CASE STUDY

CASE STUDY: The 5 Biggest Corporate Scandals of 2015

Chris Matthews, Stephen Gandel Dec 28, 2015

The Volkswagen Emissions Scandal

When Volkswagen revealed in September that it had installed software on millions of cars in order to trick the Environmental Protection Agency’s emissions testers into thinking that the cars were more environmentally friendly than they were, investors understandably deserted the company.

Volkswagen lost roughly $20 billion in market capitalization, as investors worried about the cost of compensating customers for selling them cars that weren't compliant with environmental regulations.

The company not only has to deal with compensating their customers, but it will also need to contend with potential fines from regulators as well as a reputational hit that could severely affect its market share.

The FBI also indicted five sports marketing executives at the same time. And the scandal spooked some of America’s largest corporations, including Coca-Cola and McDonald’s-top FIFA sponsors. These firms called on the governing body to fire its leadership and enact tough reforms.

Toshiba Accounting Scandal

No list of corporate screw-ups would be complete without a good old-fashioned accounting scandal. In September, electronics conglomerate Toshiba admitted that it had overstated its earnings by nearly $2 billion over seven years, more than four times its initial estimate in April.
CEO and President Hisao Tanaka resigned from the firm, and an independent investigators found

that “Toshiba had a corporate culture in which management decisions could not be challenged” and “Employees were pressured into inappropriate accounting by postponing loss reports or moving certain costs into later years.”

Valeant's Secret Division

In October, short seller Andrew Left accused drug company Valeant of using a specialty pharmacy company Philidor to artificially inflate its sales. Valeant denied the charges. But the fact that Valeant had never discussed its close ties to Philidor raised questions about Valeant's, and Philidor's, sales practices. It also shook investors' confidence in the acquisitive drug company, which had racked up debt as it did deals.

Valeant (VRX, +1.28%) could still be on the hook if Philidor broke any laws. Valeant employees appear to have worked at Philidor under aliases to hide their identities. And Valeant had paid $100 million for an undisclosed option to acquire Philidor for no additional dollars whenever it wanted, essentially giving Valeant ownership of the company.

Valeant has appointed a special committee of its board, and an outside investigator, to look into the company's ties to Philidor, but it has yet to report its findings. Valeant said that Philidor sales never amounted to more than 7% of its total sales. Valeant's shares fell 75% in the wake of these revelations, to just over $70 from a high of $260.

Also contributing to the stock fall was the fact that Valeant had been accused over the summer of price gouging, buying up drugs and then rapidly raising their prices. A number of members of Congress, including presidential hopeful Bernie Sanders, have called for an investigation into the company's drug pricing practices. And in early October, the company confirmed that it had received a federal subpoena.

Many well known hedge funders, including Bill Ackman, who has defended the company, suffered big losses on Valeant stock in the wake of the scandal.

Turing Pharmaceuticals and Martin Shkreli

Martin Shkreli became known as the bad boy of the drug industry after his drug company, Turing, increased the price of a 62-year-old drug that treated HIV patients by 5,000% to $750 a pill. But it's what he did before that could land him in jail.

In mid-December, the government arrested Shkreli on charges of stock fraud related to his activities while at Retrophin, the drug company he ran before Turing. The former hedge fund manager is accused of using shares of Retrophin to pay off investors who had lost money with a hedge fund he ran in the past. The government described Shkreli's alleged behaviour as similar to a ponzi scheme.

Shkreli, who maintains he is innocent, says there is little evidence of fraud because his investors didn't lose money. Shkreli, who has been defiant on Twitter about the allegations against him, bought the sole copy of a Wu-Tang Clan album for $2 million. He has had called himself the most successful Albanian. Mother Teresa, also an Albanian, presumably would not be proud.

