Posted by Samantha Staudt.

One in five Americans have reported that they have skipped medicine doses or failed to fill a prescription each year because of the cost of the medicine.  This statistic is outrageous and states have to start doing something about it because the federal government will not.  Certain states, like Nevada, have passed a new law that manufactures must disclose more information about why drug prices are rapidly increasing.  In the past few year, prices in Nevada have increased as much as 325 percent, so this law will help regulate the prices of prescription drugs.  Maryland provides another example of steps that must be taken in an order to regulate drug companies.  The attorney general sued generic drug manufacturers whose prices rose more than fifty percent in a year.  States are partly responsible for the funding of the Medicaid program, spending more than 20 million dollars a year on prescription drugs for public employees and prisoners.

Drug manufacturers have recently pushed opioids while denying and misunderstanding their addictiveness.  This may be enough to cut the political power of the pharmaceutical industry.  This statistic is not settling well with anyone and more than 100 states have filed lawsuits against pharmaceutical companies related to tobacco.  This is in an effort to recover the costs of dealing with the epidemic of addiction and overdoses.  Oklahoma’s attorney general, Nolan Clay, is making strides to fixing this rising issue by refusing to accept donations from drug companies.

Of course, pharmaceutical companies fight the big changes that would affect the company.  The industry has been at the top of the lists for lobbying expenditures and campaign contributions at the same time managing to block reform proposals.  During Nevada’s fight to lower drug prices, drug companies hired more than seventy lobbyist to descend on the bill.  When state drug pricing bills pass, the drug industry challenges them in court.  There have been several lawsuits filed, but none have succeeded yet.  In order to prevent drug companies from overpricing prescription drugs, states must enforce regulation laws immediately.

Samantha is a finance major at the Stillman School of Business, Seton Hall University, Class of 2020.

Posted by Ryan Simoneau.

The National Law Review recently posted an article on February 20, 2018 discussing the impact of the N.Y. Court of Appeals decision in Forman v. Henkin, a personal injury case. Forman, the Plaintiff, claimed she suffered spinal and brain injuries when she fell off the Defendants horse. Before the accident, the Plaintiff admitted to having an active Facebook account on which she posted pictures of her active lifestyle. After the accident, she claimed her life changed and she could no longer continue her active lifestyle and could barely type coherent messages. During discovery, the Defendant asked the court to compel the Plaintiff to provide full access to her Facebook account, regardless of whether it was public or private. At trial court level, the discovery (or electronic discovery) request was limited to photos before and after the accident and those relevant to her difficulty to type. When appealed, the appellate court limited the photographs provided in court. The court based its decision on another case, Tapp v. New York State Urban Development Corporation, in which it decided, “[t]o warrant  discovery, defendants must establish a factual predicate for their request by identifying relevant information in plaintiff’s Facebook account- that is, information that contradicts or conflicts with plaintiff’s alleged restrictions, disabilities, and losses and other claims.” The Court of Appeals, however, disagreed. They determined that public versus private did not matter in regards to social media and reinstated the trial court’s ruling.

The Court of Appeals did not grant full access to the Plaintiff’s social media to protect her privacy, yet does not see a difference between public and private Facebook posts. Typically in personal injury cases, the Defendants will ask the court for full, unrestricted access to social media which is oftentimes unwarranted and called a metaphorical fishing expedition. The Court of Appeals held that the information compelled has to be “appropriately tailored and reasonably calculated to yield relevant information.” What this means is that the request cannot be overly broad and burdensome, but relevant. This ruling mimics Federal procedure, specifically Federal Rule of Civil Procedure 26.

I am torn on the fairness of treating all Facebook posts the same regardless of whether it is private or public. In the 21^st century, social media is becoming more and more popular. People utilize Facebook and Twitter as if they are personal diaries. Sometimes a physical diary could be relevant to a case, I’m sure, but it seems like an invasion of personal privacy. On the other end, social media utilizes the internet and the internet is not private so it should all be treated the same. I believe that in social media discovery (Facebook, Twitter, Instagram), the court should use this appeal as a precedent and continue to limit requests to what is relevant but privacy settings should not matter.

