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PC Cooling Specialist Zalman Goes Bankrupt Due To Fraud
An anonymous reader writes Zalman's parent company Moneual's CEO Harold Park, and vice presidents Scott Park and Won Duck-yeok, have apparently spent the last five years producing fraudulent documentation relating to the sales performance of Zalman. These documents inflated sales figures and export data for Zalman's products. The reason? Bank loans. By increasing sales and exports Park and his associates were able to secure bank loans totaling $2.98 billion. Someone has finally realized what has been going on, though, triggering Zalman's shares to be suspended on the stock market and the company filing for bankruptcy protection. The questions now turn to how this practice was allowed to continue unnoticed for so long and how the banks will go about getting their near $3 billion back.
Will he be sent to the Cooler?
don't get me wrong, i love their fans... but come on, it's a fan. those exec and investors are dreaming if you think that market is that large.
In these situations everyone should just chill and take it easy. Clearly we don't need to let things spin out of control. I'm sure Zalman's lawyers can take the heat.
The occurence of this sort of fraud in the 19th century led to the emergence of the role of auditors, whose responsibility is to ensure that the accounts are telling the truth; as a result this sort of fraud is rare in Western countries. The question now becomes one of who the auditors were - were they ones who should have done the job, or were the banks fooled into accepting a poor audit. In either case however the auditors will be on the hook unless they can prove that the CEO was doing a VERY good job of hiding the facts.
Presumably sold off to multiple interested parties by a curator if it gets to that stage.
All of their coolers - and we're not just talking fans here, but their vast library of heatsink and heatpipe designs (both functional and aesthetic targets), cooling pads, etc. will be an easy target for either a competitor, or for a company to keep Zalman going and focus only on those. It's what Zalman's known for - to the point of their own website suggesting for the VGA products that "Zalman cooler is equipped with VGA card", rather than the other way around ;) - so that would make some sense.
The peripherals.. well, most of them can probably die off. Not too many people seem to care about Zalman mice, keyboards, USB sticks, headsets, etc. - they're either a dime a dozen or too fancy for their own worth, and only a few get to be big brand names in that arena.
There's some niche products like their virtual device storage options that would make a good complementary offering in WD's lineup.
Given their financial numberfiddling, I can't help but imagine that some divisions were used to prop up others to help make things look good - so selling it all together seems, to me, unlikely; except for purposes of selling it on again
(yes, the IP vultures, whose day job is to make up ways in which popular products violate their IP in the hopes of landing settlements because that's cheaper than bothering with the court case even if you think they're on extremely shaky ground)
Classically, capitalism relies on producing goods that people want at prices people are willing to pay for them. It relies on consumers being rational actors in their own self interests. Deception throws the whole thing off; you can make rational, selfish decisions if important data needed for your purchase decisions is withheld; hence consumer protection laws.
Except that, of course, in modern capitalism banks are too big to fail and take these risks because they know it's not their own money that's at stake, but that of tax payers.
But well obfuscated.
They shouldn't be getting their $3 billion back: they took a foolish risk and need to suffer the consequences.
I respectfully disagree. They are entitled to get their money back, per the contract that was signed. All debtors of the company have the same entitlement to get their contractually obligated money back.
Now, where that money comes from is a different story. Not a dime of it should come from anybody that wasn't directly involved in the fraud. Any executive/board level people that were involved should be stripped of any and all assets, then the company should be liquidated, restructured, or whatever it takes to satisfy the debtors. If someone wants to pick up the pieces and build Zalaman 2.0, that's for them to decide.
I am familiar with US / western bankruptcy law. This is Korea so your mileage will vary.
First, the issue is one of finance, not operations. If that is true, that means the company is still viable – that is worth more as a operating entity than being sold off for parts. So it will probably keep on going.
Second, from a brief scan of the article, there are no allegations of fraud against Zalman. It is against Moneual, which owns 90% of Zalman's shares. It sounds like it is not the court seizing Zalman's assets, but freezing Moneual's assets.
Technically as a independent entity, Zalman should keep on ticking like it has. This assumes that Zalman did not assist Moneual's fraud. Since Moneual had a controlling interest in Zalman that is a big assumption that needs to be checked out. Probably another reason why the shares are frozen.
What happened was that the parent company Moneual, faked sales near $3 billion, NOT get that much loans. They secured loans of about $600 million with about $300 million insured. So the banks will have a loss of less than $300 million (probably near that amount). Also even though the parent company is definitely going bankrupt, Zalman will probably get a court order to keep running after the parent company forfeits all it shares.
