JACK GREENBERG, INC.
In the mid-1980s, Emanuel and Fred Greenberg each inherited a 50 percent ownership
interest in a successful wholesale business established and operated for decades by their father.
Philadelphia-based Jack Greenberg, Inc., (JGI) sold food products, principally meat and cheese,
to restaurants and other wholesale customers up and down the eastern seaboard.
largest product line was imported meat products.
Following their father’s death, Emanuel
became JGI’s president, while Fred accepted the title of vice-president.
In the latter role, Fred
was responsible for all decisions regarding the company’s imported meat products.
purchased these products, they were initially charged to a separate inventory account known as
Prepaid Inventory, the company’s largest account. When these products were received weeks or
months later, they were transferred to the Merchandise Inventory account.
In 1986, the Greenberg brothers hired Steve Cohn, a former Coopers & Lybrand
employee, to modernize their company’s archaic accounting system.
Cohn successfully updated
each segment of JGI’s accounting system with the exception of the module involving prepaid
Despite repeated attempts by Cohn to convince Fred Greenberg to “computerize” the
prepaid inventory accounting module, Fred resisted.
In fact, Fred had reason to resist since he
had been manipulating JGI’s periodic operating results for several years by overstating its
From 1986 through 1994, Grant Thornton audited JGI’s annual financial statements,
which were intended principally for the benefit of the company’s three banks.
like Steve Cohn, failed to persuade Fred Greenberg to modernize the prepaid inventory
Finally, in 1994, when Fred refused to make certain changes in that module
that were mandated by Grant Thornton, the accounting firm threatened to resign.
thereafter, Fred’s fraudulent scheme was uncovered.
Within six months, JGI was bankrupt and
Grant Thornton was facing a series of allegations filed against it by the company’s bankruptcy
Among these allegations were charges that the accounting firm had made numerous
errors and oversights in auditing JGI’s Prepaid Inventory account.
Jack Greenberg, Inc.—Key Facts