Ryan is an undecided business major at the Stillman School of Business, Seton Hall University, Class of 2020.

Link: https://www.natlawreview.com/article/ny-court-appeals-no-difference-between-private-and-public-posts-discovery

Posted by Elizabeth Win.

Dollar bills might as well be worth as much as computer paper now. Cryptocurrency has been on the hot seat for the past few months because of its financially growing nature and easy accessibility. Now, as we are starting to see a slow downfall of people investing in Bitcoin; the I.R.S. is starting to detect serious problems with the millennial choice of currency. One of their main concerns is that this cryptocurrency fad has created another giant, financial bubble. If this bubble were to burst, this Bitcoin “bust” could wipe out millions of spectators leading to a huge loss in tax revenue.

A main contender to this potentially huge loss is Bitcoin’s anonymity. For those unaware, Bitcoin’s underlying technology, blockchain, thrives on anonymity. When a person makes a transaction, the transaction only links through an electronic address, making blockchain more attractive to buyers. Now, the I.R.S. has many problems with this missing identification of creative transactions. The anonymity fuels the underground economy, a significant factor in the source of lost tax revenue. Most of the underground economy is conducted through cash transitions; however, what the I.R.S. fears is that cash will slowly transition to cryptocurrencies because of its convenience. An anonymous buyer of bitcoin can easily pay fewer taxes by cheating the cryptocurrency system – also known as major tax evasion. The solution? The government might have to accept the hardships of directly taxing cryptocurrencies and raise tax rates in order to offset the loss of revenue. Understand that the public would highly disagree with this solution, they generated a smarter response: a switch from taxing income when it is received to taxing income when it is spent. Although this switch would require a “major overhaul of the tax code,” many economists support this decision and believe it is future of the economy.

On the contrary, the I.R.S. understands cryptocurrencies offer major reductions in the cost of financial transactions, making it very appealing to the lower classes. There would also be less reliance on banks, which would increase the power of the Federal Reserve to control money. However, the opportunities are too great for tax evasion and illegal operations that the I.R.S. cannot continue to allow it. Although the cryptocurrency economy is growing steadily, it will need to find a way to prevent tax evasion while preserving anonymity in order for it to survive and stay attractive to buyers. For cryptocurrencies to be successful, societies will have to learn to trust the government, a very difficult task for many to grasp. With the rise of extremely advanced technology, it is inevitable that the economy will eventually transition to the cryptocurrency movement. Figuring out how to smoothly transition from worthless green pieces of paper to slick, glassy pieces of technology worth thousands of dollars each, the challenge to adjust will be difficult by eventually necessary.

Elizabeth is a marketing and information technology major in the Stillman School of Business, Seton Hall University, Class of 2020.

Posted by Barkimba Diallo.

In the last few months, a federal investigation has helped yield numbers of guilty pleas in South Jersey. A firefighter in Atlantic City, a Margate doctor, two local pharmaceutical representatives and six others admitted fraud of more than $25 million.  The number of convictions is expected to go up due to court documents showing that more than $50 million was paid to one compounding pharmacy. According to the article, this is a minor fraud case compare to the trial of Senator Bob Menendez where a Florida eye doctor Salomon Melgen abetted by Senate Majority Leader Harry Reid was convicted of Medicare fraud for more than $100 million in five years. Sen. Bob Menendez and Harry Reid allegedly contacted former Health and Human Services Secretary Kathleen Sebelius for advice on the trial and She replies in the negative.

Marc Pfeiffe, of the Bloustein Local Government Research Center at Rutgers University, said that “New Jersey’s $2.5 billion State Health Benefits Plan’s generosity presents opportunities for fraud.” He also added that the $25 million fraud represents just a smidge of what really goes on. Public servants involved in the crime do not fear the consequences of their actions as they are aware that the malaise is deep rooted.

