166 ShowMetheMoney
a series of so-calle dbill-an d-hol dtransactions. During the winter
months, it recorded charcoal grill sales even though the grills were
not to be shippe duntil the spring. This manipulative maneuver en-
able dit to report higher sales in the winter.
The accounting shenanigan took place near the en dof the reign
of the self-proclaime dturnaroun dking Al Dunlap. Upon taking the
helm at Sunbeam—which was floundering from a substantial busi-
ness downturn—Dunlap fired half its workers and closed or consol-
idated more than half its facilities. Boasting that he aimed to “attack”
his company, Dunlap declared that his plan was as carefully plotted
as the invasion of Normandy. (Alas, Dunlap is no Churchill, and all
his plans for Sunbeam faile dmiserably.) With that kin dof siege
mentality driving the company, accounting irregularities might not
have been inevitable, but they were certainly made more likely.
MicroStrategy
Sunbeam’s travails of revenue recognition have sprea dthrough other
businesses, especially the computer software companies that Levitt
single dout for special illustration. One of the most dramatic ex-
amples of the potential fallout occurre dat the software company
MicroStrategy.
MicroStrategy entere dinto several unusual contracts un der
which it bought an dsol dsomething from the other party. The dual
deal enable dMicroStrategy to recor drevenue much earlier than ac-
counting rules permit an dto obscure that accounting from the au-
ditors reviewing its books.
Pressure from journalists compelle dthe company an dits au di-
tors to scrutinize those contracts, and they ultimately decided the
earlier accounting ha dbeen incorrect. Shazam! When the company
finally came clean, its stock price plunge dfrom $245 to $87 per
share (over a 60% wipeout). Who lost? Popeye dsharehol ders.
Cendant
Obfuscatory language in corporate disclosure signifies brewing trou-
ble. This is only one of the scores of lessons learne dfrom the
notorious accounting scandal that unfolded in the late 1990s at Cen-
dant Corporation, a company formed by the merger in late 1997 of
CUC International an dHFS Inc.
CUC operate da members-only discount shopping service that