India's biggest scams

The Satyam Computer Services is neither the first nor will it be the last corporate scam to have hit India, so investors must be on guard and ask for more information before making any investment decision, says former Sebi chairman M Damodaran.

Sound advice. But with corporates, brokers, banks, politicians, regulators colluding at times, many a multi-crore scam has hit India. And the saga is likely to go on.

India has seen some of the most high-profile scandals where investors have lost billions of rupees just because a few people in high places could not control their greed.The Satyam Computer Services fraud is neither the first nor will it be the last corporate scam to have hit India, so investors must be on guard and ask for more information before making any investment decision, says former Sebi chairman M Damodaran.

Sound advice. But with corporates, brokers, banks, politicians, regulators colluding at times, many a multi-crore scam has hit India. And the saga is likely to go on.

India has seen some of the most high-profile scandals where investors have lost billions of rupees just because a few people in high places could not control their greed.

Here's more about India's biggest scams...

1. Ramalinga Raju

The biggest corporate scam in India has come from one of the most respected businessmen.

Satyam founder Byrraju Ramalinga Raju resigned as its chairman after admitting to cooking up the books.

His efforts to fill the "fictitious with real ones" through Maytas acquisition failed, after which he decided to confess the crime.

With a fraud involving about Rs 8,000 crore (Rs 80 billion), Satyam is heading for more trouble in the days ahead.

On Wednesday, India's fourth largest IT company lost a staggering Rs 10,000 crore (Rs 100 billion) in market capitalisation as investors reacted sharply and dumped shares, pushing down the scrip by 78 per cent to Rs 39.95 on the Bombay Stock Exchange.

The NYSE-listed firm could also face regulator action in the US. "I am now prepared to subject myself to the laws of the land and face consequences thereof," Raju said in a letter to SEBI and the Board of Directors, while giving details of how the profits were inflated over the years and his failed attempts to "fill the fictitious assets with real ones."

Raju said the company's as of September 30 carries "inflated (non-existent) and bank balances of Rs 5,040 crore (Rs 50.40 billion) as against Rs 5,361 crore (Rs 53.61 billion) reflected in the books."

2. Harshad Mehta

He was known as the 'Big Bull'. However, his bull run did not last too long.

He triggered a rise in the Bombay Stock Exchange in the year 1992 by trading in shares at a premium across many segments.

Taking advantages of the loopholes in the banking system, Harshad and his associates triggered a securities scam diverting funds to the tune of Rs 4000 crore (Rs 40 billion) from the banks to between April 1991 to May 1992.

Harshad Mehta worked with the New India Assurance Company before he moved ahead to try his luck in the stock markets. Mehta soon mastered the tricks of the trade and set out on dangerous game plan.

Mehta has siphoned off huge sums of money from several banks and millions of investors were conned in the process. His scam was exposed, the markets crashed and he was arrested and banned for life from trading in the stock markets.

He was later charged with 72 criminal offences.

A Special Court also sentenced Sudhir Mehta, Harshad Mehta's brother, and six others, including four bank officials, to rigorous imprisonment (RI) ranging from 1 year to 10 years on the charge of duping State Bank of India to the tune of Rs 600 crore (Rs 6 billion) in connection with the securities scam that rocked the financial markets in 1992. He died in 2002 with many litigations still pending against him.

3. Ketan Parekh

Ketan Parekh followed Harshad Mehta's footsteps to swindle crores of rupees from banks. A chartered he used to run a family business, NH Securities.Ketan however had bigger plans in mind. He targetted smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange, and bought shares in fictitious names. His dealings revolved around shares of ten companies like Himachal Futuristic, Global Tele- Systems, SSI Ltd, DSQ Software, Zee Telefilms, Silverline, Pentamedia Graphics and Satyam Computer (K-10 scrips).

Ketan borrowed Rs 250 crore from Global Trust Bank to fuel his ambitions. Ketan alongwith his associates also managed to get Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank.

According to RBI regulations, a broker is allowed a loan of only Rs 15 crore (Rs 150 million). There was evidence of price rigging in the scrips of Global Trust Bank, Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer.

4. C R Bhansali

The Bhansali scam resulted in a loss of over Rs 1,200 crore (Rs 12 billion).

