Assignment -
Apply the fraud triangle to Scrush.
What evasive tactics did you observe in the Scrushy interview (be specific)?
In the interview, Richard Scrushy claims that he is innocent and that it was others who committed the fraud. In your opinion, based solely on this interview with Scrushy, indicate whether you agree or disagree with Scrushy's claim.
1. Motivation - His stock options, salaries, bonuses benefit directly when the company is meeting or beating earnings expectations in the stock market. As the CEO of the company, he benefits more than anyone else from the fraud. He was also living 'high', so he needed the stock price to be high to continue with his lifestyle. The fraud was not a one time deal, but happened over many years. Later when the company had the potentially struggle with bankruptcy, he had the motive to sell high.
Opportunity - As the CEO of the company, he is in the best position to commit the fraud due to his authority and power. Once the CFOs cooked the books for him once, he had the opportunity to ask them again and again in subsequent quarters. He also had a good reputation before the fraud, and was able to give investors confidence in the company even though it wasn't doing well financially, such as his television interview when he said he thought the stock should be in the 20's.
Rationalization - His rationalization was that selling 99 million in stock was something any other MBA would do, and the american dream. He also rationalized to his CFOs that other companies cook the books too. He also rationalizes that he deserved the right to keep some of the money because he built up the company from nothing.
2. When the interviewer told Scrushy about how everyone claims he is a crook, he tried to attack the interviewer by calling his name and saying that he 'knows' he is not.
When initially asked about the CFO's motive to commit the fraud, he tried diverting the question by saying he certainly didn't commit the fraud, and people know he wouldn't.
When asked again, he initially declined to answer the question, then later gives his reasoning for the CFO's motive.
Scruchy was gave an equivocal answer when asked whether he kept track of the financial numbers. Rather then answer whether he did or not, he just says that CEOs don't do that, rather it is the CFO's job.
Furthermore he gives 'half' answers such as not selling the stock at the highest point, even though he sold the stock at the 10-14s which is much higher than the 3s during the interview. And he says he didn't sell the company out, to only later say that he didnt' sell 'all' of it.
He attacks the interview later on again by saying that $99 million dollars was going away, and asking what the interviewer or anyone would have done.
Finally when the interviewer askes whether he thinks everyone that accused him of being a crook is wrong but he is right, he tries to evade the question again by saying that the testimony of people who were criminals and felons would say otherwise.
Attachment:- Assignment File.rar