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,
David Myers was the controller of WorldCom. He instructed the accounting department to make billions of dollars in adjustments to financial state...
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
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.
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
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...
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
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,
"This is why the market keeps going down every day - investors don't know who to trust," said Brett Trueman, an accounting professor from the University of California-Berkeley's Haas School of Business. As these things come out, it just continues to build up"(CBS MarketWatch, Hancock). The memories of the Frauds at Enron and WorldCom still haunt many investors. There have been many accounting scandals in the United States history. The Enron and the WorldCom accounting fraud affected thousands of people and it caused many changes in the rules and regulation of the corporate world. There are many similarities and differences between the two scandals and many rules and regulations have been created in order to prevent frauds like these. Enron Scandal occurred before WorldCom and despite the devastating affect of the Enron Scandal, new rules and regulations were not created in time to prevent the WorldCom Scandal. Accounting scandals like these has changed the corporate world in many ways and people are more cautious about investing because their faith had been shaken by the devastating effects of these scandals. People lost everything they had and all their life-savings. When looking at the accounting scandals in depth, it is unbelievable how much to the extent the accounting standards were broken.
Sandberg, J., Solomon, D., & Blumenstein, R. (2002, June 27). Accounting Spot-Check Unearthed A Scandal in WorldCom's Books. Retrieved from The Wall Street Journal: http://online.wsj.com/article/SB102512901721030520.html
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.
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
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 Tyco accounting scandal is an ideal illustration of how individuals who hold key positions in an organization are able to manipulate accounting practices and financial reports for personal gain. The few key individuals involved in the Tyco Scandal (CEO Kozlowski and CFO Swartz), used a number of clever and unique tactics in order to accomplish what they did; including spring loading, manipulating their ‘key-employee loan’ program, and multiple ‘hush money’ payouts.