Also See: 2002: The Year in Review

REMEMBER LAST NEW YEAR'S DAY, when you woke up, opened the newspaper and read that stocks haven't declined for three straight years since the Roosevelt administration? After a two-year hangover from the roaring Nineties, that little statistic was soothing, wasn't it? Sure, the economy had slowed a bit, and the U.S. was still reeling from the devastation of Sept. 11 but things weren't nearly as bad as they were in the Thirties, right? Unemployment was less than 6%. There were no Dust Bowls, no Okies jumping trains to California, no European madmen preparing for global domination. Stocks couldn't possibly decline for another year, could they?

Of course they could. Just a few weeks into the new year, it became clear that the forces that gave rise to the Enron debacle for a while the biggest bankruptcy in U.S. history weren't confined to Houston. Former SmartMoney.com Staff Editor Matthew Goldstein was the first journalist to obtain and then publish LJM partnership documents that laid bare the astonishing breadth of Enron's despicable dealings. At least two Big Five accounting firms and a handful of Wall Street investment banks knew of the secret LJM partnership. What else, we asked, was corporate America hiding?

A lot. As winter turned to spring, revelations of accounting abuse began to pile up like Pottery Barn catalogs. When WorldCom confessed in June that it had intentionally understated its normal business costs by billions over the last few years, the stock-market slide that had begun a month earlier intensified and continued until July, when the market touched a five-year low. In October, stocks plunged still lower.

After a year like this one, it's easy to wallow in grief. And, certainly, the innocent people at Enron, Arthur Andersen and elsewhere who lost their nest eggs have every right to do so. But for the rest of us, the people who've lost some money on paper or who've been paid to cover this sickening market day in and day out, it's time to put 2002 to rest once and for all.

The best way to do that, we figured, was one final, grand, bilious purge. So we gathered our editors and reporters, compiled a list of the year's 10 biggest disasters, and voted on them, holding our noses all the while.

The competition was so stiff that we had to expand our list of 10 to 15. Even more telling: Our favorite whipping boy, Lucent, didn't receive a single vote, despite the fact that its stock touched an all-time low of 58 cents in October. (Of course, the Securities and Exchange Commission is still probing Lucent's books meaning there's plenty of time for this corporate ne'er-do-well to snatch defeat from the jaws of victory.)

All right, enough talk. Here are the 15 biggest disasters of 2002.

15. He Sure Cast a Paul Over the Markets
Incredibly, Treasury Secretary Paul O'Neill almost survived the year gainfully employed, despite his pitch-perfect turn as the White House's crazy uncle. O'Neill seemed like he was coming from way out in left field (or was it right?) when he simultaneously talked up the slumping economy, pooh-poohed the president's tax-cuts-fix-everything shtick, championed free trade (except in the steel business, that is) and slammed foreign bailouts (except for Brazil, naturally). The "other" Paul O'Neill, as he was known in New York, should've hit the showers in 2001.

14. Jack and the Bean Counters
Former General Electric CEO Jack Welch's tawdry extramarital affair with then-Harvard Business Review editor Suzy Wetlaufer was only the beginning. Last time we checked, it was immoral to cheat on one's spouse, and unethical for a journalist to sleep with an interview subject. But when wife Jane filed for divorce, we learned of Jack's outrageously greedy retirement package, too. Imagine the furor that would have erupted if a blue Gap dress emerged as evidence in the divorce proceeding and GE shareholders got the dry cleaning bill!

13. You've Got Jail?
The merger of the millennium has turned out to be the biggest marital farce this side of Liza and David. How doomed was the couple now known as AOL Time Warner? A year into their honeymoon, the two couldn't even agree on a common email system which is awfully embarrassing given that AOL brought email to the drooling masses in the first place. To make matters worse, AOL Time Warner wrote off billions in merger-related goodwill, and we learned that the SEC was investigating the America Online unit's accounting practices for 2000 and 2001. With Time Warner executives now firmly in control, it wouldn't surprise us to see a nasty divorce in 2003.

12. The Most Disheartening Story of the Year
Two California doctors are under FBI investigation for performing unnecessary heart procedures, some of which were billed to Medicaid. After the FBI raided the doctors' offices in November, their employer, Tenet Healthcare, acknowledged that its Medicare billing practices are being audited by the U.S. Health and Human Services Department. Rumor has it the Hippocratic oath is being amended thusly: "First do no harm unless you can bill the government. Then, by all means, cut people's hearts out."

11. Say Goodbye to the White House Rotunda
Harvey Pitt's disastrous tenure as SEC chairman came full circle in 2002. He began the year by demanding Cabinet-level power, resources and pay. Fat chance, said the White House. As scandal after scandal unfolded, Pitt brazenly supported the Big Five accounting firms now the Big Four at every turn. In the end, it was the stock exchanges themselves that stepped in to beef up securities regulation, with some needed (if demagogic) prodding from New York State Attorney General Eliot Spitzer. Pitt's nomination of former FBI and CIA chief William Webster to head the accounting oversight board, bungled from the beginning, was his undoing. The man so roundly criticized for being in the pocket of his former Big Five law clients announced his resignation at 9 p.m. on election night. Classy!

