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U.S. Securities and Exchange Commission

Before the

Securities Exchange Act of 1934
Release No. 42968 / June 21, 2000

Accounting and Auditing Enforcement
Release No. 1277 / June 21, 2000

Administrative Proceeding
File No. 3-10238

In the Matter of :


The Commission deems it appropriate that public cease-and-desist proceedings be, and hereby are, instituted against Waste Management, Inc. ("WMI" or the "company") pursuant to Section 21C of the Securities Exchange Act of 1934 (the "Exchange Act").


In anticipation of the institution of these administrative proceedings, WMI has submitted an Offer of Settlement, which the Commission has determined to accept. Solely for the purpose of this proceeding and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the findings set forth herein, except as to the Commission's jurisdiction over it, which is admitted, WMI consents to the entry of the findings and to the issuance of this Order Instituting Proceedings Pursuant To Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing A Cease-and-Desist Order ("Order").



On the basis of this Order and WMI's Offer of Settlement, the Commission finds1:


WMI, headquartered in Houston, Texas, is a holding company whose primary subsidiaries and operating divisions are engaged in the business of collecting, transporting and disposing of solid waste for residential, municipal, commercial and industrial customers. WMI was formerly known as USA Waste Service, Inc.("USA"). The company changed its name after acquiring the much larger Waste Management, Inc. ("Old Waste") in July 1998. USA's management became the predominant management for the combined entity. WMI's stock is registered with the Commission pursuant to 12(b) of the Exchange Act and is listed on the New York Stock Exchange.


1. Summary

This matter involves WMI's violations of the antifraud, books and records and internal controls provisions of the federal securities laws in 1999.

WMI violated the antifraud provisions in June 1999 when its management publicly projected results for the company's second quarter. The June forecast was a reiteration of second quarter projections made earlier in the year. Although the earlier projections may have had a reasonable basis when first disseminated, by at least the time when the reiteration occurred, WMI was aware of significant adverse trends in its business which made its continued public support of its previously announced forecasts unreasonable.

WMI's violation of the books and records and internal control provisions of the securities laws in 1999 arose from the failure to implement and maintain effective and accurate billing, accounting and management information systems as it proceeded through 1999 B the first full year following the July 1998 merger of Old Waste and USA. WMI's management information system failures, which became increasingly evident as time went on, made WMI's June earnings forecast even more unreasonable since it should have been clear to the company that it simply could not generate information from which responsible forecasts could be made.

On July 6, 1999, after the close of the market, the company announced that it anticipated a revenue shortfall versus its internal budget of approximately $250 million in the second quarter ended June 30,1999. On July 7, 1999, the company's share price went from $53.56 to $33.94 per share and continued to decline as the market digested subsequent announcements that supplied additional detail to the July 6 disclosure. By August 4, after the company announced its second quarter operating earnings, the company's share price had retreated to $22.25 per share.

In the period surrounding the announcement and completion of the merger, USA and Old Waste had publicly estimated that the combined entity would earn from $2.90 to $3.05 per share in 1999. These initial estimates were based on the merger analysis conducted by investment bankers retained to advise USA and Old Waste.2 By the first quarter of 1999, WMI senior management had begun to accompany these annual projections with quarterly earnings per share estimates, including a projected range of $.78 to $.81 for the second quarter of 1999.

In the aftermath of the merger, the smaller, more decentralized USA had to assimilate the larger and more centralized Old Waste. One of the major assumptions underlying WMI's second quarter projections was the successful integration of the two companies' operations. In particular, the Old Waste operating entities were expected to convert successfully to the USA accounting, billing and management information systems. A further critical assumption was the ability of the combined entity to realize substantial savings through synergies. In particular WMI hoped to realize economies by consolidating facilities and routes, by increasing the use of company-owned disposal sites instead of using higher-priced sites owned by others and by implementing a new strategy of increasing prices in certain areas of its operations.

Various measures of the company's operating results for the third and fourth quarters of 1998 and the first quarter of 1999 were consistent with the assumptions that formed the basis of the company's publicly stated projections. As the second quarter of 1999 progressed, however, the company began to suffer severe setbacks. The systems conversion did not progress as planned. Further, the company was not able to raise prices to the extent it had planned and it had incurred costs resulting from the merger. On July 6, the setbacks which the company had suffered led to an announcement that the company could not meet its earnings forecasts.

