Shipping bricks
One of my friends asked me to recommend an external hard drive today, and it reminded me of a case I read about the hard drive manufacturer MiniScribe. It appears in Jim Collins’ book, Managing the Small to Mid-Sized Company, as case 17 about a company called R3. Collins changed the names of the company and the people involved, but his veil is thin.
MiniScribe was founded in the late 1980 and went public a few years later. It grew rapidly and then crashed before being rescued by the San Francisco investment bank Hambrecht & Quist, which installed Q.T. Wiles as the company’s CEO. The company recovered briefly, but Wiles continued setting ambitious goals for earnings growth, which the company met with the help of some accounting fraud. The most outlandish fraud involved hiring overnight workers to prepare packages filled with bricks, which conveniently weighted about the same as MiniScribe’s hard drives. The day workers would arrive and find the new shipments prepared to go out and book the orders. After booking the sales and shipping the orders, MiniScribe would later recall the “hard drives” with serial numbers matching the brick shipments. The practice came to be known as “shipping bricks.” See this Wall Street Journal article for further reading on the scam.