He first launched the finance company CRB Capital Markets, followed by CRB Mutual Fund and CRB Share Custodial Services. He ruled like a financial wizard 1992 to 1996 collecting money from the public through fixed deposits, bonds and debentures. The money was transferred to companies that never existed.

CRB Capital Markets raised a whopping Rs 176 crore in three years. In 1994 CRB Mutual Funds raised Rs 230 crore and Rs 180 crore came via fixed deposits. Bhansali also succeeded to to raise about Rs 900 crore from the markets.

However, his good days did not last long, after 1995 he received several jolts. Bhansali tried borrowing more money from the market. This led to a financial crisis.

It became difficult for Bhansali to sustain himself. The Bank of India (RBI) refused banking status to CRB and he was in the dock. SBI was one of the banks to be hit by his huge defaults

5. Cobbler scam

Sohin Daya, son of a former Sheriff of Mumbai, was the main accused in the multi-crore shoes scam. Daya of Dawood Shoes, Rafique Tejani of Metro Shoes, and Kishore Signapurkar of Milano Shoes were arrested for creating several leather co-operative societies which did not exist.

They availed loans of crores of rupees on behalf of these fictitious societies. The scam was exposed in 1995. The accused created a fictitious cooperative society of cobblers to take advantage of government loans through various schemes. Officials of the Maharashtra State Finance Corporation, Citibank, Bank of Oman, Dena Bank, Development Credit Bank, Saraswat Co-operative Bank, and Bank of Bahrain and Kuwait were also charge sheeted.

6.IPO Scam

The Securities and Exchange Board of India barred 24 key operators, including Indiabulls and Karvy Stock Broking, from operating in the and banned 12 depository participants from opening fresh accounts for their involvement in the Initial Public Offer scam.

It also banned 85 financiers from capital market activities.

Suzlon Energy Ltd's Rs 1,496.34 crore (Rs 14.963 billion) public issue (September 23-29, 2005). The retail portion was oversubscribed 6.04 times and the non-institutional portion was oversubscribed 40.27 times. Key operators used 21,692 fictitious accounts to corner 323,023 shares representing 3.74 per cent of the total number of shares allotted to retail individual investors.

Jet Airways's Rs 1,899.3 crore (Rs 18.993 billion) public offer (Feb 18-24, 2005). The retail portion was subscribed 2.99 times and the non-institutional portion by 12.5 times. Key operators used 1186 fake accounts for cornering 20,901 shares repersenting 0.52 per cent of the total number of shares allotted to retail investors.

National Thermal Power Corporation Ltd's Rs 5,368.14 crore (Rs 53.681 billion) IPO (Oct 7-14, 2004). The retail portion was oversubscribed 3.73 times and the non-institutional portion by 11.93 times. Key operators used a total of 12,853 afferent accounts for cornering 2,750,730 shares representing 1.3 per cent of the total number of shares allotted to retail investors.

Tata Consultancy Services's Rs 4,713.47 crore (Rs 47.134 billion) public offer (Aug 19-23, 2004). The retail portion was oversubscribed 2.86 times and the non-institutional portion by 19.15 times. Key operators used 14,619 'benami' accounts to corner 261,294 shares representing 2.09 per cent of the total shares allotted to retail individual investors.

Patni Computer System Ltd's Rs 430.65 crore (Rs 4.306 billion) public issue (Jan 27-Feb 5 2004). The retail portion was oversubscribed 9.36 times and the non-institutional portion by 39.22 times. A lone key operator used 2541 afferent account for cornering 127,050 shares representing 2.71 per cent of the total number of shares allotted to retail investors.

7. Dinesh Dalmia

Dinesh Dalmia was the managing director of DSQ Software Limited when the Central Bureau of Investigation arrested him for his involvement in a stocks scam of Rs 595 crore (Rs 5.95 billion). Dalmia's group included DSQ Holdings Ltd, Hulda Properties and Trades Ltd, and Powerflow Holding and Trading Pvt Ltd.

Dalmia resorted to illegal ways to make money through the partly paid shares of DSQ Software Ltd, in the name of New Vision Investment Ltd, UK, and unallotted shares in the name of Dinesh Dalmia Technology Trust.

Investigation showed that 1.30 crore (13 million) shares of DSQ Software Ltd had not been listed on any stock exchange.

8. Abdul Karim Telgi

He paid for his own education at Sarvodaya Vidyalaya by selling fruits and vegetables on trains.