10. Schoolhouse Crock
How hard is it to raise kids in Manhattan? Ask former Salomon Smith Barney analyst Jack Grubman, who pulled off the year's best "kid pro quo," as the Wall Street Journal put it. Grubman agreed to "take a fresh look" at AT&T at the behest of his boss Sandy Weill, who happened to sit on Ma Bell's board. After Grubman upgraded AT&T shares, the 92nd Street Y, an exclusive Manhattan nursery school, received a big donation from Citigroup just as Grubman's kids were applying for admission. Word has it the school is building the Jack Grubman School of Ethics right next to its Donald Trump Hair Academy.

9. Nacchio, Jeez
In this year of accounting blowups, few were as damaging as Qwest Communications' revelation that it might restate as much as $1.1 billion in revenues dating back to 1999 and will write off $20 billion to $30 billion in goodwill. CEO Joseph Nacchio didn't survive the scandal. There's no word on the whereabouts of his son, Ralph, who was last seen in The Karate Kid, Part 3.

8. Initial Public Outrage
Guess what? Initial public offerings aren't always executed in a fair and equitable manner. Seriously! It turns out that the good folks over at Salomon Smith Barney and most other investment banks in the U.S. doled out huge risk-free stakes in newly public companies to their investment-banking "whales." These huge sea mammals like former WorldCom CEO Bernie Ebbers promptly flipped their shares and booked big profits. Months later, individual investors who bought into the hype washed ashore like used syringes.

7. The Blodget Blog
Guess what? Some analysts didn't believe every word they said about the companies they were hyping during and after the boom. Seriously! Eliot Spitzer released emails written by former Merrill Lynch analyst Henry Blodget that characterized various companies he rated favorably as "dogs" and "crap." In his defense, though, he didn't describe any of the companies as "dog crap."

6. After the Fall, the Gall
Enron was the evilest company in recorded history. In the months after the energy giant's spectacular demise, former CEO Kenneth Lay sent his crying wife out on the talk-show circuit to profess his innocence and cry poverty; former CFO Andrew Fastow stoically maintained his innocence despite overwhelming evidence to the contrary; and we learned that Enron played a major role in the California electricity crisis of 2000 and 2001. Enron also helped write the first draft of the Bush administration's energy policy. But why worry about that?

5. I Am Sam, an Inside Trader
You'd have to be living under a rock not to know the sordid story of ImClone by now. The gist: Founder and CEO Sam Waksal tried to rush cancer drug Erbitux onto the market with a hastily assembled Food and Drug Administration application; the FDA rejected ImClone's application; Sam got the news a few days early and told family members and friends to dump their shares right away. Sporting!

4. Martha's Return to the Salad Days
One person on Waksal's speed dial was Martha Stewart, CEO of Martha Stewart Omnimedia. She sold her entire stake in ImClone after Waksal learned of the rejection and before the news came out. Her friend sold shares before the announcement, too. Martha says she had a stop-loss order with her Merrill Lynch broker, but no such order was ever recorded, and the broker's assistant disputes her claim. Obstruction of justice isn't a good thing. Martha: It's time to tell us the truth, chop chop!

3. The Amazing Kozlo
Idea for a sitcom: Former Tyco International CEO Dennis Kozlowski doesn't like taxes; the state of New York doesn't like tax evaders. Hilarity ensues.

The man who moved Tyco International to Bermuda to reduce his tax burden ended up in a Bermuda Triangle of humiliation after New York State charged him with sales-tax evasion. OK, we're not quite sure what that metaphor meant. What we do know is that Kozlo needed some rare art to adorn the walls of his multimillion-dollar company-bought Manhattan apartment. But, aye, those pesky sales taxes! Better, Kozlo may have thought, to avoid said taxes by sending empty boxes with the word "art" stamped on them to his New Hampshire offices. The real paintings could go straight to his penthouse and no one would be the wiser! No one, that is, except Manhattan's meddling district attorney. After Kozlo was arrested, Tyco revealed that it had spent millions on perks for the alleged tax cheat, including a birthday party for Kozlo's wife that would've made Liberace blanch, a $15,000 umbrella stand and a $17,100 "traveling toilette box," whatever that is. 2002 was an emotionally taxing year for Kozlo, we're told.

2. That's Between Doltsburgh and Idiotsville, Right?
Cable giant Adelphia Communications shocked the investing world last spring with evidence of Enron-esque off-balance-sheet partnerships, overzealous accounting and rampant self-dealing. You'd have to be from Coudersport, Pa., to think it's OK for the CEO of a public company to buy condos and land for family members and finance a kid's film project with company funds. Did we mention that the Rigas family hails from Coudersport, Pa.?

1. Oh Yeah, About Those Earnings Numbers, Um, Our Bad
WorldCom isn't the evilest company in history, but it may be the saddest. Former CEO Bernie Ebbers thought he could play with the big boys in the 1990s by buying every company in sight. For a while, the strategy worked. But WorldCom became the telecommunications industry's biggest casualty in 2002 after it admitted that it had been cooking its books for years, classifying operating costs as capital expenditures and spreading them out over several years to improve earnings per share. Investors fled, creditors lined up, and the company filed for bankruptcy, the biggest in U.S. history. Bernie's motives weren't as nefarious as they were poignant: He just wanted to make investors happy. But lying never makes people happy, Bernie.

And that's one to grow on.

Also See: 2002: The Year in Review