Posted Layla Alzahrani.
Embezzlement is money stolen by an unethical person. According to the article, 40 percent of small businesses in the United States will be targeted for average loss of $ 140,000,00.00, but embezzlement is only reported two percent of the time. Most of the embezzlers are trusted and long-term employees or family friends, or relatives. Victims’ trust usually is shattered after embezzlement happened, especially if embezzlers are their friends or relatives. According to forensic psychologists, victims have lack of judgment to discover the perpetrators before embezzlement happens.
It is difficult to discover employees who follow no pattern and offer no outward signs. Embezzlement sometimes is committed by people who do not have previous criminal records and and may have reputations beyond reproach. There are warning signs, however, that can show as evidence of employees’ behavior before the theft is uncovered, such as: enthusiastic employees who ask questions about business processes and procedures; employees who have excessive debt because of divorce or drug abuse; and employees who refuse to take time of their job, and who want to work when no one is around. Usually embezzlers have a hostile attitude if they get questioned about financial transaction.
Moreover, there are three factors must be present before a person can commit fraud; they are need, opportunity, and rationalization. Some examples of need are addiction to drugs, alcohol, and gambling. Rationalization appears when an employee believes that his/her illegal action fits within a personal code of conduct or ethic, which means that an embezzler steals because they see that as situational fraud. However, embezzlement can be discovered if accountants find amounts of expenses that are not consistent with historical norms or budget, documents are missing or incomplete, problems of bank reconciliations, and documents are adjusted without adequate support.
Preventing embezzlement can be difficult because there is no sure-fire method that can prevent it. Some examples that make it difficult to prevent fraud are issuing fictitious checks, invoking products that a company does not need it, issuing cashing checks for return products that not actually returned, forging checks and destroying them, and charging patients more than a duplicate invoice. There are some precautions that clients can take to prevent fraud such as doing an extensive background check before hiring an employee, tracking a person’s checks and verifying them, making bank deposits nightly, reconciling the bank and credit card statements, and requiring vacations. Those handing funds must be closely and routinely monitored in a company to insure that all profit within the practice and not in someone’s pocket.
Layla is a graduate accounting student with a concentration in forensic accounting at the Feliciano School of Business, Montclair State University.
Source:
Tranyor, Robert M. (2016) Embezzlement Could it Really Happen to You?, Audiology Today, Vol. 28. No. 4.
Posted by Nick Farkas.
A McDonald’s’ franchise in California has repeatedly gotten into legal trouble throughout the past few years because they were not paying and recording the overtime of their employees correctly. The Smith family owns the franchise and have around 800 employees working for them. They initially settled the claims for $700,000 but did not learn from their mistakes.
McDonald’s is not entirely liable because it is a specific franchise involved; however, they are going to pay the $1.75 million in damages and $2 million in legal fees to protect the brand. McDonald’s has also agreed to train the Smith family on the use of corporate software designed to ensure compliance with California’s distinctively strict employment laws.
This is not the end of McDonald’s’ lawsuits and it is certainly not the beginning. Earlier this month, a union-backed group filed sexual harassment complaints on behalf of workers. McDonald’s has to decide which cases are worth fighting, and which cases they should automatically plead guilty. These decisions are based on risk and image.
Nick is an accounting major at the Feliciano School of Business, Montclair State University.
Posted by Navjoat Aulakh.
PepsiCo’s famous ‘healthy’ beverage line, Naked Juice, is being stripped down and exposed for it’s misleading marketing tactics. The line of beverages features images of various fruits and vegetables, and claims to be ‘all natural’. The CSPI (Center for Science in the Public Interest) has argued that “a single 15.2-ounce container (the smallest option) contains 61 grams of sugar, about 50% more sugar than a 12-ounce can of Pepsi”. The American Heart Association’s suggested sugar intake is 37.5 grams a day, PepsiCo’s Naked Juice almost doubles this suggested amount.
Although the lawsuit is less than two months old, it is expected to make impact in due time. CSPI is asking that the company be more transparent in the ingredients of the drink, and to compensate monetary damages to customers. Although the compensation of damages is not likely, PepsiCo will most likely have to change it’s marketing tactics. The CSPI has a strong history of exposing the misleading marketing of products, and has even caused changes in rival companies such as Coca-Cola.
Navjoat is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2019.
Posted by Johanna Ortiz.
An ex-executive Andrew Caspersen at New York investment bank was declared guilty to securities and wire fraud. He admitted defrauding investors of more than $38 million, and the judge gave him four years in prison because the defendant’s attorney asked him for leniency for gambling addiction.
