Marcie Lewis and Fred Cisco worked as accounting mangers at Save-Lot Food Stores. The Company distributes stock
Question:
Marcie Lewis and Fred Cisco worked as accounting mangers at Save-Lot Food Stores. The Company distributes stock options to its 10,000 employees as part of their compensation package. Marcie and Fred both work with the ACE computer system that is used to distribute the stock options to employees. The ACE computer system creates a control number and broker transaction summary. After broker transaction summary is created, the request for the stock option is faxed to Second Boston, which handles the distribution of the option to the employee’s brokerage account. Once the option is in the brokerage account, the employee can request the issuance of the shares and sell them. The broker will confirm the existence of options with Second Boston and take care of the sale. In auditing transactions, Marcie found that Second Boston reused account control numbers essentially negating its controls. Also, the ACE computer system issued control numbers that were never sent to Second Boston. Second Boston expected control numbers received from the ACE system to be out of sequence.
Marcie and Fred knew it would be easy to create a broker transaction summary and fax requests with a forged signature to Second Boston for stock options to be sent to their brokers. They could easily use an extra control number from the ACE system that had not been sent to Second Boston. Considering all the federal and state statutes described in the chapter, if Marcie and Fred were to execute this scheme, what would they be guilty of doing?
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