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Happiness Express

In: Business and Management

Submitted By liaaa
Words 5098
Pages 21
Budgie Crashes, Dudley is a Dud
In the spring of 1995, shortly before the close of Happiness Express’s 1995 fiscal year, a Wall Street investment firm projected a “precipitous” drop in the company’s earnings during fiscal 1996. The firm predicted that declining interest in the Mighty Morphin Power Rangers television program would quickly translate into falling sales of licensed merchandise featuring those characters, Joseph Sutton responded to that grim prediction by referring to another earnings forecast for Happiness Express released at approximately the same time by Donaldson, Lufkin & Jenrette (DLJ), a major investment banking firm. This latter forecast a sizeable increase in revenues and profits for Happiness Express during fiscal 1996.
To support this second forecast, Sutton revealed that his firm’s backlog of toy orders in the spring of 1995 was nearly three times larger than the company’s backlog 12 month earlier. While admitting that sales of Power Rangers merchandise would likely decline in fiscal 1996, Sutton insisted that the company’s new product would more than make up for those lost sales. Bolstering Sutton’s point of view regarding his company’s future were the record operating results that Happiness Express reported in the late spring for fiscal 1995 of $7.5million was nearly double the figure reported the previous year, while its 1995 revenues rose to $60million, a 50% increase over the previous 12 months. Approximately one-half of the latter increase was attributable to Happiness Express’s fourth-quarter sales. During the fourth quarter of fiscal 1994, the company reported sales of $2.3million; that figure was dwarfed by the $12.8million of sales the company reported for the fourth quarter of fiscal 1995
Despite Joseph Sutton’s rosy outlook for his company, fiscal 1996 proved to be a difficult year for Happiness Express. By the fall of 1995, sales of Power Rangers merchandise has fallen off drastically. Making matters worse for Happiness Express, Budgie the Little Helicopter failed to capture the imagination of children in the United States despite intense promotional efforts by the company and the Duchess of York. Likewise, children’s response to Dudley the Dragon was underwhelming. In early September 1995, the price of Happiness Express common stock plunged when Joseph Sutton publicity admitted that DLJ’s earning forecast for fiscal 1996had been optimistic. The day following the announcement, the company was rocked by the filing of the large class-action lawsuit that named Happiness Express’s previous financial statements had been engaged in ‘insider trading’. As those executives were touting the company’s promising prospects earlier in the year, they were allegedly selling large blocks of the company’s stock that they owned.
As the end of fiscal 1996, approached, Happiness Express’s sales continued to sag, which caused management to issue an earnings release indicating that the company would reports a loss of $14 to $17 million for the year. That news sent the company’s stock price plummeting to less than $2 per share. A few days later, a company spokesperson revealed that federal authorities, including representatives of the Securities and Exchange Commission (SEC), had seized certain accounting records and documents of Happiness Express and were launching an investigation of financial irregularities within the company. More bad news arrived on May 31,1996, when Happiness Express’s audit firm, Coopers & Lybrand sent to Joseph Sutton to notify him on that decision.
Throughout the summer of 1996, the financial condition of Happiness Express worsened, on September 25, the company’s board of directors filed for bankruptcy and fired Isaac Sutton; two days later, Jospeh Sutton resigned as CEO. In May 1999, the SEC filed a criminal complaint against Joseph Sutton, Isaac Sutton, and Happiness Express’s former chief financial officer (CFO), Micheal Goldberg. The complaint also names Goldberg’s close friend and Goldberg’s former landlord as defendants.
The SEC charged the Suttons and Goldberg with inflating Happiness Express’s sales and net income for fiscal 1995 and 1996. For fiscal 1995, the SEC revealed that the company had actually incurred a net loss of $7.5 million net income it had reported. Happiness Express’s executives had apparently booked phony sales and receivables to conceal the company’s deteriorating financial condition and operating results from Wall Street analysis, investors, and other parties. The primary source of the company’s financial problem that had prompted the fraudulent scheme was the sudden drop in sales of Mighty Morphin Power Rangers merchandise.
The SEC alleged that Michael Goldberg had sold Happiness Express common stock during 1995 before the fraudulent scheme was revealed, allowing him to earn ‘illicit’ trading profits of approximately $310,000. Additionally, the SEC‘s investigation indicated that Goldberg had provided ‘material non public information concerning Happiness Express’s poor financial condition’ to two other individuals, his close friend and landlord. Reportedly, the close friend had used this information to earn large trading profits by ‘shorting’ the common stock of Happiness Express. The nonpublic information that the landlord received from Goldberg caused him to sell Happiness Express’s common stock that he owned before the company’s true financial condition and operating result were publicly reported.

