Laws need to be written to hold the c-suite personally responsible for fraud. Otherwise there’s basically every incentive to commit fraud and consider it a cost of doing business. There’s a sitting U.S. senator with presidential ambitions who presided over the largest Medicare fraud in history when he was CEO of a healthcare company. He claimed ignorance and got off scott free.
Exactly this. As long as there are no painful personal consequences for fraud, this will keep happening. In this case, $8M is casually written off as cost of doing business. This is utterly insane.
Would be a good start, but even then, if there's a low probability of getting caught, a lot of business people might roll the dice. There needs to be serious jail time for serious fraud.
Say you have a sample worth billions that is about to expire and you do some speeding to get it delivered and analyzed in time. Then the fine should be in the hundreds not in the billions.
I've been of the mind that it should START with any profits. Then the fine.
It was a crime after all. They should be required to disgorge any gains, and then be penalized.
I worry how hard it would be to calculate these numbers though. Especially with creative accounting. That could be another part of the fine though: the cost of the forensic accountants to determine profits.
It should be both. The calculus needs to be reworked so that its never a more profitable move to break the law. That's why it keeps happening today after all, its just considered the cost of doing business.
People should go to jail, the company should lose any gains it made from the action and there should be a fine on top. They should unequivocally be worse off because of it.
Honestly, I have yet to hear a good argument for why people who commit fraud and other white-collar crimes shouldn't serve jail sentences. I also believe that strict sentencing for white collar crime (like we do for literally everything else) might actually be a deterrent.
I have heard the argument that being overly punitive will force businesses to be too conservative in their dealings for fear of accidentally breaking the law, but I just don't buy that.
The reason, and I don't think its a good one, as I understand it has to do with the hacky way in which our legal system treats corporations.
A corporation isn't its own class of entity. Its basically a a repurposed concept of a person. "Corporate personhood" is the term. They are and aren't people at the same time. They are because the law says so. They aren't because reality says so.
You end up with weird consequences like how do you punish a corporation thats broken the law? Well you cant jail one really. So the only recourse most of the time are fines. People didn't break the law, the corp did. Which is also a person because we said so.
What we need is a constitutional amendment that defines a corporation as a separate entity from people and sets the standards for who is criminally responsible for a corp. Personally I feel it should be some combination of the owners and the executives running it. Usually its the executives that are the cause for evil but the owners often incentivize them to do so.
That is awfully hard to calculate, and even harder to calculate fairly. Hollywood accounting, "unrealized gains/losses", and the way film companies calculate every individual digital copy of a pirated movie as a separate monetary loss all indicate that there is no way such a law would not be abused.
“ During his tenure as chief executive, the company defrauded Medicare, Medicaid and other federal programs. The Department of Justice ultimately fined the company $1.7 billion in what was at the time the largest health care fraud settlement in U.S. history.”
I suspect the reason is far more complicated: customers were also asking to defer sales starting in Q1 2020 due to pandemic complexities and fears. A lot of big corps will hold up delivery of HW and purchases to to align with their finance budgets and estimates.
Heck car salesmen will do it if they plateaued on their bonus comp time and another car will shifted a day or two later to the next month will put them a bit ahead of meeting quotas for that next month. Of course they don’t have to file highly scrutinized financial statements for investors but I still can’t find much outrage for this or fault the SEC for not wasting resources better spent on more harmful fraud cases.
> I have seen a lot of requests coming across about testing if my company can assist in some very large corporations [...] moving large numbers of VMs (100,000-500,000) over to Linux based virtualization in very short time frames.
EDIT: But, having read the article, seems probably unrelated.
This might have added to the already reported issues around licenses etc. As the new licensing model will be subscription based, having 100,000 VMs might come in at quite a larger price point as well as switching it from OPEX to CAPEX expenses?
This seems rather vanilla. They’re just smoothing out their revenue to make the curve look a little better. This is a result of the fact that companies can’t have down quarters without massive stock implications.
TBH I'm a bit underwhelmed by this fraud. I went in expecting some super-shady shenanigans only to see that VMware had done what literally all salespeople do when they have a capped upside in relation to their targets.
