Eight Companies Ruined by Their Founders

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5. Countrywide Financial
> Founder: Angelo Mozilo
> Percent voting share: 1.5%
> Date founded: 1968

Former Countrywide CEO Angelo Mozilo became the face of the subprime mortgage mess once that market collapsed. Under his watch, his company began financing mortgages to high-risk borrowers, which during the housing boom drove the company’s large growth. In 2006, Countrywide financed about 20% of all mortgages in the U.S., more than any other mortgage lender in the country. But the company fell apart when the housing market tanked and borrowers defaulted on their high-interest loans. Countrywide was eventually sold to Bank of America in 2008 for $4 billion, with Mozilo forced out a few months later. The company then faced a barrage of lawsuits arguing that the company used deceptive practices to get people to apply for mortgages they could not afford. Mozilo’s integrity was also called into question when it was reported that several government officials and politicians, such as then-U.S. Sen. Chris Dodd, received favorable mortgage deals simply by being “Friends of Angelo.” In 2010, Mozilo settled an insider trading charge with the SEC for about $67 million. He is also permanently banned from serving as an officer and director of a public company.

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6. Groupon
> Founder: Andrew Mason
> Percent voting share: 19.5%
> Date founded: 2008

Andrew Mason, Groupon’s quirky founder and CEO, has stumbled repeatedly in his role during the past couple of years. His company, which provides discounts and daily deals online, had to revise its financial reports in August 2011 after regulators and analysts took issue with its accounting methods. Groupon issued another revision to its financials in early 2012 as the company overstated its 2011 profit by more than $20 million. Because of these problems, along with general concern that the daily deal fad — the company’s core business — may be slowing, the stock price has been declining. It is now roughly a quarter of its initial public offering price of $20 a share, with the company’s market capitalization at $3.3 billion. It didn’t have to be this way. In 2010, Groupon rebuffed Google’s offer to buy the company for up to $6 billion. There has been talk that Mason isn’t mature enough to run a company of this size. For instance, he was criticized for drinking beer at a company meeting and for his public gaffes commenting on why it turned down buyouts.

7. American Apparel
> Founder: Dov Charney
> Percent voting share: 43.3%
> Date founded: 1989

Dov Charney started and ran American Apparel from his dorm room at Tufts University in the late 1980s. Twenty years later, in 2008, the apparel company had more than 6,700 employees and 197 stores worldwide. But provocative ads and rapid expansion did little to address the problems plaguing the company. In 2009, the Immigration and Customs Enforcement agency said that a quarter of workers at the company’s downtown Los Angeles manufacturing facility were illegal immigrants. In 2011, two sexual harassment lawsuits were filed against Charney. In December, a former store manager accused Charney of choking him and rubbing dirt in his face. Charney has denied all allegations of misconduct. The company has also struggled to stay afloat financially, running an operating loss in the last 12 months for which financial statements have been released.

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8. Best Buy
> Founder: Richard Schulze
> Percent voting share: 20.24%
> Date founded: 1966

Best Buy founder Richard Schulze has presided over a company that has struggled to stay relevant in a sector that is increasingly moving online. Best Buy’s business has taken a sizable hit from online retailers such as Amazon.com. Some industry experts and analysts point out that Best Buy is increasingly becoming a showroom for electronics consumers — meaning that people go to the store to check out the product only to buy it online at a lower price. In the most recent quarter, Best Buy lost $10 million as revenue fell 4% compared to the previous year. The company’s share price is approximately one-third of what it was five years ago. Schulze has also found himself embroiled in a company sex scandal. A Schulze lieutenant, former CEO Brian Dunn, was forced to resign from the company after it was discovered that he had an affair with another staffer. The founder received criticism after an internal investigation found that he did not report that information to the board despite knowing about Dunn’s affair. Schulze announced his retirement from the board shortly after that investigation.

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