Class-action lawsuit targets coopers & Lybrand.
Coopers & Lybrand was the principal target of the multimillion-dollar, class-action lawsuit filed by Happiness Express’s stockholders in the fall of 1995. Plaintiff attorneys in that lawsuit alleged that Coopers & Lybrand had recklessly audited Happiness Express’s financial statement for fiscal 1995, which prevented the firm from uncovering millions of dollars of bogus sales and corresponding receivables in the company’s accounting records. Approximately $6 million of the bogus revenues involved fictitious sales to wow wee international. Ltd and west coast liquidators that had been booked by happiness Express’s accounting staff near the end of fiscal 1995.
The allegations included in the class-action lawsuits focused almost exclusively on the audit procedure Coopers& Lybrand had applied to Happiness Express’s 1995 sales and to the company’s 1995 year-end receivables. Plaintiff attorney charges that Coopers& Lybrand audit team had failed to obtain a through understanding of Happiness Express’s operations and internal control and as results, failed to properly plan the 1995 audit. For examples, the plaintiff attorneys identified several red flags linked to Happiness Express’s year-end receivables that the Coopers & Lybrand auditors had apparently overlooked or ignored. These red flags included a significant change in the nature of Happiness Express’s accounts receivables between the end of 1994 and the end of 1995.
Historically, Happiness Express’s had ‘factored’ most of its accounts receivables. A finance company typically approved or authorized happiness Express’s credit sales before shipments were made to given customers and then provided cash advances for the resulting receivables. This practice significantly reduced the credit risk that Happiness Express’s faced on its outstanding receivables. At the end of fiscal 1994, approximately 88% of Happiness Express’s receivables were factored. Because of the bogus sales (and corresponding receivables) entered in the company’s accounting records near the end of fiscal 1995, only 19 % of its 1995 year-end receivables were factored. The Coopers & Lybrand auditor apparently never learned of this change in the nature of Happiness Express’s accounts receivables and consequently, failed to make the appropriate modifications in their planned audit procedures for that important financial statement line item. The allegation here is the Coopers was reckless when it relied on a previous year’s information without bothering to independent assess the current year’s data, which were vastly different… Coopers (fiscal 1995) workpapers are replete with inaccurate references to condition which did not exist at March 31, 1995. For examples is assessing Happiness controls over its revenues, Coopers noted in its workpapers that: “accounts receivables are predominantly factored (credit risk is not an issue) and the Company obtain credit authorizations from the factor company prior to shipping.
Another red flag Coopers & Lybrand allegedly ignored in planning the 1995 audit was the suspicious nature of the large receivables from Wow Wee and West Coast Liquidators that resulted from credit sales recorded by Happiness Express’s in late fiscal 1995. In facts, Happiness Express’s booked $2.4 million of fictitious sales to Wow Wee,, alone, on the final day of fiscal 1995. The majority of the bogus sales to West Coast Liquidators were recorded in the final month of fiscal 1995. In their civil complaint, the attorneys for Happiness Express’s stockholders pointed out that Coopers & Lybrand’s policy and procedures manual alerted the firm’s personnel to the risk posed by such transactions. “unusually large increase in year-end sales to a single or a few customers is an indicator of the risk of potential material misstatements in the financial statement”
Plaintiff legal counsel also pointed out that Coopers &Lybrand should have doubted the integrity of any credit sales made to Wow Wee since that company was a toy manufacturer and one of Happiness Express largest suppliers. An audit procedure performed by Cooper & Lybrand involved obtaining and testing a Happiness Express report listing the company’s “Top 25 Customers” for the period April 1, 1994 – March 31,1995. The $3.2 million of sales allegedly made to Wow Wee during fiscal 1995 should have placed that company among Happiness Express’s five largest customers. However, Wow Wee did not appear on the “Top 25” list, nor did the Cooper &Lybrand auditors apparently question client personnel regarding this noticeable omission fro that report. During fiscal 1995 audit, the Coopers & Lybrand auditors performed a sales cut-off test, included in this test were the $2.4million of bogus credit sales to Wow Wee recorded by Happiness Express on the final day of fiscal 1995. Plaintiff attorneys contended that carelessness on the part of the auditor caused them to overlook glaring irregularities evident in the accounting documents for those sales. In the performance of the sales cutoff test, Coopers purportedly examined invoices and bills of lading associated with approximately $2.4 million of approximately $3.2 million of phony Wow Wee sales. However, the invoices and bills of lading purportedly examined by Coopers in the performance of this test were highly suspicious on their face. For example, none of these Wow Wee invoices contained customer purchase order number. In addition, at least one of the three bills of lading associated with the fictitious Wow Wee sales purportedly examined by Coopers in the performance of the sales cutoff was, illogically , purportedly signed by the shipping company’s representative on March 29, 1995, two days prior to the date o the bill of lading. Obviously, it