Home Business 25 Prominent Businesspeople Who Broke The Law
Business

25 Prominent Businesspeople Who Broke The Law

TristaDecember 15, 2020

“Nice guys finish last,” is unfortunately how the saying goes. Many billionaires, CEOs, and tycoons have broken the law to avoid finishing last. Some of the world’s wealthiest people got in hot water by committing corporate fraud and landed behind bars. Check out this who’s who list of very wealthy individuals who were found guilty.

These standalone tycoons realized huge risks were necessary to create multimillion-dollar enterprises. In their drive to build a business empire, they broke the law in the process. They aren’t like those entrepreneurs who started a small business in their basements and made millions of dollars. Take a look at 25 well-known entrepreneurs who broke the law with financial crimes trying to make a fortune via CBS News here.   

Shutterstock

25. Dennis Kozlowski

Kozlowski was the CEO and chairman of Tyco International Plc, a fire protection and security systems corporation. However, police charged him with embezzling over $150 million. Furthermore, the judge convicted him of this crime. Ex-CFO Mark H. Swartz, was also guilty of misappropriating nearly $134 million. Both served a prison term of 25 years. Investigations revealed the duo received $81 million in kickbacks in the form of illegal bonuses.

ABC News

Kozlowski and Swartz refuted the charges by iterating that Tyco’s board of directors had offered and sanctioned the paybacks. New Hampshire Federal courts authorized a class action suit settlement wherein Tyco was directed to reimburse $2.92 billion to shareholders. Kozlowski bought yachts and property in New York with the millions he misappropriated, mainly from 1999-2001. Despite all of his crimes, Kozlowski was still granted parole on January 17, 2014.

Shutterstock

24. Bernard John Ebbers

Ebbers’ name is permanently etched in the notorious circles of the biggest frauds. They credited him (albeit disreputably) with carrying out one of the biggest accounting frauds in United States history. Ebbers personally supervised fictitious financial reporting, while cheating investors and shareholders over one year from January 2001 to March 2002.

The New York Times

A judge prosecuted him on 15 counts of fabricated and misleading financial reporting in 2003. In 2005, they handed him nine accounting transgressions. After four months, the trial court announced a 25-year prison term because of the fraud.

Ebbers was the CEO and co-founder of WorldCom and played a crucial role in fostering the company’s growth and development. After it came to light that Ebbers had committed fraud to the tune of $11 billion, WorldCom Inc. disintegrated and filed for bankruptcy. Ebbers would serve only 13 years of his sentence due to his deteriorating health.

Shutterstock

23. Jeffrey Keith Skilling

Skilling, a U.S. businessman and the former CEO of Enron Corporation, fell under the spotlight following the Enron scandal. During the trial in 2006, Skilling was found guilty on 19 counts. Consequently, the judge convicted Skilling harshly and sentenced him to 24 years behind bars. 

The New York Times

The prison term handed to Skilling turned out to be one of the most severe ever for white-collar crime. Skilling appealed the stringent conviction and a jury arbitrated the case in March 2010. Eventually, the US Supreme Court referred the case back to the Court of Appeals, setting aside a part of the conviction. Eventually, the U.S. Department of Justice negotiated with Skilling, cutting his sentence 10 full years.   

Shutterstock

22. Walter Forbes

Forbes was an American corporate executive and ex-CEO of Cendant Corporation. He received a 12-year sentence for masterminding one of the biggest accounting scams in U.S. corporate history. New Jersey prosecuted Forbes for securities fraud. As a result, the attorney’s office sentenced Forbes to 12 years, seven months in jail. They also ordered him to pay $3.28 billion as compensation. 

The New York Times

The trial lawyers revealed that Forbes and Kirk Shelton, the former Vice-Chairman of Cendant, masterminded a bookkeeping scheme for a decade. They exaggerated the firm’s revenues and proceeds. Furthermore, the fraud disclosure in 1998 led to the plummeting of Cendant’s stock market value by approximately $14 billion. In turn, Cendant made a deal with investors where the organization agreed to pay $2.85 billion.

