If you have ever built a house with a deck of cards, you know that one wrong move can cause the paper structure to fall. It doesn’t take much to cause a shaky foundation to collapse – an unsteady hand, a light breeze or a bumped table can compromise the integrity of the building. You can also look at designing a successful company in the same way. To build one that lasts, a good company will hopefully have a strong foundation consisting of knowledgeable leaders who operate with integrity. The South Florida Business Journal reports on how a former CEO, who was seriously lacking in the integrity department, watched his empire come crashing down after he was caught committing fraud that earned him $200 million, which was used to fund his lavish lifestyle.
The story details that the CEO of a body armor supplier had a serious love for horse racing. (We all have our extra-curricular activities.) He financed his obsession by looting his own company, defrauding company investors and lying to the Securities and Exchange Commission – as well as public investors, all while profiting from insider trading. (Yeah…we don’t all do that to fund our interests.) And another important tidbit – the company knowingly manufactured and sold defective bulletproof vests to law enforcement and the U.S. military. (This con risked the lives of many men and women to fund his greed.)
The complex fraud scheme paid for corporate-paid trips to exotic locations, a luxury car, an armor-plated vehicle, plastic surgery for his wife, a burial plot for his mother, $40,000 leather-bound invitations for his son’s bar mitzvah and a $101,000 belt buckle with diamonds, sapphires and rubies. (It appears that he spared no expense.) He also had a habit of scalping company tickets to sporting events and concerts and reportedly kept more than $300,000 from the proceeds.
The man was convicted on 14 counts of conspiracy, mail and wire fraud, securities fraud, obstruction of justice, and lying to auditors. He also pleaded guilty to conspiracy to defraud the Internal Revenue Service and filing false income tax returns. He was ordered to pay a fine of $8.7 million and to forfeit nearly $65 million in illegally-gained profits to the U.S. The court will determine how much he must pay in restitution to the victims of his fraud scheme. He will be serving a sentence of 17 years for orchestrating the crime.
For someone who loves horses so much, he didn’t have much horse sense. The cards were stacked against the fraudster because greed always leaves a money trail. Unfortunately, the former CEO not only cheated American taxpayers, but he also put the lives of our men and women in law enforcement and the military at risk. This company had a shaky foundation from the beginning and was bound to collapse.