Caspersen was a good worker. He graduated from Princeton University and Harvard Law School. Unfortunately, for his addictions, he defrauded investors’ money including his family and friends. “I lost their money” he said “I abused their friendship. I destroyed my family’s name” (news.findlaw.com).
He used to go to an organization which helped him with his alcohol and gambling addictions; however, he never finished his treatment. He always quit. His attorney used this as an excuse to let the judge know that he is not under control and he is unable to think or act as a normal person. The judge declared him with a very real gambling disorder and for that reason he gave him short-term prison sentence. He said to the judge that he learned from this and he is going to retake the treatment.
His defense attorney said his client was very ill with his addictions that he did not care about money, and he just wanted to play. At the end of the day, he lost over $100 million. He had hope that no matter how many times he lost, he would win and take the money back.
In my opinion, Caspersen acted without values, morals, and respect to investors. He knew his addictions and he was irresponsible and quit the treatments. All his irresponsibility were not investors’ fault and he had to pay for his mistakes.
Johanna is an accounting major at the Feliciano School of Business, Montclair State University.
Posted by Rafaela Andrade.
Costco wholesale store is now using new Visa credit cards and no longer American Express after fifteen years. Under a new contract, Citigroup, Inc. will now be the issuer for their credit cards along with Visa, Inc. Early this year, Costco reported that their earnings were not met and the stock price had dropped. The reason why the wholesale store left and would not renew the contract with American Express is due to economic reasons. When the news of this broke to the public, the “credit- card company’s stock fell 6.4%.”
Costco only accepted American Express for the past fifteen years. The wholesale store represented around $80 billion of their business and just on interest it was about $14 billion. This was clearly a major hit for American Express. AmEx is also limited in certain retail stores. It is said that even though AmEx offers great rewards it is costly for the merchants, costing the retailer about 3.5% where Visa and MasterCard have a cost around 2-3% or less. Costco members will have rewards and allowing them to use their new Visa cards where they are accepted.
American Express provided deals to the members such as 3% cash back on gas, 2% cash back on restaurants and even when traveling, 1% on Costco purchases and other purchases. Visa offers 4% cash back on gas, 3% cash back on restaurant and eligible travel purchases, 2% cash back on purchases from Costco, and 1% on all other purchases. This deal is great way to get extra cash and there is no annual fee for the credit card. Many Customers are happy with the results while others are not as happy. Costco had to do what is best for the company (enter a new contract) in order to keep generating business.
Rafaela is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2018.
Sources:
http://www.latimes.com/business/la-fi-costco-visa-20150302-story.html
http://www.marketwatch.com/story/5-things-to-know-about-the-costco-and-amex-breakup-2016-02-11
Posted by Agnieszka Baj.
In this digital age, User Generated Content has been described as an exceptional marketing strategy. Onibalusi (2016) argues that “its potential value is great, but you’ll need to do a lot of navigating to unlock its true potential”. This is based on also legal issues that need to be considered when posting information on the online platform.
Copyright issues have been a major legal pitfall, and corporations have addressed this issue with regard to the content posted on their online platforms. For large businesses, UGC is a preplanned strategy, and thus they have a legal team that address the legal issues involving it. Small businesses should have a “well-defined” legal policy its users can access. For this reason, emerging businesses using UGC should consider all the legal issues before venturing into the strategy. Onibalusi (2016) points out that “your company should consider issues such as copyrights, responsibility for stolen content and ownership of content”. In this way, the business may be able to protect itself from imminent copyright suits. The article also cites the importance of content management in the use of UGC. Both the audience and online optimization firms need to see quality content in online platforms. For this reason, it is important to ensure that all content posted are within a certain level of quality.
User Generated Content is an effective trend for marketers, but proper management is required to access the full benefits. Firstly, the legal considerations of posted content should be ensured to avoid copyright issues. Also, the quality of posted content should be always managed to suit a certain level.
Agnieszka is an accounting major at the Feliciano School of Business, Montclair State University.
Posted by Karolina Staron.
A lawsuit was brought against Dannon Company, Inc for falsely advertising their yogurt brand. Dannon Company for years has claimed their popular product to be the healthiest on the market, ultimately pricing higher than competitors. Stating that daily consumption of the yogurt will reduce occurrences of colds and strengthen individual’s immune system. Consumers profoundly believed in the advertising, willing to pay a higher price.
One individual, however, challenged those claims. Trish Wiener suffered with digestive problems, the consumption of the yogurt that guaranteed digestive system improvements was intended to aid with the discomfort. Inspire of this, with time the yogurt failed to relieve the daily burden and Wiener began to question the accuracy of the advertisement. “In its ads for the yogurts Dannon claims the products use exclusive strains of what are known as probiotic bacteria, [which] are live microorganisms, usually bacteria, similar to the beneficial ones found in the human digestive system. In the right amounts, they ‘confer a health benefit on the host.’” While, in fact no clinical testing has been accomplished to support the existence of probiotics in the dairy product.