He is today famous (or infamous) for being he man behind one of India's biggest scams.

The Telgi case is another big scam that rocked India. The fake stamp racket involving Abdul Karim Telgi was exposed in 2000. The loss is estimated to be Rs 171.33 crore (Rs 1.71 billion), it was initially pegged to be Rs 30,000 crore (Rs 300 bilion), which was later clarified by the CBI as an exaggerated figure.

In 1994, Abdul Karim Telgi acquired a stamp paper license from the Indian government and began printing fake stamp papers.

Telgi bribed to get into the government security press in Nashik and bought special machines to print fake stamp papers.

Telgi's networked spread across 13 states involving 176 offices, 1,000 employees and 123 bank accounts in 18 cities.

9.Virendra Rastogi

Virendra Rastogi chief executive of RBG Resources was charged with for deceiving banks worldwide of an estimated $1 billion.

He was also involved in the duty-drawback scam to the tune of Rs 43 crore (Rs 430 milion) in India.

The CBI said that five companies, whose directors were the four Rastogi brothers -- Subash, Virender, Ravinde and Narinder -- exported bicycle parts during 1995-96 to Russia and Hong Kong by heavily over invoicing the value of goods for claiming excess duty draw back from customs.

10. The UTI Scam

Former UTI chairman P S Subramanyam and two executive directors -- M M Kapur and S K Basu -- and a Rakesh G Mehta, were arrested in connection with the 'UTI scam'.

UTI had purchased 40,000 shares of Cyberspace between September 25, 2000, and September 25, 2000 for about Rs 3.33 crore (Rs 33.3 million) from Rakesh Mehta when there were no buyers for the scrip. The market price was around Rs 830.

The CBI said it was the conspiracy of these four people which resulted in the loss of Rs 32 crore (Rs 320 million). Subramanyam, Kapur and Basu had changed their stance on an investment advice of the equities research cell of UTI.

The promoter of Cyberspace Infosys, Arvind Johari was arrested in connection with the case. The officals were paid Rs 50 lakh (Rs 5 million) by Cyberspace to promote its shares.

He also received Rs 1.18 crore (Rs 11.8 million) from the company through a circuitous route for possible rigging the Cyberspace counter.

11. Uday Goyal

Uday Goyal, managing director of Arrow Global Agrotech Ltd, was yet another fraudster who cheated investors promising high returns through plantations. Goyal conned investors to the tune of over Rs 210 crore (Rs 2.10 billion). He was finally arrested.

The plantation scam was exposed when two investors filed a complaint when they failed to get the promised returns.

Over 43,300 persons had fallen into Goyal's trap. Several criminal complaints were filed with the Economic Offences Wing.

The company's directors and their relatives had misused the investors' money to buy properties. The High Court asked the company to sell its properties and repay its investors.

12. Sanjay Agarwal

Home Trade had created waves with celebrity endorsements.

But Sanjay Agarwal's finance portal was just a veil to cover up his shady deals. He swindled a whopping Rs 600 crore (Rs 6 billion) from more than 25 cooperative banks. The government securities (gilt) scam of 2001 was exposed when the Reserve Bank of India checked the acounts of some cooperative banks following unusual activities in the gilt market.

Co-operative banks and brokers acted in collusion in abid to make easy money at the of the hard earned savings of millions of Indians. In this case, even the Public Provident Fund (PPF) was affected.

A sum of about Rs 92 crore (Rs 920 million) was missing from the Seamen's Provident Fund. Sanjay Agarwal, Ketan Sheth (a broker), Nandkishore Trivedi and Baluchan Rai (a Hong Kong- based Non-Resident Indian) were behind the Home Trade scam.

The Biggest Stock Scams Of All Time by Investopedia Staff Editors' Note: The information included here is accurate as of September, 2007.

It is unfortunate, but words often associated with money and fortune are "cheat," "steal," and "lie." Who among us hasn't "accidentally" taken two $500 bills from the Monopoly bank, or forgotten at least once to pay $5 back to a friend? Chances are you were never called on it because your friends trusted you. Just as we trust our friends, we put faith in the investing world. Investing in a stock takes a lot of research, but it also requires us to make a lot of assumptions. For example, we assume reported earnings and figures are correct, and that management is competent and honest. But these assumptions can be disastrous.

