Jamaica Water Properties
The case is about an accounting fraud that involves the Jamaica Water Properties, Inc. This fraud was discovered by David Sokol, who was at that time served as COO (Chief Operating Officer) of the Jamaica Water Properties, Inc. The main culprit was Ernest Grendi, JWP’s CFO, helped by several of the company’s senior accountants. Moreover, the company’s external auditor, Ernst & Young, seems to be involved as well. This case will show regarding the auditor independence, its duty as professional accountant, fraud, and the perspective from the employees toward their higher-ups management. * Background
Its company’s name, before becoming as JWP, was the Jamaica Water Supply Company. It began its operations in 1886 as a small business that delivered water to a few neighborhoods in the Queens borough of New York City. Gradually, the company expanded its geographic market and eventually became one of New York State’s largest water utilities.
In the mid-1960s, Martin Dwyer took control of the company. Dwyer realized that the heavily regulated water utility industry limited his company’s profit potential, so he decided to expand it into other business. Because of his familiarity with governmental agencies, Dwyer began offering various contracting and construction services to local municipalities. Over the next several years, the company expanded into other lines of businesses by acquiring a varied assortment of small firms in the New York City metropolitan area. During the 1960s and 1970s, the company grew rapidly, while its profits and losses vacillated sharply from year to year. But because of severe nationwide recession and other condition at that time, it drove the company to the verge of bankruptcy. Therefore, to salvage the company, Martin stepped down in 1978 and placed his son, Andrew T. Dwyer, in charge.
It took Dwyer and his associates several years to fend off complete collapse. They restructured the