An internal investigation of MiniScribe Corp that took six months and cost $2m has concluded that senior management at the Longmont, Colorado company apparently perpetrated a massive fraud on the company, its directors, its outside auditors and the investing public. In an executive summary of their findings, an investigative committee of outside directors said they found fraudulent activities as far back as 1985, when Q T Wiles, who sounds more like a Las Vegas showgirl than the noted turnaround specialist and then chairman of the investment firm of Hambrecht & Quist that he was, took over as chief executive. The investigators’ summary does not specifically fault Wiles, but says the fraud required the active participation of many company personnel and was common knowledge within the company as officials went to extraordinary lengths to create the illusion of unbounded growth. The investigators suggest that senior company officials apparently broke into locked trunks containing the auditors’ workpapers during the year-end 1986 audit and changed inventory figures, inflating inventory values by approximately $1m; packaged bricks and shipped them to distributors as disk drives in 1987, recording $4.3m in sales. When the shipments were returned, MiniScribe inflated its inventory by the purported cost of the bricks. Wiles resigned abruptly earlier this year and the company announced that while it would have to restate its figures for several years, it was not sure that the true picture of its trading position could ever be determined.
