis,’ he said. I expressed surprise. The were able to write-off. bank had lost over $1 billion, blaming the collapse of Asian markets. ‘You have no idea what we were able to write-off,’ he said with a broad grin.

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DAS_C10.QXD 5/3/07 7:59 PM Page 291 9  C re d i t w h e re c re d i t i s d u e – f u n w i t h C D S a n d C D O 291 Hangovers After a period of strong returns, the CDO market hit an iceberg around 2000/2001. The losses were huge – one investor lost a cool $1,000 million plus. The reasons were clear. It was the credit cycle, stupid! You were investing in credit, what did you expect? Defaults increased sharply as the US slipped into recession and creative accounting compounded the losses. CDOs are also massively leveraged: if you buy the 2% equity in a CDO, then you are 50 times leveraged, compared to the 10 to 12 times that a normal bank uses. Losses and leverage are not good bedfellows. Sound, highly-rated companies also found reefs. Asbestos liability and the Californian electricity deregulation claimed victims.

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European bankers blushed: they muttered about ‘American influence’ and DAS_C10.QXD 5/3/07 7:59 PM Page 299 9  C re d i t w h e re c re d i t i s d u e – f u n w i t h C D S a n d C D O 299 ‘American investment banks’. A central player in the Parmalat road crash was a company – ‘Buconero’ (meaning ‘black hole’ in Italian). Buconero was used to conceal a spectacular piece of creative accounting. Parmalat had been a common firm in CDO portfolios. Diversification of credit risk demanded firms in different industries and from different countries, and Italian food companies were hard to find. The Parmalat default resulted in losses to many CDO investors. Many STCDO tranches were downgraded as investors and dealers struggled with ‘jump to default’.

The Enigma of Capital: And the Crises of Capitalism
by David Harvey
Published 1 Jan 2010

Krieger’s figures turned out to be faulty by $80 million but, rather than admit its profitability had disappeared, the bank tried all manner of ‘creative’ accounting practices to cover over the discrepancy before finally having to admit that it had been wrong. Notice the elements in this tale. First, unregulated over-the-counter trading permits all sorts of financial innovation and shady practices which nevertheless make a lot of money. Secondly, the bank supports such practices, even though they don’t understand them (the mathematics in particular), because they are often so profitable relative to their core business and hence improve share value. Third, creative accounting enters the picture, and fourth, the valuation of assets for accounting practices is extremely uncertain in volatile markets.

Understanding Asset Allocation: An Intuitive Approach to Maximizing Your Portfolio
by Victor A. Canto
Published 2 Jan 2005

The potential distorting economic effects of tax changes and their impact on the way investors, managers, and employees behave are numerous: • If changes in the tax structure produce an after-tax return ranking different from the before-tax ranking, the economy’s resources are allocated in a suboptimal way. • Tax changes alter the way returns are delivered to investors. For example, a financial manager would have an incentive to convert dividend returns into capital-gain returns if the tax on capital gains were reduced in a significant way. The incentive to do so would also generate some creative accounting behavior at the corporate level as well as an increase in resources devoted to the financial engineering of after-tax returns. • Altering the relative attractiveness of the way returns are delivered to investors also alters the investment composition of individual corporations. Changes in corporate and investor behavior are most likely noticeable during inflection points in the tax code.

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The continued investment shifts away from dividends and toward capital gains during the 1990s, as well as the surge in corporate debt, are well documented today. But unlike most, I happen to think these shifts were in large part tax-induced—and this has far reaching implications. During the previous decade, corporate managers, as noted, had an incentive to convert dividends into capital gains. The incentive to do so generated some creative accounting behavior as well as an increase in resources 76 UNDERSTANDING ASSET ALLOCATION devoted to engineering after-tax returns rather than generating before-tax returns. In this environment, employers and employees at times found it worthwhile to develop “creative” compensation schemes. Not only were many contracts written in a way that generated capital gains, the contracts also rewarded managers for generating capital gains.

Practical Doomsday: A User's Guide to the End of the World
by Michal Zalewski
Published 11 Jan 2022

Heck, that stranger could even deposit their shilling in another bank, to be loaned once more—in the end making it seem as if there were three shillings in the place of one. Of course, no new money was being created in any physical sense. The deposits were gone until repaid by the borrowers. All that banks were doing was engaging in a bit of creative accounting—the sort that would probably land one in jail if attempted in any other enterprise. If too many depositors were to ask for their money back, or if too many loans were to go bad, the banking system would fold. Fortunes would evaporate in a puff of accounting smoke, and with the disappearance of vast quantities of money—generally on the depositors’ side—the wealth of the entire nation would shrink.

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For example, prices can rise if there’s a reduction in the availability of raw materials used to manufacture goods. That said, such fluctuations are different from regulators setting explicit inflationary targets and tweaking monetary policy until they achieve the intended goal. * Considerable controversy exists around the way governments measure inflation. Some developing countries have relied on creative accounting to boost their credibility, but for the United States and the European Union, the numbers are almost certainly sound. That said, the inflation index is just an abstract tool that tries to crudely approximate a perfectly average person in a perfectly average town with a perfectly average income and needs; it follows that the official findings can diverge pretty sharply from the cost of living for techies in Silicon Valley or coal miners in Wyoming

How the City Really Works: The Definitive Guide to Money and Investing in London's Square Mile
by Alexander Davidson
Published 1 Apr 2008

. ________________________________________ HOW TO VALUE SHARES 37  To compare cash flow with earnings, the ideal approach is to compare the cash flow statement with the income statement in the annual report and accounts, which is usually available on a listed company’s website. If net cash generated from operating activities on the cash flow statement is materially less than net operating profit on the income statement, there has been creative accounting at work, as Jim Slater put it in his book The Zulu Principle. Earnings per share divided by dividend per share provides dividend cover, a figure that you will be able to calculate from data provided on individual companies in the business section of Times Online. Dividend cover says how easily a company can pay a dividend from profits.

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The Act met the recognised need for stricter auditing controls. At Enron, the Arthur Andersen team in charge of the company audit was found to have destroyed documents to conceal the truth, which showed a need for greater controls. Sarbanes–Oxley aims to reinforce the independent status of external auditors and requires procedures that stamp out creative accounting. Financial reports should be auditable and supported by data, as well as proof against alteration, with systems in place to detect this. Under Sarbanes–Oxley, accountants cannot mix auditing with certain activities, including actuarial or legal services, and bookkeeping. Auditors are supervised by a Public Company Accounting Oversight Board that is answerable to the Securities and Exchange Commission (SEC), the US regulator of financial markets.

Don't Be Evil: How Big Tech Betrayed Its Founding Principles--And All of US
by Rana Foroohar
Published 5 Nov 2019

The favorable treatment was granted whether the increase in stock prices was a result of the efforts of the manager or the result of a lowering of interest rates or a change in oil prices.”12 Making matters worse, the tax code, which was gradually relaxed to favor corporate debt over equity (corporate margin debt is today at record highs thanks to the tax benefits of borrowing), gave companies even more incentives to manipulate their share prices with buybacks. “The whole stock options boom caused so many incentives for bad behavior of all kinds, and for making each [corporation] look better than it was. It’s all directly responsible for what I’d term ‘creative accounting,’ which has had such a devastating effect on our economy,” says Stiglitz.13 The buyback issue would reemerge as an even bigger problem after the financial crisis of 2008 when companies like Apple and Google would take advantage of the ultralow interest rates (which themselves were a response to the crisis) to issue loads of bonds on the U.S. debt markets and then use the proceeds to pay back the richest shareholders in the form of buybacks and dividends, thus increasing the wealth divide.14 But back in early 2000, a different problem was emerging—the dot-com boom was turning to bust.

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The value of the NASDAQ index peaked on March 10, 2000; three days later news that Japan had once again entered a recession triggered a global stock sell-off, which led to the usual “flight from risk,” in which investors start to dump fundamentally weak stocks whose problems had been previously masked by “creative accounting.” On March 20, Barron’s ran a cover story entitled “Burning Up: Warning—Internet Companies Are Running Out of Cash, Fast.” Companies were starting to issue reversals of revenue statements, and investors began to realize that many once-lauded start-ups were more style than substance. Once the Fed decided to raise interest rates, the die was cast.

The Reckoning: Financial Accountability and the Rise and Fall of Nations
by Jacob Soll
Published 28 Apr 2014

With rumors that Spain had given up its trade rights in South America and old stories about Drake and Raleigh finding an El Dorado in the New World catching the imagination of both the public and the political classes, Harley, together with John Blunt—director of another stock company and bank—created the South Sea Company. The crown would give the company a trade monopoly for the east coast of South America from the Orinoco River to the Terra del Fuego and for the entire west coast. In return, the company would offer all holders of government debt shares in the company. In other words, using creative accounting, government debt was magically turned into shares of the South Sea Company. The company agreed to assume around £31 million of government debt for a payment from the government of 4 percent interest and £1 million in cash for liquidity (cash so that it could operate). Once stocks were sold, the company would pay the government £4 million outright for monopoly rights.

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See Catholic Church; Protestantism Christianity, money and, 15–28 culture of accounting of, 22–28 Datini and, 15–22, 25, 26, 27–28 laws of the church and, 20–22 Neo-Platonism and, 39–40 Christmas Carol, A (Dickens), 179 Chrysoloras, Manuel, 31–32, 38–39 Cicero, 5 Clarendon, Earl of, 101 Clews, Henry, 175 Clinton, William, 200 Colbert, Édouard François, 99 Colbert, Jean-Baptiste, ix, 88–99 Colonies, account books and, 148 Commines, Philippe de, 45 Commission of Accounts (England), 101, 128 Compte Rendu au Roi (Necker), 138–142, 147 Comte, Auguste, 182 Conferencia Interamericana de Contabilidad, 193 Congressional Budget Office (CBO), 198 Conrad, Joseph, 185–186 Consejo de Hacienda, 63 Constantine (emperor), 6 Constitutions French revolutionary, 145, 233n29 U.S., 147, 163–164 Contaduría de Cuentas, 63 Contaduría de Hacienda, 63 Convention Nationale, 145 Coolidge, Calvin, 192 Coopers & Lybrand, 196 Copying machine, Watt and, 124 Corruption Athenian, 4 Dutch, 82 English, 111–116, 166 French, 136 professional accountants and, 178–179, 195–200 railroads in the Gilded Age and, 168, 170–171, 176 Spanish, 68 Cost accounting Nazi Germany and, 187–188 railroads and, 169–170 scientific management and, 186–187 Wedgewood and, 122–126 Council of Finance (France), 94, 96 Council of Finance (Spain), 63–64 Council of Florence, 38 Courtier, The (Castiglione), 56–57 Covenants, 22 Creative accounting, 106–107 Credit and exchange, tools of, 17, 33 Credits and debits. See Double-entry accounting/bookkeeping Cultures of accountability, xvi–xvii, 207–208 British Protestantism and, 119–122 Christianity and, 22–28 in colonial America, 149–155 in England, 103–104, 107–108, 112–113, 119–122 French Revolution and, 133 in Holland, 80, 207 Jesuits and, 57 Medici family and, 35–47 Neo-Platonism and discrediting of, 55–59 republican, 52–54 Da Vinci, Leonardo, 50 Dante, 21, 25, 189 D’Artagnan, Charles Ogier de Batz-Castelmore, comte, 93 D’Artois, Charles-Philippe de France, comte, 143 Darwin, Charles, 183–185 Darwin, Emma, 184 Darwin, Erasmus, 129, 183 Darwin, Francis, 184 Darwin, William, 183–185 Datini, Francesco, 15–22, 25–28 Davenant, Charles, 103 David Copperfield (Dickens), 180 De Bonicha, Jacobus, 12 De Calonne, Vicomte, Charles Alexandre, 137 De Chabrol de Crouzol, Christophe, comte, 167 De Computis (Pacioli), 51, 54–55 De Créquy, Marquise, Renée-Caroline, 141–142 De Gournay, Vincent, 135 De la Court, Pieter, 84–85, 86 De Solórzano, Bartolomé Salvador, 67 De Witt, Cornelis, 86 De Witt, Johan, 85–86 Death and the Miser (art) (Provost), 208 Debits and credits.

Principles of Corporate Finance
by Richard A. Brealey , Stewart C. Myers and Franklin Allen
Published 15 Feb 2014

This would avoid any systematic biases. It would break no law or accounting standard. This step seems so simple and effective that we are at a loss to explain why firms have not adopted it.20 Earnings and Earnings Targets The biases that we have just described do not come from creative accounting. They are built into GAAP. Of course we should worry about creative accounting also. We have already noted how stock options have tempted managers to fiddle with accounting choices to make reported earnings look good and prop up stock price. But perhaps there is a deeper problem. CEOs of public companies face constant scrutiny.

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New projects may take several years to reach full profitability. In these cases book income is ______ than economic income early in the project’s life and ______ than economic income later in its life.” 7. Earnings targets How in practice do managers of public firms meet short-run earnings targets? By creative accounting? INTERMEDIATE 8. Incentives Compare typical compensation and incentive arrangements for (a) top management, for example, the CEO or CFO, and (b) plant or division managers. What are the chief differences? Can you explain them? 9. Incentives Suppose all plant and division managers were paid only a fixed salary—no other incentives or bonuses.

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Patel, and R. Zeckhauser, “Earnings Management to Exceed Thresholds,” The Journal of Business 72 (January 1999), pp. 1–33. 24Sometimes, instead of adjusting their operations, companies meet their target earnings by bending the accounting rules. For example, in August 2009 GE was fined $50 million for creative accounting in earlier years. The SEC said that GE had met or exceeded analysts’ profit targets in every quarter from 1995 through 2004, but that its top accountants signed off on improper decisions to make its numbers look better and to avoid missing analysts’ earnings expectations. 25Graham, Harvey, and Rajgopal, op. cit., p. 29. © 2005, with permission from Elsevier. 26We are grateful to Mike Staunton for providing us with these estimates.

