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49 Cards in this Set
- Front
- Back
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Enron
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o Enron was a multinational energy corporation in Omaha Nebraska
o Enron sent out an application for government deregulation so that the government would not be looking over their commercial and financial activity o As a result, the executives of ENRON were able to misrepresent their respective earnings reports and stock activity in a fraudulent manner – using loopholes found in the limited liabilities undertaken by ENRON, the executives misrepresented their earnings reports o Subsequent to the influx of incoming funds resulting from increased investment activity, the executives of ENRON illegally obtained these funds in lieu of funneling them back into their rightful place in the corporation’s budget; the misappropriation of these funds not only result in a loss of billions of dollars with regard to investors, but led to the bankruptcy of the ENRON Corporation. o In 2001, the failure to provide for any evidence of the earnings fraudulently claimed by the ENRON Corporation, the Securities and Exchange |
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Merck and Vioxx
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o Vioxx was a popular painkiller that was recalled because its long term use increased the risk of heart attack and stroke
o Evidence surfaces that Merck and Company knew about these dangers, yet allowed the drug to remain on the market o Merck’s failure to recall the drug earlier could potentially have adversely affected the health of thousands of patients o In the end, Merck owed $4.85 billion o This involves people being more worried about making money than being ethical |
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Guin vs Bravos Higher Education Service Corp.
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• Brazos Higher Education Service Corporation in Waco Texas, makes and services student loans
• Brazos issued a laptop to an employee • Wright uses the laptop to store borrowers personal information • His home was burglarized and the laptop was stolen • Based on Federal Trade Commission guidelines and California state law, Brazos sent a letter to all of its 550,000 customers. • The address, Social Security number and loan balance may have been inappropriately accessed by a third party • One of the customers filed a suit in a federal district court against Brazos, alleging negligence. • Brazos filed a motion for summary judgment. • The court granted the defendants motion for summary judgment and dismissed the case. • Brazos may have owed Guin a duty of care under the GLB Act, but neither Brazos nor Wright breached that duty. Wright had followed Brazos written security procedures, which was all that the GLB Act required. |
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The Foreign Corrupt Policies Act
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o Prohibits the bribery of most officials of foreign governments if the purpose of the payment is to get the official to act in his or her official capacity to provide business opportunities
o The FCPA does not prohibit payment of substantial sums to minor officials whose duties are ministerial referred to as facilitating payments o All companies must keep detailed records the “accurately and fairly” reflect their financial activities. In addition all companies must have accounting systems that provide “reasonably assurance” that all transactions entered into by the companies are accounted for and legal. o The FCPA states that firms that violate the act may be fined up to $2 million. And individual officers or directors may be fined up to $100,000 and may be imprisoned for up to 5 years |
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I-9 Employment Eligibility Form
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employers must perform these verifications for new hires and this includes those hired as “contractors” or “day workers” if they work under the employers direct supervision. The I-9 form must be completed within three days. Good faith is a defense unless it is the failure to posses the proper paper work.
• This form requires employers to review and verify documents establishing the prospective workers identity and eligibility for employment in the United States. • Must be completed within 3 days of the worker’s commencement of employment. This grace period allows the employer to verify the documents and the forms accuracy. • The employer then becomes the party legally responsible for any problems with the I-9 verification process. |
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Trollinger v. Tyson Foods, Inc
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• In December Tyson, the nations largest poultry processors with more than 100,000 employees, was indicted for conspiring to smuggle illegal aliens into the country and employ them.
• 4 former workers filed action against Tyson under the Corrupt Organizations Act, alleging that Tyson engaged in an illegal scheme to depress wages by hiring illegal immigrants. • Tyson Moved to dismiss the complaint • Tyson signed Employment Eligibility Verification forms (I-9) in mass quantities before any documents are inspected, more than 3 days after new hires have been employed and based on a review of copies of documents rather than reviewing the original documents. -The court denied Tysons movement to dismiss the complaint |
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National Labor Relations Act
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o Gave the employees the right to form unions
o Unions had the right to participate in collective bargaining o Unions had the right to strike |
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Labor Management Relations Act
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o Lists unfair Labor practices that could not occur
o Employers cant: • Interfere with the right to unionize • Refuse to bargain in good faith • Management cannot discriminate against union members • Cannot dominate the union o Unions Cant: • Cannot coerce people to join a union • Refuse to bargain in good faith • Feather bedding: hire unnecessary workers • To leave excessive or discriminating dues • Engage in a secondary strike o This act also allows the president of the US to postpone a strike for 80 days |
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Appropriate Bargaining Unit
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o Must have a mutuality of interest among all the workers represented
o Similarity of jobs o Work Site proximity o Management cannot be a part of a union |
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Union Election
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labor law provides for an election to determine whether employees choose to be represented by a union and, if so, which union.
