Suchergebnisse

• eBook-Kapitel aus dem Buch Accounting Fraud

  Case 4: MiniScribe (1989)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …times in the mid-1980s. It lost its biggest customer, IBM Corp. (which decided to make its own disk drives), as well as several other critical supply… …stock quintupled, becoming a Wall Street favourite. MiniScribe appeared to have achieved a remark- able turnaround. “It looked for three years like Q.T… …, 1987 and the first three quarters of 1988. In May 1989, the company reported to the SEC that it had uncovered “inaccurate reports about earnings”… …existing records and documentation were so inadequate that it was extremely difficult for a specially appointed independent evaluation committee to… …at the end of a quarter to boost sales (a practice known as “channel stuffing”), MiniScribe went far beyond that. On multiple occasions, it shipped… …more than twice as many disk drives to computer manufacturers as had been ordered. It later said to the customers that it had shipped the excess disk… …and packaging them as finished products. It was only when those boxes were opened that the true value of their content was seen. – Eventually, some… …1992 settlement, it agreed to pay a total of USD 140 million for failing to detect the accounting fraud committed by MiniScribe. In July 1994, the… …being duped: “He was as much a victim of it as anyone else.” Eventually, the attor- ney pointed out that during his long career, Wiles was the… …MiniScribe accountant said, “Q.T. Wiles was saying, ‘This is the number we want to hit first quarter, second quarter, third quarter and so on,’ and it was…

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  Case 15: Xerox (2002)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …copier). Xerox was defined as “the copier company” in its very DNA, and it was even in the dictionary as a syno- nym for photocopy. The copiers were “money… …machines” nonpareil. The 1990s, however, would be a time of crisis for the company. It was confronting intense product and price competition from its… …focus on high-margin, high-end copying equipment. To succeed in the new digital age, the company needed to reinvent itself. However, it was far better at… …management. In May 2000, Xerox made a public announcement that it had discovered accounting irregularities associated with its Mexican operations. CEO… …outside auditors. KPMG was so concerned about ROE and margin normalization that it internally referred to these methodologies as “half-baked revenue… …“Rank reserve” for items unrelated to any risks arising from the acquisition. It continued to draw down on this reserve for unrelated expenses each… …quarter until it was exhausted at the end of 1999. Internally, Xerox regarded the reserve as “interdivisional opportunity” or “unencumbered reserve”… …receivables at a deep discount. In other words, it sold its future stream of cash at far less than its full value to realize instant cash.) – In certain… …the lease term. US-GAAP prohibited increasing the estimated residual value for any reason after it was first established. However, Xerox often… …actions to “close the gap” between its actual results and the numbers it wished to and did report to the public. Yet the company continued to portray…

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  Case 26: Juergen Schneider (Germany, 1994)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …behaviour as a serious and important businessman. It also appeared that they were seduced into taking the risk by the promise of big profits. The scam ran… …verified something as basic as the size of the property it was lending on. Accounting Fraud in European Companies 166 Schneider also appeared… …explic- itly whether there were any supplementary contracts. Deutsche Bank claimed that it was the victim of systematic fraud. Hilmar Kopper, at the… …the affair proved to be very embarrassing for the bank. The report from the auditors, Wollert-Ellmendorff, supported Deutsche Bank’s argument that it… …had been crimi- nally deceived. But it also made clear that there had been complacency in the deal- ings with the property tycoon. There were several… …ensure that it was technically possible to construct a particular building and that the building costs were in relation to what was required. – All… …asked for a “transitional loan” in a letter received on April 7, 1994. It was in the spring of this year that Schneider began to face a string of… …it is possible that one individual can collect such a volume of debt in such a short time”. Schnei- der was arrested in Miami, Florida, in January… …1995. When he was returned to Germany in February 1996, the mass-circulation newspapers made it the big story of the day. “Hello, Mr. Schneider, Your… …just before it became impossible to stave off his creditors. The German media portrayed Juergen Schneider as a sophisticated con artist. But…

