TASK 3 WHITE COLLAR CRIME CASES THAT MADE HEADLINES Since the collapse of Enron a decade ago due to shoddy and deceptive accounting practices, America has become more aware of the seriousness of white collar crimes. The work of a small handful of people can result in the demise of a multi-billion dollar company, the complete loss of value of its stock, and most problematically, the loss of numerous jobs ranging from the innocent higher-ups to the hardworking office managers. 1. Enron collapse With revenues exceeding $100 billion and the distinction of being named by Fortuneas "America's Most Innovative Company," Enron was a seemingly indestructible energy giant during the beginning of the 2000s. However, even during its rise in the '90s, rumors swirled that it was involved in illegal accounting procedures with its accounting firm Arthur Anderson, then one of the "Big Five" accounting firms. Jeffrey Skilling, who served as president COO and CEO, along with a staff he assembled, hid billions of dollars of debt through poor financial reporting, accounting loopholes and the use of special purpose entities. Andrew Fastow, COO, deceived the board of directors about the company's accounting practices and convinced Arthur Anderson to go along for the ride. After stocks plummeted, the SEC conducted an investigation that ultimately resulted in the 24-year, 4-month prison sentence of Skilling and six-year sentence of Fastow. Founder Kenneth Lay died of a heart attack before he was sentenced. 2. Worldcom accounting scandal Enron's impressive collapse was followed by the implosion of Worldcom, which was the doing of CEO Bernard Ebbers. His plan to compensate for the downturn of the telecommunications industry in 2000 and Worldcom's declining stock included the use of fraudulent accounting methods in order to deceive investors into thinking the company was in good health. The underreporting of line costs and inflation of revenues accumulated $3.8 billion in fraud and ended with the company's bankruptcy, then the largest in U.S. history. Ebbers, who resigned from Worldcom in April 2002, was sentenced to 25 years in prison for conspiracy and securities fraud and filing false statements with securities regulators.3. Tyco accounting scandal A year after he was named one of the top 25 corporate managers of 2001 by Business Week. it was uncovered that Tyco CEO Dennis Kozlowski, along with former CFO Mark Swartz, stole more than $150 million from the company, including $2 million that was used for a birthday party for Kozlowski's wife that was thrown in Sardinia. The thieving men were spared after their first trial was declared a mistrial because a juror said she received a letter urging her to side with the prosecution. The second trial ended with the convictions of Kozlowski and Swartz as both were sentenced to no less than eight years and four months in prison. From all the example of accounting scandal above, one would think that identifying the risk in financial statement and in doing business has increased that open staff or employees especially accountants and those who holds the decision making power to be vulnerable to these kind of risk. The determination of risk area and the internal control that should take place is the ultimate goal of any company. REQUIRED: As a group of consultant that has been hired by any one of these companies, how would you prevent such fraud and embezzlement from happening in the organization. Identify and suggest the control activities that can take place in these companies. The consultants are also required to suggest some corrective measures that would benefit companies who has to deal with these issues [15 marks] [TOTAL MARKS : 40 MARKS]