In 2010 alone, 675,000 companies closed their doors and 62,250 went bankrupt. Some were ill-conceived startups, others were beloved institutions. Some were little mom and pop shops, others were unfathomably large global entities.
In November 2010, the yellow brick road dulled for Metro-Goldwyn-Mayer (MGM) as the studio declared bankruptcy. Once the largest film studio in the world, MGM — owners of the James Bond franchise and distribution rights for The Hobbit — had accrued over $4 billion in debt. Bond fans everywhere heaved a collective sigh of relief after the company restructured, received a $500 million line of credit, and got the cameras rolling again.
Unsurprisingly, not all bankruptcies come packaged with a happy ending.
Take 2011, which was a bad year for booksellers. Borders, feeling the pressure from Internet retailers, squeezed into the courtroom to file for Chapter 11 protection. Planning to reduce overhead by closing 30% of its stores, the company began locking the doors at 226 US locations in February. By July, the company had not been able to resolve its financial issues and began liquidating its remaining stores, 399 in total.
According to Bloomberg Businessweek, one of the biggest problems Borders faced with liquidation was that its “sales” were not exactly great deals for consumers. According to the magazine, while slashing prices to convert every book, DVD and CD into cash before their contract expires April 30, the art of liquidation requires they keep prices high for popular items.” Thus, Borders still found itself pitted against online retailers who were, in most cases, still offering consumers lower prices on popular items and new releases.
With the specter of failure looming, many companies get creative with their accounting to avoid bankruptcy. Most famously, energy company Enron employed a number of fraudulent accounting practices to make the company appear profitable. Promoting an almost religious focus on increasing their stock value and an implicit understanding that their ship was sinking, Enron execs collapsed the stock value by overselling their shares. In 2001, with over $63 billion in assets, Enron declared bankruptcy.
So, from big screen time travel to 15-year-old con men, here’s a list of four companies that up and vanished.
DeLorean Motor Company
The DeLorean Motor Company (DMC) is perhaps best remembered for manufacturing the car that took Marty McFly and Doc Brown back to the future. The stainless steel DeLorean DMC-12, traveling at 88 miles per hour, took the intrepid duo back to 1955 and forwards to 2015. With its distinctive gull-wing doors powered by cryogenically preset torsion bars, a fully stainless steel body and a rear-mounted engine, approximately 9,000 DMC-12s were made before production ended in 1982.
The trouble began in 1981, when a lack of demand for the unique car drove the company to seek additional funding sources. John DeLorean desperately sought aid from the British government, however they promised funding only if he could match their contribution. To make matters worse, DeLorean found himself the subject of an FBI sting in 1982 after allegedly conspiring to smuggle $24 million worth of cocaine into the US. Though he was acquitted of all charges, DeLorean’s — and his company’s — reputation were irreparably damaged.
In 1982, DMC entered receivership and declared bankruptcy. The DMC-12 — that once-great steel bird — soared into legend and became a creature of the past remembered only through junkyard fossil records and suspicious Craigslist ads.
Formerly among the “Big Five” accounting firms, Arthur Andersen was founded in 1913 by Arthur Andersen and Clarence DeLany. A bastion of professional honesty and integrity, Andersen believed that an accountant’s loyalty should lie with investors. His personal motto was, “Think straight, talk straight,” and legends abound of him refusing to sign off on faulty accounting.
Upon Andersen’s death in 1947, however, the firm took a sharp and decisive turn away from his philosophy.
During the 2001 Enron scandal, the Powers Committee found that, “[t]he evidence available to us suggests that Andersen did not fulfill its professional responsibilities in connection with its audits of Enron’s financial statements.” Just a few months later, Andersen was found guilty of obstruction of justice after it was discovered that the company shredded documents pertaining to its audit of Enron.
Though the conviction was eventually overturned by the Supreme Court, the damage done to the company’s reputation prevented it from maintaining anything more than a marginal presence in the accounting world. The company had previously employed 28,000 employees in the US and 85,000 worldwide; as of 2011, that number has dwindled to 200, most of whom spend their time handling civil lawsuits against the company.
Barry Minkow founded ZZZZ Best — a carpet cleaning and restoration company — in 1982 in his parent’s garage when he was only 15 years old. As he struggled through his first few years of operation, he relied on friends to get him to and from jobs.
Due to his age, Minkow had difficulty opening business accounts because California law didn’t allow minors to sign binding contracts. As a result, he was forced to pursue less legal means of funding his business venture. Resorting to check kiting, stealing his grandmother’s jewelry and credit card fraud, he managed to keep ZZZZ Best afloat until he met Tom Padgett. Minkow and Padgett, an insurance claims adjuster, soon set up an “insurance restoration” arm of ZZZZ Best. Forging documents and forming a non-existent subsidiary company, the pair received massive loans from Minkow’s bankers.
ZZZZ Best went public on the NASDAQ in 1986, and by 1987 the company was valued at $280 million. Then, it all came back to bite Minkow squarely on his behind. A woman who Minkow had defrauded for a few hundred dollars had been doing some digging. She presented her findings to the Los Angeles Times, which published a story detailing Minkow’s rash of credit card fraud from 1984 to 1985.
Almost overnight, ZZZZ Best was gone, and by the following year, Minkow and other company execs were indicted on 54 counts of racketeering, mail fraud, money laundering, tax evasion, securities fraud, embezzlement and bank fraud.
F.W. Woolworth Company
One of America’s original variety stores, F.W. Woolworth Company was founded in 1878 by Frank Winfield Woolworth. The company’s stores practically invented the concept of retail merchandising, customer service and direct sales. In a time when most stores kept merchandise behind the counter, away from customers, Woolworth revolutionized the shopping experience by putting merchandise in a public area where customers were able to inspect and handle it.
By 1904, Woolworth had six chains of stores operating in the US and Canada and in 1912, these chains — 596 stores in all — were incorporated under a single name, “F.W. Woolworth Company.” Woolworth’s low price, high variety, and open atmosphere stores soon became a model for hundreds of imitators across the country.
In time Woolworth’s began to diversify its concept. The company was transformed from a strict “five-and-dime” store into a traditional discount store. Facing a growing number of competitors such as Kmart, Target and Wal-Mart, Woolworth’s market share began to dwindle.
In 1993, the company devised a plan to restructure by closing over 400 of its general merchandise stores, but by then it was too late. The company faded into the marginalia of the annals of history in 1994, when Woolworth sold the last of its stores to Wal-Mart.
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