Understanding how disasters happened in the past can help investors avoid them in the future. With that in mind, we'll look at some of the all-time greatest cases of companies betraying their investors. Some of these cases are truly amazing; try to look at them from a shareholder's standpoint. Unfortunately, these shareholders had no way of knowing what was really happening as they were being tricked into investing.

• ZZZZ Best Inc., 1986 - Barry Minkow, the owner of this business, posited that this carpet cleaning company of the 1980s would become the "General Motors of carpet cleaning". Minkow appeared to be building a multi-million dollar corporation, but he did so through forgery and theft. He created more than 10,000 phony documents and sales receipts without anybody suspecting anything. Although his business was a complete fraud designed to deceive auditors and investors, Minkow shelled out more than $4 million to lease and renovate an office building in San Diego. ZZZZ Best went public in December of 1986, eventually reaching a market capitalization of more than $200 million. Amazingly, Barry Minkow was only a teenager at the time! He was sentenced to 25 years in prison.

• Centennial Technologies Inc., 1996 - In December 1996, Emanuel Pinez, the CEO of Centennial Technologies, and his management recorded that the company made $2 million in revenue from PC memory cards - the company was really shipping fruit baskets to customers. But the employees then created fake documents to appear as though they were recording sales. Centennial's stock rose 451% to $55.50 per share on the New York Stock Exchange (NYSE). According to the Securities and Exchange Commission (SEC), between April 1994 and December 1996, Centennial overstated its earnings by about $40 million. Amazingly, the company reported profits of $12 million when it really lost about $28 million! The stock plunged to less than $3. Over 20,000 investors lost almost all of their investment in a company that was once considered a Wall Street darling.

• Bre-X Minerals, 1997 - This Canadian company was involved in one of the largest stock swindles in history. Its Indonesian gold property, which was reported to contain more than 200 million ounces, was said to be the richest gold mine ever. The stock price for Bre-X skyrocketed to a high of $280 (split adjusted), making millionaires out of ordinary people overnight. At its peak, Bre-X had a market capitalization of US$4.4 billion. But the party ended on March 19, 1997, when the gold mine proved to be fraudulent, and the stock tumbled to pennies shortly after. The major losers were the Quebec public sector pension fund, which lost $70 million; the Ontario Teachers' Pension Plan, which lost $100 million and the Ontario Municipal Employees' Retirement Board, which lost $45 million.

• Enron, 2001 – Prior to this debacle, Enron, a Houston-based energy trading company was, based on revenue, the seventh largest company in the U.S. Through some fairly complicated practices that involved the use of shell companies, Enron was able to keep hundreds of millions worth of debt off its books. Doing so fooled investors and analysts into thinking this company was more fundamentally stable than it actually was. Additionally, the shell companies, run by Enron executives, recorded fictitious , essentially recording one dollar of revenue multiple times, thus creating the appearance of incredible earnings figures. Eventually, the complex web of deceit unraveled, and the share price dove from over $90 to less than $0.70. As Enron fell, it took down with it Arthur Andersen, the fifth leading accounting firm in the world at the time. Andersen, Enron's auditor, basically imploded after David Duncan, Enron's chief auditor, ordered the shredding of thousands of documents. The fiasco at Enron made the phrase "cook the books" a household term once again.

• WorldCom, 2002 - Not long after the collapse of Enron, the equities market was rocked by another billion-dollar accounting scandal. Telecommunications giant WorldCom came under intense scrutiny after yet another instance of some serious "book cooking". WorldCom recorded operating as investments. Apparently, the company felt that office pens, pencils and paper were an investment in the future of the company and therefore expensed (or capitalized) the cost of these items over a number of years. In total $3.8 billion (yes, with a 'b') worth of normal operating expenses - which should all be recorded as expenses for the in which they were incurred - were treated as investments and were recorded over a number of years. This little accounting trick grossly exaggerated profits for the year the expenses were incurred; in 2001, WorldCom reported profits of around $1.3 billion. In fact, its business was becoming increasingly unprofitable. Who suffered the most in this deal? The employees - tens of thousands of them lost their jobs. The next ones to feel the betrayal were the investors who had to watch the gut-wrenching downfall of WorldCom's stock price, as it plummeted from more than $60 to less than $0.20.

