The Pbs & J Accounting Scandal

2212 Words Apr 27th, 2016 9 Pages
The Enron and WorldCom scandals were arguably the incidents that permanently changed the procedures for accounting controls. In response to these incidents, the Sarbanes-Oxley Act (SOX) of 2002 was passed. Once the knowledge of these scandals was made public, a number of subsequent accounting scandals were discovered in public companies such as Tyco International, HealthSouth, and American Insurance Group. In addition, a then-employee-owned company, Post, Buckley, Schuh & Jernigan, Inc. (dba PBS&J, now known as “Atkins North America, Inc.”), was also hit by a similar accounting scandal. Henceforth, a case study of PBS&J is presented where we will examine the fraudulent transactions that
…show more content…
The major players of the scandal were located in the firm’s Miami office. They were Scott DeLoach, then chief financial officer (CFO); Maria Garcia, an accounting employee who was in charge of the office’s database and bank reconciliations; and Rosario Licata, a bookkeeper who maintained the firm’s benefits bank account (Eubanks, 2016).
Garcia and Licata took a number of old invoices and issued checks in the invoice amount, subsequently cashing the checks and splitting the amount between themselves. DeLoach soon after joined them and deposited a number of checks, issued by Licata, into various personal accounts throughout Miami. DeLoach used the funds from the fraudulent checks to write checks to Garcia and Licata (Barnett, 2007).
DeLoach, a trusted member of PBS&J’s senior management staff, was appointed as the treasurer of the board in 2003. According to Barnett (2007), “That same year, he, Garcia and Licata began to divert money from PBS&J’s medical benefits account. Licata opened secret bank accounts and created what auditors describe as a phantom political action committee, ‘PBSJ PAC.’ The signatory on the secret accounts was DeLoach, who over two years transferred in millions of dollars from the medical benefits account” (Barnett, 2007). The trio then posted “false journal entries, manipulated the bank reconciliations, deleted fraudulent checks from the statements, and added false deposits to inflate account balances” (Barnett, 2007). In 2004, DeLoach was named
Open Document