The Criminalization of American Business

What do Bank of America, Citigroup, JPMorgan Chase, and Goldman Sachs have in common? All paid hefty fines for purportedly misleading investors about mortgage-backed securities. In fact, these companies paid the government a total of $50 billion in fines. The payments were made in lieu of criminal prosecutions.

Today, several hundred thousand federal rules that apply to businesses carry some form of criminal penalty. That is in addition to more than four thousand federal laws, many of which carry criminal sanctions for their violation. From 2000 to 2019, about 3,200 corporations either were convicted or pleaded guilty to violating federal statutes or rules.

Criminal Convictions

The first successful criminal conviction in a federal court against a company—the New York Central and Hudson River Railroad—was upheld by the Supreme Court in 1909 (the violation: cutting prices). Many other successful convictions followed.

One landmark case developed the aggregation test, now called the Doctrine of Collective Knowledge. This test aggregates the omissions and acts of two or more persons in a corporation, thereby constructing an actus reus and a men's rea out of the conduct and knowledge of several individuals.

Not all government attempts at applying criminal law to corporations survive. Courts have sometimes found insufficient evidence to show that a company acted with specific intent to commit a crime. Often, however, companies choose to reach settlement agreements with the government rather than fight criminal indictments.

Many Pay Substantial Fines in Lieu of Prosecution

More than four hundred corporations reached so-called non-prosecution agreements with the government from 2000 to the beginning of 2019. These agreements typically involve multimillion- or multibillion-dollar fines. This number does not include fines paid to the Environmental Protection Agency or to the Fish and Wildlife Service.

According to law professors Margaret Lemos and Max Minzner, “Public enforcers often seek large monetary awards for self-interested reasons divorced from the public interest and deterrents. The incentives are strongest when enforcement agencies are permitted to retain all or some of the proceeds of enforcement.”

Questions Presented

1 A. Why might a corporation’s managers agree to pay a large fine rather than to be indicted and proceed to trial?

B. How does a manager determine the optimal amount of legal research to undertake to prevent her or his company from violating the many thousands of federal regulations?

(At least 100 word response for each please)

1. A transfer of contractual duties by the obligor to another party for performance is:

   	a.	delegation of duties
   	b.	assignment of a contractual right
   	c.	declaration of duties to a third party
   	d.	none of the above

2 points   

QUESTION 27

1. If a contracting party fails to perform a duty owed under a contract, there is:

   	a.	a breach of contract
   	b.	an illusory remedy available at law
   	c.	substantial performance waived
   	d.	A and C are appropriate

2 points   

QUESTION 28

1. When a minor voluntarily leaves home and lives apart from their parents, the minor is:

   	a.	a competent party due restitution
   	b.	owes a minor's duty of restoration
   	c.	emancipated
   	d.	has no legal duties or obligations.

2 points   

QUESTION 29

1. Certain state statutes require certain contracts to be in writing

   	a.	statute of limitations
   	b.	statute of word processing
   	c.	statute of primary purpose
   	d.	statute of frauds
   	e.	none of the above

2 points   

QUESTION 30

1. Forbearance of a legal right is a form of:

   	a.	bargained for exchange
   	b.	gift promise
   	c.	consideration
   	d.	nominal consideration

2 points   

QUESTION 31

1. Joe Sr. tells his son, Joe Jr., he will give him $1,000 if he does not smoke "crack" while in college.  Can Joe Jr. enforce the contract if he regrains from "smoking" during college?

   	a.	no because it was an illusory promise
   	b.	no, because it was based on a moral obligation
   	c.	no, because it was a promise to refrain from doing an illegal act
   	d.	no, because it was based on past consideration

