1989 - Miniscribe’s accounting scandal hit like a brick
MiniScribe’s failure centered on one of the first major accounting scandals in the computer industry; after losing a supply contract with IBM’s PC division in 1985. MiniScribe falsified its sales records for several years before being discovered in 1989.
The primary scandal erupted in the final weeks of 1989, when after failing to procure short-term financing, company executives decided to embark upon a fraudulent course of action to bring in the financing unwittingly from their customers.
As each unit sold was tracked via serial numbers and also sat uninspected for some weeks inside warehouses in Singapore awaiting use in production, the decision was made to ship pieces of masonry inside the boxes that would normally contain hard drives. After receiving payment, MiniScribe then planned to issue a recall of all the affected serial numbers and then ship actual hard drive units as replacements, using the money received to meet financial obligations in the short term.
MiniScribe embarked upon a round of layoffs just before their Christmas shutdown, including several of the employees that were involved in the packaging and shipping of the masonry. These people immediately called the Denver area newspapers, which broke the story during the holiday season. Following immediate investigations in Singapore and in Colorado the fraud was confirmed.