Suchergebnisse

• eBook-Kapitel aus dem Buch Accounting Fraud

  Case 15: Xerox (2002)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …the problems became public, the Accounting Fraud in U.S. Companies 107 SEC launched an investigation into what happened at the Mexican… …fraudulent tactics, invoice dates were changed so that an over- due receivable appeared current. – US-GAAP required that at the inception of a lease, the… …Xerox was an earnings success story and that its perform- ance would continue to improve. However, the executives knew that Xerox’s in- creasing… …they were routinely presenting an inaccurate picture of Xerox’s financial per- formance. In November 1999, CFO Barry Romeril told senior management that… …in on stock options valued at an estimated USD 35 million. In settling the suit, the six defendants agreed to pay USD 22 million in penalties –… …without admitting or denying any of the charges brought by the SEC. Also as part of the settlement, the SEC imposed an officer and director bar against… …investing public expects auditors to do,” said Paul R. Berger, an associate director of enforcement at the Accounting Fraud in U.S. Companies 111…

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  Case 16: Tyco International (2002)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …accounting and tax strategies”. Indeed, in an era of rampant financial trick- ery, Kozlowski exploited nearly every accounting loophole and tax-avoidance… …scheme imaginable. Among other things, – Kozlowski moved Tyco’s headquarters to Bermuda, an island where the cor- porate tax rate is zero. However… …than writing this cost off as an expense (which would have to be reported to shareholders as a reduction in earnings), it created goodwill. Since the… …merged company an artificial boost afterwards. Tyco’s aggressive accounting practices (even when in accordance with US-GAAP) clearly increased… …bewildering tax-avoidance schemes. In late 1999, the SEC had already opened an investigation into the accounting practices surrounding the com- pany’s many… …acquisitions, but it had ultimately decided not to take action. In Kozlowski’s view, the SEC probe qualified as an endorsement, and he emerged from the… …investigation as more dominant than ever before. According to the Washington Post, he was “among the most imperial in an era of imperial CEOs”… …contended that, beginning in 1995, Kozlowski and Swartz created an elaborate, covert system that he called “the top executives’ criminal enterprise”, which… …New Hampshire, Connecticut and Nantucket, as well as a USD 7 million Park Avenue apartment in New York City for his former wife. Besides, he took an… …compensation by offsetting the costs against an unrelated gain realized on the disposal of a Tyco subsidiary. As a consequence, this executive compensation was…

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  Case 18: Qwest Communications International (2002)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …capacity as an investment. Doing so had the effect of inflating reve- nues, making it seem as if the communications markets were far more robust than they… …increasingly reliant on capacity swaps. For example, in late 2001, an analyst at Morgan Stanley had questioned whether many of the swaps (also known as “Lazy… …wrote an internal note saying to “quietly close Morgan Stanley out of company”, and listed businesses in which Qwest should shun Morgan Stanley. Thus… …. “Accounting rules, policies or controls that in- terfered with meeting revenue targets were stretched or ignored outright, creating an environment for fraud.”… …an internal memo, one finance executive stated: “I sense that the general feeling is that one-time sales of assets were originally meant as gap… …ultimately paid USD 577,000 as part of the SEC settlement. The deal also prohibited her from acting as an officer or director of a public company, and in-… …cluded a suspension from appearing or practicing before the SEC as an accountant. Ex-CEO Joseph Nacchio attacked the SEC’s fraud case against him as “a…

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  Case 19: Adelphia Communications (2002)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …subscribers (which is considered an important measure of a cable com- pany’s financial condition because, among other things, basic cable subscribers provide a… …predictable cash flow that is unlikely to shrink during an economic down- turn), (2) the percentage of its cable plant that had been upgraded (which also… …as an ex- ample of eye-popping corporate looting. According to the U.S. Justice Department, John Rigas, together with members of his family, “looted… …corporate aircraft for private jaunt. For example, in August 2000, Timothy Rigas and his friends used an Adelphia jet to fly to Africa for a safari vacation… …of the planes. – John Rigas’s daughter, Ellen, used corporate aircraft to bring guests to her wedding to Peter Venetis (who became an Adelphia board…

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  Case 20: AOL Time Warner (2002)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …should not be recorded in an arrangement in which the essence is merely a circular flow of cash: the customer does not actually want or need the goods or… …pay an additional USD 20 million for a USD 30 million software license, in return for the software company’s agreement to purchase USD 20 mil- lion of… …consequence of the fraud), the merged company dropped “AOL” from its corporate name. The move was widely seen as an admission that the 2001 merger had failed… …, Time Warner agreed to hire an independent exam- iner to determine whether the company’s historical accounting for certain other transactions conformed… …troubled internet unit, to make it an independent, publicly traded company. Over the years, the merger had become a sort of “anti- playbook” for corporate…