Shutterstock

21. John James Rigas

Rigas was one of the establishers of Adelphia Communications Corporation, an American cable T.V. company. He had to resign as CEO following his indictment for securities scams, wire fraud, and banking fraud. Along with Rigas, company executives Michael Mulcahey and James Brown and his two sons were also found guilty of misdemeanors. Furthermore, the prosecution divulged that the perpetrators had robbed the company by not disclosing $2.3 billion in liabilities from investors.

Buffalo News

Rigas, his sons, and the executives siphoned off millions in corporate funds. It was established that Rigas, together with his sons, had fraudulently pocketed $3.1 billion as an unaccounted loan. After arraigning Rigas of the charges leveled against him, the federal court dealt him a 15-year prison term. However, in 2016 on February 19, U.S. District Judge Kimba Wood, following Rigas’ attorneys’ recommendations, formally announced his release. Rigas’ lawyers reported that he had been diagnosed with bladder cancer. andhis life expectancy was six months at most. Nevertheless, it’d not be out of place to mention here that Rigas continues to lead a fulfilling life to date.                 

Shutterstock

20. Robert Allen Stanford

Stanford is a former CEO and chairman of the redundant Stanford Financial Group. Courts indicted him for organizing a colossal Ponzi scheme, the second-largest in U.S. corporate history. Stanford faced arraignment for defrauding investors to the tune of $7 billion and sentenced to 110 years in federal prison in 2012. The US SEC (Securities and Exchange Commission) conducted a raid at the Houston headquarters of Stanford Financial Group (SFG) in February 2009. It charged the fraudster with discreetly operating a massive Ponzi scheme. 

Wall Street Journal

Soon after, the FBI raided SFG’s offices in Tupelo, Mississippi, and Memphis, Tennessee. During the trial in 2012, federal prosecutors found him guilty on 13 counts and handed him a 110-year prison term. He is currently serving his sentence in a high-security United States penitentiary in Florida.

Shutterstock

19. Thomas Kwok

The erstwhile managing director and joint chairman of Sun Hung Kai Properties (the largest real estate firm of Hong Kong), Thomas Kwok, was accused of accepting an illegal payment in 2014. The ‘Independent Commission against Commission’ (ICAC) apprehended that he and his brother Raymond Kwok for giving $8.5 million as a kickback to the ex-chief secretary of Hong Kong, Rafael Hui. While ICAC could not substantiate Raymond’s wrongdoing, the regulatory body charged Kwok with committing transgression and directed him to pay recrimination of $500,000. 

South China Morning Post

Additionally, ICAC announced a five-year prison term for Kwok, following which he resigned from Sun Hung Kai as chairman and managing director. However, after serving time for a little more than three years, he walked out of jail in March of 2019.

Shutterstock

18. Mikhail Khodorkovsky and Platon Lebedev

Once billed as Russia’s wealthiest oligarch, Khodorkovsky and his business partner, Platon Lebedev, were indicted for tax fraud in 2003 and imprisoned. Under President Vladimir Putin, Russian authorities arrested them. After that, Putin’s government froze shares of Khodorkovsky’s oil and gas company, Yukos, that ultimately led to collapsing of the firm’s shares.

VOA News

The Russian government decreed a 13-year prison term for Khodorkovsky. He was transferred to a labor camp in 2005. The business partners were again charged with money laundering and embezzlement, which tacked on an extra six years to their current terms. President Putin granted amnesty to Khodorkovsky in 2013 while his partner was freed after one month.

The New York Times

17. Michael Milken

Milken is a US-based investor and philanthropist who came into the limelight for pioneering high-yield bond policy to facilitate mergers & acquisitions. Milken was employed with Drexel Burnham Lambert, an investment bank, when he conceptualized the technique of high-yield bonds in the 1980s. He coaxed Tubby Burnham, his superior, to allow him to lay the foundations for a separate high-yield bond trading division.

