Regina Case

Regina Company Inc. was cognise as a complacent slow-growth guild and was dominated by hoover and Eureka within the floorcare industry. Donald Sheelen was a promising young individual when he was hired first as the head of the marketing division in Regina, and then became its president. Shortly afterwards becoming company president, Sheelen set kayoed to make Regina the industrys number one company and repeatedly vowed to bomb Hoover, the number one firm in the industry at the time.Sheelen expanded Reginas product line and started an aggressive advertisement trend to promote Reginas products over Hoovers. His strategy remunerative off, as Reginas profits grew substantially, and after Regina went public, its stock price soared by virtually 500 percent, making Sheelen and the companys other principal stockholders millionaires galore(postnominal) times over. However, it turned out that the impressive financial figures released by Regina after it went public were fabricated by S heelen. Instead of a growth company with bright prospects, Regina was a dying company mired in acclivity losses. The major reason behind Reginas financial difficulties was the poor part of its new products, which resulted in a reported 50 percent client return rates. After realizing that Regina was in a deep trouble, Sheelen, with the help of Regina chief financial officer Vincent Golden, came up with several illicit accounting schemes to keep the companys stock prices at a high level.In addition to importantly understating customer product returns and companys cost of goods, they recorded counterfeit sales to inflate sales revenues, and implemented a so-called ship-in-place betrothal scheme. After realizing that he could no longer conceal the companys deteriorating condition, Sheelen decided to let the public know of the companys grand financial condition. Although Sheelen and Golden initially blamed the computer system for errors, they ulterior pleaded guilty to federal mail and security prank charges in 1989. Sheelen served 1 year in prison in a halfway house, and paid a mere $25,000 in fines.One of the charges was that Sheelen and Golden had repeatedly and deliberately misled the companys audit firm, Peat Marwick. In a sharp phone line to the Mattel case, SEC did not fault Peat Marwick for failing to uncover the massive fraud by Sheelen and Golden, although several articles in financial press did criticize the audit firm. It is interesting that while SEC heavily criticized Arthur Andersen for failing to uncover Mattels fraudulent activities, there was not apparently a similar examination of Peat Marwick for failing to uncover the fraud in Regina.Based on this article, it seems that Peat Marwick plainly trusted Goldens assurance that no fraudulent legal proceeding had been recorded in Reginas accounting records, and that Peat Marwick was therefore not to be blamed for failing to uncover the fraud in Reginas financials. habituated that the frau d schemes in both Mattel and Regina were of very similar nature, one wonders wherefore Peat Marwick was not scrutinized to the same degree as Arthur Andersen. There is definitely more(prenominal) to this story than what is told in this article.