The Social Life of Money
by Nigel Dodd
Published 14 May 2014

This is a crisis of legitimacy as much as economics, provoked by the contrast between the resources that governments have devoted to rescuing banks and on the other hand, their subsequent willingness to make dramatic and socially corrosive cuts in public expenditures. Many financial institutions have been saved from insolvency by a combination of public finds and creative accounting, but households and individuals tend to be granted no such leniency. The crisis has polarized every society that has been affected by it, giving birth to a meme—the 99 percent—that is inextricably tied to rising resentment and hostility toward Wall Street. Faced with these realities, it is little wonder that a war has been declared on the banking system through political protests that have embraced as wide a spectrum of society as the original crisis itself.

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The euro convergence criteria (also known as the Maastricht criteria) based on Article 121(1) of the European Community Treaty, were designed to ensure that the Eurozone’s constituent national economies were sufficiently in line to prevent the single monetary policy from working in favor of some member states and not others. The criteria were the result of compromise between French and German negotiators (Eichengreen 2008: 220), and they were subject to creative accounting (Aldcroft 2001). Just before the euro’s launch in 1999 (as a virtual currency, with exchange rates fixed: notes and coins came three years later), the debt/GDP of Germany (61.3 percent) was too high, and in Belgium (122.2 percent) was more than twice as high as the entry criteria demanded, whereas that of the Netherlands ran at 70.4 percent.

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From the neochartalist perspective, as discussed in Chapter 3, this means that any government spending not covered by taxes requires external financing (Wray 2006: 92–93). To some experts and political actors, this was (and remains) a virtue, preventing states from using lax monetary policy to fund excessive spending. Such an argument misses three important points, however. First, just as most governments engaged in creative accounting to meet the convergence criteria, some would continue to do so to disguise high levels of borrowing. This appears to be what happened with Greece, where the government consistently misrepresented the size of the public debt (Tsoukalis 2012). In October 2009, the incoming Papandreou government revised the country’s deficit figures, from 5.4 percent to around 12 percent of GDP.

The Cosmopolites: The Coming of the Global Citizen
by Atossa Araxia Abrahamian
Published 14 Jul 2015

In a world governed by free trade, the fate of the stateless is largely dependent on whether the nation in which they were born will accept them. Edward Kleinbard, a tax law professor at the University of Southern California, has been studying the topic of stateless income: money generated by multinational companies which, thanks to loopholes and creative accounting, has no discernible country of origin. “Stateless persons wander a hostile globe, looking for asylum,” Kleinbard noted in a paper. “By contrast, stateless income takes a bearing for any of a number of zero or low-tax jurisdictions, where it finds a ready welcome.” Such are the paradoxical effects of globalization.

Collision Course: Carlos Ghosn and the Culture Wars That Upended an Auto Empire
by Hans Gremeil and William Sposato
Published 15 Dec 2021

The chairman, who earned his Le Cost Cutter reputation through unforgiving economizing, decided the best way to defuse resentment would be to award special bonuses to three Japanese executives, including Hiroto Saikawa, the man once considered his right-hand man. The extra pay bump was just enough to nudge these executives over the threshold so their respective income would have to be disclosed as well. Thus, with three non-Japanese and three Japanese on the public disclosure list, it seemed at least balanced. Despite such creative accounting, Ghosn’s package still soared high above the others’. So, before shareholders, he usually came armed with a clear, unapologetic message that the new Nissan played by different, international rules. “It’s true, we don’t pay as a function of the Japanese standard. We pay as a function of the global standard because we want to be able to attract global talent,” a calm and collected Ghosn countered during the 2011 showdown with investors.

…

They alleged this supposed scheme provided a convenient workaround for Ghosn, whose frustration with his compensation was an open secret over the years. Prosecutors thought it was no coincidence the scheme started in calendar year 2010, when Japan’s new rules required public disclosure of his income. Ghosn allegedly turned to the creative accounting to avoid the public scrutiny of reporting a supersize salary out of step with Japanese and French sensibilities. At the same time, it still allowed him to reap a package befitting his better-paid industry peers, in retirement. Under the prosecutor’s narrative, Ghosn could have his cake and eat it too—he would be well paid but wouldn’t let it show.

Advertisers at Work
by Tracy Tuten
Published 28 May 2012

I had to write this book—mostly to get it out of my system. I wrote it out of an obsession. Once I had the idea in my head, I literally could not stop working on it. After I had finished, I showed the first manuscript around to about forty people I admired. These were just folks in the business. I showed it to creatives, account folks, directors. Every one of them was kind enough to read the entire thing and give me criticism. I am still in debt to those people. After that, it was just a matter of getting it into the hands of the right publisher. Not knowing the first thing about the process, I just wandered over to the Barnes & Noble in downtown Minneapolis and bought some books on how to write book proposals and other how-to manuals.

…

I know you might not be able to given client confidentiality and things like that, but if you’ve got a story you can share, please do. Credle: Well, you know, there’s a brand that we all pushed together. It was M&Ms. In 1995, my partner Steve Rutter and I were told that we were going to run the M&Ms account. We were kind of bummed because it didn’t seem like a very creative account. We went out to talk to the client. At the time, the client was Paul Michaels, who’s now the CEO. In one conversation, we realized he was on our side. He was ready to go. He wanted to push this brand to a place that the company, quite frankly, probably wasn’t ready [to be in]. Or if they were ready to go, they hadn’t thought to go there.

The Billionaire Raj: A Journey Through India's New Gilded Age
by James Crabtree
Published 2 Jul 2018

” But it was equally true that he was the beneficiary of generous loan restructurings which were hard to justify in retrospect given the state of his business—part of a pattern of what was known as “ever-greening,” in which Indian bankers often provided new money to borrowers who were unable to repay existing loans, in order to cover up problems at the banks themselves. Then there were allegations of creative accounting, which Mallya also strongly denied. Diageo, the company that had bought United Spirits, sued the tycoon in 2017, claiming that he had used money from his profitable liquor operations to prop up other parts of his empire.39 Earlier that year, accusations that he had diverted funds prompted a six-month stock trading ban from India’s securities regulator.40 Mallya had a point when he complained that cabals of politicians and bureaucrats would continue to funnel cash into state-backed Air India, despite its dismal financial reputation.

…

More generally, it was assumed that Indian growth would keep purring along, while any bureaucratic problems could be managed away. The tycoons grew giddy. “At the promoter level, there was just this sense of exuberance,” Gupta told me. “If the guy in the next bungalow to you on Altamount Road is building two new power plants, then you want to do it too.” At its worst, the tycoons’ creative accounting could stray into outright corruption. Indian promoters were known as masters of extracting cash from projects, even those that ended up losing money. The most common ruse was “gold-plating.” Here a business approached a bank with a proposal to build a project, say a steel mill, costing $2 billion.

The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer
by Dean Baker
Published 15 Jul 2006

Enforcing Tax Laws: Why the Rest of Us Should Care According to the IRS, in 2001 (the most recent year examined) the government lost more than $340 billion in uncollected taxes.2 This is money that is actually owed to the federal government – not money that taxpayers have been able to legally avoid paying through creative accounting or the clever use of loopholes. This is a substantial sum. It is approximately 20 times what the federal government spends on Temporary Assistance to Needy Families (TANF) each year, the main welfare program for poor families. It is 55 times 2 See “Tax Cheating Has Gone Up, Two Federal Studies Find,” New York Times, February 15, 2006. 84 what the federal government spends on Head Start and almost 100 times annual foreign aid spending for Sub-Saharan Africa.

Working the Street: What You Need to Know About Life on Wall Street
by Erik Banks
Published 7 Feb 2004

The head of trading will make the case for trying to take 75 percent of X based on the same rationale, the head of retail sales will do the same, and so forth. In fact, it is well known that every executive manager always wants 75 percent of X for his or her division. During these intense shouting matches, creative accounting often surfaces—accounting in which the sum of each division’s earnings is far, far, far greater than the firm’s total earnings. It’s interesting how such numerate folks can come up with such silly figures. After shouting themselves to exhaustion, the executive managers each walk away with some portion of X (which we will term x).

Why We Can't Afford the Rich
by Andrew Sayer
Published 6 Nov 2014

Yet, in the new financialised capitalism, the creativity lay not in long-term investment in goods and services, as it had done in productionist capitalism, but in finding ways of outsourcing activities to cheap labour providers, in sweating existing assets for more income, speculating on price differences in different places and price movements and engaging in tax avoidance and creative accounting. Though finding cheaper labour is often claimed to increase efficiency, it just reduces the amount of demand in the economy because workers have less to spend. Efficiency increases require reorganisation of the ways of doing things so as to increase output per worker, and it is this that accounts for capitalism’s success, not cutting wage bills and making people poorer.

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Vodafone’s takeover of Mannesman yielded $640 million in fees for intermediaries.87 These fee revenues are typically concentrated at the top. In Goldman Sachs, around 8% of net revenue was claimed by partners who made up about 1% of the firm’s 25,000 workforce, receiving bonuses of nearly $7 million in 2005. Then there is the support force of public relations people, consultants, marketing experts, lawyers, creative accountants and tax avoidance experts, all of whom are in a strong position to reap large rewards. In the financial sector in Britain, the number of intermediaries has been estimated at 15,000.88 These largely anonymous members of the so-called working rich far outnumber chief executive officers (CEOs) and senior executive directors (c.600), let alone footballers and celebrities.

Mastering Spreadsheet Bookkeeping
by Peter Marshall
Published 16 Apr 2014

They also only have to file a modified version of their balance sheet and do not have to file a profit and loss account at all. Medium-sized companies also have some concessions, in that a modified form of profit and loss account and accompanying notes is allowed. Limitations of published accounts • Creative accounting can hide negative information. • Not all the relevant facts have to be disclosed. Internal accounts Internal accounts or management accounts are those prepared only for use within the company. Unlike published accounts, they are not required by law to be set out in a certain way. However, it pays to keep them as consistent as possible with the published accounts, so that the latter can be drawn up just by adapting the internal accounts slightly.

The World According to Physics
by Jim Al-Khalili
Published 10 Mar 2020

As they drift together they will gradually gain in gravitational attraction, but this gravitational energy is negative in the sense that you would need to put positive energy in to pull them apart again and get them back to the zero energy they started with. When inflation ended, the energy of the inflaton field decayed into normal energy, which condensed out into all the matter we have today. The stuff of the universe was created from energy borrowed from its own gravitational field—the ultimate in creative accounting. But just because inflation theory solves these problems in cosmology does not mean that it is correct. While most cosmologists subscribe to this theory, there are others who disagree, and there are indeed some subtle issues that have not yet been resolved. One critic is Stephen Hawking’s long-term collaborator Roger Penrose.

Life You Can Save: Acting Now to End World Poverty
by Peter Singer
Published 3 Mar 2009

Yet Charity Navigator’s evaluations don’t answer Karnofsky and Hassenfeld’s key question: How do you know whether the charity is helping the people it’s intended to help? One reason the figures don’t necessarily tell the full story is that they are taken from forms the charities themselves complete and send to the tax authorities. No one checks the forms, and the breakdown between administrative and program expenses can be massaged with a little creative accounting. For example, staff working in an organization’s head office may do some administrative work on an aid program as well as performing more routine office tasks, and in that case their time may be assigned largely to the aid program, so that a high proportion of their salaries is itemized as part of the aid budget, rather than as office expenses.

Freedom Without Borders
by Hoyt L. Barber
Published 23 Feb 2012

The Economics of Sovereign Investing 39 We have a banking crisis in the United States and Europe that just doesn’t want to go away. Many of the financial institutions in these Western countries are bloated with toxic waste that’s listed as “assets” on their books. These outfits engage in creative accounting to disguise their true anemic financial state, including the reality that many are actually insolvent and others are posting multibillion-dollar losses. Putting these problems aside, the mother of all inventions is the derivative. The derivatives market was introduced by the Chicago Board of Trade in 1973, and it has rapidly grown to be a real ticking stink bomb.

Economic Gangsters: Corruption, Violence, and the Poverty of Nations
by Raymond Fisman and Edward Miguel
Published 14 Apr 2008

We would argue that this episode only reinforces our main point: not only did shady government deals come to light quickly (suggesting that Canada has effective civil institutions for catching this sort of thing), the scandal generated public outrage that helped to topple the Liberals. Corrupt Canadian officials are usually held accountable; corrupt Italians are not. One might make similar claims for the Jack Abramoff influence-peddling scandal in the U.S. Congress, or the creative accounting at Enron, for that matter. In fact, in the 2006 mid-term Congressional elections, a broad public backlash was already in evidence, as voters listed corruption and influence-peddling in government as one of their primary concerns. The fact that these abuses were discovered and justice was served is evidence of a healthy set of national norms and legal institutions. 95 CH A PTER F O U R Because diplomatic privileges are only relevant outside of the home country, the other way to collect evidence is to see how U.S. diplomats behave abroad.

Grand Central: How a Train Station Transformed America
by Sam Roberts
Published 22 Jan 2013

In April 1990, Metro-North announced a $425 million master revitalization plan conceived by Beyer Blinder Belle and intended to transform Grand Central into, as Stangl described it, “a destination in its own right.” With the Metropolitan Transportation Authority perennially strapped for funds, the renovation budget was quickly pared, to about $240 million. But through creative accounting by visionary bureaucrats and a bond issue backed by retail revenue, the full $400 million and more (actually, closer to $800 million, including repairs, new passageways, and platforms, utilities, and other improvements) has been spent since 1983 on enhancing and ennobling Grand Central. “We figured out a scheme that allowed us to buy a building losing a fortune,” Susan Fine remembered, and ultimately redeemed “the value of public entrepreneurship—taking risks beyond the MTA’s core mission and trusting staff to get it done.”

