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Read MoreThis article was originally published in the Pennsylvania CPA Journal, Summer 2025
Publication Date: November 18, 2025
In July 2023, one of the year’s most anticipated movies, the Barbie movie, premiered in theaters, achieving more than USD1 billion in global ticket sales. [1] One potentially overlooked detail in the movie was the character Ruth, who appeared to live on the 17th floor of Mattel’s headquarters, and who mentioned getting into trouble with the Internal Revenue Service. The character Ruth was, in fact, paying homage to Barbie’s creator, Ruth Handler. Mrs. Handler was one of the co-founders of Mattel and created the Barbie doll in 1959, which was inspired by her daughter, Barbara. [2] Given the adoration Barbie has garnered over the years since her creation, you might ask yourself, how could she possibly be involved in a fraud case? While the Barbie movie correctly depicted Ruth facing trouble, it inaccurately identified the agency involved; it was the Securities and Exchange Commission, not the IRS. Mrs. Handler, among others, were charged with conspiracy and making false financial statements by overstating revenues and income between 1971 and 1973, which Mattel ultimately admitted to in 1974. [3] The reason for Mattel’s fraudulent actions was to influence the market price of their stock. Mrs. Handler was sentenced to 500 hours of community service per year and five years of probation. [4]
Unfortunately, the Handler case is not the sole instance of a toy company being accused of fraudulent activities. Over the years, the toy industry has seen several notable fraud cases, including those involving prominent toy companies, such as Toys “R” Us, Funko, Inc., Hasbro, Inc., LeapFrog Enterprises, Inc., and Tyco International. While it is not feasible to discuss all of them, we have selected two particularly interesting cases to highlight.
In the Toys "R" Us fraud case, which was filed in 2020, executives were accused of making false representations to secure loans during bankruptcy, which they filed for in 2017. These false statements included misrepresenting the company’s sales projections and its viability as a going concern, leading to significant financial losses. The former executives and board members were accused of giving preference to their own financial interests over those of the creditors during the company's bankruptcy. Allegations included making false representations to secure loans for a costly restructuring, while knowing they couldn't meet the terms, and timing bonuses to circumvent bankruptcy rules. [5] This case was ultimately resolved in 2022, though the terms of the settlement remain confidential. [6]
The LeapFrog fraud case centered around allegations that the company misrepresented its financial health, which misled investors and stakeholders. It was alleged that they inflated their sales projections for the fiscal year of 2003 by either failing to disclose or misrepresenting several key issues that could impact their projected earnings. In October 2003, LeapFrog announced that they had failed to meet their sales projections, resulting in a significant 25% decline in their stock. A class-action lawsuit was filed in April 2005, citing violations of the Securities Exchange Act of 1934, resulting from false and misleading statements and omissions. This case was ultimately resolved in 2008, with LeapFrog agreeing to a settlement of USD2.3 million. [7]
These incidents draw attention to the importance of strong corporate governance, ethical practices, and rigorous regulatory compliance in maintaining the integrity and trustworthiness of not only the toy industry but for all companies. Due to fraudulent activity, companies can experience significant consequences, including reputational damage, financial losses, and regulatory scrutiny.
However, the repercussions of fraud can extend beyond the company responsible, including:
The takeaway from these types of fraud cases is the extensive and detrimental impact they have not only on the companies committing the fraud but also on the broader environment. Fraud perpetrated by companies distorts market perceptions, causing inefficient capital allocation, which can have a ripple effect on the overall economy.
While public companies (and others) may require annual financial statement audits, which have an affirmative duty to address the risk of fraud, only 3% of all occupational frauds are discovered from financial statement audits, internal audits discover 14% of frauds and tips comprise 43% of all occupational frauds. [8] For CPAs, the implications are significant, with increased scrutiny and potential legal liability. As CPAs, our responsibility is to ensure the accuracy and reliability of financial reporting to protect the interests of the public and the integrity of the financial markets. A few key practices CPAs can implement to contribute to this include adhering to professional standards and ethical guidelines, as provided in the AICPA’s Code of Professional Conduct; establishing strong internal controls; segregation of duties; maintaining effective communication; and keeping their education up to date, which is ever-changing and becoming more challenging with new technologies.
We would like to thank our colleagues, Marion Wickersham, MS-FFE, CPA, CFE and Allison Greenfield, MBA,CPA, CFE, for providing insight and expertise that greatly assisted this research.
Marion Wickersham, CFE, is a Vice President in J.S. Held’s Economic Damages & Valuations practice. She joined J.S. Held in January of 2024 as part of J.S. Held's acquisition of Forensic Resolutions, Inc. Marion is involved in complex forensic accounting and litigation assignments involving personal injury, wrongful death, subrogation, lost business income, and employment discrimination, among other claims. She has worked in commercial banking, identifying and solving fraudulent transactions and activities. Marion also has extensive knowledge in cash handling and reporting, employee training, and development.
Marion can be reached at [email protected] or +1 856 857 1275.
Allison Greenfield, CPA, CFE is a Senior Consultant in J.S. Held’s Economic Damages & Valuations practice. She joined the company in January of 2024 as part of J.S. Held's acquisition of Forensic Resolutions, Inc. Allison’s experience includes engagements in a variety of financial dispute matters including personal injury, wrongful death, commercial damages, business interruption claims, medical malpractice, and fraud investigations.
Allison can be reached at [email protected] or +1 856 433 6427.
[1] https://www.today.com/video/-barbie-hits-1-billion-at-box-office-breaking-record-190197829599
[2] https://corporate.mattel.com/history
[4] https://www.museumofplay.org/app/uploads/2022/01/2-3-book-review-5.pdf
[7] https://securities.stanford.edu/filings-case.html?id=102926
[8] https://www.acfe.com/-/media/files/acfe/pdfs/rttn/2024/2024-report-to-the-nations.pdf
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