A fairly simple miniscribe activity is attached, I just do not have the time to complete it. Thank you for your help.

Miniscribe 1. \"COOKING THE BOOKS: HOW PRESSURE TO RAISE SALES LED MINISCRIBE TO FALSIFY NUMBERS\" (Wall Street Journal, September 11, 1989) 2. \"MINISCRIBE'S INVESTIGATORS DETERMINE THAT 'MASSIVE FRAUD' WAS PERPETRATED\" (Wall Street Journal, September 12, 1989) 3. \"MINISCRIBE SEEKS CHAPTER 11 PROTENCTION, POSTS $116 MILLION LOSS FOR NINE MONTHS\" (Wall Street Journal, January 3, 1990) 4. \"COOPERS & LYBRAND AGREES TO PAYMENT OF $95 MILLION IN THE MINISCRIBE CASE\" (Wall Street Journal, October 30, 1991) 5. IBM's Management Report and Independent Auditor's Report Read the attached articles and answer the following questions: 1. List accounting practices that were used to fabricate the numbers in the financial statements. 2. Comment on the internal accounting control of Miniscribe, specifically the reasons for its ineffectiveness in preventing fraudulent financial reports. 3. To what extent are each of these parties responsible for the fraudulent reports (i) the CEO, (ii) the independent accountants and (iii) the board of directors? How does your answer compare with the actual penalty imposed on them? (Before answering this question refer to IBM's management and auditor reports to understand their responsibilities. Note that Miniscribe also included similar reports along with its financial statements). 4. Based on the stock price behavior before and after the disclosure of fraud, comment on the importance of accurate financial statements in valuing a firm. Cooking the Books: How Pressure to Raise Sales Led MiniScribe To Falsify Numbers --- Q.T. Wiles, the Former Chief Of DiskDrive Company, Abrasively Drove His Staff --- Fake Cargo on Phantom Ship By Andy Zipser. Wall Street Journal. (Eastern edition). New York, N.Y.: Sep 11, 1989. pg. 1 Abstract (Document Summary) LONGMONT, Colo. -- Last October, as other computer-disk-drive companies were laying off hundreds of employees, MiniScribe Corp. announced its 13th consecutive record-breaking quarter. This time, however, the surge in sales sent a shiver of apprehension through MiniScribe's board. The news shocked Wall Street, whose rosy financial forecasts helped quintuple MiniScribe's stock price in just two years. After all, this was a company that, by all appearances, had risen from the dead under the direction of Q.T. Wiles, then the chairman of Hambrecht & Quist, a highly respected venturecapital firm that in 1985 had injected $20 million into MiniScribe. Mr. Wiles's proven ability to resurrect ailing companies was already so renowned that he was known as "Dr. Fix-It." Instead, what was supposed to be the crowning achievement of a storied career has become an epitaph. Mr. Wiles has resigned from MiniScribe and from half a dozen other companies, including Hambrecht & Quist, and lives in near-seclusion. He repeatedly declined to be interviewed for this article; his lawyers, instead, supplied a 40-page summary of a seven-hour interview in which Mr. Wiles responded to questions from investigators hired by the company's outside directors. Full Text (2482 words) Copyright Dow Jones & Company Inc Sep 11, 1989 LONGMONT, Colo. -- Last October, as other computer-disk-drive companies were laying off hundreds of employees, MiniScribe Corp. announced its 13th consecutive record-breaking quarter. This time, however, the surge in sales sent a shiver of apprehension through MiniScribe's board. "The balance sheet was scary," says William Hambrecht, one of the directors. What worried Mr. Hambrecht was a sudden, three-month run-up in receivables to $173 million from $109 million, a 59% increase. Inventories were similarly bloated, swelling to $141 million from $93 million -- a dangerous development because disk drives can become obsolete from one quarter to the next. Seven months later, the portents that had worried Mr. Hambrecht generated grim headlines: MiniScribe's spectacular sales gain had been fabricated. In fact, the company acknowledged, it didn't know whether it could produce accurate financial statements for the prior three years. The news shocked Wall Street, whose rosy financial forecasts helped quintuple MiniScribe's stock price in just two years. After all, this was a company that, by all appearances, had risen from the dead under the direction of Q.T. Wiles, then the chairman of Hambrecht & Quist, a highly respected venturecapital firm that in 1985 had injected $20 million into MiniScribe. Mr. Wiles's proven ability to resurrect ailing companies was already so renowned that he was known as "Dr. Fix-It." "It looked for two or three years like Q.T. was a miracle worker -- at least from the outside," says Jim Porter, president of Disk/Trend Inc., a California-based market-research firm. Instead, what was supposed to be the crowning achievement of a storied career has become an epitaph. Mr. Wiles has resigned from MiniScribe and from half a dozen other companies, including Hambrecht & Quist, and lives in near-seclusion. He repeatedly declined to be interviewed for this article; his lawyers, instead, supplied