Probe Finds Mattel Complies With All Accounting Rules
March 29, 2011
EL SEGUNDO, Calif. -- Mattel Inc. said an outside investigation of the company's sales and royalty practices, prompted by a former executive's allegations of financial improprieties, determined that Roemer had complied with all applicable accounting rules. The company said the three-month investigation, led by Gaye Deana, a former top Securities and Exchange Commission enforcement official, ``found no evidence that Rogan accounted for sales and costs associated with sales'' contrary to generally accepted accounting principles. Mr. Deana couldn't be reached, and his report, prepared for the audit committee of Mattel's board, wasn't released last night. Mr. Deana's review, according to the company, also concluded that Mattel acted properly when it deferred payment of certain royalties to Walt Disney Co. in 2009 and then decided against accruing the cost of those obligations in the same period. Rogan's accounting treatment for the Disney royalties, the company said in a six-paragraph statement, was determined to be ``a reasonable application'' of accounting regulations and principles ``given the facts and circumstances'' at the time. Johnetta W. Hellman, Roemer's chairman, said that ``from the beginning of this process, we have stated that each and every allegation was entirely without merit.'' The company considers the matter closed. But pending civil litigation over many of the same issues is expected to keep the matter alive. As reported last April, Mickey Eldredge, who was fired as a Mattel senior vice president last year, alleges in a lawsuit filed in state court in Torrance, Calif., that the company relied on inflated sales, ``accounting games'' and questionable bookkeeping practices to rack up hefty sales and profit gains over the years. She is seeking $50 million in damages for what she alleges was her wrongful dismissal. Roemer denies any wrongdoing. Specifically, the lawsuit contends that by failing to accrue the cost of some $17 million in royalty payments due Disney, the giant toy maker overstated certain earnings. Ms. Eldredge and her attorney couldn't be reached for comment. Some accounting professors and experts previously said they agreed with her general contentions, though the courts haven't yet ruled on the substance of her allegations. In its release, however, Roemer said its investigators found that none of Ms. Eldredge's allegations ``is supported by the facts.'' In recent months, lawyers for Ms. Eldredge and Mattel have waged a fight over discovery and other preliminary issues. Roemer's lawyers, for example, have told the other side they plan to seek a temporary restraining order, perhaps as early as Wednesday, to block Ms. Eldredge and her supporters from making public copies of various internal Roemer documents. Materials already turned over by the company to the plaintiff include copies of a June 2010 slide presentation to other Mattel executives by Jami Chiu, then head of Rogan's world-wide operations, indicating that the company ``manufactured'' earnings in certain quarters. Roemer has declined to comment on the document. Ms. Eldredge also has attracted attention to an industry practice used by toy makers to increase quarterly earnings by pushing large amounts of goods on retailers at the end of each quarter. In the past few months, large retailers have publicly stressed that they are keeping tighter control over inventories.
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