JAMAICA WATER PROPERTIES

On 8th September 2015, we had our first Ethics Class. Professor Powers started the class by reviewing a case involving Queen’s University, Canada and the COO of the newspaper empire, Hollinger, David Radler. David Radler along with his business partner in Hollinger, Conrad Black, were found guilty of diverting funds of around $32M for personal benefit. Radler, that time 63, faced 29 months in prison and a $250,000 (U.S.) fine for his in fraud at Hollinger International Inc, after agreeing to co-operate in criminal probe against Conrad Black (The Globe and Mail, Sep 21 2005). Because of this co-operation, Conrad Black got 6.5 years in prison though Radler was equally accountable for the fraud according to the judge Amy J. St Eve. (The Globe and Mail).

The second ethical problem in this case relates to the Rigas family’s use of publicly-held corporate funds as a personal “piggy bank.” The Rigases used the company jet for personal reasons “without approval of the Board of Directors”, on one occasion flying to Africa for a safari (Markon & Frank, 2002). On another, one of John Rigas’ sons used a corporate jet to pick up an actress friend of his (Grant, Young, & Nuzum, 2004). The former CFO claimed that Adelphia’s funds were used by one of Rigas’ sons to buy a condominium, and to build a $13M golf course (Grant, Young, & Nuzum,

Ethical leadership is vital for the success of any business; this case study illustrates that the lack of moral values and a healthy ethically incline corporate culture, can lead to scrupulous behavior from the CEO all the way down the company. Scrushy had a demanding and cunning personality, and it was easy for his to influence others in his business to go along with the fraud. Also, having Stanwick and Stanwick, (2013) an active board of directors does have a positive impact on the performance of the firm. Also, good corporate governance supports the ethical requirements established by the stakeholders. A moral leader must cultivate a real ethically driven organization, which has no tolerance for unethical behavior.

The Waste Management scandal from the late 1990’s was described as “One of the most egregious accounting frauds we have seen," said Thomas C. Newkirk, associate director of the SEC's Division of Enforcement. (Cottrell, 2009) The majority of the fraud was centered around the fact that earnings were not growing as fast as projected so earnings were inflated. Waste Management executives avoided recording write offs which overstated their income statement by failing to record abandoned projects. They also capitalized items that should have been left on the income statement to increase their value on the asset side. It is documented that Waste Management’s auditor Arthur Andersen LLP (Anderson) entered into an agreement with Waste Management to help cover up such fraud in

‘’ For many judges and jurors, what goes on in an executive suite may just as well be happening in mars,’’ says University of Illinois law professor Larry Ribstein (ribstein prosecutorial advantages pg. 2). Ribstein is right what goes on in an executive office most of the time doesn’t come out most of the time because most of the corporate executives are selfish greedy and irresponsible. CEO’s make sure their covered they are the most selfish one’s/smart ones cause they don’t get fired most of the time because they cover themselves. ‘’ Signs that banks were either lying about their results or were taking large risks that were not fully disclosed’’ (Gelinas, Nicole pg. 5). Sometimes CEOs have to lie because

In examining the standards of ethics, or lack thereof, in cases of corporate fraud there are key questions to consider. These questions relate to ethics, the fraud triangle, and the legal ramifications incurred. It is important to examine the elements related to these key questions, in order to gain an understanding of the impacts fraud has upon all parties involved. This handbook provides information to gain an understanding of what ethical violations are at play and the impacts upon all involved parties resulting from those violations. Further provided is information regarding ethical issues when an awareness of the fraud is known, and what the reactions should be by the

Lack of integrity, incomplete discloser, and unwilling to speak the truth are all scopes of dishonesty (Ferrell, Fraedrich, & Ferrell, 2013). Some businesses prompt and participate in dishonorable activities through unethical behavior. This is the very reason why today’s economy faces financial disaster. The Sarbanes-Oxley Act appears to have a strong grasp on controlling the financial environment in organizations; however, other financial disasters will more than likely hit home. Because these transgressions will emanate additional legislation might greatly prevent future misconducts. For this reason, legislations continue to recover with up-to-date implementations.

Before 2002, shocking scandals in the stock markets generated substantial losses to investors and, for a time, the United States economy was in near chaos. Enough evidence of impropriety, financial statements, market analysts, politicians and company executives, emerged to increase investor skepticism for a long time (Larson, Thompson and Walters, 2004). The primary focus of this problem was the concerns regarding the ethical behavior of business enterprises and the effectiveness of accounting and auditing norms (Larson et al. 2004). The Sarbanes-Oxley Act of 2002 was signed into law by President George W. Bush to enhance the public's confidence in the accounting profession (Larson et al., 2004). This Act, considered one of the most noteworthy

Throughout the years, the news covered stories of corporate scandals involving accounting unethical practices. These unethical corporate acts had a tremendous negative impact on these company’s stockholders, investors, employees and the whole U.S. economy. Most of these scandals would have been prevented, if the independent audits of these companies were conducted in an ethical manner. With this in mind, two corporate scandals will be the subjects of further review to understand that an auditor might encounter ethical dilemmas, if independence and objectivity are not part of the audit process.