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Collective Bargaining
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When a union is officially recognized, it may make a demand to bargain with the employer. The union then sits at the table opposite the representatives of management to negotiate contracts for its workers.
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Strikes
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A strike occurs when union members leave their jobs and refuse to work
o The right to strike is guaranteed by the NLRA o Violent strikes are illegal o Wildcat Strikes: occurs when a minority group of workers, perhaps dissatisfied with a union’s representations, class its own strike and is also illegal. o When the workers go on strike, the business is allowed to bring in replacement workers which are commonly known as “scabs” o Strikes that threaten National Health or Safety, the law does not prohibit these but the president may call for an eight day cooling off period in hopes that it can be resolved otherwise |
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Lockouts
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Lockouts occur when the employer shuts down to prevent employees from working. Lockouts are usually used when the employer believes that a strike is about to take place
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Unfair Labor Practices of Employers
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o Employers may not refuse to recognize a union or negotiate with them
o The employers may not interfere with, restrain, or coerce employees in the exercise of their rights to form a union and bargain collectively o Employers can have no say in which employees belong to the union |
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Unfair Labor Practices of Unions
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o Coercion: restraint of an employees decision to participate or refrain from participating in union activities
o Discrimination: a union may not discriminate against workers because they refuse to join o Featherbedding o Refusal to participate in good faith bargaining o Employers cant discriminate against union employees |
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Employee Committee
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In a nonunion workforce, a company may wish to create some institution to communicate with workers and act together with them to improve workplace conditions. It is usually composed of representatives from both management and labor.
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Lien
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A lien is one person’s interest in another person’s property that arises because of a debt. There are many types of liens, but they all have the same purpose: to guarantee that the property owner repays a debt owed to the lien-holder. Liens restrict a property owner’s ability to sell the property until the debt has been paid. Second, with a court’s approval, a lien-holder may force a sale of the property and collect the amount owed from the sale proceeds.
o Mechanics Liens: when a person contracts for labor, services or materials to be furnished for the purpose of making improvements on real property but does not immediately pay for the improvements, the creditor can place a mechanics lien on the property. • EX: a painter agree to paint a house for a homeowner for an agreed upon price to cover labor and materials. If the homeowner cannot pay or pays only a portion of the charges, a mechanics lien against the property can be created. The painter is the lien holder and the real property is e |
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Garnishments
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permits a creditor to collect a debt by seizing property of the debtor that is being held by a third party.
• Taking money out your account, if you owe money • Sheriffs can take 25% out of pay checks |
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Suretyship
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Cosigning on someone else’s commitment
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Guaranty
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Similar to a suretyship, in that it includes a promise to answer for the debt or default of another.
o With a suretyship arrangement, the surety is primarily liable for the debtor’s obligations. With a guaranty arrangement the guarantor, the third person making the guaranty, is secondary liable. The guarantor can be required to pay the obligation only after the principal debtor defaults, and usually only after the creditor has made an attempt to collect from the debtor. |
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Defenses of the Surety And the Guarantor
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o Defenses are basically the same for both
o Actions Releasing the Surety • If the principal obligation is paid by the debtor or by another person on behalf of the debtor, the surety is discharged from the obligation • If valid tender of payment is made, and the creditor rejects it with knowledge of the surety’s existence, then surety is released • If a creditor surrenders to collateral to the debtors or impairs the collateral while knowing of the surety and without the surety’s consent, the surety is released to the extent of any loss suffered as a result of the creditors actions • Making any material modification in the terms of the original contract between the principal debtor and the creditor can operate to discharge surety’s obligations o Defenses of the principal debtor: • The surety can not assert the principal debtors incapacity or bankruptcy as a defense, nor can the surety assert the statute of limitations as a defense • Incapacity • Bankruptcy • Fraud |
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Exempted Personal Property
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personal property that is most often exempt from satisfaction of judgment debts includes the following
1. Household furniture up to a specified dollar amount 2. Clothing and certain personal possessions, such as family pictures or bible 3. A vehicle for transportation 4. Certain classified animals, usually livestock but including pets 5. Equipment that the debtor uses in a business or trade, such as tools or professional instruments |
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Chapter 7 Liquidation
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A debtor in a liquidation bankruptcy turns all assets over to a trustee. The trustee sells the nonexempt assets and distributes the proceeds to creditors. With certain exceptions, the remaining debts are then discharged and the debtor is relieved of the obligation to pay the debts.
