Bank of America reached a settlement with federal prosecutors over the sale of mortgage-backed securities in the run-up to the 2008 financial crisis.  BofA will pay 10 billion cash and about 7 billion in consumer aid.  Most of BofA’s trouble is inherited from its purchase of Countrywide Financial.  BofA was charged with misrepresenting the quality of loans it sold to investors.

BofA sold residential mortgages from borrowers who were unlikely able to repay their loans; yet, these securities were promoted as safe investments.  Subsequently, the housing market collapsed and investors suffered billions of dollars in losses.

The consumer aid component should come in the form of reducing the principal on loans BofA knows it cannot recover in full.  This is one of the “consumer-friendly” activities BofA can engage in order to achieve “credits.” Credits consist of a multiple for each dollar spent on each form of consumer relief.  Critics claim that because of credits, tax write-offs, and “other tricks” the fines paid by banks who break the law are worth only a fraction of the amount.

Posted by Abdullah Almohammadi.

51-year-old Steven Croman is a landlord with more than 141 apartment buildings in Manhattan. In 2016, was arrested for the allegations of obtaining loans fraudulently and committing tax fraud. Croman pleaded guilty for giving false business records, grand larceny, and criminal tax fraud. He was sentenced to one year jail and a five million fine.

The case came from the investigation of the allegations that Mr. Croman was harassing his tenants. He was alleged that he pushed rent-regulated out of their apartments. He also withheld the state payroll taxes to earn a bonus for forcing the rent-regulated tenants.

He was taken to court on Tuesday but declined to address the court. Justice Jill made a judgment stating that he was given time in jail to think about the people he has harmed. As he left the court in handcuffs heading to prison, an elderly tenant, Carol, stated that his apartment was in bad condition since Mr. Croman had refused to clean the apartment. Another elderly tenant by the name Cynthia suggested that the public ought to be protected from such a person as Croman forever. This indicated that Mr. Croman should have life jail term. On the other hand, Mr. Croman lawyer believes that Mr. Croman will behave appropriately in jail which will make him be released after eight months instead of one year.

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

Source:

http://www.foxbusiness.com/features/2017/10/03/nyc-landlord-sentenced-to-year-in-fraud-case.html

Posted by Gurpreet Kaur.

CNN Money released an article on Well Fargo’s employees secretly withdrawing money from customers’ bank account and transferring to new accounts since 2011. The article was published on September 8th of this year and Wells Fargo bank was forced to fire 5,300 employees in Los Angles for setting up accounts for customers. This fraud was taking place without any of the customers’ knowledge. After this fraud, many customers were fumed because their bank accounts were unsafe. The employees’ fraud was unethical and illegal because they were creating credit card accounts without letting their customers know.

Brian Kennedy, a Maryland retiree, was one of the victims and he told CNN Money “he detected an unauthorized Wells Fargo account had been created in his name about a year ago. He asked Wells Fargo about it and the bank closed it.” Wells Fargo’s customers had trust in the bank. The victims of this fraud could have filed for refunds, but it wasn’t necessary because Wells Fargo agreed to refund 5 million dollars to them. The settlement in Los Angles required Wells Fargo to warn their California customers to shut down their unrecognized accounts. The fraud caused the bank to unemployed 5,300 workers over these five years.

Richard Cordray is the director of the Consumer Financial Protection Bureau and he said, “Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses.”  Those employees transferred funds from customers’ accounts without their knowledge to new accounts they created. Customers were upset because they were facing overdraft fees and insufficient fees. Wells Fargo stated, “We regret and take responsibility for any instances where customers may have received a product that they did not request.” Wells Fargo’s market valuation was the highest in America, but the fraud led to lawsuits against Wells Fargo. In May 2015, “Feuer’s office sued Wells Fargo for authorizing accounts” and “after filing the suit, his office received more than 1,000 calls and emails from customers as well as current and former Wells Fargo employees about the allegations.”

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

Posted by Ahmed Alhadaith.

Embezzlement is an illegal activity which several business owners have found themselves in over the years. One of the most recent cases in the United States involved one Jonathan Todd. He was an entertainment manager and through his dealings; he allegedly embezzled funds from some of his clients. Some of the clients sued him in a civil court and on January 18^th 2017; he accepted that he had embezzled funds amounting to more than 6.5 million.  He had done this by taking “Clients money for himself and Falsifying Account records to conceal the embezzlement.”

