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 6^th, 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.

Posted by Jessica Page.

In 2008 and 2009, there was a huge salmonella outbreak traced to peanut butter produced by the Peanut Corporation of America. Nine people died from this incident and 700 were reported ill. The $30 million company was shut down and liquidated after the incident and the CEO, Stewart Parnell, was indicted and prosecuted. In late September, he was sentenced 28 years in prison.

What’s intriguing about this article is the comparison to the GM faulty ignition case. In this particular incident, the defect caused 124 deaths and over 200 injuries. GM has recently settled for $900 million and a three year prosecution agreement. The major difference between the two cases though – indictment of employees. Preet Bharara, one of the best federal prosecutors in Manhattan, explained, “it is unusually difficult to prosecute auto industry executives” and because of the national auto safety laws, there is a call for punishing the corporation as a whole, rather than any one individual.

The main conviction in the salmonella case is the fact that Parnell committed fraud by “knowingly introducing tainted peanut butter paste into interstate commerce.” The fact of the matter is though, there were GM executives who knew about the faulty ignition but failed to report it within the five-day span. The company itself was fined as a corporation for this matter, but there was not specific indictment of GM executives. The real issue at hand is how much harder it is to prosecute auto executives when it comes to cases of product liability. There is currently a bill that many senators are working to pass that would make this process easier and hold executives accountable, if they were knowledgeable of the faulty auto product or provided false statements to consumers, as GM did. This could change future product liability cases within the auto industry and as Senator Blumenthal stated, “one sentence like Parnell’s [within the automotive industry] would change auto safety dramatically and enduringly.”

Jessica is a finance and marketing major at the Stillman School of Business, Seton Hall University, Class of 2016.

Posted by Ali Paladino.

Recently, on September 1, 2016, the electric car maker Tesla Motors was called out for attempting to sell their vehicles directly to their customers in Missouri. The judge ruled Tesla’s efforts to rule out the middleman, car dealerships, violated state law.  The Missouri Revenue Department “gave the California-based manufacturer a license for a University City dealership in 2013 and a franchise license for a Kansas City dealership in 2014.” Both of these licenses allowed Tesla motors to sell their vehicles directly to their customers, disregarding any use of dealerships.

The court ruled this was not suitable, and Missouri Automobile Dealers Association agreed. The Association sued the State claiming that “it had given Tesla special privileges,” in their attempts to disregard using franchised dealerships to sell their vehicles. The court ruled that Tesla’s action was not technically unconstitutional, but held the licensing was not allowed. Tesla argued the ruling against them was going to damage the company and suppress their ability to compete with other motor vehicle companies. The company also argued the order was an “attempt” to “limit consumer choice in Missouri.” Yet, Tesla appears to be determined to try and continue to sell to their customers directly in the hopes that this will improve their bottom-line. Doug Smith, head of the Dealers Association, however, does not agree with Tesla’s actions and believes that it is not fair to other manufacturers. He believes all manufacturers should be “treated the same in Missouri.”

I have to agree with Doug Smith. I do not think Tesla should have the right to sell directly to their customers and completely bypassing dealerships, only because it puts the company on a different playing field than other motor vehicle companies. I do not believe that is fair.

Tesla has looked at other ways to get around laws in other states in order to improve their sales; however, I do not agree with this either. In this situation, the law stands blurry and unclear and it is intriguing to see how far Tesla will go in attempts to get around the law.

Ali is a finance major at the Stillman School of Business, Seton Hall University, Class of 2019.

Posted by Justin Ihnken.

For many years, especially those who found themselves in an area of economic success, investors who succeeded because they worked with a financial advisor. The roll of the advisor is to assist individuals in asset portfolio management. Investments in both fixed market vehicles, and those driven with equity in the market, have [for the majority of advisors] been the number one and two sources of financial security investments. Both of these categories are tied together with the strategic planning and goal orientations of specific individuals. This theory comes primarily because “your advisor” would allocate dollars in a way that would ultimately secure monies for specific reasons and even more so, provide an aspect of future practical growth.

