Albert J. Dunlap
Encyclopedia
Albert John Dunlap is a retired corporate executive. He was best known as a turnaround specialist and downsizer. The ruthless methods he employed to streamline ailing companies, most notably Scott Paper, won him the nicknames "Chainsaw Al" and "Rambo in Pinstripes". However, his reputation was ruined after he engineered a massive accounting scandal at Sunbeam-Oster
.
, Dunlap graduated from West Point before taking the reins of Lily Tulip Cup and Scott Paper.
Dunlap mentored James Packer
for three years in the late 1980s.
Dunlap believed that the primary goal of any business should be to make money for its shareholders. To that end, he believed in making widespread cuts, including massive layoffs, in order to streamline operations. By firing thousands of employees at once and closing plants and factories, he drastically altered the economic status of such corporations as Scott Paper and Crown Zellerbach. He sold Scott Paper to Kimberly-Clark
in 1995 for $7.8 billion and walked away with a $100 million golden parachute
.
He took over as chairman and CEO of Sunbeam in 1996. His methods resulted in Sunbeam's reporting record earnings of $189 million in 1997. However, he was unable to find a buyer by 1998. Dunlap then decided to buy controlling interest in camping gear maker Coleman
and coffee machine maker Signature Brands (best known for making Mr. Coffee
and smoke detector maker First Alert
). Within two days, Sunbeam's stock jumped to an all-time high of $52 a share only to end up worthless in bankruptcy.
However, industry insiders were suspicious when they discovered certain seasonal items were being sold at higher volume than normal for the time of year. For instance, large numbers of barbecue grills were being sold during the fourth quarter. It turned out that Dunlap had been selling products to retailers at large discounts. The products were stored in third-party warehouses to be delivered later. This strategy, known as "bill and hold", is an accepted accounting practice as long as the sales are booked after delivery. However, Dunlap booked the sales immediately. Many shareholders felt they'd been tricked into buying stock that was worth far less than it actually was, and filed a class-action lawsuit against Dunlap and Sunbeam.
Reports of the methods Dunlap used to inflate revenues led the board to review Dunlap's practices in June 1998. It turned out that Dunlap had sold retailers far more merchandise than they could handle. With the stores hopelessly overstocked, unsold inventory piled up in Sunbeam's warehouses. As a result, Sunbeam faced losses of as much as $60 million in the second quarter of 1998. The company's controller also told the board that Dunlap had told him to push the limits of accounting principles. On June 13, Dunlap was fired. The shareholder suit against Dunlap dragged on until 2002, when he agreed to pay $15 million to settle the allegations.
In 2001, the Securities and Exchange Commission sued Dunlap, alleging that he had engineered a massive accounting fraud. Also named in the suit were four other former Sunbeam executives and the lead partner for Sunbeam's account with Arthur Andersen LLP
. An SEC investigation revealed that Dunlap and others had created the impression of a greater loss in 1996 in order to make it look like the company had experienced a dramatic turnaround in 1997. By the SEC's estimate, at least $60 million of Sunbeam's 1997 earnings were fraudulent. He also offered incentives for retailers to sell products that would have otherwise been sold later in the year, a practice known as "channel stuffing
". The SEC also argued that the purchases of Coleman, Signature and First Alert were made to conceal Sunbeam's growing problems. Dunlap's actions forced Sunbeam into bankruptcy.
Dunlap was also suspected of irregularities at Scott Paper. Not long after the shareholder settlement, he agreed to pay $500,000 to settle the SEC's charges. He was also banned from serving as an officer or director of any public company. The Justice Department
investigated Sunbeam's management during Dunlap's tenure, but ultimately didn't file any charges.
Not long after the SEC sued Dunlap, The New York Times
reported that he'd engineered a massive accounting fraud at Nitec, a paper-mill company in Niagara Falls, New York
. He'd been the company's president from 1974 to 1976, when he was fired due to his abrasive management style. An audit by Arthur Young (now part of Ernst & Young
) revealed numerous irregularities, including inflated inventory and nonexistent sales—circumstances similar to the Sunbeam case. The final result was that Nitec's $5 million profit for 1976 was actually a $5.5 million loss. Nitec sued Dunlap for fraud, but was ultimately forced out of business. However, Dunlap never mentioned Nitec on his resume.
In May 2009, Conde Nast Portfolio.com named Dunlap the 6th worst CEO of all time.