Does capitalism depend on people being truthful all the time? Somehow I don't see that working. I thought the robustness of capitalism came from relying on everybody to be selfish bastards.
That depends on what you mean by 'capitalism'(many people who use the term do mean something, though often not the same thing, so it's pretty rhetorically slippery).
Typically, when people say 'capitalism', they are implying 'free market' and implicitly or explicitly extolling the virtues of 'economic equilibrium'. This is where truthfulness becomes a direct requirement. The idealized model of a free market equilibrium requires rational actors, perfect information, absence of market power, and the like. Lying is about as aggressively contrary to perfect information as you can get, since it's usually a calculated attempt to ensure even more asymmetric information in the liar's favor. And the demonstrations of asymmetric information leading to market failure(both historical case studies and in theoretical models) are numerous.
So, while any real-world implementation can't rely on people to be honest, or even assume that the cheats will be caught all the time; there are good reasons to suspect that dishonesty imposes both direct costs on the victims of fraud and an overall drag on the market efficiency, so there is a strong incentive to punish, and attempt to minimize, dishonesty and fraud.
Zalman might actually be a better 'sell off and business as usual' candidate than OCZ was.
Fraudulent accounting is a problem, and no doubt the banks are angry and the books are thoroughly cooked; but none of that has any direct impact on Zalman's products, consumer perception of them, or how profitable or unprofitable Zalman's day-to-day operations would be. It is unlikely that they are even remotely profitable enough to make good on the loans obtained by fraud; but if they are otherwise healthy the creditors might recover the most money by selling them off as a viable business.
OCZ, by contrast, had some dramatic product issues, and was being eaten alive by pressure from competitors on the low end who (while a bit slower) were as cheap or cheaper and didn't fail catastrophically, and competitors on the high end who were as fast or faster, actually reliable, and getting cheaper at a reasonably steady clip. I'm still amazed that somebody thought that their brand was worth saving.
No. You're right that if you end up in jail, you did it wrong. But if you end up bankrupt, well, that's normal and shows you're good at taking risks. Lots of entrepreneurs wind up going through several bankruptcies. When they do the bankruptcy right, they still come out rich, and have something else already lined up. I know this sounds insane, but it's really quite normal. Fiscal responsibility, the kind we normal wage earners have to maintain, is a sign of not taking risks. It's a negative attribute, as far as the VCs are concerned. (Until it's their money being lost.)
Not necessarily. Elevated prices act as a "release valve" on demand; the higher things are priced, the less consumers are willing to buy them. In the aftermath of the Katrina crisis, Americans changed their driving habits significantly to reduce the need for gasoline. Without elevating prices, shortages become complete scarcities, and this happens often in South American socialist states with centrally planned economies, such as Venezuela.
And a note about collaboration: cartels are a function of lassaiz-faire economics, not free-market capitalism; they skirt the organic supply-demand relationship of capitalism by introducing artificial price points, when price fluidity is an essential component to capitalism.
The world sure would seem more just if the banks suffered more, right? Unfortunately, it's not that simple.
The loans were made specifically on the basis of Moneual's revenue statements. That is, the banks were trying to learn from mistakes they made last decade, and were relying on audited sales figures to make their loans, rather than "it's a technology company, it must be magic" like they were ten years ago. Unfortunately, the company lied about its sales figures, and then the auditing firm confirmed those falsified numbers. I'm not sure why the banks involved "should" have known that Moneual was lying and the auditing firm was incompetent. Maybe it's different in South Korea, but in the U.S., that kind of screwup would put the company's executives in jail for many years, and would lead to crippling fines and lawsuits for the auditing firm (how's Arthur Andersen doing these days?), so income statements and balance sheets tend to be considered fairly trustworthy.
Furthermore, bank loans like this are almost always collateralized by company assets, so in the event of default the bank gets first go at anything left over. Only large, well established companies can get away with issuing unsecured debt without crippling interest rates. Secured debt is precisely why lending to a startup (the Korean parent company is only four years old) is not a "foolish risk." Seriously, think about a world in which banks were not allowed to recover assets from their debtors. Why would any bank issue a loan, or at least a loan without double digit interest rates?