In the case, the judge sentenced him to six years in prison ruling that his actions were plainly “insidious’, ‘audacious’ and they brought about ‘grave economic and psychological harm to his victims’” (Robb, 2017). From the case, Schwartz had stolen money from multiple clients. In one instance, he had said that. His admission to the claims levied against him brought him to the seven year sentence. However, he agreed that he had made the mistake and took full liability for his actions.

In his actions, he had broken the law and hence met the full force of the law. In another article on the same site, the judge said that money managers hand responsibilities, both moral and fiduciary, to preserve the assets of their clients without using the money for their own gain. On top of this, He had evaded taxes by filing false tax returns for the year 2012 ,and the Judge noted that he would face ‘serious consequences’ as a result. His case was taken especially to serve as a lesson to other financial professionals and deter them from engaging in fraudulent activities as he had (Robb, 2017). Through these articles, the Deadline Blog sheds light into Business Forensics accounting and the application of commercial law in indictment of embezzlers and fraudsters.

Ahmed is a graduate student at the Feliciano School of Business, Montclair State University.

References:

Robb, Davi. Alanis Morissette’s Business Manager Sentenced To Six Years In Prison After Stealing $7 Million. 04 May 2017. .

Robb, David. Manager Admits He Embezzled $4.8M From Alanis Morissette. 18 January 2017. .

Posted by Gurpreet Kaur.

CNN Money released an article on Well Fargo’s employees secretly withdrawing money from customers’ bank account and transferring to new accounts since 2011. The article was published on September 8th of this year and Wells Fargo bank was forced to fire 5,300 employees in Los Angles for setting up accounts for customers. This fraud was taking place without any of the customers’ knowledge. After this fraud, many customers were fumed because their bank accounts were unsafe. The employees’ fraud was unethical and illegal because they were creating credit card accounts without letting their customers know.

Brian Kennedy, a Maryland retiree, was one of the victims and he told CNN Money “he detected an unauthorized Wells Fargo account had been created in his name about a year ago. He asked Wells Fargo about it and the bank closed it.” Wells Fargo’s customers had trust in the bank. The victims of this fraud could have filed for refunds, but it wasn’t necessary because Wells Fargo agreed to refund 5 million dollars to them. The settlement in Los Angles required Wells Fargo to warn their California customers to shut down their unrecognized accounts. The fraud caused the bank to unemployed 5,300 workers over these five years.

Richard Cordray is the director of the Consumer Financial Protection Bureau and he said, “Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses.”  Those employees transferred funds from customers’ accounts without their knowledge to new accounts they created. Customers were upset because they were facing overdraft fees and insufficient fees. Wells Fargo stated, “We regret and take responsibility for any instances where customers may have received a product that they did not request.” Wells Fargo’s market valuation was the highest in America, but the fraud led to lawsuits against Wells Fargo. In May 2015, “Feuer’s office sued Wells Fargo for authorizing accounts” and “after filing the suit, his office received more than 1,000 calls and emails from customers as well as current and former Wells Fargo employees about the allegations.”

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

Posted by Kelly Shaw.

Morris Zukerman, age 72, plead guilty in June 2016 to obstructing the IRS as well as tax evasion. He was sentenced to 70 months in prison for his criminal offenses in March 2017. Morris sold a co-owned petroleum products company, which was owned by a subsidiary of his investment firm M.E. Zukerman & Co., and then proceeded to mask the income he received from the sale. By doing so, Morris was able to evade taxes on his $130 million in income in 2008.

One may wonder how Morris was able to hide such a large profit from his accountants and receive clean audits over the years. The cover story that was given stated that in 2007, Morris transferred ownership of the subsidiary to a trust account. He even went as far as creating false documents to support his story such as a promissory note. By not reporting the $130 million sale, M.E. Zukerman & Co was able to avoid paying $33 million in corporate income taxes.

To add to Morris’s list of crimes, he also claimed a $1 million charitable contribution deduction in 2009  and 2011, which he was not entitled. Morris was registered to purchase a property on Black Island that the Maine Coast Heritage trust (MCHT) was preparing to purchase and use for business purposes. After contemplating about whether he would make a charitable contribution or not, he ultimately purchased the land for himself through his new LLC for $1 million. On his personal tax return, he convinced his accountant that the purchase should be stated as a charitable contribution to MCHT which was incorrect.

