The Worst CEOs In American History

7.   Thomas Edison. In 1887, Thomas Edison, the greatest inventor in US history, formed the Edison Phonograph Company – founded to profit from the phonograph technology he created.

Edison himself ran the company through most of the years it operated. Sound was recorded on wax cylinders. Recognizing the commercial appeal of the device, Edison increased adoption of his products by acquiring and offering more entertainment recordings for his machine. However, because the cylinders were difficult to mass produce, sales were limited.

In response to this design flaw, competitors, notably Columbia, designed and sold lighter discs, now called records.  Its superior design allowed for faster production than the wax cylinders.

In 1916, Edison expanded into dictation, a more profitable business. But by that time, Edison had made a fatal decision that would lead to the firm’s eventual failure: he allowed competitors to dominate the business of selling the discs. Around that time, a group of popular artists under the Victor brand did all of their recordings on discs and Edison lost the market for recorded audio that he had created.

Although Edison hedged his bet in 1913 by creating his own disc division, he continued to aggressively market the wax cylinder product, believing it would be the eventual winner in the format wars. He was wrong and The Edison Company, as it had been renamed, shut down in 1929.

8.   Bernard Ebbers. Under Bernard Ebbers’ stewardship, Worldcom became the second largest long distance company in the US, after it bought MCI in 1997 in a transaction valued at $37 billion.

Bernard Ebbers had been CEO of Worldcom’s predecessor firms starting in 1985. Over 15 years, he built the company through a series of acquisitions, culminating with the MCI deal.

In 1999, Ebbers tried to buy Sprint.  Had the merger been completed, the $129 billion deal would have made Worldcom the largest telecom company, placing it ahead of AT&T.  However, the deal was plagued by objections from regulators and eventually fell through.

During the merger, Ebbers began to prop up the Worldcom results with the help of senior financial executives at the company. The tech and telecom downturn of 2001 began to undermine Worldcom’s earnings and over the next two years, the efforts to manipulate the company’s financial results became more aggressive.

On top of this, Ebbers needed to sell large portions of his own Worldcom stock, to support his lavish lifestyle. The Worldcom board, fearing Ebbers’ sales would destroy the firm’s share price, made him a series of loans.

In 2002, internal auditors discovered that Ebbers’ efforts were the cause of a $3.8 billion financial fraud. That same year, Worldcom filed for Chapter 11.

In 2005, Ebbers was convicted of fraud, conspiracy and filing false documents. He was sentenced to 25 years in prison.

9.   Angelo Mozilo. Mozilo co-founded Countrywide Credit Industries in 1969 as a mortgage lender.

By the mid-1990s, Countrywide had created a system to lay off risk by reselling bundled loans into the secondary market as mortgage-backed securities. Countrywide also expanded its services so that it could make loans, service them via collections, and handle closings with real estate appraisal services. About half of Countrywide’s loans did not conform to the criteria necessary for them to be sold to Fannie Mae and Freddie Mac. This increased its need to sell securitized loans to institutions.

By the mid-2000s, Countrywide’s core lending business had grown so much that it was estimated to have issued over 15% of all home loans in the US. When housing prices began to falter, the mortgage-derivatives market that CountryWide had helped to create began to collapse. These derivatives had been a major source of revenue for CountryWide and in August 2007 it was near financial collapse. The federal government provided capital to CountryWide but the sums could not salvage it as an independent business.

In July 2008, Bank of America closed a transaction to buy the failed mortgage lender. Subsequent to the events, it was disclosed that Mozilo had sold shares in the company that gave him a profit of nearly $300 million between 2005 and 2007. Shareholder class action suits claim that Mozilo was aware of the company’s problems during much of this period. The company was also sued in several states for misleading customers about the terms of the mortgage agreements, particularly the effects of adjustable rate mortgages on monthly payments. Countrywide was accused of originating loans with little or no due diligence on those receiving the loans. Those loans were then packaged and sold by CountryWide in the secondary market. Friends of Angelo, stock holders were not.

10.   John Rigas. Adelphia Communications, once one of the largest cable companies in the US, filed for bankruptcy in 2002. John Rigas, its founder, is now in prison.

Rigas founded the company in 1952 and built Adelphia into the fifth largest cable TV enterprise in the nation. By the late 1990s, Adelphia had almost 5 million subscribers to its cable TV service and a rapidly expanding high-speed Internet business. It had cable systems in over 30 states.

In 2002, the company filed for bankruptcy, in part because Rigas had siphoned off money to fund other companies owned by his family. He was eventually charged with stealing nearly $100 million. After its bankruptcy most of the Adelphia assets were eventually purchased by Time Warner Cable.

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