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.

Posted by Mariafernanda Ayin.

Best Buy is considered one of the biggest electronic selling corporations, but not even the biggest companies can avoid problems. Best Buy has been selling products like TVs, computers, and appliances such as washing machines that have had recalls.  These recalls have been one of the biggest headlines in the past couple of months in the electronics industry.

Federal Law states that it is illegal to sell and distribute products to consumers that have been publicly recalled. Best Buy, allegedly knowing that they were selling recalled products, told the U.S. Consumer Product Safety Commission that they had created measures to stop the risk of selling recalled products, however they continue to do so. Therefore, U.S. Consumer Product Safety Commission decided to penalize Best Buy because the company was not able to effectively create procedures to be able to identify, separate, and avoid selling recall products. In addition, Best Buy failed to block the product code which caused them to get erroneous information that indicated that the recall product was not in inventory.

Best Buy is being blamed for selling over 16 different products and a total of 600 recall items from September 2010 through October 2015—400 of the items being Canon cameras. Some of the items sold had a risk of skin irritation, and even catching on fire, which could have caused enormous harm to the customers. Best Buy is a company that has shown a clear lack of ethics by knowingly selling and distributing recall products just to make a profit, not caring about the well-being of their customers. This unethical act caused Best Buy to settle and pay $3.8 million of civil penalty in thirty days and in addition the company needed to create a compliance program to show that they are strictly following the laws and regulations of the Consumer Product Safety Act.

After the settlement was made, Best Buy sent a spokesperson to publicly address the situation, making an announcement after the settlement, “we regret that any products within the scope of a recall were not removed entirely from our shelves and online channels. While the number of items accidentally sold was small, even one was too many. We have taken steps, in cooperation with the CPSC, to help prevent these issues from recurring.” (Kieler).

This whole dilemma that Best Buy has been through has put them in the eye of the public, and could of possibly affected their sales. However, they still remain one of the biggest companies in the electronic business, and most likely will surpass this situation.

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

Posted by Shakil Rahman.

Americans pride themselves on the idea that their country is the land of the free, where people of different parts of the world could have the equal opportunity to live as they wish, pray freely, and be free to live without being persecuted for their beliefs. It is stated in the constitution and laws are created to make sure people’s rights are not infringed upon or people are discrimination for their beliefs. But there are times when the people seem to be discriminated against because of their beliefs and it spills into the national spotlight.

Abercrombie & Fitch are multimillion dollars clothing store and in one of their stores a Muslim woman named Samantha Elauf applied for a job but she was rejected. When inquired about why she was being rejected, the company replied that the company’s dress code is “classic East Coast collegiate style” and since she wore head scarf, a headwear named Hijab that Muslim women wear, which went against the dress code, she was not hired. Ms.Elauf filed a discrimination lawsuit against Abercrombie & Fitch and the case went to the Supreme Court after being going through trial court and appeals court. The defendant claimed that since the plaintiff did not specifically state that the head scarf was worn for religious reasons they did not discriminate the plaintiff. The Supreme Court justices voted 8-1 for the plaintiff stating that the company should have understood that the head scarf had a religious significance, since it is of common knowledge and therefore the plaintiff was being discriminated and that is prohibited by the Title VII of the Civil Rights Act of 1964.

The lawsuit against the company is based around the claim that the company rejected the applicant’s application for a job due to dress code violations knowing that it had religious significance. The reasoning given by the company was that the applicant did not specifically ask for religious accommodation, therefore there was no discrimination. While it is true that the applicant did not request religious accommodation, head scarves are commonly used for religious reasons in various religions and being ignorant of the fact is not valid argument. Therefore, when the company rejected Ms.Elauf’s application due to her wearing a head scarf, they were discriminating her based on her religious practices. Being ignorant of law is not sufficient excuse either, since the company is supposed to know the laws of the land it is conducting its business in.

In the modern world where globalization has brought the world, and the business world, laws are created to make sure that people are not discriminated for their personal life choices. But sometimes the laws are not interpreted in the same manner by people. For instance, for this lawsuit, the trial court granted the Plaintiff $20000 for the lawsuit, but the appeals court saw the same case and decided that there were no signs of discrimination and overturned the ruling, only for the ruling to be overturned by the Supreme Court. Interpretation of the law is an important part of the business world that must be done in a prudent manner by the courts but also by companies and individuals in order to avoid situations where a wrongdoing does not occur due to ignorance.

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

The Supreme Court issued an order denying an application to vacate the Fifth Circuit’s stay of a district court’s final judgment enjoining the enforcement of a Texas voting statute. The statute requires voters to produce identification before they vote. Business law students learn about injunctions (in this case, the court’s power to stop a party from acting) as a equitable remedy.