2 points   

QUESTION 32

1. If a minor does not disaffirm a contract prior to reaching majority (18) or sometime reasonable soon thereafter, the contract is:

   	a.	voidable
   	b.	void
   	c.	misrepresented
   	d.	ratified

2 points   

QUESTION 33

1. If either party to a contract has the opinion to avoid their contractual obligation, it is:

   	a.	a valid contract
   	b.	a void contract
   	c.	a voidable contract
   	d.	an unenforceable contract

2 points   

QUESTION 34

1. If an offeree responds to an offer by offering terms and conditions different from the original offer, it is:

   	a.	a revocation of the offer by the offeror
   	b.	a rejection by the offeree
   	c.	a counter-offer by the offeree
   	d.	a promisory estoppel

2 points   

QUESTION 35

1. A rule that says an acceptance is effective, even if it is lost in the mail is called:

   	a.	mirror image rule
   	b.	acceptance upon dispatch - "mail box" rule
   	c.	acceptance is effective upon receipt
   	d.	none of the above applies

Dany needs help with some personal finance concepts and has turned to you for help. Insert the correct word from the choice of words at the end of this Mini-Case 1 to complete the sentence (note: not all words will be used): (8 marks -1 mark each)

• Pooled investments is an investment fund that pools together money from many investors; it provides for diversification, _______________________________________, and marketability.

• When applying for life insurance, the information you provide about your medical history and lifestyle is used to determine your eligibility for coverage and your ______________________.

• ______________________________________ insures against costs of damage to your car resulting from an accident in which the driver of your car is at fault.

• A ___________________________ is a gift that results from the instructions provided in a Will.

• A person specified in a Will to receive part (or all) of an estate is called a ___________________________________. For life insurance proceeds, this person receives the insurance payment directly upon the death of the insured as it does not form part of the estate.

• The ______________________________________ is the dollar value of the Estate assets that will be distributed to the surviving spouse before assets are distributed among all potential beneficiaries.

• The ______________________________________ is written solely in the handwriting of the testator and it does not require any witnesses.

• Sarah is leaving for vacation and will be travelling around the world for six months. She has decided to leave her brother, Aaron in charge of her affairs to pay her bills and take care of her home while she is away. Sarah should have a notary prepare a ______________________________________ to allow Aaron to make specific decisions on her behalf.

Robert Campbell and Carol Morris are senior vice-presidents of the Mutual of Chicago Insurance Company. They are co-directors of the company's pension fund management division. A major new client has requested that Mutual of Chicago present an investment seminar to illustrate the stock valuation process. As a result, Campbell and Morris have asked you to analyze the Bon Temps Company, an employment agency that supplies word processor operators and computer programmers to businesses with temporarily heavy workloads. You are to answer the following questions.

a. What is the difference between common stock and preferred stock? What are some of the characteristics of each type of stock?

b. (1) Write a formula that can be used to value any stock, regardless of its dividend pattern.

(2) What is a constant growth stock? How do you value a constant growth stock?

(3) What happens if the growth is constant, and g > rs? Will many stocks have g > rs?

c. Bon Temps has an issue of preferred stock outstanding that pays stockholders a dividend equal to $10 each year. If the appropriate required rate of return for this stock is 8%, what is its market value?

d. Assume that Bon Temps is a constant growth company whose last dividend (D0, which was paid yesterday) was $2 and whose dividend is expected to grow indefinitely at a 6% rate. The appropriate rate of return for Bon Temps' stock is 16%.

(1) What is the firm's expected dividend stream over the next 3 years?

(2) What is the firm's current stock price?

(3) What is the stock's expected value one year from now?

(4) What are the expected dividend yield, the capital gains yield, and the total return during the first year?

e. Assume that Bon Temps' stock is currently selling at $21.20. What is the expected rate of return on the stock?

f. Assume that Bon Temps is expected to experience supernormal growth of 30% for the next 3 years, then to return to its long-run constant growth rate of 6%. What is the stock's value under these conditions? What are its expected dividend yield and its capital gains yield in Year 1? In Year 4?

g. Suppose Bon Temps is expected to experience zero growth during the first three years and then to resume its steady-state growth of 6% in the fourth year. What is the stock's value now? What are its expected dividend yield and its capital gains yield in Year 1? In Year 4?