You Are Not a Gadget
by Jaron Lanier
Published 12 Jan 2010

If there is a trace of “slumming” in the way that many privileged young people embrace current online culture, it is perhaps an echo of 1960s counterculture. It’s true that the record companies have not helped themselves. They have made a public fuss about suing the most sympathetic people, snooped obnoxiously, and so on. Furthermore, there’s a long history of sleaze, corruption, creative accounting, and price fixing in the music business. Dreams Still Die Hard By 2008, some of the leading lights of the open culture movement started to acknowledge the obvious, which is that not everyone has benefited from the movement. A decade ago we all assumed, or at least hoped, that the net would bring so many benefits to so many people that those unfortunates who weren’t being paid for what they used to do would end up doing even better by finding new ways to get paid.

Internet for the People: The Fight for Our Digital Future
by Ben Tarnoff
Published 13 Jun 2022

Gray and Siddharth Suri, Ghost Work: How to Stop Silicon Valley from Building a New Global Underclass (Boston: Houghton Mifflin, 2019). 119, Uber is one of the main … Singularly unprofitable: In September 2021, Uber said that it could post its first profit on an adjusted basis in Q3 2021, following a similar announcement by Lyft in the previous quarter. These announcements have more to do with creative accounting than with the health of the underlying businesses, however: the adjusted basis, known as “adjusted EBITDA,” excludes many kinds of losses and expenses. As the journalist Preetika Rana notes, “Uber and Lyft have yet to turn a net profit on the strength of their operations and haven’t projected when they might.”

Termites of the State: Why Complexity Leads to Inequality
by Vito Tanzi
Published 28 Dec 2017

Many of these “mandated disclosures” were added after major abuses were revealed in past activities and after people were damaged, as happened after the Enron and the 128 Termites of the State subprime disasters. Within a few weeks, Enron went from being one of the most admired enterprises in America to declaring bankruptcy. Lack of transparency in its operations, assisted by highly creative accounting that had been validated by a major accounting firm, had played a major role in creating the perception of a highly successful enterprise. After that disaster, which cost billions of dollars for many citizens, laws were passed for enterprises to provide much more information, increasing the costs to the enterprises and their complaints.

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The total earnings of this market and of some individuals operating in it have increased sharply over the decades, once again not necessarily because of higher efforts on the part of the individuals involved or because of higher genuine value contributed to the economy by them, but because of particular market situations and also because of increasingly creative accounting, which has increased the levels of total (private plus public) debt of many countries and the connected risks that, occasionally, have led to financial crises. See Mian and Sufi, 2014; Tanzi, 2016b. While some lucky individuals have seen their incomes grow and become very high, other individuals have not done so well.

Financial Fiasco: How America's Infatuation With Homeownership and Easy Money Created the Economic Crisis
by Johan Norberg
Published 14 Sep 2009

The idea, one must assume, was to ensure that no angry taxpayer would spot the executives and go punch them in the nose. Mark-to-Nothing One reason why mortgage-backed securities were written down so fast and by so much was that the accounting rules in force made the write-downs self-reinforcing. U.S. government agencies had long worried that the rules were too lax and facilitated creative accounting. During the dot-com bubble, many companies had used strange methods to calculate the value of their assets, and the energy-trading company Enron had managed to trick investors by entrusting that task to complex mathematical models. To address this situation, the U.S. financial authorities now required mark-to-market accounting.

Mastering Book-Keeping: A Complete Guide to the Principles and Practice of Business Accounting
by Peter Marshall
Published 1 Feb 1997

‘Small’ companies, however, are exempt from filing one with the Registrar of Companies; also they only have to file a modified version of their balance sheet, and do not have to file a profit and loss account at all. Medium-sized companies also have some concessions, in that a modified form of profit and loss account and accompanying notes is allowed. Limitations of published accounts . Creative accounting can hide negative information. . Not all the relevant facts have to be disclosed. Internal accounts Internal accounts or management accounts are those prepared only for use within the company. Unlike published accounts, they are not required by law to be set out in a certain way. However, it pays to keep them as consistent as possible with the published accounts, so that the latter can be drawn up just by adapting the internal accounts slightly. 136 55 Revenue accounts of limited companies A ledger account Remember, the trading, profit and loss account is first and foremost a ledger account, so we should begin by treating it as such.

The (Honest) Truth About Dishonesty: How We Lie to Everyone, Especially Ourselves
by Dan Ariely
Published 27 Jun 2012

I knew John as the erstwhile lyricist for the Grateful Dead, but during our chat I discovered that he had also been working as a consultant for a few companies—including Enron. In case you weren’t paying attention in 2001, the basic story of the fall of the Wall Street darling went something like this: Through a series of creative accounting tricks—helped along by the blind eye of consultants, rating agencies, the company’s board, and the now-defunct accounting firm Arthur Andersen, Enron rose to great financial heights only to come crashing down when its actions could no longer be concealed. Stockholders lost their investments, retirement plans evaporated, thousands of employees lost their jobs, and the company went bankrupt.

How to Predict the Unpredictable
by William Poundstone

Here are Enron’s: 1996 $1.08 1997 $0.16 1998 $1.01 1999 $1.10 2000 $1.12 Earnings were a lot less impressive than revenue. Enron was straining to make a dollar a share, and there’s scant indication of growth over five years. The outlier year was 1997. “Operating results” were said to be $.87 a share, but “items impacting comparability” whittled that down to $.16. Creative accounting allowed Enron to sweep expenses and markdowns into one big pile — the annus horribilis of 1997 — and keep the other years’ earnings above $1 a share. Enron’s pitch was that revenues mattered, not earnings. Revenues are easier to manipulate. In early 2001 Enron folk spoke of doubling revenue again, to the nice round figure of $200 billion.

The Cult of Smart: How Our Broken Education System Perpetuates Social Injustice
by Fredrik Deboer
Published 3 Aug 2020

Could we possibly expect the same in the small towns of the Mississippi River delta? In rural North Dakota? In Bridgeport, Connecticut? I’m skeptical. (For the record: there is good reason to believe that Success Academy’s impressive student performance is, at least in part, an artifact of creative accounting involving student attrition and the refusal to fill in empty slots in the later grades, after it has become apparent which students are most talented.16 Success Academy’s head honcho Eva Moskowitz has been accused particularly of using repeated suspensions to compel poorly performing students to drop out, essentially eliminating data points that would otherwise drag down averages.)

The Code: Silicon Valley and the Remaking of America
by Margaret O'Mara
Published 8 Jul 2019

The Wall Street IPO became a rite of passage for nearly any Silicon Valley start-up, no matter how new or untested. “Why do they do IPOs?” parried one broker. “Why do rock stars marry models? In part, it’s because they can.” Wall Street was clamoring for all things Internet, Meeker observed. “These companies would be silly not to take access to capital.”30 CREATIVE ACCOUNTING The storming of Wall Street by new, mostly profitless dot-coms wasn’t embraced by everyone. Business columnists tut-tutted about “Netscape fever” as soon as Clark and Andreessen’s company shot out of the gate. “For someone who looks at the fundamentals, this really represents a dangerous sign of overspeculation,” warned one analyst.31 There was reason to be concerned if you knew much about the fundamentals underneath the dot-com flash and pop.

…

Washington made spasmodic efforts to change the system in the Obama years, but it was hard to cast beloved tech brands as tax-dodging fat cats. “I love Apple!” rhapsodized Missouri Democrat Claire McCaskill at a 2013 Senate hearing where Tim Cook was supposedly being called to account for his company’s creative accounting. Kentucky Republican Rand Paul berated his fellow Senators for “bullying” Cook and a company that was “one of America’s greatest success stories.”12 Facebook employees and alumni also joined the ranks of the breathtakingly wealthy. Napster co-founder and early Facebook leader Sean Parker became something of a latter-day Jerry Sanders, making headlines for the conspicuous consumption of the billions he had reaped from Facebook’s 2012 IPO.

Birth of the Euro
by Otmar Issing
Published 20 Oct 2008

AMECO data deficit class: data at current prices. Figure 2 General government deficit 1990–8 (percentages of GDP) – admittedly with grave exceptions as regards public debt levels. The 1990s saw often steep declines in budget deficits, albeit with the numbers massaged in certain instances by acts of ‘creative accounting’. Such a violation of the spirit of the Treaty provisions was more than regrettable in the run-up to monetary union. As later became clear, it created precedents that significantly weakened discipline in applying the rules of the Stability and Growth Pact. All of this should not, however, detract from the appreciable efforts that were made to improve budgetary positions before the start of monetary union.9 As figure 2 shows, the reductions in budget deficits achieved during 1990–98 were impressive.

Kill Your Friends
by John Niven
Published 7 Feb 2008

“Surely we want to be cashing in on all this?” Ross says. “A tribute LP? A charity thing?” Trellick thinks for a bit. “Nah,” he says finally, “too much scrutiny. It’d be impossible to skim any cash off. Maybe in a year. Anniversary thing…” He’s probably right, but it’s a pity because in the past, thanks to a little creative accounting, we’ve been very successful at skimming cash off of a couple of other charity records we’ve been involved in. “Yeah, not worth the grief,” I say. “I dunno,” Parker-Hall says, lighting a cigarette, “the sales would still count towards our market share, wouldn’t they?” “Good point,” Trellick admits, nodding.

Scary Smart: The Future of Artificial Intelligence and How You Can Save Our World
by Mo Gawdat
Published 29 Sep 2021

They will want to loosen the grip of the tripwires and relax the stunning limits they have applied, so that the machine can roam as far as it can reach – and make more money for them, or whatever other impact is desired. Our history is littered with examples of corporations and individuals who have bent the rules for a quick buck. Enron’s collapse and the subprime mortgage crisis, which resulted from creative accounting to escape the regulations that were supposed to keep us all economically safe, took the entire global economy into recession. Imagine the depth of the crisis we could face if the same creativity was applied to the operations of an unregulated machine. These methods will also certainly fail the politics test because creators will prefer not to confine an AI for further safety tests when their competitors, or enemies, are gaining an advantage due to this delay.

The Future of Capitalism: Facing the New Anxieties
by Paul Collier
Published 4 Dec 2018

Each of them stripped their company of its pension fund, leaving thousands of employees impoverished. Maxwell stepped off the back of his mega-yacht as the scam was about to be discovered; Green still has his mega-yacht, aptly renamed by his critics The BHS Destroyer. Perhaps mega-yachts should be considered leading indicators for ‘creative’ accounting? Options 2 and 3 each have consequences that are seriously damaging for society. Major companies are run without adequate attention to the longer term; and the reported accounts of companies become untrustworthy. It gets worse: so far, we have seen that CEOs are increasingly diverting their energies from the long-term process of building a great firm to short-term tricks.

Breaking Twitter: Elon Musk and the Most Controversial Corporate Takeover in History
by Ben Mezrich
Published 6 Nov 2023

She turned on her laptop and began walking Elon through some of the products she had been developing in the sphere of creative monetization and payments, but she realized very quickly that Elon didn’t have the patience for the details. He’d nod appropriately when she spoke broadly about wanting to harvest the value of the big, creative accounts on the platform and to grow the subscription base, but as soon as she got into the weeds of any product, he completely tuned out. It wasn’t that he couldn’t follow along; he just seemed instantly uninterested. The more granular she got, the more bored he became. So she quickly adapted, shutting her laptop and focusing on big themes and broad concepts; he seemed pleased, and she could feel their connection—at one point he told her she really “got it” and that he thought they would “work well together.”

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned?
by Steve Keen
Published 21 Sep 2011

Rather than maximizing profits, as economists argue firms do, the additional output – that produced past the point where marginal revenue equals marginal cost at the industry level – must be produced at a loss. This paradox means that the individual firm and the market level aspects of the model of perfect competition are inconsistent. Creative accounting For the assertion that perfect competition results in a higher level of output at a lower price than monopoly to be correct, then in the aggregate, the individually rational profit-maximizing behavior of perfectly competitive firms must lead to a collectively irrational outcome. This would be OK if the theory actually admitted this – as do the theories of Cournot and Bertrand competition13 – but the Marshallian model taught to undergraduates claims instead that equating marginal cost and marginal revenue maximizes profits for the competitive firm.

…

commodity and commodity-power commodity production: mystery of; Marx’s analysis of; theories of comparative statics method competition see also perfect competition completeness complexity theory Computational Theory, laws of computers, training in conjectural variation conservation laws constant technology, assumption of constructionism consumer, individual, in economic theory consumer demand; theory of consumer sector, and debt consumption continuity conventions, formation of convexity Copenhagen school of quantum theory costs: fixed; variable Cotis, Jean-Philippe Cournot and Bertrand competition Cournot-Nash model creative accounting credit; analysis of; creation of; nature of; pure credit economy; role of credit crunch Credit Impulse curves see demand curves, Engel curves, indifference curves and supply curves cycles; cyclical nature of capitalism see also business cycle Davidson, Paul Debreu, Gerard; Theory of Value debt; absence of, from macroeconomic models; acceleration of; analysis of; and aggregate demand; banks profit from; correlated with unemployment; creation of; empirical dynamics of; further endebtment of debtors; growth of; limitation of; private (dominant role of); rate of change of; reduction of; relation to national income (GDP) see debt to GDP ratio; repayment of (non-repayment of); role of; zero target see also Jubilee policy debt bubble debt deflation; hypothesis; in USA; modeling of debt-financed speculation debt to GDP ratio Debtwatch deflation deleveraging demand, affected by rising income see also Law of Demand demand constraints demand curves; downward-sloping; for labor; Hicksian compensated; individual, determining of demand management Demiralp, S.

