Posted by Trisha Daraji.
After the recent recalls in Ford pick-ups for braking issues in May, Ford Motors is back in the limelight for similar issues. In the previous recalls, the malfunctions in the vehicles occurred from an internal leak that caused the cars to lose braking function and have a loss of brake pressure. Last May, there were 225,000 models affected with the problem which all had the 2.5 EcoBoost engine (Valdes- Dapena, CNN Money). The cars involved in the new recalls are the same models that have the same engine, and have the similar problem of break failures. Ford Motor Vehicles is now under investigation for the break failures reported by 25 owners. The malfunctions that occurred in May involved Ford’s 2013 and 2014 F-150 pick-up truck models, and similar malfunctions were reported in the 2015 and 2016 models. Not only are the models some of Fords most popular vehicles, but they are also the top selling vehicles in the U.S. The federal auto safety regulations agency has launched the investigation, and the National Highway Traffic Safety Administration is now considering expanding the recall launched in May to include the new model years.
Aside from the emerging braking problems in Ford’s most popular and best-selling vehicles, the company is under another investigation for safety issues concerning door-latch warning signs and steering issues. “The U.S. National Highway Traffic Safety Administration said today it was opening a probe into 380,000 2011-2013 Ford Edge SUVs after receiving 1,560 reports of ‘door ajar’ lights” (Shepardson, Automotive News). Owners reported that doors would not properly close and would swing open while the vehicle is moving. One injury has been reported, but there have been no reports of crashes. The recall for door latches has been expanded from 1.5 million vehicles to 2.4 million. A separate investigation was opened for the steering problems found in 262,000 2010 Ford Fusion cars. The failures in the system caused 12 crashes and four injuries (Shepardson, Automatic News).
From the recent recalls, it is estimated that 642,000 cars could be affected. Not only has this become a growing safety issue for Ford car owners, but it has also taken a huge toll on the company’s profit and reputation. The door-latch issues have resulted in six different recalls of 4 million cars since the year 2014. The new recall has been expanded and include Ford C-Max & Ford Escape (2013-2015), Ford Focus (2012-2015), Ford Mustang & Lincoln MKC (2015), and Ford Transit Connect vans (2014-16). The recalls have cost the company to cut its pre-tax profit from $10.8 billion to $10.2 billion due to the $640 million charges from recalls (Shepardson, Automatic News).
Trisha is an accounting student at the Feliciano School of Business, Montclair State University, Class of 2019.
Works Cited:
http://www.autonews.com/article/20161003/OEM11/161009993/ford-vehicles-being-probed-by-u.s.-over-door-latch-lights-steering
http://money.cnn.com/2016/10/04/autos/ford-f-150-brake-investigation/
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 Cynthia Mihalenko.
JBS’s plan to list shares on the New York Stock Exchange are uncertain now due to their legal issues. The company, located in Brazil, is the world’s largest meatpacker. Plans for a global reorganization were in place to try and boost their company’s value. JBS is already in the U.S. market, as they own Pilgrim’s Pride and Swift & Company. The new company they would reorganize into would be called JBS Foods International and would be based in Ireland.
Current developments have both JBS’s Chief Executive Wesley Batista and his brother, Chairman Joesley Batista, suspended from managing their companies until the investigation is over. JBS has not announced a new replacement and this has also fueled speculation that JBS’s plans for global reorganization are on hold. Company spokespeople have denied they are changing their plans and also denying any wrongdoing by the Batistas. One investigation is the overbilling in government contracts where some funds were paid as bribes to politicians. Another investigation is whether the company received favorable treatment from Brazil’s National Economic Development Bank. Analysts at some of Brazil’s banks have expressed concern that the legal problem could delay the reorganization as Guilherme Figueiredo, a fund manager at Sao Paulo base investment firm M. Safra states that “Our feeling is that the new (corruption probe) will at least delay the NYSE listing.”
Investors are rightfully fearful of JBS, now that it is under this investigation. No one wants to invest in a company if their CEO cannot be trusted. However, the Wall Street Journal interviewed several analysts and they knew of a large pool of talent that the company could tap into if they needed someone to take over should Wesley Batista step down. This should help alleviate some of the investor’s concerns.