would have been impossible for someone to sign a bill of lading before it was generated. Yet, Coopers did not question the legitimacy of the bill of lading. Cooper and Lybrand mailed account receivable confirmations to selected customers of Happiness Express at the end of fiscal 1995. The auditors informed Micheal Goldberg that the Wow Wee receivable was included in the accounts chosen for confirmation. Because Goldberg provided the auditor discussed this matter with Goldberg, he offered to contact the appropriate individual at Wow Wee to ensure that the confirmations returned. The auditors accepted Goldberg’s offer. Goldberg then forged a confirmation and had it faxed to Cooper & Lybrand. The auditor apparently accepted the confirmation without forming any follow-up procedures. The large receivable from West Coast Liquidators accounted for approximately 13 percent of Happiness Express’s accounts receivable at the end of fiscal 1995. However, the receivable was not among the accounts Cooper & Lybrand selected or confirmations. In the civil complaints they field against Cooper & Lybrand, plaintiff attorneys also pointed out that Cooper & Lybrand’s sales cutoff test did not include any of the bogus sales to West Coast Liquidators during the inal month of fiscal 1995. The attorneys maintained that even a cursory investigation of those transactions would have revealed that they were suspicious in nature. In fact, had Coopers even performed the perfunctory procedure of examining Happiness Express’s invoice associated with the year-end receivables from West Coast Liquidators, it would have discovered that they also were highly suspicious on their face. For example, such invoices representing $1,346,598 of purported sales to West Coast Liquidators did not contain any bills of lading or purchase order numbers. Cooper & Lybrand contested each of the allegations included in the class-action lawsuit. At one point, the firm’s legal counsel charged that the allegations involved no more than “nipticking attacks’ by the plaintiff attorneys. U.S District Judge Robert P. Patterson, however, ruled that the allegation were sufficient to allow the case to proceed to trial. In particular, the federal judged rules that, if proven, the plaintiffs’ allegations would support a finding of ‘scienter’ under the federal securities laws. Based on the facts as alleged, a trier of fact could find Cooper’s audit so reckless that Coopers should have had knowledge of the underlying fraud and acted in blind disregard that there was a strong likelihood that Happiness Express was engaged in the underlying fraud. Proving this will be plaintiffs’ burden at trial, but they have alleged facts sufficient to support a finding of scienter on the part of Coopers and so Coopers’ motion to dismiss is denied. After several years of legal wrangling, an out-of-court settlement was reached to resolve the class-action lawsuit stemming from the Happiness Express fraud. In January 2000, the parties to the lawsuit field a legal notice describing the details of the proposed settlement with the federal distinct court in which the case would have been tried. The proposed settlement required Cooper & Lybrand to contribute $1.3 million to a settlement fund. Happiness Express’s former shareholders would receive $715,000, or 55 percent of the settlement und, while the stockholder’s attorneys would receive the remaining $585,000. In the legal notice field with federal court, the plaintiff attorneys were required to state why they supported the settlement. The attorneys noted that a major problem they would have to surmount in pursuing the case was proving that Cooper & Lybrand had a motive to issue a false audit opinion on Happiness Express’s financial statements. Additionally, the plaintiff attorneys admitted that they would have to overcome the contention by Cooper & Lybrand that the Happiness Express auditors had no actual knowledge of the falsifications in the company’s accounting records and financial statements. Finally, even if the jury ultimately ruler in favour of Happiness Express’s former shareholders, the plaintiff attorneys pointed out that the jury might decide the Cooper & Lybrand was responsible for only a small portion of the losses suffered by the stakeholders. As a result, the stockholders might receive only a nominal judgement from the accounting firms. The SEC settled the changes pending against Michael Goldberg by requiring him to pay a $150 000 civil fine and to forfeit the $310,000 of insider trading profits that he had earned while serving as Happiness’s CFO. Goldberg also agreed not to violate federal securities laws in the future, although under the terms o the SEC settlement he neither admitted nor denied the charges that the SEC had filed against him. In February 2003, the SEC issued a litigation release that reported the settlement of the charges pending against Michael Goldberg’s close friend who had received “material non-public information” from Goldberg regarding Happiness Express’s deteriorating financial condition. Goldberg’s friend was required to forfeit the $79,000 of trading profits he had earned by “shorting” Happiness Express’s common stock and to pay a civil fine in the same amount. The SEC also announced that it had settled the insider trading claim filed previously against Goldberg’s former landlord but did not reveal the nature of settlement. In 2003, Joseph Sutton pleaded guilty to conspiracy to commit bank fraud and securities fraud was sentenced to 30 months in federal prison. His brother, Isaac refused plead guilty to similar charges pending against him and instead opted for a jury trial. On September 29, 2004, a New York jury found Isaac Sutton innocent of all fraud charges files against him by SEC.