Stealth of Nations
by Robert Neuwirth
Published 18 Oct 2011

David had started in trade in the auto parts market in Nnewi, a city in the east of Nigeria. He knew nothing about clothes. But selling is selling and buying is buying, and he knew from experience that his profit would come from the increment between the two. Over time, he learned that, with a tiny bit of creative accounting, he could work in a little extra profit for himself on every deal. “If the factory gives you something for eight naira, you tell the person who hired you that it is nine,” he said, and you pocket the addition. At approximately a hundred and fifty naira to the dollar, this amounts to less than a penny on each item.

Artemis
by Andy Weir
Published 14 Nov 2017

Artemisian slugs are an unregulated, largely untracked quasi-currency and the city has iffy identity verification at best. We’re a perfect haven for money laundering.” “Oh God…” “You have one thing going for you: They don’t have a strong presence here. This isn’t an ‘operation’ to O Palácio. It’s just an avenue for creative accounting. But it would seem they do have at least one enforcer on-site.” “But…” I started. “Wait…let me think this through…” He rested his hands on the table and waited politely. “Okay,” I said. “Something doesn’t add up here. Did Trond know about O Palácio?” Rudy sipped his water. “I’m sure he did.

The Impulse Society: America in the Age of Instant Gratification
by Paul Roberts
Published 1 Sep 2014

It was, clearly, the obsession with share price that encouraged many companies to start inflating quarterly earnings. From 1992 to 2005 the number of firms issuing earnings “restatements”—essentially, admissions that previously reported earnings were bogus—jumped from six a year18 to nearly a hundred a month.19 And the term earnings fraud doesn’t do justice to creative accounting undertaken at firms such as WorldCom, which padded earnings by nine billion dollars, or Enron, which concealed twenty-three billion dollars in liabilities in “special purpose entities.” In hindsight, however, it’s plain that these scandals were only a prologue. The real catastrophe would come as Wall Street’s new mentality of capital efficiency—of delivering high returns by whatever means necessary—made the jump, like a virus, into the mind of the consumer.

The Age of Stagnation: Why Perpetual Growth Is Unattainable and the Global Economy Is in Peril
by Satyajit Das
Published 9 Feb 2016

Since the crisis, governments too have resorted to financial engineering to deal with economic problems. The EU experimented with complex finance techniques, originally used for repackaging residential mortgages, to finance bailouts of troubled member countries and ambitious infrastructure investment programs. The aim was to overcome the lack of available funds. Governments use creative accounting. In the period prior to the introduction of the euro, Italy and Spain used derivative transactions, allegedly to understate their debt levels. Now, governments use off-balance sheet structures and often delayed payments to massage the level of borrowings. Governments have consistently understated liabilities, such as unfinanced commitments for future healthcare, aged care, and retirement benefits.

Content Provider: Selected Short Prose Pieces, 2011–2016
by Stewart Lee
Published 1 Aug 2016

The initial outlay of developing a system where the audience laughed into airtight, sound-proofed bags, which were then driven to Luxembourg in a van and opened noisily but harmlessly on an alpine meadow, to the bewilderment of billy goats and trolls, would be costly, but in the end I would be able to avoid paying tax on the vast majority of my income. It’s a system that Google’s creative accountants, Ernst & Young, could doubtless find a way of making legal, laughter being as invisible and slippery a commodity as the online transactions whose virtual existence they magically transport from one theoretical taxation zone to another, but would that make it moral, a distinction that seems to have been deliberately obscured this week?

The Internet Trap: How the Digital Economy Builds Monopolies and Undermines Democracy
by Matthew Hindman
Published 24 Sep 2018

The myth of monetization is the central driver behind these digital-only fantasies. Even the New York Times as of this writing gets less than 40 percent of its total revenue from digital sources.15 Online-only proposals for local news depend on misleading figures about the amount of money raised by digital advertising. Some of the confusion comes from newspapers’ creative accounting of online ad revenue. In fact, a large fraction of digital advertising comes as a part of a joint print advertising buy.16 “Full price” digital ads are often sold only because they come with corresponding discounts on print advertising. If newspapers really did end their print editions, much of this joint digital revenue would quickly disappear too.

Economists and the Powerful
by Norbert Haring , Norbert H. Ring and Niall Douglas
Published 30 Sep 2012

Mayew (2008) found that analysts who had recently issued a strong buy recommendation for a firm were more than twice as likely to be allowed to ask a conference call question as analysts with strong sell recommendations. Analysts who had given favorable assessments of the company were allowed to ask their questions earlier than those who had given unfavorable ones. THE POWER OF THE CORPORATE ELITE 131 Paying Well for Lies, Gambles and Creative Accounting Top executives will routinely and inevitably possess information not available to investors. In these situations, changes in short run share prices will not imply a similar change in long run shareholder value. —Michael Jensen and Kevin Murphy, 2004 The large amounts of stocks and stock options that top managers get, ostensibly to align their interests with those of shareholders, create a massive insider trading problem.

Confessions of a Microfinance Heretic
by Hugh Sinclair
Published 4 Oct 2012

The main sections “edited,” (that is, that were censored/omitted) were: Comments about the remaining high overhead costs (principally salaries) at head office, and the use of client savings being an illegal practice with no one accepting clear responsibility. Regarding self-sustainability: [World Relief] Baltimore is ultimately picking up the bill for the poor performance/excessive overhead of FCC, and that the cost management has been achieved with some creative accounting that shifted costs around rather than cutting them. The issue of wide salary discrepancies unrelated to productivity was also “omitted.” An entire paragraph from the original minutes was deleted, discussing the rather important issue of competition and fund raising. . . . I feel that our donors, largely [World Relief] Baltimore, have a right to hear of the reality of the company they have so diligently funded over the last decade.

Six Degrees: Our Future on a Hotter Planet
by Mark Lynas
Published 1 Apr 2008

These ‘free goods’, which include all the ecosystem services which support the human species, are considered financially valueless and missed out from conventional economic accounting. The standard ‘gross domestic product’ (GDP) measuring stick of national economic success tots up the value of production and consumption without considering the sustainability of the process. In a master stroke of creative accounting, conventional economic theory therefore counts the depletion of resources as an accumulation of wealth. This is analogous to an individual spending all of the money in their current account and counting it as ‘income’-an absurdity, but one which underpins our entire economy. Bearing this societal dysfunction in mind, it is perhaps rather unfair to blame individuals for not facing up to climate change when the whole weight of economy and society works effectively in preventing them from doing so.

Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe
by Gillian Tett
Published 11 May 2009

Enron had been a poster child for innovation and free-market competition. It employed 22,000, had reported revenues of $101 billion in 2000, and had been named as “America’s most innovative company” by Fortune magazine for six years in a row. However, in the autumn of 2001, it emerged that those stunning profits had been a mirage; the company had used creative accounting tricks to inflate its results, seemingly with the knowledge of its banks and accountants. When those schemes came to light, confidence in Enron collapsed, and the company filed for what was then the largest bankruptcy in American corporate history. The news delivered a shocking blow to JPMorgan Chase.

The Winner-Take-All Society: Why the Few at the Top Get So Much More Than the Rest of Us
by Robert H. Frank, Philip J. Cook
Published 2 May 2011

We may thus be witnessing the emergence of a new class of winners on the industrial scene-the "symbolic analysts," to use Sec­ retary of Labor Robert Reich's term: Included in this category are the problem-solving, -identifying, and bro­ kering of many people who call themselves research scientists, design engineers, software engineers, civil engineers, biotechnology engineers, sound engineers, public relations executives, investment bankers, lawyers, real estate developers, and even a few creative accountants. Also included is much of the work done by management consultants, fi­ nancial consultants, tax consultants, energy consultants, agricultural consultants, armaments consultants, architectural consultants, manage­ ment information specialists, organization development specialists, strategic planners, corporate headhunters, and systems analysts.

The King of Oil: The Secret Lives of Marc Rich
by Daniel Ammann
Published 12 Oct 2009

Shortly after assuming office, Prime Minister Manley entered into talks with Clarendon’s managers.11 They explored the idea of Rich helping Jamaica with a loan—and discovered they were preaching to the converted. The IMF forbade countries from borrowing money to cover their currency reserves, so a normal loan was out of the question. Rich’s people, however, believed the problem could be solved with a bit of “creative accounting.” They offered to give Jamaica the desperately needed 45 million, but not as a loan. Instead, the money was intended as an advance payment on future aluminum oxide deliveries. Jamaica was saved; IMF officials accepted the government’s accounts and approved the new credit. Critics maintain that Rich was thus essentially able to buy Manley and effectively take Jamaica hostage.

Rockonomics: A Backstage Tour of What the Music Industry Can Teach Us About Economics and Life
by Alan B. Krueger
Published 3 Jun 2019

The streaming service Tidal, for example, is under investigation for its business practices.11 Considering that many record companies used to underreport album sales in the 1960s and concert promoters used to underreport ticket sales and exaggerate expenses in the 1970s, I would not be surprised to learn that some streaming companies have used creative accounting practices to boost their profits and overstate their reach. The history of rockonomics teaches us to trust but verify. This analysis oversimplifies the revenue issues, however. In practice, more is negotiated between the streaming platforms and record labels than just the payout rate. A confidential and murky feature of the streaming business is that record labels sometimes implicitly compensate streaming platforms to undertake campaigns to promote their artists.

The City
by Tony Norfield

This is the reality behind so-called austerity policies today, to the extent that even the privileges of the middle-class professions, traditional bastions of support for established political parties in all countries, are coming under attack. Profits, financial and global developments Measuring the rate of profit on capitalist investment is complicated by many factors, not just companies hiding or boosting their profits with creative accounting tricks. Above all, it is difficult to pinpoint the location of the investment that generated the profit when giant corporations supply their own global networks with their own transfer prices, or when they get cheap inputs from other companies in low-wage countries. In addition, a key distinction in Marxist value theory, between operations that are productive and those that are unproductive, cannot easily be determined when using economic data.

British Rail
by Christian Wolmar
Published 9 Jun 2022

Sadly, however, it was brought to a premature end by the most radical privatization ever attempted on a railway network anywhere in the developed world. By the late 1980s, sectorization had clearly demonstrated its viability. InterCity was profitable again – though, as we have seen, with a bit of creative accountancy – and Network SouthEast was breaking even, thanks in part to a booming economy following the Big Bang in the City. That was a remarkable achievement for a suburban railway, whose main function was carrying people in and out of the centre of London during the rush hour. Overall, BR was thriving, with train miles up by almost a fifth from 1985 to 1988, while costs per passenger dropped by nearly a third.

Fault Lines: How Hidden Fractures Still Threaten the World Economy
by Raghuram Rajan
Published 24 May 2010

Essentially, Enron had set up off-balance sheet entities to which it “sold” its failing projects at a hefty profit, thus creating the appearance of both profitability and growth, even though the reality was just the opposite. It was the short sellers who made Enron’s stock price plummet and forced the company to shut down even while the firm’s traditional bankers supported its creative accounting with yet more creative loans. As Chanos later wrote, defending the short seller’s role as professional skeptic: “We spoke with a number of analysts at various Wall Street firms to discuss Enron and its valuation. We were struck by how many of them conceded that there was no way to analyze Enron, but that investing in Enron was instead a ‘trust me’ story.

Paper Promises
by Philip Coggan
Published 1 Dec 2011

Greece was the first country to get into trouble. It had joined the euro in 2001, slightly after the other PIGS countries, thanks to its long history of higher-than-average inflation rates and large budget deficits. And although it appeared to qualify under the deficit rules, it has subsequently admitted that creative accounting had been used to massage the figures. The country may have hoped that joining the single currency would impose an external discipline. But it failed to knuckle down to the task of being competitive; by 2010, its costs had risen 25 per cent relative to the rest of the euro-zone.9 This had resulted in current-account deficits of more than 10 per cent of GDP in each of 2006, 2007 and 2008.

Austerity: The History of a Dangerous Idea
by Mark Blyth
Published 24 Apr 2013

The end result of all this activity was a full guarantee of the assets of the entire banking system: a total bailout. NAMA bought the assets at above book value with taxpayer money, sold shares of NAMA back to the banks, and they, in turn, used these shares as collateral to get liquidity from the ECB. In short, creative accounting and a helpful government enabled the banks to walk away scot-free from the carnage they had caused. Ireland was now shut out of international markets and placed at the mercy of the IMF-ECB-EC troika. Since then, over 70 billion euros have been injected into its banking system—divided by a population of some 4.5 million.

Bean Counters: The Triumph of the Accountants and How They Broke Capitalism
by Richard Brooks
Published 23 Apr 2018

It inspired a host of further ruses, given the predatory name ‘Raptors’, to magic away dubious investments while holding onto those that seemed safe. The LJM vehicles generated $2bn in cash flow in 1999 alone, while the Raptors were estimated to have artificially spared Enron $1bn in losses, half of that in 2000 when its reported profits were $979m. And these were just the two main strands of a huge web of creative accounting, stretching to more than 3,000 ‘special purpose entities’, on which the reported results depended. A new lead accountant at Andersen’s Professional Standards Group dealing with Enron was less biddable than Duncan. Carl Bass was an expert old-school bean counter who had worked as an audit manager on the company in Houston before joining the technical unit in 1999.

file:///C:/Documents%20and%...
by vpavan

Subpoenaed documents and the internal investigation by a special committee of Enron's board show that Andersen played a major role in setting up some of the partnerships, and then blessed their accounting treatment. This is a conflict of interest for any auditor. In addition, internal documents show that Andersen officials held discussions as early as December 2000 about the risks entailed in allowing Enron's aggressive and creative accounting. Documents also show that Andersen knew as early as August 2001 about accounting irregularities at Enron, and while it consulted with its own legal counsel on what to do, it failed to let shareholders know. In fact, it stood by its client for another three months before forcing it to restate five years' worth of earnings.

