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CA's Ex-CEO Indicted on Fraud
An anonymous reader writes "CNN is carrying a story about how Sanjay Kumar, ex-CEO of Computer Associates, was indicted on fraud charges. Prosecutors said the long-running accounting fraud scheme featured what came to be known by Computer Associates employees as a "35-day month" because company books were routinely kept open until revenues exceeded projected goals. "The defendants cooked the books by simply keeping them open beyond the end of a fiscal quarter for however long it took to meet the analysts earning estimates," said Deputy Attorney General James Comey. Comey said by the time the "house of cards" collapsed, about $2.2 Billion in revenue was booked prematurely. Good thing CA settled it's case with the DOJ."
A late bubble bursting? A lot of innocent people are going to suffer for this: lost jobs, lost opportunity, lost credibility.
Seriously, can't the tech industry rise above this Enron-ish nonsense?
You seem to think that the IT industry has some eerie ethics that govern all. That is not the case. The IT industry is just another industry with shares, stockholders, filings, profits and losses. Money is what counts. The size of the profits and payouts of high ranking executives are just numbers on a scoresheet those people play like a game. Trouble is, real people get hurt and those assholes get a slap on the wrist at the white-collar country club jail for a while.
If you or I were to walk into a bank with a note that said "I have a gun." and walked away with a few $K, once caught we'd be in jail longer than the white collar criminals that steal tens or hundreds of millions of dollars.
Trolling is a art,
I more and more like China's answer to corrupt CEOs. They shoot them.
I prefer the "u" in honour as it seems to be missing these days.
which brings us back to the beginning of the argument... that if the focus was more on dividends and less on share value going up and up and up, the incentive to cook books would not be as large.
Making the share price go up only requires BELIEF that the stock is worth more... paying more dividends requires actual profits... I think that was the point.
Nobody is arguing that it's not an investment.. it is.. but the inherent value of that investment is, or should be, based on what the company can actually produce.. in reality, it's now based largely on hype.
Please tell your professor he is an idiot.
"When is the last time the SEC or a Certified Public Accountant identified a case of major corporate fraud before the scam was so far gone it sent the company to court and probably bankruptcy?"
When dod the police catch on a planned murder (or other crime) before it is actually comitted? -- very very rarely. So should we disband the police? Or should we consider that even if they are too late to prevent a crime punishing the criminal provides justice and prevention to other criminals.
The answer is to make the SEC better and not to disband it.
"The SEC was established in the 1920s, yet there have been numerous major stock market crashes and other scams at regular intervals since, and just as many high profile corporate bankruptcies. "
Actually if my memory serves me correctly, it was established in the 30's when securities act was passed. It was established in response to the great depression and there has not been another great depression yet. Furthermore, while there are numerous examples of fraud that is not caught by the SEC, we no longer see the obvious fraud that used to happen during the robber baron ages.
"who do not scrutinize firms in the detail they should"
Scrutinizing firms in higher detail will not necessary prevent fraud. The only thing investors can do is check financial statements for inconsistencies, and the financial statements are entirely created by management. So a dishonest manager only needs to lie consistently in order to escape the deepest scrutiny.
So what is the alternative? That investors become spies and actually go to the company's offices and check on things? Well if you believe that, then 99.999% of current stock owners will not be able to invest properly, which means that the market will crash, capital will become 10x more expensive and our economy will disappear. I would rather have the SEC.
"But they are badly mistaken, the protection offered is nothing but a rubber stamp on an audit report."
Actually the protection offered should be much much greater because auditors are personally liable for any losses resulting from their lies (or screw-ups). And auditors usually have a lot of money. The only problem is that the system is so fraught with corruption, that the auditors responsible for the Enron case, and other similar disasters have been largely able to get away. For the Enron case, the DOJ dragged their feet and let Andersen consulting burn all their documents, destroying all evidence.
Again the solution is getting rid of corruption, not doing away with the system alltogether.