Originally created 10/31/04

Internal, external woes still haunt companies

Tonight, as Halloween trick-or-treaters come a-knockin', be thankful the scares of the little ghouls and goblins are only temporary. Some of America's largest corporations have endured real-life horror stories whose effect still linger.

When someone says Prince William Sound, what's the first thing that comes to mind? Probably the Exxon Valdez disaster.

Like that devastating oil spill, many corporate nightmares were brought on by the companies themselves, such as the implosion of Enron's house-of-cards financial schemes and Ford's initial reluctance to admit to faulty engineering on the ill-fated Pinto.

Others were the work of outsiders, such as the still-unknown person or persons who placed cyanide-laced Tylenol capsules on store shelves or the woman who tried to bilk Pepsi out of money by claiming to find a syringe in her Diet Pepsi can.

Here's a look at several prominent corporate horror stories throughout the years:


In 1996, women in a Garden City, N.Y., Smith Barney office filed a sexual harassment lawsuit against the company for failing to promote women, giving unequal pay and creating a hostile work environment.

One of the most notorious allegations involved the "boom- boom room," a male-only basement office where clients were entertained with cocktails. Smith Barney managers denied the room existed.

The initial complaint led to a class-action lawsuit involving an estimated 23,000 women who worked for Smith Barney from 1993 to 1997. The case was settled out of court.

Exploding PintosAs fuel prices rose in the 1960s and '70s, Americans were looking for smaller cars. Ford Motor Co. responded with the Pinto, a 2,000-pound, $2,000 car that was billed as the car that "leaves you with that warm feeling."

Truth in advertising? You bet. The car's gasoline tank was prone to rupturing and igniting in rear-end crashes as low as 25 mph.

Ford, however, calculated it was cheaper to settle potential death and burn lawsuits than to fix the problem.

An estimated 500 people died before Ford admitted Pintos were prone to burning and corrected the problem, at a much lower cost than it initially estimated.

McDonald's spilled coffee

More than 700 people had complained to McDonald's Corp. about being scalded by its hot coffee, which was brewed 20 degrees hotter than at most other restaurants.

The company didn't begin taking action until 1994, however, when a jury awarded an 81-year-old woman $2.7 million in punitive damages after she spilled McDonald's coffee on her lap, causing third-degree burns that required several skin grafts and a seven-day hospital stay. A judge later reduced the punitive damages to $480,000 on appeal.

Ironically, McDonald's initially turned down the woman's offer to settle the case for $20,000.

Exxon Valdez

The Exxon Valdez oil tanker ran aground on Bligh reef in Alaska's Prince William Sound at 12:04 a.m. March 24, 1989, spilling 11 million gallons - equivalent to 125 Olympic-size swimming pools - making it the worst oil spill in U.S. history.

It also was the most publicized, mainly because of the environmental havoc it wreaked on the fragile Alaska coastline, 1,300 miles of which were coated with crude oil.Though Exxon said it paid $2.1 billion on the cleanup effort, it was vilified for the cavalier manner in which it handled the spill in the initial stages, becoming a public-relations case study in what not to do.

Today, Exxon's fleet operates as the Sea River Shipping Co. The Valdez was renamed the Mediterranean and operates in the Atlantic Ocean, because it has been prohibited by law from returning to Prince William Sound.

Needle in a Pepsi

In 1993, a Tacoma, Wash., woman claimed to find a syringe in her Diet Pepsi can.

More than 20 people soon claimed to find other items such as wood screws, crack cocaine vials and bullets in cans of the soft drink. It was all proved to be a hoax when a woman was caught on a store videotape inserting a syringe into a can.

Pepsi said it lost $25 million in sales during the scandal. Sales rebounded after the company invited the media to see its plants.

Enron Corp.

Out of all the greed-fueled corporate scandals that brought an end to the boom years of the 1990s - WorldCom, Adelphia, Tyco - one company stands out as the poster child: Enron.

The Texas pipeline company grew into an energy-trading company during the '90s, eventually becoming America's seventh-largest corporation and a darling among Wall Street analysts.

It was brought down in 2001 by federal regulators investigating a series of partnerships that allowed top executives to personally profit while inflating the company's earnings.

On Dec. 2, 2001, Enron filed for what was then the largest bankruptcy in U.S. history. As its once high-flying stock fell below $1 a share, the company laid off more than 20,000 workers, many of whom held only worthless Enron stock in their retirement plans.

Since then, more than 20 executives have been indicted. Some, including the former chief financial officer, have been convicted and are in prison. Former Enron Chairman Ken Lay, who says he was unaware of the machinations of his executives, is awaiting trial.

Firestone Wilderness ATs

Certain Firestone Wilderness AT truck and SUV tires were coming apart during highway speeds during the late 1990s. The National Highway Transportation Safety Administration investigated and eventually linked 270 deaths and more than 800 injuries to tread- separation rollover accidents involving Firestone tires, mostly equipped on Ford Explorers.

Bridgestone/Firestone recalled 20 million tires in 2000 at a cost of $500 million. That doesn't account for the wrongful-death lawsuits still pending.


Barings Bank, London's oldest investment bank, collapsed because a trader in Singapore enacted billions of dollars worth of unauthorized trades.

The illegal dealing came to a head in January 1995 when Nick Leeson made an overnight trade that went sour when the Kobe earthquake hit Japan, sending the markets into a tailspin.

The 28-year-old trader's losses totaled $1.4 billion - more than twice the 233-year-old institution's trading capital.

Dutch bank ING bought Barings for 1 pound, and dropped the Barings name a few years later.


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