Linkage of Case to Chapter Material This case focuses on the controversial $165 million in retention bonuses paid to employees of the Financial Products unit of the American International Group (AIG), a behemoth insurance and financial services company. In early 2008, employees in the Financial Products unit were asked to remain with the company through the unit’s shutdown and, essentially, to work themselves out of a job. To entice talented employees to stay and work through the shut-down, a contractual retention bonus plan was instituted. When the bonuses were paid in early 2009, controversy and outrage arose given that AIG was the recipient of a substantial amount of United States government bailout money under its Troubled Assets Relief Program (TARP). Amid this controversy, Edward Liddy, AIG’s CEO, requested the bonus recipients to return half of the bonus amount.
This article talks about a Frontline PBS episode regarding the recent market crash that was bigger than the great depression. It asks why the Department of Justice and the Securities and Exchange Commission did not prosecute and convict executives that broke laws that led to the world's largest crash in history. The only thing that have been able to do is fine banks for violating regulations and to some of these large investment banks the fine results as being nothing more than a slap on the wrist. The Frontline episode asks why the DOJ did not use a powerful weapon, the Sarbanes Oxley Act. This act was signed by President Bush after the financial scandals revolving around Enron, Worldcom, amongst others.
In this essay, I will discuss the circumstances that resulted in the merger, assess the significant positive (or negative) effects of the merger, and examine the organizational structure that has resulted from the merger. American Airlines filed for bankruptcy in November 2011. According to an interview with Richard Quest of CNN, Thomas Horton the new CEO of American Airlines stated that the company was forced into bankruptcy because of the cost disadvantages it faced compared to it’s competitors that had already gone through a bankruptcy. The news came as a shock to many. The company had enough money to sustain the losses that it may incur through
The SEC's investigation found a long-running cover-up -- not just by Waste Management, but by Andersen as well. Andersen and Waste Management paid a steep price in stockholder settlements, but no one went to jail. The SEC fined Andersen $7 million in June 2001, and Andersen promised to shore up its internal oversight -- but by then they were already deeply enmeshed in new trouble at
According to ch 5 in the book and page 3 in the case How was this fraud possible and where were the auditors? Auditors didn’t do their jobs. In this case, the auditing company was Coopers&Lybrant. In order to realize the fraud, Mickey Monus and other had to put all their losses into expense accounts and come up with the way of boosting their asset accounts. They came up with an idea of inflating inventory.
Ultimately, what caused Mozilo’s, and subsequently Countrywide’s downfall can be attributed to greed and other unethical behaviors. Countrywide serviced more than $1.5 trillion dollars in home loans (Englund, 2008) and Mozilo was trying to increase that, which led to bad loans and their eventual downfall. JPMorgan Chase, on the other hand, has been a steady presence in the banking and loan industry, with very little issues arising from the mortgage debacle that plagued many other banks. This is most likely because they are dedicated to being a bastion of corporate responsibility, always providing an example of how a bank should
If this was not the case, Congress would not have enforced the Sarbanes-Oxley Act. In 2002, the financial scandals that occurred by multiple corporations proved that the accounting profession was in dire need of some regulation by the government. I predict that corporate fraud will remain the same based on the research produced during the writing process for this assignment. There is no fool proof way to completely diminish financial fraud or to protect investors. As people as a whole have proven time and time again, there are rules and laws and there are people whom break those rules and laws for personal gain.
These institutions borrowed billions of dollars to purchase companies they weren’t experts in, allowed no money down mortgages, and used financial devices to calculate exactly how much they could lose if things went wrong so they needed little money on hand in reserve. However, in 2007 and 2008 when interest rates began to rise, asset prices fell, and borrowers couldn’t pay off debts the “Dumb Money era” crashed and burned and took the American economy down with it. The government and taxpayers are now responsible for paying off the $700 billion bank and financial institution bailout, along with many companies needing to shut down and lay off thousands of workers as well. Alan Greenspan appeared before congress in 2009 to discuss that after reevaluating his theories on which the “Dumb Money” era was based on (low interest rates, unregulated markets, and the ability to use debt instruments to manage risk) he found an error in his judgment. Gross believes that if we continue to listen to people like Alan Greenspan, another “Dumb Money” age may
Matt LaFlamme Bus law 9am The Sarbanes–Oxley Act, also known as SOX was enacted July 30, 2002. SOX is administered by Securities and Exchange Commission, which sets time limits for compliance and publishes rules on requirements. SOX is not a business practice and does not regulate on how a business should store their records, it defines which records need to be stored and for how long they need to be stored. SOX was enacted due to the reaction of multiple major corporate and accounting scandals, which include Enron , Tyco international and WorldCom. These scandals cost investors billions of dollars when the share prices of affected companies collapsed, and shook the publics’ faith in the security markets.
Respondent was not personally involved in the representation, but he was aware of the transaction enough to know that if he purchased Pillsbury securities now that they would increase in value once the offer went through. Respondent was going to use the profits from this transaction to replace money that he embezzled from the firm and its clients. After the offer went through, he made a $4.3 million profit. The SEC investigated Respondent’s transactions and claimed he violated Section:10(b) and Section:14(e) for misappropriating confidential information. A jury convicted Respondent.