The Case Of Cardillo Travel Systems Essay

1554 Words7 Pages
Situations arise that cause companies to conduct or record fraudulent transactions to deceive the stakeholders or in the case of Cardillo Travel Systems, meet court orders. Cardillo Travel Systems, ranked as the fourth largest company in the travel agency industry, was founded in 1935 and purchased by A. Walter Rognlien in 1956. After being acquired by Rognlien, annual revenue increased steadily but expenses were increasing at a more rapid rate. By 1985, Cardillo was involved in a lawsuit and a court injunction required the company to maintain at least $3 million in stockholders’ equity. Around the same time, Rognlien had negotiated a transaction with United Airlines that if record as revenue would ensure the minimum stockholders’ equity was met (Rittenberg, Johnstone, Gramling, & Knapp, 2012). As with most fraudulent activity, management worked together to get around the terms of the agreement and get the transaction recorded. This action led to the various violations including making false representations to outside auditors, failing to maintain accurate financial records, failing to file prompt financial reports with the Securities Exchange and Commission (SEC) and violating insider trading provisions. Securities Exchange and Commission Charges Issued The SEC found three of Cardillo’s executives, CEO A. Walter Rognlien, COO Esther Lawrence, and Vice President of Finance William Kaye, guilty of violating several federal securities laws. All three executives provided false

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