The article review is showing the overall scope of corporate fraud and the impact it is having on a variety of businesses. This is because the ethical practices of corporate executives will have a major impact in determining if they are engaging in questionable activities. In this particular case, Richard Conner became the CEO of Maine Today Media. When he was starting the position, many people believed that he is someone who could save the troubled newspaper from the challenges of declining revenues and increasing costs. This occurred in response to more customers accessing their news online. (Turkel, 2012)
However, after being at the helm for nearly two years, he suddenly resigned. Citing personal reasons and working around the clock were causing him to become burnt out. This is when the company began to face even more financial challenges. After it was disclosed; that he had abused his position in order to reap lucrative financial benefits for himself and his family. However, Connor defended these transactions, claiming they were necessary in order to effectively run the company and reduce its costs. (Turkel, 2012)
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"The Impact of Federal Regulations on Identifying, Preventing and Eliminating Corporate Fraud".
These challenges are showing the inability of federal regulations to identify, prevent and eliminate corporate fraud. To fully understand what is taking place requires examining the effectiveness of these laws in conjunction with this situation. These elements will highlight their capacity to prevent abuses and mitigate the damages on stakeholders. (Turkel, 2012)
The article is illustrating how federal regulations are reactive in preventing fraud and other abuses. This is because they are reactive and many of those who commit fraud will justify their actions as acceptable practices in running the company. The situation involving Richard Connor is showing this, with him claiming how these expenses were necessary to decrease liabilities. Yet, a more careful examination is demonstrating how most of the charges were a misappropriation of company funds for his personal use. Evidence of this can be seen with Turkel (2012) citing a number of areas most notably, “$287,224.78 in unauthorized salary increases / bonuses, $90,381.32 in unauthorized personal expenses charged to company credit cards, $70,352.49 in unauthorized payment of personal American Express card bills with company funds, $36,089.74 in unauthorized compensation for and use of company automobiles, $22,940.35 in unauthorized hand-written checks drafted by or at the direction of Connor, $6,000 for items such as home landscaping, personal dental work / a Camden vacation rental, $16,000 in unauthorized use of company funds to pay for another Camden vacation rental, $10,000 in an unauthorized wire transfer to Richard Connor and $5,000 in claim expenses.” (Turkel, 2012)
These expenses resulted in the company realizing added costs of $537,988.68. This caused their financial condition to become worse which nearly placed it on the verge of entering bankruptcy. What saved the firm was an insurance policy with Travelers Casualty & Surety Company. They conducted an extensive review of Richard Connor’s practices with a team of accountants over the course of one year. The results show, that he used the company’s funds to pay for personal expenses. (Turkel, 2012)
Richard Connor’s attorney claims that these individuals are trying to destroy his reputation and character. As he is claiming that the charges are completely fabricated and do not reflect the agreement he made with the company. In many cases, he feels that they can be explained. For instance, the Camden vacation rental was used as temporary housing for his family after they relocated to the area. Once they found suitable accommodations, is when they moved out. The purchase of a vehicle for his son was to reduce the costs of utilizing rental cars. (Turkel, 2012)
To make matters worse, another company where Connor was the CEO (i.e. Wilkes-Barre Publishing LLC) sued him in federal court. They claimed that he failed to repay $250,000.00 used for personal expenses including credit cards. Connor says that these charges are normal. This is because their newspaper (The Times Leader) was facing severe financial problems. He claims they are a part of the compensation package the company agreed to. Under these provisions, he took a voluntary pay cut. However, this allowed him to offset spending for unused bonuses and unpaid vacation time. (Turkel, 2012)
This is illustrating a pattern involving Richard Connor and the practices he was utilizing when he was the CEO of two different publishing companies. In both cases, the board of directors brought him in to turn around fledgling businesses that were struggling to make it. However, in spite of doing this, he pushed through his own personal agenda which rewarded himself and his family with company funds. The long term effects are that he forced these firms on the brink of insolvency. (Turkel, 2012)
This is illustrating that federal regulations are ineffective in identifying, preventing and eliminating corporate fraud. Instead, they are more reactive to what is happening by not imposing stiff penalties and those who engage in this kind of behavior. To prevent this from occurring requires changing the various laws. One possible approach is to have provisions in place prohibiting someone from becoming the CEO of another company if they are under investigation or facing litigation for fraud. This will allow them to settle their outstanding legal issues and it will serve as a safeguard in protecting firms which are vulnerable to these charlatans. (Turkel, 2012)
- Turkel, T. (2012, April 24). Press Herald Parent Accuses Former CEO. McClatchy Tribune News.
