Some big names among the 250 cases in the SEC’s enforcement pipeline.
Sources: Securities and Exchange Commission, news reports
|ConAgra Foods||The fictitious sales and “irregular practices” at a subsidiary led to restating three years’ worth of earnings.|
|Critical Path||Back-dated sales contracts and side-letter deals raised eyebrows as well as revenues.|
|GenesisIntermedia||The investigation relates to “trading in its securities,” according to the company.|
|Informix||The company settled, but the SEC is continuing its investigation of former officers
after suing a former VP in May.
|Lucent||The beleaguered telecom company used channel-stuffing and excessive credits to energize sales in 2000, according to published reports and lawsuits.|
|Raytheon||Possible accounting irregularities at its former engineering and construction unit, sold to Washington Group International in July 2000, have brought both companies into the probe.|
|Rite Aid||The SEC alleges it used cookie-jar reserves and faked bank documents to meet loan repayments, restated 1997-99 earnings; now negotiating with local criminal authorities to avoid charges in exchange for a civil penalty.|
|Warnaco||The company disclosed in its April 10-K that the SEC had begun an investigation into its accounting practices, then announced an earnings restatement in August with no further details.|
|Xerox||Accounting irregularities, including a $100 million cookie-jar reserve at Xerox’s Mexican subsidiary, have led to an expanded probe of practices and three years’ worth of restated earnings.|
The first known accountants were pairs of scribes who independently recorded daily transactions for the pharaohs of ancient Egypt. If their numbers didn’t match at the end of the day, explains Joseph T. Wells, chairman of the Association of Certified Fraud Examiners (ACFE), both were put to death. “One of the first internal controls, if you will,” he says.
Today, that historical emphasis on fraud detection is making a comeback (albeit with less dire consequences) after decades of neglect. Thanks to the globalization of business in the early 1900s, and especially after the stock market crash of 1929, explains Wells, auditors shifted their focus from fraud detection to public reporting. “That created an expectation gap between auditors and the reading public,” who still viewed auditors as the first line of defense against fraud, says Lawrence Redler, who runs the Forensics and Investigative practice for accounting firm Grant Thornton LLP.