Marc Pfeiffer, of the Bloustein Local Government Research Center at Rutgers University, said that fraud is the big reason why we don’t have fair competition among health providers because the choice of beneficiaries is done based on who gives the most kickbacks. He concluded that we should imbibe the best practices in the private sector if we want to root out corruption.

Barkimba is a graduate student at the Felicano School of Business, Montclair State University.

Source:

http://www.pressofatlanticcity.com/news/breaking/our-view-corruption-cases-show-health-benefits-fraud-out-of/article_04e17d37-7eec-564a-b7c2-623e260d7a00.htmlLinks to an external site.

Posted by Chelsea Macchione.

Earlier this year in Beverly Massachusetts, Nick’s Roast Beef, a family owned sandwich shop, was found guilty to tax evasion during the years of operation, 2009 to 2013. The sandwich shop, at this time, was an all-cash business and would understate their income by splitting up excess cash between the two owners, Nichols Kaudanis and Nicholas Markos. By understating their income, Nicks Roast Beef got away with paying taxes on not even half of their actual income during those 5 years. The company found a way to manipulate their receipts so that it reflected only the cash that had been reported on and not any of the other cash that was earned and distributed to the partners. Between the years of 2009 to 2013 the investigating auditors claim the company got away with not paying around $1,000,000 dollars in taxes.

Tax evasion can happen within any type of business. If there is a way to manipulate income, there is a company out there is doing it to try to get away with paying fewer taxes for one reason or another. In this example, it was very easy for the business to get away with type of fraud because at the time they were strictly cash based. Cash is hard to audit and keep track of within a business, like the sandwich shop, because the only form of evidence there is are receipts from cash register transactions or customers. It is not difficult in a situation like this to either not record cash collected or generate fake receipts to report. Nicks Roast Beef took full advantage of this type of fraud and then suffered the consequences of jail time served by all of the owners and parties involved within the sandwich shop.

In my opinion, this type of fraud is probably existent within many different types of businesses due to similar circumstances in this case. Cash plays a huge factor with understating income because, like stated before, its very hard to keep track of it. Any type of business that can get away with cash transactions for goods or services that are usually paid for on account, can easily get away with not reporting it with no questions asked. Nicks Roast Beef was also a family operated business, which is sometimes what fuels fraud to occur within a business, having trust in everyone involved to not report the illegal activity. In circumstances like this, I believe it will always be a challenge as an auditor to know if the business is stating their cash income correctly. More evidence and questioning should be exercised in cases where family owned businesses are in charge of reporting their income and more of a consistent monitoring of the business finances should be put into place.

Chelsea is a MS accounting student at the Feliciano School of Business, Montclair State University. 

Posted by Shaiban Almarri.

Wilmington Trust Corp. has agreed to pay $60 million to the government after facing charges relating to the bailout program of the federal bank. This agreement incorporates a civil forfeiture of $16 million and $44 million that the bank had paid to the Securities and Exchange Commission in an earlier but similar lawsuit. The court postponed the anticipated trial until March after the acting U.S. Attorney David Weiss said his office had agreed to dismiss the case against the bank.

Mr. Weiss said the bank had accepted the responsibility of its actions despite having refused to admit liability. Meanwhile, the bank’s parent company M&T Bank asserted that it was in the bank’s best interest to resolve the matter.

Wilmington Trust had been accused of dishonesty regarding its “…deteriorating commercial real estate portfolio from investors, bank regulators, and the Securities and Exchange Commission.” Consequently, some members of its former top management will be answering charges of conspiracy and fraud. Meanwhile, a number of the bank’s employees have already pleaded guilty while a section of them have even been sentenced.