• Tyco International (NYSE: TYC), 2002 - With WorldCom having already shaken investor confidence, the executives at Tyco ensured that 2002 would be an unforgettable year for stocks. Before the scandal, Tyco was considered a safe blue chip investment, manufacturing electronic components, healthcare and safety equipment. During his reign as CEO, Dennis Kozlowski, who was reported as one of the top 25 corporate managers by BusinessWeek, siphoned hordes of money from Tyco in the form of unapproved loans and fraudulent stock sales. Along with CFO Mark Swartz and CLO Mark Belnick, Kozlowski received $170 million in low-to-no interest loans, without shareholder approval. Kozlowski and Belnick arranged to sell 7.5 million shares of unauthorized Tyco stock for a reported $450 million. These funds were smuggled out of the company, usually disguised as executive bonuses or benefits. Kozlowski used the funds to further his lavish lifestyle, which included handfuls of houses, an infamous $6,000 shower curtain and a $2 million birthday party for his wife. In early 2002, the scandal slowly began to unravel and Tyco's share price plummeted nearly 80% in a six- week period. The executives escaped their first hearing due to a mistrial, but were eventually convicted and sentenced to 25 years in jail.

• HealthSouth (NYSE: HLS), 2003 - Accounting for large corporations can be a difficult task especially when your boss instructs you to falsify earnings reports. In the late 1990s, CEO and founder Richard Scrushy began instructing employees to inflate revenues and overstate HealthSouth's . At the time, the company was one of America's largest healthcare service providers, experiencing rapid growth and acquiring a number of other healthcare related firms. The first sign of trouble surfaced in late 2002, when Scrushy reportedly sold HealthSouth shares worth $75 million, prior to releasing an earnings loss. An independent law firm concluded the sale was not directly related to the loss, but investors should have taken the warning. The scandal unfolded in March, 2003, when the SEC announced that HealthSouth exaggerated revenues by $1.4 billion. The information came to light when CFO William Owens, working with the FBI, taped caught Scrushy talking about the fraud. The repercussions were swift, as the stock fell from a high of $20 to a close of $0.45 in a single day. Amazingly, the CEO was acquitted of 36 counts of fraud, but was later convicted on charges of bribery. Apparently, Scrushy arranged political contributions of $500,000, allowing him to ensure a seat on the hospital regulatory board.

Conclusion The worst thing about these scams is that you never know until it's too late. Those convicted of fraud might serve several years in prison, which in turn investors/taxpayers even more money. These scammers can pick a lifetime's worth of garbage and not even come close to repaying those who lost their fortunes. The SEC works hard to prevent such scams from happening, but with thousands of public companies in North America, it is nearly impossible to ensure that disaster never strikes again.

Is there a moral to this story? Sure. Always invest with care and diversify, diversify, diversify. Maintaining a well-diversified portfolio will ensure that occurrences like these don't run you off the road, but instead remain mere speed bumps on your path to financial independence

The Top Ten Most Outrageous Stock Market Scams of all Time

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Scams occur in the stock market every day. Stock market scandals are woven into the fabric of our culture.

However, these are the TRULY outrageous stock market scams. The scams that when you hear about them, you say to yourself "How did they ever think that they would get away with this?"

Here is my top ten list, starting from the least outrageous (but still outrageous) -

10. Anthony Elgindy and the corrupt FBI agent. Here is a guy who built up a large following in the late 90's by exposing overvalued stocks and then subsequently -selling them for profit. He had a corrupt FBI agent on his payroll, Jeffrey Royer, who would log into government databases using his credentials and try to dig up confidential information that they could use to manipulate the stock market. For instance, if the CEO of a company had a criminal investigation against him ongoing, they would short the stock (bet that it would fall) and then disseminate the confidential information in order to create weakness in the stock. Elgindy would also inform the companies that he possessed this information, and then try to extort funds from them in exchange for not releasing the info. Eventually the FBI caught on to their scheme and Elgindy ended up receiving 11 years in jail, where he still is today.

