Posted by Ailinulan Aihemaiti.

Politicians are always prone to controversy, and not even the current President of the United States, Donald J. Trump, is exempt from any of it. In 2010, a class suit was filed against Trump University upon allegations that it defrauded its students. The allegations centered around Trump University engaging in aggressive sales tactics and spreading misleading information. Former students say the university promised to teach Trump’s insider secrets of the real-estate business, but after they paid $35,000 for an education, they said they received no such “secrets.” One such student, Bob Guillo stated the Trump University advertised tricks “included using the real estate website Trulia.com to search for properties and learning about tax deductions on the Internal Revenue Service’s website” (Time).  Many others said they received a great education.

After a seven-year long battle, the Trump University lawsuit finally ended on March 31, 2017 when a federal judge declined the request from a Florida attorney to “opt out of the $25 million Trump University global settlement” (Courthouse News Service). The final settlement of $25 million will be a much better deal for the students, giving back 90 percent of what students invested in Trump University rather than the 50 percent of the November settlement. Class attorney Rachel Jensen provides even more good news, saying that the students should get their checks a few months from now if there are no appeals.

However, if an appeal is filed, the court battle could go on for years, and the settlement payments will also be held up. The prospects are still unclear as Sherri Simpson, former student who spent $20,000 on Trump University in 2010, has made movements to opt out in the March 30 hearing; she has expressed her desire to opt out to file her own fraud case against the University, despite filing an earlier claim to recover damages. Although Simpson’s proposal was rejected by a federal judge, she still has 30 days to file an appeal.

Ailinulan is a management major at the Stillman School of Business, Seton Hall University, Class of 2017.

Sources:

http://time.com/money/4573705/trump-university-lawsuit/

Judge Signs Off on $25M Trump U Settlement

http://www.courthousenews.com/wp-content/uploads/2017/03/Trump-U-Settlement-FINAL.pdf

Posted by Jayce Chavez.

Mark Moskowitz, a 48-year-old Short Hills New Jersey resident, pleaded guilty before U.S. District Judge Katharine Hayden to one charge of wire fraud. He admitted to fraudulently using investment money for his personal use. He ran a trading company and defrauded investors of more than $675,000 and used the money for himself. His company was called Edge Trading which was created in 2012, he, “told his investors that the company invested in equities and contracts and was growing even though it was not.” Moskowitz was fined, separately by the New Jersey Bureau of Securities, for$1 million in civil penalties for the sale of fraudulent unregistered securities and misusing investor’s funds. He will be sentenced July 5, 2017 and could face a maximum of 10 years in prison and $250,000 fine.

Joseph Meli, a 42 year old Manhattan New York resident; and Steven Simmons, a 48-year-old Wilton Connecticut resident were arrested in late January this year, “on charges alleging they enticed wealthy individuals to make multi-million-dollar investments.” These gentlemen were caught by a civil complaint to the Securities and Exchange Commission, claiming that this Ponzi scheme led people in 13 states to invest $81 million. This scheme included investments in businesses that would purchase large sections of tickets for concerts and musicals. The SEC says that at least $51 million of the $81 million was used to pay off other investors and for personal expenses for Meli, Simmons, and other coconspirators. Only Meli was charged with the civil complaint but both men were charged criminally with conspiracy, securities fraud and wire fraud. Both men were then freed on a $1 million bail after a prosecutor’s request for them to be held without bail was rejected.

Both of these cases are similar not only because they were both people scheming investors of their money but large sums of the money were used for personal expenses. These cases had criminals who fraudulently used investors’ money for everything but what they had promised the investors. In the first case, Moskowitz had used most of the $625,000 for himself, while on the second case, the 63% of the $81 million was fraudulently split amongst Meli, Simmons, and other co-conspirators. Moreover, this shows that there are Ponzi schemes that range between hundreds of thousands of dollars to millions of dollars. Thus, we must be careful when investing into corporations which are not well-known or established.

Jayce is an accounting major at the Stillman School of Business, Seton Hall University, Class of 2019.

Sources:

http://www.nj.com/essex/index.ssf/2017/03/short_hills_man_admits_to_675k_ponzi_scheme.html

http://www.foxnews.com/us/2017/01/28/2-men-allegedly-raised-81m-in-hamilton-ponzi-scheme.html

Posted by Michael Martin.

