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Today the right of publicity clearly allows people to control the commercial use of their names and images during their lives. What happens after death is much murkier. Throughout much of the world, the right of publicity ends at death, after which a person’s identity becomes generally available for public use. In the United States, however, this issue is governed by state laws, which have taken a remarkably varied approach. Interestingly, Hebrew University and its American marketing agent have aggressively defended Einstein’s image, even blocking its use on a book called “Everything’s Relative.”

Questions:
1. According to the article, how much has Einstein’s estate generated for his heirs?
2. Is there a mechanism by which you could prevent the exploitation of your reputation after you die? What is the author of this article proposing?
3. According to the article, what cost does the economic value of a dead celebrity’s image impose? How does the author think this cost should be assessed?

Source: Madoff, R.D. (2011). The New Grave Robbers, The New York Times, March 27 (Retrievable online at http://www.nytimes.com/2011/03/28/opinion/28madoff.html?_r=2&pagewanted=2&hp)

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The New York Times began charging online readers Monday for full access to its website and offered a heavily discounted introductory offer intended to lure its first digital subscribers. The Times is offering its three digital subscription plans for the same price of 99 cents for the first four weeks. After that, unlimited access to NYTimes.com and the newspaper’s smartphone application will cost $15 for four weeks while full access to the website and a tablet computer application will cost $20 for four weeks. Full access to NYTimes.com and both smartphone and tablet applications will be $35 for four weeks. The Times believes that those who view 20 articles online during a four week period is the current market for this service. The Times began testing its digital subscriptions in Canada on March 17 and extended the system to the rest of the world on March 28.

Questions:

1.  How do you think they came up with this number, 20 times in 4 weeks?  Would this subscription appeal to you?  Why or why not?

2.  What is it that the company wants to avoid in electing this new business model? In other words, what are the costs and benefits of this model?

3.  How do you think the companies expenses and profit margin will differ between the print and online product? Can you think of other accounting elements that are different between the print revenue model and the online revenue model?

Source:
CNN (2011). New York Times to start charging online, March 28 (Retrievable online at  http://www.cnn.com/video)

Lefkow, C. (2011). New York Times Begins Charging Online Readers, Yahoo! News, March 29 (Retrievable online at http://news.yahoo.com/s/afp/20110329/tc_afp/usitmediaindustrynewspapersinternetnytimes)

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As a way of tracking the housing crisis, an NPR investigative team bought a toxic asset.  While it was filled with home loans from people across the country who borrowed more than they could afford, it also contained at least one mortgage that was a part of a $200 million mortgage fraud scheme. The house had six owners over four years and went from a sale price of $600,000 to $2,000,000 in the Florida market. Essentially, Craig Adams, a real-estate agent known in Sarasota as a guy who could make deals happen, had a group of friends and associates.  One would buy the house. Then he’d sell it to another, for a higher price. Then it would get sold again, at a price that was still higher. The sales often wouldn’t get listed publicly and Adams would set the price. Adams always represented the buyer and the seller. With each sale, someone would take out a loan that was more than big enough pay off the previous loan. The players would split the remaining cash. The last $2 million was the default point.  The banks kept handing out the loans because they were caught up in the bubble. Now the FBI is looking into more than 3,000 cases of mortgage fraud.  In Sarasota, they’re doing it with help of Craig Adams, who has gone from real estate genius to FBI informant.

Question:

1. In general terms, how would you classify this fraud scheme?

2. Could this scheme happen in today’s recessionary market?  Why or why not?

3. Research which states have the highest incidence of mortgage fraud.  What characteristics make this possible?  What are some red flags of this type of fraud?

Source:

Joffe-Walt, Chana. (2011). Inside our Toxic Asset (Continued): A $200 Million Mortgage Scheme, NPR.org, March 21 (Retrievable online at http://www.npr.org/blogs/money/2010/07/23/128720556/atc-flipping)

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The American government has terminated its contract with an international accounting firm that was providing technical advice to the Afghan banking system here because of the firm’s failure to report signs of trouble at Kabul Bank, the nation’s largest financial institution.