Task: Reporting on economic, social and environmental ramification of COVID 19

You are working as a management accountant with Clean Living Limited, a large travel company that specialises in green tours- package tours to environmentally sensitive destinations. These type of tours had been growing in popularity among local and international tourists until the breakdown of the COVID 19 pandemic in December. The Clean Living Limited has branches in Australia, China, India, and Singapore. The company management had been contemplating to expand its open tours packages to the Arctic National Wildlife Refuge in Alaska and Serengeti safari park in Tanzania by the end of 2020.

However, due to the worldwide spread of the COVID 19 as a pandemic, the company’s current operation has become totally stagnant. The company’s management is seriously considering redesign its strategic planning and operation to minimise the damage and to ensure future sustainable operations. Remember, your report is crucial for management to undertake immediate strategic changes.

Required:

You are asked to prepare a report on the following:

1. Identify and briefly explain the possible financial, environmental, social and broader economic consequences the company is being exposed to.

2. Identify the key stakeholders of the company that are going to be affected by the pandemic

4. Highlight the possible changes to the following indicator:

(a) Return on Investment (ROI)

(b) Residual Income (RI)

(c) Economic Value Added (EVA)

(d) Earnings Per Share (EPS)

5. The company management anticipates that the situation will get back to normal by the end of September. Traditionally, the peak season starts from the beginning of November and continues until the end of March. In the meantime, they are contemplating the development on a sustainable Balanced Scorecard to regain its competitive position in the market within the shortest possible time. You are given the following list of variables related to the economic, social and environmental perspectives. Select one variable from each perspective that you consider as the most important, provide your argument in favour of your selection.

Instructions:

Your report should be structured as follows:

Assessment – Module 4

Directions: Complete these questions and submit to the correct Assignments folder on D2L. Please upload as a Word document (.docx) or a .pdf.
You can print this and write in the space provided, type your answers here, or write answers on a separate sheet of paper and upload photos. If you upload photos, please put page numbers on your pages and make sure the photos aren’t blurry.
Note: Sometimes the book isn’t so good at giving examples, so you are allowed to discuss this on the discussion forum, work with other people, or ask me for help.

1.   The table below gives selling prices for 24 houses in the fictional SE Portland neighborhood of Westsellstock in July 2016. (Numbers are in thousands of dollars.)
315
310
314
337
288
292
277
267
336
361
169
339
295
318
271
241
288
241
345
321
340
306
228
314

   •   Find the mean and standard deviation of the prices of these 24 houses.
   •   What conditions and assumptions do you need to check to create a confidence interval for the mean price of houses in Westsellstock?
   •   To create a 95% confidence interval, we need to know the value of t* for a sample this size. What is that value? (Looking it up in a table is the easiest.)
   •   Create the 95% confidence interval. (It’s okay if the conditions aren’t met.)
   •   Interpret the interval with a sentence. (Be sure your sentence includes the context of this situation, so it should be about house prices.)

2.   A consumer advocate wants to collect a sample of jelly jars and measure the actual weight of the product in the container. He needs to collect enough data to construct a confidence interval with a margin of error of no more than 2.5 grams with 99% confidence. The standard deviation of these jars is usually 3 grams. What do you recommend for his sample size?

3.   The heights of women in the fictional country of Rohkia follow a Normal distribution. You’d like to perform a hypothesis test to see if the average height of Rohkian women is significantly more than 61 inches.
   You select 8 women at random and measure their heights (in inches), which are recorded in the table below.
61
61
62
64
67
63
64
62

a.   Find the mean and standard deviation of the heights in the sample. Use the correct symbols for this sample data.
b.   Write hypotheses to test whether the population height is over 61 inches.
c.   Perform the calculations for the test. Please report the value of test statistic (t) and the p-value.
d.   Can we conclude the mean height of Rohkian women is significantly greater than 61 inches? Explain why or why not. (Use α = 0.05)

While many organizational costs can be planned for, the actual results may vary from the initial projections. Assessing how these variances impact the bottom line is an essential task of many managers.

