Waste, Restate, Then Pay Plenty

It was an expensive slap on the wrist for James E. Koenig, the former chief financial officer for Waste Management Inc., who was ordered to pay more than $4 million for his part in the company's five-year accounting fraud.

But not nearly as expensive as it had been for the Houston-based waste hauler which made the largest corporate restatement ever when it reduced its earnings in 1998 by $1.7 billion—the amount that the scheme had inflated company's earnings.

Koenig was ordered by a federal judge to pay the amount for his participation in the fraudulent scheme that took place between 1992 and 1997, the Securities and Exchange Commission announced Thursday.

His attorney, Sarah Wolff, said he will appeal. After an 11-week jury trial in 2006, Koenig was found guilty of 60 securities law violations, including falsifying company books and records, lying to auditors, and aiding and abetting the company's violations.

In setting the money penalty, U.S. District Court Judge Wayne R. Andersen last month permanently barred Koenig from acting as an officer or director of a public company and enjoined him from future violations of the antifraud provisions of the federal securities laws.

His penalty included returning more than $831,000 in earnings-based performance bonuses as well as a $2 million civil fine.

Motivated by "greed and desire to preserve professional and social status"—according to the original commission complaint against Waste Management's founder Dean L. Buntrock and his top executives—the waste hauler falsely boosted earnings by manipulating the value of its assets, including trucks and containers, and improperly accounting for expenses, depreciation, and interest.

Liz Johnson, spokeswoman for Waste Management, said the company had dealt with the issues accounting and governance shortcomings raised by the scheme. She noted that the judge's ruling "is another step in the process of closing this chapter in our company's history."

The commission has reached settlements with Buntrock, four other top executives and the company's now-defunct accounting firm, Arthur Andersen, and four of its former partners.

by Elizabeth Olson