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Petitioner began to investigate G�nther’s financial condition and
discovered that G�nther’s management had concealed the magnitude
of G�nther’s operating losses by capitalizing expenses into phony
inventory, incorrectly accounting for inventory, and overstating
receivables with G�nther's subsidiaries.
On August 20, 1992, Mr. Lackey fired Albert because, among
other reasons, petitioner had discovered that Albert had
orchestrated the coverup. For a short time after Albert was
fired, Kampfrad acted as gesch�ftsf�hrer, but, as Mr. Lackey
suspected that Kampfrad had been involved in the coverup, Mr.
Lackey eventually dismissed him as well.
B. G�nther’s True Financial Condition as of FYE April 30,
1992
In addition to the investigation by petitioner’s management
discussed above, G�nther’s German auditors conducted an audit in
connection with the preparation of G�nther’s commercial report
for its FYE 1992. Petitioner’s investigation revealed that
G�nther’s liabilities substantially exceeded the book value of
its assets as of April 30, 1992, and that G�nther was currently
unable to pay its bank loans and other liabilities. The audit
revealed that, for its FYE 1992, G�nther had incurred a net loss
from operations of DM 15,903,268 and that it had a “deficit not
covered by equity” of DM 4,068,076, determined under German
accounting standards.
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