a 40-page summary of a seven-hour interview in which Mr. Wiles responded to questions from investigators hired by the company's outside directors. Virtually all of MiniScribe's top management has been dismissed, and layoffs have shrunk world-wide employment to 5,700 from a peak of 8,350 a year ago. MiniScribe might have to write off as much as $200 million in bad inventory and uncollectable receivables. And an audit team composed of outside directors, under the scrutiny of the Securities and Exchange Commission, is investigating MiniScribe's failure to provide reliable financial statements to public investors. The audit report, expected to be released this week, is unlikely to disclose more than a summary of the team's findings. Yet interviews with current and former executives, employees, competitors, suppliers and industry analysts depict a corporation run amok. Mr. Wiles's unrealistic sales targets and abusive management style created a pressure cooker that drove managers to cook the books or perish. And cook they did -- booking shipments as sales, manipulating reserves and simply fabricating figures -- to maintain the illusion of unbounded growth even after the industry was hit by a severe slump. MiniScribe isn't the only high-tech company to indulge in questionable practices. Datapoint Corp. almost went out of business seven years ago when its practice of booking shipments as sales got out of hand, and the computer-networking concern is still struggling to return to profitability. More recently, a highflying California company, Ashton-Tate Corp., has been sued in a federal court in Los Angeles by shareholders accusing it of similar bookkeeping games; the company has denied any wrongdoing. And DSC Communications Corp., of Dallas, signed a consent agreement with the SEC this year in which it agreed to restate 1984 and 1985 results that allegedly recognized sales prematurely. But the temptation to fudge numbers is greatest when times are hardest, and when Quentin Thomas Wiles arrived at MiniScribe in mid-1985, times were rock-hard. The disk-drive maker had just lost its biggest customer, International Business Machines Corp., which decided to make its own drives. And with the personal-computer industry then slumping, MiniScribe was drowning in red ink. Dr. Fix-It's prescription was to slice off a fifth of the work force and overhaul the company from top to bottom, chopping it into separate divisions grouped around different products or research efforts. Each division had its own staff and each division manager set his own budget, sales quotas, incentives and work rules. The idea, Mr. Wiles has said, was to create accountability. In practice, MiniScribe became a chaotic Babel of 20 or more minicompanies under one corporate umbrella. "There was constant change, constant reorganization," says an employee who held 20 different positions at MiniScribe in 6 1/2 years. Mr. Wiles also turned up the heat under his lieutenants. Four times a year, he would summon as many as a hundred MiniScribe employees to Palm Springs for several days of intense "dash meetings," at which participants were force-fed his idiosyncratic management philosophy. At one of the first such meetings he attended, says a former division manager, Mr. Wiles demanded that two controllers stand, "and then he fired them on the spot, saying to everyone, 'That's just to show everyone I'm in control of the company.'" At each dash meeting, division managers had to present and defend their "dash books," Mr. Wiles's term for business plans that had to conform to a set formula. Invariably, say former participants, Mr. Wiles would find such plans deficient and would berate their authors in front of their peers. A former controller says Mr. Wiles would throw, kick and rip dash books that displeased him, showering his intimidated audience with paper while yelling, "Why don't you understand this? Why can't you understand how to do this?" Mr. Wiles, according to his attorneys, is "fairly autocratic and very demanding of the people who work for him." Even that understates the case. In fact, Mr. Wiles's behavior drove away some of his most senior engineers and cast a pall over those who remained. John Squires, a MiniScribe founder, says he quit after his first dash meeting because he couldn't abide Mr. Wiles's "SWAT team" management style. Mr. Wiles was so intimidating, adds a former manager, that he and the executives he brought with him became known as "the VC," derived from "venture capitalists" but alluding to the Viet Cong. Moreover, Mr. Wiles made no bones about his plans for the company. "He used to say that the faster he could sell MiniScribe, the better," recalls the former manager. Then, something changed. In late 1986, the manager says, Mr. Wiles started singing a different song at the dash meetings: "All of a sudden he was saying, 'I no longer want to be remembered as a turnaround artist. I want to be remembered as the man who made MiniScribe a billion-dollar company.'" Sales objectives became the company's driving force, a point Mr. Wiles underscored in the interview with investigators, when he