In no time, Milken’s innovation started paying off as his high-yield bonds enabled his employer to earn near 100% return on investment. By the mid-’70s, Milken was earning $5 million annually. Milken’s uncanny capacity to quickly and effortlessly raise vast sums of money also paved the way for leveraged buyouts (LBO). Milken’s unconventional and somewhat unprincipled mode of acquiring companies using LBO attracted the attention of the SEC. 

Pensions & Investments

Yet it was not until 1986 that Milken’s dubious trading strategies came to light when Ivan Boesky, former arbitrageur, and accomplice confessed to stock manipulation and insider trading crimes. Boesky turned whistleblower accusing Milken of willfully committing grave financial crimes such as stock manipulation, parking, and insider trading.

As a result, a federal grand jury impeached Milken on 98 counts of fraud and racketeering in March 1989. Finally, he admitted to six counts of tax and securities infringements and breaches, ad directed to pay $600 million as reparation. Milken also served time for two years behind bars. Nevertheless, President Donald Trump granted Milken a pardon in February 2020.     

Shutterstock

16. Raj Rajaratnam

Rajaratnam is an American billionaire born in Sri Lanka who established the Galleon Group, a hedge fund management company based in New York. The FBI took Raja Rajaratnam in for insider trading in 2009, which eventually leading to the Galleon Group’s closure. Appearing in a trial in the U.S. District Court for New York’s Southern District in 2011 on May 11, Rajaratnam was indicted for five conspiracy counts and nine securities scams.

Bloomberg

The federal jury ordered to pay more than $150 million for civil and criminal penalties and was also handed an 11-year jail term in October 2011. Rajaratnam was the first magnate to be served an 11-year extended prison sentence for insider trading. Also, Rajaratnam spent the first few years of his incarceration at the Federal Medical Center in Devens, Ayer, Massachusetts. Following President Donald Trump’s ratifying the First Step Act in 2019, Rajaratnam was discharged from prison. Rajaratnam, a diabetic, lives under strict confinement in his Upper East Side Manhattan apartment.

Shutterstock

15. Jay Y. Lee

Lee is the chairperson of Samsung and was apprehended in 2017 for perjury, embezzlement, and bribery. Sadly, his financial crimes came out in the open following the arraignment and incarceration of South Korea’s then-president Park Geun-Hye and her close associate Choi Soon-Sil.

Mint

It was alleged that Lee had purportedly paid $38 million to Choi to facilitate the amalgamation of Samsung C&T and Cheil Industries. As a result, the prosecutor’s office sentenced Lee to five years in jail on August 25, 2017, after the charges were proved. However, Lee spent only about 11 months in prison and was set free in February 2018 after he appealed the sentence.

Shutterstock

14. Joaquin Guzman Loera

Loera earned the moniker “E.L. Chapo” because of his short stature. Many people regarded him as the world’s most notorious drug dealer. His father introduced Loera into the drug trade. He harvested weed for local drug lords in Mexico. In his early years, he worked for Mexico’s main linchpins such as Miguel Felix Gallardo and Hector Luis Palma Salazar.

WSJ

Authorities detained Gallardo and Loera established his cartel in the year 1988. He supervised the production, smuggling, and distribution of heroin, marijuana, cocaine, and methamphetamine in bulk throughout Europe and the U.S. His highly-organized network enabled him to become the most powerful and the largest drug trafficker globally.

After escaping twice from prison in Mexico, they finally nabbed him in 2017. Authorities handed him over to the U.S. Loera was convicted for ten counts of money laundering and drug trafficking. The judge sentenced him to life imprisonment in addition to 30 years. They also gave the drug dealer a $12.6 billion fine.

Shutterstock

13. Curtis Johnson

Johnson is the great-great-grandson of Samuel Curtis Johnson, founder of household cleaning supplies firm SC Johnson. Curt was accused of molesting his stepdaughter for three years starting when she was 12. The charges could have kept him imprisoned for 40 years.

MSJ

During the trial, his stepdaughter relocated to North Carolina, making it difficult for her to testify in court. Johnson bargained for settling the litigation by confessing to fourth-degree sexual assault charges and agreeing to pay a $60,000 penalty while also spending four months in jail. 

