Posted by Carter McIntosh.

Valeant is a very large pharmaceutical company that focused on creating a “drug giant that was focused on distribution.” Valeant “was” one of the hottest stocks on Wall Street; this stock was booming; the stock soared all the way to $260 in just months. Wall Street analysts and Hedge Funds loved Valeant and everyone wanted to own it. Valeant has been in the news lately, and it is not good news but rather some very bad news. Allegations now follow Valeant and whether or not they have true success or that there true success can be attributed to “price gouging: a secret network of specialty pharmacies; and fraud.” With these allegations surfacing, Valeant stock has “plummeted 60% in the last three months.”

Valeant has been under scrutiny for a while now, dating all the way back to August 14th, 2015. In August, Valeant was being scrutinized because they raised the price of their drugs. On October 5th, 2015, a study by a Deutsche Bank analyst finds that it is not just two drugs that they raised the prices. The report concludes that Valeant has jacked up prices on 54 other meds this year alone, by an average of 66%.” In response to this issue, Valeant CEO Pearson said during an earnings call on October 19th, 2015, that “Valeant will ease up on its strategy of buying up drugs that are mispriced and hiking the prices.”

On October 20th, 2015 “A report by Citron Research, run by activist short seller Andrew Left reveals more information about Philidor and it’s network of phantom captive pharmacies.” Left accused Valeant of committing accounting fraud; furthermore, Left compared “Valeant to companies like Enron.” Two days later on October 22nd, 2015, Valeant “called Left’s reports erroneous. The company says it hasn’t used Philidor to book false sales. It says Philidor is a separate company, but that Philidor’s financial statements are included in Valeant’s financial statements.” With this allegation surfacing Valeant shares have plummeted 30% in just three days.

As more and more information surfaced about Valeant’s relationship with Philidor, on October 30th, 2015, “Valeant says it is cutting ties to Philidor, and that the pharmacy will shut down immediately. Allegations have emerged that Philidor may have changed prescriptions to push Valeant’s high-priced drugs on patients, rather than the generics.” Bill Ackman, the largest shareholder in Valeant held a “four – hour conference call to defend Valeant,” as he believes in Valeant’s business strategy and that the company would not commit accounting fraud and price gouging. Unfortunately, this course of action did not help Valiant. In fact, after the Bill Ackman conference call, Valeant shares fell another 10%.

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

Posted by Luca Aufiero.

In the article, “BizEquity Launches Online Valuation Tool for Accountants,” Daniel Hood discusses how BizEquity, an online business valuation system for businesses to be able to estimate the value of their businesses, launched a new product called Accountant Office. For accountants and advisors, this new business solution of BizEquity successfully improves the valuation process. Using a keen platform for its refined algorithms and big data knowledge, accountants and advisors will be able to provide clients with real-time awareness of what their business is really worth, more efficiently and cheaply. Accountant Office costs less than one-tenth of the average business valuation fee of $8,000. It can also deliver a valuation report in minutes compared to the average time of 3-6 weeks it takes for traditional business valuation firms to deliver a valuation. BizEquity’s business solutions help companies create, manage, and optimize its business valuations. This may revolutionize the business valuation landscape pertaining to forensic accounting as technology and data cloud services are evolving among the profession.

Currently, BizEquity is one of the world’s largest providers of business valuations, valuing more than 29.4 million companies around the globe. PrimePay, one of the nation’s biggest private payroll companies and a network of more than 10,000 accountants, will be exclusively distributing Accountant Office in the U.S. The founder and CEO of BizEquity, Michael Carter, wanted to expand the views of the capabilities that accountants are perceived at by demonstrating their value in business advisory and not just tax planning. Somewhat as their motto and the first thing that stands out on their website, reads “What’s Your Business Worth?” BizEquity conveys the importance of business valuation to owners and to those accountants and advisors who will benefit from these tools in order to better inform them. With proper valuation knowledge, companies are in a more desirable position in determining the fair value of selling a business, ability to secure financing, and striving for growth.