In 2001, he was caricature
d in Titans of Finance (Alternative Comics
, 2001, ISBN 1-891867-05-9) by R. Walker
and Josh Neufeld
. The comic book
is a collaboration
between a cartoonist
and a finance
columnist
, which casts Wall Street
executive
s and traders as hero
es and villain
s. The lead story features Ronald O. Perelman, and Mike Vranos
and Victor Niederhoffer
are among those included.
On May 27, 2011 Dunlap was featured in a segment on Public Radio International
's radio show This American Life
as part of a study on psychopathy. The journalist Jon Ronson
, author of the book The Psychopath Test
, recounted an interview he did with Dunlap where he asked Dunlap whether he fit the characteristics of a psychopath. According to Ronson, Dunlap freely admitted to possessing many of the traits of a psychopath, but he re-cast these as positive traits such as leadership and decisiveness. Ultimately, Ronson concludes that while Dunlap possesses many traits of a psychopath he differs from psychopaths in several key respects. For example Dunlap had no record of juvenile delinquency and has been happily married for 41 years, with no evidence of infidelity or cruelty in his second marriage (though his first wife divorced him on the basis of "extreme cruelty"). Ronson notes that Dunlap's score on the test, in the low 20s, is below the score of 30 that researchers consider to be the threshhold indicative of psychopathy.
Sunbeam Products
Sunbeam Products is an American brand that has produced electric home appliances since 1910. Their products have included the Mixmaster mixer, the Sunbeam CG waffle iron, Coffeemaster and the fully automatic T20 toaster. Sunbeam is owned by Jarden Consumer Solutions after Jarden's acquisition in...
.
Career
Born in Hoboken, New JerseyHoboken, New Jersey
Hoboken is a city in Hudson County, New Jersey, United States. As of the 2010 United States Census, the city's population was 50,005. The city is part of the New York metropolitan area and contains Hoboken Terminal, a major transportation hub for the region...
, Dunlap graduated from West Point before taking the reins of Lily Tulip Cup and Scott Paper.
Dunlap mentored James Packer
James Packer
James Douglas Packer is an Australian businessman.Packer is the son of the late media mogul Kerry Packer and grandson of Frank Packer. He inherited the family company, Consolidated Press Holdings Limited, which controls investments in Crown Limited, Consolidated Media Holdings and other companies...
for three years in the late 1980s.
Dunlap believed that the primary goal of any business should be to make money for its shareholders. To that end, he believed in making widespread cuts, including massive layoffs, in order to streamline operations. By firing thousands of employees at once and closing plants and factories, he drastically altered the economic status of such corporations as Scott Paper and Crown Zellerbach. He sold Scott Paper to Kimberly-Clark
Kimberly-Clark
Kimberly-Clark Corporation is an American corporation that produces mostly paper-based consumer products. Kimberly-Clark brand name products include "Kleenex" facial tissue, "Kotex" feminine hygiene products, "Cottonelle", Scott and Andrex toilet paper, Wypall utility wipes, "KimWipes"...
in 1995 for $7.8 billion and walked away with a $100 million golden parachute
Golden parachute
A golden parachute is an agreement between a company and an employee specifying that the employee will receive certain significant benefits if employment is terminated. Sometimes, certain conditions, typically a change in company ownership, must be met, but often the cause of termination is...
.
He took over as chairman and CEO of Sunbeam in 1996. His methods resulted in Sunbeam's reporting record earnings of $189 million in 1997. However, he was unable to find a buyer by 1998. Dunlap then decided to buy controlling interest in camping gear maker Coleman
Coleman Company
Coleman Company, Inc., is an American company that specializes in outdoor recreation products. Historically, Coleman is known for camping gear....
and coffee machine maker Signature Brands (best known for making Mr. Coffee
Mr. Coffee
Mr. Coffee is a registered trademark of Sunbeam Products, Inc. d/b/a Jarden Consumer Solutions. The Mr. Coffee brand manufactures automatic-drip kitchen coffee machines as well as other products.-History:...
and smoke detector maker First Alert
First Alert
First Alert is an American safety brand company, based in Aurora, Illinois. They make carbon monoxide detectors, smoke alarms, fire extinguishers, and other safety products like flashlights and fire escape ladders...
). Within two days, Sunbeam's stock jumped to an all-time high of $52 a share only to end up worthless in bankruptcy.