The accounting world has changed dramatically during the last two decades, yet at the same time its core responsibilities remain the same as it has in previous eras. Ethically speaking, company accountants and outside accounting firms have been at the crux of many of the disasters that have befallen major corporations both in America, and globally. The word 'Enron' is a prime example of a company becoming a hiss and a byword, and the lack of ethics evidenced in that case is quite blatant. One report states that "after some significant financial scandals around the world, such as those involving Enron, WorldCom, and Arthur Andersen, various United States bodies have appealed to the public for a greater emphasis on accounting ethics" (Ho, Lin, 2008, p. 883). With that demand for higher personal and company-wide ethical standards and behavior has come a shift of the public's perception concerning the role of accountants and/or accounting firms.

Enron, a multinational company avoided showing their true financial statements for several years with the help of their auditor. Arthur Anderson, the company’s auditor signed off on the validity of the company’s accounts despite the inaccuracies in the financial statements (Accounting ethics, 2011, para. 12). As a result of Arthur Anderson engaging in unethical practices, Enron’s shareholders lost their money when the company went into bankruptcy, Arthur Andersen employees lost their jobs, and the company went out of business (Accounting ethics, 2011, para. 12). Another example is Adelphia founder, and former CEO John Rigas. He was found guilty of looting Adelphia in 2005. (Mallor, Barnes, Bowers, & Langvardt, 2010). Rigas, along with his son, and CFO Scott, was accused of using the company as their on private ATM to provide fifty million dollars in cash advances, buy 1.6 billion in securities, and repay 252 million in margin loans. As a result of their crimes Rigs received fifteen years in prison, and his son, and former CFO Scott, received twenty years in prison (Mallor et al., 2010).

The case study analyzes Crazy Eddie. Crazy Eddie was convicted of white collar crime through fraud triangle. Crazy Eddie involved in fraud through incentives, opportunity and rationalization. Crazy Eddie reported lacking rationalization but confirmed that incentives and opportunity were working. The company also reported lacking morality and excuses. Crazy Eddie executed its business without taking into account moral implications of doing business. Crazy Eddie illegally adjusted returns to avoid paying excessive tax thus faulting the federal government millions of dollars (Foderaro, 1998). Crazy Eddie paid workers off books to avoid compiling tax returns. Crazy Eddie administrators worked closely with external and internal auditors on reaching consensus about their illegal financial dishonest. Crazy Eddie overstated income to the public to attract people dumb stock at inflated prices using a variety of tricks. There were cases of money laundering aimed at increasing revenue reports to attract investors. Crazy Eddie inflated inventory assets to increase earned revenue. There were also cases of cut-off fraud that were done through decreasing accounts payable liabilities to increase reported returns. Debit memo was also practiced. The company’s financial records indicated fictitious purchase discounts and trade allowances to send customer friendly image against competitors.

3. This case introduces some lawsuits for Andersen from its clients, such as BFA, Sunbeam, Waste Management, Enron, and Worldcom. Those proceedings had a huge negative influence on Andersen, specifically Enron's, which is deadly strike. 4. In the end, Andersen agreed to cease auditing public corporations by the end of August in 2002, essentially marking the end of the ninety-year-old accounting institution. At the end of this case, Andersen has received his well deserved punishment. What is more important, Who was the mastermind making so much fraud? Maybe it’s just some people’s faults. However, the main reason is from its degenerative corporate culture that places great emphasis on placing huge profits ahead of ethics and laws. Unfortunately, the life of staffs in the accounting firm were affected pessimistically by all of the events associated with this case. Furthermore, this ethical misconduct caused the loss of the public. Accordingly, no matter who we are, the CEO, the CFO or employees, we should keep something in mind that accounting ethics is significant not only for everything and everyone in the company but also for the

Business Industry has witnessed the outcomes of bad moral decisions taken by business leaders. Enron’s story is only one example of corporate scandals and cases of bad moral decisions, which has not only shaken the public trust in corporations, but also affected the bank accounts of investors and employees. Before the bankruptcy of Enron; it was included in one of the fortune 500 companies after its fraudulent accounting case the share went down to $1 (Enron scandal, 2010; PBS, 2002; Godwin, 2006; Godwin, 2008).

2. What measures can and should be taken to make it easier for corporate employees to ‘‘blow the whistle’’ on a fraudulent scheme they uncovered within the firm?