Many of the meat and seafood products sold by the Company were historically manufactured, processed or produced by it, while other food items sold by the Companysuch as fruits, vegetables, condiments, and seasonings, have always been purchased by the Company from other sources. Since completion of the sale in February of certain assets related to the Company ' s manufacture of barbecue and chili products and the sale of the deli-meats business in April see below: Material Transactionsthe Company's business has consisted solely of distributing food products to commercial and institutional customers, including supermarkets, restaurants, cafeterias, independent food distributors, schools, hospitals, and other public and private facilities.
The Gravins Division was essentially a large warehouse that wholesaled frozen-food products to retail outlets on the East Coast. Nashwinter quickly discovered that managing a large wholesale operation was much more complicated and stressful than working a sales route.
Within a short time after accepting the promotion, Nashwinter found himself being maligned by corporate headquarters for his division's poor performance.
After several rounds of scathing criticism for failing to meet what he perceived to be unrealistic profit goals, Nashwinter decided to take matters into his own hands. The young manager began fabricating fictitious inventory on his monthly performance reports to headquarters.
By inflating his monthly inventory balance, Nashwinter lowered his division's cost of goods sold and thus increased its gross profit. Several years later, Nashwinter insisted that he had never intended to continue his scheme indefinitely.
Instead, he saw his actions simply as a solution to a short-term problem: With each passing year, Nashwinter had to fabricate larger amounts of fictitious inventory to reach his profit goals. Finally, inNashwinter admitted to a superior that he had been filing false inventory reports to corporate headquarters for several years.
Doughtie's management immediately fired Nashwinter and retained Price Waterhouse to determine the magnitude of the inventory errors in Gravins' accounting records and their impact on the company's consolidated financial statements.
Price Waterhouse's study revealed that Nashwinter's scheme had overstated Doughtie's consolidated Doughties foods inc income by 15 percent, while the company's net income had been overstated by 39 percent. Inhe inflated Gravins' inventory by including three pages of fictitious inventory items in the count sheets that summarized the results of the division's annual physical inventory.
Nashwinter also changed the unit of measure of many inventory items. Rather than reporting 15 single boxes of a given product, for example, Nashwinter changed the inventory sheet so that it reported 15 cases of the product.
Inafter Doughtie's acquired a computerized inventory system, Nashwinter simply input fictitious inventory items into his division's computerized inventory ledger.
In both years, Frank Pollard was the audit supervisor assigned to the Doughtie's engagement. Following the disclosure of Nashwinter's scheme to the Securities and Exchange Commission SEC by Doughtie's executives, the federal agency began investigating the and audits of the food distribution company.
The SEC subsequently criticized Wilson and Pollard for their roles in those audits, particularly for their failure to rigorously audit Doughtie's inventory account. The SEC maintained that Doughtie's inventory should have been considered a high-risk account and thus subject to a higher-than-normal degree of scrutiny by Wilson and Pollard during the and audits.
First, inventory was the largest line item on the Doughtie's balance sheetaccounting for approximately 40 percent of the company's total assets.
Second, Wilson and Pollard were aware of several weaknesses in Doughtie's internal controls for inventory, particularly within the Gravins Division.
These weaknesses increased the likelihood of inventory errors. Finally, the SEC noted that Gravins' inventory increased rapidly during and The federal agency maintained that Wilson and Pollard should have considered the audit implications of this high growth rate and the closely related implications of the division's abnormally low inventory turnover.
The SEC also criticized Wilson and Pollard for failing to pursue problems that they or their subordinates uncovered during the and audits of Gravins' inventory. Following the completion of the physical inventory for Gravins inNashwinter forwarded the three fictitious inventory count sheets to Wilson and Pollard.
After briefly reviewing these count sheets, Wilson and Pollard added the items on them to Gravins' inventory. Following the division's physical inventory, the audit senior on the Doughtie's engagement could not reconcile the quantities for numerous items listed on the inventory count sheets with the quantities shown on the computer printout that summarized the details of Gravins' year-end inventory balance.
The senior notified Wilson of the problem and wrote Nashwinter a memo asking for an explanation. Wilson failed to follow up on the problem, and Nashwinter never responded to the memo. In his review of the senior's workpapers, Pollard either did not notice the numerous differences between the count sheets and the computer listing of Gravins' inventory or chose not to investigate those differences.
Nashwinter testified that he often made up excuses to account for missing or misplaced inventory and that the auditors apparently never double-checked his explanations.
He also testified that the auditors were lax when it came time to test count inventory items in Gravins' blast freezer: It was too cold.
The following is an excerpt from a K SEC Filing, filed by DOUGHTIES FOODS INC on 3/27/ The following is an excerpt from a K/A SEC Filing, filed by DOUGHTIES FOODS INC on 5/25/ Doughtie's Foods, Inc. is a Virginia Domestic Corporation filed on November 16, The company's filing status is listed as 20 Merged and its File Number is Founded: Nov 16,
The SEC also required that selected audits supervised by the two men in the future be subjected to peer reviews to determine that the appropriate audit procedures had been performed. To settle the charges filed against him by the SEC, William Nashwinter signed a consent decree in which he neither admitted nor denied the charges but agreed not to violate federal securities laws in the future.The following is an excerpt from a K/A SEC Filing, filed by DOUGHTIES FOODS INC on 5/25/ The following is an excerpt from a K SEC Filing, filed by DOUGHTIES FOODS INC on 3/27/ Doughtie's Foods, Inc.
is a Virginia Domestic Corporation filed on November 16, The company's filing status is listed as 20 Merged and its File Number is Founded: Nov 16, Case (Doughtie's Foods, Inc.) In the late s, William Nashwinter accepted a position as a salesman with Doughtie's Foods, Inc., a publicly owned food products company headquartered in Portsmouth, Virginia.1 The ambitious.
In May , the board of directors of Doughtie's Foods, Inc., agreed to sell the company to Sysco Corporation. The merger was completed on August 27, In , Bob Doughtie's family retained the trademark and reintroduced the brand to the Southeastern .
Doughtie's Sysco Food Services, Inc. was founded in as Doughtie's Foods, Inc.
|DOUGHTIES FOODS INC - Amended Annual Report (K/A) List of Exhibits:||Seller desires to sell certain of its assets used in the manufacturing division of Seller's business for the production and sale of the Products set forth on the attached Exhibit A which is incorporated in and made a part of this Agreement the "Products".|
|Purchase Solution||This historic document was printed by the American Bank Note Company and has an ornate border around it with a vignette of the company logo, a pig wearing a bow tie. This item has the printed signatures of the Company's President Robert F.|
and was acquired by SYSCO Corporation on August 29, The company distributes a full line of institutional food products to approximately 1, customers in Virginia, Maryland, North Carolina, and Delaware, generating over $87 million dollars in annual sales.