Case Study for Member $3$High$-$ magnitude financial statement fraud rarely happens at the hand of only one individual.Sometimes though, the influence of a leader is so powerful that it defines the culture of theorganization and can cause employees to commit fraudulent acts they would otherwise neverconsider. In such instances, the employee's behavior can extend far beyond his or her intentions$-$or so the accused will claim. To be fair, there were many bad actors in this case who significantlycontributed to the complex financial gamesmanship about to be discussed. In fact a judge hearingone of the many action brought against the company identifies the Inner Circle" as a criminalorganization. And not unlike in a criminal organization, the $$boss$"$ was generally removed fromdirect involvement. However, the actions of the perpetrators had to be approved or ordered, withknowledge somewhere in the chain of command. If you define powerful as the ability to controland have undue influence, then Hary Rodney was the most powerful man in the largest publishingcompany in the past five decades. One of Rodney's key means of control was having the final sayover salaries and bonuses, including controlling awards of deferred compensation funded incompany stock. Employees were held captive by the practice of being their accumulated companystock if they left for any reason other than retirement. A veteran and law school graduate, Hary hada diverse skill set that made him well equipped to run an international company. Few people withoutthe benefit of holding a controlling interest in stock get to run a publicly held business as their own,but Rodney was an exception. Growth and stability were the mainstays of both his career andmarriage; he raised six children to share his traditions and values about leadership. Hary began hiscareer at International Publishing directly out of law school. He quickly earned the respect of hissuperiors and was given responsibility over one of the largest divisions, and eventually took controlof the entire publishing house.A True Success StoryInternational Publishing $($IP$)$ began its operations in a remote foreign out$-$post in the early twentiethcentury and moved to the United States in the late $1950$s to take advantage of strong capital markets.After Rodney took over as CEO of IP$,$ he maintained a focus on doing business in foreign marketswhile focusing on serving the interests of multinational media enterprises. IP went public shortlythereafter and expanded into print$-$ media markets. By the end of the twentieth century, IP was themost respected company in its industry and was sought after as a business partner by its peers andcustomers. Stock analyst raved over IP's results:We believe that IP is likely to continue to post double$-$ digit earnings gains over the next severalyears. First, the domestic market continues to be profitable despite one of the most difficultenvironments in recent memory. The cycle turn now at hand will add further momentum to IP'searnings...Finally, IP has a deep bench of management talent, and we expect Mr$.$ Rodney'seventual successor to come from within these ranks. IP was under significant pressure to maintainits status. The company had operations in more than $60$ countries, most as wholly ownedsubsidiaries, and had more than $20$ business segments operating within these subsidiaries, butseveral were structured as LLCs$,$ LLPs and joint ventures. Rodney and his management team beganto use these entries for experimental ventures, unproven markets and products, or simply as a placeto park losses and revenues that they did not want to recognize in a specific accounting period. Thecomplexities of IP's operations were designed to create confusion and keep outsiders from piecingthe puzzle together.Let's Make a DealSize has both advantages and disadvantages. Being the largest and most influential business in anindustry brings power as well as the scrutiny of regulators and analysts. Keeping these outsidegatekeepers in the dark requires very coordinated and complex structures. Rodney maintainedrelationships with his industry counterparts in case the opportunity for a venture arose. IP wasalways making deals and it became standard industry practice for competitors to collaborate witheach other to create new business structures. Generally, IP's partners were guaranteed a fee or someindemnification$-$ which was never disclosed to the outside regulators. This amounted to a scam,which began to unravel when Rodney and others on his management team became so cozy withtheir partners that they took turns winning print$-$media contacts. This prompted an investigation bythe state's attorney general's office for potential collusion among industry players. It brought awave of attention and the first in a series of high$-$profile accusations involving or directly targetedat IP$.$ IP was already the focus of stock analysts who closely followed the company's financialresults. IP's balance sheet liability, deferred reve