Six former executives and managers of the pharmaceutical company Insys Therapeutics Inc. were arrested “on charges that they led a nationwide conspiracy to bribe medical practitioners to unnecessarily prescribe a fentanyl-based pain medication and defraud healthcare insurers” (Dep. of Justice). The spray drug, named “Subsys,” is a strong opioid that is typically prescribed to cancer patients suffering from breakthrough pains. Insys bribed doctors to prescribe their drug to patients, many of which did not even have cancer, in high doses. Insurance companies became skeptical of the drug, because it was not prescribed to cancer patients, which resulted in the former executives of the company to mislead providers with the ““reimbursement unit” which was dedicated to obtaining prior authorization directly from insurers and pharmacy benefit managers” (Dep. of Justice).  Employees of this unit were pretending to call insurers from a doctor’s office. “Insys also set up its phone system to block the origin of the calls” (Thomas).

Insys was writing off the bribes and kickbacks to the doctors as speaking fees. The issue with the speaking fees is that the “events” held by Insys were usually entirely fabricated on paper, and were really just a few Insys members having dinner with a “speaker” doctor at a fancy restaurant. On one occasion, Alec Burlakoff, the former vice president of Insys, texted a sales representative about the communication skills of the doctors saying “They do not need to be good speakers, they need to write a lot of” prescriptions for Subsys. In the case of an Alabama doctor, after becoming a paid speaker, his prescription count increased from two a week to about eleven (Thomas).

The actions of the Insys executives are not only illegal, but are also highly unethical. Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, said “[Insys] contributed to the growing opioid epidemic and placed profit before patient safety” (Dep. of Justice). Michael L. Babich, 40, the former CEO and President of the company, “is charged with conspiracy to commit racketeering, conspiracy to commit wire and mail fraud and conspiracy to violate the Anti-Kickback Law.” Burlakoff, Richard M. Simon, 46, former National Director of Sales; and Regional Sales Directors, Sunrise Lee, 36, and Joseph A. Rowan, 43 “are charged with RICO conspiracy, mail fraud conspiracy and conspiracy to violate the Anti-Kickback Law.” And former Vice President of Managed Markets, Michael J. Gurry, 53, “is charged with RICO conspiracy and wire fraud conspiracy” (Dep. of Justice).

The charges for RICO and fraud crimes are “no greater than 20 years in prison, three years of supervised release and a fine of $250,000, or twice the amount of pecuniary gain or loss.” Plus a mere $25,000 fine for violating the Anti-Kickback Law, with a maximum of five years in prison.” This minimal punishment becomes even more disturbing when you realize that the “actual sentences for federal crimes are typically less than the maximum penalties” (Dep. of Justice).

Michael is an accounting major at the Stillman School of Business, Seton Hall University, Class of 2019.

Sources:

https://www.justice.gov/usao-ma/pr/pharmaceutical-executives-charged-racketeering-scheme

Posted by Nicole Boodhoo.

About 6 years ago, Apple first sued Samsung over the design of their Galaxy S series. Apparently, the designs of the phones infringed on a patent that was created over the design of the original iPhone.  The court closed the case in December of 2016, ruling in Samsung’s favor saying they did not need to pay the $399 million to Apple, but it is now reopened. The court case is not going to be about whether Samsung did or did not infringe on the patents created by Apple but rather how damages will be calculated. Originally, Samsung would have had to pay Apple a percentage of each sale. However, the justices disagreed and stated that they only needed to pay for the components that were claimed to be infringed upon.

According to the article written by Julian Chokkattu, he stated,

“In delivering the court’s majority opinion, Justice Sonia Sotomayor wrote that “article of manufacture” — the legal term that refers to both a product sold to a consumer and a component of said product — has a “broad meaning,” and that an “article” could refer to “a particular thing.” In Samsung’s case, an “article” could be an infringing smartphone’s appearance, for instance, or software feature” (1).

The design patents are at question in this case. A design patent is what protects the look of the product and what makes the product unique. In 2012, the court sided with Apple stating that Samsung did copy the design, featuring “the black rectangle shape and rounded corners, the bezel, and a patent that covered the graphical layout of icons of the iPhone” (Chokkattu 1).  The law states that whoever applies the patented design, without license of the owner, is liable to said owner “to the extent of his total profit, but not less than $250, recoverable in any United States district court having jurisdiction of the parties” (1).  Samsung and all the supporters believe that total profits should not be included in the reward since smartphones are filled with hundreds if not thousands of components that are patented from neither of these two companies.

