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Centennial Technologies Inc Scam 1996

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  1. 1. Centennial Technologies Inc Scam 1996 Presented by- SHIFALI GARG
  2. 2. INTRODUCTION Centennial Technologies, Inc • Founded by Emanuel Pinez in 1987, Centennial makes PC memory cards. • The company went public in 1994 . • As a global leader, Centennial integrates patented and proprietary technology into application specific cards for commercial, industrial and military markets. • The company's international sales and service operations are headquartered in the United Kingdom. • It was once considered a Wall Street darling.
  3. 3. PERSONS INVOLVED • Mr. Emanuel Pinez • Former chief financial officer, James Murphy • The company's auditor, Coopers & Lybrand
  4. 4. Emanuel Pinez • He was the CEO of Centennial Technologies. • He has homes in Canada, Switzerland and suburban Boston. • In 1996, on the strength of vigorous revenue growth and alleged boasts by Pinez that a big contract from AT&T was imminent, the stock took off. • Pinez's paper wealth was US$244 million.
  5. 5. SCAM • In December 1996, Emanuel Pinez, the CEO of Centennial Technologies, and his management recorded that the company made $2 million in revenue from PC memory cards . • Emanuel Pinez was accused of trying to profit from a decline in Centennial's stock by buying put options and selling call options on the stock. • On 11 February 1997 he was fired by the board of his own company for allegedly falsifying inventory reports and inflating sales figures.
  6. 6. Contd.. • On 15 February 1997 he was arrested by FBI agents and sued by the Securities and Exchange Commission for stock fraud. • Between April 1994 and December 1996, Centennial overstated its earnings by about $40 million.
  7. 7. Contd… • The employees created fake documents to appear as though they were recording sales. • Centennial's stock rose 451% to $55.50 per share on the New York Stock Exchange (NYSE). • According to the Securities and Exchange Commission (SEC), between April 1994 and December 1996, Centennial overstated its earnings by about $40 million. • Emanuel Pinez pleaded guilty to masterminding a huge fraud that made his company's stock the top performer on the New York Stock Exchange in 1996.
  8. 8. Contd… • The company reported profits of $12 million when it really lost about $28 million. • The stock plunged to less than $3. • Over 20,000 investors who lost $150 million to $376 million. • The firm's troubles became public in Feb 10 1997 when firm had fired former Chief Executive Emanuel Pinez for misstating financial results .
  9. 9. Contd.. • The court sentenced the Pinez to five years in prison for stock fraud . • And ordered him to make restitution of almost $150 million by liquidating all his assets. • Among other misdeeds, Pinez is accused of engineering phony sales transactions to boost Centennial's revenues. • In one infamous scheme, Centennial allegedly shipped fruit baskets to customers to create fake shipping documents.
  10. 10. • Centennial's stock began to sink in January 1997 when questions emerged about Pinez's academic credentials and the company's financial reports. • As the stock plunged, Pinez's brokers conducted an options trade on his behalf aimed at profiting from the fall in Centennial's stock price.
  11. 11. AFTER THE SCAM • Centennial Technologies Inc. stock plunged 76% . • Centennial, the top performer on the NYSE will be off the Big Board and every other major U.S. stock exchange . • Centennial had to pay out $1.475 million in cash and give up 37 percent of its stock to settle dozens of shareholder suits.
  12. 12. • The company is now battling back under new management and has reported four consecutive profitable quarters. • But the damage allegedly engineered by Pinez was severe.
  13. 13. THANKYOU