April 12, 2003

The Mathematics of Crime

I read an article in the business section of the paper today about yet another executive sentenced for fraud. California as a rule is pretty tough on crime. We've sent people to the big house for 25-to-life for stealing a slice of pizza (really, this is not a joke). Anyway, Paul Jain was CEO of Media Vision. In 1993 the company reported a profit of $20 million on revenues of $241 million. Their stock price doubled, Wall Street went wild and there was much rejoicing by investors. A few months later they announced they needed to restate their earning for 1993: they actually had a net loss of $99 million on revenues of only $150 million (i.e. they lied to the tune of $100 million). Wall Street went wild again, but this time investors lost nearly $200 million in equity. On Friday Mr. Jain was sentenced to two and a half years in federal prison. Steve Allan, the CFO (Chief Financial Officer) received a much harsher sentence. Well, at least a slightly harsher sentence: three and a half years (the maximum sentence he could have gotten was only eight years). If you stole ten slices of pizza a day (at $1 per slice), every day, it would take you approximately 55 thousand years to steal $200 million worth of pizza.

Posted by thom at April 12, 2003 04:21 PM
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