Is it better to look good than have money?

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Here’s a quirky little story. American money has been consolidated into a single system of currency since the late 1800s. As part of this, U.S. dollars have been printed on a unique cotton blend paper, supplied by only one company (Crane) for more than a century. The chief cotton ingredient has been denim. However, since the 1990s, Lycra has contaminated the denim supply.

Questions:
1. What is Lycra and why has it become the scourge of the money supply?
2. What percentage of its cotton did Crane previously get from denim?
3. What is Crane using now, instead of denim?
4. Why is money printed on cotton blend paper?

Source:
Garber, M. (2013).Your Skinny Jeans are Destroying the U.S. Dollar. The Atlantic, Dec. 17 (Retrievable online at http://www.theatlantic.com/business/archive/2013/12/your-skinny-jeans-are-destroying-the-us-dollar-literally/282442/
Mui, Yian Q. (2013). How tight jeans almost ruined America’s money. The Washington Post, December 16 (Retrievable online at http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/16/how-tight-jeans-almost-ruined-americas-money/)Money-file-2

It Takes Money to Make Money

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How much would you like to make per hour at your job or your next job? Legendary investor Warren Buffett makes about $1.54 million per hour (even when he is sleeping)! This article documents the 10 richest investors and entrepreneurs and their wealth gains during 2013.

Questions:

1. Who is the wealthiest of those ten mentioned in the article?
2. Who made the greatest gains during 2013? How did the gains compare to the returns on the S&P500 this year?
3. Are any of these individuals making a salary in addition to their investments? Which ones and how much?
4. What journal entry would Jeff Bezos make at the end of the year, just based on the information in the table?

Source:

La Roche, J. (2013). Here’s How Much 10 Of The Richest People In The World Made Per Minute In 2013. Business Insider, Dec. 19 (Retrievable online at http://www.businessinsider.com/what-warren-buffett-makes-per-hour-2013-12#ixzz2nwv4uwvV)

Target hit by credit-card breach

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On December 19, 2013, Target admitted that it was hit by an extensive theft of its customers’ credit-card and debit-card data over the Black Friday weekend. The theft was national in scope and happened in stores, not online.

Questions:
1. When and what happened with respect to a card breach at T.J. Maxx and Marshalls retail stores?
2. What information may the criminals now have from the Target breach?
3. What is the normal journal entry for recording a credit card sale? Assume a $50.00 sale, with a 7% sales tax and a three percent credit card bank fee.
4. What measures is Target taking currently regarding the breach and what agencies or groups are involved?

Source:
Hsu, T. (2013). Target says 40 million credit, debit card accounts may be breached. The Los Angeles Time, Dec.19 (Retrievable online at http://www.latimes.com/business/money/la-fi-mo-target-40-million-breach-20131219,0,1326731.story#ixzz2nwq8aown)

Do you really have a 2nd job?

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This is an interesting fraud that took place at the Environmental Protection Agency (EPA). John Beale, a retired, former EPA employee, collected paychecks from approximately the year 2000 through 2013 even though he had absence totaling about 2 1/2 years. What was his alibi? He claimed falsely that he was simultaneously working undercover in special projects for the CIA.

Questions:
1. What type of internal controls could the government have put in place to prevent this?
2. Based on the information regarding retribution to be paid back in the article(s), what do you assume Mr. Beale’s annual salary was approximately?
3. Although Mr. Beale was sentenced for this fraud, do you think that there are any other individuals at the EPA or a separate government agency that should be reprimanded or are responsible for the length of time that this fraudulent situation continued?
Source:
Zajac, A. (2013). Ex-EPA Official Who Faked CIA Jobs Gets 32-Month Sentence. Bloomberg News, Dec. 18 (Retrievable online at http://www.bloomberg.com/news/2013-12-18/ex-epa-official-who-faked-cia-jobs-gets-32-month-sentence.html)
Teichert, E. (2013). Former EPA Official Admits to Salary Scam. Law 360.com, Sep. 27 (Retrievable online at http://www.law360.com/articles/476367/former-epa-official-admits-to-salary-scam)

Fraud is quicker than the law?

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Without regulation of Bitcoin, consumers have no protection in a Bitcoin economy. The virtual currency continues to result in swindles, with little prospect of a crackdown.

Questions:
1. What is a pump-and-dump scheme?
2. What event(s) sent Bitcoin’s price tumbling?
3. In the U.S., the SEC has not ruled that Bitcoin is a security. However, they have punished what type of fraud using Bitcoin?

Sarah Meiklejohn, a graduate student at the University of California, San Diego, who researches the Bitcoin economy.

Sarah Meiklejohn, a graduate student at the University of California, San Diego, who researches the Bitcoin economy.

Source:
Popper, N. (2013). In the murky world of bitcoin, fraud is quicker than the law. The New York Times, Dec. 5 (Retrievable online at http://dealbook.nytimes.com/2013/12/05/in-the-murky-world-of-bitcoin-fraud-is-quicker-than-the-law/?hp)

Plain English: It’s all about influence!

