1) An anonymous caller notified a bank that $100,000 had been stolen from one of its electronics supply subsidiaries. 2) An internal auditor investigated and discovered the president's son was selling inventory from the supply company at half price to a construction firm, effectively stealing $100,000. 3) The construction firm admitted to the scheme after being contacted by the auditor. Within 48 hours, the president retired and his son fled the state, returning $100,000 in cash to the bank.

1. SJCC, Bangalore
Business Ethics
ASSIGNMENT No. 1
Case Study: The Magical $100,000
by Dennis Greer
Accounting
On a weekday morning in 1975, there was an anonymous phone call to a cash teller at one
of the nation's largest national banks. The anonymous caller stated that an employee had
just stolen $100,000 from an electronics supply subsidiary of the bank. The Financial VP of
the bank was notified; he called in one of the internal auditors and assigned him to solve
the case. The auditor, working in conjunction with a retired FBI agent, employed a
secretary and immediately set up an office at the electronics supply plant. An analysis of
the accounting records showed that the theft involved inventory. The first step was to
interview many of the 100 employees of the plant including all plant officers. None of the
employees knew anything about the inventory.
An analysis of the Accounts Receivable records showed that a major building construction
firm only owed $9.54, though its supply trucks were always picking up large amounts of
electronic inventory. He immediately became unavailable for questioning! Several days
later the auditor was contacted by an attorney representing the building construction firm
for an appointment for his client and himself. When the auditor arrived, the attorney
stated, "I want you to know that my client has done absolutely nothing wrong! But here is
some information you might like to know." The attorney then explained how the 30-year-
old son of the president of the electronics supply plant would sell inventory at one-half
price if the construction firm made out the checks to the son personally. They had, in effect,
purchased $200,000 of inventory for only $100,000.
This information of the theft was immediately supplied to the Financial VP and the bank's
attorneys. Within 48 hours, the president of the electronics supply plant retired. His son
had fled the state and $100,000 in cash was returned to the bank.
Questions:
1) Did the employees know of the lost inventory?
A. As we read the case study, they say 'the first step was to interview many of the 100
employees of the plant including all plant officers. None of the employees knew anything
about the inventory'. But, since there was an anonymous call stating $100,000 was stolen. We

2. can say that at least one of the employees would have had some knowledge of the lost inventory.
2) If they did, why didn't they tell more?
A. Fear. Since one of them knew about the missing inventory, they would have known that the
President’s 30 year old son was involved. The president would have a lot of power to put the
whole blame on the employees who had knowledge about the theft.
3) Were the president of the construction firm and his employees honest?
A. The clients attorney had given information to the auditor stating that '30-year-old son of the
president of the electronics supply plant would sell inventory at one-half price if the
construction firm made out the checks to the son personally. They had, in effect, purchased
$200,000 of inventory for only $100,000.' Since they were personally making out cheques to
the son to purchase. This shows that they were dishonest well.
4) Had they done anything wrong?
A. Yes. Even after having knowledge that the son was selling at a lesser price to them. They still
continued having transactions with the son and he was being paid personally by cheque by the
construction firm.
5) Could they be sued?
A. They could have been sued as there were illegal transactions going on with the supplier and
the construction company though they had knowledge about it.
6) Why did the father retire?
A. The father would have retired after finding out that his son was involved in theft or maybe the
company would have asked him to retire.
7) What was his responsibility?
A. As he was the President of the company, it was his responsibility to ensure that nothing would
go wrong with his company being involved in theft.
8) Should the bank's corporate officers go to the police and indict the son on grand theft?

3. A. An internal investigation has to be done finding out the reason of why the theft happened after
the internal investigation was done to why the theft occurred. The decision would be taken be
taken by the higher authorities of the bank whether to go to the police or not.
9) The bank received back $100,000 from the theft. Where from?
A. The bank could have received from the construction company as they had the fear of being
sued for the illegal transaction or the money could have been received from the son after he was
caught of his illegal transaction or the sons father would have paid the bank after trying to
convince them not to file a police case against his son.