Apple feels that everything within the phone, as well as the looks of the phone, is what sells the smartphone and states that, “removing the need to pay total profits would hamper legal protection for new products and designs” (Chokkattu 1). Although Apple agreed that “article of manufacturer” could represent only specific features of the product and not the whole thing, financial damage would prevent people in the future from pocketing designs of other products. As the discussion goes on, the design on the Beetle is brought up as a reference stating that one may not buy the car for just its looks, but might be a primary factor into driving sales up. The article states that, “the infringement wasn’t found on the whole phone,” Samsung attorney Kathleen Sullivan said after the hearing. “It asserted three narrow patents. The patent doesn’t apply to the internals of the phone, so Apple doesn’t deserve profits on all of Samsung’s phone” (Chokkattu 1).  She also states that if they do win and are awarded total profits that it would devalue all of the other patents within the smartphone, which roughly has about 250,000 patents. Apple states that this is the 11^th time Samsung has copied an idea and they have been found guilty of it. They believe that if this continues it will pose risks to future designs.  In the last 100 years, a design patent case has not been ruled on in the Supreme Court.

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

Posted by Alexandra Entrup.

In December 2016, the United States v. Nosal (Nosal II) case was heavily questioned. David Nosal worked at KFI, Korn/Ferry International, however, in 2004, he made the decision to leave the company. Despite leaving the company, he resumed working as a contractor under an agreement that forbade competition with KFI. Regardless of the agreement, Nosal among additional employees were in the process of establishing a competing business. The company utilized the database, Searcher, to hold “information about over a million executive search candidates” (Harv. L. Rev.). Though Nosal and his colleagues took information from the database for their own use using their own login information, their credentials were rescinded after their decision to leave the company. Upon noticing that their login information no longer worked, they approached Jacqueline Froehlich-L’Heureaux, Nosal’s assistant during his time at KFI. Froehlich-L’Heureaux remained an employee despite Nosal’s absence so they decided to ask her for her own credentials. She gave them her username and password and Nosal and his partners utilized this information on multiple occasions. The article suggests that they accessed the database using her credentials “on at least three discrete occasions” (Harv. L. Rev.). An anonymous tip was sent to Korn/Ferry International and an investigation ensued.

The defendant was convicted and Nosal was accused of “nineteen criminal counts, five of which alleged CFAA violations under the ‘exceeds authorized access’ clause of §1030(a)(4) while Nosal was a KFI employee” (Harv. L. Rev.). CFAA, the Computer Fraud and Abuse Act, discusses computer use, specifically hacking. The act states that the invasion of a computer system is considered a crime. The article further discusses the CFAA and its application to the case stating, “the CFAA imposes criminal penalties on whoever ‘accesses a protected computer without authorization, or exceeds authorized access’ to perpetrate a fraud” (Harv. L. Rev.). This statement is especially important to the case because it dismisses Froehlich-L’Heureaux’s decision to give Nosal and his partners her credentials. Instead, it blames Nosal for using this information in a deceptive manner, perpetrating a fraud. Throughout the case the term “without authorization” was referred to as “an unambiguous term with a plain meaning”, implying that there aren’t any alternate interpretations.

In the Nosal I case, the CFAA nineteen criminal counts previously mentioned were dismissed. However, following the dismissal of these counts, further counts were filed. “In 2013, the government filed a superseding indictment with three CFAA counts resting on accomplice liability for the three times Nosal’s partners, without authorization, accessed Searcher with FH’s credentials after they had left the firm. The government also indicted Nosal on two trade secret misappropriation counts under the Economic Espionage Act and one count of conspiracy. A jury found him guilty on all counts” (Harv. L. Rev.). All arguments that Nosal proposed were rejected by the court. Looking at previous cases, it was certain that authorization much be approved by the computer owner. Nosal was obviously not given authorization, evident through the revocation of access to the system. The importance of authorization is common knowledge which is evident in the article’s statement, “the majority’s view that only the owner of the system has authority to grant access undermines the authorization upon which many forms of commonplace computer access depend.” The article further explains this belief with a comparison to social media, “it could be a crime for an individual to log in to someone else’s Facebook account with that person’s permission, simply because the system owner prohibits it” (Harv. L. Rev.).

Alexandra is a finance and information technology management major at the Stillman School of Business, Seton Hall University, Class of 2019.

Source:

http://harvardlawreview.org/2017/02/united-states-v-nosal-nosal-ii/

Posted by Samar Baeshen.

