Federal Financial Aid Fraud

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A federal lawsuit was filed by seven former employees against Harris School of Business and its for-profit parent education company, Premier Education Group, which owns more than two dozen trade schools and community colleges operating under several names in 10 states. The suit alleges that school officials routinely misled students about their career prospects and charged more than $10,000 for programs lasting less than a year, but falsified records to enroll students keep them enrolled in order to game the government grant and loan system.

Questions:
1. What was your favorite example of students enrolled at Harris who were not qualified for their particular program or had poor job prospects afterward?
2. Which for-profit large national education chains have received the most scrutiny for aggressive recruiting, high prices, low graduation rates and heavy borrowing by students?
3. In 2011-12, how much did Premier collect in federal Pell grants and federal student loans?
4. Who is Andrew N. Yao and what was his role in the Premier companies? Why doesn’t Premier’s lawyer, Mr. Farrell, know who owns Premier? Is this a violation of representing a client?
5. What is the Federal False Claims Act that is being used to file this lawsuit? Explain and include the potential damages under the Act and its possible effect on Premier.

Source:
Perez-Pena, R. (2014). Federal Lawsuit Accuses For-Profit Schools of Fraud. The New York Times, Feb. 19 (Retrievable online at http://www.nytimes.com/2014/02/20/us/lawsuit-accuses-for-profit-schools-of-fraud.html?action=click&contentCollection=Europe&module=MostEmailed&version=Full&region=Marginalia&src=me&pgtype=article&_r=0)

Think before you Speak

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AOL recently altered its 401(k) program, by switching matching payments to one lump sum at year-end instead of throughout the year. The change was implemented, according to CEO, Tim Armstrong, because of soaring medical costs that arose in part from two families with “distressed babies.”

Questions:
1. What is a 401(k)?
2. What was Armstrong’s takehome pay in 2012?
3. Explain the relationship between quarterly earnings at AOL and the new benefits policy.
4. In Mr. Armstrong’s reversal of policy, what did he apologize for in the way he communicated the new policy?

Source:

Kaufman, L. (2014). Facing Criticism After Remarks, AOL Chief Reverses 401(k) Changes. The New York Times, Feb. 9 (Retrievable online at http://www.nytimes.com/2014/02/10/business/media/facing-criticism-aol-chief-reverses-change-to-401-k-plan.html?ref=business)

AOL

FDA Cracks Down on Scary Imports That Impact Public Safety

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India is the second largest exporter of over-the-counter and prescription drugs to the U.S. However, the FDA has recently increased their inspections of these manufacturers due to falsified drug test results, safety lapses, and the sale of fake medicines.

Questions:
1. What percentage of U.S. over-the-counter and generic prescription drugs are supplied by India manufacturers?
2. What generic prescription drugs were recently banned? Research what each of the are used for and why this is so dangerous.
3. What are some of the statistics associated with the FDA’s increased scrutiny of Indian drug plants? How would you assess the cost effectiveness of this campaign?

Sources:

Harris, Gardner.(2014). Medicines Made in India Set Off Safety Worries. The New York Times, Feb. 14 (Retrievable online at http://www.nytimes.com/2014/02/15/world/asia/medicines-made-in-india-set-off-Indian drugssafety-worries.html?hp&_r=0).

Royal Fraud?

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Spain’s Princess Cristina was questioned in court over whether she and her husband illegally used company funds for personal expenses, including lavish parties at their modernist Barcelona mansion. Her her husband, Inaki Urdangarin, former Olympic handball medalist turned businessman, is accused of defrauding regional governments of millions of euros of public money.

Questions:
1. Summarize the allegations, including the not-for-profit organization involved. What red flags of fraud do you see?
2. In November 2013, the judge ordered properties belonging to the king’s son-in-law be impounded. What was the purpose of this?
3. What is the alleged amount of the fraud?
4. Why is this scandal considered to be so devastating for Spain at this particular time?

Sources:
Reilly, J. (2014) Spain’s Princess Cristina in court to face questions over a ‘corruption scandal involving her husband who defrauded local governments of millions of euros,’ Mail online, Feb. 8 (Retrievable online at http://www.dailymail.co.uk/news/article-2554606/Spains-Princess-Cristina-court-face-questions-corruption-scandal-involving-husband-defrauded-local-governments-millions-euros.html)

Burridge, T. (2014) Spain’s Princess Cristina in court over corruption case. The BBC, Feb. 8 (Retrievable online at http://www.bbc.co.uk/news/world-europe-26094035)

BBC Staff (2013). Spanish royal’s property impounded in corruption case. The BBC, Nov. 4 (Retrievable online at http://www.bbc.co.uk/news/world-europe-24808787)

What is a Super Bowl Ad Worth?

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Derek Thompson presents evidence on both sides of the debate about whether Super Bowl ads are a waste of money or worthwhile advertising venues.

Questions:
1. Rather than the price you pay for the advertisement, what does Mr. Thompson say that Super Bowl advertising is all about?
2. What is this year’s Super Bowl ads cost-per-mille (thousand viewers)? What was last year’s cost-per-mille?
3. According to the article, what is the relationship between viewership of the Super Bowl and ad costs?
4. Discuss which view you agree with – Cheap Advertising or Waste of Money. Why?