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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… …aries even further: instead of accounting for revenue from these deals over the life of the contracts, Qwest accounted for much of it upfront, producing… …of USD 1.9 billion in August 2002, a 98% decline for the period. In September 2002, the company announced that it would restate its financial… …Wall Street that it used any means necessary to meet its “outrageously optimistic revenue projec- tions”. “Qwest senior management created a… …employees inter- nally referred to such transactions as “one hit wonders”). When senior management realized that it could not meet the projected growth… …through increases in recurring revenue, it directed the sale of portions of Qwest’s fiber optic network originally held for own use. Thus, Qwest began… …fourth- largest long-distance telephone service provider, he had been ultimately swayed by greed. In 1999 and 2000, it had become apparent that the revenue…

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  Case 23: Computer Associates International (2004)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …corporations used its software products to run and manage their IT technology. At the time, Islandia, New York-based Computer Associates was the world’s… …began slowly (mainly because of the obstruction led by Computer Asso- ciates’ senior management), it steadily gained momentum in 2004. In January 2004… …participated in a scheme to inflate revenues and then lied to cover it up. He said senior management pressured him to lie, although he didn’t name names. In… …after the end of the quarter so that revenues could be counted a quarter earlier than it ought to have been. In all, the company prematurely reported… …, Accounting Fraud in U.S. Companies 150 when the company reported USD 557 million in revenues beyond the USD 1.047 billion it could properly claim. Thus… …kept scoring until it had all the points it needed to make every quarter look like a win.” Employees at Computer Associates also called the Extended… …million soft- ware license deal with a nearly insolvent customer. It then backdated the contract so it could be recorded in the prior quarter. In the next… …quarter, knowing that it would not be able to collect on the contract, Computer Associates reversed its internal records but did not publicly restate… …the first quarter of fiscal year 2001, it fell short of the Wall Street earnings estimate, and the share price dropped by more than 43% in a single day… …. This was only the second time in the company’s history that it missed Wall Street estimates. Until June 2000, Computer Associates also…

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  Case 24: AIG (2005)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …“Hank” Greenberg was credited with vastly expanding the company, turning it into one of the world’s largest and most revered insurance firms. For decades… …AIG were three primary areas of fraud (see SEC 2009): – Sham reinsurance transactions with General Re Corp. (“Gen Re”), in order to make it appear… …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… …boosted AIG’s net investment income and allowed it to improperly recognize capital gains Accounting Fraud in U.S. Companies 156 The “Gen… …it appear that Gen Re was paying AIG to share some of its claim risk. But investigators found no evidence of risk transfer from Gen Re to AIG. In… …analysts. The move helped AIG to persuade analysts that it was in better shape to pay claims, and helped to increase its share price. Without the phony… …. The SEC complaint said that AIG even lent the investors the money, hiding the loan by channelling it through various AIG subsidiaries. Using Capco to… …transactions in which it – appeared to redeem a portion of its interest in certain hedge funds back to the funds, – recorded the resulting cash payments… …financial results.” According to Spitzer, CFO Howard Smith ordered so-called “top-level adjustments” to AIG’s financial statements each quarter, to help it… …, after Greenberg and Smith were forced out by the board, AIG announced that it would restate many of its prior transactions. In addition, AIG stated that…

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  Case 34: Royal Ahold (The Netherlands, 2003)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …the most prominent and re- spected corporations in the Netherlands. For several years, it had been named the most desirable employer and the company… …and the French firm Carrefour S.A. had larger annual food retail sales than Ahold. In 2002, the com- pany’s reported sales were EUR 62.7 billion; it… …share quickly by purchasing existing grocery chains in foreign countries. In 2000, the company completed its most ambitious acquisition when it… …was forced to buy out Velox’s interest and absorb its liabilities. Ahold had failed to disclose that it had committed itself to purchase the residual… …ownership interest in the joint venture if Velox de- faulted on its outstanding debts. Now Ahold had to announce that it was taking over USD 492 million in… …subsidiary. In early 2003, Ahold surprised investors when it announced that U.S. Foodservice had overstated earnings by at least USD 500 million in 2001 and… …by USD 880 million over three years, and that it would have to take pre-tax charges of nearly USD 1 billion on group level. The size of the new… …figures shocked Ahold’s new management as much as it did analysts and investors. The company immediately authorized an investigation by law firm White &… …investigations, it was ultimately found that there were two principal sources of material misrepresentations in Ahold’s consolidated financial statements: (1)… …at USF centred around the way it accounted for “promotional allowances”. USF typically purchased products from a variety of suppliers at full price…

