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Writer's pictureRichard Bistrong

Is that a shortcut, or is it accounting fraud ❓❓❓

Updated: Dec 14, 2021


This article initially appeared on The FCPA Blog, here and is reposted with the permission from the editor and publisher.


In 2019, Fiat Chrysler (FCA) paid the SEC $40 million in penalties. 💰

The company had accumulated unreported sales in what FCA employees called a “cookie jar." 🍪 In months when FCA wanted its vehicle sales to appear better than they were, it dipped into the cookie jar to inflate sales numbers.

I too had a cookie jar. It was a network of channel partners (as opposed to auto dealers) I could count on to take products that they didn’t need when I was close to my quarterly forecast but not quite there.

One person can’t make distribution stuffing happen — all kinds of support functions were involved.


Tolerating distribution stuffing sends out the message that shortcuts are tolerated if they’re necessary to make the numbers.


And for most compliance leaders, those shortcuts are often walled off as “business decisions” that aren’t related to compliance — and therein lies the peril for everyone.


There’s a relatively easy test to uncover distribution stuffing. Take your sales forecasts, by reporting period, for the past few years and chart them. It can be for the entire sales organization or a region. Then take the actuals and plot them, side-by-side, broken down by week, or even by day, over that same time-period.


Peaks or spikes right before the expiry of a fiscal period, and valleys right after, could be the result of timing of the market. For example, some product sales are cyclical, with revenue low during the summer, and higher towards year end spending, and that’s natural. But after backing those out, if the peaks and valleys are still there, quarter after quarter, that could indicate something more troubling.


In that case, it’s time to have some conversations. There are always people at various levels of the organization who see and hear a lot. Have you ever stopped by the shipping and receiving room the last days of a fiscal period just to watch? Or approached someone in sales order processing who might have an unusually high stack of orders to process, and just asked about them what’s happening?


Those and other support functions can be great sources of compliance information. Beyond that, the people in those functions can become ethics and integrity ambassadors, once they’re empowered with both the role and responsibility that comes with it.

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