The Case of Bernard Madoff Case 5 Problem Statement: Fraud Summary : This case closely encompasses how Bernie Madoff was accused of creating a scheme that destroyed $65 billion in investments. He single handedly deceived thousands of people including auditors, accountants, and regulators. His scheme deceived so many intelligent people and regulators considered him legitimate. His family, auditors and employees have been under investigation to find out who helped and benefited from Madoff's scheme. Madoff claimed he was the only one at fault however his right hand man explained that numerous businesses new about his scheme and still accepted it and openly violated the law.
This was the case in the article “Fashioning a Fraud” by Bethmara Kessler. IN this article, Bobbie Jean Donnelly was a fraudster who used Travel and Expense reimbursements to defraud her company. She was an assistant for a design division in a retail corporation. She quickly figured out how to manipulate her travel and expense reimbursements to eventually defraud her company of more than $200,000. Had her company had proper controls in place for travel and expense reimbursements, this probably would have occurred to this magnitude.
The ultimate goal is to protect investors. Reason Many acts of corporate corruption in the 1990s and early 2000s brought on this regulation. There were many loopholes that allowed for accounting errors without any legal incentive to correct the problem. Due to the accounting practices at companies such as Enron, Tyco, and WorldCom investors lost billions. The accounting practices created a scandal in which the companies were able to hide information from investors.
Article Analysis Over the past several years, unethical business practices, specifically in the accounting and financial categories, have made the news headlines frequently. Corporate America has been hit by greed and an overwhelming desire to make money at any cost, including sacrificing strong ethics and a proper moral code. Unethical situations include treatment of employees and stakeholders, manipulating financial reporting, and selling known unsafe products. Manipulating financial reports most often begins at the top management within a company (Clement, 2006) in an effort to boost salaries for those senior executives. Hiding accurate earnings, reporting inventory sold when it was not, and recording erroneous cash flows are just some of the ways that corporations have used to side step proper ethics.
The purpose of the SOX Act in response to the fraudulent and misleading activities of large corporations such as Enron, Health South, Xerox, Global Crossing, and almost one thousand publicly traded companies. Fraud is defined as “a dishonest act by an employee that results in personal benefit to the employee at a cost to the employer” (Kimmel, Weygandt, & Kieso, 2011). The afore mentioned companies and many others committed fraud when they willingly published false and/or deceptive financial statements making their companies look like they were making huge profits, therefore causing their stock prices to soar and enticing the public to by more and more shares of their companies. Unfortunately, when the truth came out, the fraudulent actions of a few resulted in the loss of almost $5 trillion of stock market value and an undetermined amount for stockholders. Because of this fraudulent action, Congress had no choice but to intervene and pass legislation that would curtail this illegal
Business Research Misrepresentation In the court case United States v. Dokich, case No. 08-2850, appealed and sustained on July 21, 2010, Melvin Dokich defrauded many investors for millions. Dokich sold stock for a fraudulent company named Efoora Incorporated. Efoora made claims of conducting research for developing diagnostic tests for HIV, mad-cow disease, and blood glucose levels. Efoora’s claims of research and testing was feloniously supported, and staged, by inviting potential investors and customers to Efoora’s headquarters in Buffalo Grove, Illinois.
In 2001, the United States faced its biggest financial market fraud scandal by the worldwide known corporation Enron. The top management was found guilty for using accounting loopholes to overstate revenues and stock price. The discovery of the Enron scandal lead to the exposure of several more corporate fraud cases from more well-known companies including WorldCom. This decreased the confidence in our markets and question the adequacy of the United States disclosure practices and the reliability in the required independent audits. Consequently, the biggest accounting legislation was passed known as The Sarbanes-Oxley Act of 2002.
Initially, a criminal investigation was the primary focus for one the Navy’s main ship supplier, Glen Defense Marine Asia, a Pacific Fleet. However, investigators turned their inquiry to another contractor who supplied ships located in the waters of Africa, Middle East, and South America. A whistle-blower who worked for Inchcape Shipping Service, which is owned by the government of Dubai, suspected the company of fraudulent activity as a result ignited a civil fraud investigation to be conducted by The Justice Department. According to the article, it was alleged Inchcape, along with subcontractors, overcharged the Navy by millions of dollars (Drew & Ivory, 2013). The owner of Glen Defense was arrested in September 2013, charged with conspiracy to bribe Navy officials with cash, trips, and prostitutes.
Allergan Inc. is a big company in the pharmaceutical industry and was involved in this unethical behavior making millions of dollar without thinking in the wellbeing of the society. To resolve this case Allergan has to admit the unethical issue and collaborate to advice the society about the issue. Then take out of the market all the promotions about the product. Then apologize to the consumers and paid the price to help solve the issue. Drugs and medicine are very sensitive products that can killed people if there are not control and approved to
He shares his battle with his conscience over these actions and offers advice for how Americans can work to end these practices which have directly resulted in terrorist attacks and animosity towards the United States. What Is An Economic Hit Man? Perkins defines economic hit men as "highly paid professionals who cheat countries around the globe out of trillions of dollars. They funnel money from the World Bank, the U.S. Agency for International Development (USAID), and other foreign ‘aid' organizations into the coffers of huge corporations and the pockets of a few wealthy families who control the planet's natural resources. Their tools include fraudulent financial reports, rigged elections, payoffs, extortion, sex, and murder.