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Colorado. A report was prepared to consider various solutions, but Wiles suggested that they continue hiding the problem, ordering all copies of the report be destroyed. This led to the company's most infamous cover-up. The managers rented a second warehouse in
Colorado, where they personally packed 26,000 bricks into hard drive boxes and shipped them to Singapore to bolster the inventory count. After the count was complete, they recalled those serial numbers as defective units. Instead of writing them off, they checked them into inventory, along with other failed drives that had been returned.
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Wiles responded to these positive reports by setting even higher sales targets, leading to ever-increasing fraud to meet them. Wiles left the company in
February 1989, followed by most of the company's officers over the next months. The directors report was released in the summer, stating that Wiles and his management team had "perpetrated a massive fraud" in a "company run amok".
317:"), back-dating shipments to allow them to be booked in earlier reporting periods to meet goals, and deliberately shipping defective products repeatedly to different customers so one drive could be booked as multiple sales (leading employees to joke that the only thing being repaired were the worn-out cardboard boxes). When the company embarked on a round of
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management. Several of those middle managers testified that Wiles was aware of the fraud. The court also noted that Wiles sold a considerable number of shares in the company in April and May 1988, immediately prior to reporting a shortfall due to an "elaborate scheme" to manipulate inventory shortfalls. Wiles was convicted of
245:, with a management team made up primarily of accountants. The company soon returned to profitability, with sales increasing from $ 114 million at the height of IBM's orders, to $ 603 million by 1988, when they were named the most well-managed company in the disk drive industry. Their major customer at this time was
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would be unimpressive. Instead of reporting this, a number of the managers decided to cover it up by various means. They produced an inflated inventory count, and then broke into the accountants' lock boxes and replaced their independent count to match their newly inflated numbers. The team continued
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The investigation revealed that Wiles set iron-clad sales forecasts and pushed these requirements down into the sales team, leaving no room for failure and setting bonuses on beating those figures. The sales team responded by "touching up" reporting documents as they moved up the reporting chain.
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grew dramatically, indicating a large amount of unpaid billables, while at the same time inventories were also growing, indicating unsold product. Those two numbers are normally at odds. Increased receivables should indicate increased sales, which would normally result in decreased inventory. The
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led IBM to dramatically scale back their orders late that year, forcing MiniScribe to lay off 26% of its staff and causing the value of the stock to plummet. Johnson left the company; at the time he stated that he had been planning to do this for some time and that his departure had "absolutely
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In July 1987, Jesse Parker, director of far east operations, told Wiles that something was amiss. In August, Wiles travelled to Hong Kong and
Singapore where he found a complete loss of control. The inventory count from that autumn showed that the numbers had grown to $ 15 million, mostly in
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acquiring its assets in a $ 46 million cash and stock deal in 1990. Since then MiniScribe
Corporation was known as Maxtor Colorado Corporation and later merged with its parent. In a subsequent court case, Wiles claimed to have known nothing of these schemes, saying he was duped by the middle
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just before the 1989 Christmas shutdown, including several of the employees who were involved in the brick scheme, they immediately called the Denver area newspapers, who broke the story. Following immediate investigations in
Singapore and Colorado the fraud was confirmed.
269:. Their internal inventory count showed that there was a shortfall of between $ 2 and $ 4 million. This implied the cost to produce those drives that did sell was higher than initially thought, which, if properly booked against sales, would mean their
229:
nothing" to do with IBM. Johnson later said "It's a very low inertia industry, you can blow your way into it and get blown out of it very quickly". Roger Gower, who had been recently promoted to
President, took over the CEO role as well.
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firm. One of H&Q's officers was
Quentin Thomas ("QT") Wiles, a turnaround specialist nicknamed "Dr. Fix-It". Wiles took over the CEO position from Gower, running the company remotely from his office in
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directors began an internal investigation in
October, while the company reported another record-setting quarter for that period in spite of failing to win either the Apple or DEC contracts.