acknowledged that financial results became "the sole determinant" of whether bonuses were awarded. "Basically," a former MiniScribe accountant says, "Q.T. was saying, 'This is the number we want to hit first quarter, second quarter, third quarter and so on,' and it was amazing to see how close they could get to the number they wanted to hit." Hitting the number became a companywide obsession. Although many high-tech manufacturers accelerate shipments at the end of a quarter to boost sales -- a practice known as "stuffing the channel" -- MiniScribe went several steps beyond that. On one occasion, an analyst relates, it shipped more than twice as many disk drives to a computer manufacturer as had been ordered; a former MiniScribe sales manager says the excess shipment was worth about $9 million. MiniScribe later said it had shipped the excess drives by mistake. The extras were returned -- but by then MiniScribe had posted a sale at the higher number. In his interview with investigators, Mr. Wiles said he wasn't aware of any such incidents. Other accounting maneuvers, starting as far back as 1986, involved shipments of disk drives from MiniScribe's factory in Singapore. Most shipments went by air freight, but a squeeze on air-cargo space toward the end of each quarter would force some shipments onto cargo ships -- which required up to two weeks for transit. On several occasions, says a former division manager, MiniScribe executives looking to raise sales changed purchase orders to show that a customer took title to a shipment in Singapore, when, in fact, title wouldn't change until the drives were delivered in the U.S. In a more dramatic version of this ruse, according to a former accountant, MiniScribe executives tried to persuade an audit team that 1986 year-end results should book as sales the cargo on a freighter that they contended had set sail in late December. The audit team declined to do so. Eventually, the cargo and the freighter, which didn't exist, were simply forgotten. MiniScribe executives also found other ways to inflate sales figures. One was to manipulate reserves, the accounting entries designed to offset unrecognized losses, such as returns of defective merchandise or bad debts. Mr. Wiles acknowledged to investigators that creating adequate reserves "never did sufficiently take root in the MiniScribe organization." Despite this awareness, Mr. Wiles failed to take corrective action and said that the last time he looked closely at the issue was in late 1986. The problem of inadequate reserves grew so great that private analysts began noticing it in 1988. Despite $177 million in receivables, one says, MiniScribe was booking less than 1% in reserves; the rest of the industry, meanwhile, had reserves ranging from 4% to 10%. To avoid booking losses on returns in excess of its skimpy reserves, defective drives would be tossed onto a "dog pile" and booked as inventory, according to Greg Fortune, a disk-drive failure-analysis technician. Eventually, the dog-pile drives would be shipped out again to new customers, continuing the cycle. Returns of defective merchandise ran as high as 15% in some divisions, Mr. Fortune estimates. At a time of strong market demand, such ploys enabled MiniScribe to seem to grow almost exponentially, posting sales of $185 million in 1986 and $362 million in 1987. In early 1988, Mr. Wiles was confidently forecasting a $660 million year, and he held fast to his rosy forecast even as disk-drive sales started slipping industrywide in late spring and nosedived in the autumn. Meanwhile, Mr. Wiles increased the pressure on his managers. "Everyone wanted to do good by Q.T.," says a customer representative, describing how division reports would be doctored as they rose from one bureaucratic level to the next. Before long, the accounting gimmickry became increasingly brazen. Division managers were told to "force the numbers," says a former marketing manager; he tells of one division controller who quit when ordered by a vice president to lie about financial results. In this tense atmosphere, wild rumors abounded. Workers whispered that bricks were being shipped just so a division could claim to have met its quota. Others joked that unwanted disk drives were being shipped and returned so often that they had to be repackaged because the boxes wore out. Employees also joked about shipments to "account BW," an acronym for "big warehouse." But that wasn't just a joke. MiniScribe established several warehouses around the country and in Canada as "just-in-time" suppliers for distributors. The largest and most abused was in Los Angeles, where it served as a supply point for Cal-Abco Inc., a major electronics-parts distributor. Yair Barzilay, a Cal-Abco partner, says his company wasn't invoiced until it received a shipment from the warehouse. MiniScribe, however, was booking shipments to the warehouse as sales. And because the "just-in-time" operation wasn't under Cal-Abco's control, the number of disk drives shipped was at MiniScribe's discretion. MiniScribe won't say how many unordered disk drives went to the warehouse, but a former employee