Corporate blame game.('The Funny Money Game')

The Funny Money Game By Andrew Tobias, 1970

As vice president of a rapidly growing $100 million corporation at age 22, Andy was on his way. National Student Marketing, a company that employed "no creative people over 25," was vaulting into the stratosphere, with a hot concept concentrating on sales to the youth market, and tremendous growth. As the decade closed, NSM went public, producing huge stock gains. Tripling its sales and profits each year, and trading at well over 100 times its earnings, NSM was a darling of Wall Street. In addition to his impressive salary, Andy held stock options worth nearly $400,000.

Yet within a year or two, the corporations founder would end up in jail. The company collapsed. The accounting behind its rapid growth turned out to be creative, to say the least.

Sound familiar? In this case, however, the decade was not the 1990s, but the 1960s. Though many of the journalists who report on our present stock market troubles seem not to realize it, America has been through bursting bubbles before, complete with accounting scandals and executives moving from Lear Jets to the pokey in a matter of months.

The true-life expose in this case was a book called The Funny Money Game. It was the debut of financial writer Andrew Tobias, who, after getting caught up in a shady business himself, went on to become one of today's most prominent financial columnists. His apologia for his part in the National Student Marketing scandal was graceful, funny, and full of insight into the mix of greed, stock market shenanigans, and managerial rationalizations that helped transport Tobias from a college job selling travel books to a ringside seat at one of the most expensive chain letter scams ever perpetrated on the public.

In 1968, NSM issued its first annual report, showing earnings of $700,000. The report stated $1.8 million in unbilled receivables, increasing revenues and earnings by a like amount. Unbilled receivables were a novel accounting concept with a great deal of power. But like all chain letters, NSM had to run ever faster just to stay in place.

In the next fiscal year, the company reported as earnings more than $3 million dollars from acquisitions that didn't take place until well after the end of ...