Congressman Marc Veasey, D-Fort Worth, sued Governor Perry and Texas Secretary of State John Steen in federal court, challenging the enforcement of the voter ID law, named SB 14. Veasey claimed that the law had the potential of preventing hundreds of thousands of people from voting. The strict Texas statute “requires the state’s estimated 13.6 million registered voters to show one of seven kinds of photo identification” before casting their ballot. Defendants responded SB 14 was designed to prevent voter fraud and argued voter ID laws were already approved by the Supreme Court in an Indiana case.

After a hearing, the district court agreed with Veasey that enforcement of the law “may prevent more than 600,000 registered Texas voters (about 4.5% of all registered voters) from voting in person for lack of compliant identification.” The district court determined the strict Texas statute was unconstitutional and enjoined defendants from forcing voters to produce ID. The Fifth Circuit issued a stay of the order, meaning defendants were temporarily permitted to enforce the law. The Supreme Court denied Veasey’s application to vacate the stay pending appeal. Led by Justice Ginsberg, three Justices wrote a scathing dissent (and in a rare circumstance, later corrected) expressing disagreement with the court’s decision not to vacate the stay.

Voting rights are analyzed under strict scrutiny. As of now, voters in Texas must show proper ID before they are allowed to vote in the midterm elections on November 4th.

IKEA, the popular low-cost furniture manufacturer, recalled 27 million “Malm” dressers.   Three children were recently killed as a result of the defect in design.

The company was on notice of the tendency of the furniture to be top-heavy, but did nothing to address the issue until the death of a 22-month-old child earlier this year.  In addition to the recall, the company offered to send crews to people’s homes to tether the dresser to the wall.

“On average, one child dies every two weeks from falling TVs or furniture. At least six deaths have been connected to Ikea’s Malm dresser.”

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 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 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 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 Sarah Velez.

International business relations is a major component of the United States economy. Foreign countries send their ships to the United States to pick up shipments and deliver products. While this global trade relationship is highly beneficial, the challenges that arise as a result of compliance issues and differences in ethical standards have recently been brought to light. The article “Greek Shipping Companies Fined $1.5 Million for Pollution” written by Gene Johnson of the Associated Press, reports a case of a Greek vessel that “deliberately pumped oil-polluted water into the ocean, then repeatedly lied and falsified records in an effort to deceive inspectors with the U.S. Coast Guard.” These illegal actions led to a million and a half dollar fine to be paid by the companies that jointly own Gallia Graeca, the Greek vessel.

In October of 2015, Gallia Graeca arrived in Seattle to pick up a substantial shipment of soybeans. This ship, owned by both Gallia Graeca LTD and Angelakos SA, was routinely inspected by U.S. Coast Guard Petty Officer Daniel Hamilton once it arrived at the port. As reported by Petty Officer Hamilton, the oil was not properly cleaned and it was actually in areas where it should not have been as a result of the poor maintenance of the oil-water separator. A deeper investigation made by the prosecutors showed that the ship had discarded “5,000 gallons of oil-fouled bilge water” (Johnson). In addition to knowingly dumping this substantial amount of oil, the engineers on the ship also presented the U.S. Coast Guard with false records and feigned the functioning of the oil-water separator. According to the U.S. Attorney’s Office, company executives were aware of the entire operation which shows the unethical behavior throughout the company chain.

While the Coast Guard has reported cases of sea pollution, they consider that holding corporations, as well as individuals, criminally liable is “notoriously difficult to detect and prove” (Johnson). Not only were the two companies charged with forging log books and polluting, but other involved individuals were also held accountable and the engineers on board were sentenced to jail time. U.S. District Judge John Coughenour stated that this case “will resonate with other parties in this industry and cause them to pause when they think about creating a corporate culture that encourages deception.”

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

Posted by Majd Abusadah.

Even though that companies usually have their own accountants who observe accounting transactions, there are still chances for fraud, and this can cause and increasing need for forensic accountants. As a result, universities started to provide courses in forensic accounting for people who are interested in a job as a forensic accountant, such as Florida National University (FNU).

While traditional accounting discusses the financial information and how to provide this information for different users, such as investors and mangers, forensic accounting is used to investigate and analyze financial information for determining if there are any illegal transactions that may have occurred. The forensic accountant’s role is to search and investigate an extensive domain of various crimes. For example, the crimes could involve company health care fraud, money laundering, and contract disagreements. Also, the forensic accountant might be required to be experts witnesses during a trial. Forensic accountants might use their skills in personal matters, such as: dissolution of a marriage where they have to study the financial positions for both parties and their spending for better settlement.

The discipline is starting to notice many needs that go beyond accounting and finances. According to FNU, “the need for skill sets more accustomed with the legal process and computer technology are highly sought after and play a crucial role in determining the outcome of courtroom events.” Forensic accounting affected by few factors such as appearing of a new generation of business professionals and hopeful entrepreneurs. There are around 500,000 new businesses each year and some of them use technology for their transactions. In fact, this extended the forensic accountant’s role to the digital world. Even though technology has a strong protection system, there is still a chance of risk, so it is important for forensic accountant to update their skills in this area.