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Chapter 7 Schedules
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the voluntary petition must contain the following
1. A list of both secured and unsecured creditors, their addresses and the amount of debt owed to each 2. A statement of the financial affairs of the debtor 3. A list of all property owned by the debtor, including property that the debtor claims is exempt 4. A list of current income and expenses 5. A certificate of credit counseling 6. Proof of payments received from employers within sixty days prior to the filing of the petition 7. A statement of the amount of monthly income itemized to show how the amount is calculated 8. A copy of the debtors federal income tax return for the most recent year ending immediately before the filing of the petition |
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The Trustee
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The basic duty of a trustee is to collect the debtors available estate and reduce it to cash for distribution, preserving the interests of both the debtor and unsecured creditors.
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Distribution of Property
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The code provides specific rules for the distribution of the debtors property to secured and unsecured creditors.
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In Re Mosely
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o Mosley incurred student loans while attending Georgia Alcom State University.
o He joined the army reserves and fell from a tank and injured his hip and back o Medical injuries led him to resign and he had to live with his mother o He worked a few jobs but was depressed because of his injuries o He tried to return to school but was unable to get financial aid due to his debt o A federal bankruptcy court granted him a discharge under the chapter 7, but did not include student loans o Mosley’s income consisted of about $210 a month o Homeless and in debt for $45,000 Mosley asked to reopene his case o The court granted him a discharge of his student loans on the basis of undue hardship. o Educational Credit appealed to the US court of Appeals for the Eleventh Circuit o The court agreed with Mosley. The debtors medical problems, lack of skills, and dire living condition made it unlikely that he would be able to hold a job and repay the loans. Furthermore the debtor has made good faith efforts to r |
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Offer
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The moment a definite offer is met by an unqualified acceptance, a binding contract is formed
o Open Terms: contract must be definite enough for the parties, terms are left open as long as 1. Parties intended to make contract and 2. There is a reasonably certain basis for the court to approve remedy o Requirement of good faith |
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Acceptance
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if an offer comes by one mean (email) the acceptance can be through text, email, letter, etc.
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Statute of Frauds
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has nothing to do with fraud! deals with when a contract has to be in writing, if the sale is over $500.00 to be enforceable
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Identification
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before any interest in a specific good can pass from the seller or lessor to the buyer or lessee, two conditions must prevail:
1. The goods must be in existence 2. They must be identified as the specific goods designated in the contract • Identification takes place when the goods are designated as the subject matter of a sales or lease contract. Title and risk of loss cannot pass to the buyer from the seller unless the goods are identified to the contract. Identification is important because it gives the buyer or lessee the right to insure the goods and the right to recover from third parties who damage the goods. |
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When Title Passes
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Title passes to the buyer at the time and place the seller performs the physical delivery of the goods
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Risk of Loss
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must be stated in the contract, says who is at risk
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Insurable Interest
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the moment the contract of goods are identified by the seller or the lessor, the buyer or lessee has a special property interest that allows the buyer or lessee to obtain necessary insurance coverage for those goods even before the risk of loss has passed. A seller has an insurable interest in goods as long as he or she retains the title to the goods.
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The UCCC's Good Faith Provision
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“Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement” Good faith means honest in fact
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Webster v. Blue Ship Tea Room
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• Webster went to the Blue Ship Tea Room and ordered fish chowder.
