The Big Three: Bailout or Bankruptcy?

by Jennifer Chamberlain March 7 2009, 14:21
The auto industry’s troubles have recently come to light in mainstream American news. The big three automakers, comprised of GM, Chrysler and Ford, have seen slumping sales and are in need of major financial help to avoid going under. In 2008, GM’s sales were down 21% in North America. Ford reported a loss of $14.6 billion dollars in the same year. Chrysler’s sales were down 30% in 2008, which was the largest reported loss of the major auto makers last year. Both GM and Chrysler have requested help in the form of federal loans from the US government, while Ford has made an effort to stay afloat without federal help. [More]

Weekend at Bernie's

by Patrick Schuette February 18 2009, 01:32
I. Introduction

The past few months have seen numerous financial frauds uncovered. Two of these frauds are particularly noteworthy. On December 11th, 2008, the largest of these financial frauds was unveiled when Bernard Madoff admitted to a $50 billion fraud through his firm, Madoff Securities.[1] On February 17th, the Securities and Exchange Commission (SEC) filed charges against Stanford International Bank relating to an allegedly fraudulent $8 billion certificate of deposit (CD) scheme.[2] Other alleged frauds have come to light, often in highly publicized and dramatic fashion.[3] These frauds suggest something is amiss in the markets. [More]

The Wall Street Bonus Culture: Well-Deserved Benefit or Unnecessary Waste?

by Rayna Gokli February 17 2009, 17:37

Recent headlines that Wall Street investment banking executives have received billions of dollars in bonuses, just months after the federal government has given these same firms billions of dollars in bailout money, has greatly increased skepticism about acceptable methods of awarding bonuses. [1] President Obama condemned the awarding of these exhobirtant bonuses. "That is the height of irresponsibility. It is shameful. And part of what we're going to need is for the folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility." [2] However, many individuals on the flip side of the coin believe these bonses are imperative to the success of the banking business. [3] This article will discuss the arguments for and against seemingly inflated bonus plans by delving into the most common types of compensation plans and their relation to the current economic crisis on Wall Street. [More]

Tamed Tigers: Sovereign Wealth Funds as Passive Investors

by Patrick Schuette November 3 2008, 00:26
I. Introduction

The purpose of this article is to analyze the current role of sovereign wealth funds in a corporate governance scheme. Sovereign wealth funds, which have become increasingly important institutional investors in the United States, have found their activities in equities markets in the United States increasingly constrained due to stringent regulations. While these sovereign wealth funds raise important policy considerations for lawmakers, these regulations hinder sovereign wealth funds in their role as investors. Despite the power the sovereign wealth funds could hold in American companies, these funds have effectively become “tamed tigers.” Despite their enormous power, they simply cannot exercise it. Thus, this article will examine whether having sovereign wealth funds in a “tamed tiger” capacity should continue or whether regulations should encourage more activity from sovereign wealth funds. [More]

Wall Street to Fraud Street: Disgruntled Investors Want Compensation

by Yuri Kim October 21 2008, 02:39
I. Introduction

With the financial crisis showing no signs of recovery many are worried about employment, job security, investments, and the overall economy. With the collapse of Lehman Brothers Holdings, the buyout of Merrill Lynch along with several other Wall Street firms, and the government bailout of American International Group, many are beginning to reevaluate and question Wall Street and the executives that run the corporations.[1] While the Bush administration was proposing a $700 billion bailout plan, investors began to point fingers at the wealthy corporate executives that pocketed millions of dollars while the companies they worked for crumbled.[2] Although there are several factors that played a part in the Wall Street crisis, investors are lining up to sue the executives with the deep pockets.[3] Two major issue at the center of heated discussion are: fiduciary duty and executive compensation.[4][5]




Salute Your Shorts

by Patrick Schuette October 2 2008, 00:29
I. A Short Introduction

With the recent collapse of numerous financial institutions, the practice of short-selling (“shorting”) has come under fire. Some authors have gone so far to claim that the actions of short-sellers (“shorters”) are among the core reasons for the current credit crisis.[1] In response to this outcry, the United States has imposed temporary bans on the shorting of certain stocks, particularly the stocks of firms in the banking and finance sector, citing the need to protect investors and markets.[2] Furthermore, New York Attorney General Andrew Cuomo has launched an investigation into shorters for allegedly spreading false rumors in the financial market.[3] These enforcement responses prompt the question; do shorters have a legitimate role to play in a fair and open market? [More]