The adverse circumstances that confronted WMI did not emerge fully formed at once. Instead, as is often the case, the news filtered in over time. In addition, the company's materially inadequate management information systems made it even more difficult for the company to measure its true performance. Nevertheless, by at least June 9, 1999, WMI had the following information at its disposal :

  • internal estimates from senior field managers showing earnings shortfalls in the company's North American solid waste business which had been generated by the end of May

  • indications in early June that certain of the price increases implemented by the company at the end of the first quarter of 1999 were being rolled back,

  • increasing accounts receivable balances due to delays and other difficulties in the conversion of billing systems and,

  • finally, decreases in the volumes of solid waste entering the company's domestic and Canadian landfills.

Further, the company could not generate accurate and timely financial performance data due to significant deficiencies in its accounting, billing and management information systems.

Under these circumstances, WMI knew or was reckless in not knowing that the projections provided to the market on June 9, 1999 for its second quarter lacked a reasonable basis.

As a result of the foregoing, WMI violated the antifraud, books and records, and internal controls provisions of the Exchange Act.

2. The USA/Old Waste Merger

USA and Old Waste entered into a merger agreement on March 10, 1998. The Old Waste press release announcing the merger stated that the companies anticipated that the combined entity would realize synergies as a result of the merger of approximately $800 million and forecast 1999 earnings per share in a range of $2.90 to $3.05. USA's press release provided the same estimates of synergies and 1999 performance.

This range of earnings per share estimates was derived from the projections of 1999 combined results provided to the Old Waste and USA Boards of Directors by their respective senior management and outside financial advisers in March meetings to approve the proposed transaction. Old Waste's outside financial adviser reported to the Old Waste Board that, based on historical financial and operating information from both companies, it projected combined 1999 financial results to be $2.90 per share, with $13.9 billion in revenue (assuming $250 million in revenue was divested following the merger) and synergies of $800 million. USA's outside financial adviser reported to the USA Board that, based on historical financial and operating information from both companies, it projected combined 1999 results at $3.05 per share, with revenue of $13.8 billion (assuming $400 million of divestitures) and synergies of $800 million. Both financial advisers projected approximately 11% revenue growth between 1998 and 1999 for the combined company. In making their synergy assumptions from data provided by the companies, both financial advisers included $225 million of synergies from consolidating the headquarters of the two companies and other cost reductions at a corporate level, $400 million of synergies from the field (consolidation of duplicative routes, etc.) and $175 million from increased internalization of waste (disposing of company-collected waste in company-owned landfills or disposal sites).

The 1999 earnings forecast in the range of $2.90 to $3.05 was included in the joint proxy statement filed by USA and Old Waste on June 10, 1998 pursuant to Section 14(a) of the Exchange Act.3 Recognizing that the integration of the significantly larger centralized Old Waste operations into the decentralized USA operating structure and the resulting synergies would be crucial to the success of the merged entity, the proxy also disclosed that ([t]he inability of management to successfully or timely integrate the operations of the two companies could have a material adverse effect on the business and operating results of New Waste Management.)

On July 29, 1998 B less than two weeks after the merger closed B WMI reiterated the 1999 earnings forecast of $2.90 to $3.05 per share at a meeting with analysts in New York City. As described in the meeting, the forecast included $800 million in savings from synergies from the merger and $800 million in revenue growth from acquisitions. In addition WMI predicted internal revenue growth of 5% to 7%. WMI stated that a significant part of the internal revenue growth was forecast to come from price increases that the company was planning to implement over the coming year and commented that they viewed the general pricing environment in the industry as strong. Finally, WMI once again noted that achievement of the projected synergies and successful completion of the systems integration and conversion efforts were crucial to the success of WMI.

At the July 29, 1998 meeting WMI introduced its senior management team.4 In their comments to analysts on the company's prospects, WMI's management stated that the decentralized management structure to be employed by the new company depended on its field management's ability to meet deadlines and commitments in the provision of information and results to corporate level management. This, in turn, required the company to provide its field management with the necessary tools for meeting these obligations, including adequate accounting and management information systems.

