For instance, in Dorajay Pty Ltd v Aristocrat Leisure Limited  FCA 19, shareholders launched class action against Aristocrat after acquiring interest in shares and suffering a loss because Aristocrat exaggerated profits and failed to reveal that earnings forecasts will not be met. A more recent example is Dick Smith shareholders filing class action against Dick Smith after being deceived about the financial state and subsequently losing a considerable amount of money. Companies will be liable if shareholders successfully launch class action against companies for suffering loss or
It is observed by researches and analysts that unethical business and accounting decision has took place in Enron Company especially CFO Jeffrey Skilling and CEO Ken Lay who played major roles in this scandal. Enron involved in business risks like fraud and the company failure happened when it entered into conservative transactions. The problem Enron faced was that they treated their loans as revenues yet it is not shown in the balance sheet, in other words, Enron did not treat them as current liabilities such as accounts payable so they did not show their creditors as liabilities, which had mislead their customers and investors. Because the company had taken the help from others in hiding a large amount of company debt (partnerships with various
Enron was also able to hide their losses through the transfer of troubled assets which were falling in value to the SPEs, which means the losses were kept off the books. Enron has been conducting business through thousands of SPEs, and some of them were LJM Cayman LP and LJM2 Co-Investment LP. LJM partnerships invested in another group of SPEs, called the Raptor Vehicles, which were designed to hedge Enron investment in a bankrupt broadband company, Rhythm Net Connections. Enron issued common stock in exchange for a note receivable of $1.2 billion as a part of the capitalization of the Raptor entities. Enron increased notes receivable and shareholder’s equity to reflect this transaction, which violate the GAAP.
Once people invest money , they run away with all the money. Leaving the honest directors to face the lawsuits and the liabilities. This was the case with the directors of Realcon Ltd. Sometimes directors can land in trouble for smallest of mistakes. The directors of Shasun Chemicals and Drugs Ltd experienced that first hand when an FIR was slapped against them for a cheque dishonouring
Conflicting Interest: It has been suggested that conflicts of interest and a lack of independent oversight of management by Enron's board contributed to the firm's collapse. Moreover, some have suggested that Enron's compensation policies engendered a myopic focus on earnings growth and stock price. In addition, recent regulatory changes have focused on enhancing the accounting for SPEs and strengthening internal accounting and control systems. We review these issues, beginning with Enron's board. The conflict of interest between the two roles played by Arthur Andersen, as auditor but also as consultant to Enron.
Throughout the case, it can be seen how Cendant Corporation was performing activities that dealt with the interactions of income smoothing. The main cause of performing with Income Smoothing was to make their shareholders and investors believe that they had a professional and ethical operation running. Income smoothing can best be represented as how either gains or losses from a certain period are taken into a good or bad period with losses or no profits. Income smoothing throughout this case was used as an unethical practice performed by Cendant Corporation to achieve financial stability and falsify numbers to make the investors believe they had premium stocks when in reality it wasn’t what was really occurring which would then lead to the
Conaway, chief executive of Kmart, who were once a popular publicity from consumer value store. Mr. Conaway uses his previous experience and has made a negative decision for the organization. In order to compete with the success competitors such as Wal-Mart or Target, he allowed Kmart to get caught between pricing strategies. Leaflet is not distributed to attract or alert customers, around 40,000 product prices were slashed and Kmart advertise “Kmart prices is lower than Wal-Mart”. These were gusty decisions.
The Royal Bank of Scotland was fined $390 million for the misconduct in Libor. The Rabobank was fined $662 million.JP Morgan was recently fined an amount up to $139 million The Barclays Rigging scandal What has Barclays been doing. Barclays traders conspired with ex-employees of other banks to control the movement of the interest rates known as Libor can also be translated as the rate in which banks lend one other money on. The way Barclays manipulated the Libor rate was by submitting wrong figures while they are lodging their Libor rates. The lodging of the Libor rates is due in every morning, so the Barclays Traders would urge their submitters to increase or decrease the Libor rate.
ABSTRACT The Enron scandal explains about the activities of the particular key workers of the organization as well as the activities of the top control performed a crucial part in the downfall of the organization. Enron used market-to-market accounting technique, which later backfired. Another reason was that in Enron, rewards and rewards in way of money or share came in profits only if you were excellent enough and if you were regarded one of the moneymakers. Moreover the culture within Enron was quite competitive and also if we talk about the key players that lead to this scandal then the upper level management could have been blamed. Enron scandal could have been avoided had there been a truly separate and purpose evaluation of its financial
Although in reality, CEO Dennis Kozlowski, CFO Mark Swartz, and former General Counsel Mark Belnick were suspects of giving themselves very low interest rate loans or no interests loans, (sometimes even reported as bonuses) that were never approved by the Tyco board and has also never been repaid. Some of these so called “loans” were a portion of “Key Employee Loan” program. This program had also been investigated and found that they have been selling stock without reporting it with their investors, which is a requirement with the SEC. Kozlowski, Swartz, and Belnick reportedly stole over $600 million dollars from Tyco through their unapproved bonuses, loans, and company spending. There are also rumors of their extravagant spending such as a $2,000 trash can, $6,000 shower curtain, and a $2 million-dollar birthday party for Kozlowski’s wife in Italy; these are only a few examples of their outrageous abuse of company spending!