Actually, you don't have to imagine this - just look at the interest rates on a credit card, which is unsecured by any collateral. And before you tell me that those rates are so high only because banks are greedy, compare the credit card interest rate to the interest rate on a mortgage. Both credit cards and mortgages are issued by the same greedy banks, yet one usually has an interest rate of 15%-20% while the other has an interest rate of 4%-5%. The main reason for this difference is the fact that the mortgage is collateralized by the underlying house. That is precisely why lending $200,000 to a couple that makes $60,000 a year is not a foolish risk; the bank knows that it can get most or all of its money back by foreclosing on the house.
And lastly, how would you feel if the same logic got applied to every other fraud victim? Do you find it just as easy to say that the victims of Bernie Madoff "should" have known that something was suspicious, and that those investors took a foolish risk and should suffer the consequences? Why should these fraud victims (and make no mistake, the banks are fraud victims in this case, according to statements from at least one Moneual's own managers) be treated differently just because you don't like them?
Not even that, they make aftermarket versions of those. Not a single manufacturer makes devices with a Zalman cooler, only casemodders and those that put together their own computer do with the occasional repair or 'noise reduction' DIYer.
Custom electronics and digital signage for your business: www.evcircuits.com
Capitalism done right.
Sorry fag, it stopped being capitalism the moment they started lying
Wait, you're saying it stopped being
an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.
the moment they started lying? This was very much a case of private owners doing something for profit.
I think you're confusing it with the ideal free market, which assumes well-informed decision-makers. Do please try to be accurate when you are correcting others.
Don't waste your vote! Vote for whoever you want, unless you live in a swing state it won't matter anyways
Part of the bankruptcy will be to get as much cash back as possible. That's typically done by selling the assets and technologies of the company, along with things like brand names. The buyer does not assume any of the original company's financial responsibilities.
I am familiar with US / western bankruptcy law. This is Korea so your mileage will vary.
Well its Korea so it'll involve having a big meeting with everyone; the people at the top can't make a decision without consulting with everyone all the way down to the janitors.
Then they will all get very very VERY drunk.
In the free world the media isn't government run; the government is media run.
You know, judging by how their manufacturing economy has been going for the last decade or so ... I would say they might be on to something.
Hyundai has caught up to Honda in terms of reliability and customer satisfaction. They also do some other major heavy manufacturing.
In common with Honda, I find consultation, and getting drunk ... ergo ... if you want a better company, consult with your people, and then get drunk and sing karaoke together. Put aside the massive egos of your executive and stop being a cult of personality, and include the people who actually do the work.
And then come in the next day and make an awesome product, and lots of money.
Lost at C:>. Found at C.
So by your definition if I break into a house and steal everything, then sell it at my store... Thats Capitalism.
Sorry, you are wrong. What they have done is not capitalism, it is fraud and IMO Theft.
You might want to do some research. Zalman does indeed make OEM heatsinks and fans, along with many other products not directly related to PC cooling.
Sorry, teleporters just kill you and then make a copy. A perfect, soul-less copy.
And a note about collaboration: cartels are a function of lassaiz-faire economics, not free-market capitalism
I think this is the real important point here: many fans of laissez-faire economics call that "real capitalism". According to them, you can't say capitalism is a failure, because it simply hasn't been tried yet. Any government interference makes it not really capitalism anymore. But the one gem in capitalism, the one really, truly unmitigatedly good thing about it, is the free market. But with everybody looking to dominate the market in some way, the only way to keep the market free is to regulate it in a sensible way, break up cartels and monopolies, and force some competition in places where it is clearly needed (like the broadband internet market in the US, perhaps?).
And of course the regulators need to be independent from the industries they regulate. (Again, ISPs buying laws that block competition and ban community broadband is something that shouldn't even be possible. Or car dealers lobbying to block Tesla.)
http://www.zalman.com/global/p...
I would love if some other company took over making something like the Zalman ZM-VE200. A hard drive that can do a virtual CD-ROM from ISO files. There have been some flash drives that do this, but none that have the storage capacity I was looking for.
Really, I'd like to see one of these that would do a virtual hard drive for EFI booting of OS X images or Windows 8.
The real question is, how much are you charging for that straw man, there?
Gamingmuseum.com: Give your 3D accelerator a rest.
You'll have to keep them to yourself then. If you don't want the light to shine, don't turn on the lamp.
“He’s not deformed, he’s just drunk!”
One thing that's currently regulated is "anticompetitive behavior". One example of such is lowering the price on your product enough to drive the competition out of business, absorbing the loss with your (presumably larger than theirs) cash reserves, and thereby becoming a monopoly provider.
Would you consider that behavior to be force, fraud, or okay? (Seriously, I'm curious how you would classify it. I could see arguments for each; they're pretty broad categories.)