Having traditional accountants is not enough for companies who want to protect their financial health. This is because their role does not include anything about how to investigate the financial information, hence, the need for forensic accountants.

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

Reference:

(2015, May 05). The Growing Importance of Forensic Accounting. Retrieved from http://www.fnu.edu/growing-importance-forensic-accounting/

Posted by Ola Mohammed Alghasham.

The world encounters cases where frauds are committed by white collar criminals. Executives whom fight against fraud are beneficial for the company. Although the board and management make strong efforts in composing fraud preventing policies, there are several behavioral, environmental, and fraud assessment elements which are ignored during the composition of such policies and their absence provides shelter to the fraudsters. White collar criminals often attain confidence from their role in the organization. This confidence gets transformed into arrogance which prohibits the criminal from applying organizational policies and rules on himself, as an employee of the company.

There is no doubt that the top management always looks for the creative and clever individuals as employees. They forget, however, this creativity and cleverness can be used against the company instead of in its favor. Employees with these traits can cunningly commit frauds by practicing unnoticeable unethical behavior. Companies should execute proper controls with the recruitment of talented people. The tone of top management can either promote or discourage the ethical behavior because it is supposed to set an example for the rest of the organization. The whistle-blowing attitude is shaped by the organizational culture. Moreover, an illogical increase in pay, without any improvement in the performance, allows the fraudsters to continue their unethical activities.

Board members and executives should identify the fraud tactics and fraud hidden strategies of these individuals to compose a fool-proof risk assessment process. Major warnings can appear from the financial data (e.g. unusual, frequent or large transactions), documents with missing or incomplete information or suspicious signatures, poor controls (e.g. lack of monitoring, poor reconciliation of accounts, lack of position to manage conflicts of interest), behavior (e.g. unstable behaviors, mismatched lifestyle with income, high expectations family, and job dissatisfaction). Management must implement strong controls in the day-to-day business operations to avoid fraudulent activities. The board must adopt a proactive behavior in the elimination or early detection of fraud by establishing an audit committee with full authority, monitoring transactions, promoting and maintaining an ethical environment, and composing a procedure for the reporting of fraudulent activities. The board must compose and enforce certain strategies to cope up with the frauds. The executives must develop an ethical environment for keeping the employees loyal with the company and directing the human talent towards the betterment of the company.

Ola is an graduate accounting major with a certification in forensic accounting at the Feliciano School of Business, Montclair State University.

Source:

Marks, J., (2012), A Matter of Ethics: Understanding the Mind of a White-Collar Criminal, Financial Executive, pp. 31-34. Retrieved from www.financial executives.org.

Posted by Kirsten T. Rewekant.

A somewhat recent case, Ellis Vs. Cartoon Network, Inc. shows how old statutes can be in conflict with the new and always updating technology. Ellis uses the Cartoon Network app on his android device to watch popular television shows that Cartoon Network airs. This is a free service, which you could choose to upgrade to pay for exclusive content that the free app does not allow others to see. When signing up for this extended service, you would create a profile with personal information that Cartoon Network would be available to see. Ellis had decided the free version was good enough for him, and therefore, did not give Cartoon Network permission to obtain any personal information.

Cartoon Network uses a service called Bango, which allows them to assign an ID number to everyone who views their content, free service or extended. This service does not know exactly who you are with any personal information, but is essentially learning who you are by linking all the shows you watch to your ID number, and therefore, learning what you like to watch. Through the service, the company is getting an understanding of who you are. Ellis tried to argue this to the court.

The court heard arguments as to whom is considered a consumer or producer. Cartoon Network argued Ellis is not considered a consumer under the definition of the Video Privacy Protection Act (VPPA) because he does not provide any “personal identifiable information.” But Ellis argued, this ID number does show a side of his personality and gives the company his personal information. Finally, the court needed to decide whether Ellis can be considered a subscriber to Cartoon Network, which makes him a consumer under the VPPA. To be a consumer under the VPPA, you do not have to pay for a service, log in, or create a profile.

Overall, the court ruled Ellis as not a subscriber under the VPPA for not signing up for an account, providing no personal information, having no profile, not paying for the service, and he is not considered to have a committed relationship with Cartoon Network to obtain the exclusive content they offer.

Some issues with this ruling includes the fact that if you were to visit Cartoon Network on your web browser, you would not be assigned an ID number, as the app does. Another issue with this case is the very little distinction between downloading the app and being a subscriber to Cartoon Network and how these two do not show a difference in commitment. After this case, there are still questions regarding the VPPA regarding privacy, and therefore, there may need to be some revising.