Budgie Kemalangan, Dudley adalah tak berguna
Pada musim bunga tahun 1995, tidak lama sebelum akhir tahun 1995 fiskal Kebahagiaan Express, sebuah Wall Street firma pelaburan dijangka penurunan "tergesa-gesa" dalam pendapatan syarikat semasa tahun fiskal 1996. Firma itu meramalkan bahawa faedah yang menurun di Mighty Morphin Power Rangers program televisyen dengan cepat akan diterjemahkan kepada jualan jatuh barangan berlesen menampilkan watak-watak, Joseph Sutton menjawab bahawa ramalan suram dengan merujuk kepada satu lagi unjuran pendapatan untuk Kebahagiaan Express dibebaskan pada kira-kira masa yang sama dengan Donaldson, Lufkin & Jenrette (DLJ), sebuah firma perbankan pelaburan utama. Ini ramalan kedua peningkatan besar dalam hasil dan keuntungan untuk Kebahagiaan Express semasa tahun fiskal 1996.
Bagi menyokong ramalan kedua ini, Sutton mendedahkan bahawa tunggakan firmanya perintah mainan pada musim bunga tahun 1995 adalah hampir tiga kali lebih besar daripada tunggakan 12 bulan lebih awal syarikat.Sambil mengakui bahawa jualan Power Rangers barangan mungkin akan menurun pada tahun fiskal 1996, Sutton menegaskan bahawa produk baru syarikat itu lebih daripada akan membuat untuk mereka yang kehilangan jualan. Mengukuhkan titik Sutton pandangan mengenai masa depan syarikat itu adalah hasil operasi rekod itu Kebahagiaan Express dilaporkan pada musim bunga lewat bagi tahun 1995 fiskal $ 7.5million telah hampir dua kali ganda angka yang dilaporkan tahun sebelumnya, manakala pendapatan 1995 meningkat kepada $ 60 juta, 50% meningkat dalam tempoh 12 bulan sebelumnya. Kira-kira separuh daripada peningkatan yang kedua adalah hasil jualan suku keempat Kebahagiaan Express. Pada suku keempat fiskal 1994, syarikat itu mencatatkan jualan sebanyak $ 2.3million; angka yang dwarfed oleh $ 12.8million jualan syarikat yang dilaporkan bagi suku tahun keempat fiskal 1995
Walaupun prospek cerah Joseph Sutton untuk syarikatnya, fiskal 1996 terbukti menjadi tahun yang sukar untuk Kebahagiaan Express. Pada musim luruh tahun 1995, jualan Power Rangers barangan telah jatuh di luar secara drastik. Membuat perkara-perkara yang lebih buruk untuk Kebahagiaan Express, Budgie Helikopter Little gagal untuk menangkap imaginasi kanak-kanak di Amerika Syarikat, walaupun usaha-usaha promosi hebat oleh syarikat dan Duchess of York. Begitu juga, tindak balas kanak-kanak untuk Dudley Naga telah underwhelming. Pada awal September 1995, harga saham biasa Kebahagiaan Express menjunam apabila Joseph Sutton publisiti mengakui bahawa ramalan pendapatan DLJ untuk 1996had fiskal menjadi optimis. Pada hari selepas pengumuman itu, syarikat itu telah menggegarkan oleh memfailkan tuntutan mahkamah tindakan kelas besar yang dinamakan penyata kewangan Kebahagiaan Express sebelumnya telah terlibat dalam 'insider trading'. Sebagai orang-orang eksekutif telah touting menjanjikan prospek syarikat pada awal tahun ini, mereka telah didakwa menjual blok besar saham syarikat yang mereka miliki.
