When energy-trading company Enron declared bankruptcy in 2001, it was the largest bankruptcy filing in U.S. history. The company’s demise was tinged with scandal, as it was revealed that Enron execs were pocketing millions while knowingly overstating the company’s earnings to shareholders through fraudulent accounting.
Although Enron became the poster child for corporate scandal, it’s far from the only major company to fall from grace. These 24 other corporations were once at the top of their games — worth millions and even billions of dollars — but crashed and burned due to crooked execs, poor management, changing times or a combination of the above. Take a look at how these companies lost it all.
Last updated: July 13, 2o21
No list of corporate downfalls is complete without a mention of Standard Oil, which was the most dominant oil company in the world from 1870 to 1911, according to NBC News. Although the Sherman Anti-Trust Act was passed in 1890, it wasn’t until 1911 that the Supreme Court found Standard Oil guilty of violating the Act through its practice of using low prices to eliminate its competitors. As a result of the Supreme Court ruling, Standard Oil was broken up into separate companies that are now known as Chevron, Exxon Mobil and ConocoPhillips.
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There was a time when Blockbuster was everyone’s go-to place for movie rentals, but Netflix changed all that. Although Blockbuster initially dismissed Netflix’s looming threat, execs at the rental company soon wised up and took steps to compete. Blockbuster discontinued late fees, invested in an online platform and created a Total Access program that let customers rent videos online and return them in stores. The program was successful, but investors didn’t like how expensive it was to operate, and franchisees thought it could threaten their businesses. In 2007, then-CEO John Antioco was fired after a salary dispute. His replacement, Jim Keyes, reversed the company’s online strategy to focus on retail. Three years later, Blockbuster went bankrupt.
Allied Crude Vegetable Oil Refining Corporation
Commodities trader Anthony De Angelis was the mastermind behind what came to be known as the salad oil scandal. In the 1960s, De Angelis’ Allied Crude Vegetable Oil Company took out bank loans secured by his inventory of soybean oil. However, he filled his containers with mostly water and claimed that he had $175 million worth of salad oil that didn’t actually exist. A whistleblower tipped the scheme to American Express, which was one of the company’s biggest loan providers. Shortly after, in 1963, Allied Crude Vegetable Oil Company filed for bankruptcy.
Borders was the second-largest bookstore chain when it announced that it would be liquidating its assets in 2011. Borders initially thrived thanks to its giant stores that could hold more inventory than smaller bookstores and its superior inventory system, but sales began to decline in the mid-1990s. The company invested big in CDs and DVDs at a time when the music and movie industries were largely going digital. Another mistake was outsourcing its online sales to Amazon and focusing on refurbishing its physical stores. By 2007, Borders was no longer turning a profit, NPR reported. Four years later it filed for bankruptcy.
In the 1980s, oil giant Texaco got hit with a giant civil lawsuit by Pennzoil for interfering in the latter company’s imminent acquisition of the Getty Oil Company. The court ruled that Pennzoil was owed punitive damages of $10.5 billion (though Texaco ended up paying only $3 billion). In 1987, Texaco filed for bankruptcy protection. Roughly a year later, the company was acquired by Chevron.
Pictured: Federal Trade Commission director Timothy Muris gives approval for Texaco to buy Getty Oil
DeLorean Motor Company
Thanks to “Back to the Future,” the DeLorean is forever ingrained in pop culture — but the car manufacturer itself ended quite abruptly. John Z. DeLorean left General Motors in the late ’70s to create a new American sports car, backed by $200 million in investment funds. In 1981, production began on his creation, the gull-wing DMC-12, in Belfast, Northern Ireland. Due to rising costs, DeLorean ended up having to rush the car to market and sold it for more than twice the original asking price. The high price, coupled with bad reviews, led DeLorean Motor to sell only half of what it expected to sell. The company declared bankruptcy in 1982 after its founder got embroiled in personal scandals, including an arrest in a drug-smuggling scheme.
Woolworth was once the biggest retailer in the world, but the combination of poor performance and market dynamics forced it to close its namesake U.S. stores for good in 1997. The company’s department stores had been moving from stand-alone stores to malls, but the setup costs were higher than what the stores were making in returns, according to The Woolworths Museum. Fortunately, the F.W. Woolworth Company spent much of the ’60s, ’70s and ’80s buying out specialty stores, including Foot Locker, so the company continues to live on through its other properties.
TWA was once one of the world’s most recognized and respected airlines. Its roots trace back to 1930 when Western Air merged with Transcontinental Air Transport to create Transcontinental and Western Air. The airline expanded and modernized under the leadership of aviation pioneer Howard Hughes during the ’50s, ’60s and ’70s, and fared well after U.S. airlines deregulated in 1978. However, deregulation also made TWA a takeover target, and in 1985 it was purchased by corporate raider Carl Icahn. Icahn’s focus was on short-term profit rather than long-term investment in its systems, and TWA ended up going into debt. It filed for bankruptcy in 1992 and again in 1995, and was purchased by American Airlines in 2001, USA Today reported.
