【正文】 SEC brought civil and administrative fraud charges against seven former officials of CUC, including the chief financial officer, the controller, the vice president of accounting and financial reporting and the director of financial reporting. The charges against these individuals included violations of the antifraud, periodic reporting, corporate recordkeeping, internal controls and lying to auditors provisions of the federal securities laws. The SEC also brought charges against Cendant for violating the periodic reporting, corporate recordkeeping and internal controls provisions of the federal securities laws. In December, Ernst amp。Young, CUC39。s auditors, agreed to pay Cendant shareholders $335 million. The current investigation of Enron39。s accounting practices by the SEC and several Congressional Committees may lead to the same types of sanctions against individuals as those imposed on Cendant executives. Recent reports suggest that several highlevel executives at Enron engaged in deliberate attempts to conceal the magnitude of Enron39。s debt from investors and creditors, using offbalance sheet partnerships to conceal debt obligations (Emshwiller et al, 2001). According to published reports, Enron violated GAAP by setting up partnerships which it controlled and recording the transfer of Enron stock to the partnerships in exchange for notes receivable (Emshwiller and Smith, 2002). Published reports also indicate that Enron used the partnerships it controlled to exchange impaired assets for notes receivable. This practice allowed Enron to increase earnings by the excess of the notes receivable over the book value of the assets exchanged and, at the same time, remove impaire! d assets from its balance sheet (Emshwiller and Smith, 2002). Although the accounting practices in published reports have not been confirmed by SEC investigation, Enron39。s past accounting practices led them to restate earnings by $586 million (Emshwiller et al, 2001). b. Manhattan BagelFrom its initial public offering in 1994 to June 1996, the stock price of Manhattan Bagel rose from $5 per share to $29. The pany grew to be the third largest bagel franchise in the United States with ambitious plans for substantial expansion. Sales and earnings were growing. The pany began to expand through acquisition. In January 1996, the pany acquired a West Coast bagel operation, however, the firm failed to perform the necessary due diligence and acquired millions of dollars of overstated revenues.In June 1996, the firm announced accounting problems in its recently acquired West Coast operations, and its stock price was cut in half within days. The freefall in its stock price continued and with the negative publicity and shareholder lawsuits that followed, the pany was unable to sell franchises at anywhere near their previous pace. Eventually, the pany was forced to seek bankruptcy protection.c. SunbeamSunbeam, a maker of small consumer appliances such as , has drawn much attention in recent years for its disappointing financial results and cutthroat tactics of its former CEO, Chainsaw Al Dunlap. The nickname was given to Mr. Dunlap for the manner in which he cut the size of the employee base.In midNovember 2000, the SEC concluded its investigation into accounting practices at Sunbeam. The SEC charged that Sunbeam recognized revenues prematurely from sales promotions with retailers in 1997. This activity was prior to the dismissal of Sunbeam39。s infamous CEO, who was terminated in 1998. Although not discussed in the SEC ruling, it would not be surprising if the stress of the environment contributed to the aggressive revenue recognition.d. TycoRecently, Tyco was forced to restate fiscal 1999 and the first quarter of 2000 due to certain merger, restructuring and other nonrecurring charges, increasing 1999 earnings and decreasing earnings for the first quarter of 2000. Tyco is still under investigation for its usage of pooling of interest accounting in its merger and acquisition activities. Based on the SEC ruling, it appears that Tyco set aside cookie jar reserves in 1999 and began to reduce the liabilities in 2000, thus, increasing earnings.e. SensormaticBetween 1994 and 1995, Sensormatic recognized outofperiod revenue, overstating earnings to meet analysts39。 expectations. The Chairman and CFO had to pay penalties of $50,000 and $40,000, respectively. Most likely, there were quite a few individual investors who incurred greater financial losses as a result of their actions.f. 3Com3Com agreed in November 2000 to pay $259 million to settle shareholder lawsuits involving accounting irregularities following its 1997 acquisition of . Robotics Corp. 3Com had allegedly concealed losses at . Robotics when they bined the panies. Under pressure from the SEC, 3Com was forced to reduce it stated net ine for 1997 by $111 million and reduce a purchaserelated charge for 1998 by $158 million.g. . GraceWR Grace amp。 Co. was charged by the SEC with manipulation of its earnings through the use of cookie jar reserves used to smooth reported earnings in its National Medical Care Inc. unit.The above cases are just a sample of some of the recent cases. These cases display some of the circumstances and ways in which earnings can be manipulated, including cases of blatant fraud, aggressive revenue recognition, cookie jar reserves and inadequate due diligence in mergers and acquisition practices.h. MicroStrategy (AAER 1350,12/14/ 00), MAX (AAER 1430,08/01/01), and Indus (AAER 1437,09/01/01) MicroStrategy began business in 1989, and went public in June 1998. In April 2000, when MicroStrategy disclosed that it had overstated its revenue and earnings over a threeyear period, its stock price dropped from a high of $333 per share to $33 per share. In December 2000, the SEC announced that it was bringing charges against MicroStrategy, its founder, and several members of management. The SEC alleged that MicroStrategy had materia