Yes, and also on costs - who hasn't been in a company who tries to either pull cost forwards / backwards across financial years? This is effectively the same, just with revenue.
And both are illegal ubder Sarbanes-Oxley for public US companies. SOX came into being after Enron went bust for, among other things, doing exactly that. Because it is a very easy way to cook your books. If a company is doing it, it mounts to fraud and is a red flag.
As far as fraud goes this seems a variety that would have extremely little impact (if any) In terms of lost investor money. They shifted revenue toward the end off the quarter and booked it in the following quarter by delaying delivery.
I’m not saying it was okay, it did present investors with in accurate information, but over a slightly longer period of time it wouldn’t really impact total revenue reported. Basically I’m having a hard time feeling much outrage for this, and the $8 million fine seems an appropriate penalty for a relatively low impact bit of fraud.
> An investigation by the agency found that, “beginning in fiscal year 2019, VMware began delaying the delivery of license keys on some sales orders until just after quarter-end so that it could recognize revenue from the corresponding license sales in the following quarter [...] building a buffer in those periods and obscuring the company’s financial performance as its business slowed relative to projections."
This seems very similar to what became known as "fiscal pedaling" in Brazil¹ when the government delayed repayment from Treasury to state-owned bank to hide increase in government expenses. This became the legal argument for the impeachment of the Brazilian president in 2016.
39 comments
[ 4.1 ms ] story [ 73.0 ms ] threadIt was a crime after all. They should be required to disgorge any gains, and then be penalized.
I worry how hard it would be to calculate these numbers though. Especially with creative accounting. That could be another part of the fine though: the cost of the forensic accountants to determine profits.
People should go to jail, the company should lose any gains it made from the action and there should be a fine on top. They should unequivocally be worse off because of it.
I have heard the argument that being overly punitive will force businesses to be too conservative in their dealings for fear of accidentally breaking the law, but I just don't buy that.
A corporation isn't its own class of entity. Its basically a a repurposed concept of a person. "Corporate personhood" is the term. They are and aren't people at the same time. They are because the law says so. They aren't because reality says so.
You end up with weird consequences like how do you punish a corporation thats broken the law? Well you cant jail one really. So the only recourse most of the time are fines. People didn't break the law, the corp did. Which is also a person because we said so.
What we need is a constitutional amendment that defines a corporation as a separate entity from people and sets the standards for who is criminally responsible for a corp. Personally I feel it should be some combination of the owners and the executives running it. Usually its the executives that are the cause for evil but the owners often incentivize them to do so.
That is awfully hard to calculate, and even harder to calculate fairly. Hollywood accounting, "unrealized gains/losses", and the way film companies calculate every individual digital copy of a pirated movie as a separate monetary loss all indicate that there is no way such a law would not be abused.
“ During his tenure as chief executive, the company defrauded Medicare, Medicaid and other federal programs. The Department of Justice ultimately fined the company $1.7 billion in what was at the time the largest health care fraud settlement in U.S. history.”
https://en.m.wikipedia.org/wiki/Rick_Scott
https://en.m.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act
> I have seen a lot of requests coming across about testing if my company can assist in some very large corporations [...] moving large numbers of VMs (100,000-500,000) over to Linux based virtualization in very short time frames.
EDIT: But, having read the article, seems probably unrelated.
https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...
I’m not saying it was okay, it did present investors with in accurate information, but over a slightly longer period of time it wouldn’t really impact total revenue reported. Basically I’m having a hard time feeling much outrage for this, and the $8 million fine seems an appropriate penalty for a relatively low impact bit of fraud.
This seems very similar to what became known as "fiscal pedaling" in Brazil¹ when the government delayed repayment from Treasury to state-owned bank to hide increase in government expenses. This became the legal argument for the impeachment of the Brazilian president in 2016.
¹ https://en.wikipedia.org/wiki/Fiscal_pedaling
https://news.ycombinator.com/item?id=32818402 (205 points/66 comments)