Lernout & Hauspie Speech Products.
The unique characteristics in L&H that made it prone to fraud were the rapid expansion and acquisition of companies beyond their boundaries, and the inability to oversee these operations. The one thing that stands out is the lack of ethical values from the founders of the company from the initial stages of the firm. Mr. Hauspie’s creative but legally acceptable financing plans to retain control of the company while selling minority interests. The desperate ambition to succeed fueled with the accounting skills the company was in a prime position to engage in fraudulent practices. The tone at the top did not set a code of ethics, instead wanted to maximize their value of the futuristic software.
The first questionable accounting practice was the series of complex financing plans dreamed up by Mr. Hauspie- this was unethical and fraudulent. The second practice was sales to customers who had financial ties with the company- this can be on the border of fraud, as we cannot confirm if the sale/revenue was genuine. As the product seemed to have many glitches and not market ready. The third practice was the FLV venture capital fund, were sales personnel were encouraged to refer potential customers- this seems to be unethical as the ties between FLV and L&H were evident. The fourth noticeable practice was the creation of several R&D companies such that L&H could contract with. They manipulated it in a way so that they could recognize profit by purchasing the so called R&D firm. This is fraud and unethical, as they were recording huge revenues. The final practice was the sales in Korea, which soared 52%- which was unethical and fraudulent as they were not following any good business practices. No, practices as above are not smart, they are not good moral and ethical values; moreover they do not last for long. Behaviors such as these cost the organization, their stakeholders, and the society a great deal of discomfort. Although...
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