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Financial Statement Fraud Casebook: Baking the Ledgers and Cooking the Books by Joseph T. Wells

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Chapter 20

What Is 1 + 1? What Do You Want It to Be?

Robert Barr

Elliott Z. Maroni was a native of Houston, Texas, who moved to Austin to attend college. Shortly after finishing his freshman year, Elliott, known to his friends as “EZ,” dropped out of school at age 19 to open a stereo store in a vacant grocery store. He named the store Austin Stereo and designed it to be similar to the stereo stores his family owned in Houston. In his first year in business, EZ sold $1.5 million worth of stereo equipment, and Austin Stereo was considered a big success.

Two years later, EZ sold his store to the family business, Houston Stereo Enterprises (HSE), a high-end stereo components retailer in Houston. EZ's store became HSE's first location outside Houston and the company grew from six stores to more than eighty within five years. EZ was highly involved in HSE's business operations, particularly purchasing the products carried in the stores. He was very skilled at getting discounts from his vendors to keep inventory costs down and margins high.

EZ wanted to begin carrying discounted electronics merchandise, including telephones, kitchen appliances and other consumer electronics items in the HSE stores, but other family members wanted to stay solely in the high-end stereo equipment that had made HSE successful. So EZ, along with a friend who also worked for HSE, resigned from the family business to start a discount electronics business. He used the money he saved from the sale of his Austin ...

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