Cardillo Travel Systems

Cardillo Travel Systems, Inc. case

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Guideyou may find helpful.

1-During the early 1980s, Cardillo incurred significant operating losses even though it was experiencing rapid growth in revenues as a result of Rognlien's aggressive franchising strategy

2-The court order outstanding against Cardillo required the company to maintain total stockholders' equity of at least $3 million.

3-The $203,000 payment by United Airlines to Cardillo was intended to reimburse the latter for expenses incurred in changing to the United Airlines reservation system.

4- Recording the $203,000 United Airlines payment as commission revenue allowed Cardillo management to maintain stockholders' equity above $3 million.

5-Cardillo's executives attempted to conceal the true nature of the United Airlines payment from the company's controller and from its independent auditors.

6-The company's controller refused to misrepresent the nature of the United Airlines payment when pressured to do so by Rognlien.

7-The two audit engagement partners involved in this case refused to accept the incomplete and suspicious explanations of the United Airlines payment that were provided by Rognlien and his subordinates.

8-In early 1986, Cardillo's weak financial condition was made even worse by a $685,000 civil judgment imposed on the company.

9-Rognlien sold a large block of Cardillo stock prior to the company publicly disclosing the large civil judgment.

10-In 1988, the SEC sanctioned three of Cardillo's executives for violating several provisions of the federal securities laws.

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