3. 1998 Results and Projections of 1999 Performance

Through the Fall of 1998, WMI was engaged in the initial phases of the integration of Old Waste into the USA decentralized structure. The company performed several tests of the billing and accounting system conversions and was implementing the route consolidations, internalization of waste collections, and other changes necessary for the realization of the projected synergies. By September 1, 1998, the company estimated internally that it was on target to realize close to $900 million of synergies, including $475 million from the field and waste internalization and more than $400 million from the elimination of Old Waste's headquarters and other corporate expenses.

On November 13, 1998 the company announced its results for the third quarter, its first as a combined entity. On February 25, 1999, WMI announced its fourth quarter and year-end results. Various measures of the company's actual performance for these periods, including growth in margins and revenue growth fueled by acquisitions, internalization of solid waste flows and other merger-related synergies, were consistent with the assumptions that formed the basis for the company's previous publicly stated projections.

Thus, the company's forecast remained in the $3.00 to $3.05 per share range throughout the remainder of 1998 and was included in the 1999 budget presented to WMI's Board of Directors at their meeting on January 12, 1999.

4. The Company Implements Systems Conversions and Price Increases in the First Quarter of 1999

a. Systems Conversion

Having completed tests of the accounting and billing systems conversions in the fall of 1998, the company began full-scale conversion of these systems in the first quarter of 1999. Because Old Waste had centralized most of its accounting functions, these conversions were intensive, complex undertakings that involved both software and hardware components. The overall effort required both the transfer of Old Waste accounting records to the USA system and the installation of USA system hardware and software to enable the Old Waste operating entities to perform their required accounting, recordkeeping and management information functions under the decentralized WMI structure. Those operating entities that were part of Old Waste also had to be equipped with and instructed on the use of entirely new billing systems.

The company set an aggressive and, ultimately, unattainable timetable for these conversions. The transfer to a single accounting system was to be completed in the first quarter and all billing conversions were to be completed by May 1999. This schedule left very little time for unexpected events or particularly difficult conversions.

b. Price Increases

WMI decided to raise prices in many of its operating areas by the end of the first quarter. The decisions on amount and timing of the price increases were left to the field management, who were in a position to assess the degree to which price increases were feasible for particular customers in their particular areas. Although a decision was made to raise prices, the actual evidence of whether, and to what extent, the price increases could be sustained would not be known immediately. The implementation of the price increases required varying periods of time, depending on the type of business (hauling, transfer or landfills), billing frequency and existing contractual requirements. Further, once a price increase is announced and reflected in an invoice, there can be an additional delay before the customer accepts or rejects the increase.

Nevertheless, based on management's view of the competitive environment, particularly in some areas of the country, the company anticipated that it would be able to implement substantially all of these price increases B generating additional revenues and earnings B without losing significant amounts of collection or landfill disposal volumes, despite some initial losses in certain markets. These assumptions on the competitive environment and the likely success of these price increases were key components of the company's 1999 earnings forecasts.

5. First Quarter 1999 Results and Projections of Second Quarter Performance

The company's results in the first quarter of 1999, like those of the third and fourth quarters of 1998, were substantially consistent with the assumptions that formed the basis for the company's revenue projections for 1999. Even though the company's revenues and volumes were slightly lower than expectations in the first quarter B a fact attributed mainly to a more severe late winter than expected B the company's earnings per share of $.61 were in the range that analysts had estimated for the quarter.

During a conference call with analysts on May 6 discussing the first quarter of 1999, the company noted, (We don't see anything in these Q1 results that does anything but reinforce the guidance [of $.78 to $.81 per share for the second quarter] we've given to you.) Landfill volumes had steadily increased in April consistent with the company's prior experience and the seasonal nature of its business. Historically, the company's revenues increased more than 10% from the first to the second quarters.

However, one significant area of concern in the company's first quarter 1999 results was that its cashflow was below expectations. The apparent cause of this shortfall, as explained to the analysts on May 6, was a greater-than-expected increase in working capital needs. WMI attributed this increased working capital to three areas: increased accounts receivable from billing conversions which the company anticipated and believed would be temporary; prepayment of certain insurance and other expenses; and cash payments relating to the merger. WMI told the analysts that it would focus more attention on the receivables issue in the second quarter. WMI's senior management directed its field management to focus their attention on decreasing receivables, but they knew that the decrease in receivables largely depended on the completion of the billing conversion as projected.

