This week’s homework assignment is an analysis of a news article about a bankruptcy fraud, workers' compensation fraud or a fraud that involved bribery. The article will be about a fraud that has oc

11/20/2017 General Cable paying $82.3 million to settle accounting and bribery violations | Accounting T oday https://www.accountingtoday .com/news/general-cable-paying-823-million-to-settle-accounting-and-bribery-violations 1/5 Gen era l C ab le p ayin g $ 82.3 m illio n t o s e ttle a cco un tin g a nd b rib ery v io la tio ns By M ichael C ohn Published December 29 20 16, 1∶0 5pm ES T More in Accounting , Accounting f raud , Int ernal contr ols , International accounting , SEC , Do J Gener al Cable C orporation, a K entucky -based wir e and cable mak er, is paying $6 .5 million in penalt ies to settle account ing violations wi th the Securi ties and Ex change Commission, on t op of over $7 5 million t o resolv e allegat ions by the SE C and the Justice Department that the compan y violated the F oreign C orrupt Practices A ct.

Gener al Cable ’s overs eas subsidiaries made impr oper payments to officials f rom f oreign go vernments f or 12 years to get business in Angola, Bangladesh, China, E gypt, Indonesia and Thailand, accor ding to the SE C. The H ighland Heights, K y.- bas ed compan y’s weak int ernal contr ols also failed t o detect impr oper invent ory account ing at its Brazilian subsidiary , leading GCC to materially misst ate i ts financial st atements f rom 200 8 until the s econd quart er of 2012.

In Oct ober 200 7, a ft er acquiring Phelps Dodge Int ernational C orp., GCC cr eated the R OW r eport ing segment, whos e management w as based in Dor al, Fla. GCC Br azil, as part o f ROW’s L atin America oper ations, w as one o f the largest and most significant oper ations that w ere r eport ed in R OW’s financial st atements . During that s ame period, GCC Br azil had two manufacturing f acilities . From at least 200 8 until mid- 2012, GCC Br azil materially underst ated the cost o f sales and overst ated i ts copper in vent ory balances on i ts books and records, which w ere cons olidated into GCC’s financial st atements .

The invent ory o verst atement, leading t o material financial r eporting err ors, came f rom bo th missing in vent ory and account ing errors wi thin GCC Br azil’s ent erpris e resour ce planning s yst em and i ts implement ation.  Print  Email Reprint s  Share  The Lat est (1/5)  Login R egist er 11/20/2017 General Cable paying $82.3 million to settle accounting and bribery violations | Accounting T oday https://www.accountingtoday .com/news/general-cable-paying-823-million-to-settle-accounting-and-bribery-violations 2/5 In covering up the missing in vent ory, some o f the compan y’s cost account ing personnel, who contr olled entries in GCC Br azil’s gener al ledger and als o controlled the account ing for in vent ory, manipulat ed the ERP syst em t o reflect in vent ory that did no t in fact e xist. After perf orming an int ernal invest igat ion, GCC f ound the in vent ory account ing errors at GCC Br azil were mat erial and w ould require a restatement o f some pr eviousl y issued financial st atements . For the y ears ended Dec. 31, 20 11, 2010, 2009 , and 200 8, and f or the thr ee months ended Mar ch 30, 20 12 and six months ended June 29 , 2012, the compan y understated cost o f sales b y $17.9 million, $8 .3 million, $5 .6 million, $7 .1 million, $2. 7 million and $6 .2 million, respectivel y. As o f Dec. 31, 20 11, 2010, 2009 and 200 8, Mar ch 30, 20 12 and June 29 , 2012 in vent ory balances w ere o verst ated b y $40.0 million, $27 .0 million, $17 .4 million, $8 .7 million, $4 3.7 million, and $4 3.5 million, r espectivel y.

On t op o f that, thanks t o accounting errors at one o f the Brazilian f acilities that occurr ed befor e GCC’s acquisi tion o f PDIC in 2007, GCC als o overst ated in vent ory in i ts allocat ion of the pur chase price among ass ets acquired, result ing in an underst atement o f goodwill . The underst ated goodwill and o verst ated in vent ory ass ociated wi th the acquisi tion o f PDIC in the fourth quart er of 200 7 was $3 .4 million. The in vent ory account ing errors at GCC Br azil caused GCC t o overst ate i ts net income av ailable t o common shar eholders by 21.6 per cent, 11.3 per cent and 29.8 percent f or annual periods ended Dec. 31, 20 11, 2010, and 2009 , and 8.8 percent and 13 .8 percent f or quart erly periods ended June 3 0 and March 31, 2012, respect ivel y.