A quote from the US Attorney John H. Kim, “While amassing a personal fortune through, among other things, the $130 million sale of his company, Morris Zuckerman cheated on his taxes for years, illegally scheming to evade almost every one of his tax liabilities. Through his criminal schemes, Zukerman deprived the public of over $45 million in taxes he rightfully owed.” It is evident that Morris Zukerman’s actions were motivated by pure greed with little regard for the consequences of his actions.

Kelly is an MBA student with a concentration in accounting at the Feliciano School of Business, Montclair State University.

Reference:

https://www.justice.gov/usao-sdny/pr/manhattan-energy-investor-sentenced-70-months-prison-evading-over-45-million-income-and

Posted by Kelly Shaw.

Morris Zukerman, age 72, plead guilty in June 2016 to obstructing the IRS as well as tax evasion. He was sentenced to 70 months in prison for his criminal offenses in March 2017. Morris sold a co-owned petroleum products company, which was owned by a subsidiary of his investment firm M.E. Zukerman & Co., and then proceeded to mask the income he received from the sale. By doing so, Morris was able to evade taxes on his $130 million in income in 2008.

One may wonder how Morris was able to hide such a large profit from his accountants and receive clean audits over the years. The cover story that was given stated that in 2007, Morris transferred ownership of the subsidiary to a trust account. He even went as far as creating false documents to support his story such as a promissory note. By not reporting the $130 million sale, M.E. Zukerman & Co was able to avoid paying $33 million in corporate income taxes.

To add to Morris’s list of crimes, he also claimed a $1 million charitable contribution deduction in 2009  and 2011, which he was not entitled. Morris was registered to purchase a property on Black Island that the Maine Coast Heritage trust (MCHT) was preparing to purchase and use for business purposes. After contemplating about whether he would make a charitable contribution or not, he ultimately purchased the land for himself through his new LLC for $1 million. On his personal tax return, he convinced his accountant that the purchase should be stated as a charitable contribution to MCHT which was incorrect.

A quote from the US Attorney John H. Kim, “While amassing a personal fortune through, among other things, the $130 million sale of his company, Morris Zuckerman cheated on his taxes for years, illegally scheming to evade almost every one of his tax liabilities. Through his criminal schemes, Zukerman deprived the public of over $45 million in taxes he rightfully owed.” It is evident that Morris Zukerman’s actions were motivated by pure greed with little regard for the consequences of his actions.

Kelly is an MBA student with a concentration in accounting at the Feliciano School of Business, Montclair State University.

Reference:

https://www.justice.gov/usao-sdny/pr/manhattan-energy-investor-sentenced-70-months-prison-evading-over-45-million-income-and

Posted by Chenglu Xia.

In his article, “Bitcoin Will Be Taxed as an Asset: Israel Tax Authority,” Samburaj Das states that Israel government will have a new regulation on cryptocurrency. The official tax authority is making a change, transferring bitcoin’s role from the cryptocurrency to an asset. However, Israel’s official authority is not the only one that regards bitcoin as an asset. The IRS also did the same thing; it admits the importance of bitcoins, but the precondition is that bitcoins should play a role of asset rather than cryptocurrency and should be taxed proportionately. I believe this change can make bitcoins market legal, which will also benefit the worldwide economy. If any transaction of bitcoins will be taxed, it will lead to stronger and more sustainable economic growth without some illegal transactions.

Nowadays, bitcoin is the most popular cryptocurrency around the world. It has two main characteristics. Primarily, it’s a kind of digital currency rather than fiat currency, such as USD. Moreover, it’s decentralized which use a process called mining. This process use advanced technology with some complex mathematic formulas to produce specific codes. At the beginning, most investors prefer to use this kind cryptocurrency to avoid taxation.  Meanwhile, they can exchange bitcoins with fiat currency, also goods and services; and, it is difficult to track those transactions, which encourages the black market to use this cryptocurrency to carry on illegal transactions.