Shutterstock

12. Alfred Taubman

Taubman is an American investor, philanthropist, and entrepreneur, and former chairman of Sotheby’s. They charged him with conniving to fix auction commission rates in the U.S. in contravention of antitrust laws.

Artnet

They sentenced him to one year and an extra day in jail; however, he vehemently refuted the charges leveled against him. After remaining imprisoned for nine months, he walked out of prison in 2003. Taubman passed in 2015 after suffering a massive heart attack.

Shutterstock

11. Bernie Madoff

Madoff, a stockbroker, financier, investment consultant, and former non-executive chairman of NASDAQ, is best known for orchestrating the largest Ponzi scheme in U.S. corporate history. Trial attorneys, who carried out detailed investigations and interviewed nearly 4,800 of Madoff’s clients, alleged that the fraudulent scheme was worth about $64.8 billion. Madoff, a seasoned investment banker and industrialist, and his wife had a combined net worth of $823-826 million before the scandal’s unearthing.

Newday

That Madoff managed to keep his Ponzi scheme under wraps for several decades left industry pundits and investigators utterly shocked. His house of cards, Bernard L. Madoff Investment Securities LLC, started crumbling when investors asked him to reimburse $7 billion. Madoff just had $200 million to $300 million to pay his creditors. Bernie is alleged to have defrauded more than 4700 investors to the tune of $65 billion and approximately $20 billion went into his pocket. The Department of Justice prosecuted Bernard Madoff for 11 counts of theft, perjury, embezzlement, money laundering, misappropriation of funds, and fraud.

Shutterstock

10. Vijay Vittal Mallya

Indian businessman, high-flying liquor baron, and ex-Member of Parliament Vijay Mallya has been mired in controversies and financial indignities ever since 2012. Owner of the Kingfisher Airlines (non-operational), Mallya used to lead a very extravagant and wasteful lifestyle that earned him the name “King of Good Times.” From 2012 onwards, it became widely evident that Mallya had piled up enormous debts to keep Kingfisher Airlines operational. 

Affair Post

When the public-sector banks in India that had loaned vast sums to the industrialist pressurized him to settle his debts, he fled to the U.K. using his diplomatic passport. The entrepreneur has been accused of embezzling public funds and laundering bank credits to the tune of Rs 90 billion (roughly $1.3 billion). Following the filing of a bankruptcy petition that helped salvage £1.145 billion of bank debts, Mallya’s net worth nose-dived massively. The Indian government’s earnest endeavors to extradite Mallya have proved unsuccessful and he continues to evade arrest.     

Shutterstock

9. Eike Batista

Eike Fuhrken Batista Da Silva, a Brazilian entrepreneur of German descent, was the richest man in Brazil with an estimated net worth of $30 billion. However, when his oil company OGX went bust in July 2013, his fortunes plunged drastically, rendering his net worth harmful. He was slapped with a 30-year prison term in July 2018 for offering kickbacks to ex-Rio de Janeiro governor Sergio Cabral.

Wilson Dias/Agência Brasil

Eike aspired to become the wealthiest individual globally and often bragged in public that he’d one day dethrone Mexican mogul Carlos Slim. Batista was a self-made baron who was held in high esteem by generations of young Brazilians. With an estimated net worth of $35 billion, Eike was Brazil’s wealthiest person and the world’s seventh-richest man.

However, Brazilian authorities in January 2017 indicted nine Brazilians including Batista in a $100 million bribery and money-laundering case and issued an arrest warrant. After Eike came back from New York, he was apprehended and sent to the high-security penitentiary in Bangu.

Shutterstock

8. Bernie Ecclestone

Bernard Charles Ecclestone, the ex-CEO of Formula One Group, found himself embroiled in controversies throughout his career. Ecclestone first courted controversy big-time when he parleyed with erstwhile Labor PM Tony Blair for endorsing tobacco sponsorship. He articulated that outlawing tobacco advertisements would lead to Formula One moving out of the U.K., causing loss of over 1,00 000 jobs and £900 million of revenues from exports.

