Financial Fraud Case Study: Stephen Richards

Financial Fraud Case Study: Stephen Richards Table of Contents Executive summary Problem Statement Company overview Case Analysis Questions A letter from prison Executive summary This case study is about the former global head of sales Stephen Richards at the Computer Associates, Inc. (CA), who is serving a seven year prison sentence for financial fraud. In addition to this, Stephen Richards responds to the number of the questions asked by the Eurenge Soltes about the responsibilities of the managers as well as the handling of the financial activities in a letter written to a graduate student. Moreover, Stephen Richards joined the Computer Associates, Inc. (CA) in the year 1988 immediately after graduating. He has achieved continuous promotions in the company throughout his time period in the Computer Associates. As, Stephen Richards gets prompted within two years’ time period after his joining to operate New Zealand’s and then promoted to the Australian site of the company. Stephen Richards becomes the vice president of the Pacific region and is a leading regional figure for the Computer Associates, Inc. (CA). The company has acquired various competitors as well as firms that are producing complementary software products during the time duration between 1980s and 1990s.In addition to this, the company has around 18,000 employees and subsidiaries in approximately in 100 countries in the late 1990s. The company recorded its NPVof the licensing contract in the quarter when the revenue recognition criteria are met in accordance with the GAAP regulations. Problem Statement Computer Associates International, Inc. (CA) is currently facing the problems related to the financial fraud allegations against the company.As, the company finds it more difficult to accurately forecast the revenues as well as earrings for each quarter of their sales targets. Company overview Computer Associates International, Inc. (CA) is founded by the Charles Wang in the year 1976 in order to meet the growing needs of the mainframe computing software for IBM computers. Moreover, the company offers a variety of products that include database, application and financial management software in order to meet the computing necessities of the businesses. The most of the software products are sold by the sales team of the Computer Associates to the clients who buy a license to use the product for a period between three to ten years. Additionally, Computer Associates provides the software updates and technical support to its clients during the period of licensing. The fee of the licensing charged by the Computer Associates to the clients increases with the length of the contract as well as each additional licensing year was priced lower as compared to the previous year in order to reflect software oldness. The amount of the fee that is charged by the company to its clients could be amounted to hundreds of thousands of dollars. The Computer Associates distributes the revenues to licensing fees as well as to usage and maintenance fees once the contract of the license between the company and the client is finalized. Mostly the 80% of the revenue is allocated to the licensing fee. The significant part of the company revenue is normally booked during the final week of the quarter. During each quarter the management sets internal sales targets for the sales team with the sales incentives are given to the immune pressure to meet these sales targets. The company showed huge growth during the 1990s, even with the challenges and pressures. Case Analysis The case analyzes the overall situation of the Computer Associates International Inc. (CA) related to the allegation about the financial fraud within the company by a few executives of the Computer Associates. The management of the company found it hard to forecast accurate results for the revenues and earnings for each quarter in the year. As, before the end of the quarter, the management of the company found it incompetent to warn the specialists about the unexpected shortfalls in the revenue. Additionally, the various larger contracts resulted in the shortfall in the revenue of the company’s products as these contracts are those that are close on the final day of the quarter. Due to the decrease in the revenue of the Computer Associates affected the stock price of the company that reduced the Computer Associates stock by 42%. There is an allegation about the company that is published in an article in the New York Times, and according to this, Computer Associates have excessively implemented the approach of aggressive accounting practices in order to boost the earnings. But there are several evidence that proves that all the accounting practices of the company are according to the generally accepted accounting principles. This allegation also gets the attention of the federal investigators who showed dissatisfaction with the internal investigation of the company. Due to this allegation the company has faced much criticism that greatly impact the standing of the Computer Associates (CA) and requires other ways to make investigation done efficiently so, the company hire the prestigious law firm in order to investigate more aggressively. It is determined from the investigation that the few employees of the Computer Associates (CA) had backdated the some of the contracts as well as it also appeared that the revenues related to such contracts had been recognized after the end of the quarter. While, the revenues linked with