Can you say: Tapping a Swiss Bank account with Other People’s Money?

A Houston jury Tuesday convicted Texas financier R. Allen Stanford on all but one of the charges he faced for allegedly bilking investors out of more than $7 billion in one of the largest Ponzi schemes in U.S. history.

Questions:

1. Why, if Allen Stanford faces up to 20 years in prison for the most serious charges but could he be imprisoned for much longer?

2. How did Mr. Stanford separate the investors from their money and when did the government shut down the scheme?

3. What red flags of fraud were mentioned in the article?

Source:

MSNBC.com Staff. (2012). Jury convicts Stanford in $7 billion Ponzi scheme, March 6 (Retrievable online at http://www.msnbc.msn.com/id/46642425/ns/business-us_business/)

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A Ponzi Scheme in Ohio

In September, a prominent member of the Amish community in Sugarcreek, Ohio was arrested and accused by federal prosecutors of running a Ponzi scheme that betrayed his neighbors’ trust and wiped out more than $16 million of their savings. The elderly defendant, Monroe L. Beachy, had been a respected financial figure in his community for decades. Interestingly, unlike Bernie Madoff, the investors went to court and urged that it was more important to forgive him than recover their money. In fact, Amish religious leaders petitioned the bankruptcy court to let the church take on the debt and handle the ponzi scheme, rather than the courts. The bankruptcy judge ruled that “delegating insolvency proceedings to a religious body” would be unconstitutional. More than a year after Beachy went bankrupt, he has been indicted on mail fraud charges arising from a “scheme to defraud” that the Feds say dates back to 1990. If convicted, he faces a possible jail term of up to 20 years.

Questions:

1. What is a Ponzi scheme?

2. The campaign to have the Beachy bankruptcy case dismissed was based on what legal Act or rights? Do you agree or disagree with the bankruptcy judge? Discuss.

3. Explain how, if Beachy had been insolvent since as early as 1998, that this fraud was able to last until 2010?

Sources:

Henriques, D. B. (2012). Broken Trust in God’s Country. The New York Times, Feb. 25. (Retrievable online at http://www.nytimes.com/2012/02/26/business/in-amish-country-accusations-of-a-ponzi-scheme.html?_r=1)

NYTimes Video. (2012). Ponzi Scheme in Ohio (Retrievable online at http://video.nytimes.com/video/playlist/business/1194811622255/index.html)

Embrace Change

Kodak, the 131-year-old film pioneer, filed for bankruptcy protection last month. News got worse this week when the company announced they would stop doing what they were the first to ever do – manufacture digital cameras. Then on Feb. 15, Apple asked a bankruptcy court for permission to sue Kodak for patent infringement, resulting from Kodak’s efforts to import printers and digital camera.

Questions:

1. Why did the video say that this should be a business school case study?
2. What specific signs should Kodak have recognized as roadmarks for change?
3. What is Kodak’s strategy going forward under bankruptcy protection? Discuss what other avenues you believe Kodak could take going forward.
4. If Apple is successful, how should the company account for any proceeds gained from the patent infringement lawsuit?

Source:

The New York Times video.(2012). Kodak Declares Bankruptcy, Jan.19 (Retrievable online at http://video.nytimes.com/video/2012/01/19/business/100000001296658/kodak-declares-banruptcy.html)

Passikoff, R. (2012). No More Kodak Moments. Forbes.com, Feb. 13 (Retrievable online at http://www.forbes.com/sites/marketshare/2012/02/13/no-more-kodak-moments/)

Reuters staff. (2012). Apple Inc. has asked a bankruptcy court for permission to sue Eastman Kodak, accusing it of infringing its patents. Reuters.com, Feb. 15 (Retrievable online at http://www.reuters.com/article/2012/02/16/us-apple-kodak-idUSTRE81F05V20120216)

Chose Me

Have you ever wondered how some people get chosen to be profiled on a commercial? You may have seen the American Express Gold Card commercial featuring Sammy’s Fish Box, Sam Chernin’s flagship restaurant on City Island in the Bronx (one of five eateries he currently owns). Most small businesses would like to be featured on this type of very professionally produced commercial for the free publicity (rather than the low-budget commercials they can afford), but it may not be that easy.