Cynthia is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2019.
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 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 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.
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 Sara Firnstein.
Everybody knows that General Motors, or “GM,” has had its fair share of issues throughout the years. Many recalls have been raised based on multiple different issues. In 2014, GM came out and recalled over 3.4 million cars because of an ignition switch issue on top of the already 2.6 million small cars they recalled four months earlier to fix the same issue. GM said that they needed to change the keys to these cars. The major issue that prompted this recall is that the switch could rotate out of “run” if the key has excess weight on it. This could lead to the car shutting off the engine and then the power steering with become disabled, leaving the driver without any control. This recall had an effect on cars ranging from 2000 to 2014.
The most surprising facts about this recall is that after the first recall of 2.6 million small cars, GM has only repaired seven percent of the vehicles. This leaves ninety-three percent of the recalled cars not fixed yet, and another 3.4 million cars just recalled, which obviously haven’t been fixed yet either. Also, the effect of the first recall has caused a minimum of 54 crashes and 13 deaths, but lawyers who are suing GM say that there have been at least 60 deaths. The deaths from this issue are the most surprising, but also “GM has acknowledged knowing about the problem for more than a decade, yet the cars weren’t recalled until this year” (CBS News, 2014).
An issue that arose from these ignition switch recalls are the massive amount of lawsuits filed against GM. This has led to many different court cases and GM has tried to avoid lawsuits that deal with cars that were made by the old, pre-bankruptcy GM. Recently in July, the “U.S. Second Circuit Court of Appeals overturned a bankruptcy judge’s ruling this week that had protected GM from those lawsuits because of the company’s 2009 bankruptcy restructuring” (Bomey, 2016). Because of this ruling, it may expose the new GM to liabilities for a defect that killed a minimum of 124 people and injured over 275 more in the small cars that were made by the old GM before bankruptcy. This ruling gives life to hundreds of cases where the victims decided to take their chances in court and refused to settle. Attorney Robert Hilliard says that he is happy for his clients because for years “the victims of the GM ignition switch have had their claims languishing in bankruptcy court and now these folks will have their day in court” (Bomey, 2016). These victims aren’t going to back down and GM has to continue to deal with the old GM car lawsuits along with the new GM car ignition switch lawsuits. GM is not out of the clear just yet, as they have to deal with these lawsuits that can now proceed based off of the court’s most recent ruling.
Sara is a criminal justice major with a minor in legal studies at the College of Arts and Sciences and the Stillman School of Business, Seton Hall University, Class of 2019.
Works Cited:
GM recalls 3.4 million more cars for ignition defect. (2014, June 16). Retrieved September 26, 2016, from http://www.cbsnews.com/news/gm-recalls-3-16-million-cars-for-ignition-problems/.
Bomey, N. (2016, July 14). Court: Ignition-switch lawsuits against GM can proceed. Retrieved September 26, 2016, from http://www.usatoday.com/story/money/cars/2016/07/13/general-motors-bankruptcy-ignition-switch-lawsuit/87029916/.
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 Ivanna Klics.
There has been quite a ruckus at Wells Fargo as they made headlines for causing fraudulent transactions that have not been authorized by the customers themselves. Wells Fargo is being accused for creating banking and credit card accounts without the permission of its customers. Who are the customers more to blame then the CEO, John Stumpf; however, in his defense, he is not capable of overlooking every branch in the bank. Stumpf’s leaders have not only stepped out of their comfort in the company but the reputation of the company, as well as opening up the door to a criminal investigation case.
The investigation has put the company to shame. Stumpf appears to be clueless of what has been going on literally right under his nose. Because it is almost impossible for these events to occur overnight, management should have known about it for a long time. Whether Stumpf admits it or not, Charles Gasparino stated “he and the bank will still face numerous civil and criminal inquiries for years to come.”
Although the company does not mean all harm, Wells Fargo is still one of the most profitable banks worldwide; however the company’s perception has had a dramatic change. Currently the company is facing a congressional investigation, and who knows if they will be able to build back their reputation.
Ivanna is an accounting major at the Feliciano School of Business, Montclair State University, Class of 2019.