Who is Symbol Tech?

Distorting balance sheet metrics to avoid showing deterioration

Schemes Per Type

Early Revenue Recognition

Types Of Schemes

• Used by companies to convince investors the company is in good health
• Symbol Used two techniques
• Distorting A/R Metrics to to hide revenue problems
• reclassed accounts
• Distorting inventory methods to hide profitability problems
• moving products to limbo

• Per US GAAP, Revenue can only be recognized once the work has been completed.
• Technique used by Symbol tech was Recording Revenue before buyers acceptance
• They incorrectly shipped out products to customers

• Earnings Manipulation
• Cash Flow Manipulation
• Key Metric Manipulation

Bogus Revenue

• Earnings Manipulation
• Recording Revenue too soon
• Recording Bogus Revenue
• Boosting Income using one-time or unsustainable activities
• Shifting current expenses to a later period
• Employing other techniques to hide expenses
• Shifting current income to a later period
• Shifting future expenses to an earlier period
• Cash Flow Manipulation
• Shifting financing cash inflows to the operation section
• Shifting normal operating cash outflows to the investing section
• Inflating operating cash flow using acquisitions or disposals
• Boosting operating cash flow using unsustainable activities
• Key Metric Manipulation
• Showcasing misleading metrics that overstate performance
• Distorting balance sheet metrics to avoid showing deterioration

• Companies will sometimes just make up revenue too!
• Technique used by Symbol Tech was recording revenue from transactions that lack economic substance
• Symbol used a company to send fake purchase orders to symbol at the end of each quater

Responsible for the Fraud

Scandal involved nearly is entire former management team including:

• Chief executive: Tomo Razmilovic
• Chief financial officer: Kenneth Jaeggi
• Senior vice president for worldwide operations: Brian Burke
• Senior vice president for worldwide sales & services: Frank Borghese
• General Counsel: Leonard Goldner
• Vice president for sales & finance: Christopher DeSantis
• Director of finance: James Heuschneider

Pressure/Incentive

• Symbol was pressured by the environment of Wall Street to constantly succeed
• 32 consecutive successful quaters
• Also investors critical eye on companies

Conclusion

Opportunity

Rationalization

• Ineffective monitoring of managment
• Wanting to keep success streak alive
• Investors not questioning the constant success of Symbol
• Seven specific warnings for investors

Who is Symbol Tech?

• Justified certain fraudulent acts as necessary for the business going forward
• Recorded $185.9m (harbored some fictious costs) in connection with a merger, justified as necessary for restructuring

• Caught at the end of 2002, fraud began in 1998
• Paid $175m in relation to fraud committed
• This company used a plethora of different fraudulent techniques
• Bought by Motorola in 2007 for $3.9B
• Symbol's former CEO fled the country and lives comfortably Sweden

• Largest seller of barcode scanners in the world
• Founded in 1975
• Introduced its first product in 1980
• Product: the first hand held laser scanner LS1000
• Symbol doubled its size when it acquired MSI
• MSI is a company manufacturing hand held terminals

Accounting Fraud!

• Years of fraudulent accounting practices 1998-2003
• Obsessed with never disappointing Wall Street
• 32 Straight quaters of success
• Used cookie jar reserves and channel stuffing
• Corporation inflated revenue in order to meet analyst projections for a total of $230 million

The Great Symbol Tech Fraud