Sunbeam 15, 2001, Securities and Exchange Commission filed

Sunbeam Corporation is a company that produces electrical home appliances such as electric blankets and blenders. In July 1996, Albert Dunlap, also known as “Chainsaw Al,” was hired in as CEO of Sunbeam. Sunbeam hired him knowing of his ruthless reputation of excessive layoffs and budget cuts with the intention of rebuilding their company. Another key individual was Russell Kersh who was the Chief Financial Officer at the time. Kersh was appointed by Dunlap when he was hired in as CEO. In the summer of 1998, Albert Dunlap was fired. On May 15, 2001, Securities and Exchange Commission filed a civil injunctive action in the United States District Court in Miami, Florida against Albert Dunlap, Russell Kersh, former controller Robert Gluck, former Vice Presidents Donald Uzzi and Lee Griffith. At the end of 1996, Gluck and Kersh created inappropriate accounting reserves which were used to inflate income in 1997. In the beginning of 1997, Dunlap, Kersh, Gluck, Uzzi, and Griffith had Sunbeam recognize revenue for sales that did not meet applicable accounting rules. As a result, for fiscal 1997, at least $60 million of Sunbeam’s reported (record-setting) $189 million in earnings from continuing operations before income taxes (“income”) came from accounting fraud. They also hid from people that their current revenue growth was based on future results rather than current results. Sunbeam’s financial statements were incorrect and deceiving in 1996-1998. In June 1998, negative press statements forced Sunbeam to start an internal investigation of their finances which led to the firing of Dunlap, Kersh and all the other former employees involved. Kersh and Dunlap had fabricated their numbers. Overall, they were charged with violation of federal securities laws (Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder), the reporting provisions (Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder), and the books and records and internal controls provisions (Sections 13(b)(2)(A), 13(b)(2)(B) and (with respect to Kersh) 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder). Check this info, not sure I phased right The verdict of Securities and Exchange Commission versus Albert Dunlap and Russell Kersh was that Dunlap had to pay five hundred thousand dollars to settle the charges and Kersh had to pay two hundred thousand dollars to settle the charges. They both had to agree to never work as a executive or director of any public corporation again. Andrew Shore had been following Sunbeam’s numbers since the day Albert Dunlap had been hired. On April 3, 1998, Shore downgraded his assessment of Sunbeam’s stock. He had been alerted by the huge jump in sales of electric blankets and other items. It was not even just how much the sales jumped. It was about the timing when they jumped. The sales of current products jumped on periods where sales are normally very low. This also raised a red flag for Shore. Shore discovered that Dunlap was using a “bill-and-hold” strategy. This strategy is when the company sells an item at a discount to buyers but then holds the products in a third-party location to be delivered at a later date. The type of fraud that was committed by Dunlap and his committee was management or financial statement fraud. The victims of the case were the shareholders and debtholders and regulators. This type of fraud is also considered the most expensive type. According to Fraud Detection, the reasons why people commit fraud are the pressure, rationalization, and opportunity. I believe that Dunlap fabricated the numbers due to extreme pressure. From reading multiple articles on him and simply having the nickname of “Chainsaw A

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