The light and dark sides of accounting were on display Tuesday at the LSU Alumni Center. Approximately 200 business professionals attended the third annual Fraud and Forensics Accounting Conference. The agenda centered on corporate fraud and the on-going struggle to bring balance to the balance sheet. WorldCom whistle-blower Cynthia Cooper spoke of her experience as an accountant and a “snitch.” In 2002, Cooper uncovered $11 billion in fraud as WorldCom, the Fortune 500 company and “darling” of Mississippi, set the record as the largest bankruptcy in U.S. history. The company grew through acquisition, buying 70 companies in 20 years. The steep growth of the past created pressure to keep growing, Cooper said. Cooper said the dot-com boom was so big, AT&T and MCI couldn’t keep up with demand. The myth of the Internet tripling in size each quarter forced companies like WorldCom to over-invest in laying fiber-optic cable. When the dot-com bubble burst, Cooper said the telecommunications bubble also burst, acting as a “double whammy” that crippled WorldCom. Cooper said the focus then shifted to meeting earnings guidance in 2002, which precipitated the fraud that she would uncover over a period of three weeks. Cooper stressed that ethics are lacking in accounting and corporate America. She said 82 percent of business executives admit to cheating in golf. She said greed, arrogance, rationalization, and pressure from above combine to make good people do bad things. Two lower level accountants at WorldCom struggled with following the unethical commands of superiors. Cooper said each wrote resignation letters that were never sent. Both chose to follow orders to provide for their families. Cooper said “just following orders” is not a valid defense. “Character is not forged at a cross-roads,” she said. “It’s built daily on smaller decisions.” Cooper said character alone is not enough. She said it takes courage to follow the guidance of a moral compass. “Courage is not being without fear,” Cooper said. “Courage is acting in the face of fear.” Sam Antar has little difficulty in dealing with his experiences as a criminal. He is the first to say as an “economic predator” his moral compass never existed. “Criminals like me only have to be right once to cause carnage,” said Antar. “We will use your humanity against you. We will use every tool at our disposal. We committed crimes because we could.” Antar was CFO of Crazy Eddie’s, Inc. The electronics store chain cheated investors, customers and suppliers for the more than 15 years under the direction of the Antar family. Eddie Antar and his co-conspirators skimmed millions of dollars in cash from sales of used electronics sold as new, profited from fraudulent insurance claims and robbed Wall Street blind when they brought Crazy Eddie, Inc. public in the 1980s. All told, the Antar family made off with $200 million before investigators intervened. Sam Antar was the inside man. As a CPA, he knew the way audits work and the cracks in the system. He said the Antar family skimmed one dollar for every five taken in sales. “I got on the job training for how to be a criminal, legitimately,” Antar said. Antar said a good white collar criminal uses persuasion, not intimidation. He said he got in the habit of offering consulting work to cloud the judgment of auditors. The lack of internal controls and analytical research combined with the naivety of outsiders to make it all possible, Antar said. “They didn’t want to believe their clients were crooks,” said Antar. Once confronted, Antar said he cooperated with authorities for practical reasons. “The government had me by the balls, and I had no where else to go,” he said. Antar cautioned those in attendance to be skeptical and called for better training. “Ronald Reagan said ‘Trust and verify,'” Antar said. “I say, ‘Don’t trust, and verify.’ A good criminal builds a wall of integrity around him.” Antar said criminals see a jail sentence as an occupational hazard. He said 92 percent of white collar criminals have no prior criminal record. Antar said he still would not invest in any publicly traded companies. Matthew Whitley served as finance manager for one of the world’s largest publicly traded companies, Coca-Cola. He blew the whistle on shady practices at the company in 2003. He detailed several fraudulent and unethical actions by the company in the last decade. Whitley said in 1999, former Coke President Jeff Dunn may have sparked Coke’s slide from General Electric’s rival as the best company in America to outside the top 10 within its own industry in announcing a philosophical shift to the company. “This was a new era, and [Dunn said] if we had to bypass measures or procedures to get things done, so be it,” said Whitley. Whitley said Coke also manipulated Burger King’s test market of Frozen Coke machines. He said he found $5,000 worth of value meal purchases in an expense report audit and got suspicious. Whitley said Coke employees picked up baseball teams and treated them to Burger King in the Virginia area in order to bolster results, a move that fooled Burger King into investing $160 million in the machines. Whitley said he was ignored when he caught the errors in accounting and marketing, then was reassigned to a new department after pressuring superiors for answers. “I don’t know if I’m blessed or cursed,” Whitley said. Whitley landed in another controversy involving Coke’s “fountain of the future.” He said the fountain was terrible, despite 100 million dollars in research and development. Whitley said Coke engineers decided to raise the price of the old machines and lower the price of the new one to create a market for the fountain. That decision backfired, Whitley said, as the old machine sales held steady and increased profits. That wasn’t the only machine issue for Coke. Wal-mart stores received frozen coffee machines from Coke that had a major flaw. The machines were mixing metal shavings into the drinks. Whitley said the attitude of Coca-Cola engineers was too casual. “My first question was, ‘When is the recall?'” Whitley said. “They said, ‘We promise you, it’s not life threatening.'” Racial ethics were lacking at Coke as well, said Whitley. He said white males were only punished for 11 percent of their code of conduct violations, while women and minorities were punished 88 percent of the time. As a Georgia native, Whitley said he grew up drinking Coke all the time. He said as an employee he still drank it. Since he left the company, he has not had a Coke, displaying the Pepsi product Aquafina to the crowd. LSU assistant professor of accounting Angela Woodland said the 2006 Fraud and Forensic Accounting Conference was a great success. She credited the high quality of speakers to the success of accounting professor Glenn Sumner’s Center for Internal Audit. “This is nice way for the department of accounting to reach out to the community and bring our business professionals to campus to serve them,” said Woodland. The two-day conference was sponsored by the E.J. Ourso College of Business Department of Accounting.
_____Contact David Hebert at dhebert@lsureveille.com