Bank of America: Fudged Accounting?
by: David Sarna
Writer, All About Business
According to the Wall Street Journal, Bank of America Corp. admitted to making six transactions that incorrectly hid from view billions of dollars of debt, following a bid to cut the size of a unit’s balance sheet and meet internal financial targets.
Bank of America’s accounting of the six trades is similar to what a bankruptcy-court examiner said Lehman Brothers Holdings Inc. did to make its balance sheet look better before it filed for bankruptcy in 2008. Lehman used a strategy dubbed “Repo 105″ that helped the Wall Street firm move $50 billion in assets off its balance sheet, the examiner said in March.
As head of Computer Associates(now CA Technologies), Sanjay Kumar also smoothed revenues to meet The Street’s expectations. He was sentenced to 12 years in prison, paid $800 million in restitution, and received a $12 million fine. Overall, he caused much less damage than in this case. Here are the details, when all was said and done. “A total of $1.78 billion was prematurely recognized in fiscal 2000 and $445 million in fiscal 2001, the company said. The figure for 2000 was more than the $1.4 billion that the Securities and Exchange Commission has cited; CA said its internal investigation discovered additional contracts that were improperly booked. But because the accounting shift moved sales from one period to another rather, the overall impact on results was small. The company’s $696 million net income for 2000 was unchanged. Revenue was cut by $2 million to $6.092 billion.”
I wonder what will happen in this case.
History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff
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