However, industry insiders were suspicious when they discovered certain seasonal items were being sold at higher volume than normal for the time of year. For instance, large numbers of barbecue grills were being sold during the fourth quarter. It turned out that Dunlap had been selling products to retailers at large discounts. The products were stored in third-party warehouses to be delivered later. This strategy, known as "bill and hold", is an accepted accounting practice as long as the sales are booked after delivery. However, Dunlap booked the sales immediately. Many shareholders felt they'd been tricked into buying stock that was worth far less than it actually was, and filed a class-action lawsuit against Dunlap and Sunbeam.
Reports of the methods Dunlap used to inflate revenues led the board to review Dunlap's practices in June 1998. It turned out that Dunlap had sold retailers far more merchandise than they could handle. With the stores hopelessly overstocked, unsold inventory piled up in Sunbeam's warehouses. As a result, Sunbeam faced losses of as much as $60 million in the second quarter of 1998. The company's controller also told the board that Dunlap had told him to push the limits of accounting principles. On June 13, Dunlap was fired. The shareholder suit against Dunlap dragged on until 2002, when he agreed to pay $15 million to settle the allegations.
In 2001, the Securities and Exchange Commission sued Dunlap, alleging that he had engineered a massive accounting fraud. Also named in the suit were four other former Sunbeam executives and the lead partner for Sunbeam's account with Arthur Andersen LLP
Arthur Andersen
Arthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations...
. An SEC investigation revealed that Dunlap and others had created the impression of a greater loss in 1996 in order to make it look like the company had experienced a dramatic turnaround in 1997. By the SEC's estimate, at least $60 million of Sunbeam's 1997 earnings were fraudulent. He also offered incentives for retailers to sell products that would have otherwise been sold later in the year, a practice known as "channel stuffing
Channel stuffing
Channel stuffing is the business practice where a company, or a sales force within a company, inflates its sales figures by forcing more products through a distribution channel than the channel is capable of selling to the world at large. Also known as "trade loading", this can be the result of a...
". The SEC also argued that the purchases of Coleman, Signature and First Alert were made to conceal Sunbeam's growing problems. Dunlap's actions forced Sunbeam into bankruptcy.
Dunlap was also suspected of irregularities at Scott Paper. Not long after the shareholder settlement, he agreed to pay $500,000 to settle the SEC's charges. He was also banned from serving as an officer or director of any public company. The Justice Department
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
investigated Sunbeam's management during Dunlap's tenure, but ultimately didn't file any charges.
Not long after the SEC sued Dunlap, The New York Times
The New York Times
The New York Times is an American daily newspaper founded and continuously published in New York City since 1851. The New York Times has won 106 Pulitzer Prizes, the most of any news organization...
reported that he'd engineered a massive accounting fraud at Nitec, a paper-mill company in Niagara Falls, New York
Niagara Falls, New York
Niagara Falls is a city in Niagara County, New York, United States. As of the 2010 census, the city had a total population of 50,193, down from the 55,593 recorded in the 2000 census. It is across the Niagara River from Niagara Falls, Ontario , both named after the famed Niagara Falls which they...
. He'd been the company's president from 1974 to 1976, when he was fired due to his abrasive management style. An audit by Arthur Young (now part of Ernst & Young
Ernst & Young
Ernst & Young is one of the largest professional services networks in the world and one of the "Big Four" accountancy firms, along with Deloitte, KPMG and PricewaterhouseCoopers ....
) revealed numerous irregularities, including inflated inventory and nonexistent sales—circumstances similar to the Sunbeam case. The final result was that Nitec's $5 million profit for 1976 was actually a $5.5 million loss. Nitec sued Dunlap for fraud, but was ultimately forced out of business. However, Dunlap never mentioned Nitec on his resume.
In May 2009, Conde Nast Portfolio.com named Dunlap the 6th worst CEO of all time.
In popular culture
A documentary film was made about Dunlap in 1998 called Cutting to the Core—Albert J. Dunlap http://www.fmgondemand.com/id/9796/Cutting_to_the_Core-Albert_J_Dunlap.htm.In 2001, he was caricature
Caricature
A caricature is a portrait that exaggerates or distorts the essence of a person or thing to create an easily identifiable visual likeness. In literature, a caricature is a description of a person using exaggeration of some characteristics and oversimplification of others.Caricatures can be...
d in Titans of Finance (Alternative Comics
Alternative Comics (publisher)
Alternative Comics is a U.S. independent graphic novel and comic book publisher which operated from 1993–2007. Located in Gainesville, Florida, it is owned and operated by its founder, attorney Jeff Mason...