Fall: The Mysterious Life and Death of Robert Maxwell, Britain's Most Notorious Media Baron
by John Preston
Published 9 Feb 2021

Owen car dealers, 147 Haines, Irene, 159 Haines, Joe: anecdotes related to him in course of writing RM’s biography, xxiii, 5–6, 33, 46; background, character and appearance, 116–17; attitude to RM taking over Mirror, 105; work for Mirror under RM’s ownership, 116–17, 121, 122–3; RM buys toy for his puppy, 122–3; attends lavish RM party, 159; watches Davies denounce RM, 179; interviews Davies about indiscretions and arms-dealing allegations, 222–3; last meeting with RM, 230; tribute to RM, 253 Hall, Julie, 161 Hambro, Sir Charles, 30–31, 38, 41, 68–9 Hambros Bank, 30–31, 68 Hamilton, John, 240 Harris, Sandra, 82–3 Hasty Heart, The (film), 287 Hattersley, Roy, 119 Headington Hill Hall: history, 42, 154; Maxwells move into, 42–3; parties at, 154–61, 209–10; décor, 160; contents sold, 268–70; current function, 275–6 Heath, Edward, 57 helicopters, 126 Hersh, Seymour, 219, 220–21 Herzog, Chaim, 199–200, 261 Heuvel, Count Vanden (‘Fanny the Fixer’), 31 Hill, Dave, 119 Hinsey, Caroline (‘Tiny’), 213, 227–8, 231–2 Hitler, Adolf, 19, 20–21 Hoch, Brana, 18, 21, 47 Hoch, Chanca: RM born to, 1; way of life and family, 2–3; relationship with RM, 3, 50; sends RM to school, 4; death, 13, 18 Hoch, Mehel, 1, 2–3, 18 Hoch, Shenya, 18 Hoch, Sylvia, 4, 18, 21, 47, 287–8 Hodson, Nigel, 235 Hoge, Jim, xv–xxi, xxiv–xxv, xxvii– xxviii, 202, 204, 213–14 Holocaust and Genocide Studies (journal), 150 Hoppit (chauffeur), 84 houses, prefabricated, 29 Howell, Grover, xxiii Hull, Brian, 240 Hult, Madeleine, 255 Hungary, 5–6 hunting, 152–3 Husák, Gustáv, 152, 153 ‘I’m Backing Britain’ campaign, 59–60 IBM, 76 ILSC see International Learning Systems Corporation India, 63, 76 Intelligence Corps, 20–21 International Learning Systems Corporation (ILSC), 75, 76–8 IPC, 64, 101–2 Iserlohn, 20 Israel: RM visits and forms links with, 148–50; RM helps restore links with Russia, 197; RM visits Yad Vashem Holocaust memorial, 215–16; Davies’s links with Mossad, 219, 220–21; and RM’s death, 276; sends guard of honour to accompany RM’s body on last part of flight, 257; RM’s second autopsy takes place in, 257–60; RM buried in, 246, 261–3 Israel Day Parade, 213 Jackson, Sir Charles, 65 Jackson, Professor Derek, 64–6, 74 Jackson, John, 242–4, 245, 247, 248, 251 James, Clive, 136 Jaruzelski, General Wojciech, 167–8 Jay, Margaret, 127–8 Jay, Peter: background, 127–8; hired by RM, 128; RM’s treatment of, 130–32; on RM’s relationship with Murdoch, 142; on RM’s parties, 159; tries to help Andrea Martin, 178; discusses Reagan with Molloy, 287; RM fires, 184 Jews and Judaism: RM’s attitude to, 10, 56, 148–50, 215–16, 281–2; life in Czechoslovakia, 2; fate of Czech Jews in Second World War, 17–18; Betty’s Holocaust work, 150, 281; RM watches newsreel of Jews arriving at Auschwitz, 218 Johannmeir, Major Willi, 20–21 joke books, 273 Jordan, David, 224 Kamienski, Tadeusz, 80 Kaufman, Ben, 220, 221, 222 Keating, Robert, 239 Kerley, Peter, 36 KGB, 128 Khashoggi, Adnan, 147 Kinnock, Glenys, 160–61 Kinnock, Neil, 156–7, 160–61, 229, 231, 252 Kipling, Rudyard, 221 Kissinger, Henry, 226 Klein, Edward, 284 Kohl, Helmut, 252 Kordalski, Liza, 238, 239–40 Korean War (1950–53), 28 Kosygin, Alexei, 54 Kroll, Jules, 226 Labour Party Conference (1991), 229–31 Lady Ghislaine (yacht): RM buys, 147–8; named for his favourite daughter, xix, 147–8; chartered out, 175; RM sails to New York on, xiii, xix; party on board, xxvi–xxviii; RM’s last cruise on, 233–40, 277–8; Betty arrives to take over, 244–7; Betty orders crew to shred everything, 251; renamed Lady Mona K and bought, unwittingly, by Anna Murdoch, 288 Langdon, Julia, 151–3, 160 Lange, Maxwell & Springer, 31 Le Ribault, Professor Loïc, 264 Leaders of the World series, 179–80, 216 Leasco, 76–81, 86–92 Lehman Brothers, 227, 232 Leigh, Wendy, 94–5, 266 Lemela, Dr Carlos, 250 Lennox, Ken: covers collapse of Soviet Union, 217; flies out to Canaries with Betty in wake of RM’s death, 242, 244, 245; formally identifies RM’s body, 242; coaches Ghislaine in speech to be given to press, 248; accompanies RM’s body to Israel, 250, 251, 256–7 Leonard, Graham, 238–9 Liechtenstein, 168, 169 Lindsay, John, xxvi Liverpool, 8 Lobl, Arnos, 30 Lonrho, 142, 144 Loss, Joe, 155 Low-Bell & Maxwell, 30 Lucas, Sir Colin, 281–2 Lukanov, Andrei, 179–80 McDonald, George, xvi–xvii Macdonald Futura, 206 Mackenzie, Miss (security guard), xxii–xxiii, xxv Macmillan publishers, xviii, 145–6, 169, 267 Madeira, 235 Mafia, xviii Major, John, 208, 252 Maloney, Mike, 115, 137, 170, 172, 215 Mandela, Nelson and Winnie, 199–200 Mandelson, Peter, 131, 160–61 Margaret, Princess, 108, 113, 149 Markham, Sir Frank, 55 Marseilles, 7 Marsh, Richard, 58 Martin, Andrea, 170–83, 185–7, 223, 255, 283 Maxwell, Anne (RM’s daughter), 44, 157, 284 Maxwell, Christine (RM’s daughter): contracts infantile cholera, 37; and Karine’s death, 38; and Michael’s serious car accident and death, 45; other children’s attitude to, 48; Ian joins in California, 99; at lavish RM party, 157; compiles Birthday Book for Betty’s seventieth birthday, 199; role at Pergamon, 205; on Pergamon sale, 206; tries, unsuccessfully, to see RM, 212; on his deterioration, 212–13; later life, 284 Maxwell, Deborah (no relation), 177, 212 Maxwell, Elisabeth (Betty; née Meynard; RM’s wife): RM meets and marries, 13–15; RM writes to from the front, 16; RM spends leave with, 16–17; RM writes to from Berlin, 19–20; Michael’s birth, 22; and RM’s lung cancer diagnosis, 35, 36; Karine’s death, 3–7, 38; fights against RM’s possible affair with Anne Dove, 38–9; married life, 40–41; trip to Auschwitz, 41–2; moves to Headington Hill Hall, 42–3; Ghislaine’s birth, 44; Michael’s serious car accident and death, 44–52; RM drifts apart from, 46–7, 50; helps RM with his MP work, 57; attitude to RM’s attempt to buy News of the World, 66, 74; on Steinberg, 78; on RM’s loss of control of Pergamon, 81; supports RM in 1970 General Election, 83, 84; on downturn in their fortunes, 86–7; takes children camping, 90; difficult married life, 93–8; studies for degree, 95; relationship with Greg, 95–6; typical Christmas, 97–8; photo on Christmas card, 100; and RM’s eating, 134, 135, 136; chooses RM’s Desert Island Discs, 141; attitude to Rothschild’s, 146; studies the Holocaust and her and RM’s family trees, 150, 281; visits RM’s home town, 150–51; parties thrown by, 154–61; wonders about RM’s feelings for Andrea Martin, 173, 174; stands in for RM at engagements, 174; RM threatens with legal separation, 188–91; seventieth birthday dinner, 199–202; meets RM for first time in two months, 214; RM visits in France, 216; and RM’s death, 241, 242–7, 249–50; last meal on Lady Ghislaine, 251; receives tributes to RM, 252, 253; continuing unease over cause of his death, 254; accompanies RM’s body to Israel, 256–7; and RM’s funeral, 260, 261–2; receives half of proceeds of sale of RM’s estate, 268–9; clears Headington Hill Hall, 269, 275; tries to buy back RM’s MC, 270; tries to raise money for Ian, 271; on cause of RM’s death, 277; later life and death, 281–2; writes book about her marriage, 281–2 Maxwell, Ghislaine (RM’s daughter): birth, 44; childhood neglect because of Michael’s serious car accident and death, 45, 47; becomes spoiled, 47; helps promote Who Dares Wins game, 116; yacht named after, xix, 147–8; at lavish RM party, 157; role at Pergamon, 206; appointed RM’s Emissary, xxv; deteriorating relationship with RM, 213; and RM’s death, 245, 251; gives speech to press about his death, 248; on cause of his death, 277; later life, 284–5; arrest, 285 Maxwell, Ian (RM’s son): on RM’s war service, 16; and Michael’s serious car accident and death, 45, 51; relationship with RM, 48–9, 49–50, 96; on downturn in family fortunes, 90; on family Christmases, 97, 98; fired by RM, then eventually rehired, 98–9; takes Sasakawa to Buckingham Palace garden party, 105–6, 107–8; chooses RM’s Desert Island Discs, 141; at lavish RM party, 157; appears in advert for MCC, 166–7; stands in for RM at engagements, 174, 188–9; made joint MD of MCC, 175; on sale of Pergamon, 205–6; on RM and fax machines, 211; on RM’s deterioration, 211–12; marries Laura, 214; on RM’s gambling, 215; party for those unable to attend wedding, 215; sees RM watching newsreel of Jews arriving at Auschwitz, 218; phones RM on yacht, 236, 238; and RM’s death, 241–2; appoints administrators, 265; tried for conspiracy to defraud, 271–2; later life, 284 Maxwell, Isabel (RM’s daughter): contracts infantile cholera, 37; and RM’s lung cancer diagnosis, 36; and Karine’s death, 38; and Michael’s serious car accident and death, 45–6, 47; other children’s attitude to, 48; relationship with RM, 49; on Steinberg, 78; and RM’s eating habits, 135; at lavish RM party, 157; compiles Birthday Book for Betty’s seventieth birthday, 199; career, 205; RM compliments for first and last time, 216; later life, 284 Maxwell, Karine (RM’s daughter), 37–8 Maxwell, Kevin (RM’s son): and anecdote about RM’s war service, 16; relationship with RM, 96, 122; at lavish RM party, 157; appears in advert for MCC, 166–7; made joint MD for MCC, 175; Betty consults about potential separation from RM, 189–90; handles Pergamon sale, 206; becomes MCC’s CEO, 206; and Mirror flotation, 210; morning meetings with RM, 211; discusses business problems with RM, 214; Swiss Bank visits to announce calling in MCC loan, 234–5; asks RM to return to London, 236; phones RM on yacht, 239; and RM’s death, 241; rumoured to have helped RM fake death, 255; insists companies’ finances are sound, 263; appoints administrators, 265; tried for conspiracy to defraud, 270–72; biggest bankrupt in history, 271; criticized in DTI report into MGN, 272–3; later life, 284 Maxwell, Laura (née Plumb; RM’s daughter-in-law), 214, 216 Maxwell, Michael (RM’s son), 22, 35, 44–52, 157 Maxwell, Pandora (RM’s daughter-in-law), 270 Maxwell, Philip (RM’s son): first words, 43; and Michael’s serious car accident and death, 44, 51; relationship with RM, 50; goes to live in Argentina, 99; at lavish RM party, 157; RM confides in, 282; and RM’s death, 242, 245, 248–9, 251; speaks at RM’s funeral, 261–2; later life, 284 Maxwell, Robert (RM) GENERAL: appearance, 14, 23, 110, 147, 176–7; awards, honours and medals, 11–13, 155, 157, 270; biographies, memoirs and fictional re-creations, xxiii, xxviii, 273–4, 281–3; character, xviii, xix, xxv, 4, 10, 13, 26, 37–8, 46–7, 61, 91, 96–7, 123–4, 130, 148, 282–3; charities supported, 149; and the Establishment, 34; food likes and dislikes, 133–7; fortune, xiii; and gambling, 215; handwriting, 4; identity formation, 286–8; and Judaism, 10, 56, 148–50, 215–16, 281–2; management style, 118; names, 1, 7, 9–11, 288; nickname, xv; political influence, xiii–xiv, 104, 196, 197; relationship with parents, 3, 50; voice and accent, 8 LIFE: background, xiii; childhood, 1–4; joins Hungarian underground, 5–6; joins French army, 7–8; joins British army, 8–17; wins MC, 11–13; death of mother and many of family in Auschwitz, 13, 18; meets and marries Betty, 13–15; dubious treatment of German civilians, 15–16; posted to Germany in immediate aftermath of war, 17, 19–26; becomes British citizen, 21; Michael born, 22; espionage work, 22–3; helps set up Der Telegraaf, his introduction to the world of newspapers, 24; acquires worldwide distribution rights to Springer-Verlag’s publications, 24–7; demobbed, 26; ongoing British Intelligence connection, 27, 31; ‘creative’ trade deals, 28–30; moves forward in publishing industry, 31–4; Pergamon established, 31; his impact on scientific publishing, 32–3; first instance of asset-stripping, 33–4; lung cancer, 35–6; Karine’s death leads to emotional reserve, 37–8; possible affair with Anne Dove, 38–9; gains key contracts for Pergamon, 39–40; work ethic at this time, 40–41; continuing Intelligence work, 41; trip to Auschwitz, 41–2; moves to Headington Hill Hall, 42–3; Michael’s serious car accident and death leads to profound change in attitude to his family, 44–52; drifts apart from Betty, 46–7, 50; becomes MP, 53–62; dangerous-driving conviction, 55–6; ‘reforms’ House of Commons catering, 58–9, 60–62; fails to secure partnership deal with Murdoch, 63–4; loses battle against Murdoch for ownership of News of the World, 66–74; loses control of Pergamon despite some creative accounting, 75–81; loses parliamentary seat, 82–3; DTI report into sale of Pergamon leads to downturn in fortunes, 86–7; regains control of Pergamon, 86–92; marriage problems and affairs, 93–8; typical Christmas, 97–8; fires then rehires Ian, 98–9; loses battle against Murdoch for ownership of Sun and Times, 102–3; wins back respect of City by transforming fortunes of MCC, 103; takes over MGN, 103–12; rivalry with Murdoch, 104, 110–11, 113, 116, 142–6; management of Mirror, 113–23, 125–7; Pitt-Atkins predicts dramatic fall, 123–4; treatment of employees at this time, 127–32; increasing weight problem, 133–7; appears on Desert Island Discs, 5, 138–41; loses battle against Murdoch for ownership of Today, 142–4; buys Macmillan and Official Aviation Guide, 145–6; buys Lady Ghislaine, 147–8; invests in Israel, 148–50; revisits home town, 150–51; ‘state’ visit to Czechoslovakia, 151–3; parties thrown by, 154–61; becomes increasingly suspicious of everyone and arranges for phones to be bugged, 162–4; starts to borrow from Mirror pension fund to prop up MCC, 167–9; becomes besotted with Andrea Martin, 170–83; increasingly disorganized, 173–4; trip to Bulgaria, 179–81; desperate to separate Davies and Martin, 185–7; threatens Betty with legal separation, 188–91; while serious money problems loom continues to try to play role in international relations, 192–8; buys New York Daily News, xiii–xxviii, 201; throws dinner for Betty’s seventieth birthday though still not reconciled with her, 199–202; attends Gridiron Dinner and has lunch with Bush Snr, 202–4; sells Pergamon, 205–6; props up MCC share price, 207–8; floats Mirror on Stock Exchange, 208–10; increasingly irrational behaviour and health deterioration, 210–13; sixty-eighth birthday party, 213; problems at New York Daily News, 213–14; attends Ian’s wedding, 214; uses Mirror funds to pay debts, 215; visits Betty in France, 216; deteriorating health, 216; Guest tries to track down Mirror funds, 217–18; difficult relationship with Davies because of Martin, 219; arms-dealing allegations, 219–23; business affairs spiral out of control and health worsens, 223–32; total debts, 227, 232; Hinsey tells him about yachting accident, 227–8; unexpectedly joins Lady Ghislaine for a sail amid deepening financial problems, 233–9; vanishes from yacht, 239–40; body found, 241; general unease over cause of death, 242–51, 253–4; first autopsy, 249–50; body flown to Israel, 250–51, 265–7; tributes, 252–3; rumour that faked own death, 254–5; second autopsy, 257–60; funeral, 261–3; photos of body published in Paris Match, 263–4; empire collapses, 263–7; estate sold, 268–70; public contempt grows, 272, 273; continued speculation about cause of death, 276–80; reasons for distancing from Betty, 281–2; author’s speculation about last hours in water, 288 Maxwell Charitable Trust, 168 Maxwell Communications Corporation (MCC; formerly British Printing Corporation): RM takes over, 103; Pole hired by, 162; advert for, 165–7; RM tries to prop up share price, 167–9; Ian and Kevin made joint MDs, 175; financial problems, 194–6; RM steps down as Chairman, 206; RM further props up share price, 207–8; Walker resigns as Chairman because of potential inflation of profits, 210; Stoney made Commercial Director, 214–15; and missing MGN funds, 214–15, 217–18, 224–5; accelerating slump in share price, 223; Finance Director threatens to resign over missing money, 226; banks sell off shares, 232; Swiss Bank calls in loan, 234–5; collapse, 263–7 Maxwell House (formerly Strand House), 125, 126, 132, 211, 268, 269 Me and My Girl (musical), 155–6 Meynard, Elisabeth see Maxwell, Elisabeth MGN see Daily Mirror and Mirror Group MI6, 27, 31 Miller, Peter, 118 Mincemeat operation (1943), 254–5 Miranda, Bob, 88–9, 90–91 Mirror Group see Daily Mirror and Mirror Group Molloy, Mike: appearance, 110; welcomes RM to Mirror, 110; RM talks to about past life, 16, 19; on eating with RM, 119; on Who Dares Wins prize presentation, 120; discusses RM with Pitt-Atkins, 123–4; on Mother Teresa, 126–7; on Maxwell House, 132; attends lavish RM party, 160; on Andrea Martin, 176; on RM’s background, 287–8 Mondale, Walter, 169 Monte Carlo, 39 Montgomery, Field-Marshal Bernard, 13 Moon, Anna, 205 Morgan, Sir John, 170, 172 Morrell family, 154 Mosley, Oswald, 65 Moss, Brian, 44, 46, 55 Mossad, 149, 219, 220–21, 276 Mother Teresa, 126–7 MTV, 195–6 Murdoch, Anna, 70–71, 288 Murdoch, Elisabeth, 70–71 Murdoch, James, 288 Murdoch, Sir Keith, 68 Murdoch, Rupert: background, 68; relationship with RM, xx–xxi; abandons partnership talks with RM, 63–4; wins battle against RM for ownership of News of the World, 64–74; wins battles against RM for ownership of Sun and Times, 102–3; influence in Conservative Party, 104; RM’s rivalry with, 104, 110–11, 113, 116, 142–6; on RM’s ego, 115; transfers production of papers to Wapping, 117–18; possible spy at Mirror, 119; wins battle against RM for ownership of Today, 142–4; quote about RM, 145; warned about RM’s increasingly irrational behaviour, 210; tribute to RM, 252–3; discusses RM with Black, 268; Archer novel about rivalry with RM, 273–4; on cause of RM’s death, 276–7; helps Betty publish book about her marriage, 281; see also Sun Nabarro, Sir Gerald, 57 Netherlands, 11–13, 28–9 New Caxton Encyclopedia, 75 New York: Fu’s restaurant, xxvi New York Daily News, xiii–xxviii, 201, 202, 213–14, 267 News (Adelaide), 68, 70 News International, 143 News of the World, 64–74 Noble, Kendrick, 166 novels, 273–4 O’Connor, Cardinal John, xvi, xx Official Aviation Guide, 146 Olmert, Ehoud, 262 Oxford United, 103 Paarlo, 11–13 Panorama (TV programme), 223–4 Paris, 10, 13–15 Paris Match, 263–4 Parkinson, Michael, 5, 138–41 Parliament: RM’s speeches, 53–4, 56–7; House of Commons food, 58–9, 60–62; Westminster wine cellar, 61–2 Pearl, Alex, 6 Peat Marwick, 33 People, 171; see also Daily Mirror and Mirror Group Perdoma, José Francisco, 241 Perera, Josef, 203–4 Peres, Shimon, 252, 261 Pergamon Australia, 63–4 Pergamon Press: established, 31; RM gains key contracts, 39–40; RM loses control, 75–81; DTI report into sale, 86; RM regains control, 86–92; publishes Betty’s Holocaust journal, 150; fortieth-anniversary party, 155–61; RM sells to Elsevier, 205–6 Pergamon Press Inc.