9. Stock Exchange Hoax of 1814. One of the first instances of stock market manipulation. On February 21, 1814, a man in a British military uniform showed up in an inn on the coast of the English channel and pronounced that Napoleon had been killed and the Napoleonic Wars were now over. Word spread quickly and people celebrated by driving up the price of stocks on the London Stock Exchange. The only problem was that the news was soon discovered to be a hoax, and it was also revealed that someone had engaged in a plot to profit from this erroneous news. Lord Thomas Cochrane was eventually fingered as the culprit, but he was later pardoned by the King after it was determined that he was not involved. The true culprit was never found. 8. ZZZZ Best Inc. Meet Barry Minkow. You may think that he's just a normal, ordinary 16 year old but he's not. He actually runs a carpet cleaning company called "ZZZZ Best Inc." out of his garage. This "company" grew to a company with over 1400 employees who specialized in insurance restoration cleaning. The company was winning "big" contracts (from Mob families) and Barry was driving a Ferrari and living in a mansion. Life was good. In 1986, the company went public and temporarily had a market value of over $200 million, valuing Minkow personally at over $100 million dollars. Not bad for a teenager! However, the company was nothing more than a huge hoax. The company was simply a massive , raising money from new investors to pay off old ones. Thousands upon thousands of documents were forged to maintain the appearance of a thriving business. The company borrowed fake offices to maintain their image. Company officers were embezzling funds. The company tried issuing fake press releases to stave off worried investors. The company quickly collapsed, and Minkow and eleven others were indicted on 54 different counts of fraud. Minkow was sentenced to 25 years in prison, but served 7 1/2. He has now turned to God and is deeply religious.

7. Bre-X. Was, at one time, a company with a total capitalization of over $6 billion dollars. Was apparently sitting on the largest gold deposit in the world at their Busang site in Indonesia. Bought the Busang plot of land in 1993, and in 1995 announced that they had discovered significant amounts of gold. Bre-X's independent consulting company, Kilborn Engineering, estimated that there were 70 million ounces of gold in the Busang deposit. Others speculated that it might be as much as 200 million ounces. As you may guess, the entire thing turned out to be a massive fraud. Bre-X had "salted" the samples by placing shavings from gold jewelry in with the core samples to maintain the allusion of a massive gold deposit. The stock collapsed and went into bankruptcy, sparking many lawsuits and books written about the topic. The Bre-X story resembles a Hollywood movie; dead geologists who might not really be dead, corrupt governments and disgraced company officials in exile.

6. Nick Leeson. The man who single-handedly brought down Barings Bank, the UK's oldest investment bank (at the time). Used an "error account" to hide his trading losses. If a trade went well, he made sure that everyone knew about it; if the trade went poorly, he would hide it in this "error account" that was marked "88888." The error accounts losses reached 200 million pounds, and Leeson engaged in increasingly speculative trades to try and gain the money back. The end came when an earthquake in Japan sent the value of one of Leeson's positions tumbling, resulting in a total loss for Barings of over 800 million pounds, including all of Leeson's previous losses. Leeson fled and was eventually captured, and the company was declared insolvent. The company's lack of rules and regulations when it came to their star trader eventually led to their downfall.

5. Recruit Scandal. A massive scandal in Japan. The chairman of Recruit, Hiromasa Ezoe, offered shares in a Recruit subsidiary named Recruit Cosmos to many different prominent politicians including the Prime Minister, former Prime Minister and Chief Cabinet Secretary. The chairman of NTT was also involved. Basically, Ezoe offered unlisted shares of Recruit Cosmos at bargain basement prices to politicians, business leaders and journalists in an attempt to curry favor. The shares eventually went public and sky-rocketed in value. Word of these "deals" between Ezoe and the others soon leaked out, and the dominoes began to fall. The fallout was swift, with many of these politicans stepping down after being disgraced. The scandal rattled Japan and helped lead to a major slowdown of the country's economy.

4. Michael Milken. Known as the "Junk Bond King", Milken was another in our list who abused his privileges and power. Milken pioneered the use of high-yield debt (or junk bonds) to help finance corporate takeovers and corporate raids. He was more fond of enriching himself though, as he used his knowledge of forth-coming acquisitions to enrich himself and his cronies, through the purchase of warrants in companies that were about to be taken over and other beneficial self-dealings that would enrich him. Milken built up a net worth of over a billion dollars. When Ivan Boesky was taken down, he ratted out Milken and the entire house of cards came toppling down. It is said that the movie "Wall Street" is largely based upon Boesky and Milken.

