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48-578: The company was co-founded in 1973 by Jerome Swartz and physicist Shelley A. Harrison. At that time, the company focused on handheld laser-based scanning of bar codes. Under Swartz, the company marketed handheld laser barcode scanning devices. The company focused heavily on the retail industry and began to get involved in inventory management. These activities typically required people to scan items where they are stored and as such needed to be mobile. Symbol began to make small computers that could store data scanned to take inventory counts remotely and then upload

96-617: A bachelor's degree in electrical engineering from The City College of New York and a Ph.D. also in electrical engineering from Polytechnic University in Brooklyn , receiving fellowships from the National Science Foundation and Ford Foundation along the way. In 1999, he led Symbol to the National Medal of Technology, the U. S.'s highest honor for technology innovation. The award was presented to Swartz by President Clinton at

144-417: A bonus target based on earnings, or artificially inflate stock prices. As for misappropriation of assets , financial pressures are a common incentive for employees. Employees with excessive financial obligations, or those with substance abuse or gambling problems may steal to meet their personal needs. Opportunities: Although the financial statements of all companies are potentially subject to manipulation,

192-456: A company's asset, whether those assets are of monetary or physical nature. Typically, assets stolen are cash, or cash equivalents, and company data or intellectual property. However, misappropriation of assets also includes taking inventory out of a facility or using company assets for personal purpose without authorization. Company assets include everything from office supplies and inventory to intellectual property. Fraudulent financial reporting

240-541: A competition for business at Kroger. Symbol Technologies and Telxon were operating radio networks in the 2.4 GHz ISM bands. IEEE 802.11 was not yet ratified, so Symbol and Telxon were free to define competing standards of communication at this frequency band. Symbol settled on frequency hopping as the most robust, agile and interference-tolerant approach to data communications while Telxon selected direct sequence technology which they felt afforded higher transfer speeds with adequate interference immunity. Kroger ordered

288-495: A head-to-head comparison test. Ultimately and not decisively, Kroger chose Telxon. At about the same time, the IEEE decided to adopt the direct sequence approach in its IEEE 802.11b standard. The ratification of IEEE 802.11b was a huge blow to the Symbol team which now had to reconfigure and engineer a direct sequence radio system. This was accomplished with great pains and IEEE 802.11b became

336-548: A mass consumer and enterprise market. In June 1998, Telxon rejected a hostile takeover bid of $ 668 million made by Symbol. The ensuing proxy battle lasted two years, and in December 2000 Symbol was able to complete the takeover at a much lower price of $ 465 million. In 2004 Symbol acquired Matrics, helping the company to push further into the RFID field. In 2002, Tomo Razmilovic , who succeeded Swartz as CEO in 2000, abruptly retired in

384-402: A multibillion-dollar operation, especially since it had only one active accountant, David G. Friehling . Friehling's practice was so small that for years he operated out of his house; he only moved into an office when Madoff customers wanted to know more about who was auditing his accounts. Ultimately, Friehling admitted to simply rubber-stamping at least 18 years' worth of Madoff's filings with

432-495: A publicly held asset or non-profit organization undergoes privatization . Executives often profit greatly. Again, they can help by making the organization appear to be in financial crisis. This lowers the sale price, and makes non-profits and governments more likely to sell. It can also contribute to a public perception that private entities are more efficiently run, thereby reinforcing the political will to sell off public assets. Again, due to asymmetric information , policy makers and

480-449: A radio to allow the mobile computer to be untethered but connected to the host system. A thin client architecture was adopted in conjunction with a spread spectrum radio network. The enterprise mobility management market was dominated by Symbol Technologies and Telxon, Inc. Most notably, these two companies serviced major retailers such as Wal-Mart , Kroger , Safeway , Federated and others. A notable turning point occurred in 1994 with

528-404: A reality in the industrial and commercial markets far before the radios were available to the consumer market. The addition of a radio to a mobile device was roughly estimated to have a real value of between $ 500 and $ 1000 per unit. This was paid by enterprise customers that desperately needed this feature to accomplish their operations. Later on Symbol started to sell the radios as PC Cards as

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576-455: A scandal on insurance and mutual funds the year before, AIG was investigated for accounting fraud. The company already lost over $ 45 billion worth of market capitalization because of the scandal. Investigations also discovered over a $ 1 billion worth of errors in accounting transactions. The New York Attorney General's investigation led to a $ 1.6 billion fine for AIG and criminal charges for some of its executives. CEO Maurice R. "Hank" Greenberg