A government affidavit referenced in the court revealed how a top official fraudulently got money from Wilmington Trust to be used for personal activities. Furthermore, the bank failed to explain why it used to “waive” mature loans that had been specified as current for interest, a practice that was later found to have hidden around $333 from the previous due loans.

Shaiban is an MS Accounting student at Feliciano School of Business, Montclair State University, Class of 2017.

Work Cited

“Wilmington Trust Reaches $60M Settlement with Prosecutors.” CNBC. Np. 2017. Web. 17 Oct. 2017.

https://www.cnbc.com/2017/10/10/the-associated-press-wilmington-trust-reaches-60m-settlement-with-prosecutors.html

Posted by Abdullah Aldahmash.

As the article begins, “to survive in this age of austerity and fraud,” there is a requirement for a more quick-witted and more refined arrangement of accountants, prepared to offer experiences and answers for all methods of business. This incorporates not just representing legitimate direct of business and reinforcing inbuilt process controls, yet in addition techniques for the discovery and avoidance of extortion and unfortunate behavior. In the beginning of the financial downturn, the accounting profession had experienced radical changes because of accounting catastrophes, e.g. Enron and WorldCom. Forensic accounting is an integration of accounting, auditing, and investigative skills. There is interest for it as general society is compelled to manage financial downfalls, and an ascent in desk violations and misquotation of money related data. Financial misstatement is one of the highest constituents of fraud today. It is the “deliberate misrepresentation of the financial condition of an enterprise, accomplished through purposeful misstatement or oversight of amounts or disclosures in the financial statements to fool users.”

According to the article, corruption, asset misappropriation, and fraudulent financial statements are the main reasons for the financial misstatement. Corruption includes fraudulent situations in the nature of conflict of interest, bribery, illegal gratuities and “economic extortion.” Asset misappropriation includes “skimming and larceny of cash, fraudulent billing, payroll and reimbursements, and misuse and larceny of assets.” Finally, fraudulent financial statements includes inappropriate representation of liabilities and expenses, inappropriate disclosures in financial statements, inappropriate valuation of assets and inventory, inappropriate realisation of revenue, and “timing differences.”

To prevent fraud in the future, a forensic accountant should keep in mind many key rules that absolutely will help them to be more efficient regarding handling the fraud. These keys are:

Improper composition of the Board of Directors or Audit Committee; improper oversight or other neglectful behavior by the Board of Directors or audit committee; weak or non-existent internal controls or process controls, including an ineffective internal audit function and improper conduct of external audits; unusual  or extensively complex transactions; financial  statements requiring significant subjective judgment by the management; rapid growth or unusual profitability, especially when compared with industry peers; recurring negative cash flows or inability to generate positive cash flows; significantly high transactions with related entities not in the ordinary course of business; inappropriate disclosure of related-party transactions; uncommon changes in the relationship between fixed assets and depreciation; uncommon increase in gross margin or profitability compared with industry peers; immoral standards: recurring  attempts by the management to justify marginal or inappropriate accounting on the basis of materiality; sophisticated organisation structure involving uncommon legal entities or managerial lines of authority; central administration; significant operations in places considered tax havens, with no clear business justification.

Abdullah is a graduate accounting student at the Feliciano School of Business, Montclair State University, Class of 2017.

References:

Anand, D. Elementary, my dear retail investor. The Hindu BussinessLine. Retrieved from: –

http://www.thehindubusinessline.com/news/education/elementary-my-dear-retail-investor/article4960231.ece

Posted by Monika Lipowska-Flis.

In article “PWC Lawsuit Tests Whether Auditors Must Guarantee Against Fraud,” the trial will determine if the one of the big four companies will survive or vanish from the market. PricewaterhouseCoopers (PWC) is being sued by Federal Deposit Insurance Corp. for 2.5 billion in losses suffered from collapse of Colonial Bank. According to the lawsuit, the fraud was perpetrated by the former chairman of Taylor Bean & Whitaker, the biggest mortgage customer of Colonial bank, and also by top executives from the bank. As we read in the article, the fraud was undetected by PWC, internal auditors, state and federal banking regulators and also by a forensic audit accounting company.