3. Guinness Fraud. Speaking of Boesky, he paid dearly for his involvement in this scandal. Basically the scheme was this: inflate the price of Guinness shares by buying as many Guinness shares of they possibly could, maintain the price and then use the inflated market cap to take over Distillers, a much larger company. The "Guinness Four", Ernest Saunders, Gerald Ronson, Jack Lyons and Anthony Parnes were charged with using company money to try and artificially inflate the stock price of the company, which would allow them to take over Distillers. Guinness fronted money to various "investors", including Ivan Boesky, who would buy shares in the company and then receive a kickback for doing so. The merger was eventually completed, although the fallout was great once this insider scheme was uncovered. This scandal roiled global financial markets that were already shaky at the time.

2. Tang Wanxin. Formally one of the richest men in China, he played a major role in China's largest ever stock scandal. Tang raised over 45 billion yuan over a 4 year period without regulatory approval. Not only that, but Tang also rigged the prices of three listed companies that his company owned so that he could inflate the share prices, use the shares as collateral for loans and send more money into his company's. Many company executives were in on this scam to defraud the Chinese public. One of the biggest companies in China was taken down, one of the richest men in China fell from grace, and billions upon billions of dollars were involved. Certainly worthy of a number two spot on this list.

1. Enron. The grand-daddy of all scams. You have all of the elements. A company with incredible political connections. The seventh-largest company in the United States at the time. A darling of the stock market. Thousands of employees with their life savings tied up on the stock, and many more thousands with exposure to the stock either directly or indirectly. The multi-billion dollar company was mostly smoke and mirrors. Company officials were using shell companies to hide hundreds of millions of dollars in debt, and to inflate profits. Company officials were creating shell companies in order to enrich themselves as well through lucrative side deals. Enron truly signalled the end of the "boom era" in the United States stock market. Billions upon billions were lost. Arthur Andersen, one of the largest accounting firms in the US, shredded company documents and was eventually taken down. Congressional hearings. Whistle-blowers. Books. Movies. This one had it all, and was certainly the most outrageous stock market scam of all when you consider all of the elements involved. The Top Twelve Stock Market Scams of the Last Twelve Years

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The title is self-explanatory. Here are the top 12 scams since 1995:

12. The Emulex Press Release Hoax. In the summer of 2000, Mark Jakob, a former employee of Internet Wire, sent out a fake press release stating that Emulex was under investigation by the SEC, that its CEO was resigning and that it was restating its previous quarter earnings to a loss. Mark Jakob, now a student at El Camino Community College, used his connections and knowledge of Internet Wire to fudge the press release through the standard screening procedures. The stock tumbled as low as $43 from the previous day's close of $113.06 before quickly recovering. Jakob ended up profiting almost $250k from the scam. He was quickly caught, sentenced to 44 months in jail and had to forfeit his gains, plus pay an extra $103k in fines.

11. Market Maker Gouging. February, 2004. Top market makers agree with regulators to pay a $240 million dollar penalty for trading abuses, including trading ahead of customers and other violations including "interpositioning." Market makers involved in this settlement included LaBranche & Company, Fleet Specialist and Leeds & Kellogg. None of these names sound too significant until you see the names of the companies that own them: FleetBoston, Goldmans Sachs and Bear Stearns. These market makers took advantage of the antiquated system of trading on the NYSE and exploited their customers for their own benefit.

10. CEO Compensation - CEO's of publicly traded companies making tens of millions of dollars per year in compensation. Fired company officials with only six months of service at a company walking away with millions of dollars in compensation. As shareholders in these companies, this is OUR money that they are pilfering. Eventually, CEO compensation will become a big issue.

9. Tyco. For a time, Tyco was a darling of Wall Street, as was company officer Dennis Kozlowski. Along with CFO Mark Swartz and CLO Mark Belnick, the three pilfered hundreds of millions of dollars from the company and its shareholders by issuing themselves unauthorized loans and unauthorized stock sales. These three were addicted to their extravagant lifestyle, and used these ill-gotten funds to fuel their lifestyles. Eventually they were caught and convicted to 25 years in jail. The main victims in all of this were the shareholders, that saw their shares plunge over 80% in just a few short weeks.

8. Centennial Technologies. Traded as high as $55.00 on the New York Stock Exchange, but the entire company was built on smoke and mirrors in the form of forged company documents. The company reported millions of dollars in sales of PC memory cards, when in fact they were shipping fruit baskets to their customers and falsifying sales invoices. Eventually the SEC caught up with them and found that the company had overstated earnings by $40 million dollars. Supposed profits turned into losses and the company went up in smoke.