Luca is a BS and MS in Accounting, Forensic Certificate Program, at the Feliciano School of Business, Montclair State University. 

Reference:

Hood, Daniel. “BizEquity Launches Online Valuation Tool for Accountants.” Accounting Today. 20 Oct. 2015. Web. 20 Nov. 2015. http://www.accountingtoday.com/accounting-technology/news/bizequity-launches-online-valuation-tool-for-accountants-76144-1.html

Posted by Catherine Caldwell.

The trendy new and convenient company, Uber Technologies Inc., is currently enduring a legal battle for its illegal classification of freelancers. Uber was founded in 2009, as an application that acts as an electronic link from individuals who have cars to individuals who needs rides. The company has received a reputation of convenience to its customers and an easy way to make profit for its drivers. However, attorney Shannon Liss-Riordan, a powerful attorney in the state of California, disagrees with the classification of Uber drivers.

Shannon Liss-Riordan is no stranger in her attack on large billion dollar industries such as Uber. She has made cases against Starbucks, Harvard University and FedEx, to name a few. Ms. Liss-Riordan thinks that Uber drivers are unlawfully “on-demand workers” with no benefits. Instead of freelancers, Uber drivers should receive employee status, which would include drivers receiving reimbursement of their transportation expenses among other employment protective benefits.

As a software intermediary in the transportation business, Uber Technologies Inc. claims that they do not need grounds for titling their drivers as employees. Uber does not have a “fleet of drivers” waiting to pick up the next customer, but is based on convenience for both the drivers and employees. Uber does not plan on settling the case and has begun their approach by assembling 400 statements from drivers saying they were content with the flexible labor opportunities. However, in retaliation, Liss-Riordan took 50 of those statements and found that those drivers stated they would like to have official employment status.

In September, the case won class action status in San Francisco and will continue in federal court. Valued at $51 billion and is willing to fight for their case all the way to the Supreme Court and are unwilling to settle.

This case will create a precedent in the industry of software application employment services, and therefore needs to be handled very tactically. The basic labor protection laws should not be ignored due to new forms of introducing a business such as Uber. However, each Uber driver participates to make profits on their own agenda. Some use the service for extra cash, where others, in the grueling unemployment climate, use Uber as full time opportunities. In my opinion, the court should require Uber to create employment contracts with Uber drivers who can prove that it is a major source of income.

Catherine is a finance and information technology major at the Stillman School of Business, Seton Hall University, Class of 2018.

Posted by Nikolina Stojkovic.

Insider trading just got a little easier, if you can use the right defense.  Based on the case United States v. Newman, insider trading charges were dropped based on what was considered wrong jury instruction and failure to show sufficient evidence for conviction. The case was tried in a New York district court. New York has joined the cavalry in trying to take down Wall Street crimes.  US Attorney General Preet Bharara took office about six years ago and arrested 100 people for insider trading, of whom 87 have been convicted¹.

A little background of the case will help demonstrate what defense attorneys were able to accomplish in appeals. In January 2012, hedge fund portfolio managers Todd Newman and Anthony Chiasson were charged with securities fraud. In December 2012, they were convicted and, in May 2013, sentenced to lengthy terms: 54 months for Newman and 78 months for Chiasson¹ for using information tipped to them about Dell and Nvidia via an intermediary. Newman earned $4 million and Chiasson earned $68 million as a result of the information received.²  The charges were overturned because the prosecution never linked a personal benefit received by the original tipper, not because Newman/Chiasson denied receiving the information.

According to the defense, their clients did not commit any crime because the tipper received no known benefit of relaying the information, nor did the intermediaries that passed along the information to Newman and Chiasson.  Rather, their actions were part of a business transaction based on information received.  It sure sounds like insider trading without the benefit requirement.