“Gener al Cable oper ated globall y without the e ffect ive compliance pr ograms and int ernal controls necessary to proact ivel y addr ess corrup tion risks and account ing errors,” said SE C Enfor cement Division act ing director S tephanie A vakian in a st at ement . Whit e P ap er R eve n ue r e co g nit io n c o m ple x it y s im plif ie d If y ou plan t o try and account f or revenue r ecogni tion (R evR ec) under the ne w accounting standar ds ASC … PAR TNER INSIGHTS SPONSOR C ONTENT FROM:

Account ing November 1 GCC ackno wledged Thurs day that its resolut ion wi th the SE C encompass es both the F CPA issues and the s eparate account ing and dis closure issues that w ere the subject o f its pr evious financial r estatements . General Cable will dis gorge profits o f around $5 1.2 million and pay pr e-judgment interest o f appr oximat ely $4 .1 million in connect ion with the F oreign Corrup t Practices A ct violat ion, and pay a civil penalty in connect ion with the r estatement -relat ed matt ers of $6.5 million.

As part o f the DOJ resolut ion, the compan y will also pay a penalty o f approximat ely $20 .5 million. It has ent ered int o a non- pros ecut ion agr eement wi th the DOJ, which will be in e ffect f or thr ee years . No criminal char ges will be brought against General Cable , as long as i t complies wi th its obligat ions under the agr eement. To s atisf y i ts financial obligat ions, General Cable will r emit a t otal o f appr oximat ely $82.3 million t o the DOJ and SEC.

“W e ar e pleas ed to hav e reached an agr eement with the DOJ and SEC regar ding thes e matters,” said Gener al Cable president and CE O Michael T . McDonnell in a st atement . “Gener al Cable is commi tted t o conduct ing our business ethicall y and with the utmost int egrity, and o ver the past tw o years, w e have invest ed significant t ime and resour ces t o implement a world-class compliance pr ogram. A t the s ame time, we hav e transf ormed our business str ategy under an ent irel y r efr eshed 11/20/2017 General Cable paying $82.3 million to settle accounting and bribery violations | Accounting T oday https://www.accountingtoday .com/news/general-cable-paying-823-million-to-settle-accounting-and-bribery-violations 3/5 Comment s (1) Login or Regist er Post ed B y topbeancount er Friday , December 3 0 2016 at 12∶19 PM So, w ere thos e clever cost account ants promoted? Didn't s ee any ment ion of suing the audi ting firm. That must be a first! Spons or Links Get Out of These Big-Name St ocks Befor e It ’s Too Lat e.

WEISS RA TINGS $500 ,000 in T erm Life Cover age St art ing at $16/ month AIG DIRECT R ack Up 12%- 15% A ver age Gains a Year wi th "Plan Z" In vest ing AAII strategic leadership t eam committed t o maint aining a str ong performance and compliance cultur e. W e ar e a diff erent and bett er compan y today as a r esult of these actions.” Mic h a el C ohn M ichael C ohn, editor-in-chie f of A ccount ingToday .com, has been co vering business and t echnology for a variety o f publicat ions since 198 5.  Mor e from this A uthor Inspector gener al finds pr oblems wi th electronic filing IDs Senat e tax plan w ould increase taxes on 29% o f taxpay ers by 2027: r eport Account ants rank high f or return on equi ty 11/20/2017 General Cable paying $82.3 million to settle accounting and bribery violations | Accounting T oday https://www.accountingtoday .com/news/general-cable-paying-823-million-to-settle-accounting-and-bribery-violations 4/5 Get AT in your inbo x Email Address Subs cribe Regist er Web S em in a r Th e a cco un tin g p ro fe ssio n: T h e y e a r a hea d December 19 20 17 2∶00PM EST SPONSORED BY SAGE Mor e in Accounting , M&A Bas ed on e xtensiv e resear ch wi th the A ccounting Today audience , this session will e xplore firms ’ plans f or 2018, from hiring and t echnology spending, t o growth str ategies, po tent ial M&A , new service o fferings and mor e. R egist er Key Speak ers  Email  Share Daniel Hood Moder ator E ditor in Chie f, A ccount ing Today Newslett er Lik e what y ou see? Mak e sure you'r e get ting i t all Account ing Today is a leading pr ovider o f online business ne ws f or the account ing community, o ffering br eaking ne ws, in-dep th featur es, and a host o f res our ces and s ervices .  Daily 11/20/2017 General Cable paying $82.3 million to settle accounting and bribery violations | Accounting T oday https://www.accountingtoday .com/news/general-cable-paying-823-million-to-settle-accounting-and-bribery-violations 5/5 Regist er Acco un tin g T o d ay © 2 0 17 S o ur ceMed ia. A ll r ig hts r es erved .     About Us Cont act Us The Magazine Sit e Map R SS F eed Privacy P olicy Subscription A greement Cont ent Licensing/R eprints Adv ert ising/Mark eting Ser vices