In 1996, Sunbeam, a US appliance manufacturer, was in serious financial trouble. AI Dunlap, known as ‘Chainsaw AI’ for his approach to cutting staff, was appointed to save the company. Over the next two year, the business reported dramatically improved results. Investors chased after the shares as the price rocketed. There was talk of a bid, which would make the investors, and particularly Dunlap and hit colleagues, a lot of money.But no bid came.
By 1998, some outside directors were uneasy and launched an inquiry. They did not like what they found and Mr Dunlap was fired. The SEC subsequently charged him, other senior executive, and the audit partner at Arthur Andersen, who had approved the accounts, with fraud. The SEC alleged that, on his arrival, Mr Dunlap identified massive previous losses, which he wrote off, giving him a ‘cookie jar’ to dip into to inflate subsequent results.
Then he shipped out more goods thought hit distribution channels than they could possibly sell, taking credit for the revenues, but pushing forward the problem to the next financial year. Returned goods were overlooked. Other efforts were made to boost sales artificially: record numbers of outdoor barbecues were reported sold during the winter months.
In 2011, Andersen agreed to pay US $ 110 million to the Sunbeam shareholders in settlement of a lawsuit alleging that the auditors had failed to identify the problem.
In 1996, Sunbeam, a US appliance manufacturer, was in serious financial trouble. AI Dunlap, known as ‘Chainsaw AI’ for his approach to cutting staff, was appointed to save the company. Over the next two year, the business reported dramatically improved results. Investors chased after the shares as the price rocketed. There was talk of a bid, which would make the investors, and particularly Dunlap and hit colleagues, a lot of money.But no bid came.By 1998, some outside directors were uneasy and launched an inquiry. They did not like what they found and Mr Dunlap was fired. The SEC subsequently charged him, other senior executive, and the audit partner at Arthur Andersen, who had approved the accounts, with fraud. The SEC alleged that, on his arrival, Mr Dunlap identified massive previous losses, which he wrote off, giving him a ‘cookie jar’ to dip into to inflate subsequent results.Then he shipped out more goods thought hit distribution channels than they could possibly sell, taking credit for the revenues, but pushing forward the problem to the next financial year. Returned goods were overlooked. Other efforts were made to boost sales artificially: record numbers of outdoor barbecues were reported sold during the winter months.In 2011, Andersen agreed to pay US $ 110 million to the Sunbeam shareholders in settlement of a lawsuit alleging that the auditors had failed to identify the problem.
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