Sebagai akhir fiskal 1996, didekati, jualan Kebahagiaan Express terus mengendur, yang menyebabkan pihak pengurusan untuk mengeluarkan pendapatan melepaskan menunjukkan bahawa syarikat itu akan melaporkan kerugian sebanyak $ 14 hingga $ 17 juta bagi tahun ini. Berita yang menghantar harga saham syarikat itu jatuh kepada kurang daripada $ 2 sesaham. Beberapa hari kemudian, seorang jurucakap syarikat mendedahkan bahawa pihak berkuasa persekutuan, termasuk wakil-wakil daripada Suruhanjaya Sekuriti dan Bursa (SEC), telah merampas rekod-rekod perakaunan dan dokumen tertentu Kebahagiaan Express dan telah melancarkan penyiasatan penyelewengan kewangan dalam syarikat. Lebih banyak berita buruk tiba pada Mei 31,1996, apabila firma audit Kebahagiaan Express, Coopers & Lybrand dihantar kepada Yusuf Sutton untuk memberitahu beliau mengenai keputusan itu.
Sepanjang musim panas 1996, keadaan kewangan Kebahagiaan Express teruk, pada 25 September, lembaga pengarah syarikat memfailkan untuk muflis dan menembak Ishak Sutton, dua hari kemudian, Jospeh Sutton meletak jawatan sebagai Ketua Pegawai Eksekutif. Pada bulan Mei 1999, SEC memfailkan aduan jenayah terhadap Joseph Sutton, Ishak Sutton, dan bekas ketua pegawai kewangan Kebahagiaan Express (CFO), Micheal Goldberg. Aduan itu juga nama-nama kawan rapat Goldberg dan bekas tuan Goldberg sebagai defendan.
SEC dikenakan Suttons dan Goldberg dengan menaikkan jualan Kebahagiaan Express dan pendapatan bersih bagi tahun fiskal 1995 dan 1996. Bagi tahun fiskal 1995, SEC mendedahkan bahawa syarikat itu sebenarnya telah mengalami kerugian bersih sebanyak $ 7500000 pendapatan bersih ia telah dilaporkan. Eksekutif Kebahagiaan Express nampaknya telah ditempah jualan palsu dan diterima untuk menyembunyikan keadaan kewangan merosot syarikat dan keputusan operasi daripada analisis Wall Street, pelabur, dan pihak-pihak lain. Sumber utama masalah kewangan syarikat yang telah mendorong skim penipuan adalah penurunan mendadak dalam jualan Mighty Morphin Power Rangers barangan.
SEC mendakwa Michael Goldberg telah menjual Kebahagiaan saham biasa Express dalam tahun 1995 sebelum skim penipuan diturunkan, membenarkan beliau untuk mendapatkan 'haram' keuntungan perdagangan kira-kira $ 310,000. Selain itu, penyiasatan SEC menunjukkan bahawa Goldberg telah disediakan 'bahan maklumat awam bukan mengenai keadaan kewangan yang lemah Kebahagiaan Express' kepada dua individu lain, kawan rapat dan tuan tanah. Dilaporkan, kawan rapat telah menggunakan maklumat ini untuk mendapatkan keuntungan perdagangan yang besar dengan 'pintasan' saham biasa Kebahagiaan Express. Maklumat bukan umum bahawa tuan tanah yang diterima daripada Goldberg menyebabkan beliau untuk menjual saham biasa Kebahagiaan Express bahawa dia dimiliki sebelum keadaan kewangan sebenar syarikat dan hasil operasi dilaporkan secara terbuka.
Kelas-tindakan saman sasaran Coopers & Lybrand.
Coopers & Lybrand adalah sasaran utama berjuta-juta dolar, tuntutan mahkamah tindakan kelas yang difailkan oleh pemegang saham Kebahagiaan Express pada musim gugur tahun 1995. Peguam plaintif dalam tuntutan mahkamah yang mendakwa Coopers & Lybrand melulu telah diaudit penyata kewangan Kebahagiaan Express bagi tahun fiskal 1995, yang menghalang firma dari mendedahkan berjuta-juta dolar jualan palsu dan diterima sama dalam rekod-rekod perakaunan syarikat. Sekitar $ 6 juta daripada hasil jualan palsu terlibat rekaan untuk wow wee antarabangsa. Ltd dan pantai barat penyelesai yang telah ditempah oleh kakitangan perakaunan kebahagiaan Express berhampiran akhir tahun fiskal 1995.