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

Posted by Abier Mustafa.

Stryker Corp., a device maker company, recalled its Rejuvenate and ABG II hip implant devices in July 2012 after warning surgeons they could harm tissue around the hip and cause other health problems to its patients. Patients have complained of severe pain, unusual swelling and excessive metal debris in their blood, blaming all these symptoms on the Stryker devices. There are at least 1,800 cases Stryker consolidated before U.S. District Judge Donovan Frank in St. Paul, Minnesota. After facing more than 4,000 suits consolidated in the New Jersey state court and federal court in Minnesota alone, Stryker will pay a base amount of $300,000 per patient’s case. This settlement to patients who had the devices surgically removed prior to November 3^rd.

Stryker Corp. has reported more than $9 billion in revenue in 2013 on the advertisement of their hip implants lasting for years. After the devices failed patients within a short amount of time, the company has now agreed to pay more than $1 billion to resolve these lawsuits. However, “the company said that it set aside more than $1.4 billion to cover costs of handling cases over the recalled hips so the settlement fell into the “‘low end of the range of probable loss.’” “This settlement program provides patients compensation in a fair, timely and efficient manner,” Bill Huffnagle, a spokesman for Kalamazoo, Michigan-based Stryker, said in an e-mailed statement. A source also reveals that a majority of the payments will be made by the end of 2015.

Abier is a finance major at Montclair State University, Class of 2016.

Posted by Abier Mustafa.

Cell phone Company, AT&T, has agreed to pay back $105 million in what is being called ”the largest cramming settlement in history.” AT&T has been adding unauthorized charges to tens of thousands of customers’ monthly bills. The charges are usually for the amount of $9.99 per month, coming from third-party services, including trivia, horoscopes, and love tips.  ”AT&T is accused of keeping at least 35% of the fees, as well as obscuring the charges on bills and preventing customers from securing full refunds.”

There have been previous lawsuits against other cell phone providers besides AT&T.  For example, the Federal Trade Commission has filed a similar lawsuit against T-Mobile in the past also due to unethical charges to customers.  “For too long, consumers have been charged on their phone bills for things they did not buy,” Wheeler, the Federal Communications Commission chairman, said- “It’s estimated that 20 million consumers this year are caught in this kind of trap, costing hundreds of millions of dollars.”

AT&T has released a statement saying that they have provided customers with “Premium Short Messaging Services” in the past. However, they have discontinued third-party billing.  To resolve all claims, $80 million of the settlement has been set aside for customer refunds, along with $25 million in penalties due to regulators.

So if you’re an AT&T customer and have been wrongfully charged, you may be eligible for a refund!

Abier is a finance major at Montclair State University, Class of 2016.

Posted by Shanice Cooper.

In an article by Forbes Magazine entitled, Fake IRS Agent Scam Targets Public, Even Feds, while Identity Theft Tax Fraud is Rampant, Robert Wood outlines the seemingly growing issue of identity theft. This particular article takes a close look at how horrible identity thieves are especially during the inevitable tax season.

Identity theft according to Wikipedia, occurs when someone uses another’s personal identifying information, like their name, social security number, address or credit card number, without their permission or knowledge, to commit fraud or other injurious crimes. Identity thieves use the tax season to their advantage and flourish in it by secretly getting individuals’ personal information. How do they do this? One way is by simply calling an unsuspecting person and asking for their social security number, and bank account data: “The plan is frighteningly simple. Steal Social Security numbers, file tax returns showing false refund claims, and have the refunds electronically deposited.” The person doing the crime would call an individual and impersonate a government official; they would intimidate the person into giving up their personal information. “There is also a massive phone scam in which an impostor claiming to work for the IRS calls and intimidates you. You need to pay right away, and many do.” The article gave two popular ways in which identity thieves often steal information, but there are other ways.

In most cases, the taxpayer finds out that their social security number has been tampered with once they attempt to file a real tax return. However, by the time most people realize that they have been dealing with an imposter, the thief is long gone and often times untraceable. This tax season alone has had over 100,000 people affected by tax scams and is going down as the worst year for scams. “[T]he Treasury inspector general has already received more than 366,000 complaints, more than 3,000 people have been conned out of a total of $15.5 million.” These are outstanding numbers of innocent people who are being victimized by identity theft and tax scamming.

In conclusion, I think identity theft is horrible and no one should have to worry about having their information tampered. I personally know of individuals who have been affected by identity theft and have had to go through incredibly long processes to recover their credit. “In January 2015, a Maryland woman and former bank employee, was sentenced to 87 months in prison for her role in a massive and sophisticated identity theft . . . seeking refunds of at least $40 million.” Once the fraudster is caught they are faced with a number of felonies. In the end, committing the crime is not worth it.

Shanice is a business administration major at Montclair State University, Class of 2016.