The Fine Print of Reverse Mortgages

Children of elderly borrowers are now learning how their parents’ reverse mortgages are threatening their own inheritances.

Questions:
1. Under federal rules for reverse mortgages, what options are survivors suppose to be offered when their parents die?
2. All reverse mortgages require the borrower to pay into a federal insurance fund each month. What is this insurance suppose to do?
3. What is the estimated amount of reverse mortgages that are underwater?
4. Use the example of Robert Campbell, assuming that his mother originally received $150,000 in 2008.
(a) What entries would the lender have made over the period from 2008 to 2012?
(b) What entry would the lender have made, if they had let Mr. Campbell know about the
95% rule?
(c) Explain what type of entries they will make if they foreclose on the house of
Mr. Campbell’s mother in 2014.

Proxy fight
Source:
Silver-Greenberg, J. (2014). Pitfalls of Reverse Mortgages May Pass to Borrower’s Heirs. The New York Times, March 26 (Retrievable online at http://dealbook.nytimes.com/2014/03/26/pitfalls-of-reverse-mortgages-may-pass-to-borrowers-heirs/?_php=true&_type=blogs&_php=true&_type=blogs&hp&_r=1)

Here’s a Warning for Dog Lovers!

Over approximately the last seven years (or 2,643 days), at least 600 dogs have died and thousands of others have been sickened by jerky treats. However, while the FDA has warned against this apparent link, the culprit has remained largely a mystery.

Questions:
1. Have the illnesses only affected dogs? Why is the FDA limited in its use of regulatory action?
2. What percentage increase of pet food has been imported from China over the period from 2003 to 2011?
3. Nestle Purina and Del Monte voluntarily pulled popular chicken jerky treats off the shelves in 2012. How should these companies account for these products and their revamping and overhaul of the supply chain for new products?

Source:
Dennis, B. (2014). Mystery of pet deaths related to jerky treats made in China continues to stump FDA. The Washington Post, March 28 (Retrievable online at http://www.washingtonpost.com/national/health-science/mystery-of-pet-deaths-related-to-jerky-treats-made-in-china-continues-to-stump-fda/2014/03/28/c860002a-b39b-11e3-8cb6-284052554d74_story.html?hpid=z3)

NBC video.(2013). Tainted dog treats, Oct. 23.

Visit NBCNews.com for breaking news, world news, and news about the economy

When will paper records be a thing of the past at Iron Mountain?

There are 600 employees of the federal government’s Office of Personnel Management processing retirement papers of the government’s own workers deep down in a limestone mine in Boyer, PA. No, this is not a joke or prank. The operative word here is “paper.” The old mine’s tunnels have room for more than 28,000 file cabinets of paper records.

Questions:
1. When did this IRON Mountain storage begin? According to the article, the processing task takes so long because of Congress and its complex retirement rules. What type of information is required?
2. Since 1977, has the government processing become more efficient and less costly? Explain how a combination of accounting information systems and managerial accounting best practices might help in a redesign.
3. According to Farenthold, the nightmare cases are the “reemployed annuitants.” What are these?

Source:
Farenthold, D.A. (2014). Sinkhole of Bureaucracy. The Washington Post, March 22 (Retrievable online at http://www.washingtonpost.com/sf/national/2014/03/22/sinkhole-of-bureaucracy/?hpid=z8)

Oh, to get a hole-in-one!

Matt Ramsey’s joy of winning the $10,000 prize for sinking a hole in one was not dashed by his own skills, but the scamming of Kevin Kolenda. Like other hole-in-one winners around the country, Matt learned that he was the victim of a scam whereby Kolenda sold insurance without a license in several states to people seeking indemnity for hole-in-one and putting-contest prizes, but then would not pay when a winning shot occurred.

Questions:
1. What was the name of Kolenda’s company?
2. What was the rare incident when Kolenda insured something other than golf?
3. Are Kolenda’s crimes victimless?
4. How has he been able to run under the radar for so long? Where has he faced prosecution?

Source:
Dohrmann, G. (2014). Default! The man who scammed golf prizewinners across the country. Sports Illustrated, Feb. 28 (Retrievable online at http://sportsillustrated.cnn.com/more/news/20140228/golf-insurance-fraud-kevin-kolenda/)

Can you beat Nate Silver?

ESPN’s Nate Silver went on Sportscenter this morning and revealed his favorites for the Final Four.
The prediction:
• Louisville (#4 seed, Midwest region)
• Florida (#1 seed, South region)
• Arizona (#1 seed, West region)
• Michigan State (#4 seed, East region)
These are the favorites in each region according to Silver’s statistical model.
So, will he win Warren Buffett’s Final Four Perfect Bracket billion dollar challenge or will you?

Questions:
1. Why are Warren Buffett and QuickLoans so sure that they will not have a winner?
2. Even if no one wins, what will the people with the 20 most accurate brackets receive?
3. How many entries do they expect?
4. Does it help to know something about basketball? Explain.