For this Assignment, review the information in the scenario posted in the entry titled Week 5 Assignment located in the Doc Sharing link. You will utilize the information in this week’s Resources and your course text to consider how variance analysis and the results obtained from conducting such an analysis might impact decision making. There is also an Excel template provided in the same entry in the Doc Sharing link that you may find helpful in completing this Assignment.

The Assignment:

• Part 1: Calculate all materials and labor variances in a spreadsheet by using a program like Excel. Be sure to include price, quantity, wage rate, and labor efficiency variances.
• Part 2: Prepare a memo to your subordinate, using a program like Word.
  • Summarize and analyze the actual costs in relation to the standard costs incurred for the month.
  • Ask for clarification of any variances that need to be investigated.

Be sure to include whether alternatives exist for the future of the organization and explain how the results of the variance analysis might influence those alternatives.

Week 5 Assignment

ComfortRight, Inc. is a manufacturer of high-quality products designed to help support healthy backs and spines. Their newest product offering is a massage chair. Below is the standard cost structure for the chair:

This month, ComfortRight manufactured 500 massage chairs. The following costs were incurred:

Adapted from: Zimmerman, J. L. (2014). Accounting for decision making and control (8^th ed.). New York: NY: McGraw-Hill, “Healing Touch”, p. 565.

Suppose you are the senior controller for ComfortRight and you plan to perform a variance analysis of the massage chairs manufactured to determine if the standards are being met. Once you have completed the analysis, you plan to show it to the production department manager and ask for an explanation of any variances that you believe should be examined.

In his own words, Daniel Jones was “The Dude.” With his waist-long dreadlocks, part-time rock band, and well-paid job managing a company’s online search directory—he seemed to have it all. Originally from Germany, Jones, now age 32, earned his doctorate and taught at the University of Munich before coming to the United States, where he started his career in computers. In 1996, Jones started working with the company as a director of operations for U.S.-Speech Engineering Service and Retrieval Technology—working on a new, closely guarded search engine tied to the company’s .net concept.

The company allows employees to order an unlimited amount of software and hardware, at no cost, for business purposes. Between December 2001 and November 2002, Jones ordered or used his assistant and other employees (including a high school intern) to order nearly 1,700 pieces of software which had very low cost but were worth a lot on the street. He then resold them for reduced prices— reaping millions. When items with a cost of goods sold of more than $1,000 are ordered, an e-mail is sent to the employee’s direct supervisor, who must click on an “Approve” button before the order is filled. In no individual order was the cost of goods more than 1,000—he made sure none of the orders required a supervisor’s approval. The loosely controlled internal ordering system reflects the trust the company puts in its employees.

In June, FBI agents said they saw Jones exchanging a large box of software for cash in a department store parking lot.

You are a newly hired fraud examiner. You have been asked to write a preliminary report on the Dude Case scenario based on the information presented in Units 1 to 4 and findings from your additional research.  Your essay should be 1,500 words. Word limit is not inclusive of bibliography and cover page

In your essay the following points must be addressed fully:

a) Determine if fraud was committed and if so describe the symptoms of fraud that might be evident to a fellow employee.

b) As discussed in one of the units, all frauds involve key elements. Identify and describe the elements of the Jones fraud.

c) In the scenario, Jones' employer has been putting more emphasis on controlling cost. With the slowing of overall technology spending, executives have ordered managers to closely monitor expenses and have given vice presidents greater responsibility for statements of financial positions. What positive or negative consequences might this pose to the company in future fraud prevention?

d) Describe the company's fraud prevention programme and identify any improvements that might be necessary.