As time continues, there are still many individuals that work with advisors and insist that they do planning and individual investments on their own. Coming changes in investments will show that there is a driving need for RIA’s (Registered Investment Advisor). Unfortunatly, the traditional fixed income and equity allocations are rather lacking for specific individuals that wish to diversify their portfolios accordingly. A recent study done by Bridget Bearden, director of retirement research at fund industry consultant, Strategic Insight, went as far as to say many folks do not understand that the effects of falling short on their diversification strategy may have a serious impact in the long run.

“The fund industry generally advocates a 10 percent to 20 percent allocation to liquid alternatives for risk mitigation. But many off-the-shelf asset allocation portfolios seem to fall short of that.”

Many RIA’s are of traditional thought, however the coming realization of alternative investments is proving itself to be a more prominent tool to properly advocate clients. An example of a small and “up and coming” firm that shows its mindset is multiple footsteps ahead of the curve would be that of Circled Squared Alternative Investments. Circled Squared was founded in 2014, by Jeffrey Sica, CEO and President of Sica Wealth Management. With the changing times and ability to allocate dollars properly will prove to be a huge outlet for this small powerhouse. In an interview with a Berkshire Hathaway associated press, Sica spoke on his outlook and thoughts on the future for both Circle Square and alternative investments.

Add to this the inescapable conclusion that investors are growing increasingly dissatisfied with the stagnant performance and unacceptable volatility they’re getting from traditional investments like stocks and bonds, and you have a situation in which advisors have fewer and fewer ways to provide value to their clients.

As the stock market continues to be a murky water, few dare to try to understand the various inlets and outlets of the market. With the change of alternative investments slowly phasing themselves into our everyday planning as RIA’s, we must work above and beyond the curve and enable our’ clients and potential clients alike to take advantage of the various opportunities that alternative investments withhold.

**About Circled Square Alternative Investments

“Circle Squared Alternative Investments is a firm devoted to providing independent financial advisors with access to a range of innovative alternative investments previously available only to institutions and ultra-high net-worth investors. The suite of investment products will include real estate, private equity, private credit, natural resources, private placement offerings, entertainment and media.”

Justin is a student at the Stillman School of Business, Seton Hall University.

Sources:

1. D’Allegro, Joe. “A Retirement Riddle Placing $1 Trillion at Risk.” Cnbc.com. CNBC, 10 Nov. 2015. Web. 12 Nov. 2015.

2. Healy, Andrew. “Jeff Sica Launches New Alternative Investments Firm for RIAs; Unlocks Door to ‘Real Economy’.” Business Wire: A Berkshire Hathaway Company. Berkshire

The regulatory process and its role in the legal system is a fundamental concept in business law. Federal, state and local governments received the authority to regulate activities from Article 1 Section 8 of the U.S. Constitution. Article 1 Section 8 also referred to as the Commerce Clause or Necessary and Proper Clause dictates the enumerated powers of Congress in professional and private settings.

The regulatory process is performed by administrative agencies. Some commonly recognized administrative agencies are the Central Intelligence Agency (CIA), the Environmental Protection Agency (EPA), and the Food and Drug Administration (FDA). The recent GlaxoSmithKline bribery scandal focused on the Securities and Exchange Commission (SEC) administrative agency. The mission of the SEC is to “protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” (Securities Exchange Commission)

The SEC recently alleged that GlaxoSmithKline’s Chinese subsidiary had engaged in bribery activity for four years, 2010 to 2013. The SEC accused GlaxoSmithKline subsidiary of violating the Foreign Corrupt Practices Act. According to the SEC, GlaxoSmithKline’s subsidiary had been providing foreign officials and health-care professionals with gifts incongruous to the law. These gifts included shopping trips, cash, travel, entertainment, etc. for the purpose of boosting sales. Further, the SEC suspected that GlaxoSmithKline’s subsidiary deceptively recorded these payments as expenses. The bribery scandal investigation eventually captured the attention of a second agency, the U.S. Department of Justice.

GlaxoSmithKline has not admitted nor denied these bribery charges, but has agreed to pay $20 million to settle the matter. Nonetheless, this is not GlaxoSmithKline’s first bribery settlement. In 2014, the company paid $491.5 million and several managers were convicted with charges and suspended imprisonment for a similar matter. Since the 2014 bribery controversy, GlaxoSmithKline stated it “installed several reforms, including shifts to the compensation of sales representatives and the end of payments to health-care practitioners for advocating for Glaxo products to other prescribers.” (Minaya)

My opinion on the matter is that GlaxoSmithKline was rightfully accused by the SEC and DOJ, specifically for violating the Foreign Corrupt Practices Act. The Act has a firm anti-bribery provision that GlaxoSmithKline and its Chinese subsidiary had a legal and ethical responsibility to follow. The fact that GlaxoSmithKline and its subsidiary’s records were not a true representation of its payments is a clear piece of evidence suspecting its violation. In addition, having read the SEC order and learned that GlaxoSmithKline had engaged in this activity before, I believe that the company and the subsidiary did participate in bribery.