PWC defense is using pari delicto doctrine. It is “a descriptive phrase that indicates that parties involved in an action are equally culpable for a wrong. When the parties to a legal controversy are in pari delicto, neither can obtain affirmative relief from the court, since both are at equal fault or of equal guilt. They will remain in the same situation they were in prior to the commencement of the action.” PCW is also arguing Alabama’s “contributory negligence,” stating that Federal Deposit Insurance Corp. was also negligent in discovering the fraud at Colonial Bank. “The failure of the bank had nothing to do with auditing or accounting,” according to legal counsel representing PCW. “The bank had its own failed strategies that over time caused it to suffer and fall apart.”

Judge Rothenstein’s position is that PCW had the opportunity and means to detect the fraud if they properly conduct the audit they were hired to do. All defenses submitted by the audit company has been rejected by the judge, stating that they were negligent and responsible for bankruptcy of the bank.

Under SAS No. 99, “The auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.” This new standard provides guidelines how to design the audit and assess risk of fraud that could occur. Exercising personal skepticism by the auditor is the most important factor. There were red flags observed during various audits and all of them were ignored and not considered by PWC personnel.

Detecting fraud is very hard because the higher-up executives are usually involved and they have the means to override internal controls and hide it successfully. Knowing this, the auditor should keep open mind and if any irregularities uncovered they should be investigated thoroughly. Due diligence is the best defense to every audit firm from being sued for not detecting fraud during audit. It is the company’s responsibility to design sufficient internal controls that will prevent the fraud in the first place. PWC if found guilty will follow steps of Arthur Anderson who went bankrupt after Enron scandal.

The money lost will not be recovered and lives of thousands of people damaged never repaired.

Sources:

https://www.forbes.com/sites/legalnewsline/2017/09/18/pwc-lawsuit-tests-whether-auditors-must-guarantee-against-fraud/#5cd7b84a5fbe

Definition for Pari Delicto:

https://legal-dictionary.thefreedictionary.com/In+Pari+Delicto

Posted by Aliasger Mithaiwala.

Qualcomm, a telecommunications company that designs and sells wireless telecommunications products and services, is suing Apple Inc. for patent infringement. Apple was originally the initiator in this entire legal conflict because they were the first to file a lawsuit against Qualcomm. Specifically, they filed an “antitrust suit against [them], arguing that the chipmaker’s licensing practices are unfair, and that it abused its position as the biggest supplier of chips in phones” by charging Apple more in payments than any other company (King). This suit Apple initiated claims that Qualcomm has been “charging royalties for technologies they have nothing to do with” and that the telecommunications company has been “withholding nearly $1 billion in payments from Apple as retaliation for responding truthfully to law enforcement agencies investigating them” (Balakrishnan). After this first legal bout, Apple ended its licensing program with Qualcomm, which has cost the telecommunications company billions of dollars in lost revenue. As a result of this suit by Apple, Qualcomm shares decreased by “19 percent … [while] Apple shares are up 36 percent this year” (King).

Qualcomm then fired back with a lawsuit of its own, which could potentially prove fatal to Apple, if the court finds it reasonable. Qualcomm disagrees with Apple’s claims stated above and cites that, “Apple employs technologies invented by Qualcomm without paying for them,” and as a result, they have filed lawsuits in China, which they intend to ban Apple from selling and manufacturing iPhones in that country (King). If the court finds that Apple is to blame and finds the ban a reasonable punishment, then Apple will lose a large sum of money because not only will their costs of making the products increase drastically, but also they will be unable to market and sell the product in China, which possesses the largest population in the world. In addition, “two-thirds of Apple’s revenue” is derived from China and because this suit became public, Apple has already seen some of the effects (King). Its shares “gave up some gains from earlier on Friday,” so if this lawsuit continues in favor of Qualcomm, Apple may see a continued decrease in their stocks (King).