Energy-trading company Enron collapsed after a major accounting fraud scheme was revealed in 2001. In October of that year, the company admitted that it had overstated earnings dating back to 1997. In December, after being investigated by the Securities and Exchange Commission, it filed for Chapter 11 bankruptcy protection. Enron’s bankruptcy filing was the largest in U.S. history at the time, CNN reported. In 2008, a class-action lawsuit filed by shareholders and investors was settled in federal court, and it was ruled that the banks involved in the accounting fraud scheme would have to pay out $7.2 billion.
Before you could access any song with the click of a button, music stores like Tower Records were immensely popular with music lovers. The chain started as an offshoot of a Sacramento, California, drugstore owned by founder Russ Solomon’s father and eventually expanded into an international empire. However, Tower’s rapid expansion was a major contributor to its downfall as it took on $110 million debt to become the dominant chain in the music biz, NPR reported. The debt — combined with Tower’s inability to compete with lower CD prices at big-box stores and the rise of online music sources like Napster and iTunes — led to the company’s eventual demise after more than 40 years in business. Tower Records declared bankruptcy in 2006.
Lincoln Savings & Loan
Charles Keating’s Phoenix-based construction company acquired Lincoln Savings & Loan in 1984 and made billions by selling Lincoln customers $200 million worth of unsecured “junk” bonds. The good times didn’t last long, though. Keating was convicted on federal racketeering charges related to defrauding investors, though those charges were later thrown out, according to NBC News. His company went bankrupt in the process. The demise of Lincoln Savings & Loan was the costliest savings and loan debacle of the 1980s, NBC News reported.
Pictured: Charles Keating during a hearing for Lincoln Savings and Loan
Pan Am was one of the premier names in the airline industry during the 1970s, but things took a turn for the worse over the next two decades. Rising fuel costs, a fleet that was too big for the market and a series of missteps led the airline to begin selling off some of its major assets through the ’80s, including the famous Pan Am building in New York. The airline was still losing money in 1988 when one of its flights was bombed over Lockerbie, Scotland. Pan Am failed to reach potential deals for a buyout by Delta and TWA, and the company shut down for good in 1991.
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Investment firm E.F. Hutton was best known for its advertising slogan, “When E.F. Hutton talks, people listen.” The company was well-regarded during the early 1980s but ran into trouble midway through the decade when it pleaded guilty to 2,000 counts of mail and wire fraud. E.F. Hutton admitted to taking part in a check-kiting scheme that involved making bank withdrawals and deposits that gave it illegal access to millions of interest-free dollars. It paid more than $10 million in penalties as a result, Money reported. Following the 1987 stock market crash, the E.F. Hutton brand disappeared amid a series of mergers. Although E.F. Hutton has made numerous attempts at a revival — including a 2018 foray into the world of cryptocurrency — the company has failed to return to its former glory.
Pictured: Former Attorney General Griffin Bell during a news conference about E.F. Hutton banking fraud
Accounting firm Arthur Andersen LLP got caught up in the Enron scandal. In June 2002, the company was convicted of obstruction of justice for shredding and doctoring documents related to Enron audits, ABC News reported. Two months later, after 89 years in business, Arthur Andersen told the SEC it would no longer audit public companies. That same year, 23 former Arthur Andersen partners founded a new tax practice under the name WTAS and changed the name 12 years later to Andersen Tax.
Pictured: Arthur Andersen executives testify on the shredding of Enron documents
When Compaq emerged on the personal computer scene in 1982, IBM was already a giant in the field. Despite the odds against it, Compaq quickly rose to become a Fortune 500 company just four years after it was founded thanks to its range of portable PCs, PC Guide reported. Several missteps led to the company’s eventual downfall, including the 1998 acquisition of Digital Equipment Corporation for $9.6 billion — which ended up being a bad match — and a shift in focus from retail to direct marketing. By 1999, Compaq’s sales were declining. Two years later Dell had taken Compaq’s place as the leader in PC systems. In 2002, HP acquired Compaq for $25 billion but continued to manufacture products under the Compaq brand. In 2013, HP officially discontinued the Compaq brand.
Pictured: Eckhard Pfeiffer, chief executive of Compaq Computer Corp., left, shakes hands with Robert Palmer, chairman and CEO of Digital Equipment Corp
At its height, telecommunications company WorldCom handled 50% of all U.S. internet traffic and 50% of all emails worldwide, according to How Stuff Works. But in 1999, the company’s revenue growth slowed and its stock price began to fall. To boost earnings — on paper, anyway — CEO Bernie Ebbers began cooking the books. WorldCom started classifying operating expenses as long-term capital investments and accounted for $500 million in computer expenses with no documentation to back them up. These changes made the company appear more valuable than it was by turning its losses into $1.38 billion in profits. The SEC grew suspicious about the numbers — especially since another telecom giant, AT&T, was losing money — and requested more information from WorldCom. After an internal audit, WorldCom admitted to inflating its profits. Shortly after the audit began in 2002, WorldCom filed for bankruptcy. Ebbers was found guilty of fraud and violating securities laws. He was sentenced to 25 years in prison.
