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| COURSE CONNECTOR |
| ARTICLE SUMMARIES AND QUESTIONS |
| "Partners
in Crime," pp. 78-100: Enron epitomizes corporate scandal, yet
it did not operate in a vacuum. Documents reveal that several of the nation's
largest financial institutions did much more than enable Enron's fraudulent
financial practices. They frequently conspired to record loans as operating
cash flow, called prepays, and knowingly set up special-purpose entities
outside the legal guidelines. In an ironic twist, Enron is suing its partners
in crime. The company claims its economic reality was distorted by the
investment banks. In the end, Enron compiled $38 billion in debt, of which
only $13 billion was recorded on the balance sheet. J.P. Morgan, Citigroup,
and Merrill Lynch recently paid a total of $366 million in fines. But,
given their complicity in the scandal, the banks actually may be getting
off easy. This adaptation from the book The Smartest Guys in the Room, by FORTUNE Magazine's Bethany McLean and Peter Elkind, provides evidence that the incredible breach of business ethics extended beyond Enron to the company's investment banking partners. The article is a must-read for anyone entering the business world, as it offers insight on management, accounting, legal, and ethical principles. Discussion Questions:
"MCI: Is Being Good Good Enough?" pp. 117-124: In terms of dollar value, WorldCom -- now known as MCI -- racked up the largest financial fraud in history. Now, CEO Michael Capellas must make the top symbol of greed into a paradigm of integrity. This Herculean challenge has no precedent. In cleaning up MCI, Capellas must please and appease diverse constituencies such as MCI's corporate monitor Richard Breeden, creditors and bondholders, employees, and shareholders. He also needs to address the telecom's competition, and most importantly, figure out a way to fix MCI's business. Since taking over last December, Capellas has centralized management operations, forged an alliance with Breeden, and developed a vision for MCI. Still, the question remains whether anything will be good enough to save the company. Capellas's management style and strategies will be crucial to MCI's future. This article offers valuable insight about the intricacies of turning around a financially and morally bankrupt company. Discussion Questions:
"George Soros Is Mad as Hell," pp. 128-139: Financier and philanthropist George Soros has become one of the richest men in the world by recognizing signs that normal situations are suddenly turning abnormal. He believes these signs, frequently unearthed during random political conversations, indicate a clear boom/bust cycle or economic crisis. Currently, Soros is predicting a bigger economic crisis, based on his view that the Bush administration shortsightedly created a war on terrorism to bolster the country's long-term international objectives. In disgust, Soros has elected to spend $10 million of his own money to support the Democratic party in the 2004 Presidential election. Soros has correctly and consistently predicted changes in the world economy, without being able to explain how he does it. No matter what your politics are, Soros's views are interesting to note. George Soros is one of the most successful investors of all time. An analysis of his economic theories is important for students studying economics, investment, and international business. Discussion Questions:
"From Betamax to Kazaa: The Real War Over Piracy," pp. 148-156: In 1984, the U.S. Supreme Court ruled that manufacturers of copying equipment, such as VCRs and photocopiers, were not infringing on copyrights when they created a product that could reproduce protected materials. The reasoning was that the equipment was primarily developed for "noninfringing" usage, such as creating and watching home videos, and that the manufacturers couldn't control what happened once the equipment was installed at home. Fast-forward 20 years to the advent of online file-sharing services, which arguably do have the ability to monitor and restrict illegal use by their subscribers, and thus are not protected by the 1984 decision. However, an April 2003 ruling by a U.S. District Court judge surprisingly protects a newer crop of decentralized file-sharing services, because they have been purposefully set up to not have the ability to monitor file usage. The entertainment industry is appealing, and the case just might make it to the U.S. Supreme Court, where the future of the file-sharing industry ultimately will be decided. The legal debate about whether online music file-sharing services violate U.S. copyright law has yet to be settled. The lawsuits provide an excellent case study for business law students as well as those interested in the fields of entertainment and technology. Discussion Questions:
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