these software contracts must be recognized in the in the quarter in which the contract has been signed. Therefore, the three executives of the company are forced to give the resignations due to this improper revenue recognition. In addition to this, six executives along with the Richard are caught to be involved in the financial fraud due to which Richard the SEC filed a formal complaint against the Richards and at the same time he resigned from the Computer Associates International Inc. Questions: How serious were Stephen Richards’ actions? Why? Stephen Richards’s actions were extremely serious; Richard in his letter writes that his self and the CEO exerted significant pressures on their team to meet the goals that they had set for themselves; also Richard mentions that performance was measured by internal goals Stephen Richard’s actions are notably serious because he had knowledge of the wrongdoings and he was in a position to report it, but he chose not to. Richards’ action together with other CA’s executives seriously victimized the shareholders as they suffered enormous losses once the practices were revealed. Therefore, â€Å"Richard was ordered to pay $29 million in restitution.† (Weidlich)  manipulating Computer Associates’ quarter end cutoff to align CA’s reported financial results with market expectations by violating the generally accepted accounting principles and their financial reporting responsibilities. According to the U.S. Securities and Exchange Commission, Richards with other CA executives extended CA’s fi scal quarter, â€Å" instructed and allowed subordinates to negotiate and obtain contracts after quarter end while knowing, or recklessly disregarding the fact that, CA would improperly recognize the revenue from those contracts, and failed to alert CA’s Finance or Sales Accounting Department that CA salespersons that reported to Richards were obtaining contracts with backdated signatures dates after quarter end.† (Release) in accordance with the expectation set by outside parties, analyst community, specifically to meet Wall Street quarterly per-share earnings estimates, â€Å"a key to keeping a company’s stock price rising.Richards with the CEO allegedly met routinely and conferred with each other and with (CFO) during the week following the end of fiscal periods, including during the â€Å"flash period†, the three business days after the end of fiscal quarter, to determine whether CA had generated sufficient revenue to meet the quarterly projections, and closed CA’s books only after they determined that CA had generated enough revenue to meet the quarterly projections, this practice, which was sometimes referred to within CA as the â€Å"35-day month† or the â€Å"three-day window†, violated GAAP and resulted in the filing of materially false financial statements. The goal of the 35-day month was to permit CA to report that it met or exceed its projected quarterly revenue and earnings when, in truth, it had not. (DOJ) Referring to the Scheme to Defraud, Richard instructed CA sales managers and salespeople to negotiate and finalize additional license agreements, which were backdated to cover the fact that the agreements had been finalized after the end of the fiscal quarter. At the end, these actions led to â€Å"overly aggressive accounting practices† to boost CA’s reported earnings and the managerial use of discretion to greatly influence reported earnings was not only used by Richards’, but it had become a company-wide practice. As Mark Director of the SEC’s Northeast Regional Office, said about CA’s fraud â€Å"Like a team that plays on after the final whistle has blown, Computer Associates kept scoring until it had all points needed to make every quarter look like a win.† (Wharton) As the result, CA fraudulently recorded and reported in the earlier quarter revenue associated with the backdated agreements. Stephen Richard’s actions are notably serious because he had knowledge of the wrongdoings and he was in a position to report it, but he chose not to. Richards’ action together with other CA’s executives seriously victimized the shareholders as they suffered enormous losses once the practices were revealed. Therefore, â€Å"Richard was ordered to pay $29 million in restitution.† (Weidlich) 2. If Computer Associates achieved the same financial results through GAAP flexibility, does your answer to question 1 change? No, with the flexibility of GAAP the risk of manipulation was that CA could have more likely made reporting mistake that would lead to legal problems and enormous losses. As long as the CA’s executives including Richards had the intention of wrongdoing actions they would cause massive losses to the shareholders of the company and to the SEC. Though such manipulations and fraud resulted CA to payback â€Å"$225 million for the purposes of compensating shareholders for losses arising out of the company’s criminal conduct.† (DOJ) Seeing that, the evidence and investigation on Computer Associates shows that the CA didn’t make false transaction and actual transaction and business deal had happened, but the problem of fraud was that CA’s executives were backdating the agreements in order to prematurely recognize revenue from contracts that had not yet been executed by both CA and its customers in violation of GAAP. Under Generally Accepted Accounting Principles (GAAP), four conditions were required to be met in order for revenue associated with a software license agreement to be recognized: 1- persuasive evidence of an arrangement was required to have existed, 2- delivery of the licensed products was required to have occurred, 3- the license fee was required to have been fixed or determinable, 4- the collectability of the license fee was required to have been probable. 