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In
January 1987, the company officers conducted a quick inventory to estimate their accounts prior to an independent review by third party accounting firm
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in July 1994 following a federal jury trial, and sentenced to 36 months imprisonment. A portion of Wiles' conviction was overturned on appeal in 1996.
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220:. MiniScribe became a major player when it won a series of contracts to supply IBM's PC division, and their subsequent rapid growth led to an
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while the rest of the hard drive industry was suffering from rapidly falling margins due to ongoing downward price pressure. In 1988 the
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The company continued to post impressive numbers, but there were troubling signs. Among them the company continued to post improving
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A MiniScribe Model 8425, manufactured on
December 15, 1988, nearly a year before MiniScribe's bankruptcy and Maxtor's acquisition
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with the intent of building a 3.5" hard drive with the capacity of standard 5.25" drives. The company merged with
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Among the other techniques used to improve the numbers were classic accounting tricks. Failing to write off
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168:. Massive financial fraud starting in 1987 led to bankruptcy in 1990, when their assets were bought by
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A 44 MB, 5.25-inch full-height MiniScribe hard disk, shown with a more recent 2 GB
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with a large amount of onboard logic for the time. They eventually moved into higher-profile
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in 1986 and as Conner Peripherals became a major vendor for a time. Johnson died near
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Shortly thereafter the company was recapitalized with a $ 20 million investment from
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526:"Cooking The Books: How Pressure To Raise Sales Led Miniscribe to Falsify Numbers".
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in late 1983, opening for trading in January 1984. However, slow sales of the
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to roll these numbers forward through the quarters, compounding the problem.
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MiniScribe drive parameters listed on Maxtor's official website
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313:, shipping drives to warehouses and booking them as sales ("
249:, but the company was also bidding for major contracts with
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588:
Oral History Of Terry Johnson, Computer History Museum
457:"Report Shows Miniscribe Inflated Financial Results"
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on January 1, 1990, and was quickly liquidated with
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Computer Systems News and Electronic News, Feb 1986
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82:
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1218:Defunct manufacturing companies based in Colorado
571:"Company News; Maxtor Acquires Miniscribe Assets"
1208:Defunct computer companies of the United States
1228:Manufacturing companies disestablished in 1990
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487:"Wiles Convicted of Fraud in MiniScribe Case"
297:became concerned when the company's reported
180:Foundation, early slump, and recapitalization
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164:motor designs, and won major contracts with
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1223:Manufacturing companies established in 1980
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1198:Computer companies disestablished in 1990
1188:American companies disestablished in 1990
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350:Founder Terry Johnson later helped found
703:List of defunct hard disk manufacturers
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1193:Computer companies established in 1980
1183:American companies established in 1980
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387:"Top Officer Quits At Miniscribe Corp"
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362:in northern Canada while piloting his
152:in 1980. MiniScribe designed and sold
455:Parker, Rachel (September 25, 1989).
27:Defunct American data storage company
7:
406:"The Hard Times in Hard-disk Drives"
1213:Defunct computer hardware companies
1178:1990 disestablishments in Colorado
485:Apodaca, Patrice (9 August 1994).
25:
644: (archived November 10, 1996)
416:from the original on 2016-04-27.
1173:1980 establishments in Colorado
513:, Southwestern University, 2012
204:memory card for size comparison
542:"Fraud Is Cited at Miniscribe"
218:Storage Technology Corporation
1:
855:Digital Equipment Corporation
255:Digital Equipment Corporation
191:Logo used from 1983 to 1986
691:History of hard disk drives
208:The company was started by
174:Maxtor Colorado Corporation
125:Maxtor Colorado Corporation
98:; 34 years ago
66:; 44 years ago
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1203:Computer storage companies
609:"Missing pilot found dead"
442: (10th Cir. 1996).
686:
404:Uttal, Bro (1985-11-25).
326:Acquisition and aftermath
243:Sherman Oaks, Los Angeles
35:
1017:Nippon Electric Industry
780:Bryant Computer Products
696:IBM magnetic disk drives
910:Hokushin Electric Works
815:Computer Memories, Inc.
