Happy Monday, fellow fraud-connoisseurs! Much like the falling leaves of Autumn, the waning year brings us no shortage of falling stock prices, falling investment valuations, and C-suite executives taking falls. Let’s dive right in…
Under Armour faces federal investigation over its accounting practices (CNBC)
“Under Armour is the subject of federal investigations by the Justice Department and Securities and Exchange Commission over its accounting practices, the company confirmed Sunday.
Under Armour began responding in July 2017 to requests for documents and information related to its accounting practices and related disclosures. Under Armour is cooperating with both investigations and believes its accounting practices and disclosures were appropriate, a company spokesperson said.
The Justice Department is conducting a criminal investigation and is coordinating with civil investigators at the SEC, according to The Wall Street Journal, which first reported the story. The SEC declined to comment. The Justice Department did not immediately respond to requests for comment.
Under Armour has struggled on its home turf as of late in the face of stiff competition from Nike, Adidas and Lululemon. Its sales in North America dropped 2% in 2018 to $3.7 billion. Analysts say the retailers’ “performance” focused gear, like sweat-proof shirts, does not resonate with as many shoppers.
Under Armour has also faced turmoil in its executive ranks. The company went through three CFOs in the period between 2016-2017 and is currently in the midst of a transition in its management.
CEO and founder Kevin Plank plans to step down from the top job on Jan. 1, and will be replaced by COO Patrik Frisk. Plank plans to stay on at the company as executive chairman and brand chief.
Plank said the change was part of the company’s succession planning.
There has also been public controversy over Under Armour’s work culture. Employees reportedly charged visits to strip clubs on their corporate cards to win over athletes. Under Armour ended the practice and Plank promised to build a “diverse” and “inclusive” environment at the company in the wake of the controversy.
The company’s stock closed up 2.37% at $21.41 Friday. Under Armour’s stock is down nearly 11% over the past 12 months.”
One of our favorite reads is NYU Marketing Professor Scott Galloway’s Blog No Mercy/No Malice. If all Prof. Galloway had ever accomplished was coining the business term “Yogababble,” That would have been enough in my book to elect him to the business-blogger Hall of Fame (if such a thing existed. Get on it, WordPress!). However, he’s done much more than that. Back in August, he called the WeWork debacle before it all came crashing down. He also rightly identified it for what it was – a scam, specifically a scam perpetrated by founder Adam Neumann. Galloway predicted that Neumann would bail when the house of cards he had built started to collapse, and would take an ungodly sum of cash with him when he left, essentially leaving investors and employees holding the bag.
Now, Isheka N. Harrison has expanded on Prof. Galloway’s thesis, and made the case for why Neumann will very likely get away absolutely scot-free. It’s hard to argue against the benefits of Upper Middle Class Pseudo Hippie Sociopath White Privilege when confronted with the We Work story. It’s a crazy one, and worth diving into!
Is There a Wine Cellar in Federal Prison? Former Woodbridge Group CEO gets 25 years in $1.3-billion fraud (San Diego Union-Tribune)
“Robert Shapiro, the former chief executive of Woodbridge Group of Cos., received the maximum sentence of 25 years in prison for running a $1.3-billion fraud that caused more than 7,000 retirees and other investors to lose money.
Shapiro, 61, of Sherman Oaks, promised returns as high as 10% from investments in loans to property developers. Instead, he used money from new investors to repay earlier ones and used $36 million to buy luxury homes, wines, paintings and custom jewelry for his wife.
U.S. District Judge Cecilia Altonaga in Miami sentenced Shapiro on Tuesday, giving him twice the amount of prison time suggested by his lawyers, according to court records.
Shapiro’s team argued that he’s in poor health and that the 25-year term recommended by prosecutors is harsher than the sentence he would probably have gotten for armed bank robbery, hijacking an airplane, sexual abuse of a child or even murder.
Prosecutors said Shapiro moved money through a network of 270 limited liability companies that he controlled. Investors lost $450 million, according to the government.
The scam ran from July 2012 until December 2017, when Woodbridge filed for Chapter 11 bankruptcy protection.
Shapiro pleaded guilty to conspiracy and tax evasion in August. In November 2018, he agreed to pay $120 million to resolve related civil claims by the U.S. Securities and Exchange Commission. Two alleged co-conspirators are scheduled for trial in June.
Prosecutors said Shapiro used investor money for his $6.7-million home and $3.1 million for chartering planes and personal travel. He agreed to forfeit artworks by Pablo Picasso, Alberto Giacometti, Marc Chagall and Pierre-Auguste Renoir; 603 bottles of wine; numerous pieces of luxury jewelry; and a 1969 Mercury convertible.”
See you on Whistleblower Wednesday!