Cardinal Health: a Kickback Scheme for Company

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Cardinal Health: A Kickback Scheme for Company

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June 2012

Southern New Hampshire University

ACC 421 Auditing and Forensic Accounting

A fraud that occurred recently was the corruption charges brought against Cardinal Health a pharmaceutical company based in Dublin, Ohio. The fraud involved Cardinal health paying pharmacies kickbacks in other to ensure that the pharmacies purchased prescription drugs for their pharmacies from them. Kickback schemes are a type of corruption scheme that involves the company bribing pharmacy owners or pharmacy companies for some sort of favor. While this type of fraud is for the company rather than against the company, it could potentially be very damaging in the long run.

This fraud was detected through the help of a whistleblower in the form of a pharmacy owner who was paid close to a half a million dollars to divert business to Cardinal health. This fraud is designed to increase Cardinal Health’s sales thereby causing an inflation in its sales, which in turn falsely increases its profits and earning of the company its shareholders. Cardinal Health was forced to pay $8 million to resolve false claims act allegations. While this fraud may not be looked as very damaging because the company did not go bankrupt, the payment made in damages could have been larger and harder to recover from. On the other hand, it could have made the company’s stock plummet and then eventually go out of business.

The breakdown in the accounting cycle occurred when management felt the need to increase its sales and went about it illegally. The pressures to increase the company’s profitability caused management to dabble into this corruption scheme.

The surest way to remedy this scheme or in other words to avoid getting involved in this scheme in the first place is to set realistic goals that can be attained without getting caught up in schemes to increase revenue. Maybe investing in efficient...
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