624-419: A significant disregard for the financial reporting process, such as consistently issuing overly optimistic forecasts, or they are overly concerned about the meeting analysts' earnings forecast, fraudulent financial reporting is more likely. Similarly, for misappropriation of assets, if management cheats customers through overcharging for goods or engaging in high-pressure sales tactics, employees may feel that it

672-413: A stand-alone product to various original equipment manufacturers (OEMs) and private label customers. These included 3Com , Nokia and Intel . The Symbol team had temporarily dominated the IEEE 802.11b market. Telxon was facing difficulties and, in the meantime, Intel, Apple Inc. and Cisco were looking at the technology to see how they would use this to their commercial advantage. Cisco investigated

720-520: A wide-ranging scheme to inflate the company's sales and profits. It included several types of fraud, such as channel stuffing (booking sales to wholesalers and distributors as final sales to customers), candy deals (selling products to distributors with no matching customer orders and then buying the products back), use of tango sheets (records of how much revenues had to be inflated to match quarterly targets) and use of cookie jar reserves (declaring nonrecurring expenses that far exceeded likely expenses). On

768-458: A year that covered large amounts of material. By January 17, 2002, Enron decided to discontinue its business with Arthur Andersen, claiming they had failed in accounting advice and related documents. Arthur Andersen was judged guilty of obstruction of justice for disposing of many emails and documents that were related to auditing Enron. Since the SEC is not allowed to accept audits from convicted felons,

816-482: Is a model for explaining the factors that cause someone to commit fraudulent behaviors in accounting. It consists of three components, which together, lead to fraudulent behavior: Incentives/pressures: A common incentive for companies to manipulate financial statement is a decline in the company's financial prospects. Companies may also manipulate earnings to meet analysts' forecasts or benchmarks such as prior-year earnings, to meet debt covenant restrictions, achieve

864-590: Is a physicist that developed early optical strategies for barcode scanning technologies in the United States and co-founded the corporation, Symbol Technologies on Long Island, New York, with physicist partner, Dr. Shelley A. Harrison in 1973. Swartz was President, becoming the Chairman and Chief Scientist in 1982. In 2006 Symbol Technologies became a wholly owned subsidiary of the multinational telecommunications manufacturer, Motorola Corporation. Swartz received

912-438: Is acceptable for them to behave in the same fashion. Fraud is done by people. There are three ways to unlawfully take another person’s money: force, trickery, and stealth. Frauds such as embezzlement are easy to hide when company records are opaque to begin with. Poor accounting, such as the absence of monthly reconciliations or an independent audit function, also indicate vulnerability to fraud. An executive can easily reduce

960-748: Is also known as earnings management fraud. In this context, management intentionally manipulates accounting policies or accounting estimates to improve financial statements. Public and private corporations commit fraudulent financial reporting to secure investor interest or obtain bank approvals for financing, as justifications for bonuses or increased salaries or to meet the expectations of shareholders. The U.S. Securities and Exchange Commission has brought enforcement actions against corporations for many types of fraudulent financial reporting, including improper revenue recognition, period-end stuffing, fraudulent post-closing entries, improper asset valuations, and misleading non- GAAP financial measures. The fraud triangle

1008-598: Is misleading to investors and shareholders . This type of " creative accounting " can amount to fraud, and investigations are typically launched by government oversight agencies, such as the Securities and Exchange Commission (SEC) in the United States. Employees who commit accounting fraud at the request of their employers are subject to personal criminal prosecution. Misappropriation of assets – often called defalcation or employee fraud – occurs when an employee steals

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1056-481: Is the Chairman of The Swartz Foundation for Computational Neuroscience. Established in 1994, it has grown to support research in 11 centers ( Brandeis University , California Institute of Technology , Cold Spring Harbor Laboratory , Columbia University , Harvard University , New York University , Princeton University , Salk Institute , University of California, San Diego , University of California, San Francisco and Yale University ). The Swartz Foundation funds

1104-663: The European Union . Symbol never recovered from the fraud, and in 2007 was acquired by Motorola for $ 3.9 billion. The company essentially took over Motorola's enterprise division; it was far larger than the pre-merger division. Symbol remained part of Motorola Solutions , the legal successor to the old Motorola, after the company spun off its mobile phone division as Motorola Mobility . In October 2014 Zebra Technologies acquired Motorola Solutions' enterprise business which included Symbol Technologies for $ 3.45 billion in cash. Jerome Swartz Jerome "Jerry" Swartz (born 1940)

1152-454: The SEC. He also revealed that he continued to audit Madoff even though he had invested a substantial amount of money with him; accountants are not allowed to audit broker-dealers with whom they are investing. He agreed to forfeit $ 3.18 million in accounting fees and withdrawals from his account with Madoff. His involvement makes the Madoff scheme not only the largest Ponzi scheme ever uncovered, but