Dakwaan-dakwaan yang dimasukkan ke dalam tindakan undang-undang kelas-tindakan tertumpu hampir secara eksklusif pada prosedur audit Coopers & Lybrand telah memohon hingga 1995 jualan Kebahagiaan Express dan untuk tahun 1995-akhir penerimaan syarikat. Caj peguam plaintif bahawa Coopers & Lybrand pasukan audit gagal untuk mendapatkan melalui pemahaman operasi Kebahagiaan Express dan kawalan dalaman dan sebagai hasil, gagal untuk merancang audit 1995. Untuk contoh, peguam plaintif telah mengenal pasti beberapa bendera merah dikaitkan dengan akhir tahun belum terima Kebahagiaan Express bahawa Coopers & Lybrand juruaudit nampaknya telah diabaikan atau diabaikan. Bendera merah termasuk perubahan ketara dalam akaun belum terima Kebahagiaan Express antara akhir tahun 1994 dan akhir 1995.
Dari segi sejarah, Kebahagiaan Express mempunyai 'kira' yang paling penghutang akaun. Sebuah syarikat kewangan biasanya yang diluluskan atau dibenarkan jualan kredit kebahagiaan Express sebelum penghantaran dibuat kepada pelanggan yang diberikan dan kemudian diberikan pendahuluan tunai untuk terima yang dihasilkan. Amalan ini dengan ketara mengurangkan risiko kredit yang Kebahagiaan Express yang dihadapi penghutang cemerlang. Pada akhir tahun fiskal 1994, kira-kira 88% daripada penghutang Kebahagiaan Express adalah difaktorkan. Kerana jualan palsu (dan terima sama) dimasukkan dalam rekod perakaunan syarikat di akhir fiskal tahun 1995, hanya 19% daripada tahun 1995 akhir tahun belum terima adalah difaktorkan. Coopers & Lybrand juruaudit nampaknya tidak pernah belajar daripada perubahan ini dalam bentuk akaun belum terima Kebahagiaan Express dan akibatnya, gagal untuk membuat perubahan yang sesuai dalam prosedur audit yang dirancang mereka bagi penyata kewangan perkara penting line.
Dakwaan di sini adalah Coopers adalah melulu apabila ia bergantung pada maklumat yang tahun sebelumnya tanpa mengganggu untuk bebas menilai data tahun semasa, yang jauh berbeza ... Coopers (fiskal 1995) workpapers adalah penuh dengan rujukan yang tidak tepat kepada keadaan yang tidak wujud pada bulan Mac 31, 1995. Untuk contoh yang menilai kawalan Kebahagiaan atas pendapatannya, Coopers dicatatkan dalam workpapers bahawa: "akaun belum terima kebanyakannya kira (risiko kredit bukan satu isu) dan Syarikat mendapatkan kebenaran kredit daripada syarikat faktor sebelum penghantaran.
Satu lagi bendera merah Coopers & Lybrand didakwa diabaikan dalam perancangan audit tahun 1995 adalah sifat yang mencurigakan penghutang besar dari Wow Wee dan Pantai Barat Penyelesai yang terhasil dari jualan kredit direkodkan oleh Kebahagiaan Express pada akhir tahun 1995 fiskal. Dalam fakta, Kebahagiaan Express ditempah $ 2400000 jualan rekaan untuk Wow Wee,, sahaja, pada hari terakhir tahun fiskal 1995. Majoriti jualan palsu ke Pantai Barat Penyelesai telah direkodkan pada bulan yang terakhir fiskal 1995. Dalam aduan sivil mereka, peguam bagi pemegang Kebahagiaan Express menegaskan bahawa dasar Coopers & Lybrand dan prosedur manual dimaklumkan kakitangan firma itu kepada risiko yang ditimbulkan oleh urus niaga tersebut. "Peningkatan yang luar biasa besar dalam jualan akhir tahun kepada pelanggan tunggal atau beberapa merupakan petunjuk risiko salah nyata yang berpotensi dalam penyata kewangan"
Peguam Plaintif juga menegaskan bahawa Coopers & Lybrand sepatutnya meragui integriti mana-mana jualan kredit dibuat untuk Wow Wee sejak syarikat itu adalah pengeluar mainan dan satu Kebahagiaan Express pembekal terbesar. Prosedur audit yang dijalankan oleh Cooper & Lybrand terlibat mendapatkan dan menguji Express laporan Kebahagiaan penyenaraian syarikat "Top 25 Pelanggan" bagi tempoh 1 April, 1994 - Mac 31,1995. The $ 3200000 jualan didakwa dibuat kepada Wow Wee semasa tahun fiskal 1995 sepatutnya diletakkan bahawa syarikat antara lima pelanggan terbesar Kebahagiaan Express. Walau bagaimanapun, Wow Wee tidak muncul pada "Top 25" senarai, juga tidak Cooper & Lybrand juruaudit nampaknya mempersoalkan kakitangan pelanggan mengenai peninggalan ini berulang alik ketara bahawa laporan.