Melissa is a marketing major with dual minors in public relations and legal studies at the Stillman School of Business, Seton Hall University, Class of 2019.

Posted by Lindsey Pena.

In business, ethics are strong guiding principles that aid managers, employees, and investors to correctly conduct business transactions. When ethical matters are disregarded, the end result is fraud, embezzlement, among many other illegal actions. One of these illegal actions is called a Ponzi scheme. Perhaps the most famous Ponzi scheme was devised by Bernie Madoff, a well-respected financier, who conned investors out of an estimated $65 billion. Madoff was caught in December of 2008 and charged with 11 counts of fraud, perjury, theft, and money laundering. He ultimately faced 150 years in prison as a result of his decades long Ponzi scheme.

Because of the magnitude of this Ponzi scheme, eight years later, the consequences are still being addressed. Recently, the estate of Stanley Chais, one of Bernie Madoff’s friends, agreed to pay the victims of Madoff’s Ponzi scheme $277 million to settle claims that insisted Chais profited from the scheme. Irving Picard, a trustee liquidating Madoff’s firm, has recovered more than $11.2 billion for the investors who were conned. They achieved this my suing the banks and offshore accounts that hid the money in addition to investors who profited from the fraud. In the 2009 lawsuit against Chais and his wife, Picard claimed that they “reaped about $1 billion in profit from fake securities transactions at Madoff’s firm.” Chais also reaped rewards through fees that he would earn when he gave his customer’s money to Madoff’s firm. In addition to this, Chais was also sued by the SEC in 2009 because he “steered assets from three investment funds to Madoff, “despite having clear indications Madoff was engaged in fraud.”

Chais, along with five of Madoff’s employees, were not the only ones who received consequences. Thousands of innocent investors trusted Bernie’s reputable, veteran background hoping to make profit from their investments. While reading this article, I could not help but to think about the Kantian ethics which states that a person should evaluate their actions by the consequences if everyone in society acted the same way. Bernie Madoff made the exception for himself when he decided to execute the treacherous plan and the consequences of his actions will cost him the rest of his life.

Lindsey is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2019.

Posted by Radhika Kapadia.

The real cost of bribery is a question that often lacks a definitive answer.  It seems that Och-Ziff Capital Management, a hedge fund headquartered in New York City, is learning a hard lesson for allegedly engaging in bribery in Africa.  The firm is set to pay a hefty price of $412 million dollars, but the SEC has added the implicit cost of hindering fundraising by insisting that the firm clear any potential deals with investors with state regulators, adding considerably lengthy minutes and cumbersome dollars to the fundraising process.

Because of the massive bribery allegations, the firm was unable to obtain a waiver for the penalties corporations subject to civil law enforcement sanctions or criminal charges, such as bribery, typically face.   As a result, the company will be faced with the tremendous cost of an increased fundraising process and the more-than-ever watchful eye of the SEC over future investment transactions.   In the burgeoning era of bribery cases, the question of whether dollar penalties are truly enough to deter corporations from engaging in illegal acts is often difficult to assess.  However, the SEC is beginning to believe that financial consequences, coupled with other implicit penalization costs will truly begin to reduce bribery within the corporate world.

The allegations against Och-Ziff are primarily as a result of their dealings with Dan Gertler, an Israeli diamond-trade millionaire.  According to the Wall Street Journal, Gertler was known to use political connections in Africa to defeat competitors.  The Wall Street Journal noted that approximately “$250 million of Och-Ziff dollars were used to bribe the current president of the Democratic Republic of Congo in exchange for diamond mining rights.”  Despite blatant warnings and advisement from their lawyers, Och-Ziff executives, such as chief executive Daniel Och, chose to deliberately ignore corruption allegations against Gertler. Subsequently, the African subsidiary of Och-Ziff pleaded guilty to conspiracy to commit bribery, resulting in one of the largest settlements under the Foreign Corrupt Practices Act.   It seems that Och-Ziff is slowly learning that the true cost of bribery is pervasive, and that ignorance truly is not bliss.

