Sunbeam Fraud Case Summary

1. Determine the relevant facts. o Sunbeam was a small household appliances company that employed over 30,000 people. Sunbeam made 1.3 billion in annual sales. o In 1996, Sunbeam sales and stock price started to decrease. So the executive board decided to hire Albert Dunlap, a turnaround specialist/ professional downsizer. o Dunlap closed 18 plants and fired more than 12,000 workers. Later, this overly aggressive tactic caused Sunbeam to be incapable of doing day to day operations. o In 1997, Sunbeam recorded a record-breaking profit of 189 million dollars, a major turnaround. This was due to him recording expenses that occurred in 1997 in 1996. This action overstated Sunbeam’s 1996 expenses and understated Sunbeam’s 1997 expenses. o Dunlap encouraged high purchase

o In 1998, the SEC filed a case against Dunlap, other Sunbeam executives involved in the fraud, and the Arthur Anderson Auditing Firm. o In 1998, Dunlap was fired and barred from work for other publically traded companies. o Later Arthur Anderson was fined 110 million dollars for their part in the fraud.
2. Identify stakeholders and their interest. o Securities and Exchange Commission (SEC) -The SEC wants to protect investors from dangerous, illegal financial practices or fraud. o Albert Dunlap- Dunlap wants to maintain his reputation as a renowned turnaround specialist. o Sunbeam’s executive board- Sunbeam executives want to increase profit for the shareholders and themselves. o The Sunbeam company- All employees, as well as the executives, want Sunbeam to continue to operate. o Arthur Anderson Auditing Firm- Arthur Anderson Auditing Firm wants to maintain their prestigious reputation as one of the top Accounting companies. o Phillip E. Harlow- Phillip E. Harlow, a partner at Arthur Anderson, wants to maintain his reputation and please his clients by any means necessary.
3. What are the ethical issues and