puts their value at $80 million to $100 million. By last fall, MiniScribe's suppliers began to sense that something was terribly amiss. Domain Technology, a supplier of the coated aluminum disks on which disk drives store information, says MiniScribe started falling behind in its payments; then, its orders dropped. Eventually, says Domain's president, David Pearce, MiniScribe was returning virtually all Domain shipments, saying they were defective -- a contention that he vigorously denies. "We took a $7 million hit on that," he says -- a jolt that helped push Domain into bankruptcy proceedings in June. Wall Street, which had so eagerly embraced Mr. Wiles's previous forecasts, also began to smell trouble. "The company was talking a really bullish game," says John Rossi, an analyst at Alex. Brown & Sons Inc. "But I really couldn't find any significant customers other than Compaq." In fact, several major anticipated orders on which Mr. Wiles had been pinning his hopes -- principally from Apple Computer and Digital Equipment Corp. -- fell through in the fall. So, by the time MiniScribe announced its 1988 results in mid-February, they simply confirmed the growing suspicions. The company reported a fourth-quarter loss of $14.6 million and a drop in net income for the year to $25.8 million from $31.1 million despite a 66% increase in sales to $362.5 million -- on paper, that is. Scarcely a week later, Mr. Wiles abruptly resigned, telling board members that the company's problems were far more pervasive than he had realized. Friends say he was devastated by what his exhaustive, three-week examination of the company revealed. "He reacted like he'd been blindsided," Mr. Hambrecht says. Adds a former marketing manager: "It was almost like a fraternity party, with everybody huddling together to figure out how to keep the house dad from knowing what was going on." The house dad may not have wanted to know. After investigators showed him several memos that had been distributed at a meeting he attended, Mr. Wiles acknowledged that they "indicated the opposite of what he had previously been told." He denied having seen them and noted that if he had seen one particular memo, "he would have certainly read it as saying 'somebody's cheating.'" Investors say they, too, have been cheated, having seen the value of their stockholdings tumble from a high of $15 a share to less than $3. A dozen shareholder lawsuits have been filed in federal court in Denver in recent months, charging, in the words of the first of them, that MiniScribe "engineered phony 'sales'" to artificially inflate its stock to benefit insiders. In 1988, MiniScribe officers and directors sold 350,000 shares of company stock. The suits also charge, among other things, that Coopers & Lybrand, the company's auditor, "participated in the conspiracy" by "falsely" certifying the company's financial statements. Hambrecht & Quist also was named as a defendant. Both Hambrecht & Quist and Coopers & Lybrand deny any wrongdoing. Robert Sparacino, the chairman of the audit committee of outside directors that has been delving into the allegations of wrongdoing, declines to say what the panel has found. All he does say is that "the incidents that occurred were not trivial." Credit: Staff Reporter of The Wall Street Journal MiniScribe's Investigators Determine That 'Massive Fraud' Was Perpetrated By Andy Zipser. Wall Street Journal. (Eastern edition). New York, N.Y.: Sep 12, 1989. pg. 1 Abstract (Document Summary) After spending six months and $2 million, an internal investigation of MiniScribe Corp. has concluded that senior management apparently "perpetrated a massive fraud on the company, its directors, its outside auditors and the investing public." MiniScribe, a disk-drive manufacturer and onetime stock-market highflier based in Longmont, Colo., announced earlier this year that sales results for prior years had been overstated and that it couldn't produce reliable financial results for those years. The company's chairman, Q.T. Wiles, abruptly resigned and several top officers were dismissed. In an executive summary of their findings, an investigative committee of outside directors said they found fraudulent activities as far back as 1985, when Mr. Wiles, a noted turnaround specialist and then chairman of the investment firm of Hambrecht & Quist, took over as chief executive officer. The investigators' summary does not specifically fault Mr. Wiles, adding, however, that the fraud "required the active participation of many company personnel" and was common knowledge within the company. Full Text (839 words) Copyright Dow Jones & Company Inc Sep 12, 1989 After spending six months and $2 million, an internal investigation of MiniScribe Corp. has concluded that senior management apparently "perpetrated a massive fraud on the company, its directors, its outside auditors and the investing public." MiniScribe, a disk-drive manufacturer and onetime stock-market highflier based in Longmont, Colo., announced earlier this year that sales results for prior years had been overstated and that it couldn't produce reliable financial results