Radhika is a graduate student with a concentration in Forensic Accounting at the Feliciano School of Business, Montclair State University, Class of 2017.

Posted by Gabriella Campen.

Unfortunately, in this day and age being well-known in Wall Street circles also happens to be synonymous with being well known by the SEC. The SEC has recently charged hedge fund manager Leon Cooperman, 73, of insider trading by using his easy access to executives to gather information, which he used to buy securities from a company called Atlas Pipeline Partners.  Cooperman’s information led him to buy more securities in the firm, right before the stock’s value soared over 30% due to the company’s $682 million dollar sale of a natural gas processing facility.

After the suspicious buy, the SEC filed a federal lawsuit in Philadelphia, and accused Cooperman of abusing his access to executive information, “By doing so, he allegedly undermined the public confidence in the securities markets and took advantage of other investors who did not have this information,” said SEC Enforcement director Andrew Ceresney.  Along with barring Cooperman from any positions as a director or officer in the future, the SEC is seeking restitution of profits as well as money penalties from Cooperman and his firm, Omega Advisors.

However, Cooperman’s attorneys, Ted Wells and Dan Kramer have released a statement claiming that these allegations are “entirely baseless” and that “Mr. Cooperman acted appropriately at all times and did nothing wrong. We intend to vigorously defend against the charges and will not allow the SEC to tarnish the legacy Mr. Cooperman has built over the course of a legendary career spanning five decades.”  Cooperman is firing back and defending his career and reputation, to which the SEC is saying that they “will continue to pursue relentlessly those who engage in insider trading, regardless of their status or resources.”  This comes as a lesson that no matter who you are or how much power you have on Wall Street, you are still not exempt from following the law.

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

Posted by Justin Gandhi.

Cuban was originally accused of ditching a stock in 2004 called Mamma.com, a metasearch Internet company. He was accused of ditching this stock due to obtaining an inside tip on an upcoming offer that would have diluted his shares.

The SEC didn’t have much evidence on its side and claimed that Cuban ditched the stock in order to avoid $750,000 dollar losses. The SEC had to prove that Cuban received confidential, significant, nonpublic information which is the reason for him selling his stock. The SEC received this information through an eight-minute phone call recorded between Cuban and Mamma.com’s CEO.

During the phone call, the CEO stated he told Cuban confidentially that he was planning a stock offering called Private Investment in public equity. Cuban responded with, “Now I’m screwed. I can’t sell.” This was an indication the insider information and decided to sell anyway.

Cuban testified that there were many reasons he ditched the stock, and that he was never told to keep the information secret. In addition to that, the information wasn’t important in his decision and said the public had this information too, as shown in a website posting. This was basically one man’s word against the others.

Lastly, insider trading requires that a trader act on “material, nonpublic” information, meaning that this information must be significant as well. It wasn’t significant, as shown in a study by Dr. Erik Sirri, a former high-ranking official at the SEC.

Overall, if Cuban went to trial, he could have faced about a 2 million dollar fine, which was less than the amount he spent on lawyers to prove the SEC wrong.

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

Posted by Giancarlo Barrera.

Goldman Sachs was infamously named “The Wolf of Wall Street.”   Goldman created, convinced, and sold mortgage investments that had been designed to fail in the first place.corruption at its finest.  It was corruption at its finest.  Goldman even went as far as betting against the same derivatives it was promoting and selling to their own clientele.  Goldman accepted that it misled investors the wrong way, but did not admit to any scheming or wrongdoing.

In July 2010, Goldman paid an enormous SEC fine of 550 milion dollars.  It was one fine after another.  Then in April 2012, Goldman paid a fine of 22 million dollars for allowing insider trading of non-public information to Goldman’s clients and traders since 2007.  On the link, the story goes into further detail of how much fraud and dishonesty was played under the table and behind the backs of its own clients, who the company was supposed to help invest their money in the first place.

Business is business.

Giancarlo is an economics and finance major at Montclair State University, Class of 2016.

Posted by Jessica Page.