6. Systems Problems Emerge in the Second Quarter of 1999

Numerous systems problems in the early months of 1999 caused significant delays in the availability of financial management information. Although the newly consolidated accounting system provided accounting data for the company's financial reporting obligations, it did not provide the company's field and corporate management access to timely financial management information that they needed to monitor the company's operations. In response to this weakness, the company attempted to develop an additional management information system to provide these financial reports. This system, however, was not linked to the general ledger system; it required significant manual entry at each level of the company's operations: districts, regions and areas. As a result, the information in this second system was often incomplete or inaccurate and required extensive and time-consuming manual reconciliations with the accounting system before reliable data was available. The net effect of this additional work was consistent delays in the roll-up of financial management information from the field to the corporate office.

By early June it should have been clear to the company that the accounting and billing system conversions were not proceeding as quickly or effectively as the company had planned. In late May 1999, senior management from one of the company's operating areas met with their regional controllers as well as corporate accounting and systems personnel to address the systems inadequacies causing the delays in the availability of financial management information out of the second system and the absence of any other management information tools. An internal memorandum dated June 2 describing the meeting notes, The conversion of the Old Waste operating entities= billing system to the USA system was similarly problematic. The conversion led to delayed or erroneous billing of customers resulting in both lost revenue and increasing receivables.

By no later than June 9, however, WMI knew that the accounts receivable balance, which had been decreasing through April, had risen dramatically in May. This knowledge was accompanied by increasing evidence from the field that the billing conversions had not been as successful as projected. A large number of locations had not been converted by May as originally planned and, of those which were, many locations were still having difficulties generating accurate and timely bills. In fact, many districts were not able to send out automated bills for two months due to the conversion. When these districts attempted to send manually generated bills, the bills frequently contained numerous errors and required rebilling, further delaying the payment of the invoice. The combination of a significant rise in accounts receivable and the mounting evidence of widespread conversion problems was more than sufficient to put WMI on notice that the company could not generate reliable information that could be used either to properly manage its business or to form the basis of a reliable projection of future performance.

7. Field Earnings Estimates, Price Rollbacks and Decreasing Volume Signal the Likelihood of an Earnings Shortfall

In an attempt to gain some insights into the company's prospects for the second quarter, corporate financial personnel collected from each of the five domestic operating areas an estimate of second quarter operating results. By May 26, 1999, results for four of the five areas were summarized on a Quarter Consolidation Worksheet that compared these field estimates with the company's budget target. This worksheet revealed that, before any shortfall from the fifth area was considered, the company's operating areas were estimating a revenue shortfall from target of more than $200 million and an earnings per share shortfall of $.11 for the second quarter.

On May 28, 1999, the fifth area reported its estimate for the second quarter, including an additional earnings shortfall that would further reduce total earnings per share by more than $.03.5 Thus, the May 26 and 28 estimates were more than sufficient to alert the company to potential shortfalls in the second quarter.6

Throughout the month of June, management received additional information suggesting potential problems with second quarter results. First, in the week ending June 5, 1999, the weekly landfill report showed a decrease in volumes of approximately 20%. Second, May's pricing results B available when the May books were closed at the area level in early to mid-June B demonstrated that certain of the company's operating areas had suffered price rollbacks, apparently indicating that field management was being forced either to reduce prices or to lose volumes in the face of significant customer resistance to the price increases which had been earlier imposed. Customer acceptance of the new pricing strategy was an important assumption behind the company's publicly announced earnings projections.

The negative information coming from the field earnings estimates, reported landfill volumes and disappointing pricing results, combined with the lack of reliable information about the company<'s second quarter performance arising from the systems problems, should have alerted WMI to the prospect that the company's second quarter results might differ materially from previous estimates.

8. WMI Senior Management Comments to Analysts on Second Quarter Projections at the June 7-9 Waste Expo Meeting in Dallas, Texas

In discussions with analysts and other members of the public at the 1999 Waste Expo conference from June 7-9, 1999, one of the largest waste industry trade meetings, WMI nevertheless maintained its second quarter earnings guidance of $.78 to $.81 per share. As one analyst report noted immediately following the conference, AOver the past several days, we have attended the solid waste industry's largest national convention, in Dallas. It gave us the opportunity to speak with [WMI] management, and get an update on the current quarter.) In its (Key Points) section, this report concluded that ([b]ased on recent conversations with management, we believe second-quarter results remain firmly on track. We continue to recommend WMI with a Strong Buy rating.) In addition to these comments on second quarter earnings, WMI's management also reported that volumes were (tracking on plan) based on the weekly volume reports, Areaffirmed the positive pricing outlook . . .) and stated that it expected to significantly reduce its accounts receivable balance in the second quarter.