Nonetheless, the appeals court decided otherwise.  Their decision spurred a flurry of review on pending and previously decided cases, where guilty verdicts were found and admissions of guilt were allowed on insider trading matters. Based on the defense attorney’s argument, insider trading cases will become more challenging for the US Attorney General’s office.  In this matter, based on the charges, the defendants are not guilty.  However, had the tipper received quid pro quo in exchange for the information, Newman and the like, would be guilty of insider trading. Quid pro quo seems trivial in the matter, either you acted upon the information or you didn’t.

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

Sources:

¹ http://fortune.com/2015/09/23/supreme-court-insider-trading-newman

² http://www.bloomberg.com/news/articles/2015-10-05/insider-trading-cases-imperiled-as-top-u-s-court-spurns-appeal

Posted by Kosta Arvanitis.

In an article written by Sophia Pearson and Elizabeth Amon, they update us on the on-going recovery of funds for Bernie Madoff’s Ponzi Scheme victims. Being the biggest one to date, it has been a grueling process in recovering the billions of dollars lost tied to the scheme. In this specific case, FutureSelect Portfolio Management sued EY in 2010 over faulty audits tied to a Madoff-linked feeder fund, Tremont Group Holdings Inc., and ultimately won a portion of its $112 million loss back. This is just the one of many victims of the scheme; and since Madoff’s incarceration, only 34% of the billions of dollars of losses have been recovered by his thousands of victims. The Washington state court for FutureSelect’s case found that the accounting giant was negligent by signing off on audits of billions in assets that didn’t exist.

It is rare that a negligence case arise against a Big Four accounting firm. This case was brought because under a Washington state securities law, it is more protective of investors than other federal and state statutes (Amon Pearson 4). The main accusation of FutureSelect’s was that EY relied on audit reports done by Madoff’s notorious accounting firm, Friehling & Horowitz. They claim that EY failed to question the firm’s professional reputation; and in doing so, took an enormous risk and lost $112 million in its investment fund. The audit reports were of Rye Funds, managed by Tremont Group Holdings Inc., who was also sued by the company. It appeared as though EY failed to perform adequate procedures in testing the existence of Rye’s assets on their financial statements, which FutureSelect claimed in court documents.

Here are the facts. EY audited Rye Funds, who were managed by Tremont Group. Tremont was the second largest feeder into Madoff’s multibillion dollar fraud. EY also audited Tremont through 2008, and supposedly did not suspect a thing even though Madoff’s assurances showed that Rye outsourced investment decisions, and even record keeping (which should have waved red flags). EY’s spokesperson Amy Call Well, stated that EY technically did not audit a Madoff entity, that they were among many auditors who also chose to use Madoff as their investment adviser. They mistakenly trusted the work done by Madoff’s accountant, saying also that they couldn’t have seen the Ponzi scheme coming. Another important factor is that in 2013, FutureSelect opted to pursue its own case when Tremont and Madoff’s brokerage agreed to a $1 billion settlement that would free up money to repay other victims of the scheme. FutureSelect tried to see if they could be more successful in conducting their own case. The question on all of this is whether EY did everything they could in their power, through adequate audit procedures, to uncover any potential fraud. In which case, there were billions in assets that did not exist that EY failed to detect, which showed EY’s negligent misrepresentation. In the end, FutureSelect’s awards netted $10.15 million, of which EY was found half liable, and FutureSelect half liable of the total $20.3 million in damages.

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

Posted by David Cadorett.

The forensic accounting field is rapidly growing and is a well-desired skill set for many different companies and firms. One set of firms is law firms that could benefit greatly from having a forensic accountant on staff. Litigation requires a skill set that a forensic accountant possesses such as complex accounting and legal issues that goes hand in hand to provide a valuable insight into financial issues.

By having a forensic accountant within the firm, one is able to access their financial skills in a timely manner versus interviewing and clearing conflicts with hiring a forensic accountant each time. Scheduling meetings is much easier than scheduling with outside experts, meaning clearing schedules and times. By having one on staff, there is a cost savings that leads to lower rates for clients making the firm more attractable when a client is looking to hire.