According to an October 21, 2015 news article in The New York Times, “Criminals Should Get Same Leniency as Corporations,” there are many critics arguing that corporations trying to make a big effort to defend their misconducted executives ought to be treated like common criminals. In addition, Emmet G. Sullivan, a federal judge, thought that criminals should be treated like big companies. Due to Obama administration’s method which gives companies the opportunity to not have a criminal record, Judge Sullivan believes that individual criminals should enjoy the same chances. In fact, the Department of Justice officials concur with Judge Sullivan’s opinion, which criticizes the American criminal justice system, and encourage Congress to lower the adjudication standards. Meanwhile, the Justice Department issued a new memo recently and released new approaches to prosecute individual employees after years of accusations about Wall Street criminals.

According to Judge Sullivan, the court is frustrated that the postponed prosecution agreements are not being utilized to give the same chances to individual criminals without causing any negative effects on the criminal conviction. Moreover, there are lack of the postponed prosecution agreements, according to the Justice Department, for both corporations and individuals. However, comparing the number of cases against individuals and companies, cases against individual criminals are enormously more than companies.

In general, the target of the Judge Sullivan’s argument is to reduce the long Sentence for prisoners who did not commit violent crimes.

Samar is a graduate student in accounting at the Feliciano School of Business, Montclair State University. 

Posted by Charles Batikha.

Ransomware is similar to a Trojan horse. Imagine receiving an email from a non-familiar email address. The email claims to be the IRS claiming you are being sued for tax evasion and instructed to click on a link to a website. You are skeptical, but what is the worst thing that could happen if you click on the link. Malware was the virus used when ransomware was first introduced, but more recently website URL and deceptive pop-ups are being utilized. Home computers are not the only victims, business and even government systems have been breached as well.

Upon clicking on the link your browser becomes frozen, unable to use your computer a message pops onto the screen informing you of the encryption of your computer. This renders it useless and a fee is charged for the encryption key, which will cost anywhere from $200 to $5000. This is the newest “variant” called Crypto-Wall or Crypto-Wall 2.0. Interestingly enough, the scammers instruct victims to purchase bitcoins to be used for payment. Bitcoins have become much more popular among criminals because of the concealment of their identity.

Ransomware has also begun to hit smartphones, locking them as well. I personally have fallen victim to this type of ransomware. A message popped up stating that I must contact Apple to unfreeze my phone, but every time I closed the pop-up the notification would come up again not allowing me to use my internet. I called the phone number on the message, and I noticed that the phone line was a Google number, which made me a little suspicious. Immediately after someone answered the phone, they gave me a scripted explanation of how my system was locked and I need to give them my credit card number for a fee for them to unlock my phone. Fortunately enough, I did not pay the fee and hung up on the pleading receptionist.

A way I have found to refresh your phone from ransomware is to clear your website data in the setting of your phone. This has given me the use of my internet after being hit with ransomware. Updated anti-virus software on your computer is another preventative tactic. Using a pop-up blocker and not fumbling with unsolicited emails are other great tips as well.

Charles is a graduate accounting student with a certificate in forensic accounting at the Feliciano School of Business, Montclair State University.

Posted by Ryan Neligan.

Earlier in the month, the state of New York banned the use of Fanduel and Draftkings, both websites in which people use to bet on daily fantasy sports. These websites are run daily in which people place down money and compete against each other in order to see who the best judge of sports is, and the winner acquires a large sum of money from those people who took place in the game. Games like this take place all over the world through these websites and have instantly gained a great amount of popularity.

The attention it is getting from the population has caused some heads to turn, such as the state government of New York. It has seen these websites as illegal gambling taking place within the state, and New York’s attorney general is set on shutting down this business. FanDuel and DraftKings are not going down without a fight though, as “the two biggest daily fantasy sports sites are taking on Eric Schneiderman in court, accusing him in lawsuits of bullying and abusing his powers in ordering that they stop operations in New York and are seeking a judge’s order to let them keep operating” (BloombergBusiness). To lose the participation of New York would be a huge blow for these two businesses, because New York accounts for “more than $1 billion each and have drawn investors across the sports, media and venture-capital industries. The state accounts for 5 percent of FanDuel’s customers and more than 7 percent for DraftKings, according to the companies’ filings” (BloombergBusienss).

Fanduel and DraftKings are taking action and are filing suit against this banning, for they do not see their business as an illegal online gambling site. They see it as a game of skill and knowledge in sports. Fanduel stated in its complaint about the case that “Such a shutdown would deprive hundreds of thousands of subscribing New Yorkers of the opportunity to pit their skills against the skills of others in selecting a ‘fantasy’ team of athletes from different sports teams and competing in contests offering prizes to the players whose fantasy teams perform best” (BloombergBusiness).

