Throughout the past several years, major corporate scandals have affected the economy and hurt major investor companies. Scandals usually involve complicated methods for misusing funds, exaggerating revenues, and understating expenses and liabilities. There are many early warning signs of fraud, but they are usually ignored. To understand the early warnings of fraud, we need to know what fraud actually is; a wrongful or criminal deception intended to result in financial or personal gain. There are so many types of fraud out there, like Medicare fraud, mortgage fraud, loan fraud, tax fraud, and many more. The Securities and Exchange Commission (SEC) has three main parts to what they do; protect investors - maintain fair, orderly, and efficient markets and facilitate capital formation.
On September 28th, 2017, Alere, a Waltham, Massachusetts-based diagnostics firm that agreed to be acquired by Abbott Laboratories earlier this year for more than $5 billion, will pay $13 million to resolve accounting fraud allegations by the U. S. Securities and Exchange Commission. According to an SEC order, Alere's South Korean subsidiary, which produces and sells diagnostic testing equipment, artificially inflated revenues by recording sales of products before they were delivered to customers, including products that were still sitting in warehouses. According to SEC Boston Regional Office director Paul Levenson, "Our securities laws give investors the right to a fair picture of public Baker 2 companies' finances. For Alere, that picture was distorted by multiple accounting failures and by outright fraud." Alere subsidiaries in India and Colombia also "obtained or retained business" by using distributors or consultants to make improper payments to officials of government agencies or entities under government control. According to The FCPA Blog, the company also "failed to maintain adequate internal controls to prevent payments, and the company inaccurately recorded the payments in its books and records." In Colombia, improper payments of about $275 000 helped Alere win business from a government-linked customer. In India, the Alere unit, through a distributor paid local governmental officials a four percent commission to increase orders for medical testing kits from 200, 000 to 1 million units.
In a company statement, Alere said, "We have cooperated with the SEC and we are pleased to fully resolve this matter." In agreeing to the SEC's order without admitting or denying the finding, Alere agreed to pay disgorgement of ill-gotten gains totaling $3, 328, 689 plus interest of $495 196 and a penalty of $9. 2 million.
According to Law 360, a Massachusetts federal judge concluded that there was little to support the idea that Alere's bosses knew about most of its alleged wrongdoing. Alere's stock price went down last year as scandals emerged. District Judge Patti B. Saris said investors who sued the company and three executives alleging fraud had failed to c...