Shutterstock

In 2012, public prosecutors in Munich, Germany, and the U.K. leveled bribery charges against Ecclestone. Ecclestone owns 13.8% of the Formula One Group directly through his family’s Bambino Trust. Finally, authorities indicted him for bribing Gerhard Gribkowsky to assure his bank BayernLB would offer their stake to CVC Capital Partners with Ecclestone at the helm. Not surprisingly, In Munich, a trial court decreed in August 2014 that Ecclestone could settle the case by paying £60m.   

Shutterstock

7. Silvio Berlusconi

Courts found Italian media magnate and statesman Berlusconi guilty of tax evasion and fraud. You might recognize him as the former prime minister of Italy. For his crimes, they gave him a four-year jail term. However, his punishment included a conviction of fornicating with a juvenile prostitute. He could no longer hold public office for at least two years. Silvio used his holding company Fininvest for buying the rights to crucial US TV shows and movies throughout the ’80s and ’90s.

Shutterstock

Berlusconi established Italy’s biggest T.V. broadcaster, Mediaset, to purchase the broadcasting rights. However, he did so at overly high rates, therefore enabling him to rake in €270 million. Berlusconi’s shady deals caused incalculable losses to shareholders and the exchequer.

They also facilitated the amassing of vast and unaccountable black money sums. Silvio was the prime minister of Italy for nine years. He served in four governments, rendering him the longest-serving PM of post-war Italy. The Supreme Court of Cassation (the highest court of appeal in Italy), released the controversial former PM considering his age (Berlusconi is 84). In turn, they ordered him to do honorary community service instead of serving time.

Shutterstock

6. Marco Muzzo

Muzzo is the grandson of late Marco Muzzo Sr., one of the wealthiest Canadians and property developers. The courts charged Marco Muzzo with fatally wounding three children and their grandfather in 2016. They described his condition as inebriated when he rammed his SUV into another vehicle. Sadly, Gary Neville and his three grandchildren were in the other car; his grandchildren were Daniel Neville Lake, Harrison Lake, and Millie Lake, ages nine, five, and two. The collision led to the instantaneous deaths of all four individuals.

CP24

29-year old Marco arrived at the courthouse in Newmarket, Ontario, on February 23, 2016. During that time, the judge sentenced him to 10 years in prison. Furthermore, Superior Court Justice Michelle Fuerst barred Muzzo from getting behind the wheels for 12 years while pronouncing the sentence. Unfortunately, breathalyzer tests revealed that Marco had more than two to three times the permissible limit of alcohol in his blood.   

Shutterstock

5. Marcelo Odebrecht

You probably don’t recognize Odebrecht if you aren’t familiar with Brazilian business. He was the former CEO of  Brazilian multinational Odebrecht. How did he get on this list? They accused the Brazil-based tycoon of paying over $30 million in kickbacks to government officials. That’s illegal and they found him guilty of his criminal activity as a result. 

WSJ

Authority detained him in June 2015. The tycoon had a trial; however, following a protracted court case, the judge sentenced Odebrecht to a 19-year prison term. Nevertheless, they reduced the sentence by nine years in December 2016. Therefore, he could spend the remaining prison term in his home. He still has a while to go before he’s a free man.   

Shutterstock

4. John Kapoor

Have you ever heard of this business tycoon who went to prison? Although his sentence wasn’t as lengthy as some others on this notorious list, he did serve time for his crimes. Kapoor, is a 78-year old Indian-American pharmaceutical entrepreneur. However, the judge handed this billionaire a 5.5 years prison term on January 23, 2020, for multiple felony counts. He’s the founder and ex-CEO of the Arizona-based pharmaceutical firm Insys Therapeutics.

WSJ

Finally, the FBI arrested Kapoor in his Arizona home, indicting him for wire fraud, racketeering, conspiracy, and several other crimes. Nevertheless, the charges were leveled against Kapoor chiefly on account of accusations that he had bribed physicians to prescribe and promote fentanyl, a potent opioid used as an analgesic.   