Enron and Citigroup Settle: MegaClaims Litigation Comes to an End

by Elizabeth Rodgers April 16 2008, 10:16
I. Introduction

In late March Enron Creditors Recovery Corp. ("Enron") settled its latest and final MegaClaim against Citigroup, the largest bank in the U.S. [1] Citigroup agreed to pay $1.66 billion to Enron over its alleged responsibility in Enron's downfall. [2] In addition, Citigroup is releasing $4.25 billion in claims against the Enron estate, including a $4 billion claim reserve established by the U.S. Bankruptcy Court for the Southern District of New York. [3] Citigroup denied any wrongdoing in its dealings with Enron, but stated that it settled solely to avoid the expense and uncertainty of litigation. [4] Trial was set to start in April. Initially, Enron had sought $3 billion from Citigroup, alleging that number represented the amount fraudulently transferred by Enron to Citigroup. [5] Enron contended that Citigroup, in particular, played a central role in its collapse. [6]

This settlement effectively put an end to the MegaClaims litigation. John Ray III, Enron President and Chairman of the Board, marked the occasion, saying, "today's settlement marks an enormous accomplishment for the Enron estate, as it concludes the MegaClaims litigation and allows us to return over $5 billion to creditors of the Enron estate, including approximately $2.1 billion plus interest, gains and dividends to the Yosemite/CLN Trust claim holders." [7] [More]



Is a Franchise for You? Making the Right Decision on Starting a Franchise

by Rayna Gokli April 15 2008, 21:12
I. Introduction

Starting a franchise can be a lucrative business. However, franchising is also an expensive start-up venture and can have significant legal consequences if not done properly. This article will first define a franchise and discuss the different types. It will then discuss financing a franchise and the legal issues of starting a franchise. Finally, the article will conclude by discussing the best way to go about starting a franchise. [More]

Ambiguity In Contemporary Money Laundering Statutes

by Dominique Carrol April 15 2008, 13:27
I. Introduction

At the end of last year, the United States Supreme Court granted a petition for writ of certiorari for the appeal of convicted felon Humberto Fidel Regalado Cuellar. [1] The Court's ultimate decision in the case of United States v. Cuellar will be of immense importance, and can have far reaching effects. The Cuellar case will allow the United States Supreme Court to give lower courts guidance in the proper interpretation of current statutes criminalizing money laundering. Currently, a plethora of crimes are in the penumbra of money laundering charges. Such aggressive interpretation and application of money laundering charges is troubling in light of its original purpose. Clearly, much has changed since the passage of the 1970 Bank Secrecy Act "BSA". [2] Furthermore, the meaning of money laundering has expanded to "cover almost any financial crime", and marks a far departure from its original conceptualization. [3] Should the Court affirm Cuellar's conviction and potentially allow prosecutors "unfettered discretion to go after anyone who touches dirty cash?" [4] On the contrast, should the Court return money laundering charges to the intent of the 1986 Congress that moved to criminalize the act of money laundering? [More]



Are Your Gift Cards Safe?

by Elizabeth Rodgers March 24 2008, 10:24
I. Introduction

On February 19th, 2008 the specialty retailer Sharper Image filed for bankruptcy under Chapter 11 and announced that it would no longer be accepting its gift cards. This came as a shock to consumers, who suddenly found their holiday gift cards worthless. "'That is typical of businesses that reorganize under Chapter 11 bankruptcy, which treats gift cards as a loan to the company, not as cash.'" [1] Chapter 11 allows for an automatic stay of recovery for any claim against the debtor that arose before the filing of the bankruptcy claim. [2] In response to this announcement, C. Britt Beemer, chairman of America's Research Group, projected that this would greatly affect Sharper Image's future. "'You will see a lot of frustration among customers. You basically stole [money] out of the customers' pocket. They will never forgive you.'" [3]

Just two and a half weeks later, on March 7, 2008, Sharper Image announced it would resume its gift card program, but with certain conditions. Sharper Image's website explains that the program is purely voluntary, applying to all gift cards issued prior to its filing Chapter 11. [4] A person choosing to redeem his gift card must spend the entire balance of the card and the purchase total must be at least twice the amount on the gift card. [5] For example, if a person has a $100 gift card the total purchase must be at least $200, using the full balance of the card. If a person chooses not to redeem according to the new policy, he may have a claim in the bankruptcy action, which would be classified as a priority unsecured claim. [6] This is high up in the unsecured food chain, but would not be paid until all secured claims, those backed by assets, were paid out. Sharper Image Chief Executive Robert Conway explained, "'while not a complete solution, it does provide satisfaction to customers on a voluntary basis.'" [7] The website goes on to say that Sharper Image hopes it can honor gift cards without condition in the future, but it cannot be guaranteed. [8] Most Sharper Image retail stores are accepting gift cards, but the website can no longer honor them. [More]

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