1200-530: The Special Plea in Fraud statute. Not all accounting scandals are caused by those at the top. In fact, in 2015, 33% of all business bankruptcies were caused by employee theft. Often middle managers and employees are pressured to or willingly alter financial statements due to their debts or the possibility of personal benefit over that of the company, respectively. For example, officers who would be compensated more in

1248-453: The United States , the firm ceased performing audits and split into multiple entities. The Enron scandal was defined as being one of the biggest audit failures of all time. The scandal included utilizing loopholes that were found within the GAAP (General Accepted Accounting Principles) . For auditing a large-sized company such as Enron, the auditors were criticized for having brief meetings a few times

1296-512: The White House on March 14, 2000. He is credited with more than 180 US patents and is the author of more than 30 published papers. He is a member of the National Academy of Engineering and a Fellow of the IEEE. https://patents.justia.com/inventor/jerome-c-swartz In July 2003, Swartz resigned from his position as chairman and chief scientist of Symbol Technologies, at which time the company

1344-472: The acquisition of various manufacturers of wireless gear to augment their commanding position in the wired infrastructure field. Cisco performed due diligence with both Symbol and Telxon, deciding to purchase the Aironet component of Telxon that designed and manufactured the radios. The Cisco purchase of Telxon's Aironet division marked the inflection point of the market moving from a specialized, esoteric market to

1392-618: The annual Swartz Prize for Theoretical and Computational Neuroscience . In 1998, he was awarded the IEEE Ernst Weber Engineering Leadership Recognition . In 2000, he was elected a member of the National Academy of Engineering for bar code technologies, including laser scanners and wireless data capture. Accounting scandal Accounting scandals are business scandals which arise from intentional manipulation of financial statements with

1440-474: The assets are small or easily removed. A lack of controls over payments to vendors or payroll systems can allow employees to create fictitious vendors or employees and bill the company for services or time. Attitudes/rationalization: The attitude of top management toward financial reporting is a critical risk factor in assessing the likelihood of fraudulent financial statements. If the CEO or other top managers display

1488-881: The business world." In 2003, Nortel made a big contribution to this list of scandals by incorrectly reporting a one cent per share earnings directly after their massive layoff period. They used this money to pay the top 43 managers of the company. The SEC and the Ontario securities commission eventually settled civil action with Nortel. A separate civil action was taken up against top Nortel executives including former CEO Frank A. Dunn , Douglas C. Beatty, Michael J. Gollogly, and MaryAnne E. Pahapill and Hamilton. These proceedings were postponed pending criminal proceedings in Canada, which opened in Toronto on January 12, 2012. Crown lawyers at this fraud trial of three former Nortel Networks executives say

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1536-565: The difficulties of classifying any system of knowledge, including accounting, as rules-based or principles-based. This also led to the establishment of the Sarbanes-Oxley Act . On a lighter note, the 2002 Ig Nobel Prize in Economics went to the CEOs of those companies involved in the corporate accounting scandals of that year for "adapting the mathematical concept of imaginary numbers for use in

1584-459: The disclosure of financial misdeeds by trusted executives of corporations or governments. Such misdeeds typically involve complex methods for misusing or misdirecting funds , overstating revenues , understating expenses , overstating the value of corporate assets , or underreporting the existence of liabilities ; these can be detected either manually, or by the means of deep learning . It involves an employee, account, or corporation itself and

1632-452: The executive's actions to surreptitiously reduce share price. This can represent tens of billions of dollars (questionably) transferred from former shareholders to the acquirer. The executive is then rewarded with a golden handshake for presiding over the firesale that can sometimes be in the hundreds of millions of dollars for one or two years of work. Managerial opportunism plays a large role in these scandals. Similar issues occur when

1680-438: The firm was forced to give up its CPA licenses later in 2002, costing over 113,000 employees their jobs. Although the ruling was later overturned by the U.S. Supreme Court , the once-proud firm's image was tarnished beyond repair, and it has not returned as a viable business even on a limited scale. On July 9, 2002, George W. Bush gave a speech about recent accounting scandals that had been uncovered. In spite of its stern tone,

1728-490: The general public see a government-owned firm that was a financial 'disaster' miraculously turned around by the private sector (and typically resold) within a few years. Under the Special Plea in Fraud statute, "the government must 'establish by clear and convincing evidence that the contractor knew that its submitted claims were false, and that it intended to defraud the government by submitting those claims.'" Mere negligence, inconsistency, or discrepancies are not actionable under

