Chambers Development

Chambers Development Co. was founded in 1982 and progressed from a minor trash hauler to a rubbish powerhouse. A family-run company headed by John Rangos Sr. with his two sons John Jr. and Alexander as executives. At it's peak in 1989 Chambers Co. released financial reports reflecting sales of $180 million dollars. Forbes magazine in 1989 listed Mr. Rangos 239 in the listing of 400 richest Americans with a fortune valued at about $415 million. Mr. Rangos had a collection of fine art and rare care. The company was considered a darling of Wall Street posting substantially increasing revenue year over year. The tide of prosperity turned for Chambers Co. in 1992 when an outside auditor disclosed that although the company reported substantial profits it had actually lost money.

At the heart of the ethical issue, which would eventually become its downfall, were Chambers Co. accounting practices. Chambers Co. put off recognizing $37 million in indirect costs that other companies would have typically expensed immediately. Examples of items deferred were costs in executive salaries, public relations, legal costs, and travel expenses. Chambers Co. claimed that they were separating costs into operational costs and developmental costs. They continued to defer costs until the company claimed to become an operational company. Chambers management claimed this was a straightforward change in accounting practices. Other sources claimed that Chambers did not change their accounting practices until accountants refused to sign off on the companies' year-end results. Another non-standard accounting practice Chambers employed to reduce their cost base included the capitalization of intangible assets. Deloitte & Touche reported the company capitalized $65 million of interest costs that should have been expense, $43 million in costs related to an acquisition, and $27 million for various start-up costs.

A second ethical concern for Chambers Company outside of its accounting practices was the companies hiring practices. Mr. Knight became the Chief Financial Officer in 1990. Prior to 1990 Mr. Knight worked for Grant Thornton, which was the company that performed Chambers annual audits. Until, 1991 Grant Thornton signed off on Chambers financial records. In 1992, after Chambers had hired Mr. Knight and two other accountants from Grant Thornton, they assigned new auditors who created a lot of questions. An auditing company has to be an impartial party. Obliviously, auditors who are auditing potential employers are likely to be less impartial. They also hired the head of the environmental prosecutions for a state where they were awarded large waste hauling contracts. Mr. Rangos and his sons hired state legislators to lobby citizens groups and recruited politicians to help them be awarded permits.

The actions of Chambers management not only affected the Chambers Company but also had fallout on other companies in the waste management industry. The other companies reported they did not utilize the same practices as Chambers.

Over the years Chambers top executives had been warned that their practices were not correct. Mr. Rangos, in the articles I read, did not want to hear any information that could take away from the profits of his company. Critics suggested that