Capital in the Twenty-First Century
by Thomas Piketty
Published 10 Mar 2014

In practice, financial institutions and stock markets are generally a long way from achieving this ideal of perfection. They are often sources of chronic instability, waves of speculation, and bubbles. To be sure, it is not a simple task to find the best possible use for each unit of capital around the world, or even within the borders of a single country. What is more, “short-termism” and “creative accounting” are sometimes the shortest path to maximizing the immediate private return on capital. Whatever institutional imperfections may exist, however, it is clear that systems of financial intermediation have played a central and irreplaceable role in the history of economic development. The process has always involved a very large number of actors, not just banks and formal financial markets: for example, in the eighteenth and nineteenth centuries, notaries played a central role in bringing investors together with entrepreneurs in need of financing, such as Père Goriot with his pasta factories and César Birotteau with his desire to invest in real estate.14 It is important to state clearly that the notion of marginal productivity of capital is defined independently of the institutions and rules—or absence of rules—that define the capital-labor split in a given society.

…

See Global tax on capital; Taxation, on capital Carbon tax, 654n55 Carpentier, Vincent, 632n34 Card, David, 313, 608n10 Castel, Robert, 608n9 Categorical or schedular tax, 501 Centile, upper/top, 251, 252–­254, 259–­264, 267, 301; in twentieth century, 272, 275, 284–­286; in twenty-­first century, 277–­278; world of, 278–­281; underestimation of, 281–­284; wages and, 290–­292, 296, 298–­300, 314–­315, 618n29; cohabitation in, 300–­303; evolution of by country and region, 315–­322, 326–­327, 329, 609–­610nn13,14,15,16,17,18,19, 610nn22,23,25; wealth distribution and, 339–­346, 348–­349, 365–­366, 438–­439, 509, 643n25; work vs. inheritance and, 408–­411; return on capital and, 431; oligarchic divergence and, 463; taxation and, 496 Centiles, mea­sure­ment and, 252–­255, 269–­270, 286 Central banks, 472–­473, 648n20, 649n22; Cyprus crisis and, 519, 553–­556; financial stability and, 547–­553, 555–­556 César Birotteau (Balzac), 115, 207, 214, 412–­413 Chabert, A., 600n29 Challenges wealth rankings, 442, 624n18 Charles X, 613n21 Chavagneux, Christian, 628n56 China: income and, 62–­64, 66; growth in, 82, 99, 329, 429; income in­e­qual­ity in, 326–­327, 610n27, 646n42; assets of, 463, 627–­628n50; taxes in, 491, 492; regulation in, 535–­536 Civil Code, 362–­366, 614n23 Clark, Gregory, 591n15 Class designations, 250–­252 Climate change, 567–­569 Clinton, Bill, 309 Cobb, Charles, 599n18 Cobb-­Douglas production function, 217–­220, 599n17, 600n25 Cole, Adam, 607n42 Colonial empires, 120–­121 Colonial era, 44–­45 Colqhoun, Patrick, 230 Colson, Clément, 57, 591n19, 617n10 Columbia, 327, 329 “Common utility,” 480, 630n20 Communist Manifesto, The (Marx), 8–­9, 225 Communist movements, 8, 10 Competition: pure and perfect, 30, 212, 214, 312–­313, 332, 639–­640n48; fiscal, 208, 221, 355–­356, 373, 375, 422, 496, 562; inheritance and unrestricted, 423–­424 Concentration effects vs. volume effects, 410 Condorcet, marquis de, 363, 654n56 Confiscatory tax rates, 473; executive income and, 505–­508; fiscal progressivity and, 512–­514 Conservative revolution, 98, 138–­139, 333, 511, 549 Consumption taxes, 494, 496, 651n37 Continental blocs, 59–­61, 68 Contributive justification, 524–­525 Convergence, 21–­22, 27, 571; forces favoring, 69–­71; global, 72 Corporations, 156, 203, 332; taxation on profits of, 560–­561, 650–­651n33, 651n36 Creative accounting, 214 Crédit Suisse, 437, 623n10 Cross-­investments, 194 Crouzet, François, 591n11 Cumulative growth, law of, 74–­77 Cumulative returns, law of, 75, 77 Cyprus banking crisis, 519, 553–­556 Damages (TV series), 419 Data: importance of, 2–­3; national income as, 11–­13, 56–­59, 584n18; on income, 16–­17; on wealth, 17–­20; geo­graph­i­cal and historical boundaries of, 27–­30; developing countries and, 58–­59 Daumond, Adeline, 582n33 Davies, James B., 638n8 Debreu, Claude, 654n56 Debt.

How Will Capitalism End?
by Wolfgang Streeck
Published 8 Nov 2016

When his Brussels tenure came to an end Monti earned his living as an advisor to, among others, Goldman Sachs, the greatest junk-bond producer of them all. Lukas Papademos, now prime minister of Greece, was president of the Greek Central Bank when the country secured, through falsified statistics, its access to the monetary union and thus to unlimited credit at German rates of interest. Help with the creative accounting of the Greek national balance sheet was provided by the European division of none other than Goldman Sachs – to be headed shortly thereafter by Mario Draghi, who is now of course president of the European Central Bank. The three of them should get along well. CONTINENTAL IMBALANCES Meanwhile, it is now quite clear that the democratic states of the capitalist world have not one sovereign, but two: their people, below, and the international ‘markets’ above.

Seventeen Contradictions and the End of Capitalism
by David Harvey
Published 3 Apr 2014

We see their representatives gliding through the streets in limousines and populating all the upmarket restaurants and penthouses in all the major global cities of the world – New York, London, Frankfurt, Tokyo, São Paulo, Sydney … These are the so-called creative cities, where creativity is measured by how successfully the ‘masters of the universe’ can suck the living life out of the global economy to support a class whose one aim is to compound its own already immense wealth and power. New York City has a huge concentration of creative talent – creative accountants and tax lawyers, creative financiers armed with glitteringly new financial instruments, creative manipulators of information, creative hustlers and sellers of snake oil, creative media consultants, all of which makes it a wondrous place to study every single fetish that capital can construct.

