Krista L. Farmer
Dr. Randolph A. Stanley, Professor
ACC499 – Accounting Undergraduate Capstone
November 17, 2012
Fraud at Electronic Game Card, Inc.
Discuss the nature of the fraud and the impact to the company as a result of the fraudulent activity. Electronic Game Card Inc. develops, produces, and markets electronic, credit card sized games to the casino, lottery, toy, game, education, and promotional industry worldwide. Chief executive officer Lee Cole and chief financial officer Linden Boyne secretly funneled millions of shares of the company’s stock to entities in Gibraltar which they secretly controlled. Those entities then sold off the stocks and had the funds transferred to people and companies associated with Mr. Lee and Mr. Boyne (U.S. Securities and Exchange Commission, 2012). The Securities and Exchange Commission charged three executives of Electronic Game Card Inc. and their independent auditor with continually lying to investors about the operations and financial condition of the company. The executives had reported to investors that they had millions of dollars in revenues, investments, and an off-shore bank account. In actuality, the bank account did not exist, and the investments were in companies affiliated with two of the executives of the company, Mr. Cole and Mr. Boyne (U.S. Securities and Exchange Commission, 2012). Both of these men were charged in the case. The independent auditor, Timothy Quintanilla, was charged with continually issuing clean audit opinions based on careless and incomplete audit work. Kevin Donovan, who replaced Lee Cole as chief executive officer of Electronic Game Card Inc., was also charged with giving false information during conference calls with analysts and investors (U.S. Securities and Exchange Commission, 2012). The result of the fraud committed by executives and the auditor is the necessity to file for bankruptcy, its stock...