Centennial Technologies IncScam 1996

Presented by-SHIFALI GARG

INTRODUCTIONCentennial Technologies, Inc• Founded by Emanuel Pinez in 1987, Centennial

makes PC memory cards.• The company went public in 1994 . • As a global leader, Centennial integrates patented and

proprietary technology into application specific cards for commercial, industrial and military markets.

• The company's international sales and service operations are headquartered in the United Kingdom.

• It was once considered a Wall Street darling.

PERSONS INVOLVED• Mr. Emanuel Pinez • Former chief financial officer, James Murphy• The company's auditor, Coopers & Lybrand

Emanuel Pinez• He was the CEO of Centennial Technologies.• He has homes in Canada, Switzerland and

suburban Boston.• In 1996, on the strength of vigorous revenue

growth and alleged boasts by Pinez that a big contract from AT&T was imminent, the stock took off.

• Pinez's paper wealth was US$244 million.

SCAM• In December 1996, Emanuel Pinez, the CEO of

Centennial Technologies, and his management recorded that the company made $2 million in revenue from PC memory cards .

• Emanuel Pinez was accused of trying to profit from a decline in Centennial's stock by buying put options and selling call options on the stock.

• On 11 February 1997 he was fired by the board of his own company for allegedly falsifying inventory reports and inflating sales figures.

Contd..

• On 15 February 1997 he was arrested by FBI agents and sued by the Securities and Exchange Commission for stock fraud.

• Between April 1994 and December 1996, Centennial overstated its earnings by about $40 million.

Contd…

• The employees created fake documents to appear as though they were recording sales.

• Centennial's stock rose 451% to $55.50 per share on the New York Stock Exchange (NYSE).

• According to the Securities and Exchange Commission (SEC), between April 1994 and December 1996, Centennial overstated its earnings by about $40 million.

• Emanuel Pinez pleaded guilty to masterminding a huge fraud that made his company's stock the top performer on the New York Stock Exchange in 1996.

Contd…• The company reported profits of $12 million

when it really lost about $28 million.• The stock plunged to less than $3.• Over 20,000 investors who lost $150 million

to $376 million.• The firm's troubles became public in Feb 10

1997 when firm had fired former Chief Executive Emanuel Pinez for misstating financial results .

Contd..• The court sentenced the Pinez to five years in

prison for stock fraud .• And ordered him to make restitution of almost

$150 million by liquidating all his assets.• Among other misdeeds, Pinez is accused of

engineering phony sales transactions to boost Centennial's revenues.

• In one infamous scheme, Centennial allegedly shipped fruit baskets to customers to create fake shipping documents.

• Centennial's stock began to sink in January 1997 when questions emerged about Pinez's academic credentials and the company's financial reports.

• As the stock plunged, Pinez's brokers conducted an options trade on his behalf aimed at profiting from the fall in Centennial's stock price.

AFTER THE SCAM• Centennial Technologies Inc. stock plunged

76% .• Centennial, the top performer on the NYSE

will be off the Big Board and every other major U.S. stock exchange .

• Centennial had to pay out $1.475 million in cash and give up 37 percent of its stock to settle dozens of shareholder suits.

• The company is now battling back under new management and has reported four consecutive profitable quarters.

• But the damage allegedly engineered by Pinez was severe.

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