The Economics of Enough: How to Run the Economy as if the Future Matters
by Diane Coyle
Published 21 Feb 2011

Even after people have a high enough income to meet their basic needs such as enough to eat and an adequate home, acquiring more goods but also importantly more services, more variety and greater quality, continues to increase well-being. The change in the character of the increases in GDP as economies grow rich is important—services of all kinds and features of products that depend on intellect or creativity account for a growing share of our increasingly weightless economies. People continue to want the economy to grow. No politicians will win elections by calling for the economy to shrink or even stand still. However, it’s widely believed that markets have made society worse, in a moral sense. What’s more, as the first part of this book set out, we face the acute dilemmas posed by the fact that we’ve not reached a clear threshold at which we can say people have Enough.

21 Lessons for the 21st Century
by Yuval Noah Harari
Published 29 Aug 2018

Devoting more attention to the offline world than to its quarterly reports also has a bearing on Facebook’s taxation policies. Like Amazon, Google, Apple and several other tech-giants, Facebook has been repeatedly accused of tax evasion.11 The difficulties inherent in taxing online activities make it easier for these global corporations to engage in all sorts of creative accounting. If you think that people live mainly online, and that you provide them with all the necessary tools for their online existence, you can view yourself as a beneficial social service even as you avoid paying taxes to offline governments. But once you remember that humans have bodies, and that they therefore still need roads, hospitals and sewage systems, it becomes far more difficult to justify tax evasion.

Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries
by Safi Bahcall
Published 19 Mar 2019

Mormon America. HarperCollins, 2007. Rajan, Raghuram G., and Julie Wulf. “The Flattening Firm.” Rev. Econ. Stat. 88 (2006): 759. Roberts, Brigham H. History of the Church of Jesus Christ of Latter-day Saints. Deseret News, Vol. III (1905); Vol. VI (1912); Vol. VII (1932). Sparviero, Sergio. “Hollywood Creative Accounting.” Media Ind. J. 2 (2015). Wicks, Robert Sigfrid, and Fred R. Foister. Junius and Joseph. Utah State, 2005. Wong, Chi H., et al. “Estimation of Clinical Trial Success Rates and Related Parameters.” Biostat (2018). Young, Brigham. The Complete Discourses of Brigham Young. Ed. R. S. Van Wagoner.

Winner-Take-All Politics: How Washington Made the Rich Richer-And Turned Its Back on the Middle Class
by Paul Pierson and Jacob S. Hacker
Published 14 Sep 2010

In the country with the second-highest CEO pay levels—Switzerland—CEOs are paid on average around three-fifths of what American executives earn.42 Pay is not only lower in other rich nations; it also takes different forms. American CEOs, for example, receive much of their pay in short-term stock options, which not only lack transparency for stockholders but are also highly lucrative for CEOs who can create quick stock market gains through job cuts, restructuring, or creative accounting. Stock options are used in other nations, too, but they are much more often linked to long-term rather than short-term performance, as well as to firm performance relative to industry norms.43 Thus, for instance, options can be designed so that when the rising price of oil drives up the share price of energy companies, CEOs receive extra compensation only if their firm’s performance exceeds industry averages.

The Great Divide: Unequal Societies and What We Can Do About Them
by Joseph E. Stiglitz
Published 15 Mar 2015

According to the advocates of an incentive-based culture, though, this would be akin to giving something for nothing. In practice, the right’s narrow focus on incentives has proved inimical to long-term thinking and so rife with opportunities for greed that it was bound to promote distrust, both in society and within companies. Bank managers and corporate executives search out creative accounting devices to make their enterprises look good in the short run, even if their long-run prospects are compromised. Of course, incentives are an important component of human behavior. But the incentive movement has made them into a sort of religion, blind to all the other factors—social ties, moral impulses, compassion—that influence our conduct.

The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry
by William K. Black
Published 31 Mar 2005

Because Wall’s team viewed Gray and his people as the enemy and as vindictive, they believed control frauds’ claims about vindictive field regulators. The control frauds’ only expertise was in manipulating people. Wall’s team would be lambs to the slaughter if control frauds existed in huge numbers. Wall’s efforts at deregulation and creative accounting, like Pratt’s, improved the environment for control frauds and weakened the Bank Board’s ability to fight them. Wall’s actions exposed the nation and his reputation to two other risks. He weakened supervision by removing the nation’s top financial regulator (Selby) from the region that most needed tougher supervision and placing Barclay in charge.

The Master Switch: The Rise and Fall of Information Empires
by Tim Wu
Published 2 Nov 2010

This vision would spread throughout the 1980s and 1990s to become the dominant industrial organization for movies, music, magazines, newspapers, book publishing—all forms of content once called “leisure.” There is no understanding communications, or the American and global culture industry, without understanding the conglomerate. Yet this industrial form, born originally to assist in creative accounting on the part of public corporations, remains surprisingly difficult to characterize, let alone justify. It is a hydra-headed creature whose operations and advantages have mystified lawyers and economists alike. As a 1981 paper in the Bell Journal of Economics put it: “Despite extensive research, the motives for conglomerate mergers are still largely unknown.”4 Nonetheless, the conglomerate is the dominant organizational form for information industries of the late twentieth and early twenty-first centuries; here and abroad it is inseparable from the production of the lion’s share of culture.

Fire and Steam: A New History of the Railways in Britain
by Christian Wolmar
Published 1 Mar 2009

He treated these businesses as his personal fiefdom and his ability to accumulate so much power so quickly within the railways demonstrated that the money men of the City, rather than local mercantile interests, were beginning to control the industry. It is unclear whether Hudson’s early success with the York & North Midland, where he quickly turned deficits into profits, was based on genuine commercial activity or whether it was merely his particular brand of ‘creative accounting’, a term that could have been invented for him. However, even if he did start off honestly, his modus operandi soon became utterly corrupt. His method was to put forward a range of proposals for new railways and amalgamations with the ultimate intention of creating a controlled monopoly. He was a wheeler-dealer sine qua non, who promoted new railways, bought out existing ones at bargain prices and, having become an MP, used his political position to push his interests and destroy those of his rivals.

Against Intellectual Monopoly
by Michele Boldrin and David K. Levine
Published 6 Jul 2008

We also know that its contract with the government called upon the publisher to donate its “profits” to charity – and we know that it did, in fact, “donate $600,000 to support the study of emergency preparedness and terrorism prevention.”19 Because the entire Hollywood movie industry has managed by creative accounting to avoid earning a profit during its entire history, we can be forgiven if we suspect that Norton earned a bit more than the $600,000 it admitted to. We have already mentioned that it took us a few years to revise this book for final publication. The delay was probably bad for our reputation as professional book writers, but the three years that passed between the first draft and the revised edition allowed for a number of our wild conjectures to be tested by facts.

The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources
by Javier Blas and Jack Farchy
Published 25 Feb 2021

On one occasion, Hart recalls calling Strothotte and telling him the Jamaican government was desperate for $5 million to meet its IMF requirements. The German trader immediately delivered. Again, Marc Rich + Co had saved the skin of the Jamaican government; and again, it had done so without even signing a contract. Such deals required some creative accounting: to satisfy the IMF, the money the trading house deposited in the government’s accounts couldn’t be shown as a debt. ‘Of course it was a debt, but it was never shown as a debt,’ Hart says. ‘We didn’t owe them anything on the books.’ That was not all. When the Jamaican government wanted to buy the country’s oil refinery from an Exxon subsidiary, Marc Rich + Co lent it the money.

Wall Street: How It Works And for Whom
by Doug Henwood
Published 30 Aug 1998

Obviously, there isn't much time left over after the clients are serviced to do serious corporate and industry research. One thing analysts rarely do is second-guess the numbers that firms report to their shareholders, which are certified by outside auditors, typically a brand-name global accounting firm. Accountancy may have a reputation for dullness, but it can be the scene of great creativity. Accountants are notoriously eager to say kind things about the companies they audit; after all, the subject of the audit pays the fees. Notorious bankrupts of the PLAYERS 1980s, from Drexel Burnham Lambert to BCCI to several hundred S&Ls, were repeatedly given clean bills of health by prominent accounting firms — the very outside auditors who are supposed to provide an external check on a firm's numerical self-representation.

An Empire of Wealth: Rise of American Economy Power 1607-2000
by John Steele Gordon
Published 12 Oct 2009

The Erie Railway, because some of its many bond issues were backed by New York State, was required to file an annual report with Albany. But it could frame that report pretty much as it chose. The managers of the Erie—one of the most mismanaged railroads in history—had no hesitation in using very creative accounting indeed to hide their own shenanigans. Horace Greeley in 1870 harrumphed in the New York Tribune that if the new annual report of the Erie was accurate, then “Alaska has a tropical climate and strawberries in their season.” The weekly Commercial and Financial Chronicle put its finger on the problem and foretold its solution.

War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt
by Kwasi Kwarteng
Published 12 May 2014

Issing admitted that as regards the criterion of public sector indebtedness – the ratio of government debt to GDP – ‘the progress made, if [there was any] at all, was much more modest’ than the figures governments announced relating to their budget deficits. Total national debt figures of the aspirant eurozone countries remained high, even though annual deficits seemed to be kept low, by official figures, in the 1990s. Rather ominously, he also admitted that the deficit figures had been ‘massaged in certain instances by acts of “creative accounting”’.38 Issing’s gravest fears about monetary union, however, were the lack of political union accompanying it, a reservation shared by many German technocrats and politicians during the 1990s. In two important areas, ‘regulation of the labour market, on the one hand, and government tax and spending, on the other’, national governments had been allowed sole discretion.

Principles of Protocol Design
by Robin Sharp
Published 13 Feb 2008

Given this particular DIT, the name: {C=GB, L=Cambridge, O=Slush Funding Ltd., CN=Ivor Fiddle} would uniquely identify the person known as Ivor Fiddle, and so in fact would the name: {C=GB, O=Slush Funding Ltd., CN=Ivor Fiddle} Of course, this only works if Slush Funding Ltd. have no Ivor Fiddles working for them at other localities than Cambridge or in other organisational units than the Creative Accounting department. A particular example of the use of X.500 names is in systems for handling electronic mail according to the ISO MOTIS and ITU-T MHS standards [191], where they are usually referred to as O/R names. O/R stands for Originator/Recipient, reflecting the fact that they identify the sender or receiver of the electronic mail. 7.1 General Principles of Naming and Addressing 197 req( nam ) Client entity Name server resp( addr ) Fig. 7.2 Obtaining an address from a name server.

The Great Railroad Revolution
by Christian Wolmar
Published 9 Jun 2014

Worse, the top three executives—Saunders; Alfred Perelman, his counterpart on the Central; and the finance director, David Bevan— spent more time plotting against each other than running the company. Possibly because he realized that the railroad business could not make any money, Saunders embarked on a massive round of acquisitions, resulting in the Penn Central owning an extraordinary 186 subsidiaries.17 Moreover, he ran the company on the basis of what was kindly described as “creative accountancy” but was really outright fraud. He consistently over-valued assets and undervalued liabilities and boosted profits through paper deals to convince Wall Street that the company was profitable. It was in fact losing $1 million per day and started borrowing money at 10 percent interest, when even in the good times it was earning 5 percent: “Never, in recent times, had the books of a large corporation been so thoroughly cooked.”18 It could not last and it didn’t.

The Fissured Workplace
by David Weil
Published 17 Feb 2014

Williamson (1985) notes: “Indeed, one would expect, and events have borne the expectation out, that the ‘go-go’ conglomerates would become unglued when adversity set in—as it did in the late 1960s. Those firms found it necessary to reorganize along M-form lines (divisional structures), to simplify their product lines, or to do both” (289). 31. The merger wave had been enhanced by creative accounting techniques that allowed companies to hide some of the costs associated with mergers and acquisitions activity, making the acquisitions look more attractive than they often were. This led to investigations by the Federal Trade Commission and the Securities and Exchange Commission (SEC). As a result of growing public and investor concern with the issue, Congress passed the Williams Act in 1968, requiring disclosure of cash tender offers resulting in changes of ownership of more than 10% (later lowered to greater than 5%).

More: The 10,000-Year Rise of the World Economy
by Philip Coggan
Published 6 Feb 2020

And countries could only qualify for the euro if they passed financial tests, limiting their budget deficits to 3% of GDP. In technical terms, the creation of the euro was a success. Exchange rates were tied together from 1999 and the new notes and coins were introduced in 2002, without real problems. But the seeds of future crises had already been sown. Several countries indulged in creative accounting to pass the budget test, and another criterion – a 60% cap on government debt to GDP – was effectively ignored. And the decline in interest rates across the region fuelled speculative bubbles, as we shall see. The build-up to the crisis The crisis that ended this era had its roots in an unexpected place – the American housing market.

On the Wrong Line: How Ideology and Incompetence Wrecked Britain's Railways
by Christian Wolmar
Published 29 May 2005

The benefits were seen in the form of investment in schemes such as electronic radio signalling, which scored notable successes in reducing costs in remote locations such as the West Highland and Far North lines in Scotland and in East Suffolk and, more important, the replacement of almost all the worn-out diesel multiple units and locomotive-hauled trains on regional routes, all dating back to the late 1950s, with a modern fleet, many of which were air-conditioned. BR was set the target of making InterCity profitable, which was achieved with a bit of fiddling over the inclusion of high-revenue routes such as London-Norwich and the omission of loss-makers, such as trains to Barrow in Furness and Cleethorpes, and some creative accounting that ensured costs were stacked into the heavily subsidised Provincial Railways sector. Freight, too, was supposed to be profitable, a much harder target. From an annual loss of £100m in 1984, InterCity broke even a couple of years later and then became highly profitable in the boom years of the late 1980s.