Dannon Company, Inc. although denying any allegations against false advertising, has agreed to settle the Federal Trade Commission law suit. The settlement required acceptance to omit disclosing “scientific proof” benefit of their products. “Claiming that any yogurt, dairy drink, or probiotic food or drink reduces the likelihood of getting a cold or the flu, unless the claim is approved by the Food and Drug Administration.” The Company’s intention behind settling was forgo incurring additional expenses.
In the modern times, busy work schedule and daily tasks often take away time from properly planning meals and force people to rely on quickly obtainable foods. With a busy lifestyle people neglect the need to educate themselves on the quality of products they purchase. If the media states a specific food is beneficial to ingest, the statement is relied upon by the public without further questioning. This is only one case that has been brought to the public’s attention that addresses the topic of food quality and false advertisement. Many of the goods consumed on a daily bases possesses even lower value, yet are an accepted norm. The lesson taken from this case is to inform ourselves on the supposed benefits of the purchased products, because in truth unless we grow and produce foods ourselves, we won’t know the true ingredients embedded in every product.
Karolina is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2017.
Sources:
http://abcnews.go.com/Business/dannon-settles-lawsuit/story?id=9950269
https://www.ftc.gov/news-events/press-releases/2010/12/dannon-agrees-drop-exaggerated-health-claims-activia-yogurt
Posted by Francesca Mecionis.
The owners of America’s Test Kitchen filed a 39-page lawsuit against Christopher Kimball, and some of his other associates, on November 3. According to the suit, Kimball and his accomplices “conspired to literally and conceptually rip off” the Boston TV show. The reason for his actions were said to be for his personal benefit in order to help launch his new brand, Milk Street. There are accusations of “stolen customer lists and trade secrets, sneaky tactics to secure a radio deal, and new office space.” Kimball had a fiduciary responsibility to the show. However, the owners believed he had stolen their entire business model, “right down to how recipes are written,” and also had worked on his own project while still being employed by America’s Test Kitchen.
Kimball, in response to the suit, claims it is “absurd” and “was meant to generate publicity and to shore up the America’s Test Kitchen brand.” Yet, there is proof of his actions in writing. There was a forensic search of his emails, which showed “Kimball’s scrambling to set up his new business before he left the old one, securing copies of his work contacts and packing up his belongings.” In another email, Kimball wrote to his assistant, “Want to get ahead of the partners!” in regards to using the America’s Test Kitchen name to find a new office space for his business.
The lawsuit was issued in the Superior Court of Suffolk County of Massachusetts. The owners are hunting for “unspecified monetary damages, repayment of some of the compensation that America’s Test Kitchen paid Kimball and the people who left with him, and asks the court to prevent him and his new company “from exploiting information, assets and opportunities stolen from America’s Test Kitchen.” Lawyers are arguing that Kimball’s motivation to steal secrets from the show stemmed from when the board and investors pushed him out. In 2013, America’s Test Kitchen’s rating decreased dramatically, and the show responded by hiring a new set of employees. By 2015, a new CE whom outranked Kimball had taken over, and eventually he stopped showing up to work, telling his coworkers “he had been fired.” “Kimball, in an interview Wednesday, cautioned not to read too much into the allegations, saying most were false or twisted interpretations.” His legal team is preparing to go against these accusations, within this month. Hopefully, the truth will be revealed and both parties receive what they deserve.
Francesca is an accounting major at the Feliciano School of Business, Montclair State University.
Posted by Paul Della Vecchia.
The recent Bloomberg article “Wal-Mart Balks at Paying $600-Million-Plus in Bribery Case” written by Tom Schoenberg and Matt Robinson, depicts a long standing bribery case Wal-Mart participated in. The article is dated October 6th, 2016. Wal-Mart is said to have been paying foreign officials in Mexico, India, and China. They did this to take a fast track into getting into those countries. A fast track is speeding up the process to start a business in a country, and it allows them to get their business permits. Wal-Mart reported sales of $482 billion, and $14 billion in profits. In this case alone, “Wal-Mart has already spent $791 million on legal fees and an internal investigation into the alleged payments and to revamp its compliance systems around the world, it said” (Schoenberg and Robinson). These legal fees are starting to add up as the investigation goes longer, but Wal-Mart is not looking to settle. To settle the case, it would be $600 million.
