IRYAN BIN SHUHAIBUN

YE2008-1478

HE10

1. Identify the ethical transgressions in this case. Universal Industries is a company that has done a lot of subcontracting jobs for the major players in the defense industry. This involves competing with other companies in getting contracts. In order to boost companys declining U.S. revenues, the COO has done ethical transgression. First, he bribed the local businesspeople and politicians of the area where the Middle Eastern military base was to tie up exclusive services of several local contractors making Universal the foremost favorable in the bidding process. He was using insider information given by his old classmate so that Universal was added to the list of several RFPs. The insider information was used so that Universal Industries is more favorable by having the right corporate management, financial strength, technical capabilities and so on. The senior management team of Universal Industries also made ethical transgression by adjusting some of the companys fourth quarter expenses in order to hit the price target that the analysts were expecting. They were using creative bookkeeping technique to portray the company as financially stable, operationally efficient organization with a strong future growth so that the reputation of the company will keep the stakeholders confidence. The CEO and CFO were responsible in signing the authenticity of the fraudulent financial reports. 2. Which piece of legislation would apply to each transgression? For the bribing case, the Foreign Corrupt Practices Act of 1977 (FCPA) can be used as it was introduced to more effectively control bribery and other less obvious forms of payment to foreign officials and politicians by American publicly traded companies as they pursued international growth. Under disclosure, the FCPA requires corporations to fully disclose any and all transactions conducted with foreign officials and politicians, in line with SEC provisions. As for the fraudulent financial reports, the Sarbanes-Oxley Act of 2002 (SOX) can be used because it was a legislative response to corporate accounting scandals of the early 2000s that covers the financial management of businesses. Title IX: White-Collar Crime Penalty Enhancements of the Sarbanes-Oxley Act can be used for the case.

3. What would be the penalties for each transgression? The bribery done by the COO of Universal Industries and the company itself under the Foreign Corrupt Practices Act of 1977 (FCPA), the Department of Justice can enforce criminal penalties of up to $2 million per violation for corporations and other business entities. Officers, directors, stockholders, employees, and agents are subject to a fine of up to $250,000 per violation and imprisonment for up to five years. The SEC may bring a civil fine of up to $10,000 per violation.

IRYAN BIN SHUHAIBUN

YE2008-1478

HE10

The penalties for fraudulent financial reports case, Under the Foreign Corrupt Practices Act of 1977 under the books and recordkeeping provisions can reach up to $5 million and 20 years imprisonment and up to $25 million for organizations. Title IX: white Collar Crime Penalty Enhancements of the Sarbanes-Oxley Act of 2002 provides that any person who attempt to commit white-collar crimes will be treated under the law as if the person had committed the crime. CEOs and CFOs are required to certify their periodic reports and impose penalties for certifying a misleading or fraudulent report.

4. If Universal could prove that it had a compliance program in place, how would that affect the penalties? According to U.S. Federal Sentencing Guidelines for Organizations of 1991 (FSGO), organizations are held liable for the criminal acts of their employees and agent. There are three steps in calculating fines for organizations sentenced under FSGO; the first, determination of the Base Fine., the Culpability Score and lastly determining the Total Fine Amount. If Universal had a compliance program in place, the judge will look at the mitigating factors and with confirmation the culpability score will decrease. This will decrease the penalties as the total of base fine multiplied with the decrease culpability score will amounted to a lower fine than the originally fined.