Accounting Fraud in Bank of America

Accounting Fraud in Bank of America

Introduction

The loss of public confidence, generated by the fraudulent dealings of managers and administrators located at the top of the world-class organizations and thus lays the importance of the issue of good corporate governance, traditionally defined codes of conduct, as the responsibility of board organizations transparent about its behavior in all its actions and decisions, which is why it is necessary to revisit the issue of business ethics from a global perspective, especially approaching the end to the current reality in a society progress and very different in the familiar surroundings in the past century.

Parmalat, the eighth largest industrial group in Italy with about 36,000 employees in 30 countries had accumulated large debts in recent years in its evolution to become a multinational food, known especially through dairy products. In its growth was supported by some of the largest banks in the world, including the Bank of America, Merrill Lynch, JP Morgan, Chase Manhattan and Citigroup. At the end of 2003, one of the biggest corporate accounting scandals in history came to light as a million of Euros hole was discovered in Parmalat's accounting records. When Bank of America states Parmalat does not hold nearly million of Euros in liquid assets for the company as Parmalat reported in September 2003.



Discussion

Parmalat fraudulently offered senior secured promissory notes to U.S. investors, significantly overstating the assets of the company and also significantly underestimates the liabilities of the same. Parmalat fraud on U.S. investors report they would use their cash balances, representing a surplus which in reality did not exist for corporate debt repurchases and ultimately did not, leaving the existing debt and failing in the promissory notes offered by the company.

Falsified bank documents to mislead investors had cash and marketable securities in a Bank of America on behalf of the Financing Corporation (Bonlat), a wholly owned subsidiary of Parmalat, after the matter had been confirmed that the account is not existed in the bank. These assets were non-existent in the books and records of Bonlat 2002 and turn in the consolidated financial statements of Parmalat from 2002 to June 30, 2003, where Parmalat offered his promissory notes to U.S. investors, where the documents submitted contained much significant false information about the company's financial condition.

The company's balance sheet showed large cash balance, but in reality is not there. The debt was very low, but in reality was much higher than that showed the balance. 

There are many American companies reaching settlement agreements to settle and avoid scandals ending in judgments, the costs and consequences are unpredictable. It is a practice allowed by U.S. law called “deferred prosecution” where many companies are benefiting from this law.

Fraud has been committed with very simple: control of the correspondence of the auditors, falsified bank statements with a scanner and a photocopier and social changes of address, to avoid having to change auditors, as required Italian law, which was easier to fool the traditional auditor, who was still doing ...