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  Case 27: Flowtex (Germany, 2000)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …precedent,” said judge Michael Meyer. He expressed his incredulity that the scam could have lasted for nearly ten years without being noticed. “It is amazing… …debts that needed to be covered.” Flowtex, based in Ettlingen near Karlsruhe in southern Germany, marketed horizon- tal drilling equipment. It… …each machine was fitted with the correct plates and documentation. It did not appear to strike KPMG as strange that machines they had chosen at… …bond to its customers as being “an attractive investment opportunity”. It would have been the first bond issue from a privately owned German… …their losses, which they refused to quantify. Why due diligence failed to expose the apparent Flowtex scam is still unclear. It is noteworthy that… …Flowtex case, said the complex structure of the Schmider-Kleiser group had “certainly played a role” in the deception. However, it emerged that KPMG… …pretend business. In 2002, the well-known auditing firm paid creditors of the bankrupt drilling equipment maker EUR 50 million. KPMG said that it made the… …against the state of Baden-Wuerttemberg after claiming that it failed to act in time against Schmider and Kleiser. The plaintiffs claimed that the tax… …records are examined before it issues securities. It is a textbook example of what can go wrong when banks and auditors place too much reliance on the…

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  Case 38: Daewoo Group (South Korea, 1999)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …biggest accounting frauds in history. It predated Enron, WorldCom, Tyco, Parmalat and the other corporate scandals that more recently devastated… …. It produced autos, ships, televisions, pianos, refrigerators, aerospace components, and practically everything else – except significant profits… …weight of more than USD 80 billion in debts; it had been unable to meet its skyrocketing interest payments. Daewoo had become a huge financial black hole… …“rags-to-riches” founder of Daewoo Group ended in a big corporate fraud scandal. Although the government prosecutor’s office released only scant details, it… …group’s flagship company) was unable to keep the plant running, and the Ukrainian government complained. To placate it, Daewoo surreptitiously shipped… …organization. Located in Lon- don, it acted as the nerve center for the group’s financial machinations overseas. Only five key persons, who proceeded under the… …utmost secrecy, oversaw its busi- ness. The BFC never appeared on Daewoo’s balance sheets. Prosecutors portrayed it as Kim’s slush fund, but could not put… …from car-export revenues. Prosecutors could not say how the money was spent, but industry experts and analysts thought at least part of it was… …destination of the money (allegedly up to USD 20 billion) remained unclear. But it is very likely that it was siphoned off for political lobbying purposes and… …manner in which it was conducted and the way in which it lasted undetected until the end. An economic adviser to President Kim Dae Jung said much of what…

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  Case 21: HealthSouth (2003)

  Prof. Dr. Klaus Henselmann, Dr. Stefan Hofmann

  …, but hindsight proved otherwise. It be- came apparent that for many years, HealthSouth’s financial disclosures had neither represented economic reality… …country as well as in Australia, Puerto Rico, and the United Kingdom. It employed 51,000 workers and had generated USD 4.3 billion in reve- nue in 2002… …. But shortly after it had become publicly traded in 1986, the company had begun to artificially inflate its earnings to match analysts’ expectations and… …of Wall Street’s expectations, Scrushy would tell management to “fix it” by recording false earnings to make up the shortfall. (The conspirators also… …from hospitals and clinics, add bogus amounts at headquarters and blend it altogether. Thus, while the rehabilitation hospitals and medical centres… …tried to persuade CEO Scrushy to abandon it. But, according to the SEC complaint, Scrushy insisted that the scheme continue because he did not want the… …August 27, 2002, HealthSouth issued a press release stating that it expected Transmittal 1753 to reduce its annual earnings by approxi- mately USD 175… …an SEC accounting probe at the healthcare rehabilitation company. Following news of the probe, Standard & Poor’s announced that it lowered… …belonged in a psychiatric facility, not a rehab facility, but we had a bed available and we were encouraged to take them.” “In this sea of fraud, is it… …, Accounting Fraud in U.S. Companies 141 citing systematic deception on the part of HealthSouth’s executives. It was a well- conceived and -executed…

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