Discussion:
"CompUSA Executives Allegedly Stole Millions"
As the e-Activity states, CompUSA executives were criticized for employing a "pay for play" model that meant vendors who paid the company more were given more exposure in stores and in promotions. Assess the congruity of this model enforced by CompUSA in relation to capitalist ideals. Based on your assessment, challenge or support the "pay for play" model on moral grounds.
The CompUSA e-Activity mentions that the Fiorentino brothers violated their "fiduciary responsibilities" to the company, which ultimately resulted in the company losing millions of dollars; however, one may question if there are ever legitimate business reasons to engage in such activities. Support or challenge the position that, at times, there are legitimate business reasons for accepting bribes or kickbacks.
CompUSA Executives Allegedly Stole Millions
Systemax, the parent company of CompUSA, filled a lawsuit against the Fiorentino brothers alleging the former executives stole millions of dollars in electronics while also accepting tips and kickbacks. The claim alleges that Gilbert Fiorentino, former CEO of Systemax's Technology
Products Group and founder of TigerDirect, as well as his two brothers Carl and Patrick were the masterminds behind "a long term scheme that diverted millions of dollars in company assets for their own personal use and the use of family and friends." The suit tells a classic tale of executives abusing their power and influence for personal gain.
The Fiorentino brothers we once lauded as successful entrepreneurs who grew a small direct-mail catalog company into what is known today as CompUSA. CompUSA is a national electronics chain that is owned by Systemax, a Fortune 1000 company. The trio fell from grace when a whistle-blower caused an investigation that brought the brothers' unethical behavior to light. Because of the issues uncovered by the initial inquiry, the Securities and Exchange Commission launched a formal investigation. This news came as little surprise to many company insiders who reported a culture of "fear and intimidation" within the company.
Vendors described a "pay for play" model where suppliers who paid the most money got the most exposure in stores and online media promotions. They also reported the brothers ruled with a "tight fist" and said that they had "little choice if they wanted to work with the company." Several inside employees acknowledged that they were aware of the unethical practices, yet stated that they kept quiet out of fear of losing their jobs.
The brothers have been formally accused of unjust enrichment, civil conspiracy, and breach of fiduciary duty. Systemax is seeking "millions of dollars in damages," with one report filed with the Miami-Dade Police Department estimating $17 million in stolen electronics alone. Other misconduct alleged in the lawsuit includes theft and waste of company property and stolen merchandise that wassecretly loaded into personal vehicles or stashed in various 'hiding places' and passed on to children, family, and friends. The brothers are accused of allowing certain vendors to overcharge for merchandise, taking the difference between what "reasonably" should have been billed as kickbacks.
Additionally, family members were added to company payroll and allotted benefits despite having no official job responsibilities with the company.
Works cited:
• Walker, Elaine. "Lawsuit: Former CompUSA executives stole millions." The Palm Beach Post: Jan. 9, 2012
( www.palmbeachpost.com/news/business/lawsuit-former-compusa-executives-stole-millions/nL26P/)
• Silver, Stephen. "Systemax Suit Alleges Fiorentinos Stole Millions." Dealerscope: Jan. 24, 2012
( www.dealerscope.com/article/systemax-suit-alleges-fiorentinos-stole-millions/1)