General Motors Co. has recently been in the news for its faulty ignition switches in over 2.6 million of the company’s Chevrolet Cobolts and other models that were recalled in 2014. The faulty ignition switches were found to “slip out of the run position and disable features including air bags.” This product defect has been connected to over 100 deaths and over 200 injuries. In September, the U.S. Justice Department brought a criminal case against GM. They agreed to pay $900 million to settle and a $35 million fine for not reporting the defect.

On Monday, Judge Robert Gerber stated that it is possible GM will also face punitive damages to compensate consumers who were harmed by the defect, even though the company sought to block plaintiffs making these claims. Judge Gerber has suggested the punitive damages could amount to billions of dollars if the legal claims are settled or successful. This is partially due to the fact that GM admitted in the original settlement that they “[mislead] regulators about the defective switch and [failed] to recall millions of vehicles.”

Another interesting factor for this case is the bankruptcy restructuring GM went through. In the restructure, they assumed responsibility for “future product-liability cases involving older vehicles.” Since this is so broad, it is likely that GM could be held responsible for claims on both compensatory and punitive damage because of its knowledge of the defect and conduct, but only to the extent that the “New GM” holds. GM has agreed to spend over $500 million to settle these cases and over the next few months, the company is expected to face even more death and injury cases that have yet to be settled.

Jessica is a finance and marketing major at the Stillman School of Business, Seton Hall University, Class of 2016.

Business law students study the corporate entity and learn from the beginning that since corporations are legal persons they can be charged with crimes.  Corporations cannot be imprisoned, because they have no physical body, but they certainly can face monetary penalties. Such was the recent fate of Credit Suisse.

Credit Suisse pled guilty to one count of “intentionally and knowingly” helping many U.S. clients prepare “false” tax returns.  For decades, Credit Suisse bankers fabricated “sham entities” to help hide the identities of U.S. clients who did not claim the Swiss accounts on their tax returns. They also failed to maintain records related to those accounts, destroyed documents sought by the U.S. government, and helped U.S. clients draw money from those accounts in ways that would not raise a red flag to the IRS. Out of the $2.6 billion, $1.8 went to the Treasury Department, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Service.

The monetary penalty is the only punishment levied on the bank, as government officials feared anything further, such as ceasing operations, would have had a detrimental effect on the global economy. Moreover, top bank officials who were involved in the scheme will keep their jobs, even though there were calls for them to resign by their own statesmen.

Reportedly, the Department of Justice is looking to bringing charges against France-based BNP Paribas for similar offenses. But without some officer or director accountability, there will be no deterrence.

Posted by Daniel Lamas.

Just recently, on May 12 in Philadelphia, an Amtrak train derailed and killed eight people and sent over 200 to the hospital. A question everyone is asking is why the train was going that fast and why it curved. Brandon Bostian, who was the engineer, has agreed to be interviewed and many feel that he will be able to answer some important questions.

Bostian claims that he has no recollection of the accident and denies a lot of claims made about the way he operated the train. It was proven that Bostian was going 106 miles per hour when the train should have only been going at 50 miles per hour. Bostian has refused to talk about that part of the case, as he has a Fifth Amendment right to remain silent, and has only said that by the time he tried to pull the safety brakes, it was too late. Bostian has already gotten a lawyer and is prepared if he is sued. Even though there are not yet any charges against Bostian, he knows that he must prepare himself for what is to come. Mayor Michael Nutter said, “He doesn’t have to be interviewed if he doesn’t want to at this particular stage. . . . That’s kind of how the system works.”

Daniel is a business management and merchandising major at Montclair State University, Class of 2017.

Posted by Timothy O’Shea.

Tesla Motors, an automotive company in the Automotive Energy Storage industry, “who’s mission is to accelerate the world’s transition to sustainable energy.”(tesla.com) It “was founded in 2003 by a group of engineers in Silicon Valley who wanted to prove that electric cars could be better than gasoline-powered cars”(tesla.com). As of now, all Tesla Cars will be made with complete self-driving software. It is their belief that these self-driven vehicles will help to improve safety while also aiding in the transition to the world’s sustainability. However, Tesla’s autonomy options have had some challenges and have caused Tesla some trouble. Tesla has now faced a number of lawsuit’s regarding false advertising and marketing, more specifically false advertising and marketing of the car’s “Insane Mode”, a performance mode intended for fast acceleration, and also for the car’s autonomous mode.

