Sunbeam Products, Inc.: The Rise and Fall

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Sunbeam Products, Inc. The Rise and Fall

• Jacqueline Clauss
• Amy Kirby
• Crystal Skov
• Philip Michelson

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Outline

• Overview of the Company
• Fraudulent Earnings Practices
• Penalties
• Stock Effects
• After Effects

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Company Overview

• International company with headquarters Boca
  Raton, FL
• Offices in U.S., Canada, Mexico, Venezuela, and
  Hong Kong
• Manufacturing Facilities in U.S., Mexico, and
  Venezuela
• 3,000 Employees worldwide

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Company Overview

• Today, Sunbeam Products Inc. is a leading global
  consumer products company that designs,
  manufactures, and markets a diverse portfolio of
  consumer products such as Sunbeam, Oster, and
  Mr. Coffee.
• Sunbeam Appliances/Products, Sunbeam Warming
  Blankets, Oster Appliances, Oster Professional
  Clippers, Health o meter products, Sunbeam
  Breadmakers, Mr. Coffee products, Sunbeam Grills

www.sunbeam.com
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Historical Timeline

• 1897- Company founded as Chicago Flexible Shaft
  Company
• 1910- First Home appliance, an iron, is
  introduced to its product line
• 1960- Acquires the John Oster Manufacturing
  Co., beginning a string of acquisitions that
  included with its purchase of Coleman, Signature
  USA and First Alert in 1988
•   1996- Al Dunlap named CEO of the company. The
  former Scott Paper CEO earned its nickname
  Chairman Al for cutting staff and firing
  executives.
• 1998- Dunlap fired by board. Company later
  reinstates financial results for 1996 and 1997.
•   Feb. 6, 2001- Files for Chapter 11 bankruptcy
  protections Says it will privately held company
  owned by its bank.
•   Sunbeam files Chapter 11, Appliance maker says
  it needs relief from burden of debt, shareholder
  suits, money.cnn.com/2001/02/06/news/sunbeam/index
  .html

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Fraudulent Earnings Practices

• People Involved
• Facts
• Fraudulent Techniques
• Cookie jar revenues
• Recording revenue on contingent sales
• Channel Stuffing
• Improper bill and hold transactions

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Auditor Involvement

• Arthur Anderson Partner, Phillip Harlow
  authorized unqualified audit opinions on Sunbeam
  Products, Inc. for 1996 and 1997 financial
  statements.

http//www.cfo.com/Article?article3167 BREAKING
NEWS SEC Sues Former Sunbeam CFO Kersh, Dunlap,
and Four Others, Taub.
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Other Wrongdoings

• Deleted corporate records
• Misrepresented companys performance
• Form 10-Q 1st Quarter 1998
• Press releases
• Communication with analysts

http//www.cfo.com/Article?article3167 BREAKING
NEWS SEC Sues Former Sunbeam CFO Kersh, Dunlap,
and Four Others, Taub.
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Discovery of Fraud

• Press release of negative statements about
  companys sale practices
• Board of Directors then began an internal
  investigation
• As a result, management was terminated
• Restatement of financial statements, 1996 - 1998
• After restatement, Sunbeam reported net losses of
  533M for two quarters - Bryan-Low and Jeff
  OPdyke

Securities and Exchange Commission Release Number
7976
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Penalties
Securities and Exchange Commission Release Number
1663, 7976, and 7977 Dunlap Settles Fraud
Charges With the SEC, Wall Street Journal, Sept.
5, 2002
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Stock Effects 1997
10-K/A 1999-11-08 SEC Filings
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Stock Effects 1998
10-K/A 1999-11-08 SEC Filings
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After Effects

• In January 2001 Wall Street suspended trading of
  Sunbeam
• On February 6th, 2001 Sunbeam filed bankruptcy
• Emerged from bankruptcy as a subsidiary of
  American Household, Inc.

Appliance Maker Files Bankruptcy. The Miami
Herald Sunbeam Emerges from Bankruptcy as
American Household. The Business Journal
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Questions

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