• After 3 or 4 spoonfuls, she felt something lodged in her throat • She underwent two esophagoscopies, in the second they found a fish bone and removed it • Webster filed a suit against the restaurant in a Massachusetts state court for breach of the implied warranty of merchantability • The jury rendered a verdict for Webster and the restaurant appealed to the states highest court • Although the supreme court “sympathized with a plaintiff who has suffered a peculiarly New England injury” but entered a judgment for the defendant Blue Ship Team Room. A fish bone in fish chowder is not a breach of the implied warranty of merchantability |
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Obligations of the Buyer or Lessee
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once the seller or lesser has adequately tendered delivery, the buyer or lessee is obligated to accept the goods and pay for them according to the terms of the contract
o Payment: the buyer or lessee must make payment at the time and place the buyer or lessee receives the goods. o Acceptance: • If the buyer or lessee, after having a reasonable opportunity to inspect the goods, signifies agreement to the seller or lessor • Has a reasonable opportunity to inspect the goods and has failed to reject them within a reasonable period of time • In sales contract, the buyer will be deemed to have accepted the goods if he or she performs any act inconsistent with the seller’s ownership |
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Remedies of the Seller
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o A buyer or lessee breaches the sales or lease contract by any of the following
• Wrongfully rejecting tender of the goods • Wrongfully revoking acceptance of goods • Failing to make payment on or before delivery of the goods • Repudiating the contract o Remedies include • The right to withhold delivery • The right to resell or dispose of the goods • The right to recover the purchase price or lease payments due • The right to recover damages |
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Implied Warranties
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on that the law derives by inference from the nature of the transaction or the relative situations or circumstances of the parties. Merchants impliedly warrant that the goods they sell or lease are merchantable and in certain circumstances
o A promise, arising by operation of law, that something that is sold will be merchantable and fit for the purpose for which it is sold. o Every time goods are bought and sold, a sales contract is created: the buyer agrees to pay, and the seller agrees to accept, a certain price in exchange for a certain item or number of items. Sales contracts are frequently oral, unwritten agreements. The purchase of items like a candy bar hardly seems worth the trouble of drafting an agreement spelling out the buyer's expectation that the candy bar will be fresh and edible. Implied warranties protect the buyer whether or not a written sales contract exists. |
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The Basic Functions of the Securities and Exchange Commission (SEC)
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1. Interprets federal securities laws and investigates securities law violations
2. Issues new rules and amends existing rules 3. Oversees the inspection of securities firms, brokers, investment advisers, and rating agencies 4. Oversees private regulatory organizations in the securities, accounting and auditing fields 5. Coordinate U.S. securities regulation with federal, state, and foreign authorities |
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The Securities Act
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o Registration Statement: If a security does not qualify for an exemption, that security must be registered before it is offered to the public.
• Newly issued stock must include a Prospectus: a written disclosure document that describes the security being sold, the financial operations of the issuing corporation, and the investment or risk attaching to the security. It is required to be given to everyone and must tell everything about the company, good or bad, or the managers will go to jail. o Exempt Securities: A number of specific securities are exempt from the registration requirements of the securities Act of 1933. They include the following. 1. Government-issued securities 2. Bank and financial institution securities, which are regulated by banking authorities 3. Short-term notes and drafts 4. Securities of nonprofit, educational, and charitable organizations 5. Securities issued by common carriers 6. Any insurance, endowment, or annuity contract issued by a state-regulated insurance compan |
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Section 10(b)
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One of the most important sections of the Securities Exchange Act. Prohibits the use of any manipulative or deceptive device in violation of SEC rules and regulations
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SEC Rule 10b-5
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Prohibits the commission of fraud in connection with the purchase or sale of any security
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Insider Trading
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(under the Securities Exchange Act of 1934): occurs when persons buy or sell securities on the basis of information that is not available to the public
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SEC v Texas Gulf Sulfur
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• Texas Gulf Sulfur Co. drilled a hole in Canada that appeared to yield a core with exceedingly high mineral content.
• TGS kept secret the results of the core sample. • Officers and employees of the company made substantial purchases of TGS’s stock or accepted stock options after learning of the ore discovery. • Several months later the company announced that the strike was expected to yield at least 25 million tons of ore. • TGS stock rose substantially • The SEC brought a suit against the officers and employees of TGS for violating SEC Rule 10b-5. • The officers and employees argued that the information on which they had traded had not been material at the time of their trades because the mine had not then been commercially proved. • The trial court held that most of the defendants had not violated SEC Rule 10b-5, and the SEC appealed. • The court ruled in favor of the SEC. All of the trading by insiders who knew of the mineral find before its true extent had been publicly announc |
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Attempts at Aligning the Interests of Shareholders with those of Officers
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o Some corporations have sought to align the financial interests of their officers with those of the company’s shareholders by providing the officers with stock options, which enable them to purchase shares of the corporations stock at a set price.
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Corporate Governance and Corporate Law
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o Effective corporate governance standards are designed to address problems and to motivate officers to make decisions to promote the financial interests of the company’s shareholders.
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The Sarbanes-Oxley Act
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• Created after the Enron incident
• The act attempts to increase corporate accountability by imposing strict disclosure requirements and harsh penalties for violations of security. The act requires chief corporate executives to take personal responsibility for the accuracy of financial statements and reports that are filed with the SEC. Additionally, certain financial and stock transaction reports must be now filed with the SEC earlier than was required under the previous rules |
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State Securities laws
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o Today all states have their own corporate securities laws, or blue sky laws that regulate the offer and sale of securities within individual state borders.
o Requirements: • Disclosure requirements and antifraud provisions • Provide for the registration or qualification of securities offered or issued for sale within the state and impose disclosure requirements • Issuers must register or qualify their stock with the appropriate state officials o State securities laws apply mainly to intrastate transactions. |