7. Day-Trading Chat Rooms. In the late '90s, Daytrading was a huge business. Most people followed the stock market religiously, and quite a few people decided to dip their toes into the water and try trading on their own. Most people, intoxicated by the allure of easy money trading high-flying Internet stocks, started to day-trade. Buy a high-flying Internet stock in the morning, sell it in the evening for a quick five digit gain. Chat rooms such as Tokyo Joe and Anthony Elgindy's room quickly became very popular, and they charged an arm and a leg for their day-trading recommendations. When the dot-com bubble popped, these daytrading chat rooms quickly lost their appeal, and in some cases, their operators were either fined and sanctioned by the SEC or sent to jail for trading infractions.

6. Bre-X. Was purported to own the richest gold mine ever, containing over 200 million ounces of gold in Indonesia. At its peak, Bre-X had a capitalization of over $4 billion dollars. Can you see the pattern here? The entire gold mine story was bogus, and the stock price evaporated overnight. Core samples were falsified, and the Busang site in Indonesia turned out to be worthless. In 1997, the stock completely collapsed, and thousands lost their investments in the company.

5. Worldcom. Was a giant company, which made the "book-cooking" seem even more unbelievable. I mean, how could such a massive company make such stupid mistakes? The company recorded operating expenses as investments in the company, which grossly exaggerated total profits. In 2001, the company reported a profit of $1.3 billion dollars, which was completely bogus. The stock, which was an 800 pound gorilla at one time and a seemingly bulletproof investment, tumbled from $60 to pennies per share. Because of mutual fund and index fund exposure, tens of thousands of people lost money due to the Worldcom hoax, plus tens of thousands of people lost their jobs.

4. Healthsouth. Another case of a company engaging in deception to make their earnings reports seem much better than they actually were. CEO Richard Scrushy instructed employees to inflate revenues and overstate income. The scandal eventually came to light when CFO William Owens, now working with the FBI, recorded Scrushy talking about the deception on tape. Scrushy also sold shares of the company just before a major loss was announced. The stock was crushed when the allegations came to light, trading from $20 down to pennies in just one trading session.

3. The Pattern Daytrader Rule. A ridiculously stupid rule instituted by the SEC once the Internet bubble had popped. Big brokers were getting their heads handed to them by companies such as E-Trade and Ameritrade, and since these big brokers sit on the boards of the NYSE and NASDAQ, they proposed the "Pattern Daytrader Rule." The PDT is meant to neuter small-time daytraders and make it very difficult for them to trade their own money how they see fit. Basically, you are not allowed to daytrade more than 3 times in 5 days if you have less than $25,000 in your account. Forget the fact that it's your money. Forget the fact that you could be profitable on every trade. The SEC instituted this rule to "protect people from themselves." BS. The big brokers implemented this rule to protect their retail trading business, and they slid this rule in when no one was paying any attention.

2. Enron. Was once one of the top 10 biggest companies in the United States. Through the elaborate usage of shell companies and offshore companies, Enron cooked its books to hide debt and multiply their earnings. Not only they do this to make their earnings reports look better, but certain company officials also enriched themselves personally. Enron was a huge mess, taking down accounting firms and sending multiple people to jail in the process. The stock price fell from $90 down to pennies a share, and many people lost their retirement savings.

1. Dot Com Boom 1.0 - A massive fraud that was perpetrated on the public. Everyone had their hands dirty; big brokerages upgrading and pushing dot com stocks on their customers while privately calling the companies worthless in internal memos; big brokerages again for underwriting companies that they knew had no chance of ever making money just so they could bank their huge underwriting fees; big brokerages again for upgrading these POS stocks so that they could earn more fees underwriting the worthless companies' secondary offerings; big brokerages once again for allowing their analysts to issue outlandish price targets with no real justification; television stations such as CNBC for breathlessly hyping Internet stocks; the government for not giving the SEC the proper resources to investigate all of the shenanigans that were taking place at the time, and the media in general for not having the intestinal fortitude to critically analyze the dot com bubble for fear of alienating their readers. The extent of the fraud was far-reaching and millions lost money, and many thousands lost their life savings.