3. Suppose you were placed in Stephen Richards’ position at computer Associates and were under pressure to extend the fiscal quarter. How would you handle the situation differently? What would be the expected consequences? I would not have extended the fiscal quarters of knowingly or encourage the backdating of agreements, regardless of the overwhelming pressures by the Wall Street estimates which Richard points to analyst community in his letter. CA regularly issued public predications at the outset of each fiscal quarter of the revenue and earnings it expected to earn during that quarter. Based on these predictions, professional stock analyst estimated what they believed would be CA’s total revenue during the period and predicted the earnings per share of CA stock. CA’s executives including Richards understood that CA’s failure to meet or exceed the consensus estimate for a quarter would likely result in a substantial decrease in the company’s stock price. (NY) I think too much emphasis was placed on the achieving financial gains improperly, for Richards and other members of management, without planning the proper ethical and legal strategy necessary to achieve CA’s goals for success. Performance measurement was a key level of concern in this case which alerted the key ingredients for financial statement fraud and fraud triangle. The sales managers and salespeople were used as enablers to negotiate and finalize additional license agreement while keeping the accounting books open after the end of the fiscal quarter. Richard also emphasizes on the â€Å"compensation is important, but the recognition of your performance is sometimes even more important. Actually, according to Richard in his email he writes that â€Å"we have created a performance driven culture without the necessary control framework for people to operate within† this shows that there was no real structure as far as milestones for growth. That is how CA pushed as much as to reach its goal of estimated earnings regardless of considering any rule or regulation type of culture attitude, which led CA to tragic results relating from poor decision making and lack of organizational structure and control. Instead CA could have placed better accounting controls to recognize and issued realistic and accurate public predications at the outset of each fiscal quarter of the revenue and earnings it expected to earn during that quarter, this way they would have not faced the legal troubles that they led themselves to. Even in such a situation for a healthy company to minimize the risk of this downward slide is encouraging and protecting whistleblowers. That way, problems ar e addressed internally- well before they become big enough to drag the entire company over the cliff.

All Quiet on the Western Front: Corruption of Power theme Essay

Power. The word itself instigates a conundrum of fear and attraction. The attraction for it, the attraction for more, and the attraction for seeking the absolute highest boundary of it. Those who thirst for it see visions of wealth, vast expansions territory, and above all, the ability to do whatever one wants whenever he wants. And those who thirst for it will seek it through whatever means necessary, whether it be a fistfight or a war. Necessity is the basic derivation for all hostility and aggression; therefore, power, and its corruption, is the source of all war. Such corruption is exemplified in the World War I novel, All Quiet On the Western Front, by Erich Remarque, through the eyes of the platoon leader, of the military officials, and of the highest level of power in Germany at the time, the Kaiser. The bottommost level of power represented in All Quiet On the Western Front is the platoon leader, who is given a pack of soldiers to bully around under his abusive authority. The authority figure in the novel is Corporal Himmelstoss, who is to train the newly enlisted soldiers in the ways of war. He is described as a semblance of Louis Napoleon in the novel; â€Å"a small undersized fellow with a foxy, waxed moustache† (Remarque 23). Immediately the description of Himmelstoss triggers an image of a short, power-hungry figure, the figure that suffers from what many refer to as â€Å"small-man’s syndrome.† His image is further emphasized in the statement: â€Å"He had a special dislike of Kropp, Tjaden, Westhus, and me, because he sensed a quiet defiance† (Remarque 23). Himmelstoss’s dislike for these soldiers is not directly related to the fact that he supposedly â€Å"sensed defiance†, but more so to his will to push the soldiers around. He focuses his efforts on Tjaden, the â€Å"skinny locksmith†¦[who] is and always will be as thin as a rake† (Remarque 2-3). To make up for his lack of size and strength, Himmelstoss attacks the thinnest, soldier of the pack, who he assumes to be the weakest. However, when Himmelstoss loses his position of authority, he is not so brave. In the Front, during invasion, Paul Baà ¼mer finds Himmelstoss in the dug-out â€Å"pretending to be wounded. His face looks sullen. He is in a panic†¦He does not stir, his lips quiver, his moustache twitches† (Remarque 131). Himmelstoss is not a powerful man on his own, but under the spell of a powerful position, he is corrupted, and abuses it to  disguise his own weaknesses, allowing him to gain some