The United States Agency for International Development ended the banking portion of a contract with the firm, Deloitte, which had staff members working as advisers to Afghanistan’s Central Bank, according to a report released Wednesday by the inspector general for the aid agency.

Questions:

1. What was the overwhelming reason for firing Deloitte?

2. Based on the article, how long had Deloitte been on this engagement?

3. Explain how the $850 million fraud was committed.

Source:

Rubin, A. J. and J. Risen. (2011). U.S. Agency Ends Accounting Firm’s Afghan Contract, The New York Times, March 17 (Retrievable online at http://www.nytimes.com/2011/03/18/world/asia/18afghan.html?_r=1&src=un&feedurl=http%3A%2F%2Fjson8.nytimes.com%2Fpages%2Fworld%2Fasia%2Findex.jsonp)

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Many Americans have applied for the federal government’s loan modification program, meant to keep them in their homes. Instead, less than a quarter of those who signed up have gotten any help. The banks are being sued by several states and consumer class action lawsuits for their failure to follow through. If you research this more, you find that Bank of America has an incredible number of violations and suits pending against the company. One of these is from the Utah man in this video, Michael Waters, who has decided to represent himself after no attorney would take on the case because “the bank’s pockets are too deep.”

Questions:

1. What is HAMP? Find an article that talks about Bank of America and its involvement with HAMP.

2. Briefly describe Michael Waters suit against Bank of America. What technicality has he been able to use, to keep this case alive? What is meant by “deep pockets”?

3. Explain the journal entries that a bank would make in the modification of a loan.

Source:

You tube.com. Michael Waters Versus Bank of America, March 7, 2011. http://www.youtube.com/watch?v=fNUZ98l7cC0&feature=player_embedded#at=159

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Companies that advance money to plaintiffs involved in personal injury lawsuits are campaigning in state capitals for legislation making clear that their growing industry is not subject to usury limits on interest rates or other state laws that protect borrowers.

Since February, they have persuaded legislators in at least five states, including New York, Alabama, Kentucky, Indiana and Maryland to introduce bills based on the industry’s own proposals. Legislators in Tennessee and Maryland have also introduced similar bills, but with somewhat stronger consumer protections. Another state focused on by lawsuit lending companies is Arkansas, who is promoting a bill that would ban lawsuit lending completely.

Questions:

1. What are usury laws?

2. The article mentioned that Oasis Legal Finance is one of the largest lawsuit lenders and charges 250 percent of the loan amount to clients.  Based on this, if someone borrowed $20,000 to defend themselves in court, how much would they have to repay?

3.  Do you agree or disagree with the lawsuit lender industry’s argument that it needs to be exempt from state regulations that govern other kinds of lending?  Why or why not?

Source:

Appelbaum, B. (2011). Lobby Battle Over Loans for Lawsuits, The New York Times,  March 9 (Retrievable Online at http://www.nytimes.com/2011/03/10/business/10lawsuits.html?adxnnl=1&src=recg&adxnnlx=1299870009-pxx7VvXoaFk2raNPd82+fg)

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Three surviving spouses of reverse mortgage borrowers filed a lawsuit today against the Department of Housing and Urban Development (HUD), alleging that the agency had abandoned long-established federal rules and violated protections for surviving spouses, with the result that the three individuals are now facing imminent foreclosure and eviction from their homes.

The case will have broad national implications, because the outcome will determine whether spouses will be able to stay in homes that are now “underwater” as a result of the housing downturn, a possibility that reverse mortgage borrowers have always paid insurance premiums to protect against.

Questions:
1. What is a reverse mortgage? Explain how they would work in terms of accounting.
2. Assume you have your own CPA firm. After reading this article, if you had an elderly client in a second marriage with a reverse mortgage, what would you advise them? Write out your advice in memo form.
3. What is the HUD rule that is at the heart of this suit? What does “underwater” mean? Summarize the basis of the suit in your own words.