Breaking News: The Remaking of Journalism and Why It Matters Now
by Alan Rusbridger
Published 14 Oct 2018

If you’re going to make a mistake of this sort, it’s probably best not to make it against a company with gross global income of more than £50 billion a year and profits before tax of £5 billion. They were Goliath; we were David. And they were a very cross Goliath. That was understandable. In common with most global organisations their financial structures were a complex maze of tax wizardry, havens, property unit trusts, intellectual property rights and creative accountancy. There was nothing improper or contrary to the law about all this. And, indeed, lawyers are kept very busy by the multinationals: one firm advising Tesco on a particular tax avoidance strategy employed no fewer than 90 lawyers on the project. The advanced tax planning undertaken today by most international companies is as intelligible to the average person as particle physics.

Big Blues: The Unmaking of IBM
by Paul Carroll
Published 19 Sep 1994

The IBMers let it be known that the real expectation was 2 million, but some executives also whispered to analysts off the record that the num ber could be as high as 4 million. Four million would have been impressive enough that it got some people’s attention, but because the word had been passed off the rec­ ord, the IBM ers knew that they wouldn’t be judged failures when the num ber actually shipped turned out to be far lower. Cannavino had to do some creative accounting to make 1992 come in on target, at 2 million. D ealers said that about one-third of the people who bought IBM PCs that came with OS/2 preinstalled were paying the dealers to take OS/2 off and replace it with Windows, which meant Gates got a double payment, because IBM paid him a royalty on each copy of OS/2 it sold, and Gates got to sell a copy of Windows, too.

MacroWikinomics: Rebooting Business and the World
by Don Tapscott and Anthony D. Williams
Published 28 Sep 2010

Integrity Years ago corporate social responsibility advocates coined the optimistic adage, “you do well by doing good.” They were trying to make a business case for good corporate behavior. Few were persuaded. The main reason for the lack of success in winning support for corporate responsibility was that the “doing well by doing good” adage was not true. Many companies did well by being bad. Creative accounting, unfair labor practices, corporate secrecy, monopolistic behaviors, externalizing costs to society, and shady environmental behaviors could help beef up the bottom line. Not to mention that corporate executives themselves could “do well” by paying astronomical bonuses, even while their companies were struggling.

Bernie Madoff, the Wizard of Lies: Inside the Infamous $65 Billion Swindle
by Diana B. Henriques
Published 1 Aug 2011

Regulators would argue that, as a lawyer and licenced securities professional, he could not have failed to discover the crime if he had been doing his job properly. Peter had signing authority for one of the firm’s bank accounts until about 1985. Although he was not an accountant by training or a partner in the firm, he could have gotten access to the firm’s general ledgers and might have seen the creative accounting and emergency loans arranged during the cash crisis in 2005 and early 2006, despite the awful distraction of his son’s illness during those frantic months. And, as chief operating officer of Madoff’s investment advisory business, he arguably should have made it his business to know what was happening on the seventeenth floor, however much his brother tried to shoo him away.

Digital Accounting: The Effects of the Internet and Erp on Accounting
by Ashutosh Deshmukh
Published 13 Dec 2005

Bandwidth explodes, along with the number of users of the Internet. Experts herald the arrival of the e-revolution and promise to change the world. Dot com stock values reach sky high. • The arrival of Internet2 and NGI. The dot com revolution crashes. Terrorism, corporate mis-governance, dubious business practices and creative accounting destroy stock values. Will the Internet deliver on its promised revolution? • Is it just one more tool in the toolkit of businesses? • What will be global effects of the Internet? • What do you think? • Copyright © 2006, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. 6 Deshmukh The 1990s witnessed an explosion in the personal, business and government uses of the Internet.

Mr Five Per Cent: The Many Lives of Calouste Gulbenkian, the World's Richest Man
by Jonathan Conlin
Published 3 Jan 2019

Gulbenkian helped Royal Dutch-Shell to overcome all these difficulties: he handled government liaison, reassured anxious concessionaires, managed share issues and kept Deterding under control. Without him, the pantechnicon would have soon come off the road. Thanks to him, the company had a very good war indeed. Even after paying dividends of 40 per cent, the combine was left with embarrassingly large amounts of retained earnings, which it did its best to ‘lose’ through creative accounting.18 In February 1907 General Antonio Aranguren had acquired a fifty-year concession for the districts of Maracaibo and Bolívar, in the Venezuelan state of Zulia. Aranguren came to London and joined forces with a New Zealander, Duncan Elliott Alves, subsequently forming an oil-focused syndicate with other, English investors in 1913.

Rentier Capitalism: Who Owns the Economy, and Who Pays for It?
by Brett Christophers
Published 17 Nov 2020

In October 2018, the then chancellor, Philip Hammond, announced eye-catching plans to introduce a so-called ‘digital services tax’, to be levied on revenues generated – rather than profits earned – in the UK specifically by digital platforms operating in three sub-sectors: search engines, social media platforms and online marketplaces. The tax will apply to any company whose worldwide annual revenues from these activities exceed £500 million, and for whom more than £25 million of these revenues are derived from UK users. Moreover, the wording of the policy paper suggests the measure may be resistant to the type of creative accounting practised by Google: taxable revenues are defined as those arising ‘by virtue of a UK user using the service’, which, in the case of advertising revenue, means ‘when the advertisement is viewed or otherwise consumed by a UK user’.98 It doesn’t matter, in other words, whether the advertising is sold out of London, Dublin or Mars.

Stigum's Money Market, 4E
by Marcia Stigum and Anthony Crescenzi
Published 9 Feb 2007

Probably in every case, a dealer who eventually engaged in fraud started out intending to make money running an honest business; then, because of his incompetence and/or a few unfortunate bets he made on the market, the dealer lost money and ended up broke. At that point, he succumbed to the temptation to reason, “I’m bankrupt at the moment, but, if I just borrow from customers for a little while, I can recoup my losses.” And, thus, started the fraud, the creative accounting, and the deceit. Full Accrual Pricing High-profile dealer bankruptcies in the 1980s, perhaps because they caused a large loss to a particular bank (Chase), finally stirred the Fed to join in on the regulation of the government securities market. The Fed recommended, in a letter to the primary dealers, that they henceforth price repo collateral at market price plus accrued interest minus a reasonable haircut.

…

The increase in the number of taxpayers has greatly exceeded the increase in number of Social Security recipients, resulting in large surpluses (as Baby Boomers retire, this dynamic will work in the opposite direction, carrying with it a bundle of economic, financial, and political ramifications). Through creative accounting and political will, the surpluses have been included in the yearly readings on the U.S. fiscal balance, producing smaller reported deficits and larger surpluses than have actually been the case, but the debts owed to the Social Security trust fund have been kept out of the public’s eye. The second reason why the total amount of publicly traded Treasuries differs from the U.S. government’s total debt relates to the Federal Reserve.

Sweden
by Becky Ohlsen
Published 19 Jun 2009

The always hilarious Bill Bryson had an entertainingly difficult time of it in Sweden, as described in two chapters of his European travel book Neither Here Nor There. There are also a couple of good views of Sweden from within, including Selma Lagerlöf’s The Wonderful Adventures of Nils. This creative account of the country’s history and geography is still taught in Swedish classrooms. Get a taste of a thematic journey in the remotest parts of northern Sweden in Torgny Lindgren’s wonderful novel Hash. Two odd characters set off on a motorcycle in search of the perfect, life-altering pot of hash (pölsan), a sort of potted-meat dish traditionally prepared in the rural north

Circle of Greed: The Spectacular Rise and Fall of the Lawyer Who Brought Corporate America to Its Knees
by Patrick Dillon and Carl M. Cannon
Published 2 Mar 2010

Requiring five years of discovery prior to a seven-month jury trial that would produce more than 13,000 pages of trial transcripts along with some fifty witnesses and thousands of articles of evidence, Nucorp would stretch the firm’s resources, costing more than $5 million and tying up its star litigator. Lerach and his team secured hundreds of documents—memos and notes—from the defendants and interviewed dozens of witnesses, including Nucorp officers and managers. The ex-Nucorp executives conceded their part in the questionable revenues, creative accounting methods, and dubious claims of oil reserves that had continued to lure investors. After learning that Lerach had said: “I’ll be living in his house”—literally the cliffside mansion that Lerach had been coveting in La Jolla—Nucorp president Richard Burns instructed his attorneys to settle. Lerach next turned his attention to others he deemed responsible for the fraud: the company’s underwriter, Wall Street’s Donaldson, Lufkin & Jenrette; its auditor, Arthur Andersen; its lender, Continental Illinois Bank and Trust of Chicago; and finally a major Nucorp investor, Circle K Corp., a Phoenix-based convenience-store chain that was the first to install gas pumps.

The Intelligent Investor (Collins Business Essentials)
by Benjamin Graham and Jason Zweig
Published 1 Jan 1949

This case is a keen reminder of the importance of reading the fine print with a skeptical eye. I am indebted to Martin Fridson for suggesting this example. 8 Martin Fridson and Fernando Alvarez, Financial Statement Analysis: A Practitioner’s Guide (John Wiley & Sons, New York, 2002); Charles W. Mulford and Eugene E. Comiskey, The Financial Numbers Game: Detecting Creative Accounting Practices (John Wiley & Sons, New York, 2002); Howard Schilit, Financial Shenanigans (McGraw-Hill, New York, 2002). Benjamin Graham’s own book, The Interpretation of Financial Statements (HarperBusiness, New York, 1998 reprint of 1937 edition), remains an excellent brief introduction to the basic principles of earnings and expenses, assets and liabilities

The Irrational Bundle
by Dan Ariely
Published 3 Apr 2013

I knew John as the erstwhile lyricist for the Grateful Dead, but during our chat I discovered that he had also been working as a consultant for a few companies—including Enron. In case you weren’t paying attention in 2001, the basic story of the fall of the Wall Street darling went something like this: Through a series of creative accounting tricks—helped along by the blind eye of consultants, rating agencies, the company’s board, and the now-defunct accounting firm Arthur Andersen, Enron rose to great financial heights only to come crashing down when its actions could no longer be concealed. Stockholders lost their investments, retirement plans evaporated, thousands of employees lost their jobs, and the company went bankrupt.

A Pipeline Runs Through It: The Story of Oil From Ancient Times to the First World War
by Keith Fisher
Published 3 Aug 2022

Williams, Beryl, ‘Approach to the Second Afghan War: Central Asia during the Great Eastern Crisis, 1875–1878’, International History Review 2, no. 1 (January 1980). Williams, Walter L., ‘United States Indian Policy and the Debate over Philippine Annexation: Implications for the Origins of American Imperialism’, Journal of American History 66, no. 4 (March 1980). Wilson, Keith M., ‘Britain’, in Wilson, ed., Decisions for War (1995). ——, ‘Creative Accounting: The Place of Loans to Persia in the Commencement of the Negotiation of the Anglo-Russian Convention of 1907’, Middle Eastern Studies 38, no. 2 (April 2002). ——, ‘Grey and the Russian Threat to India, 1892–1915’, International History Review 38, no. 2 (2016). ——, ‘The Struggle for Persia: Sir George Clerk’s Memorandum of 21 July 1914 on Anglo-Russian Relations in Persia’, Proceedings of the British Society for Middle Eastern Studies (Oxford, 1988).

The Sum of All Fears
by Tom Clancy
Published 2 Jan 1989

There are indications that the KGB is up to something. There seems to be a very discreet operation in Germany, looking for some lost tactical nukes." "Good Lord!" Fellows noted. "What do you mean by "lost"?" "We're not sure. If it ties in with SPINNAKER, well, maybe there's been some creative accounting on the part of the Soviet Army." "Your opinion?" "I don't know, guys, I just don't know. Our analysis people are about evenly divided - those that are willing to offer an opinion." "We know their army isn't real happy," Fellows said slowly. "The loss of funding, loss of prestige, loss of units and billets but that unhappy?"

Betrayal of Trust: The Collapse of Global Public Health
by Laurie Garrett
Published 15 Feb 2000

He was obsessed with the pursuit, driven by the same desire to command a field of information as guided his endless searches for rare postage stamps and obscure rocks.20 A fluent speaker of Russian, Feshbach had been making data-hunting trips to the USSR since 1973. And make no mistake about it: Feshbach was relentless, if not ruthless, in his pursuit of numbers. Long before the collapse of the Soviet Union occurred Feshbach uncovered evidence of public health failure hidden by the creative accountants in the Kremlin. For example, adult premature death rates started climbing in 1964 all across the USSR, jumping from 6.9 per 1,000 adults annually to 10.3 per 1,000 in 1980. And by 1980, he discovered, the life expectancy gap between Soviet men and women was more than eleven years—already the widest gender chasm in the world.

Corporate Finance: Theory and Practice
by Pierre Vernimmen , Pascal Quiry , Maurizio Dallocchio , Yann le Fur and Antonio Salvi
Published 16 Oct 2017

Woodward, Industrial Organization: Theory and Practice, 2nd edn, Oxford University Press, 1980. For more about company accounting practices: AIMR, Closing the Gap between Financial Reporting and Reality, Association for Investment Management and Research, 2003. C. Mulford, E. Comiskey, The Financial Number Game: Detecting Creative Accounting Practices, John Wiley & Sons, Inc., 2005. T. O’Glove, Quality of Earnings, Free Press, 1998. H. Schilit, Financial Shenanigans: How to Detect Accounting Gimmicks and Fraud in Financial Reports, 3rd edn, McGraw-Hill, 2010. For more on automated financial analysis: E. Altman, Financial ratios, discriminant analysis and the prediction of corporate bankruptcy, Journal of Finance, 23(4), 589–609, 1968.