However, I’m considering about bitcoins’ credibility. There is no guaranteed operating organization. Bitcoin is just a virtual currency and there is no regulation when it first appeared on the Internet. I am wondering why there is an increasing number of people using this currency. In China, I heard that most people just buy bitcoins for investment. It is the similar situation with the investment in stocks, which means that most people do not regard bitcoins as a currency. They only invest in it because of high profits, although it comes with high risk. Personally, I believe that there are some organizations which use bitcoins to do illegal transactions, making high profit. Thus, bitcoin becomes a tool used for illegal purposes, which attracts the attention of national legislature. Thus, it’s profound, meaningful and effective to make the decision of taxing transactions of bitcoins.

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

Sources:

https://www.ccn.com/bitcoin-will-see-taxation-asset-not-currency-israel-authority/

https://www.investopedia.com/articles/investing/040515/are-there-taxes-bitcoins.asp

Posted by Aristea Selmani.

In recent years, the operating role of business executives amid law firms has risen to a new high. Bloomberg law reporter Casey Sullivan, argues in his article Should Business Managers Run Law Firms this mere notion of as to “what degree should business executives oversee operations at law firms as opposed to lawyers who do what they do best — practice the law” (Sullivan). The growing number of business executives present in the field of law, seems particularly peculiar given the fact that a lot of these executives have no previous experience in law practices or simply do not hold any law degrees. Nonetheless, they are still entrusted with the subtle responsibility of “telling lawyers how to manage their work”, when in truth, such a role could be more effectively performed by lawyers who essentially practice law and understand how law firms operate. Throughout this article, Sullivan attempts to incorporate the opinions and thoughts of several business executives, which primarily concern their roles in the department of law.

Sullivan begins his article with an introduction detailing the influence of business executives in one particular law firm by the name of Katten Muchin Rosenman of Chicago. According to the report, this establishment just recently declared that it “has no plans to scale back managerial oversight of its 600-lawyer firm” (Sullivan). On the contrary, they are hiring longtime chief operating officer, Craig Courter to manage the daily operations of their law firm. Sullivan declares that Craig Courter is another addition to the list of business executives who “do not practice law … but are [still] charged with the delicate task” of managing lawyers (Sullivan). Their executive roles span from making small everyday decisions to choosing the right clients for the firms to take on. More explicitly, Sullivan also mentions that at Katten Muchin Rosenman Courter will act as a supervisor of marketing, finance, technology, talent management and human resources.

In another case mentioned throughout this article, chief operating officer of the Americas at White & Case, Victor Núñez, plainly stated that “[he] really didn’t know much about law firms and how they operate,” and never went to law school, but was still charged with the important role of “assessing the profitability of client matters, as well as forming strategy around and executing new office openings” (Sullivan).

Furthermore, in Should Business Managers Run Law Firms, Sullivan cites another business executive who is currently met with skepticism known as John Yoshimura, chief operating officer at McDermott Will & Emery. Yoshimura just recently began to implement a business-development team to help lawyers with their clients, however since the McDermott “partners have been “skeptical” of business development staff handling their client relations”, the new development is still in the planning phase. He did however make a strong case regarding the notion that “doing outreach through business development staff … is more cost effective than having partners do it” (Sullivan). Therefore, on the basis of this aspect, and given the statistic that there is a growing number of law firms in the market, business administration roles could consequently be greatly demanded in the recent future.

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

Source:

Article Link: https://biglawbusiness.com/should-business-managers-run-law-firms/

Posted by Muhammad Azeem.

Playing the role of a forensic accountant can be a fundamental one as it will influence various individuals whether in a business valuation or in a fraudulence sense. This article talks about how forensic accountant can play an indispensable part in perceiving issues and working up new tradition proceeding, irrespective of facing issues during the trial.

When in doubt, forensic accountants will join money related and legal capacities in choosing the proximity of a wrongdoing. Also, they can use their skills and expertise in recognizing those factors that should be considered in a business valuation. The arranging of using a forensic accountant could in like manner ask for quick and excellent results that oblige relationship with existing clients.

Whether it is for the inspirations driving business valuation or diverse examination of data, an accountant can be a fundamental part in recognizing issues. Observation is one of the biggest issues that forensic accountants face. If you are estimating a business or attempting to choose something that requires examination of a huge amount of data, an expert accountant might be the individual you require at the end.

Muhammad is an undergraduate student in accounting at the Feliciano School of Business, Montclair State University.

