Livent - When Maria…When?
Ethics Case: Livent – When Maria…When?
Summary Livent, a successful live entertainment company, known for performances of Phantom of the Opera, Ragtime, and Sunset Boulevard, was sold in 1998 to buyers that found the value the paid for the company was an illusion. Livent’s chief financial officer, Maria Messina, who joined Livent in 1996 after serving as its auditor at Deloitte & Touche, had been immersed in what the Securities & Exchange Commission (SEC) charges was a “multifaceted and pervasive accounting fraud” (“At Livent,” 1999). By using special software to carry out accounting manipulations, the top executives at Livent masked losses and shifted costs, creating results that enabled them to raise more that $179 million in public equity and debt markets. According to the SEC the manipulations were so exhaustive, the senior vice-president for finance, Gordon Eckstein, insisted that Livent keep two sets of books, one to keep track of Livent’s true finances and one for the phony numbers.
Maria may have been kept in the dark while at Deloitte, but she admitted joining the scheme after her attempts to persuade Mr. Eckstein to stop the fraud failed. Maria did not disclose the manipulations to an outsider until July 1998 when she met the new owner’s chief executive officer, Roy Furman, and again in August 1998, when she met with the new executive vice president, Robert Wheeler. By this time, Maria had not only committed a felony crime, she also destroyed her credibility as a professional accountant and in her words, her life.
1. Did Maria blow the whistle at the right time? Why or why not? Maria waited too long to blow the whistle and take action
Summary Livent, a successful live entertainment company, known for performances of Phantom of the Opera, Ragtime, and Sunset Boulevard, was sold in 1998 to buyers that found the value the paid for the company was an illusion. Livent’s chief financial officer, Maria Messina, who joined Livent in 1996 after serving as its auditor at Deloitte & Touche, had been immersed in what the Securities & Exchange Commission (SEC) charges was a “multifaceted and pervasive accounting fraud” (“At Livent,” 1999). By using special software to carry out accounting manipulations, the top executives at Livent masked losses and shifted costs, creating results that enabled them to raise more that $179 million in public equity and debt markets. According to the SEC the manipulations were so exhaustive, the senior vice-president for finance, Gordon Eckstein, insisted that Livent keep two sets of books, one to keep track of Livent’s true finances and one for the phony numbers.
Maria may have been kept in the dark while at Deloitte, but she admitted joining the scheme after her attempts to persuade Mr. Eckstein to stop the fraud failed. Maria did not disclose the manipulations to an outsider until July 1998 when she met the new owner’s chief executive officer, Roy Furman, and again in August 1998, when she met with the new executive vice president, Robert Wheeler. By this time, Maria had not only committed a felony crime, she also destroyed her credibility as a professional accountant and in her words, her life.
1. Did Maria blow the whistle at the right time? Why or why not? Maria waited too long to blow the whistle and take action
References: At Livent, Is Fraud The Thing? (1999, February 14). Retrieved January 16, 2015, from http://www.businessweek.com/stories/1999-02-14/at-livent-is-fraud-the-thing Brooks, L. J., & Dunn, P. (2015). Business & professional ethics for directors, executives & accountants (7th ed.).