The case can be made for both sides of the argument. These websites are definitely a test of skill in the area of sports just like when people play regular Fantasy games, but it can also be seen as a website used for gambling and requiring money online, which is illegal in the state of New York. If these website continuing operating, the attorney general will take action and put chargers against these companies. The people of New York will be watching this case closely to see what the final outcome is, but for now daily fantasy sports has been banned from the state.

Ryan Neligan is a finance major at the Stillman School of Business, Seton Hall University, Class of 2018.

Posted by Luca Aufiero.

In the article, “Dealing with Fraud in Your Building – Forensic Accounting,” Steven Cutler discusses the types of fraud among co-ops and condos, the possible red flags, as well as how it may be perpetrated and deterred. Some signs of fraud from higher management could entail sudden lifestyle changes and lavish expenditures such as new expensive cars, residences, and exotic vacations. As there isn’t as much fraud today as there used to be, back in the 90s, there were two years where roughly 140 managing agents and 25 management companies were indicted for kickbacks. “Still, even today, there are enough instances of fraud to keep busy forensic accountants, real estate attorneys, and district attorneys” (Cutler). The more common type of fraud in a company is the misappropriation of cash. For example, management may use funds from the company to pay for personal expenses or use forged bank records to run multiple books.

More often than not, fraud is perpetrated by a member of the staff. This is all starts with the fraud pyramid: motive, rationalization, and opportunity. Some employees might not be monitored as much as they should or have certain access to records, giving them an opportunity to commit fraud. The motive is most likely to reside from a personal standpoint. Possibly drug related, family problems, or more commonly, financial problems. The rationalization behind the act might be that the person “deserves it” (sense of being underpaid), or “just borrowing money temporarily” (even though it isn’t). Some red flags among the financials might include: large number of unrelated transactions, unexplained changes to reserve funds, and missing accounting records.

If fraud does occur, it is recommended to create a paper trail to document items not only for attorneys, but for forensic accountants to investigate the damages. The forensic accountant looks at the banks reconciliations, statements, canceled checks, and bills paid to have to total admission to the records. This will then result in whether the damages were from gross negligence or fraud. At that point in time, the attorney will decide if it should be a crime (especially if fraud is involved) and therefore be reported and prosecuted. Some deterrent procedures include monthly reviews/reconciliations of the financials, control over collections (lockbox), and monitoring the work of others.

Luca is a BS and MS student in accounting with a certification in forensic accounting at the Feliciano School of Business, Montclair State University.

Reference:
Cutler, Steven. “Dealing with Fraud in Your Building – Forensic Accounting.” The Cooperator. Oct. 2015. Web. 20 Nov. 2015. http://cooperator.com/article/forensic-accounting

Posted by Ryan Neligan.

Human beings have a natural tendency to expand upon whatever the present is. In America, pilgrims settled in the state of Massachusetts and eventually expanded all the way to California. This trend of expanding continues today, as now people look forward to what is beyond Earth: Outer Space. This week Congress has passed a bill called the Space Act of 2015, which will help the small business of asteroid mining become an official operation.

The resources that are in outer space could be quite valuable to our world for the future. There are so many things untouched out there and in such great supply. In the past, “the prospect of large scale extraction of minerals from other planets or cosmic bodies has been both technologically and legally questionable, with starry-eyed entrepreneurs hard at work on the first part, but without much guidance on the second” (Good Magazine). Our civilization has not had the knowledge or technology in order to make obtaining a vast amount of resources from outer space an appropriate business. That has changed in current day though, as technology has made leaps forward in progress of this venture, and now to is officially about to become legitimate. With the passing of the Act, the business of space mining could boom into a full blown industry in the market, for “this lays the legal groundwork for private businesses to own extra-planetary resources, as well as sell their goods back on Earth” (Good Magazine). Huge potential is seen for space mining. Businesses are waiting for the new act to become official so they can jump into the extraterrestrial world of space mining and make as profit off of it.

The Space Act of 2015 is not yet complete to be used, but it is laying the foundation to open up endless possibilities that reach far beyond he extant of this world. Humans continue to expand the horizons that are in front of them, and this act would put them in the galaxies.

Ryan Neligan is a finance major at the Stillman School of Business, Seton Hall University, Class of 2018.