After a few crashes, one of which was fatal, Tesla Motors has been receiving criticism for the way in which it chose to market and deploy its Autopilot driving-assist system. In the summer of 2016, Tesla was admittedly being investigated by the National Highway Traffic Safety Administration, for its first reported fatality in a self-driving vehicle, while a second potential crash, involving the Autopilot feature, arose. Multiple cases have erected in China after Tesla crashes, with one resulting in fatality, a 23 year old driver whose “dashboard camera showed the car hitting a cleaning truck from behind while traveling on a highway in central Hebei province.”(forbes.com) Another fatal crash took place in Florida, where Joshua Brown, 40 year old supporter of Tesla, was hit by a tractor trailer which was undetected by neither driver nor autopilot. A final crash that raise concern against Tesla’s Autopilot software occurred on the Pennsylvania Turnpike on July 1, where Albert Scaglione reportedly activated the self-driving feature prior to hitting the guard rail “off the right side of the roadway… crossed over the eastbound lanes and hit the concrete median.”

Amongst the many crashes and accusations, Tesla has continued to stand behind it’s autopilot saying that the crashes resulted from human error, rather than system error, and in most cases the opposing parties have not been able to prove otherwise. On a bold posting on its website, the company said “there is no car company in the world that cares more about safety than Tesla and our track record reflects that.”(usatoday.com) This statement resulted from the NHTSA’s disclosure it was further investigating the electric car company for the possibility of having their customers sign non-disclosure agreements that would impede reporting. With repeated complaints, the NHTSA continues to investigate the validity of Tesla motors vehicle safety but has not found any major problems at this time. From suspension concerns, to accusations of false advertising, to crashes and claims against the Autopilot feature, Tesla remains under consistent fire and has been on its toes ready to adapt and turn its feedback into more environmentally, economically, and logistically friendly features.

In more current news, Tesla has been running into some speed bumps in its growth and develop in Germany. The Federal Motor Transport Authority of Germany, has recently sent a request to Tesla asking them to stop advertising the “electric vehicles’ Autopilot function, claiming that this feature misleads drivers into unsafe inattention to the road.”(eetimes.com) Yhe claim released in late September, implies that Motor companies must refrain from using misleading terms like “auto-pilot”, “automated”, or “self-driving” if their cars do not possess the ability to control themselves completely independent of human involvement.” (eetimes.com) Tesla has responded saying its “Autopilot always requires that the driver remain engaged and ready to take over at any time.” (electrek.com)

Timothy O’Shea is an undecided business major at the Stillman School of Business, Seton Hall University, Class of 2019.

Sources:

Tesla issues thorough response following harsh critique of Autopilot by German authorities

http://www.eetimes.com/document.asp?doc_id=1330633

https://www.tesla.com/about

http://www.forbes.com/sites/dougyoung/2016/09/19/tesla-takes-new-china-hit-with-driver-death-lawsuit/#37346299284f

Posted by Ali Paladino.

Recently, on September 1, 2016, the electric car maker Tesla Motors was called out for attempting to sell their vehicles directly to their customers in Missouri. The judge ruled Tesla’s efforts to rule out the middleman, car dealerships, violated state law.  The Missouri Revenue Department “gave the California-based manufacturer a license for a University City dealership in 2013 and a franchise license for a Kansas City dealership in 2014.” Both of these licenses allowed Tesla motors to sell their vehicles directly to their customers, disregarding any use of dealerships.

The court ruled this was not suitable, and Missouri Automobile Dealers Association agreed. The Association sued the State claiming that “it had given Tesla special privileges,” in their attempts to disregard using franchised dealerships to sell their vehicles. The court ruled that Tesla’s action was not technically unconstitutional, but held the licensing was not allowed. Tesla argued the ruling against them was going to damage the company and suppress their ability to compete with other motor vehicle companies. The company also argued the order was an “attempt” to “limit consumer choice in Missouri.” Yet, Tesla appears to be determined to try and continue to sell to their customers directly in the hopes that this will improve their bottom-line. Doug Smith, head of the Dealers Association, however, does not agree with Tesla’s actions and believes that it is not fair to other manufacturers. He believes all manufacturers should be “treated the same in Missouri.”