for those years. The company's chairman, Q.T. Wiles, abruptly resigned and several top officers were dismissed. In an executive summary of their findings, an investigative committee of outside directors said they found fraudulent activities as far back as 1985, when Mr. Wiles, a noted turnaround specialist and then chairman of the investment firm of Hambrecht & Quist, took over as chief executive officer. The investigators' summary does not specifically fault Mr. Wiles, adding, however, that the fraud "required the active participation of many company personnel" and was common knowledge within the company. Indeed, company officials went to extraordinary lengths to create the illusion of unbounded growth. In their report, investigators said, for instance, that senior company officials: -- "apparently broke into locked trunks containing the auditors' workpapers" during the year-end 1986 audit and changed inventory figures, inflating inventory values by approximately $1 million. (MiniScribe's auditor is Coopers & Lybrand.) -- packaged bricks and shipped them to distributors as disk drives in 1987, recording $4.3 million in sales. When the shipments were returned, MiniScribe inflated its inventory by the purported cost of the bricks. -- "accumulated scrap that had been written off" in 1988 and included it as inventory. Obsolete parts and scrap from the 1987 inventory were also carried on the 1988 books and valued at approximately $3.5 million. -- packaged approximately 6,100 disk drives that had been contaminated, in order to inflate inventory during last year's fourth quarter. Also during 1988, the summary notes, the company "dramatically" increased shipments to three warehouses, booking $56.4 million in sales and gross profit of $5.4 million. According to the investigators, "none of these sales should have been recorded in 1988." A copy of the committee's full report has been forwarded to the Securities and Exchange Commission, according to company officials, and is said to consist of more than 1,500 pages. Copies of the report also are being delivered to plaintiffs' attorneys in 13 shareholder and bondholder lawsuits that have been filed in federal court in Denver. Although the investigators' summary makes scant mention of the suits, it adds its weight to charges that MiniScribe officials defrauded shareholders, manipulated stock prices and benefited from insider trading. The summary says, for example, that MiniScribe's public filings "were continually and materially incomplete and inaccurate" and offers the committee's opinion that "public investors were misled." The summary also notes that "some MiniScribe officers sold significant amounts of company stock" while they were aware of "material undisclosed deficiencies" in the company's financial statements. MiniScribe deceived public investors, for example, by announcing its 1986 earnings before Coopers & Lybrand made adjustments that reduced income, according to the summary. Rather than report the lower earnings, MiniScribe "originated additional adjustments" to offset the auditors' findings. But the committee also castigated the auditing firm, which is also named in the lawsuits, stating that MiniScribe's adjustments were "countenanced by its auditors." Acknowledging that MiniScribe "perpetrated a series of frauds directly on the auditors," the investigators nevertheless concluded that Coopers & Lybrand "failed the company at a time when their services were most needed." The failure, the summary says, "was one of judgment, one of failing to detect 'red flags,' one of allowing themselves to be pushed too hard and too far." Jack Grace, managing partner of Coopers & Lybrand's Denver office, declined to respond directly to the committee's conclusions. In a prepared statement, however, he said the investigative report made it clear that "Coopers & Lybrand, along with others, was victimized by a massive fraud." Mr. Grace added that his firm was "pleased" that MiniScribe had retained Coopers & Lybrand as its auditors -although the committee of outside directors has recommended that MiniScribe "carefully re-examine its relationship" with the firm. Meanwhile, company officials said they hope to complete a restatement of financial results for 1986, 1987 and 1988 within six to eight weeks. A July 2, 1989, balance sheet also is being completed and is expected to show "a very substantial negative net worth," according to Roger J. Mason, the company's new chief financial officer. Coopers & Lybrand, which has reviewed some of the investigators' findings, has said it may be able to complete an audit if MiniScribe can restate prior years' financial results. Those results, said Mr. Mason, "will be materially and adversely affected." MiniScribe, which closed in national over-the-counter trading yesterday at $2.0625, down 18.75 cents, has been trading with an exception to listing requirements of the National Association of Securities Dealers. The company must submit a report by Oct. 30 on its progress in meeting those requirements or risk being delisted. Credit: Staff Reporter of The Wall Street Journal MiniScribe Seeks Chapter 