As an agent of the law firm, internal FAs are not required to testify or to issue expert reports to the opposing side about their findings. They may communicate freely with attorneys as these communications are not discoverable by the opponents. When outside financial experts are needed for testimony, internal FAs assist in finding experts with the requisite skills and experience. The FA may also assist in preparing experts for trial. In investigating the financial facts of a case, much of the information needed by the outside expert will already have been obtained, organized and summarized by the internal FA.

This is valuable to the client this way the information is not discoverable by the opponent the internal forensic accountant has their clients best interest in mind and is able to help find the best expert witnesses to help testify where lawyers may not be able to ask the proper questions when looking for an expert.

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

Posted by Robert Santos.

Usually when people go on vacation, they come home with a souvenir of some sort such as a hat or refrigerator magnet. Lauren Guerra will be going home with a little more than a silly souvenir–in fact she will be going home with 3.5 million dollars. This will be a trip to remember for Guerra but not in the way one would want. Although Guerra will be going home a very rich woman, the damage that has been done is something that all the money in the world couldn’t fix.

On October 27, 2013, Lauren Guerra was one of the many passengers on the Star Line Tours of Hollywood bus giving a tour to passengers of Hollywood. These buses are popular and very well known for they give tours of the famous locations in California, and are known for the unique design of not having a roof but a open deck level for tourists to have a better view of sites and take better pictures. Unfortunately this would be Guerra’s biggest regret, for while aboard one of these buses, a tree branch flew into her face leaving her permanently disfigured. She immediately sued the company after hearing of another death on the same type of bus under the same company. In July 2014, and has been in a back and forth battle since then.

The court battle was vigorous and both sides seemed to have fair arguments. Mark Cunningham who is the attorney for the Starline Bus Company argued that Guerra was at fault because she was standing while the bus was in motion and also was drinking prior to being on the bus. Brian Kabateck, who is Guerra’s attorney, responded by admitting his client did indeed have a drink or two before entering the bus. But there was no way anyone could of avoided this injury, sober or not. Guerra’s attorney argued Star Line could have done more to prevent the situation such as having a worker on the second level of the bus, and also having individuals scout to see what type of environment the bus routes consisted of before actually allowing the buses on them. After a day-long discussion among jurors, the court finally awarded Guerra a settlement of 3.5 million dollars.

Something says that whether you weigh the negatives or the positives, Guerra will never forget this vacation.

Robert is a philosophy major at Seton Hall University, Class of 2016.

Posted by Yasmine Miller.

Around the time of July, 2015 Whole Foods was being sued for misleading sugar claims. Shoppers of Whole Foods were angry when discovering that the evaporated cane juice is actually sugar. The company has built their popular reputation on only selling foods that are supposed to be healthier than the foods that you would get in local grocery store. Whole Foods has been fighting against their allegations in the misleading and false advertisements on their cookies.

According to the article “The plaintiffs allege that Whole Foods called sugar “evaporated cane juice” on the label of its Gluten Free All Natural Nutmeal Raisin Cookies in an attempt to make consumers believe that the cookies do not contain as much sugar as they in fact contain.” Further, still today Whole Foods denies the claims in the Missouri lawsuit. “In their filing in support of this motion, they argue that no reasonable customer could have been led, by the label on its cookies, to believe that the product didn’t contain sugar.”

Whole Foods mislead their customers by conceiving them that their healthy snack (cookies) weren’t as healthy as everyone thought. The company mislead and falsely advertised their cookies and violated laws that are in place to protect clients from being misled about products and or services. From my understanding, businesses are not allowed to make statements that lead to incorrect impressions.

Whole Foods violated the Code of Conduct in Business for their deception and dishonesty towards their customers. A code of conduct (also known as the code ethics) provides employees with guidance for handling difficult ethnical situations related to the business. Whole Foods definitely violated this conduct.