I have to agree with Doug Smith. I do not think Tesla should have the right to sell directly to their customers and completely bypassing dealerships, only because it puts the company on a different playing field than other motor vehicle companies. I do not believe that is fair.

Tesla has looked at other ways to get around laws in other states in order to improve their sales; however, I do not agree with this either. In this situation, the law stands blurry and unclear and it is intriguing to see how far Tesla will go in attempts to get around the law.

Ali is a finance major at the Stillman School of Business, Seton Hall University, Class of 2019.

Posted by Kirill Ivanov.

Tesla, a popular tech firm, is commonly known for its production of electronically-powered cars and batteries. Tesla Motors is among many ventures pioneered by Elon Musk, who has commanded the SpaceX programs as well as many other development projects. Tesla vehicles are not as popular as those produced by Honda or Toyota; while one may occasionally spot a Tesla model out on the road, sightings are few and far between. In order to expand their sales and drive more Tesla vehicles out onto the roads, Tesla Motors initiated a referral program. This referral program, which was based on rewarding customers for purchasing the company’s products, boasted many incentives for potential Tesla buyers as well as current owners.

According to Tesla Motors, anyone who ordered a brand new Tesla Model S before October 31st using a referral link from a current Tesla owner would get $1,000 off the listed purchase price. In return, the current owner providing the referral would receive a $1,000 voucher for a Tesla service center visit or a Tesla accessory. The offer went on to offer a $25,000 discount for a new Tesla Founder Series Model X, which is not available to the public, when a person provides ten referrals. Why was this program illegal? Tesla Motors simply created a way to thank its customers for building the Tesla community while simultaneously reeling in new customers to expand the existing community.

Unfortunately, Tesla’s referral program happened to violate a California State Law, which is quite ironic due to the fact that the company’s headquarters are located in Palo Alto, California. The company’s referral program violated the California Automobile Sales Finance Act, which states the following:

It is unlawful for any seller to induce or attempt to induce any person to enter into a contract subject to this chapter by offering a rebate, discount, commission, or other consideration, contingent upon the happening of a future event, on the condition that the buyer either sells, or gives information or assistance for the purpose leading to a sale by the seller of, the same or related goods.

As a result of its failure to comply with California State Laws, the Tesla Motors referral program did not attract the customers the company had hoped it would. Many businesses use referral programs to benefit loyal customers while simultaneously attracting new ones, but it is extremely important for such business to be aware of local laws. Ignorance on a company’s part can result in catastrophic legal damages, but lucky enough for Tesla the company only received a written warning from the California Department of Motor Vehicles.

Kirill is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2018.

Source: 

Title: DMV warns Tesla it’s referral program is unlawful

Author: Mark Glover

Published: October 15, 2015

Link: ( http://www.sacbee.com/news/business/article39309483.html )

Posted by Ashley Torres.

In July of 2012, Marissa Mayer became both the President and Chief Executive Officer of Yahoo!. During her time within the company, she has found herself involved in many lawsuits, and is yet hit with another. Recently, in the San Jose District, a former media executive known as Scott Ard filed the lawsuit against Mayer. He is accusing her of running a campaign that discriminates against male employees, specifically. His reason behind this alleged accusation includes Mayer’s implemented “use of the employee performance rating system to accommodate management’s subjective biases and personal opinions, to the detriment of Yahoo’s male employees.” Mayar states the employee performance rate system has improved their overall performance, but Ard believes he was fired not because of his performance, but because of his gender.

Besides just accusing Mayer, Kathy Savitt, former chief marketing office, and Megan Liberman, editor in chief, are also involved in the lawsuit for discriminating against men. As evidence of this accusation, the lawsuit alleges that 14 of the 16 senior-level editorial employees were female whom were purposely hired by Savitt, while firing men because of their gender.

In February of 2016, there was another filed lawsuit with similar accusations. A former employee by the name of Gregory Anderson was fired, while he attended a fellowship at the University of Michigan. Anderson too believed that he was fired because of his gender and not his performance because when he asked to view his documentations with his performance that supposedly resulted in his termination, Anderson was denied. Both Anderson and Ard are represented by the same attorney, Jon Parsons, in which he declined in making any comments.

Ashley is an accounting major at the Feliciano School of Business, Montclair State University.