Case | HBS Case Collection | December 1996 (Revised October 1999)

Kidder, Peabody & Co.: Creating Elusive Profits

by Robert L. Simons and Antonio Davila

Abstract

On April 17, 1994, Kidder, Peabody & Co. announced a $350 million charge against earnings resulting from the discovery of false trading profits. That same day, the termination of Joseph Jett's employment with the company was made public. By illustrating the mechanics of bond accounting, this case describes the trading strategy that led to the creation of false profits. Failures of internal control are also discussed. The case ends by asking who was to blame.

Keywords: Bonds; Governance Controls; Crime and Corruption; Financial Reporting; Profit; Financial Strategy;

Citation:

Simons, Robert L., and Antonio Davila. "Kidder, Peabody & Co.: Creating Elusive Profits." Harvard Business School Case 197-038, December 1996. (Revised October 1999.)