Semasa tahun fiskal 1995 audit, Coopers & Lybrand juruaudit melakukan ujian potong jualan, termasuk dalam ujian ini ialah $ 2.4million daripada jualan kredit palsu untuk Wow Wee direkodkan oleh Kebahagiaan Express pada hari terakhir tahun fiskal 1995. Peguam Plaintif berhujah bahawa kecuaian di pihak juruaudit menyebabkan mereka terlepas pandang penyelewengan ketara jelas dalam dokumen-dokumen perakaunan bagi jualan tersebut.
Dalam melaksanakan ujian potong jualan, Coopers kononnya diperiksa invois dan bil muatan yang berkaitan dengan kira-kira $ 2400000 kira-kira $ 3200000 daripada palsu Wow Wee jualan. Walau bagaimanapun, invois dan bil muatan kononnya diperiksa oleh Coopers dalam pelaksanaan ujian ini adalah sangat mencurigakan di wajah mereka. Sebagai contoh, tidak satu pun daripada Wee Wow invois terkandung pelanggan nombor pesanan. Di samping itu, sekurang-kurangnya salah satu daripada tiga bil muatan yang berkaitan dengan rekaan jualan Wee Wow kononnya diperiksa oleh Coopers dalam melaksanakan potong jualan itu, tidak logik, kononnya ditandatangani oleh wakil syarikat perkapalan itu pada 29 Mac, 1995, dua hari sebelum tarikh o bil muatan. Jelas sekali, ia akan menjadi mustahil bagi seseorang untuk menandatangani rang undang-undang muatan sebelum ia dihasilkan. Namun, Coopers tidak mempersoalkan kesahihan bil muatan.
Cooper and Lybrand dihantar pengesahan akaun belum terima kepada pelanggan terpilih Kebahagiaan Express pada akhir tahun fiskal 1995. Juruaudit dimaklumkan Micheal Goldberg yang diterima Wow Wee telah dimasukkan ke dalam akaun yang dipilih untuk pengesahan. Kerana Goldberg disediakan juruaudit membincangkan perkara ini dengan Goldberg, dia menawarkan untuk menghubungi individu yang sesuai pada Wow Wee untuk memastikan pengesahan dikembalikan. Juruaudit menerima tawaran Goldberg. Goldberg kemudian dipalsukan pengesahan dan telah ia difakskan kepada Cooper & Lybrand. Juruaudit nampaknya diterima pengesahan tanpa membentuk mana-mana susulan prosedur.
Yang boleh diterima besar dari Pantai Barat Penyelesai mewakili kira-kira 13 peratus daripada akaun belum terima Kebahagiaan Express pada akhir tahun fiskal 1995. Walau bagaimanapun, tidak akan diterima adalah antara akaun Cooper & Lybrand dipilih atau pengesahan. Dalam aduan awam mereka terhadap bidang Cooper & Lybrand, peguam plaintif juga menegaskan bahawa jualan ujian potong Cooper & Lybrand itu tidak termasuk mana-mana jualan palsu ke Pantai Barat Penyelesai pada bulan inal fiskal 1995. Peguam menegaskan bahawa walaupun penyiasatan sepintas transaksi yang akan mendedahkan bahawa mereka yang mencurigakan di alam semula jadi.
Malah, telah Coopers walaupun dilakukan prosedur yang acuh tak acuh memeriksa invois Kebahagiaan Express yang berkaitan dengan penerimaan akhir tahun daripada Pantai Barat Penyelesai, ia akan mendapati bahawa mereka juga sangat mencurigakan di wajah mereka. Sebagai contoh, invois yang mewakili $ 1346598 jualan berupa Pantai Barat Penyelesai tidak mengandungi sebarang bil muatan atau nombor pesanan belian.
Cooper & Lybrand dipertandingkan setiap dakwaan yang dimasukkan ke dalam tuntutan mahkamah tindakan kelas. Pada satu ketika, penasihat undang-undang firma mendakwa bahawa dakwaan yang terlibat tidak lebih daripada "serangan nipticking 'oleh peguam plaintif. Hakim Daerah AS Robert P. Patterson, bagaimanapun, memutuskan bahawa dakwaan tersebut adalah mencukupi untuk membolehkan kes itu untuk meneruskan perbicaraan. Khususnya, undang-undang persekutuan yang dinilai, jika terbukti, plaintif dakwaan akan menyokong dapatan 'scienter' di bawah undang-undang sekuriti persekutuan.
