Top 10 Business Scandals and Ponzies in the United States

The US has seen many financial and business frauds through the years. Many of these were well thought of and deliberately orchestrated by fraudsters. Others happened when unscrupulous persons took advantage of loopholes in existing systems. No matter how these have come about, they have left many gullible Americans penniless and have put the spotlight on the ease with which financial or business frauds can be carried out. Here are a few of the more well known scams that have rocked America through the years.

Navigation Menu of the Top 10 Business Scandals in the United States

1. Yazoo Land Scandal
2. Credit Mobilier
3. Civil War Profiteering
4. Black Friday
5. Charles Ponzi Postal Coupon
6. Teapot Dome
7. Richard Whitney
8. Halliburton Scandal
9. Bernard Madoff
10. Enron Scandal

No. 1 Yazoo Land Scandal – 1795

The Yazoo Land Scandal was perhaps one of the worst financial scams to come out of the industrial USA. Involving an entire American state and bringing into question the ethics of the governing officials. The scam involved the sale of a massive 35 million acres of Yazoo land to different companies. The sale price was fixed at an astonishing half million dollars which translated into about a penny and half per acre. The entire Georgia legislature, with one exception, had been bribed heavily to push the deal through. However, the obviously corrupt deal, which was initially rejected, was later reinstated by a Supreme Court ruling.

No. 2 Credit Mobilier -1860s

The Credit Mobilier was a front for the Union Pacific Railroad, whose directors came up with an innovative idea to skim the funds allocated for construction work. The directors made a killing from the millions paid by the government for these railroad projects. Politicians too had their share of the takings. Newspaper exposés brought public attention to the fraudulent dealings that went on behind the closed doors of the Credit Mobilier.

No. 3 Civil War Profiteering – 1861 to 1862

During the Civil War, Abraham Lincoln’s Secretary of War, Simon Cameron was thrust into the limelight for all the wrong reasons. In this influential position, Cameron had ample opportunity to skim the funds allocated for supplying essentials to the soldiers at the front. He did this by paying huge sums to suppliers who supplied inferior quality products in exchange for favors or bribes. Cameron was removed from his post as soon as the President came to know of these underhand dealings.

No. 4 Black Friday – 1869

The 24th of September 1869 is known as Black Friday, the day when panic reigned in the New York Gold Exchange after two speculators nearly succeeded in cornering the gold markets.

The speculators, James Fisk and Jay Gould, convinced President Grant to issue currency without gold backing. As the government began to issue dollars without backing, Gould began to buy gold from the markets with the intention of hoarding the precious metal. When the President realized what was happening he ordered the sale of gold by the Federal Government, which controlled the situation to some extent. However, the reputation of Grant’s government was damaged significantly after this scandal.

No. 5 The Charles Ponzi Postal Coupon Scam – 1920

The Ponzi scam, as it came to be known, was one with such a far reaching impact that even today, such frauds are referred to by the same name. Charles Ponzi was an Italian immigrant who used a loophole in the US Postal system to his advantage.

In those days, letters to foreign countries were often sent with postal reply vouchers. These coupons could be exchanged with stamps. Any difference in the stamp values of the countries would bring a potential profit. Ponzi exploited this gap to the maximum and went on to swindle millions from unsuspecting Americans. At one point of time, Ponzi was making 250,000 dollars a day from his fraudulent scheme. In effect, he was paying his earlier investors from the money, which new investors brought in. The fraud was revealed by The Post, which later won a Pulitzer Prize for the exposé.

No. 6 Teapot Dome – 1920

The Teapot Dome scandal showed that oil wielded considerable clout in the political ranks of the nation back then, much as it does today. The government of President Harding came in for some fiery criticism following the revelation of the murky Teapot Dome lease dealings.

This naval oil reserve was let out to oil majors for drilling by the Secretary of the Interior, Albert Fall. Fall received substantial gifts from his friends in the oil business in exchange for the lucrative permit to drill for oil in the area earmarked for the Navy. The President’s reputation was badly damaged and Fall became the first cabinet member in the US history to be imprisoned when the unethical dealings were exposed.

No. 7 Richard Whitney – 1938

Richard Whitney was the scion of a wealthy and socially elite family. His father was president of the North National Union Bank and his brother George Whitney, Jr., was a huge success at the Morgan Bank.

Richard Whitney used these influential connections to the best advantage and he was named vice-president of the NYSE. After making losses, he began to borrow heavily. When the source of funds from relatives and friends dried up, he helped himself from the New York Stock Exchange Gratuity Fund. In addition to this, he also embezzled funds from other sources. His fraud was finally exposed by the comptroller for the NYSE and he was subsequently imprisoned.

No. 8 Halliburton Scandal – 2003

Energy giant Halliburton was involved in this huge scandal, which also dragged some big political names into the mud. The company was accused of making huge profits from its supply chain to US soldiers in war torn Iraq. The charges ranged from over-charging for meals supplied to US troops and bribery of officials to passing of the grossly inflated costs of fuel supplied to Kuwait and Iraq US bases. It was not a coincidence that Vice president Dick Cheney was also a major stock holder in this company. A contract given to the company for rebuilding structures in Iraq also passed through the Vice President’s desk.

KBR, a subsidiary of Halliburton, came under fire when it bid for a LNG plan in Nigeria

and offered to help in the selection process along with bribes to the tune of $180 million to top honchos in the Nigerian government.

No. 9 Bernard Madoff – 2008

A much more recent version of the Ponzi scam was run by former NASDAQ Chairman Bernard Madoff. Madoff was an active trader on the NYSE and at the time of his prosecution, it was believed that the fraud amounted to about $64.8 billion. By his own admission, Madoff had stopped trading since 1990’s, beyond which the figures of successful investments were purely fabricated.

Although these were all highly publicized business and financial scandals, perhaps none have received the global coverage or had the far reaching impact of the Enron scandal.

No. 10 The Enron Scandal – 2001

The Enron scandal led to the declaration of bankruptcy by the company and also brought down the curtains on audit firm Arthur Anderson. Billions in debts were concealed by clever manipulation of financial records, which kept the world believing that the energy giant was an unmitigated corporate success. The SEC investigation was initiated after suspicion was raised over the company’s manipulation of accounts and fabrication of figures to show positive financials. From being perceived as a hugely successful energy giant, Enron became as a symbol of carefully orchestrated corporate accounting fraud.

Enron is, by no means the last of the big financial scams to emerge out of the USA. There will always be unscrupulous corporate magnates, political aspirants and individual fraudsters waiting to lure the unsuspecting public astray. The country needs to build a strong legal framework to severely penalize such people and discourage others from following in their footsteps.

  • Daniel Stone (ADMIN)

    Hi Sam,

    I appreciate your comments and they are more than welcome. The compiled list above is just one man’s opinion and I could only have 10 as this is a top 10 list.

    If you would like to elaborate on each scandal I would be more than happy to create a “Submitted By Readers” list underneath the current top ten. You can use the comment box to submit the details of each if you would like.

  • Sam Chapman

    And why, may I ask, is is there no mention of Swedish Match (Ivar Kreugar) whose activities in the US and world-wide, led to huge changes in Accounting, Auditing, National and International Banking, Stoks and Shares selling law?

    The combined fraudulent activities of Charles Ponzi, the Teapot Dome oil sell-off and Richard Whitney’s activities are less than what Ivar Kreugar did, Also when one considers that the majority of the banking regulations that were watered down causing the present situation we are in, can be attributed to the Matschstick King Ivar Kreugar’s activities for over a decade, I am utterly amazed that it is omitted from this list.