The Price of Poor Rules Management

Examples of Business Mistakes Caused by Poor Rules/Process Management

The cost of managing and automating business rules is much less than the price of not managing and automating business rules. Below are examples of companies and people that have paid the price of poor rules management.

Accounting / Audit / SEC Reporting

• Broadcom finds more option errors - Broadcom Corp., a supplier of chips used in communications devices, said Friday it may need to record expenses starting at $1.5 billion for stock option accounting flaws, double what it had estimated in July. Yahoo.com Sep. 8, 2006

• Enron Jury Reaches Verdict - Lay and Skilling's day of reckoning.  Enron former chief executive Jeffrey Skilling and founder Kenneth Lay were both found guilty Thursday of conspiracy and fraud in the granddaddy of all corporate fraud cases. CNNMoney.com May 25, 20066

• McAfee lawyer fired over options grants. Security software firm releases general counsel after learning of his involvement in improper stock options grants in 2000; shares slip. money.cnn.com May 31, 2006

• Fannie Mae Finds $10.8B in Errors. Fannie Mae has disclosed $10.8 billion in accounting errors stemming from its derivatives and hedging activities. The nation's largest mortgage lender also names MCI executive vice president and CFO Bob Blakely as its new chief financial officer. Stephen Taub, CFO.com November 10, 2005

• Ex-Andersen Auditors of Enron Cited. When seven accountants for the now-defunct firm audited part of Enron's 1997 financials, they allegedly didn't consolidate the statements of two subsidiaries — Chewco and Jedi - into the parent company's audit. Stephen Taub, CFO.com November 04, 2005

• CVS to Pay $110 Million to Shareholders. Shareholders asserted that the nation's largest pharmacy chain delayed accounting for discounted merchandise in order to prop up earnings. June 7, 2005. CFO.com.

• KPMG Found Using a Tax Shelter It Sold. The Big Four accounting firm reportedly employed the strategy — which the IRS later found to be abusive — to book a $34 million deduction on its 2001 tax return. CFO.com October 17, 2005

Airlines

• Scrutiny of airlines' computers renewed. Companies face questions after holiday foul-up. 12/27/2004. MSNBC.

• US Airways, Comair struggle to recover from holiday woes. Computer glitch, labor strife cited. 12/27/2004. MSNBC.

• Airline honors $25 fares 'accidentally' offered online. 2/20/2001. USA Today. $25 to Paris? United Airlines will honor the "fantasy fares". 143 tickets were sold during a 55-minute period on Jan. 31, 2001...

• United won't honor bogus prices posted on its site. 2/15/2001. USA Today.

• A faulty enhancement to Sabre in 1988 cost about $50 million in lost revenue by causing the system to close out discount seats prematurely during 60 days of the summer peak travel season. American Airlines: The ethics of information display; Information Systems: A Management Perspective; Prentice-Hall, Inc.; 1999

Antitrust / Price Fixing

• Samsung Fined $300 Million for Price Fix. Including the Korean-based chip maker, three companies and five people have now been charged and fines totaling more than $646 million have been levied in connection with the ongoing Department of Justice probe. October 17, 2005. CFO.com.

FCC Do Not Call List Violations

• AT&T fined $780,000 by FCC for violating Do Not Call List. AT&T might get socked with a $780,000 fine for violating its own "do-not-call" list — the first such telemarketing sanction ever. AT&T broke the rules by calling 29 consumers on 78 occasions after they asked not to be called. The proposed fine includes $10,000 for each violation. Nov. 3, 2003. USA Today.

FTC Mail Order Rule Violations

• Staples, Inc. to Pay $850,000 Penalty For Alleged Mail Order Rule Violations. FTC Complaint Charges Office Supply Company Misled Consumers and Businesses About "Real Time" Inventory Availability, Misrepresented Delivery Times on its Web Site. May 22, 2003.

Insurance

• HMO glitch gives Minn. retirees free prescriptions until one points out error. July 18, 2004. SFGate.com (See also CNN.com)

IT

• Old Computer, New Woes for Freddie Mac. Since 2001, the mortgage-finance company miscalculated interest income due to an error in a legacy computer system used for certain mortgage-related securities. Stephen Taub, CFO.com November 08, 2005

• Study: Buggy software costs users, vendors nearly $60B annually. June 25, 2002. Computerworld.

Privacy / Pretexting

• Calif. AG: HP tactics violate state laws - SAN FRANCISCO - While state Attorney General Bill Lockyer has determined Hewlett-Packard Co.'s clandestine investigation of its own board members violated the law, he says it's still unclear whether anyone will be prosecuted. Yahoo.com. Sep. 8, 2006.

This list is always under construction... We welcome your suggestions.

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