It would seem in the greater fraud world, companies continue to fail to read memos from The Man From FCPA. U.K. telecom giant BT is currently reeling from a fraud scandal involving its Italian business unit. Last fall, the company reported it was taking a £145 million charge related to “inappropriate management behavior,” which caused “historic accounting errors in the business unit. However the company’s outside auditors recently have pegged the losses at £530 million. (There is a technical legal term for this discrepancy; it is called oops.) The company has lost nearly £8 billion in value since the scandal was announced.
The kerfuffle involves a bit of fraud off the beaten track. Usually a business unit will try and goose up sales through channel stuffing or some other technique to make the numbers look good. However in BT Italia’s case, it defrauded on the expenses, mis-stating its operating costs into capital expense and using “off the books” (never good) loans to pay off expenses so that it would appear more profitable than it was in reality.