As the author of this article explained, maybe Sammy was chosen because he had obtained millions of rewards points through his purchases of supplies for the business. But she later discovered that it requires much more than just using a product. As American Express’ chief marketing officer explained, AMEX looks for business owners who not only use their products to help businesses grow, but do this in an especially unusual way that may influence other business owners.

Questions:
1. Since this commercial began airing, how much have the restaurants’ revenues increased?
2. If Mr. Chernin exchanged his rewards points for cash, how should he account for the cash?
3. How should Mr. Chernin account for the rewards points that he exchanges for trips for his employees?

Source:

Fisher, A. (2011). Entrepreneur gets credit-card star treatment. Crain’s New York Business.com, March 25 (Retrievable online at http://mycrains.crainsnewyork.com/blogs/executive-inbox/2011/03/entrepreneur-gets-credit-card/)

Youtube.com Sammy’s Fish Box (Retrievable online at youtube.com)

Traveling Electronically Naked

When Kenneth G. Lieberthal travels to China, he leaves his cellphone and laptop at home.  As an expert at the Brookings Institute, he instead brings “loaner” devices, which he erases before he leaves the United States and then wipes clean the minute he returns. In China, he disables Bluetooth and Wi-Fi, never lets his phone out of his sight and, in meetings, not only turns off his phone but also removes the battery, for fear his microphone could be turned on remotely. He connects to the Internet only through an encrypted, password-protected channel, and copies and pastes his password from a USB thumb drive.  While all of this sounds like a spy thriller, the threat to data security is very real!

Questions:

1. Why does Mr. Lieberthal cut and paste in his passwords from a thumb drive?

2. What was the most interesting point you found in the article that relates to controls for corporations with employees who travel abroad?

3. The article mentions that Federal lawmakers are considering bills aimed at thwarting cybertheft of trade secrets.  Discuss whether you think that this legislation could ever deter problems arising from business dealings abroad.

 

Source:

Perlroth, N. (2012). Traveling Light in a Time of Digital Thievery, Feb. 10 (Retrievable online at http://www.nytimes.com/2012/02/11/technology/electronic-security-a-worry-in-an-age-of-digital-espionage.html?hpw)

YouTube.com (2012). Laptop Anti-Theft: Travel Identity Theft (Retrievable online at http://youtu.be/5d_O-36r9X0)

Is it Really February?

The warm and sunny weather is raising spirits all over the upper Midwest in January and February, but not for some businesses.

Questions:

1. What businesses did the video profile?
2. Can you think of other types of businesses that would be affected, both favorably and unfavorably? Discuss whether you mean in terms of profits, variable costs, fixed costs, mixed costs, etc.
3. Discuss how you believe the warm weather could either hurt or help our recessionary economy.
4. Contrast and compare by performing a brief cost/benefit analysis for a snow plow company and then a city government under this warm weather scenario.

Source:

You Tube Video. Warm Wisconsin winter hurts area businesses.mp4, Jan 31, 2012 (Retrievable online at http://www.youtube.com/watch?v=3aG6vO40cYs).

 

M’Hudi Winery

A clinical psychologist, her ‘armchair farmer’ husband and their family launched an internationally successful wine label — without capital, farming experience or wine-making knowledge. The company is the first South African winery wholly owned and managed by a Black South African family.

Question:

1. How did the Rangaka’s decide on their particular farm? Discuss the costs or benefits of this approach?
2. How long did it take before the farm was producing a drinkable wine? How did Malmsey keep the winery afloat financially during the early years?
3. From a strategic perspective, does naiveté usually benefit a new entrepreneur? How does the article contend that this helped in this particular case?
4. One hectare is equivalent to 2.47 acres and the Rangaka’s have 21 hectares that produce 14,000 cases (12 per case) of wine per year. If the average price of 6 bottles is $52.38, what is the winery’s total revenue per year?