form of power. The next level in the military edifice of power lies in the competitive military officials. With the increased level of power comes an increased level of corruption–and an increased level of consequence. Himmelstoss may have instigated hostility, even hatred, from his platoon, but the corruption of a higher military official may result in deaths. In a desperate effort to continue the attack on France, mass drafts occur, and the officials immediately send the untrained recruits to the front line. Paul Baà ¼mer states that the recruits â€Å"are helpless in this grim fighting area, they fall like flies. Modern trench-warfare demands knowledge and experience† (Remarque 129). The officials, in order to look good by fighting the war long and persistently, rush these recruits into battle, where they fall like flies. The officials carry out this inhumanity again and again, but it is not only for the sake of â€Å"looking good,† but for the desire of getting promoted, f or the desire of gaining more power. The head of power in Germany, and therefore the one able to command all those below, is the Kaiser, Wilhelm II. His position is so incredibly grand and authoritative, that he is seen almost as a form of deity. When Paul Baà ¼mer sees the Kaiser in person, he is â€Å"really rather disappointed; judging from his pictures I imagined him to be bigger and more powerfully built, and above all to have a thundering voice† (Remarque 202). This false impression of his emphasizes the disguise of power. Under his disguise, the Kaiser is viewed as giant, mighty warrior enthroned with gold and silver. In reality, he is a man unlike any other man in power, greedy and vicious. A man so powerful, Tjaden believes â€Å"he has everything he can want already† (Remarque 205). If he has everything he can want, why does he persist in the war? There is no limit to his demand for power, and so he pushes his officials further into battle, as they push their soldiers further into bloodshed. The war Wilhelm II creates is not only devastating physically, but instigates what is known as the â€Å"lost generation.† Paul Baà ¼mer describes his experience, being â€Å"lost† because of the war. He â€Å"will never be able to be [indifferent and hopeless] again. [He] was a soldier, and now [he] is nothing but an agony for [himself]† (Remarque 185). His flourishing life was  thrown away in the war and gave way to an indifferent automata, and after his leave, he is emotionally in between war and life, in â€Å"No Man’s Land.† An entire generation of soldiers, of human beings, of lives, is destroyed through emotion and severe disturbance. And for what? For Kaiser Wilhelm II to seek that highest boundary of power. Power is a recurrent theme in All Quiet On the Western Front, in three different levels: the mindless soldier, the aspiring military official, and the boundless Kaiser. Each one desperately seeks power in an effort to make themselves appear stronger. The quest for this is usually a corrupted one, and corruption creates consequence. The more power one acquires, the more devastating the consequence. When, if at all, will the quest for power end? The corruption is inevitable.

The Ultimate Cow Flu Inoculations Argument Essay Gre Samples Rubric Trick

The Ultimate Cow Flu Inoculations Argument Essay Gre Samples Rubric Trick The 5-Minute Rule for Cow Flu Inoculations Argument Essay Gre Samples Rubric Therefore receiving vaccinations is crucial to one's overall wellbeing, and the danger of creating a critical side effect is minimal. 1 method that may save lives is the usage of inoculations. On the other hand, the general effect of vaccines benefits not only the people who receive them, but the overall population also. The negative elements outweigh the little advantage of using inoculations. Within this scenario, an individual can earn a logical argument that the, eventhough there's a little danger of death from the innocultions, it's even more imperative to give the ennoculations to prevent more deaths from cow flu. These unfortunate side affects only occur in a small number of vaccinated children and are frequently as a result of a pre-existing condition. Because of this, the ideal method to defend the well-being of the y oungster is to do a vaccination. It's especially crucial for younger kids and people that are at high risk of catching infections. It's like a rumor suffusing around the full school! But as parents you must decide. Although parents oppose mandatory vaccination in public schools, the truth is that vaccination has a lot of advantages that outweigh the detriment that arrive with this. But many religious parents still decide to vaccinate their children for the interest of keeping their kids well and keeping up a safe environment because no single individual should have the right to jeopardize the well-being of the overall public just to meet their very own personal beliefs. The maturation of the vaccine against Ebola requires quite a long time and, as a consequence, the scale of Ebola epidemic grows. Initially, the idea of herd immunity wasn't associated with vaccines. To conclude, vaccines are crucial. It is thought that this disease is directly a result of the bacteria pathogen Haemophilus influenzae, but could also be brought on by viral pathogens and other disease causing agents. Flu causes mild to sev ere illness and at times even contributes to death. Flu vaccination is just one of the greatest strategies to defend the community from the seasonal and pandemic flu effects. It is