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Inflating sales is a classic move: > In indictments involving the case, prosecutors said HBOC sold software or services to more than a dozen hospitals with con

Inflating sales is a classic move: > In indictments involving the case, prosecutors said HBOC sold software or services to more than a dozen hospitals with conditional "side letters" that allowed the hospitals to back out of the deals. The side letters were then hidden from auditors and the transactions were reported as sales.[0] McKesson (and perhaps other pharma wholesalers) also played games by timing invoice payments and chargebacks to increase quarterly growth. 0) https://www.nytimes.com/2005/01/13/business/mckesson-agrees-to-pay-960-million-in-fraud-suit.html https://www.nytimes.com/2005/01/13/business/mckesson-agrees-... Edit: Another tactic is hiding rebate and chargeback transactions in numerous ~unauditable spreadsheets, stored on individual employee machines. Or even only as hard copy.

jgalt212 6y ago
I don't know how such tactics as side letters are legal. In finance, there's numerous hoops and rules to jump through to actually prove that you sold and asset and did not merely engaged in a dressed up repo transaction. a few links https://en.wikipedia.org/wiki/Repo_105 https://en.wikipedia.org/wiki/Repo_105 https://www.deallawwire.com/2017/05/18/true-sales-a-refresher/ https://www.deallawwire.com/2017/05/18/true-sales-a-refreshe...
- nmfisher 6y ago
  Side letters are legal. Lying to an auditor is not. Ideally, auditors would verify the legitimacy of a transaction with the counterparty. As in, physically visit their office and speak to the person whose signature is on the contract. Unfortunately, this is impractical when there are hundreds or thousands of such contracts every year. There aren’t enough auditors and there’s not enough time. So mostly, auditors rely on the assumption that they’re not being provided with falsified documents, and they’re not being lied to. Unfortunately, that’s sometimes (often?) just not true. Even though it’s illegal, it’s still highly vulnerable to exploitation.

jgalt212 6y ago

I don't know how such tactics as side letters are legal. In finance, there's numerous hoops and rules to jump through to actually prove that you sold and asset and did not merely engaged in a dressed up repo transaction. a few links https://en.wikipedia.org/wiki/Repo_105 https://en.wikipedia.org/wiki/Repo_105 https://www.deallawwire.com/2017/05/18/true-sales-a-refresher/ https://www.deallawwire.com/2017/05/18/true-sales-a-refreshe...

nmfisher 6y ago
Side letters are legal. Lying to an auditor is not. Ideally, auditors would verify the legitimacy of a transaction with the counterparty. As in, physically visit their office and speak to the person whose signature is on the contract. Unfortunately, this is impractical when there are hundreds or thousands of such contracts every year. There aren’t enough auditors and there’s not enough time. So mostly, auditors rely on the assumption that they’re not being provided with falsified documents, and they’re not being lied to. Unfortunately, that’s sometimes (often?) just not true. Even though it’s illegal, it’s still highly vulnerable to exploitation.