Pictured: WorldCom CEO Bernard Ebbers testifies to House Financial Services Committee
Adelphia Communications was one of America’s largest cable companies before fraudulent behavior pushed it into bankruptcy. The company was founded by John Rigas, who also served as its CEO and chairman. He and his three sons all sat on the company’s board, as did his son-in-law. The family used Adelphia funds to buy back company stock and used it to purchase perks off the books, including vacation homes, corporate jets and several cars, CNET reported. It all went downhill on an earnings call when a Merrill Lynch analyst questioned how the family could afford to buy back over a billion dollars of company stock. CFO Tim Rigas, one of John Rigas’ sons, had no explanation. Two months later, all of the Rigases had resigned and the company went into bankruptcy stemming from an estimated $3.1 billion in debts the family had accrued. John and Tim Rigas were sentenced to 15 and 20 years in prison, respectively. In 2005, Time Warner and Comcast officially purchased all of Adelphia Communications’ assets.
Commodities trader Refco was valued at $3.5 billion shortly after its IPO in August 2005. Just a couple of months later the company filed for bankruptcy after an internal audit discovered that the CEO, Phillip R. Bennett, owed $430 million in debts that he kept hidden through a series of undisclosed transactions, Forbes reported. Although Bennett paid the money back and stepped down from his position, the damage to Refco’s reputation had already been done and it collapsed after the bankruptcy filing.
Bayou Hedge Fund Group
Samuel Israel started the Bayou Hedge Fund Group in 1995 and a year later the company had already raised $300 million. What investors didn’t know was that it was basically a Ponzi scheme. The company suffered heavy losses from the time of its founding through 2002 — roughly $55 million, according to The New York Times — but it used a fake accounting firm to audit its financials so that Bayou could hide the losses from investors.
Then, in 2004, Israel drained Bayou’s accounts of $161 million over the course of six days and wired the money to different banks in an attempt to hide the stolen funds from authorities. An SEC suit filed in 2005 alleged that over the course of the fund’s existence, Israel and his CFO had misappropriated millions of dollars for their personal use, CNN reported. Israel pleaded guilty to fraud in 2005 and Bayou filed for bankruptcy the following year.
Investment bank Bear Stearns was one of the first casualties of the 2008 financial crisis. It had survived the Great Depression and the economic downturn that occurred following the September 11 attacks, but the bank took a knockout punch when its clients and trading partners started fleeing because Bear Stearns had made huge bets on toxic mortgage loans. In March 2008, after operating for 85 years as an independent company, it agreed to a government-backed fire sale and was acquired by JPMorgan Chase to avoid bankruptcy, CNN reported.
As with Bear Stearns, the subprime mortgage crisis led to the demise of fellow investment bank Lehman Brothers. At the time of its collapse, it was the nation’s fourth-largest investment bank, with around 25,000 employees across the globe, according to the History Channel. By 2007, Lehman Brothers had $111 billion in real estate-related assets and securities, so when the real estate market took a tumble, Lehman reported its first losses since 1994. In September 2008, Lehman Brothers declared bankruptcy with $639 billion in total assets and $613 billion in debts, making it the largest bankruptcy filing in U.S. history.
Toxic mortgage debt also led to the 2008 collapse of Washington Mutual. WaMu was shut down by the U.S. government, making it the largest American banking failure in history, Reuters reported. At the time it was closed by the federal Office of Thrift and Supervision, Washington Mutual had $307 billion in assets and $188 billion in deposits. Its assets were sold to JPMorgan Chase for $1.9 billion.
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Bernard L. Madoff Investment Securities
The name Bernie Madoff has become synonymous with “Ponzi scheme” ever since the financier was found guilty of defrauding investors of billions of dollars. Madoff founded his namesake investment firm in 1960. In December 2008, he reportedly told one of his employees that he had been operating a Ponzi scheme that lost about $50 billion. Madoff was arrested for securities fraud the next day.
Madoff’s “business” was bound to fail at some point. The way his Ponzi scheme worked is that he would use funds from new investors to pay off promised returns to older investors. But when clients requested $7 billion in returns, Madoff only had about $200 million to $300 million in the fund, Business Insider reported. Madoff was ultimately charged with 11 counts of fraud, money laundering, perjury and theft and sentenced to 150 years in prison.
Inspired by the Humvee military vehicle, Hummers had a cult following of off-road vehicle lovers before GM shut the brand down in 2010. The gas-guzzling vehicles were always shunned by environmentalists, but even fans of the car stopped buying them when gas prices rose above $4 a gallon in 2008. Sales of the Hummer dropped from 27,000 vehicles in 2008 to just 9,000 in 2009, CBS News reported. GM discontinued the brand after a deal to sell it to a Chinese company fell through.
Iconic camera and film company Kodak, founded in 1888, earned a reputation over the next century as an innovator and even pioneered the development of digital photography in the mid-1970s. Although Kodak’s downfall is largely blamed on its failure to pursue digital sales on a mass scale, that isn’t really the whole story, according to Inc. Kodak did invest in a line of EasyShare digital cameras as well as digital photo printing. However, it was a little late to the game, and the company still relied too heavily on developing film, a service that became mostly obsolete. Kodak declared bankruptcy in 2011 but continues to operate.