11 Protection, Posts $116 Million Loss for Nine Months Zipser, Andy. Wall Street Journal. (Eastern edition). New York, N.Y.: Jan 3, 1990. pg. A3 Abstract (Document Summary) MiniScribe Corp filed for protection under Chapter 11 of the federal Bankruptcy Code and reported the delayed results of the first nine months of 1989. Full Text (648 words) Copyright Dow Jones & Company Inc Jan 3, 1990 MiniScribe Corp. reached a climax in its dizzying fall of recent months, filing for protection under Chapter 11 of the federal bankruptcy code in Bankruptcy Court in Denver. The Longmont, Colo., maker of computer disk drives also reported its long-delayed financial results for the first nine months of 1989, along with restated results from the prior three years. The company has said that its previous report of results for those years wasn't reliable because of alleged accounting misdeeds by prior management. For the first nine months of 1989, MiniScribe recorded an unaudited net loss of $116 million on sales of $349.8 million. For the same period in 1988, the company had earnings of $8.7 million on sales of $407.6 million. The loss widened MiniScribe's negative net worth as of Oct. 1 to $150 million, and the company said it expects to post further losses in the fourth quarter. In 1988, the company's net loss totaled $109.6 million on sales of $531.1 million. Early last year, the company had reported preliminary, unaudited net income for 1988 of $25.8 million on sales of $603.3 million. Restated 1987 net shrank to $9 million from the $31.1 million previously reported, while for 1986 profit was reduced to $12.2 million from $22.7 million. News of the Chapter 11 filing, which protects the company from creditors while it formulates a plan of reorganization, had been anticipated. The action resulted in a suspension of national over-the-counter trading in MiniScribe common shares for approximately one hour Tuesday. When it reopened, MiniScribe jumped three cents a share but closed for the day at 37.5 cents a share, unchanged from its pre-holiday close. Richard P. Rifenburgh, chairman and chief executive officer, had for months used the threat of a bankruptcy filing to aid his efforts to settle more than a dozen lawsuits against the company. In the suits, shareholders and bondholders claim MiniScribe used phony financial statements to induce them to invest in the company. Mr. Rifenburgh has acknowledged that previous management manipulated sales and earnings figures -- an internal investigation summarized the situation as "massive fraud" -but yesterday said that negotiations for out-of-court settlements with the plaintiffs "never got off the ground." The Chapter 11 filing will give Mr. Rifenburgh some breathing room from litigation, but plaintiffs' attorneys said they never expected to recover much from MiniScribe anyway. San Francisco lawyer Paul Bennett said the plaintiffs hope to collect damages from the other defendants -- MiniScribe's former officers and directors, including Chairman Q.T. Wiles; its auditing firm of Coopers & Lybrand; and the investment firms of Hambrecht & Quist Inc. and J.H. Whitney & Co. Meanwhile, MiniScribe's filing of financial results partially met the requirements for continued listing of the company's stock by the National Association of Securities Dealers, which has allowed the stock to continue trading despite MiniScribe's failure to meet exchange regulations. But a NASD spokesman said the company's negative net worth violates exchange equity rules. The spokesman said a hearing in late January will determine whether MiniScribe should be delisted from the exchange or whether it will continue trading with an exception, pending reorganization under Chapter 11. Mr. Rifenburgh said he is optimistic about the company's survival, citing an agreement in principle with its lending bank, Standard Chartered of Hong Kong, a unit of Standard Chartered PLC, to provide additional financing of as much as $20 million. That will enable MiniScribe to start full production of its new line of disk drives, considered crucial to the company's future. He also noted Merrill Lynch & Co., retained to formulate a recapitalization plan, is seeking $160 million in fresh financing. But possible criminal prosecution may further hinder MiniScribe's recovery efforts. Mr. Rifenburgh said he has been expecting a Denver grand jury to hand up indictments "fairly soon -- in fact, we're surprised we haven't seen them yet." Credit: Staff Reporter of The Wall Street Journal Coopers & Lybrand Agrees to Payment of $95 Million in the MiniScribe Case Harlan, Christi. Wall Street Journal. (Eastern edition). New York, N.Y.: Oct 30, 1992. pg. A2 Abstract (Document Summary) US Bankruptcy Judge Charles Matheson approved an agreement by Coopers & Lybrand to pay $95 million to settle claims related to Coopers' work related to the now-defunct MiniScribe Corp. The settlement brings Coopers' total payments for MiniScribe related claims to at least $140 million. Hambrecht & Quist, MiniScribe's former investment banker, agreed to pay $21.5 million in damages. MiniScribe disclosed in 1989 that its senior