As discussed above, by at least the date of this convention, WMI was in possession of steadily mounting evidence contrary to the optimism expressed to this analyst and to other members of the investing public. Given the facts known to WMI of its systems inadequacies, the growing receivables balance, the presence of the May 26 and 28 estimates of revenue and earnings shortfalls, the appearance of price rollbacks, and the decreasing volumes, the company's statements to the public at this convention regarding its second quarter earnings were materially false and misleading.

9. WMI's (Discovery) of a Revenue Shortfall, Its July 6 Announcement and Subsequent Market Reaction

Following the June 9 Waste Expo, the company received a steady stream of adverse information. Weekly volume reports showed continued significant declines. Moreover, Quarter Consolidation Worksheets prepared in the latter half of June showed the likelihood of very significant revenue shortfalls from the company's budget target and publicly announced projections for the second quarter. Further, the company received additional information about current and projected operations from its Area Controllers during a meeting on June 30, 1999. By July 2, 1999, senior management of the company was aware of a range of possible revenue shortfalls and resulting earnings forecasts based on the information received from the field.

After receiving and evaluating additional performance and other information from the company's field operations, WMI issued a press release on July 6, 1999 reporting a $250 million projected revenue shortfall from target levels and earnings per share forecasts in the range of $.67 - $.70 for the second quarter of 1999 and $2.65 - $2.70 for 1999. By the close of trading on July 7, the company's share price had fallen from more than $53.50 per share to below $34 per share on trading volume of more than 70 million shares. The company indicated in the July 6 announcement that it was still analyzing data relating to the shortfall and that it would have more complete information when it reported earnings on August 3. This announcement, however, put the market on notice of the magnitude of the company's problem, and the precipitous drop in WMI's share price continued. After the company announced on August 3 that its actual earnings for the second quarter would be $.58 due to the resolution of several outstanding accounting issues, the company's stock closed on August 4 at $22.50.

10. WMI's Board of Directors Responds to the Shortfall and Surrounding Circumstances

Following the July 6 announcement, the company's Board of Directors moved to inquire as to the circumstances surrounding the revenue shortfall, among other matters. By July 13, 1999, the Board had appointed a three-member Executive Committee of independent members of the Board to oversee the management of the company. Further, the Audit Committee of the Board directed company personnel and the company's outside auditors to identify, review and resolve any outstanding accounting issues in connection with the company's financial statements prior to the filing of the company's Form 10-Q for the quarter ending June 30, 1999.

During July and August 1999 the Executive Committee and the Board made significant personnel changes at the most senior levels of the company, having requested and accepted the resignation of the company's Chief Financial Officer, General Counsel, Chief Operating Officer and Chief Executive Officer. The Board replaced former management with interim managers and members of the Executive Committee.

The Board also ordered the creation of an updated and more effective financial system and, to that end, ordered the deployment of personnel and resources to perform a detailed field-level review of the company's books and records. To accomplish the detailed review of the company's accounting records, the Board and the interim leadership team mobilized more than 1,100 contract accountants. Ultimately, this review resulted in the company's recognition of $1.23 billion in after-tax charges and adjustments to expenses.

Finally, the Board directed the company to cooperate fully in the Commission's investigation of the matter referred to in this Order and in connection with certain other matters.




Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit any person, in connection with the purchase or sale of a security, from making an untrue statement of material fact or from omitting to state a material fact necessary in order to make statements made, in light of the circumstances under which they were made, not misleading. To violate Section 10(b) and Rule 10b-5, a defendant must act with scienter, Aaron v. SEC, 446 U.S. 680, 695 (1980), defined as Aa mental state embracing intent to deceive, manipulate, or defraud.) Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n.12 (1976). Recklessness also has been found to satisfy the scienter requirement. See, e.g., Decker v. Massey-Ferguson, Ltd., 681 F.2d 111, 120 (2d Cir. 1982); IIT v. Cornfeld, 619 F.2d 909, 923 (2d Cir. 1980); Rolf v. Blyth, Eastman Dillon & Co., Inc., 570 F.2d 38, 46 (2d. Cir.), cert. denied, 439 U.S. 1039 (1978). The mental states of a corporation's officers may be imputed to the corporation for purposes of establishing its scienter. See SEC v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1096 n.16 (2d Cir. 1972).