Source:

AARP staff. (2011). HUD Targeted in Suit for Illegal Reverse Mortgage Foreclosure Actions, AARP Press Center Release, March 8 (Retrievable online at http://www.aarp.org/about-aarp/press-center/info-03-2011/hud_targeted_in_suit_for_illegal_reverse_mortgage_foreclosure_actions.html)

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JPMorgan Chase, one of the nation’s largest banks, is considering capping debit card transactions at either $50 or $100, according to a source with knowledge of the proposal. And the cap would apply even if you run your debit card as credit. The reason for this is interchange fees. as part of the Wall Street reform legislation that was passed last year, these fees are being slashed. As part of the Wall Street reform legislation that was passed last year, these fees are being slashed from $0.44 to about $0.12 per transaction. Banks say that they need this additional revenue to offset money lost from fraudulent transactions and without it, they will have to limit their losses with these caps.

Questions:

1. Based on this video and article, who will be most affected if the banks set these limits? Would this change affect you?

2. What is the name of the Wall Street reform legislation?

3.  From the accounting point of view, is there a difference in how a merchant records a debit card purchase as compared to a credit card purchase? Explain the journal entry or entries.

Sources:

Ellis, B. (2011) Debit Cards: $50 spending limit coming? CNN.com, March 10 (Retrievable online at http://money.cnn.com/2011/03/10/pf/debit_cards_limit/index.htm?hpt=T2)

CNN video. (2011). Rumored Debit Card Limit, March 10.

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The Securities and Exchange Commission has filed civil charges against a former director of Goldman Sachs and Procter & Gamble, accusing him of passing illegal tips about those companies to Raj Rajaratnam, the hedge fund manager set to go on trial next week for insider trading. Rajat K. Gupta, former Goldman director, is the highest-profile business executive charged by the government in its sweeping investigation into insider trading on Wall Street.

Questions:
1. The article mentions that Goldman has had three run-ins with the Securities and Exchange Commission in the past year. What were they? Research and discuss.

2. What is the difference between civil and criminal charges? Why do you think Raj Rajaratnam is facing criminal charges and Rajat K. Gupta is being charged with civil charges?

3. What do they mean by “loss avoidance” for Galleon funds?

Source:

Lattman, P. and J. Cane (2011). Former Goldman Director Charged With Insider Trading, Deal Book, March 1 (Retrieved online at http://dealbook.nytimes.com/2011/03/01/former-goldman-director-charged-with-insider-trading/)

Bloomberg Video. (2011). SEC Says Ex-Goldman Director Gupta Tipped Rajaratnam, March 1 (Retrieved online at http://www.bloomberg.com/video/67189564/)

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Yankees star Alex Rodriguez will pay virtually no property tax for a $6 million apartment he is buying on the upper West Side. Rodriguez will be billed around $1,200 this year in real estate tax for his 3,000-square-foot, five-bedroom penthouse with spectacular views of the Hudson River.Over the next 10 years Rodriguez and his fellow residents will continue to receive huge discounts on their tax, a city housing official said. A little-known tax abatement program, known as the “421A” program, has existed for decades, which grants as much as a 98% percent tax abatement for up to 25 years to condo owners in newly built housing. Although the program ended in December for any new construction, the city’s powerful real estate industry is determined to get it renewed and even get it expanded.

Questions:

1.  What percentage of A-Rod’s income would he pay if assessed the full tax bill of $60,000?

2. What percentage of A-Rod’s income is the $1,200 he currently pays under the tax abatement program?

3. If $900 million are lost to this program per year and the average salary of a firefighter or teacher is $50,000, how many jobs could be saved by the reform of this abatement?  If you assume that A-Rod’s full tax bill ($60,000) is the average for those who have taken this advantage, approximately how many people benefit from the discount?  Compare these two calculations and discuss.  

4.  Are there any issues that you could use to argue that the abatement program should be reinstated? 

Source: Gonzalez, Juan. (2011). Tax Breaks on Real Estate Deals for People Like A-Rod Cost City $900M a Year, New York Daily News, February 25 (Retrievable online at http://www.nydailynews.com/ny_local/2011/02/25/2011-02-25_tax_breaks_on_real_estate_deals_for_people_like_arod_cost_city_900m_a_year.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+nydnrss/home+%28Home%29)