Sources:
Manfred, T. (2014). Nate Silver’s Final Four Prediction Is Out, And He Has Two Big Upsets. BusinessInsider, March 17 (Retrievable online at http://www.businessinsider.com/nate-silver-final-four-2014-3)
Boren, C. (2014). Why you won’t win a billion dollars with Warren Buffett’s bracket challenge. The Washington Post, March 17 (Retrievable online at http://www.washingtonpost.com/blogs/early-lead/wp/2014/03/16/why-you-wont-win-a-billion-dollars-with-warren-buffetts-bracket-challenge/)


Nate Bracket

Justice goes after “Rigged” rates

The Federal Deposit Insurance Corporation has sued 16 big banks that set a crucial global interest rate, accusing them of fraud and conspiring to keep the rate low to enrich themselves.

Questions:
1. Which banks are included in the suit?
2. What was the rate and for how long are they accused of rigging it?
3. Why are cities and municipal agencies also suing these banking institutions?

Source:
Associated Press staff. (2014). F.D.I.C. Sues 16 Big Banks Over Rigging of a Key Rate. The New York Times, March 14 (Retrievable online at http://www.nytimes.com/2014/03/15/business/fdic-sues-16-big-banks-over-rate-rigging.html?smid=tw-share&_r=1)
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Seventeen police officers to ticket Gator fans?

Only 1,260 feet of Route 301 runs through Hampton, Florida, a city with a population of under 500. Yet between 2011 and 2012, Hampton officers wrote 12,698 speeding tickets. Now Hampton, an 89-year-old city, is fighting the state legislature threatening to wipe the town off the map, after a state audit last month uncovered significant financial irregularities, shoddy record-keeping, and missing funds.

Questions:
1. On which three people is the criminal investigation focusing?
2. Discuss the explanation for faulty recordkeeping. What red flags do you note?
3. Explain the nepotism that probably contributed to the irregularities.
4. How many violations of internal controls do you note in the article and what were they?

Source:
Alvarez, L. (2014) A Dot on the Map, After Scandal, Could Be Wiped Off. The New York Times, Mar. 10 (Retrievable online at http://www.nytimes.com/2014/03/11/us/need-for-speeders-puts-tiny-florida-city-on-brink-of-erasure.html?hp&_r=1)

The new Hampton, Florida mayor, Barry Moore, is in jail awaiting trial for possession of Oxycodone with intent to sell.

Chiquita’s Big Deal

Chiquita Brands International that it had agreed to acquire Fyffes, an Irish fruit and produce distributor, in an all-stock deal that valued Fyffes at about $526 million. The new firm will be called ChiquitaFyffes and will be the world’s largest producer and distributor of bananas. It is expected that the firm will have about $4.6 billion in annual revenue.

Questions:
1. The article indicated that there was a clear strategy to this acquisition. Explain what it is.
2. Under the deal, what do Fyffes shareholders receive?
3. Compare the size of Fyffes’ operations to Chiquita’s operations.

Source:
Bray, C. (2014). Chiquita to Acquire Irish Fruit Distributor Fyffes in Stock Deal. The New York Times, March 10 (Retrievable online at http://dealbook.nytimes.com/2014/03/10/chiquita-to-buy-irish-fruit-and-produce-distributor-fyffes-in-all-stock-deal/)

Warning about Emails

Four former leaders of the law firm, Dewey & LeBoeuf, were charged by New York prosecutors with orchestrating a nearly four-year scheme to manipulate the firm’s books during the financial crisis. In emails they talked openly about “fake income,” “accounting tricks” and their ability to fool the firm’s “clueless auditor.”

Questions:
1. Explain the role of these individuals manipulations for a private debt offering.
2. How was the case discovered?
3. At its height, how large was the firm? Who was Dewey’s auditor?
4. What was the amount of claims made against the bankrupt firm?
Source:
Goldstein, M. (2014). 4 Accused in Law Firm Fraud Ignored a Maxim: Don’t Email. The New York Times, March 6 (Retrievable online at http://dealbook.nytimes.com/2014/03/06/former-top-leaders-of-dewey-leboeuf-are-indicted/?src=me&module=Ribbon&version=origin&region=Header&action=click&contentCollection=Most%20Emailed&pgtype=article)

dbpix-dewey-tmagArticle

The Largest Jury Award in the History of the EOE

This article presents a “Dickensian” story about Atalissa, Iowa and the largest jury award in the history of the Equal Employment Opportunity Commission.

Questions:
1. What was the amount of the awarded damages? Why was the amount reduced?
2. If or when Henry’s Turkey Service pays the judgment for damages and back pay, how would they record the journal entry?
3. What were the paycheck irregularities and who should have caught this fraud? Explain the 2007 example.
4. What role did the article indicate that this case played in the recent executive order to raise the minimum wage to $10.10 an hour for workers employed under certain federal contracts?
5. What is your opinion on the provision of the Fair Labor Standards Act that allows employers or sheltered workshops to pay subminimum wages to employees with disabilities?

Source:
Barry, D. (2014). The ‘Boys’ in the Bunkhouse. The New York Times, Mar. 9 (Retrievable online at http://www.nytimes.com/interactive/2014/03/09/us/the-boys-in-the-bunkhouse.html?hp&_r=0)
HenryPaycheck-1200

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