A fact is material if there is a substantial likelihood that a reasonable investor would consider the information to be important. Basic, Inc. v. Levinson, 485 U.S. 224, 231-32 (1988). A company's projections about its own future financial performance have been considered material. See In the Matter of J. Douglas Elliott, Admin. Proc. File No. 3-9614, Rel. No. 34-40043, 67 SEC Docket 807 (May 29, 1998).

WMI's management knew or acted in reckless disregard of whether the statements they made to analysts at the June Waste Expo conference about the company's second quarter performance lacked a reasonable basis by omitting to state material facts about the company=>s inadequate systems, growing receivables balance, internal estimates of shortfalls, declining volumes, and price rollbacks. The fact that the deficiencies in WMI's systems prevented management from receiving timely and reliable data about the company's performance does not excuse the company for making statements without a reasonable basis or without disclosing material facts necessary to make the statements not misleading. Companies whose accounting and management systems do not provide adequate information from which they can make reasonable projections either must refrain from making any such statements about future performance or must disclose the basis on which any such statements are made and any other material information necessary to make such statements not misleading. WMI's failure to do either violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.


Section 13(b)(2)(A) of the Exchange Act requires issuers to "make and keep books, records, and accounts, which in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer." "A company's `books and records' include not only general ledgers and accounting entries, but also memoranda and internal corporate reports." In the Matter of Gibson Greetings, Inc., Ward A. Cavanaugh, and James H. Johnsen, Admin. Proc. File No. 3-8866, Release No. 34-36357, 60 SEC Docket 1401 (Oct. 11, 1995). Section 13(b)(2)(B) of the Exchange Act requires issuers to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain the accountability of assets.

WMI's unsuccessful integration of the Old Waste and USA accounting systems resulted in accounting systems that required significant manual entry and reconciliation and, in the second quarter of 1999, prevented management from obtaining, in a timely manner, reliable information on the company's interim financial performance for control or other management purposes. The company's failure to maintain accurate records of its financial performance that were accessible to management on a timely basis violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act.



Based on the foregoing, the Commission finds that WMI violated Sections 10(b), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rule10b-5 thereunder.



WMI has submitted an Offer of Settlement in which, without admitting or denying the findings herein, it consents to the Commission's issuance of this Order, which makes findings, as set forth above, and orders WMI to permanently cease and desist from committing or causing any violation or future violation of Sections 10(b), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rule 10b-5. In accepting WMI's offer of settlement, the Commission notes the prompt response of the company, acting through its Board of Directors and the Audit Committee of its Board of Directors, to investigate the facts surrounding the shortfall announcement. The Commission further notes the cooperation extended to the Commission staff by the company at the direction of its Board and the Audit Committee during the course of the Commission's investigation.




WMI shall cease and desist from committing or causing any violation or future violation of Sections 10(b), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rule 10b-5.

By the Commission.

Jonathan G. Katz

1 The findings herein are made pursuant to the Respondent's Offer and are not binding on any other person or entity in this or any other proceeding.

2 WMI (including USA and Old Waste) initially provided estimates of its 1999 performance to the public in press releases announcing the merger between USA and Old Waste, in a joint proxy filed by USA and Old Waste in June 1998 and at an introductory meeting of the new company following the July 16, 1998 closing of the merger between USA and Old Waste.

3 The proxy disclosed that these projections (assumed annualized operating synergies and cost savings of approximately $800 million) and cautioned investors that, ([i]n light of the uncertainties inherent in forecasts of any kind, the inclusion of this forecast herein should not be regarded as a representation of USA Waste, Waste Management or New Waste Management . . . that the forecast will be achieved.)

4 All of the senior managers at the corporate level were from USA and all but one of the five senior field managers were from USA. At the operating level, however, the relative contribution of employees and management reflected Old Waste's larger size as almost 80% of the regions and districts were comprised primarily of former Old Waste personnel.

5 The Quarter Consolidation Worksheet prepared on May 28, however, showed virtually no change in the earnings per share shortfalls, as another area's earnings were increased by an amount equal to almost $.04 per share.

6 Earlier estimates were generated by the field from less complete data than was available on May 26 and May 28.