Officers' fraud on corporation's behalf bars recovery against auditors.Fraud committed by management for the corporation's benefit, as opposed to fraud committed strictly for personal gain, precludes recovery against the auditors, a New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of federal district court ruled. In 1985 and 1986 Crazy Eddie This article is about the electronics store. For other uses, see Crazy Eddie (disambiguation). Crazy Eddie was a consumer electronics chain located primarily in the Northeastern United States- previously called ERS Electronics (ERS stood for Eddie, Rose and Sam – , Inc., offered its stock to the public on three occasions. In order to enhance the stock's value, Crazy Eddie's controller had created the appearance of a growing company by inflating net income, inventory and sales figures sales figures npl → cifras fpl de ventas . A physical inventory taken by management in 1987 discovered inventory overstated o·ver·state tr.v. o·ver·stat·ed, o·ver·stat·ing, o·ver·states To state in exaggerated terms. See Synonyms at exaggerate. o by $65 million and the company's net worth overstated by $86 million. Crazy Eddie's former controller admitted preparing false inventory records and sales figures. He also confessed to filing false financial information with the Securities and Exchange Commission. Crazy Eddie subsequently went bankrupt. The company's liquidator sued KPMG KPMG Klynveld Peat Marwick Goerdeler (accounting firm) KPMG Kaiser Permanente Medical Group KPMG Keiner Prüft Mehr Genau (German) KPMG Kommen Prüfen Meckern Gehen Peat Marwick for negligence and breach of contract in failing to discover the fraud and irregularities in the company's financial statements, which were audited by Peat for 1983, 1984 and 1985. Peat asserted the fraud committed by Crazy Eddie's former officers and directors for the benefit of the corporation barred the liquidator's recovery against the accounting firm. The court held when officers of the corporation act for their, own benefit, rather than the corporation's, the acts cannot be imputed Attributed vicariously. In the legal sense, the term imputed is used to describe an action, fact, or quality, the knowledge of which is charged to an individual based upon the actions of another for whom the individual is responsible rather than on the individual's to the corporation and the claim is not barred against the auditors. But when officers commit fraud on the corporation's behalf (or on both the corporation's and their own behalf) the fraud can be imputed to the corporation, barring claims against the auditors. The officers' motives in committing fraud are to be determined by the jury. |
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