most effective way to control and prevent influenza virus infections and severe complications. Just take the flu vaccine for example. Thus it's tough to determine for what strains of flu virus vaccine needs to be made which may wind up with vaccine shortage for certain flu season. Pandemic flu differs from seasonal flu, it's a worldwide disease outbreak that normally happens when a flu strain new to humans emerges and causes widespread illness. Seasonal flu causes substantial illness and in certain cases death. Flu, also referred to as Influenza, is a contagious viral disease which affects the respiratory system. Understanding Cow Flu Inoculations Argument Essay Gre Samples Rubric Fortunately, you're at the appropriate place. Among many vaccine shortage is easily the most noticed annually. Moreover, it's very essential for people to get vaccinations in order to stop contracting and spreading vaccine-preventable diseases. Childhood vaccination can happen both singly and repeatedly. Where to Find Cow Flu Inoculations Argument Essay Gre Samples Rubric Just like everything on earth, there are always risks. F inding a vaccination could not simply save your life, but could also help save you a huge amount of money too. For example, it is not possible to eradicate all diseases and body immunity lasts longer if it's created by natural conditions. Although a lot of men and women are below the assumption that vaccinating children shouldn't be required, the truth is they ought to be required to not just maintain a wholesome ecosystem in which disease isn't a factor, but also because the benefits and benefits that are made from child vaccination greatly outweigh the detriments that come too. The Most Popular Cow Flu Inoculations Argument Essay Gre Samples Rubric The overwhelming scientific consensus is that they're not. Additionally, the argument doesn't specify what `routinely' exacty ways. To summarize, the argument posited in the particular statement is weak since it does not provide us with vital evidences which are necessary to rate the argument. Demonstrate the capacity to convey i deas, wisdom and knowledge of the topic. Third, body immunity is thought to last longer if it's formed by natural conditions. It's a shield for people who lack individual immunity and an effective means to eradicate or control serious contagious diseases. In cases the patients want to leave homes, they ought to wear special surgical face masks that may be bought in every drug store to lessen the number of droplets spray when sneezing or coughing. This is quite preventable. Religion has played a very important part in society since the start of time and it's projected that 84 percent of the planet population is involved with some type of faith (Jennifer Harper). Folks need to create their final decision after considering all of the information regarding the flu shot. Probably you do, because you're browsing for aid with your essay writing. Nowadays the very best usage of drones is presented in the regions where there aren't any roads. State governments have the authority t o safeguard the public from diseases. Nobody doubts that their usage can bring a whole lot of advantages in several spheres. Several state laws are in place to guard the general public well-being.

Obesity You Are Not Alone - 2391 Words

Obesity You are not alone Remember back when you were a child, everything seemed so easy. Your only care was going outside to play and what your parents were making you for dinner. In elementary, middle, and high school everyone can recall that one person that was â€Å"different.† The people who were obese seemed to be treated differently because of their weight. Some people can recognize and understand why individuals are obese, and others judge them upon their appearance. Obesity was and still is considered a bad thing, and some people are still being bullied because of this reason. Little do people know that there is an answer to help obese people, cognitive therapy. Everyone is unique in his or her own way. People come†¦show more content†¦She told her son, â€Å"No sweetheart, you are perfect just the way you are.† Johnny said but people are making fun of me at school. She quickly replied, people do not understand you. You are just different, but that doesn’t make you any less beautiful and smart.† The following days in school, Johnny kept being picked on because of his size, and his self-esteem continued to get lower and lower. He did not understand what he had done wrong and why he was being treated so differently. He would hide in the bathroom for lunch and when it was time for recess; he kept to himself. He battled with this every day, becoming more and more upset, and eventually he became depressed. His mother just thought it was kids being kids she did not understand the extent of his emotions. She continued reminding Johnny that he was perfect, just the way he was. Johnny started feeling overwhelmed and began to eat more and more. As johhny grew up and became an adult, he went through many challenges. Johnny had an idea that if he lost weight things would be better for him. Therefore, he got the typical commercial work out program to try at home for 30 days. He was so excited to start this program. He told himself that he would cut back on his eating and his bad eating habits, and work out every single day. Dr. Robert Hoerr says, I don t think that most of these programs have internal expertise to measure whether they re actually being effective. In addition, the doctor is right about