The SEC announced the settlement of a civil lawsuit against an employee of IBM for aiding Dollar General Corporation’s accounting fraud. The final judgment ordered Kevin B. Collins to pay $95,000 for his role in assisting Dollar General’s violations of various SEC codes.

Collins allegedly proposed to Dollar General to push forward a $10 million transaction on IBM electronic cash registers in order to increase IBM’s financial revenue for the year, as well as Collins’ bonus during that period. After Dollar General’s accounting firm determined that would have a negative impact on it’s earnings for the same fiscal year, they rejected the proposal. Collins offered to have IBM buy Dollar General’s outdated cash registers for $11 million to negate the company’s loss. Dollar General then repaid the money by an increase in the amount the company paid for the new IBM electronic cash registers.

This was deemed an illegitimate purchase as IBM never intended to use the equipment and ultimately destroyed it. In turn, all of IBM’s expenditure was repaid and Dollar General minimized the negative effect on its earnings for the fiscal year 2000.

Read the entire SEC report here.

Commentary: This is a good learning example for compliance and ethics officers to use with employees for training purposes.