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					Sunbeam Products, Inc.: The
      Rise and Fall

Jacqueline Clauss
Amy Kirby
Crystal Skov
Philip Michelson
Outline
•   Overview of the Company
•   Fraudulent Earnings Practices
•   Penalties
•   Stock Effects
•   After Effects
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
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
   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#
Fraudulent Earnings
Practices
• People Involved
• Facts
• Fraudulent Techniques
   – Cookie jar revenues
   – Recording revenue on contingent sales
   – Channel Stuffing
   – Improper bill and hold transactions

http://www.cfo.com/Article?article=3167
BREAKING NEWS: SEC Sues Former Sunbeam CFO Kersh, Dunlap, and Four Others
 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?article=3167
BREAKING NEWS: SEC Sues Former Sunbeam CFO Kersh, Dunlap, and Four Others, Taub.
Other Wrongdoings
• Deleted corporate records
• Misrepresented company’s performance
     • Form 10-Q 1st Quarter 1998
     • Press releases
     • Communication with analysts




http://www.cfo.com/Article?article=3167
BREAKING NEWS: SEC Sues Former Sunbeam CFO Kersh, Dunlap, and Four Others, Taub.
Discovery of Fraud
• Press release of negative statements about
  company’s 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
  Penalties


Name                     Monetary Damages Banned?                 Other
Albert Dunlap, CEO                 $500,000 Yes                   Earlier he paid $15M to settle the class action lawsuit
Russell Kersh, CFO                 $200,000 Yes                   Earlier he paid $250,000
Robert Gluck, Controller           $100,000 Yes, for 5 years only N/A
Donald Uzzi, VP                    $100,000 No                    N/A
Lee B. Griffith, VP                 $75,000 No                    N/A
Phillip Harlow, CPA                      $0 Yes, for 3 years N/A


                        Securities and Exchange Commission Release Number 1663, 7976, and 7977

                        Dunlap Settles Fraud Charges With the SEC, Wall Street Journal, Sept. 5, 2002
Stock Effects 1997

Year Ended December 31, 1997
Quarter     High      Low
1st        34 1/2   24 5/8
2nd        40 3/4   30
3rd        45 3/4   35 3/8
4th        50 7/16 37
                  10-K/A 1999-11-08 SEC Filings
Stock Effects 1998

Year Ended December 31, 1998
Quarter     High      Low
1st        53       35 7/16
2nd        45 9/16   8 3/16
3rd        10 3/8    5 1/8
4th         7 5/16   4 5/8
                  10-K/A 1999-11-08 SEC Filings
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
Questions

				
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