Fox Business

3. Elizabeth Holmes

Holmes was the founder and CEO of Theranos. The police charged the health technology firm with wire fraud in June 2018 as a result of several questionable practices. Before the financial scandal erupted, Holmes was the toast of Silicon Valley and worth billions. Holmes spearheaded the company. Theranos wanted to guarantee a revolution in how doctors analyzed patients for different ailments and diseases.

CNBC

The company successfully raised approximately $6 million by 2004 thanks to Holmes’s strong connections with influential people. By 2015, Theranos had a $9 billion valuation, with Forbes naming her the richest and youngest self-made female billionaire. Nevertheless, Theranos started disintegrating from 2015 onwards as journalists and investigators started questioning its business practices and technology claims because of swirling rumors.

The SEC found Holmes guilty of massively defrauding investors by making overblown claims about blood-analysis technology. Therefore, Elizabeth had to return 18.9 million shares to Theranos and pay a large penalty to settle the charges.

Shutterstock

2. Bill Gates

Nearly all multinationals, behemoths, and conglomerates in their attempt to grow their business have fallen afoul of governments and/or regulatory bodies. Even Gates, who started his business in a basement-like setting, isn’t an exception. For instance, they found Gates’ Microsoft, the most thriving software corporation globally, guilty of breaching antitrust laws. The government formulates antitrust laws to ensure healthy and fair competition in all industries. It also prevents an organization from monopolizing a trade.

Antitrust laws serve as ‘checks and balances’ strategy; they restrain companies from pursuing unfair and unethical trade practices like leveraged buyouts and price-fixing. The FTC (Federal Trade Commission) initiated an inquiry in the 1990s to establish whether Microsoft Corporation was attempting to control the market by following monopolistic business policies. However, the FTC did not pursue the case for long. The Department of Justice (DoJ) picked up the case. 

Shutterstock

The DoJ and the attorney generals of 20 distinct U.S. states on May 18, 1998, filed antitrust lawsuits against Microsoft for violating fair trade practices. The DoJ alleged that Microsoft was bunching extra software programs into its O.S. (operating system) to stultify and kill competition. They filed the lawsuit in the wake of Netscape’s downfall due to Microsoft’s disbursal of its browser free of charge.  

The DoJ eventually lost the court case despite its best to edit emails, facts, and footage. The ruling by Thomas Penfield Jackson, the supervising judge, expressed that Microsoft had contravened some sections of the Sherman Antitrust Act, promulgated in 1890 for prohibiting cartels and monopolies. In March 2013, the European Union Competition Commissioner ordered Microsoft to pay a $732 million penalty for transgressing an antitrust resolution with regulators. 

Shutterstock

1. Rajat Gupta

An Indian American entrepreneur, Gupta was the first foreign-born CEO and managing director of McKinsey & Company, a US-based consultancy firm. Besides that, Rajat has been a former board member of several renowned corporations including American Airlines, Proctor & Gamble, and Goldman & Sachs. Additionally, he offered consultancy to a string of non-profit organizations such as “The Global Fund to Fight AIDS, Tuberculosis, and Malaria” and the Bill & Melinda Gates Foundation.”

CNBC

Gupta helped setup numerous business entities. However, he fell from grace when a federal judge leveled charges against him for insider trading in June 2012. Federal Judge Jed Rakoff charged Gupta with four felony counts of securities fraud and conspiracy as a result of the Galleon hedge fund scandal.

The federal judge directed Gupta to pay a fine of $13.9 million for insider trading. The SEC filed a case against Gupta for conspiring with Raj Rajaratnam, the Galleon Fund hedge fund magnate. In another financial fraud case New York jury accused Gupta of divulging boardroom discussions to Rajaratnam. Finally, a judge sentenced him to two years in prison, ordering him to cough up a $5 million penalty. In March 2016, they released him from house confinement after serving his prison term.

Advertisement