Securities and Exchange Commission vs. Richard H. Hawkins While the widely exposed and discussed trials of WorldCom's and Tyco's top executives were all over the media, one of the most interesting cases of securities fraud was happening without any public acknowledgement. Richard Hawkins, ex-CFO of a health service industry giant McKesson, was accused and later brought to court for inflating revenue at McKessonHBOC. The acquisition of HBOC, a medical software company, happened long after Hawkins became the CFO, but right before the management of both companies decided to falsify the facts. It began with a written press release of the preliminary financial results for the quarter and year ended March 31, 1999. According to the release, the quarterly revenue was $6.4 billion, which was later discovered to be false. Hawkins himself approved the release, knowing that the numbers were materially overstated due to the inclusion of an alleged sale contract with Data General. For the purpose of meeting the expectations of the analysts, the software sales growth was exaggerated by 20%. The revenue goals for the March 31 quarter were $120 million, which both Hawkins and Albert Bergonzi, HBOC's Chief Operation Officer knew were very hard to be met. In the beginning of March the newly joint corporation, McKesson HBOC started a negotiating process with Oracle Corporation. Unfortunately for McKesson, the negotiations ended without a contract. On April 1 Bergonzi let Hawkins know that he found an offer that could be a good deal. The agreement would require McKessonHBOC to sell $20 million worth of software to Data General, along with a license and a right to return any inventory that was not sold during the period of 6 months. The corporation would also have to help Data General find customers for the product. In return, they could buy $25 millions worth of computer hardware. The contract was signed on April 5 the same year. The senior management thought that backdating the sales and purchases would raise the company's revenues up to the desired levels. In order to cover their actions, the company created a false delivery receipt that showed the date of the delivery as March 31, 1999, while in reality the product was delivered in April. Both, the information about the $25 Million purchase of hardware from Data General as well as the return agreement concealed from the public. On April 21, the management of McKesson met with Teresa Briggs, a Deloitte & Touche public accountant.
As what it came to be as one of the notorious case of fraud in the mid-1980s; the electronic store well known as (Crazy Eddie), its owner Eddie Antar and CFO Sam Antar committed every possible act fraud there is. Just to mention two of which they perpetrated; tax evasion and securities fraud. Basically, the tax evasion was committed for many years, it was not until the company became public in 1984 that their wrong doing near its end. Once Crazy Eddie went public, a new set of rules took place, such as compliance with the Securities Exchange Commission and the scrutiny of its investors. Soon, they both realized that their long committed fraud was nearing its end, when an external audit found the real numbers on the company’s inventory, revenues,
Roth was in charge of emergency of Nortel, be that as it may it was affected by both individuals and capital business sector forms. Roth settled on the choice to change Northern Telcom to Nortel and put resources into the web notwithstanding doubt and uncertainity from numerous individuals. The Board of Directors of this organization didn 't know about the money related status of the association which demonstrates that the executives, Roth as CEO, and workers didn 't know about great business hones. Business includes a system of human communications (Collins, 2011). The ascent of Nortel was to some degree from the consideration the organization got from the media and the financial specialists. This consideration affected the choices that Roth
Bernie Ebbers was the founder and CEO of WorldCom. He took a small telecommunications firm and transformed it into an industry giant before it collapsed into bankruptcy in 2002. The stock prices of WorldCom began to fall in 2000 and in order to prevent the price from falling further WorldCom made mass loans to Ebbers to stop him from selling his stock. He initiated the fraud and false reporting. He did not give accounting details as to how the false reporting should occur but he did repeatedly say it was important to “make the numbers.”
Rich has been a director and a member of the Audit Committee, the Compensation Committee and the Executive Committee of Origen Financial, Inc. since August 2003 and previously served as a director and member of the Audit Committee for Aldabra II, a special purpose acquisition corporation, from February 1, 2007 to February 22, 2008, at which time Aldabra II merged with Boise Paper
In the example provided, the main issue is the privacy of employees. The company has installed hidden surveillance cameras in a bathroom and the camera was found by an employee. The employer stated that it was placed there because the area had become a high theft area and they wanted to patrol the space in an effort to reduce the crime within the workplace. After further investigation, more cameras were located in the employees’ physical fitness room. The use of workplace surveillance videos are becoming more common, but the employees still have a right to privacy. “Courts have usually ruled in favor of employers using surveillance cameras, as long as the cameras are not placed in areas where employees do have an expectation of privacy” (Harty-Golder,
There were two executives named Jeremy Blackburn and Anthony Bansa from Canopy Financial that orchestrated financial fraud in order to steal $93 million from investors. In order for this scheme to work Jeremy and Anthony devised a plan to steal $75 million from private equity investors by providing them with bogus auditor’s report and falsified bank statements. Thus, it was through the use of stating to investors that their financial statements had been audited and approved by KPMG that gave creditability to their fictitious financial statements. For example, “Canopy was absolutely making up their financial statements, even forging audited statements with fake KMPG letterhead” (Arrington). For that reason, Jeremy and Anthony were able to fool investors
Whatever the reason, state rules seem to have been ill-equipped to stave off Enron. As a result, the ABA commissioned a task force to recommend changes rules to 1.6 and 1.13. State model rules differ significantly and offer little guidance to rectify the overall situation. In most states disclosure is now allowed, but not required to prevent a client from committing a fraud that may result from financial injury to others. Additionally, fraud may be reported up the latter when an organization is represented. Attorneys must reveal fraud if committed on a tribunal. Further, disclosure is required when a client’s purpose to commit fraud is manifest and the attorney is unable to talk him out of it. In some states disclosure is states for financial crimes: Wisconsin and Virginia’s model rules ostensibly require attorneys to report securities fraud through the broad obligation to report crimes likely to cause harm to another.