The lawsuit against Apple is of patent infringement; however, there are multiple parts as to this particular patent infringement case. Qualcomm’s lawsuit is based on “three non-standard essential patents,” which covers “power management and a touch-screen technology called Force Touch that Apple uses in [its] current iPhones” (King). Apple uses the technology of Qualcomm to better its products and increase their profits; however, as per Qualcomm, Apple does not pay them for the use of their technology. Obviously, there are many different viewpoints of this story: one from Apple and one from Qualcomm. The courts will expose the truth and the financial ramifications will certainly be grave at the expense of one company’s finances.

Aliasger is a finance major at the Stillman School of Business, Seton Hall University, Class of 2020.

Works Cited

https://www.bloomberg.com/news/articles/2017-10-13/qualcomm-seeks-china-iphone-ban-escalating-apple-legal-fight

https://www.cnbc.com/2017/01/20/apple-sues-qualcomm-for-1-billion.html

Posted by Diego Henao.

During vior dire, potential expert witnesses’ credibility and expertise is assessed to arrive at a decision if they are properly qualified to give their opinion in court. In the State of Utah, Judge Paul Parker has disqualified Gil Miller, a forensic accountant, from taking the stand as an expert witness for the prosecution team in the criminal trial against father and son, Wendell and Allen Jacobson, and their company Management Solutions Inc. This decision came about after the Jacobson’s attorney’s presented their argument that Gil Miller had a conflict of interest due to his previous professional involvement with the Jacobson’s and their legal team.

Miller participated in the defense of the Jacobson’s and their company in the December 2011 trial in which the SEC sued them for allegedly running a Ponzi scheme involving the purchasing and selling of apartment buildings. Miller’s role in this case consisted of being the accountant for the Jacobson’s attorneys, and because of this, he participated in the analysis of private information, and therefore, he should not be allowed to participate as an expert witness for the prosecution in the current trial. This was the argument that the Jacobson’s legal team brought to the attention of Judge Parker; they also mentioned how Miller was exposed to private documents, legal theories, and information and this should discredit his qualification, since he would now be on the opposing side helping the prosecution against the Jacobsons. The lawyer for Allen Jacobson, Amanda Mendenhall, argued that “ (Attorneys) must be able to rely on the confidentiality of the consultants they hire to assist in providing legal services to their clients. Without these protections it is scary to think an expert could be privy to critical defense strategy and then turn around and deliver the information to a prosecuting agency” (Harvey). The Jacobson’s attorneys also stated how during that SEC trial, Miller had provided their legal team with false information in regards to the work he had conducted.

Aside from wanting Miller to not participate in the case, the defense attorneys also argued that since Miller had already been in contact with the prosecutors, and therefore, had offered some sort of insight, he had “tainted” the case, and therefore, they demanded that the prosecution team be removed and replaced from this case. If Judge Parker would agree to this second demand, then the prosecution would be able to appeal this decision. The judge’s decision to disqualify Miller as an expert witness remained and concluded with the fact that he could not participate as an expert, but that he could still be a witness in regards to the facts of the case. This trial, which accuses the Jacobson’s of 16 felony fraud involved counts of failing to inform investors about how their investments were being managed is still yet to be scheduled.

Diego is a graduate accounting student at the Feliciano School of Business, Montclair State University, Class of 2018.

Works Cited:

Harvey, Tom. “Judge Says Prominent Forensic Accountant Can’t Be Expert Witness in Fraud Case Because of Conflict.” The Salt Lake Tribune. N.p., 19 Sept. 2017. Web.

http://www.sltrib.com/pb/news/business/2017/09/19/judge-says-prominent-forensic-accountant-cant-be-expert-witness-in-fraud-case-because-of-conflict