Berdasarkan fakta-fakta seperti yang didakwa, yang Trier fakta dapat mencari audit Cooper begitu melulu yang Coopers seharusnya mempunyai pengetahuan mengenai fraud asas dan bertindak dengan mengabaikan buta bahawa terdapat kemungkinan besar bahawa Kebahagiaan Express terlibat dalam penipuan asas. Membuktikan ini akan 'beban pada perbicaraan, tetapi mereka telah didakwa fakta yang mencukupi untuk menyokong dapatan scienter pada bahagian Coopers dan sebagainya Coopers' plaintif usul untuk memecat dinafikan.
Selepas beberapa tahun perbalahan undang-undang, satu penyelesaian di luar mahkamah telah dicapai untuk menyelesaikan tuntutan mahkamah tindakan kelas yang berpunca dari Kebahagiaan penipuan Express. Pada Januari 2000, pihak-pihak kepada bidang tuntutan notis undang-undang yang menerangkan butir-butir penyelesaian yang dicadangkan dengan mahkamah persekutuan yang berbeza di mana kes itu telah cuba.Penyelesaian yang dicadangkan diperlukan Cooper & Lybrand untuk menyumbang $ 1300000 kepada dana penyelesaian. Bekas pemegang saham kebahagiaan Express akan menerima $ 715,000, atau 55 peratus daripada und penyelesaian, manakala peguam yang pemegang saham itu akan menerima baki $ 585,000.
Dalam bidang undang-undang dengan notis mahkamah persekutuan, peguam plaintif dikehendaki menyatakan mengapa mereka menyokong penyelesaian. Peguam berkata bahawa masalah utama mereka akan mempunyai untuk mengatasi dalam meneruskan kes itu membuktikan bahawa Cooper & Lybrand mempunyai motif untuk mengeluarkan pendapat audit palsu ke atas penyata kewangan Kebahagiaan Express. Selain itu, peguam plaintif mengakui bahawa mereka perlu untuk mengatasi perbalahan dengan Cooper & Lybrand bahawa Kebahagiaan juruaudit Express tidak mempunyai pengetahuan sebenar pemalsuan dalam rekod perakaunan syarikat dan penyata kewangan. Akhir sekali, walaupun juri akhirnya pemerintah memihak kepada bekas pemegang saham Kebahagiaan Express, peguam plaintif menegaskan bahawa juri boleh memutuskan Cooper & Lybrand bertanggungjawab untuk hanya sebahagian kecil daripada kerugian yang dialami oleh pihak yang berkepentingan. Akibatnya, pemegang saham mungkin menerima hanya penghakiman nominal dari firma perakaunan.
SEC diselesaikan perubahan yang belum selesai terhadap Michael Goldberg oleh menghendakinya membayar 000 sivil $ 150 dan untuk membatalkan $ 310,000 keuntungan perdagangan orang dalam bahawa dia telah diperolehi semasa berkhidmat sebagai CFO Kebahagiaan itu. Goldberg juga bersetuju untuk tidak melanggar undang-undang sekuriti persekutuan pada masa akan datang, walaupun di bawah syarat-syarat penyelesaian o SEC dia tidak mengakui atau menafikan dakwaan bahawa SEC telah difailkan terhadapnya. Pada bulan Februari 2003, SEC mengeluarkan kenyataan tindakan undang-undang yang dilaporkan penyelesaian caj yang belum selesai terhadap kawan rapat Michael Goldberg yang telah menerima "maklumat bukan awam yang material" dari Goldberg mengenai keadaan kewangan yang meruncing Kebahagiaan Express. Rakan Goldberg telah dikehendaki untuk membatalkan $ 79,000 keuntungan perdagangan beliau telah diperolehi oleh "pintasan" saham biasa Kebahagiaan Express dan membayar denda sivil dalam jumlah yang sama. SEC juga mengumumkan bahawa ia telah menyelesaikan tuntutan perdagangan orang dalam difailkan sebelum ini terhadap bekas tuan Goldberg tetapi tidak mendedahkan sifat penyelesaian.
Pada tahun 2003, Joseph Sutton mengaku bersalah atas konspirasi untuk melakukan penipuan bank dan sekuriti penipuan dijatuhi hukuman 30 bulan penjara persekutuan. Saudaranya, Ishak enggan mengaku bersalah atas tuduhan yang sama yang belum selesai terhadapnya dan sebaliknya memilih untuk perbicaraan juri. Pada 29 September 2004, New York juri mendapati Ishak Sutton tidak bersalah semua caj penipuan fail terhadapnya oleh SEC.…...

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