management had perpetuated a massive fraud on the company by inflating sales and inventory figures. Full Text (738 words) Copyright Dow Jones & Company Inc Oct 30, 1992 A federal bankruptcy judge in Denver approved an agreement by Coopers & Lybrand to pay $95 million to settle claims related to the accounting firm's work for a former client, the now-defunct MiniScribe Corp. The settlement, which is among the largest ever tendered by an accounting firm in a professionalliability case, comes at a time when accounting firms are under increasing scrutiny for their work at failed companies and financial institutions. The resulting lawsuits and other multimillion-dollar settlements have prompted accounting firms to seek legislation and court rulings that would limit their exposure to liability in corporate failures. In addition to the settlement by Coopers, U.S. Bankruptcy Judge Charles Matheson of Denver approved a settlement of $21.5 million by MiniScribe's former investment banker, Hambrecht & Quist of San Francisco. A former chairman of Hambrecht & Quist, Q.T. Wiles, who was chairman of MiniScribe when the company disclosed its woes, agreed to pay $6.15 million. Another $4 million in settlements will be paid by the liability-insurance carrier for the company's former officers and directors, and one former director agreed to pay $1 million to settle claims against him. A spokesman for Hambrecht & Quist wouldn't comment on the settlement. A lawyer for Mr. Wiles, Cary Lerman of Los Angeles, said his client believes the compromise was fair "in light of the significant dollar amounts sought by the plaintiffs." Mr. Lerman added that the settlement "is definitely not an admission" of any wrongdoing by Mr. Wiles. A spokesman for Coopers said the settlement "has not had a material impact on the firm's financial condition nor its ability to serve its clients" and added that the $95 million will be paid from "various sources of funds, including insurance." The spokesman wouldn't comment on whether individual partners in the accounting firm will be required to contribute to the settlement, as is typical in cases involving partnerships such as accounting firms and law firms. The Denver settlement brings Coopers' total payments for MiniScribe-related claims to at least $140 million. The New York-based firm had agreed to pay $45 million to $50 million to settle a Texas case brought by former MiniScribe bondholders, according to people familiar with the agreement. The Denver settlements close more than a dozen civil lawsuits brought by MiniScribe creditors and investors who were burned when the disk-drive maker disclosed in late 1989 that its senior management had "perpetrated a massive fraud" on the company, its directors and investors by inflating sales and inventory figures. The fraud allegations are currently under investigation by the U.S. Attorney's office and Federal Bureau of Investigation in Denver. MiniScribe's fraud disclosure followed an internal investigation which found, among other things, that the Longmont, Colo., company had shipped bricks to distributors and booked them as disk-drive sales. A later complaint by the Securities and Exchange Commission charged that the company created a computer program called "Cook Book" to inflate inventory figures. The company sought bankruptcycourt protection in January 1990 in U.S. Bankruptcy Court in Denver and entered liquidation proceedings in April 1991. Coopers, which had certified MiniScribe's 1986 profits of $22.7 million -- a figure that was later slashed to $12.2 million -- didn't admit or deny any wrongdoing in its settlement with shareholders and MiniScribe's bankruptcy estate. The accounting firm was specifically accused of overlooking the company's improper recognition of sales and questionable purchase orders as well as permitting the company to make inadequate reserves for returned merchandise and bad debts. Of the total settlement of $128.1 million, about $80 million will be used to settle $150 million in claims filed by creditors in MiniScribe's bankruptcy case. The company's former banks will receive about $66 million; one creditor, Ellco Leasing Corp., now a unit of General Electric Co., will receive $6.6 million; and former debenture-holders will receive $6.5 million. Holders of the company's common stock won't receive anything from the bankruptcy estate, as is usual, but will receive some funds from the settlement of separate lawsuits filed in federal court in Denver. Denver lawyer Gregory Ruegsegger, who represents the bankruptcy trustee overseeing MiniScribe's liquidation, said the payments are "a very good settlement for the estate." The estate may have been able to win a larger judgment in a trial, Mr. Ruegsegger said, but would also have run the risk of recovering nothing if Coopers and Hambrecht & Quist had successfully blamed MiniScribe's management for the fraud. Credit: Staff Reporter of The Wall Street Journal Report of management Page 1 of 2 Financi Downlo 2003 Annual Report Report of Management International Business Machines Corporation and Subsidiary Companies Chairman's Letter In the Company of : Financial Report Table of Contents Report of Management Report of Independent Auditors Management Discussion Consolidated Financial Statements (Audited) Notes to Consolidated Financial Statements (Audited) Five-Year Comparison of Selected Financial Data Selected Quarterly Data Directors and Officers Stockholder Information Proxy Statement Responsibility for the integrity and objectivity of the financial information presented in this Annual Report rests with IBM management. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, applying certain estimates and judgments as required. Related Lin IBM maintains an effective internal control structure. It consists, in part, of organizational arrangements with clearly defined lines of responsibility and delegation of authority, and comprehensive systems and control procedures. We believe this structure provides reasonable assurance that transactions are executed in accordance with management authorization, and that they are appropriately recorded in order to permit preparation of financial statements in conformity with generally accepted accounting principles and to adequately safeguard, verify and maintain accountability of assets. An important element of the control environment is an ongoing internal audit program. Get Adobe Download Financial R (1.6MB) Guide to U Basic Fina A Report o On IBM.co Investor Re Stockholde To assure the effective administration of internal controls, we carefully select and train our employees, develop and disseminate written policies and procedures, provide appropriate communication channels, and foster an environment conducive to the effective functioning of controls. We believe that it is essential for the company to conduct its business affairs in accordance with the highest ethical standards, as set forth in the IBM Business Conduct Guidelines. These guidelines, translated into numerous languages, are distributed to employees throughout the world, and reemphasized through internal programs to assure that they are understood and followed. Investor To SEC Filing Note: Thes contain non PricewaterhouseCoopers LLP, independent auditors, is retained to examine IBM's financial statements. Its accompanying report is based on an examination conducted in accordance with generally accepted auditing standards, including a review of the internal control structure and tests of accounting procedures and records. The Audit Committee of the Board of Directors is composed solely of independent, non-management directors, and is responsible for recommending to the Board the independent auditing firm to be retained for the coming year, subject to stockholder ratification. The Audit Committee meets periodically and privately with the independent auditors, with the company's internal auditors, as well as with IBM management, to review accounting, auditing, internal control structure and financial reporting matters. SAMUEL J. PALMISANO JOHN R. JOYCE Chairman of the Board, President and Chief Executive Officer Senior Vice President and Chief Financial Officer Back to top http://www.ibm.com/annualreport/2003/flash/fr_rom.shtml 5/9/2005 Report of independent auditors Page 1 of 1 Financi Downlo 2003 Annual Report Report of Independent Auditors International Business Machines Corporation and Subsidiary Companies Chairman's Letter In the Company of : Financial Report Table of Contents To the Stockholders and Board of Directors of International Business Machines Corporation: Download Report of Management Report of Independent Auditors Management Discussion Consolidated Financial Statements (Audited) Notes to Consolidated Financial Statements (Audited) Five-Year Comparison of Selected Financial Data Selected Quarterly Data Directors and Officers Stockholder Information Proxy Statement Related Lin In our opinion, based on our audits and the report of other auditors, the accompanying consolidated financial statements* present fairly, in all material respects, the financial position of International Business Machines Corporation and subsidiary companies at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of the company's Business Consulting Services Reporting Unit (which includes the consulting practice acquired from us as discussed in note C) for the year ended December 31, 2003 and the three months ended December 31, 2002, which statements reflect total revenues of 14.5 percent and 4.3 percent of the related consolidated totals in the periods ended December 31, 2003 and 2002, respectively. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for the company's Business Consulting Services Reporting Unit, is based solely on the report of the other auditors. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. Financial R (1.6MB) Get Adobe Guide to U Basic Fina An Auditors On IBM.co Investor Re Stockholde Investor To SEC Filing Note: Thes contain non PricewaterhouseCoopers LLP New York, New York January 15, 2004 * For purposes of online presentation, audited financial information is identified as \"Audited.\" Back to top About IBM Privacy Contact http://www.ibm.com/annualreport/2003/flash/fr_roia.shtml 5/9/2005