Accountant Shenanigans: Paul Beckwith (Hospira, Inc.)

The SEC has filed a complaint against Paul Beckwith, CPA alleging unauthorized transfers and embezzlement of funds from Theradoc, a Utah based medical management systems company, where Beckwith was employed as assistant controller .  The company had been acquired by Hospira, Inc., a company listed on the NYSE, in December, 2009.  Some of the more interesting details from the SEC complaint are as follows:

  • Starting in 2009, Beckwith would withdraw funds from Theradoc's operating account early in the month, transfer it to his CPA firm, and repay it prior to the end of the month.

  • In 2009, Beckwith transferred (and repaid) $1.8 million. From February, 2010 to July, 2010 the amounts withdrawn and repaid had increased to $3 million.

  • In the six weeks prior to September 15 (his last withdrawal), Beckwith had become "bolder"; he withdrew $1.3 million, which, unlike the earlierl withdrawals, was not paid back.

  • It seemed that Hospira, Inc. had not yet integrated Theradoc's financial reporting system. This allowed Beckwith to take advantage of lax internal controls, which facilitated the embezzlement.

  • Beckwith also falsified reconciliation reports by not reflecting the withdrawals and deposits.

  • Beckwith has been charged with deliberately circumventing internal controls and falsifying reports which resulted in the financial position of Hospira, Inc. not being accurately reflected.

  • Beckwith was transferring the money to his personal brokerage account at TD Ameritrade. It seems that his trades were initially profitable, however, recently he had started to incur losses. This would most likely explain why the money was not returned.

  • The SEC has frozen his assets and is seeking return of the funds plus civil penalties, which could be significant. Apparently, Hospira Inc. notified the SEC "after finding irregularities in the Theradoc account. She noted that the SEC case alleges theft by Beckwith and doesn't claim any wrongdoing on the part of the company."

The case demonstrates the need for strong internal controls, and the importance of an integration plan when acquiring another business.  One also wonders why transfers of amounts exceeding $100,000 (large by most standards) were allowed to be initiated by one person in an assistant controller position.

SEC Complaint against Paul Beckwith