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  Case 21: HealthSouth (2003)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …an SEC accounting probe at the healthcare rehabilitation company. Following news of the probe, Standard & Poor’s announced that it lowered… …costs and stabilize operations in an attempt to avoid filing for bankruptcy (e.g., they laid off thousands of employees). According to company estimates… …audit firm had received an e-mail from a HealthSouth employee advising them to examine three specific ac- counts for fraudulent entries related to asset… …stone-faced, according to an eyewitness in the courtroom. Scrushy’s lawyers had argued at trial that other HealthSouth execu- tives committed the fraud without… …shareholders asked a judge to make Scrushy repay USD 2.6 billion for his role in the fraud. An attorney, John W. Haley, said that even if Scrushy was not part… …laughter in the courtroom. Furthermore, when Scrushy decided he wanted to be a record producer, HealthSouth footed the bills for an all-female singing… …filed their civil lawsuits, Richard M. Scrushy was held at a Birmingham-area jail. He was serving an almost seven-year sentence for bribing a former… …Siegelman, in exchange for a seat on the “Certificates of Need Review Board”, an influential hospital regulatory board. Scrushy’s attorneys said that the… …, I can say that we are delighted as an organization to be getting back to what we do best – providing outstanding rehabilitation, diagnostic and…

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  Case 22: Symbol Technologies (2004)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …Accounting Fraud in U.S. Companies 144 Case 22: Symbol Technologies (2004) To the outside world, Symbol Technologies, Inc. was an icon of… …its scope.” The investigation of fraud at Symbol began in April 2001 with an anonymous letter sent to the SEC. The letter described two specific… …145 – They received substantial price discounts, guaranteeing a huge profit in case of a resale to an end user, or direct cash payments disguised… …pledge to buy back unsold products and pay the reseller an addi- tional amount (“the candy”) for cooperating. The SEC said that the candy – equal to 1% of… …revenue had to be inflated and expenses hidden so that the company could hit its quarterly sales and earnings targets. The process was considered an artful… …took large non-recurring charges in connection with an acquisi- tion and the relocation of manufacturing operations. These charges were fraudulent as… …. He fostered an aggressive “numbers driven” corporate culture obsessed with meeting financial pro- jections. To boost the company’s stock price, he… …litigation, brought separately against the company, Symbol paid USD 98 million. An additional USD 3 million went to the U.S. Postal Inspection Service…

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  Case 23: Computer Associates International (2004)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …fourth-largest software provider. Founded in 1976 by Charles B. Wang (an immigrant from China), the company had tremendous success during the 1980s and 1990s… …felt uncomfortable signing a contract with an incorrect date, company executives asked the customers “to do us a favour and sign the con- tract, but… …sulting contract” for an unnamed executive at a customer company who knew of Computer Associates’ accounting improprieties. This executive had arranged a… …monitoring for at least 18 months. In 2006, as part of an attempt to improve its image in the wake of the fraud charges, Computer Associates changed its… …. Former CFO Ira Zar consented to be barred from ever serving as an officer or direc- tor of a public company. Computer Associates’ founder Charles B. Wang… …the report, Charles B. Wang oversaw an accounting fraud lasting more than a decade at the software company. Fraud pervaded the entire CA… …executive in July 2000. Many observers asked how clearly improper accounting practices (such as the “35- day month”) could become so firmly rooted in an…

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  Case 24: AIG (2005)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …in an industry that was inherently volatile. Investors marvelled at what appeared to be AIG’s uncanny abil- ity to underwrite complicated and unusual… …risks without ever misjudging them. Greenberg often said that AIG had never experienced an underwriting loss (which occurs when an insurer… …of the most precious prizes in all of business: an AAA rating, held by no more than a dozen companies in the United States. However, in March… …2005, Greenberg was forced to step down as AIG’s chief executive amid an accounting scandal that led to multiple state and federal investi- gations… …that AIG had increased its general loss reserves, when in fact it had not – A deal with an offshore special purpose entity called Capco Reinsurance Co… …loss reserves added to its balance sheet, AIG’s re- ported loss reserves would have been USD 250 million lower in the fourth quarter of 2000 and an… …General Eliot Spitzer. “And yet, top management routinely and persistently resorted to deception and fraud in an apparent effort to improve the company’s… …, in August 2009, the SEC announced an agreement with Greenberg to settle the accusations that he oversaw the accounting fraud at AIG. The SEC com-… …he acted unlawfully. He agreed to pay a USD 1.5 mil- lion fine in order to settle fraud charges. Besides, he was prohibited from acting as an officer… …received an 80% stake in the insurance giant. References: Biegelman, Martin T. / Bartow, Joel T.: Executive Roadmap to Fraud Prevention and…

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  Case 25: Bernard Madoff (2008)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …the largest market-makers of the NYSE, matching buyers and sellers of stock. However, as brokerage was becoming an increasingly competi- tive business… …simplicity, one of the most puzzling issues of the Madoff fraud was that the majority of the victims had an expert knowledge of financial investment: they… …. Madoff was a charis- matic man who moved comfortably among the powerbrokers on Wall Street. Over time, he had secured a role as an “elder statesman”… …, he even threatened to expel some investors who had asked too many questions. Such an extreme secrecy is quite unusual in the hedge funds world. –… …supervised inquiries about Bernard Madoff’s securities operations). In general, this heavy family influence should have been questioned, as it was an… …obvious weakness of internal controls. – Until 2006, Madoff had avoided registration as an investment advisor with the SEC. He had used a regulatory… …162 tions and required advisors to count each final investor as a client, Madoff still did not register. It was only after an SEC investigation that… …, and BDO Seidman (an arm of BDO International). This prob- ably gave confidence to investors that everything was under control. However, it… …management firm invests in. As an example, if the firm you are auditing invests in AT&T, you are not responsible for auditing AT&T.” In June 2009… …: “May your jail cell be your coffin.” Listening to his victims, Madoff said he could not offer an excuse for his behaviour: “I am responsible for a…

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