The Phar-Mor Scandal

Finally, this blog will focus on the pharmaceutical industry.  In 1992, Phar-Mor was a successful pharmaceutical business with over 25,000 employees working in over 300 stores.  However, that same year, Phar-Mor’s top employees running the business were charged with embezzlement.  The owners changed data and even fooled auditors who looked over the financial statements.  The two men most responsible for the scandal occurring was the COO, Michael Monus, and the CFO, Patrick Finn.  Both of these men, along with a few others, reaped the consequences for embezzlement of the company.

Embezzlement in companies is not rare.  In an article by Patricia Schaefer on businessknowhow.com, “There’s an old saying that’s long been accepted in fraud prevention circles called the 10-10-80 rule: 10 percent of people will never steal no matter what, 10 percent of people will steal at any opportunity, and the other 80 percent of employees will go either way depending on how they rationalize a particular opportunity.”

Click here to see the article http://www.businessknowhow.com/manage/employee-theft.htm

For anyone, having good ethics is an important part of life.  For future business employees, ethical issues could come on a daily basis.  When dealing with money, sometimes people let greed take over.  As seen in this blog posting and the other postings, these business leaders did not use good ethical judgments.  Instead, they decided to steal from their companies and their employees.  We must be aware of ethics because major consequences can result when using poor judgment.

Thank you for all of the feedback I have received.  If you would like to see any more scandals that occurred throughout the 20 and 21 century, visit http://top-10-list.org/2009/07/30/ .

Subprime Mortgage Crisis

The blog for this week will focus on the real estate/housing industry.  In the early 2000’s, the subprime mortgage crisis was a major issue.  The banks were extending loans of enormous amounts around 500,000 dollars to families for houses when those families might only make around 75,000 dollars a year.  Banks were giving money to people knowing there was no way the people could pay it back.  However, people took these loans knowing they would never have the money.

My opinion is that the banks were unethical in the crisis because they wanted people to default on their loans so they could collect their money and extra amounts for late payments or no payments.  Many houses foreclosed because people could not make their payments.  In the end, financial sector rules and regulations were reformed due to the unethical crisis.

Who do you think was at fault for the subprime mortgage crisis?  I would love to hear whether you think the banks were at fault or the people who knew they could not pay the loans back.

To see what Sarah Palin and Joe Biden had to say concerning the crisis in a debate, visit the following link:

http://www.youtube.com/watch?v=zwHwWA2xgRg

The Man Who “Madoff” With Billions of Dollars

The blog this week will feature ethical issues in the financial industry.  While major frauds have occurred in this industry, Bernie Madoff committed the greatest business fraud in history when he stole over 50 billion dollars from investors.  While some of you may not know about Ponzi schemes, Charles Ponzi created this term when he made millions of dollars off people investing all of their money and life savings.  People think they are making money by investing it, but they are really losing most of their life savings.  Madoff has created a completely new meaning to the Ponzi scheme.

To learn more about Ponzi schemes, you can visit http://www.sec.gov/answers/ponzi.htm#PonziName

Bernie Madoff worked under the company called Bernard L. Madoff Investment Securities LLC.  He would ask people to invest their money, and it actually seemed like the people were making returns.  As all of their life savings would go into this business, Madoff would pay people the returns from money he made off new clients’ investments.  Madoff was not actually making money for these people but creating a huge scandal throughout the industry.

This is an example of how greed took over and how any ethical reasoning did not occur.  It is truly astonishing that Madoff was able to get away with taking billions of dollars from people.  People trusted Madoff, and he seemed to have credentials that helped him go far in the fraud.  It is important for people to realize that when making wrong ethical decisions, there are usually consequences.  With billions of dollars invested into the fraud, it is surprising that Madoff was able to keep the fraud going on for so long.  Please leave your thoughts about this case.  I look forward to hearing feelings on this scandal.

To read more about the Madoff scandal, visit http://www.forbes.com/2008/12/12/madoff-ponzi-hedge-pf-ii-in_rl_1212croesus_inl.html

The Enron Scandal

Jeff Skilling and Kenneth Lay

This week’s blog covers the energy industry and the effects of wrong ethical decisions by very high and powerful people of Enron.  Enron was a prospering company and once made it onto the Fortune 500 list.  This is before the truth about the company came out publically to the world.  After the Enron trial, Jeff Skilling, former CEO, and Kenneth Lay, former chairman, were guilty on accounts of conspiracy and fraud.  Both men claimed that they were innocent of any of these crimes.  They had covered up millions of dollars in debt letting their employees and the world think that the company was prospering.  However, the company had to declare bankruptcy, and many covered up secrets inside Enron began to come out.  Financial statements did not back up what was really going on inside of Enron.  Skilling and Lay made millions of dollars even while the company suffered.

In a video after the trial, ABC news featured a clip about the Enron investigation saying, “The stakes for the prosecution went way beyond the defendants at trial.  If after four years of investigating, they [prosecutors] couldn’t win this case, which had become the symbol for corporate greed; it would seem as if CEOs were beyond the reach of the law.”  John Hueston, an Enron prosecutor said, “‘CEO’s cannot hide behind claims of ignorance.  That’s especially when they have been paid tens of millions of dollars to be the faithful stewards of shareholders and investors.’”

To view more of this video, please visit http://abcnews.go.com/video/playerIndex?id=9129206

The Enron scandal shows that even CEO’s can mess up but that they also have to face the consequences for their mistakes.  Please leave any comments you have about this blog.  Also, do you believe that Skilling and Lay deserved this punishment?  I look forward to any questions or comments.

Welcome to Business Ethics!

Welcome to Ethical Issues in Industries!  In the following four weeks, this blog will address ethical issues in four different industries.  Anyone with an interest in business will identify with this blog because those in business need an understanding of how big of a role ethics plays in each specific business industry.  Ethical issues will surround people their entire lives no matter the industry or where they work.  This blog will address the ethical cases that have come up in past years and the results of wrong ethical decisions.

The four different industries this blog will focus on are as follows:  energy industry, pharmaceutical industry, real estate/housing industry, and financial industry.  Each week’s post will include an example of what ethical decision occurred in that industry and thoughts about that issue.  If you are interested in any other industries or topics that this blog does not cover, please visit http://www.cnn.com/ to search for issues happening in the United States or around the world.

Throughout these next four weeks, you are encouraged to leave comments.  As some of these blog postings are controversial, I would love to hear your opinions and feedback on these different topics.  Therefore, any opinion is welcome.  To learn more about ethical issues, please come back and visit this blog each week.  Below is a video for what is to come next week, so I looking forward to hearing from you.