In the first year of our MBA program we have written a case series that,
inter alian, looks at Al Dunlap and Sunbeam where they instituted a "bill
and hold" program much as Deb describes.  In some cases grills were shipped
not even to the customer, but to an independent warehouse that Sunbeam paid
for.  Despite this and a generous returns policy, these were accounted for
as actual sales.  The proram was described in various accounting reports,
but its impact on future sales was not specified.
The SEC and private fraud lawsuits are still pending.
Ross Petty
----- Originl Message -----
From: "deb ballam" <[log in to unmask]>
To: <[log in to unmask]>
Sent: Monday, October 23, 2000 1:02 PM
Subject: securities law question


> I love reading all of the answers when someone asks a question so I
decided
> to ask a question regarding securities law.  This issue came up in my
class
> last week.
>
> Company A has had flat sales during the last few months and is worried
> about the impact the flat sales will have on its stock price.  As the end
> of the quarter reporting period approaches, Company A asks Company B,
which
> is one of A's biggest purchasers, if B will buy $200,000,000 worth of
goods
> from A so that A's end of quarter report will be more favorable.  B
> certainly would have purchased this amount over the next year, but if it
> had not been for this request, would not have purchased anything from A
> before the end of the quarter.  The goods have long life and can easily be
> warehoused by B.  Because of this purchase, B will not make any other
> purchases from A for at least the next 10-12 months.  The motive for the
> purchase, of course, is not disclosed publicly.
>
> Does this kind of transaction equate to a securities law violation by
> Company A for misleading its investors?
>