, 2001, ISBN 1-891867-05-9) by R. Walker
Rob Walker (journalist)
Rob Walker is an American author and freelance journalist. He is a contributing writer to The New York Times Magazine and blogger for Design Observer....
and Josh Neufeld
Josh Neufeld
Josh Neufeld is an alternative cartoonist known for his nonfiction comics on subjects like Hurricane Katrina, international travel, and finance, as well as his collaborations with writers like Harvey Pekar and Brooke Gladstone...
. The comic book
Comic book
A comic book or comicbook is a magazine made up of comics, narrative artwork in the form of separate panels that represent individual scenes, often accompanied by dialog as well as including...
is a collaboration
Collaboration
Collaboration is working together to achieve a goal. It is a recursive process where two or more people or organizations work together to realize shared goals, — for example, an intriguing endeavor that is creative in nature—by sharing...
between a cartoonist
Cartoonist
A cartoonist is a person who specializes in drawing cartoons. This work is usually humorous, mainly created for entertainment, political commentary or advertising...
and a finance
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
columnist
Columnist
A columnist is a journalist who writes for publication in a series, creating an article that usually offers commentary and opinions. Columns appear in newspapers, magazines and other publications, including blogs....
, which casts Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
executive
Corporate title
Publicly and privately held for-profit corporations confer corporate titles or business titles on company officials as a means of identifying their function in the organization...
s and traders as hero
Hero
A hero , in Greek mythology and folklore, was originally a demigod, their cult being one of the most distinctive features of ancient Greek religion...
es and villain
Villain
A villain is an "evil" character in a story, whether a historical narrative or, especially, a work of fiction. The villain usually is the antagonist, the character who tends to have a negative effect on other characters...
s. The lead story features Ronald O. Perelman, and Mike Vranos
Mike Vranos
Michael W. "Mike" Vranos is an American hedge fund manager and philanthropist who in the 1990s was referred to by some as the "most powerful man on Wall Street." In 1993, he reportedly earned $15 million from trading mortgage bonds...
and Victor Niederhoffer
Victor Niederhoffer
Victor Niederhoffer is a hedge fund manager, champion squash player, bestselling author and statistician.Victor Niderhoffer was born in Brooklyn to a Jewish family. His father, Arthur, graduated from Brooklyn Law School but went to work in the police. Victor’s mother, Elaine was a teacher....
are among those included.
On May 27, 2011 Dunlap was featured in a segment on Public Radio International
Public Radio International
Public Radio International is a Minneapolis-based American public radio organization, with locations in Boston, New York, London and Beijing. PRI's tagline is "Hear a different voice." PRI is a major public media content creator and also distributes programs from many sources...
's radio show This American Life
This American Life
This American Life is a weekly hour-long radio program produced by WBEZ and hosted by Ira Glass. It is distributed by Public Radio International on PRI affiliate stations and is also available as a free weekly podcast. Primarily a journalistic non-fiction program, it has also featured essays,...
as part of a study on psychopathy. The journalist Jon Ronson
Jon Ronson
Jon Ronson is a Welsh journalist, documentary filmmaker, radio presenter and nonfiction author, whose works include The Men Who Stare At Goats. His journalism and columns have appeared in British publications including The Guardian newspaper, City Life and Time Out magazine...
, author of the book The Psychopath Test
The Psychopath Test
The Psychopath Test: A Journey Through the Madness Industry is a book by Jon Ronson in which he explores the concept of psychopathy.-Primary themes:...
, recounted an interview he did with Dunlap where he asked Dunlap whether he fit the characteristics of a psychopath. According to Ronson, Dunlap freely admitted to possessing many of the traits of a psychopath, but he re-cast these as positive traits such as leadership and decisiveness. Ultimately, Ronson concludes that while Dunlap possesses many traits of a psychopath he differs from psychopaths in several key respects. For example Dunlap had no record of juvenile delinquency and has been happily married for 41 years, with no evidence of infidelity or cruelty in his second marriage (though his first wife divorced him on the basis of "extreme cruelty"). Ronson notes that Dunlap's score on the test, in the low 20s, is below the score of 30 that researchers consider to be the threshhold indicative of psychopathy.