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In June, GSO Capital Partners LP, a unit of the Blackstone Group LP provided a loan to Codere SA, a Spanish gaming operator who owns betting parlors and race tracks in Europe and South America. Interestingly, the terms of the loan provided a guaranteed return on credit default swaps, which outmaneuvered sellers of the protection. In other words, the case highlights the fact that interests of lenders and debt traders aren’t always aligned. Primarily, those in a position of influence have the ability to affect whether the contracts get triggered.

Questions:
1. Was Jon Stewart’s satire helpful in understanding the transaction? Why or why not?
2. What is a credit default swap and how would Codere account for this transaction?
3. What is Codere’s debt rating? What does that mean in terms of all other debt rating? Explain the debt rating system.

Sources:
Ruhle, S., M. Childs, J. Miecamp. (2013). Blackstone Unit Wins in No-Lose Codere Trade: Corporate Finance. Bloomberg News, Oct. 22 (Retrievable online at http://www.bloomberg.com/news/2013-10-22/blackstone-unit-wins-in-no-lose-codere-trade-corporate-finance.html)
Stewart, J. (2013). Video, Dec. 4 (Retrievable online at http://www.thedailyshow.com/watch/wed-december-4-2013/blackstone—codere)

A Back Door or Bribery?

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JP Morgan’s “Sons and Daughters” hiring program is under scrutiny by federal regulators. Confidential documents obtained from the company are being explored to shed light on whether the program indicates wrongdoing by the bank to hire children of China’s ruling elite, in order to secure existing and future business from Chinese-government-run companies.

Questions:
1. Based on the information in the article, do you think the program crosses a legal line? Discuss.
2. Explain what contract is now at the center of the federal bribery investigation into JP Morgan’s hiring program.
3. Are there any linkages mentioned in the article that would support intent to commit fraud?

Source:SEC
Protess, B. and J. Silver-Greenberg. (2013) JPMorgan Tracked Business Linked to China Hiring. The New York Times, Dec. 7 (Retrievable online at http://dealbook.nytimes.com/2013/12/07/bank-tabulated-business-linked-to-china-hiring/?hpw&rref=business&_r=0)

How do Nonprofit Organizations Deal with Fraud?

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Nonprofit organization, all too often take a common approach of foregoing legal action against fraudsters rather than prosecuting them. This article covers a recent fraud and explains why many nonprofits bypass legal action in exchange for cash.

Questions:
1. Summarize the case of fraud at the Progressive Policy Institute and include red flags of fraud in your summary.
2. Why don’t more nonprofits prosecute fraud?
3. What are the benefits and risks of this approach?

money_ball

Source:
Stephens, J. and M.P. Flaherty. (2013) Nonprofit Groups Often Seek Restitution, Not Prosecution When Money Goes Missing. The Washington Post, Nov. 23 (Retrievable online at http://www.washingtonpost.com/investigations/nonprofit-groups-often-seek-restitution-not-prosecution-when-money-goes-missing/2013/11/23/d7b7ba18-51f8-11e3-9e2c-e1d01116fd98_story.html?tid=pm_pop)

Just Buy an EZ Pass and save your money next time!

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Watch out for bad information from your “expert” friends! That is what Jason Bourcier wishes that he would have done.  

Bad information tip #1: A friend told him that when the toll booths were unmanned after 11:30 p.m., you could use the road without paying on the Dulles Toll Road.
Bad information tip # 2: When working late one night, Jason asked a toll road attendant if the cameras were working when no attendants were on duty and the attendant said, NO.
Decision: Jason started going through the toll booths without paying
RESULT: Jason received a bill for $202,000 for violations beginning in 2009.

Questions:

1. Will Jason have to pay the entire $202,000?  Discuss

2. How old will Jason be when he finally pays off his tolls?

3. Can Jason take any of this off on his income taxes?

Source:

Jackman, T. (2013). Reston man runs up $202,000 bill driving through E-ZPass gates without paying. The Washington Post, Nov. 24 (Retrievable online at http://www.washingtonpost.com/blogs/local/wp/2013/11/25/reston-man-runs-up-202000-bill-driving-through-e-zpass-gates-without-paying/?hpid=z4)

Word to the Wise: Watch the Spelling!

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Ephonia Green has given away 275 wedding gown ensembles to military brides over the last five years from her bridal shop in Maryland. But how has she been able to afford such philanthropy, while working as a $56,000-a-year administrative assistant for a nonprofit organization? Since 2005, when Green started receiving publicity for her charitable gifts of wedding dresses, she has been allegedly stolen about $5.1 million from her employer, the Association of American Medical Colleges and funneled the funds through her bridal shop.

Questions:
1. How was Green able to disguise her embezzlement?
2. What segregation of duties were missing from her job?
3. How did the fraud unravel?

ephonia green 0011385146453

Source:
Flaherty, M.P. and J. Stephens. (2013). Maryland Woman Accused of Stealing Millions From D.C. Nonprofit Group. The Washington Post, Nov. 24 (Retrievable online at http://www.washingtonpost.com/investigations/prosecutors-say-maryland-woman-embezzled-51-million-from-dc-nonprofit-group/2013/11/24/97e1ecf0-53bb-11e3-a7f0-b790929232e1_story.html?hpid=z4)