Yasmine is a psychology major at Seton Hall University, Class of 2017.

Posted by Daphine Llosa.

The current legal issue relates to conspiracy and breach. A conspiracy is an agreement by two or more parties to commit a crime to do something unlawful or harmful. A breach is an act of breaking or failing to observe a law or agreement. On Tuesday, November 17, 2015, Crystal Banuelos pleaded guilty of a conspiracy to attain personal information and commit cards theft from Michaels Companies Incorporated’s customers. Michaels is an arts and crafts, custom framing, home décor and seasonal products store. Prior to this case, there was another prosecution where Eduard Arakelyan (age of 24) and Arman Vardanyan (age of 26) were charged for being involved in a breach. This breach was discovered in 2011 where devices were installed on point-of-sale terminals so they may obtain Michaels’ customers’ personal information as well as bank account numbers. Both individuals pleaded guilty three years ago for stealing from 952 debit cards; they were sentenced for five years of prison.

Crystal Banuelos, the 28 year old California woman, had participated in a conspiracy to acquire 94,000 credit and debit card numbers. It took Banuelos around four months to admit to her charges and plead guilty in the federal court in Camden, New Jersey. CNBC mentioned that the prosecutors found that the individuals involved in the conspiracy had replaced close to 90 of the point-of-sale terminals in 80 different Michaels stores in “19 states with counterfeit devices that were equipped with wireless technology.” They used these counterfeit devices to acquire customers’ personal identification number information as well as any additional information that they may have found useful for their theft. Crystal Banuelos, along with others, had managed to create an exact imitation of these debit cards using the stolen information they gathered when they applied the counterfeit devices. They were able to obtain and collect more than $420,000 by withdrawing from automated teller machines. Two of the defendants, Angel Angulo and Crystal Banuelos, had 179 of these imitated cards in New Jersey. Some of the banks that were affected include: Bank of America Corp, JPMorgan Chase & Co, Wells Fargo & Co, etc. It has been announced that Crystal Banuelo’s sentence is scheduled to be on February 23, 2016.

Daphne is a graduate accounting with a certification in forensic accounting at the Feliciano School of Business, Montclair State University, Class of 2016.

Posted by Daniella Bucci.

Abby Lee Miller, owner of Abby Lee Dance Company and known for her loud mouth on the Lifetime reality show, Dance Moms, has been indicted on bankruptcy fraud charges. Miller hid more than $755,000 of earned income from Dance-Moms-related shows, dance sessions and merchandise sales between 2012 and 2013 in secret bank accounts created solely for the purpose of hiding the income. Her charges consist of bankruptcy fraud, false bankruptcy declarations and concealment of bankruptcy assets. Miller claimed bankruptcy to “save her studio,” and perhaps creating a “’fresh start,’” instructing her accountant and partner via email, “’LET’S MAKE MONEY AND KEEP ME OUT OF JAIL’” and allegedly wrote “’DON’T PUT CASH IN THE BANK!!’”  Miller could face up to five years in prison, which is the statute of limitations for federal crimes, and a $250,000 fine for each of her 20 indictment counts.

Miller’s crime, bankruptcy fraud, is a crime under the Bankruptcy Act of 1867. Miller attempted to defraud the bankruptcy court by trying to discharge her debt, as she was fraudulently conveying her asserts in secret bank accounts which she would then claim after declaring bankruptcy. Forensic accountants, who are skilled and experienced professionals in detecting fraud, may have assisted in unraveling this case by tracing the fraud scheme, which for Miller consisted of detecting the concealment of assets totaling over $755,000. The forensic accountants may have questioned why she does not have a larger amount of cash in the bank, being knowledgeable of her successful business ventures, and dug deeper from there. Miller’s arraignment took place on November 5 in US District Court in Pittsburgh.

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