Honesty and trust are crucial ingredients in business success, but not every company chooses to go that route. Some companies lie, mislead their investors and create toxic work environments for their employees – only to have it blow up in their faces.
Business is competitive, but there are some lines that should never be crossed. Let’s look at some of the biggest business lies ever told and the practical lessons you can take away from these notorious mistakes.
Equifax is one of the three major credit bureaus in the U.S., and in 2017, it was involved in a data breach that affected 143 million consumers. Hackers were able to access personal information like credit card numbers, Social Security numbers, home addresses and even driver’s licenses. The breach happened because the company failed to implement basic security measures.
The breach itself was bad enough, but the company deliberately misled customers and withheld information. It also later came out that additional data breaches occurred, but customers weren’t informed. As a result, Equifax had to pay a minimum of $575 million as a settlement with the Federal Trade Commission (FTC), Consumer Financial Protection Bureau (CFPB), and 50 states and territories. CEO Richard Smith was ousted three weeks after the data breach was revealed.
The takeaway: Don’t compromise on cybersecurity, especially if your business houses sensitive customer data. If your company does experience a breach, own up to your part in it and be forthcoming about what went wrong. Lying and trying to cover up the problem will only make it worse.
Theranos was a consumer healthcare technology startup founded by Elizabeth Holmes in 2003. The company was once valued at $10 billion, thanks to its supposed breakthrough medical technology. It later came out, however, that this breakthrough technology never existed and that Holmes and company president Ramesh Balwani lied about their invention.
The Securities and Exchange Commission (SEC) charged Holmes and Balwani with massive fraud for deceiving investors about the company’s performance. In January 2022, Holmes was found guilty on 11 fraud charges. In November, she was sentenced to more than 11 years in prison.
The takeaway: Don’t make a promise you can’t deliver on, but if you find yourself coming up short, be truthful about failing to meet expectations. Doubling down on your lie will only make the situation worse.
The Boeing 747 Max was grounded from March 2019 to December 2020 after two crashes that took the lives of 346 people. The accidents were caused by design flaws, and the company initially stated that a fix would be ready within a few weeks. Weeks turned into months, however, and as the 747s remained grounded, it negatively impacted the aviation industry.
Boeing CEO Dennis Muilenburg had to testify before Congress and later resigned in December 2019. Boeing was charged with fraud for hiding information from safety regulators and eventually agreed to pay $2.5 billion in penalties.
The takeaway: Don’t minimize problems in your business, and don’t oversimplify the solutions. The truth will always come out. In fact, the government may even compel you to reveal what you’ve tried to keep behind closed doors. Even small businesses can be hauled into court.
The data was later sold to Cambridge Analytica and utilized to create targeted ads for the 2016 presidential election. The fallout was significant, with CEO Mark Zuckerberg called to testify before Congress. Facebook was later fined $5 billion by the FTC for privacy violations. Cambridge Analytica ended up filing for Chapter 7 bankruptcy.
The takeaway: If you collect personal data about your customers, you have an obligation to handle it responsibly. That means not only protecting it from a data breach, but also refusing to misuse it internally. An accidental data breach is one thing, but misusing data is a deliberate violation of your customers’ trust.
From 2002 to 2016, Wells Fargo executives were pressuring employees to cross-sell products and meet impossibly high sales goals. To reach these high quotas, employees resorted to creating millions of fake accounts for customers without their knowledge or approval.
For instance, if a customer opened a checking account at the bank, an employee might also secretly open a credit card under that same customer’s name. The fake accounts caused the company’s short-term profits to soar to over $2 million until the misdeeds were revealed in 2016. Wells Fargo had to pay $3 billion in fines to the SEC and the Department of Justice, and the scandal hurt the company’s reputation and credibility with its customers.
The takeaway: Don’t create a toxic work culture and set performance standards that are impossible for employees to meet. It may seem to benefit your business temporarily, but this will only hurt it in the long run. [Check out our guide for setting better business goals.]
Vibram USA is the company that makes FiveFinger, a barefoot running shoe. The shoes are thin-soled and flexible, designed to mimic the experience of running barefoot. Vibram claimed the shoes strengthen the muscles in the feet and lower legs; improve range of motion in the ankles, feet and toes; stimulate the neural function required for balance and agility; eliminate heel lift; and allow the foot and body to move more naturally.
But the American Podiatric Medicine Association has stated that barefoot running actually has a negative impact on foot health. In other words, Vibram’s product could actually hurt wearers instead of improving their foot health, and its medical claims were called into question. In 2014, the company settled a class-action lawsuit for $3.75 million but denied any wrongdoing.
The takeaway: While unique products can make you stand out in a crowded marketplace, never make unsubstantiated claims about your products, even if you believe your claims are true. Additionally, any time you’re making health claims about a product, you should have your assertions backed up by peer-reviewed data and expert opinions.
Uber has been the source of quite a bit of controversy over the years. One example: The FTC alleged the company misled its rideshare drivers about their expected earnings and about financing through its Vehicle Solutions Program.
The government’s suit maintained that in an effort to recruit new drivers, Uber exaggerated claims about expected earnings – Uber claimed that the median income for drivers in San Francisco was $74,000 and $90,000 in New York, but in reality, less than 10% of drivers in those cities earned that kind of income. The median incomes were actually $53,000 in San Francisco and $61,000 in New York.
Uber also claimed that drivers could buy a car through the company’s Vehicle Solutions Program for just $20 per day or lease a vehicle for only $17 per day. But the FTC found that the median weekly purchase and lease payments could exceed $200. In 2017, the company agreed to pay $20 million to settle the FTC’s charges.
The takeaway: Don’t mislead your employees or contractors about their expected earnings or the benefits of the job. Doing this could put them in a precarious financial situation and lead to increased turnover. When word of your false promises spreads, you may struggle to attract new workers.
The rise and fall of Uber CEO Travis Kalanick, who resigned in 2017, was depicted in the Showtime series “Super Pumped.”
In each of the above examples, the companies demonstrated a clear lack of transparency. Misguided motives, poor communication, and an effort to keep up appearances and avoid negative outcomes caused them to mislead or outright lie to staff and customers.
As these businesses learned firsthand, a lack of transparency hurts your clients, employees and investors because it prevents them from making empowered decisions about how they engage with your organization. Being open and honest about your company’s strengths and weaknesses is the best way to build a strong public image and protect your brand reputation. Lying, on the other hand, can be costly – in both dollars and goodwill.