Bribing foreign officials is illegal under the 1977’s Foreign Corrupt Practices Act. Wal-Mart tried to outsmart the system by “Calculating a fine based only on the amount of the alleged bribes, as the department has done in some cases, would yield a lower penalty, they said” (Schoenberg and Robinson). Companies are in the business of making money, and Wal-Mart looked at the pros and cons of this bribery. They believed that they would be able to actually make a profit off breaking the law, and to do that they ran calculations to see whether the fine would outweigh the benefit. Clearly it did not, because they were able to bribe their way to the top, and open more foreign companies. The case is so long standing, because the evidence the officials have is outdated. To work around this, the investigators are trying to look to more recent allocations of bribery from Wal-Mart in Brazil. As each day goes by, evidence becomes more outdated and less reliable. In 2011, “Wal-Mart disclosed possible violations in Mexico to the justice Department and SEC” (Schoenberg and Robinson). There wasn’t much done at the time, and now we fast forward to 2016 and that 5 year old evidence is not looking as clear. So the investigators are beginning to look elsewhere to try and solve this problem. The article also makes reference to attempts to find bribes in China, but to no avail.
Wal-Mart is looking to fight this case, because they are unsure what the criminal charges against them would be. If they decide to settle, the settlement “would rank among the highest levied under 1977’s Foreign Corrupt Practices Act” (Schoenberg and Robinson). The article relates the Wal-Mart case to the similar VimpelCom Ltd. and Siemens AG case. Both cases deal with bribing foreign officers to win business, and both settlements were higher than Wal-Mart. Judging the case off precedent and the increasing costs of legal fees, settlement should be a viable option for Wal-Mart. A company making $14 billion in profits should be able to sponge any damages done by their illegal acts. Wal-Mart does not want to settle, because they are unaware how it would affect their company. The timing is just not right at the moment to be spending the settlement costs, the article alludes to. “Wal-Mart said Thursday that net income for the year through January 2018 will be “relatively flat” as the company invests in its website and mobile app” (Schoenberg and Robinson). So if they have the option to clear their name and spend a little extra money or settle and have their brand slightly tarnished, they are going to fight for now. This way they are able to compete with Amazon in their work on their mobile app and website for online shopping.
Paul is an graduate accounting student with a concentration in forensic accounting at the Feliciano School of Business, Montclair State University, Class of 2017.
Posted by Cecylia Bigos.
Non-Compete agreements are a good method of protecting a business from former employees but their provisions must be reasonable or else the important limitation provisions (distance from business, duration) will not be enforced or worse yet the entire agreement will be declared void by a court. I came across an interesting article on Non-Compete provisions on the Entrepreneur.com. The article does an excellent job in summarizing how restrictive or broad the limiting provisions should be in order to protect the business yet still be enforceable in just a few sentences. “Your business is your baby. It may be tempting to be heavy-handed in your non-compete provisions, but it’s important to be reasonable. Excessive restrictions in your non-compete make it more likely that a judge will not enforce it.”
There are many fears in hiring new workers, yet new workers are essential to developing and evolving your business. One of the worst fears a business owner has is hiring and training an employee, introducing them to clients so they can perform their duties, to later learn that the employee left and is working for your former clients, essentially stealing your business right from under your nose. Yet we live in a country that encourages free thinking, expansion, new ideas and capitalism, and preventing employees from leaving businesses to start their own businesses would run contrary to our capitalistic beliefs; therefore, the limiting provisions cannot be too restrictive. The article uses one or two years as a reasonable restriction on time before a former employee can start performing the same work: longer for higher level/high skill employees. “You may reasonably demand a longer duration for higher level employees, like CEOs, where three to five years is not unheard of, depending upon the facts and the jurisdiction.” And the article explains that the geographical restriction should not be “any larger than the area in which you ordinarily conduct business.”
In my opinion, the article does not give too many examples, but using my understanding of non-compete clauses I can give some examples. Time and geographical limitations in non-compete clauses in the medical profession typically depend very heavily on how specialized a doctors practice is. For example a neurologist can limit a former practicing neurologist from working within 30 miles of the practice in which the young neurologist left. However, the geographical limitation for a general practice/family doctor would be much less than 30 miles maybe as little as 5 miles. Non-complete provisions restricting lawyers from practicing law are completely unenforceable. My hair stylist who works for a big salon and cuts my hair is not allowed to open her own salon within 5 miles of the salon and 3 years after leaving the salon. She may not even cut hair for her friends and family in her own house.
In summary, non-compete clauses are helpful in protecting entrepreneurs expanding their business yet the restrictions cannot be too restrictive or broad or else they will not be enforced by a court of law. “While a court may modify an unreasonable term or terms of a non-compete agreement, it can also invalidate an entire agreement if it finds credible evidence that the employer deliberately included overly broad language that renders an agreement unreasonable and oppressive.”
Cecylia is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2018.