222:initial public offering
435:United States v. Wiles
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144:was a manufacturer of
142:MiniScribe Corporation
31:MiniScribe Corporation
440:102 F.3d 1043
330:The company declared
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267:Coopers & Lybrand
234:Hambrecht & Quist
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148:products, founded in
992:MiniStor Peripherals
937:Intégral Peripherals
870:ExcelStor Technology
530:. 11 September 1989.
1097:Samsung Electronics
528:Wall Street Journal
511:"Fraud Examination"
393:. 11 December 1984.
32:
1122:SyQuest Technology
1107:Shugart Associates
820:Conner Peripherals
810:CII-Honeywell-Bull
795:Castlewood Systems
719:Seagate Technology
575:The New York Times
391:The New York Times
366:on July 24, 2010.
364:Beechcraft Bonanza
356:Conner Peripherals
295:board of directors
287:
206:
150:Longmont, Colorado
77:Longmont, Colorado
1160:
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1137:Texas Instruments
1062:Potter Instrument
491:Los Angeles Times
291:operating margins
271:operating margins
261:Fraud and failure
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16:(Redirected from
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1057:Plus Development
1002:Mitsumi Electric
885:General Electric
765:Areal Technology
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1027:Ohio Scientific
895:Hewlett-Packard
805:Caelus Memories
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729:Western Digital
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679:Hard disk drive
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642:Wayback Machine
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615:. July 29, 2010
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577:. 2 July 1990.
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210:Terry Johnson
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154:stepper motor
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1037:Olivetti OPE
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890:GS Magicstor
845:Dataproducts
835:Data General
617:. Retrieved
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554:. Retrieved
552:. 1989-09-13
545:
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465:. Retrieved
463:. p. 42
460:
434:
409:
399:
390:
360:Norman Wells
349:
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308:
304:
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264:
231:
207:
202:CompactFlash
173:
172:and renamed
146:disk storage
141:
140:
114:Acquired by
56:Data storage
45:Company type
299:receivables
1167:Categories
1117:StorageTek
1067:PrairieTek
997:Mitsubishi
987:MiniScribe
982:Micropolis
967:Librascope
947:JT Storage
556:2007-10-12
370:References
332:bankruptcy
162:voice coil
18:Miniscribe
1042:Panasonic
840:Datapoint
830:Data Disc
785:Burroughs
461:InfoWorld
311:bad debts
226:IBM PC/XT
122:Successor
613:CBC News
414:Archived
130:Products
53:Industry
1152:YE-Data
1112:Siemens
1077:Quantum
1052:Philips
1032:Okidata
977:Memorex
962:Kyocera
957:Kennedy
915:Hyosung
905:Hitachi
880:Fujitsu
825:Cornice
800:Calcomp
790:C. Itoh
738:Defunct
724:Toshiba
712:Current
640:at the
619:18 July
467:18 July
410:Fortune
319:layoffs
257:(DEC).
214:Memorex
156:-based
101: (
93:Defunct
83:Founder
69: (
61:Founded
48:Private
1142:Tokico
1127:Tandon
1102:Sequel
1087:Rodime
972:Maxtor
942:Iomega
925:AdStar
860:Emulex
760:Anelex
438:,
352:CoData
336:Maxtor
247:Compaq
170:Maxtor
116:Maxtor
1147:Xebec
1092:SAGEM
1082:Ricoh
1072:Priam
1022:Nomaï
865:Epson
755:Ampex
341:fraud
1132:TEAC
900:HGST
775:BASF
621:2023
469:2023
343:and
253:and
216:and
111:Fate
103:1990
96:1990
71:1980
64:1980
1012:NEC
1007:NCR
952:JVC
920:IBM
166:IBM
75:in
1169::
745:3M
611:.
573:.
548:.
546:AP
544:.
518:^
499:^
489:.
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422:^
412:.
408:.
389:.
378:^
176:.
671:e
664:t
657:v
623:.
559:.
493:.
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105:)
73:)
20:)
Text is available under the Creative Commons Attribution-ShareAlike License. Additional terms may apply.