Source:
Thompson, D. (2014). Super Bowl Ads: Incredibly Cheap or an Incredible Waste of Money? The Atlantic, Feb. 1 (Retrievable online at http://www.theatlantic.com/business/archive/2014/02/super-bowl-ads-incredibly-cheap-or-an-incredible-waste-of-money/283505/)

A Cost Benefit Analysis of Super Bowl Commercials

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Advertisers paid up to $4 million for a 30-second spot during the Super Bowl. This article examines the Go Daddy spot and the potential cost effectiveness of the company’s Super Bowl ads.

Questions:
1. According to the article, how many customers does it take to break even and what amount on average must they spend?
2. Based on Mr. Moss’ analysis, what percent of the Super Bowl audience would have to buy Go Daddy’s services, based on the average cost to keep domain names?
3. What qualitative extra value benefits emanate beyond the quantitative benefits for Go Daddy?

Source:
Moss, W. (2014). Is the Cost of a Super Bowl Commercial Really Worth It? The Atlanta Journal-Constitution, Feb. 3 (Retrievable online at http://www.ajc.com/weblogs/atlanta-bargain-hunter/2014/feb/03/wes-moss-cost-super-bowl-commercial-really-worth-i/)

Sometimes Plans Just Don’t Work Out

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Although it was an excellent strategy to run a two-minute Bob Dylan ad at the end of the third quarter, the moment of peak Super Bowl excitement, the Seahawks stole the show early in a 36-0 blowout.

Questions:
1. How much did the 2-minute ad cost Chrysler?
2. According to the article, when will the losses be tallied on this ad?
3. How should Chrysler report the ad in a journal entry? What types of costs might the company have to detail as part of this entry?

Source:
St. John, A. (2014). How the Seahawks Sacked Bob Dylan and Cost Chrysler Millions in the Super Bowl Ad Race, Forbes, Feb. 2 (Retrievable online at http://www.forbes.com/sites/allenstjohn/2014/02/02/how-the-seahawks-sacked-bob-dylan-and-cost-chrysler-16-million-in-the-super-bowl-ad-race/)

No Symbolic Message of Contrition for Jamie Dimon

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What a difference a year makes for Jamie Dimon! Last year, he had half of his paycheck cut to a measley $11.5 million for an embarrassing multi-million dollar trading blowup that resulted in $1 billion in fines. This year, after Chase paid the feds $20 billion in penalties for transgressions committed on Dimon’s watch, JPMorgan’s Board of Directors decided that Dimon should receive a raise.

Questions:
1. Is the raise expected to restore him to his previous $23 million pay package?
2. What roles did Mr. Dimon play in Justice Department moves toward JPMorgan penalties for shaky mortgage investments and the Madoff fraud?
3. Perform a cost/benefit analysis of Jamie Dimon’s performance for JPMorgan. In other words, what things are positive that justify a raise? What things are negative that support the debate presented by a vocal minority of directors who want to keep his compensation largely flat?

Source:

Silver-Greenberg, J. and S. Craig. (2014). Fined Billions, JPMorgan Chase Will Give Dimon a Raise. The New York Times, Jan. 23 (Retrievable online at http://dealbook.nytimes.com/2014/01/23/fined-billions-bank-approves-raise-for-chief/?_php=true&_type=blogs&rref=homepage&module=Ribbon&version=origin&region=Header&action=click&contentCollection=Home%20Page&pgtype=article&_r=0)

Don’t Mess with the Chef: Bob McDonnell’s downfall

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gov-bigFormer Virginia governor Robert F. McDonnell and his wife, Maureen, were charged Tuesday, January 21, with illegally accepting gifts, luxury vacations, and large loans from wealthy Richmond-area businessman, Jonnie R. Williams Sr., in return for special treatment from the state government.

Questions:
1. Did McDonnell’s wife commit fraud by accepting the $3,500 refund? Discuss.
2. What was the tip that the chef called into the Va. state fraud hotline? Discuss the chef’s involvement in the case.
3. What is quid pro quo? Explain it in terms of the McDonnell story.

Source: Helderman, R. and Carol Leonnig. Former Va. governor, wife indicted in ethics inquiry. The Washington Post, Jan. 22 (Retrievable online at http://www.bostonglobe.com/news/nation/2014/01/22/former-governor-bob-mcdonnell-and-wife-indicted/7MLlBahsChxQHA4L7apxLJ/story.html)

Starbuck’s App: Are You At Risk?

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The Starbuck’s app, used by more than 10 million customers that purchase drinks and food directly from their smartphones, was exposed as risky by security researcher, Daniel Wood. According to Wood on January 13, “There are multiple instances of the storage of clear-text credentials that can be recovered and leveraged for unauthorized usage of a user’s account on the malicious user’s own device or online at https://www.starbucks.com/account/signin.” Three days later, on January 16, Starbuck’s updated its mobile apps and told CNN that the vulnerabilities were fixed.

Questions:
1. After reading the article, explain it to someone in a paragraph and include examples of the risks that they were exposed to.
2. According to the article, what is the huge factor associated with these apps that handle a person’s money?
3. What types of internal controls does Starbucks have or need to include in relationship to this app?

Source:
Smith, D. (2014). Starbuck’s App Exposed: 10 Million Customers at Risk. Readwrite.com, Jan. 16. (Retrievable online at http://readwrite.com/2014/01/16/starbucks-app-exposed-10-million-customers-at-risk#awesm=~ou93vh8RAkPg91)

starbucks