Source:

Pitman, J. (2011). M’hudi Wines: Malmsey Rangaka, Entrepreneur Magazine: South Africa, Dec. 14 (Retrievable online at http://www.entrepreneurmag.co.za/advice/women-entrepreneurs/women-entrepreneur-successes/m%E2%80%99hudi-wines-malmsey-rangaka/)
CNN Video. (2012). A Family of Winemakers. Jan. 30 (Retrievable online at www.cnn.com/videos).

What are you doing in the Summer of 2014?

Country singer Dolly Parton is set to expand her entertainment empire and open a water-snow theme park in Nashville, Tennessee. The 66-year-old launched Dollywood in the Pigeon Forge area of Tennessee in 1986 and added a water park next door in 2001. Now Parton is working on a new addition to her popular attractions and she announced plans for the new $50 million venture on E! online.The new, as of yet unnamed park, will be opened in the Spring or Summer of 2014.

 

Questions:

1.  In general, how would you book the $50 million dollar costs?
2. How should these costs be classified on the financial statements?
3. What is Dolly’s Secret regarding Dollywood?

Sources:

Cnn Video. (2012). Dolly’s New Adventure, Jan. 19 (Retrievable online at http://www.cnn.com/video/#/video/bestoftv/2012/01/19/exp-dollys-new-adventure.cnn)

King, Dennis. (2012) Dolly Parton’s Dollywood Secret. News OK, Jan. 24 (Retrievable online at http://newsok.com/dolly-partons-dollywood-secret/article/3642804)

Insulting Discounts: The Costa Concordia Saga

The owners of the Costa Concordia are offering survivors of the disaster a 30 percent discount off future cruises as they battle to stave off law suits expected to cost hundreds of millions of pounds. As the body of a 12th victim was found inside the hull of the £370 million, 1,000 ft vessel, survivors call the discount offer “insulting.” The most recent victim was found wearing a life jacket on the fourth deck, close to a muster station.

 

Question:

1.  What was the difference between net income for Carnival from 2010 to 2011?

2.  What did Carnival attribute this drop in income to?

3.  What is Carnival’s connection with the Concordia and why is Carnival seeing a downturn in bookings this year?

 

CNN Video. (2012). Carnival Cruise Lines Takes Financial Hit, Jan. 16 (Retrievable online at http://www.cnn.com/video/#/video/world/2012/01/16/pkg-boulden-cruise-ship-business-after-concordia.cnn)

 

Duffin, C., R. Mendick, N. Squires, and V. Ward (2012). Costa Concordia: ‘Insulting’ Cruise Offer to Survivors, The Telegraph, Jan. 24 (Retrievable online at http://www.telegraph.co.uk/news/worldnews/europe/italy/9030212/Costa-Concordia-insulting-cruise-offer-to-survivors.html)

Watch that Password!

Zappos began emailing its 24 million customers Sunday, advising them that its site had been hacked, and some customers’ personal details and account information likely stolen. Despite Zappos’ data breach notification to consumers, the company hasn’t yet answered several key questions, such as detailing when the data breach occurred, the length of time for which attackers may have had access to its systems, or how the breach was finally detected. Zappos also hasn’t indicated whether it will offer identity theft monitoring services to affected customers.

Source:

Hartman, C. (2012). Zappos Hacked, 24 Million Accounts Exposed, 5min LifeVideopedia, January 16 (Retrievable at http://www.5min.com/Video/Zappos-Hacked-24-Million-Accounts-Exposed-517248590)

Schwartz, M. (2012) Zappos Hack Exposes Passwords, InformationWeek, Jan. 17 (Retrievable online at http://www.informationweek.com/news/security/attacks/232400441)

Questions:

1. According to the video, what is Zappos known for?
2. What advice is being given to the compromised account holders? Does it sound like the accounting information system was breached?
3. Who owns Zappos and what industry are they in? What type of contingent liabilities could this breach expose Zappos to?

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