1776-487: The information gathered to a host system. This was the rationale for the September 1988 purchase of MSI Data Corporation, a mobile computer company headquartered in southern California, for $ 120 million. The mobile computers being manufactured at the time relied on static memory (in this case SRAM) for execution space and general storage. SRAM was extremely expensive and the team determined that it would be an improvement to use

1824-498: The men defrauded the shareholders of Nortel of more than $ 5 million. According to the prosecutor this was accomplished by engineering a financial loss in 2002, and a profit in 2003 thereby triggering Return to Profit bonuses of $ 70 million for top executives. In 2007, Dunn, Beatty, Gollogly, Pahapill, Hamilton, Craig A. Johnson, James B. Kinney, and Kenneth R.W. Taylor were charged with engaging in accounting fraud by "manipulating reserves to manage Nortel's earnings." In 2005, after

1872-672: The midst of a Securities and Exchange Commission inquiry into Symbol's accounting practices. A few months later, an internal inquiry revealed a wide-ranging accounting fraud that had begun in 1998 and only ended in early 2002. Following this revelation, Symbol cooperated fully with the SEC investigation, as well as with a separate federal criminal probe by the United States Attorney for the Eastern District of New York . On June 3, 2004, Razmilovic and seven other former Symbol executives were indicted on charges that they orchestrated

1920-418: The price of his company's stock due to information asymmetry . He can: accelerate accounting of expenses, delay accounting of revenue, engage in off balance sheet transactions to make the company seem less profitable, or simply report very low estimates of future earnings. Executives may do this to make a company a more attractive takeover target. When the company is bought for less, the acquirer profits from

1968-406: The risk is greater for companies in industries where significant judgments and accounting estimates are involved. Turnover in accounting personnel or other deficiencies in accounting and information processes can create an opportunity for misstatement. As for misappropriation of assets, opportunities are greater in companies with accessible cash or with inventory or other valuable assets, especially if

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2016-540: The same day, Razmilovic and 10 other former executives were sued by the SEC for the fraud. In late 2002, Symbol restated almost four years of earnings from 1998 to 2001, in the process erasing $ 234 million in revenue and $ 325 million in net income. It also paid $ 37 million to settle the SEC charges and $ 138 million to settle numerous shareholder suits. Eventually, four former executives pleaded guilty, and seven former executives settled SEC charges against them. Several of those who pleaded guilty stated under oath that Razmilovic

2064-472: The short-term (for example, cash in pocket) might be more likely to report inaccurate information on a tab or invoice (enriching the company and maybe eventually getting a raise). KPMG (2002 October) The Enron scandal turned into the indictment and criminal conviction of Big Five auditor Arthur Andersen on June 15, 2002. Although the conviction was overturned on May 31, 2005, by the Supreme Court of

2112-499: The speech did not focus on establishing new policy, but instead focused on actually enforcing current laws, which include holding CEOs and directors personally responsible for accountancy fraud. In July 2002, WorldCom filed for bankruptcy protection in what was considered at the time as the largest corporate insolvency ever. A month earlier, the company's internal auditors discovered over $ 3.8 billion in illicit accounting entries intended to mask WorldCom's dwindling earnings, which

2160-636: Was by itself more than the accounting fraud uncovered at Enron less than a year earlier. Ultimately, WorldCom admitted to inflating its assets by $ 11 billion. These scandals reignited the debate over the relative merits of US GAAP , which takes a "rules-based" approach to accounting, versus International Accounting Standards and UK GAAP , which takes a "principles-based" approach. The Financial Accounting Standards Board announced that it intends to introduce more principles-based standards. More radical means of accounting reform have been proposed, but so far have very little support. The debate itself overlooks

2208-409: Was forced to step down and fought fraud charges until 2017, when the 91-year-old reached a $ 9.9 million settlement. Howard Smith, AIG's chief financial officer, also reached a settlement. Well before Bernard Madoff 's massive Ponzi scheme came to light, observers doubted whether his listed accounting firm – an unknown two-person firm in a rural area north of New York City – was competent to service

2256-414: Was the mastermind of the fraud. Razmilovic fled to Sweden, where he has citizenship, shortly before his indictment. He remains a fugitive as of 2017; he claims he will not voluntarily return to face the charges against him because he does not believe he can get a fair trial in the United States. Sweden will not give him up for extradition because it does not extradite suspected white-collar criminals outside

2304-569: Was under investigation for civil and criminal accounting fraud. At the time of his resignation, Swartz was quoted in the New York Times as stating that an internal investigation had shown that "improper finance and accounting activities occurred while he was chairman". Symbol agreed to settle the case with the Securities and Exchange Commission in June 2004, paying a $ 37 million penalty. Currently, he

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