One of the recent biggest and most popular modern time frauds in the United States started in 1993 till 2008 when the owner Madoff was sentenced to jail. Mandoff was able to keep his hidden agenda running and gaining more and more money for over 15 years in the United States, which is one of the most o...
As Robert Samuelson said, "The real vulnerability is a highly complex and interconnected global financial system that might resist rescue and revival." (Samuelson, 2008, 35) This is in response to the economic crisis of 2008. The cause of these economic problems was the crash of the United States’ stock market. The stock market crash can be broken into three parts; factors that lead up to the crash, the events during the crash, and what occurred to try and contain the crisis after the crash. The crash of 2008 can also be compared to the 1929 crash that sent the country into the Great Depression.
Symonds, W.C. (2002). Commentary: Tyco: How did they miss a scan so big? Bloomburg Businessweek, Retrieved on April 26, 2014 from http://www.businessweek.com/stories/2002-09-29/commentary-tyco-how-did-they-miss-a-scam-so-big
She was viewed as strong-willed, intuitive and judgmental and professional. She was the head of the Internal Audits department and was a lead to 24 auditors and staffers. Her department mainly conducted operational audits, which measured the performance of WorldCom’s unit and ensuring spending controls were in place, but also did a little financial auditing. In March of 2002 the head of WorldCom’s wireless business sector, John Stupka, came to see her. He had specifically allocated $400 million in the third quarter of 2001 to offset shortfalls, and was about to lose it. This infuriated Mr. Stupka because now his division would most likely have to show a large loss next quarter. The money was to be used to cover losses from customers who didn’t pay their bills. It was a common occurrence and an accepted accounting practice. However, Scott Sullivan, WorldCom’s former chief financial officer and Ms. Cooper’s boss, had decided to move the $400 million from Mr. Stupka’s wireless division and use it to increase WorldCom’s income. Accounting firm Arthur Anderson was contracted to perform the bulk of the financial auditing for WorldCom. Mr. Stupka had already contacted two auditors of the Arthur Anderson firm and complained about the financial move, but both auditors sided with Mr. Sullivan. Both Ms. Cooper and Mr. Stupka felt it was an odd move, to not want to cover a loss with
That’s why Congress has passed various laws to protect them from prosecution, protect their jobs, and even include financial incentives for coming forward with information. One case in 2009 which involved the Swiss banking giant, UBS, displayed how the major players in the financial sector will never face criminal prosecutions. Bradley Birkenfeld quit his job at UBS and two years later he voluntarily informed U.S. federal authorities that the bank was involved in a multi-billion dollar tax fraud scheme. “I became the very first Swiss private banker in history to reveal to the outside world the inside secrets behind these illegal practices. I outlined in great detail how the illegal UBS enterprise was operated, who was directing the enterprise, and how they tried to conceal what they were doing for so long from U.S. law enforcement authorities,” said
In 1934 the Securities Exchange Act created the SEC (Securities and Exchange Commission) in response to the stock market crash of 1929 and the Great Depression of the 1930s. It was created to protect U.S. investors against malpractice in securities and financial markets. The purpose of the SEC was and still is to carry out the mandates of the Securities Act of 1933: To protect investors and maintain the integrity of the securities market by amending the current laws, creating new laws and seeing to it that those laws are enforced.
The fraud came in to limelight when they could not explain improper records of $3.8 billion in their capital expenditure. Further investigation exposed that the company used to adjust the value of assets in their accounts which gave false impression to investors that company is improving quarter by quarter. They admitted to violate and adjust an earnings of $11 billion. Total fraud was reported to be $79.5 billion. WorldCom has filed for Chapter 11 bankruptcy in 2002.
It was discovered that Enron’s stated financial condition was prolonged by established, inventively, and methodically planned accounting fraud at the end of 2001. It has been since called the Enron scandal. Enron has subsequently become a popular example of deliberate corporate corruption and fraud. This scandal