Article Link: http://ezinearticles.com/?What-Are-the-Biggest-Issues-Facing-Forensic-Accountants&id=9240899

Posted by Shellian A. Murray.

The basis for this blog will be an Enron story” The Smartest Guys in the Room (2005)” which was retrieved from the documentary listings on Netflix. A 2929 Entertainment, a Wagner/Cuban Company, Magnolia Pictures, HDNet Films. The documentary takes a behind the scenes look at the reliable energy company whose downfall will forever change the scope of business prospects around the globe. The “Jesus saves” notion was embedded with everyone asking the same sets of questions, which include, whether or not one main person was to be blamed, or it is a shared effort, and what mechanisms were put in places to make sure such events will never occur again. The fall of Enron was considered to be the largest bankruptcy in the United States of America history.

Enron, a company that took approximately 16 years to build and with a net worth of over a 100 million in assets took 24 days to go bankrupt.  What everyone thought was a significant investment and a company that was poised to take over the energy section with major gas prices, turns out to be the biggest Ponzi scheme. But in an instructive tale of corporate greed, negligent and diffusion of responsibility, there was no evidence of directors’ fiduciary duty, integrity, and stewardship displayed from those who were the leading players in the Enron scandal.

Jeffery Skilling, the former president and CEO and Kenneth Lay chairman/CEO were both Harvard graduates, the leaders of Enron, and were known as “the smartest guys in the room.”  Skilling and Lay were the captains of the ship; one that they thought was too powerful to go down. The employees that were involved were consumed by pride, greed, arrogance, and intolerance that they fail to realize they were just sinking themselves into a hole: a hole that will be unable to climb back out. The chaos caused by Enron traders in the 2000 California energy crisis left many disgruntled. California was seen as the money pit for Enron. The game was to create blackouts that would then drive-up gas prices significantly.  Many called on the federal government to fix a deregulatory system that Enron officials took for self-interest, but were told that the state was on its own and had to correct the problem by themselves.

On the other hand, Enron’s CFO, Andrew Fastow was still able to continue leaving massive debts off the balance sheets and booking future earnings, producing an illusion of market-to-market profit.  The Security Exchange Commission (SEC) did not have a problem with this accounting method and failed to enforce against companies like Enron. But reported profits were actually losses, even though amounts were not collected or collected, but were supposedly prepayments from clients, where such momentum was created to keep the stock price up.  But after winning the award for the best innovative company six years in a row, many persons started to question, how Enron made its money. A reporter by the name of Bethany Mclean wrote an article, “Enron stock overpriced?”  realizing that the cash flows were not coming together.

Jeffery Skilling the CEO had resigned suddenly, which lead the SEC to launch an investigation.  Enron declared bankruptcy on December 4, 2001, giving employees thirty (30mins) to leave the building. But before such bankruptcy declaration, on October 23, 2001, Author Andersen, the prestigious accounting firm had destroyed thousands of documents which were related to Enron finances.

Opinions and Reactions

The operation of Enron defrauded employees and investors out of millions of dollars, which at the same time the “big guys” who were involved in the game were quietly bailing themselves out, putting millions in personal and offshore accounts including the banks, such as, Chase and Citi Bank. Ken Lay had a high level political figure as a good friend, one that could help Enron to maintain its operation’s practices. Consequently, and if one were to believe it or not, politics is the driving factor for all regulatory and policies within any countries operations.

ArthurAndersen, the prestigious accounting firm, was paid a million dollar per week, denied their awareness of such practices of Enron. Auditors that supposedly gave reasonable assurance that the financials were, in fact, true and fair and free of material misstatements. As a result, many persons questioned the integrity and independence of the accounting and auditing profession. Such questions left a bitter taste in my mouth, within a career that has my interest and aspiration. A profession I held a role as an external auditor, internationally, and now as an accountant, I am in an “aww” moment, as to how people’s greed could allow them to continue embezzling cash or equivalents by any means necessary, no matter what harm may have caused by such actions. The disappointment I have with these people that are involved, by allowing their integrity to be compromised because of the greed of money is very heart rendering, wherein the end, mostly the poor suffer from such harsh deals.

Shellian is a master of science in accounting student at the Feliciano School of Business, Montclair State University, Class of 2018.