9. Laura’s allegations
a. Fact: Laura found the shortfall and repayment, she reported to Robert Calloway, the Chair of the Audit Committee. Robert arranged a meeting with Tony and Doug to look in to Laura’s allegations. They lied and denied all the allegation and Robert believed them without investigation.
b. Issue: Did Robert violate fiduciary duty?
c. Answer: Yes
d. Rationale: Robert violated the fiduciary duty of care which requires directors and officers to use care and diligence when acting on behalf of the corporation, as a member of the board of directors, Robert didn’t make any reasonable investigation of this matter, he violated duty of care.
a. Fact: Tony and Doug lied in the meeting, and slandered that Laura was a disgruntled employee …show more content…
Rationale:
1. Under Tort law, Tony and Doug lied to Robert, their behavior was a fraud and violated the fiduciary duty of care, what they said didn’t in good faith and was harmful to the company.
2, Tony and Doug violated section 10(b) and rule 10b-5 of the Securities Exchange Act of 1934 by making untrue statement of a material fact willfully.
a. Fact: Laura was fired by Doug after the meeting.
b. Issue: Can Doug fire Laura legally for her behavior?
c. Answer: No
d. Rationale: SOX 806 protect employees who provide evidence of fraud. Section 1107 of SOX makes it a crime to retaliate against a whistleblower for disclosing truthful information to a law enforcement officer. So Doug fired Laura violated SOX 806 and will be punishable by fine or imprisonment up to 10 years under SOX 1107.
10. Certifying the financial reports
a. Fact: Doug and Sam file statements certifying the accompanying financial reports and management report when filing the SEC Form 10K.
b. Issue: Did Doug and Sam violate Sarbanes-Oxley Act?
c. Answer: Yes
d. Rationale:
1. SOX 302 stated that the management has responsibility for financial reports. The CEO and CFO must prepare the financial statements fairly and make full disclosures. Doug and Sam didn’t present the financial statements fairly and willfully certified the reports which contained material …show more content…
Fact: Vanderbilling Equity Fund buys shares totaling over 10 million and XYZ bank lends HOLO based on the financial reports. Six months later, when the embezzlement and cover-up are revealed, the stock prices of HOLO drop drastically, Vanderbilling Equity Fund and XYZ filed lawsuits.
b. Issue: Were Doug, Sam, Tony, PPW, and HOLO liable for this lawsuits?
c. Answer: Yes
d. Rationale:
1. Common law fraud. HOLO issued false financial reports and hided the embezzlement on purpose, Tony willfully expressed the unqualified opinion on financial statements and internal controls. This was a fraud.
2. Under the section 10(b) and rule 10b-5 of the Securities Exchange Act of 1934, it is unlawful to employ any device, scheme or artifice to defraud and to make any untrue statement of a material fact. HOLO’s directors and officers willfully violated these rules.
3. Their conduct is a criminal offense, and violated SOX 1106 which also amends section 32(a) of the Securities Exchange Act of 1934 by knowingly to make any false statement that required to be filed with the SEC, penalties for intentional violations from 1 million to 5 million and imprisonment from 10 years to no more than 20 years, for the companies, the fines from $2.5 to $25
a. Fact: Laura found the shortfall and repayment, she reported to Robert Calloway, the Chair of the Audit Committee. Robert arranged a meeting with Tony and Doug to look in to Laura’s allegations. They lied and denied all the allegation and Robert believed them without investigation.
b. Issue: Did Robert violate fiduciary duty?
c. Answer: Yes
d. Rationale: Robert violated the fiduciary duty of care which requires directors and officers to use care and diligence when acting on behalf of the corporation, as a member of the board of directors, Robert didn’t make any reasonable investigation of this matter, he violated duty of care.
a. Fact: Tony and Doug lied in the meeting, and slandered that Laura was a disgruntled employee …show more content…
Rationale:
1. Under Tort law, Tony and Doug lied to Robert, their behavior was a fraud and violated the fiduciary duty of care, what they said didn’t in good faith and was harmful to the company.
2, Tony and Doug violated section 10(b) and rule 10b-5 of the Securities Exchange Act of 1934 by making untrue statement of a material fact willfully.
a. Fact: Laura was fired by Doug after the meeting.
b. Issue: Can Doug fire Laura legally for her behavior?
c. Answer: No
d. Rationale: SOX 806 protect employees who provide evidence of fraud. Section 1107 of SOX makes it a crime to retaliate against a whistleblower for disclosing truthful information to a law enforcement officer. So Doug fired Laura violated SOX 806 and will be punishable by fine or imprisonment up to 10 years under SOX 1107.
10. Certifying the financial reports
a. Fact: Doug and Sam file statements certifying the accompanying financial reports and management report when filing the SEC Form 10K.
b. Issue: Did Doug and Sam violate Sarbanes-Oxley Act?
c. Answer: Yes
d. Rationale:
1. SOX 302 stated that the management has responsibility for financial reports. The CEO and CFO must prepare the financial statements fairly and make full disclosures. Doug and Sam didn’t present the financial statements fairly and willfully certified the reports which contained material …show more content…
Fact: Vanderbilling Equity Fund buys shares totaling over 10 million and XYZ bank lends HOLO based on the financial reports. Six months later, when the embezzlement and cover-up are revealed, the stock prices of HOLO drop drastically, Vanderbilling Equity Fund and XYZ filed lawsuits.
b. Issue: Were Doug, Sam, Tony, PPW, and HOLO liable for this lawsuits?
c. Answer: Yes
d. Rationale:
1. Common law fraud. HOLO issued false financial reports and hided the embezzlement on purpose, Tony willfully expressed the unqualified opinion on financial statements and internal controls. This was a fraud.
2. Under the section 10(b) and rule 10b-5 of the Securities Exchange Act of 1934, it is unlawful to employ any device, scheme or artifice to defraud and to make any untrue statement of a material fact. HOLO’s directors and officers willfully violated these rules.
3. Their conduct is a criminal offense, and violated SOX 1106 which also amends section 32(a) of the Securities Exchange Act of 1934 by knowingly to make any false statement that required to be filed with the SEC, penalties for intentional violations from 1 million to 5 million and imprisonment from 10 years to no more than 20 years, for the companies, the fines from $2.5 to $25