Assessment Marking Rubric

Question 1

• Clearly understands ethical issues and gives comprehensive explanations

• Clearly understands ethical issues and gives in-depth explanations

• Understands ethical issues and gives sound explanations

• Shows some understanding of the ethical issues and provides explanations

• Shows limited understanding basic or no explanations

150 words /5

• All aspects of the discussion are relevant

• Most aspects of the discussion are relevant

• Some aspects of the discussion are relevant

• Aspects of the discussion are sometimes relevant

• Meaning is unclear
• Many of the aspects of the

Question 2

• No plagiarism
• Clearly understands

• Clearly understands responsibilities of individuals and management

• Understands responsibilities of individuals and management
• Some aspects of the discussion

• Shows some understanding of the responsibilities of individuals and management

400 words /10

management
• All aspects of the discussion are

• Most aspects of the discussion are relevant

are relevant
• Discussion is supported by a

• Aspects of the discussion are sometimes relevant

individuals and management • Meaning is unclear
• Many of the aspects of the

High Distinction Distinction Credit Pass Fail 85–100% 75–84% 65–74% 50–64% 0–49%

• Discussion is supported by a substantial range of credible and current sources

• Discussion is supported by a wide range of credible and current sources

• Discussion is supported by a range of credible and current sources

• Discussion is supported by some sources but not always credible and current

discussion are not relevant
• Discussion is not supported by

• Sentences and paragraphs are well structured and clear so the reader can focus on what is written.

• Sentences and paragraphs are consistently well structured
• Vocabulary is comprehensive

• Sentences and paragraphs are mainly well structured

• Sentences and paragraphs are readable but with grammatical errors

credible and current sources (does not use minimum references)

• Vocabulary is professional, appropriate and extensive

• Vocabulary is limited
• Substantial errors in grammar,

• Many grammatical, vocabulary and spelling errors

• Grammar, spelling and punctuation are flawless, which allows the reader to focus on the message.

presented in terms of KBS guidelines and assignment instructions with minimal exceptions

presented in terms of KBS guidelines and assignment instructions with some exceptions

spelling and punctuation • Document professionally

• The main points and new technical terms are not explained, or are ambiguous

• Document professionally presented in terms of KBS guidelines and assignment instructions

• In-text referencing and reference list format correct with limited errors

• In-text referencing and reference list format correct with some errors

presented in terms of KBS guidelines and assignment instructions with a number of exceptions

• Document poorly presented and does not comply with KBS guidelines and assignment instructions

• In-text referencing and reference list format correct

• No apparent incidents of plagiarism

• Evidence of plagiarism
• Shows limited understanding

responsibilities of individuals and

of the responsibilities of

relevant
• Discussion is supported by a

• Discussion is supported by a wide range of credible and current sources

range of credible and current

• Discussion is supported by some sources but not always credible and current

discussion are not relevant
• Discussion is not supported by

substantial range of credible and

sources
• Sentences and paragraphs are

current sources
• Sentences and paragraphs are

• Sentences and paragraphs are consistently well structured
• Vocabulary is comprehensive

mainly well structured
• Vocabulary is sound
• Some errors in grammar,

• Sentences and paragraphs are readable but with grammatical errors

credible and current sources (does not use minimum references)

well structured and clear so the reader can focus on what is written.

• Minimal errors in grammar, spelling and punctuation

spelling and punctuation

• Vocabulary is limited
• Substantial errors in grammar,

• Comments are poorly structured and unclear

• Vocabulary is professional, appropriate and extensive

spelling and punctuation

• Many grammatical, vocabulary and spelling errors

COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969

• Minimal errors in grammar, spelling and punctuation
• Document professionally

• Vocabulary is sound
• Some errors in grammar, spelling and punctuation • Document professionally

• Comments are poorly structured and unclear

• No plagiarism

• No plagiarism

• In-text referencing and reference list format contains significant errors

• In-text referencing and reference list format incorrect or omitted

This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B.

Question 3

• •

• Clearly identifies where breaches occur

• Understands where breaches occur

• Shows some understanding of where breaches occur

• Evidence of plagiarism
• Shows limited understanding

300 words /10

demonstrate an understanding and is not supported by credible and current sources (does not use minimum references)

Question 4

• •

• Clearly identifies preventative steps using quality examples
• Most aspects of the discussion

• Identifies preventative steps using appropriate examples Some aspects of the discussion are relevant

• Identifies some preventative steps using some examples • Aspects of the discussion are

• Evidence of plagiarism • Able to identify limited

350 words /10

• •

are relevant
• Analysis demonstrates an in-

• Analysis demonstrates a sound understanding and judgement, supported by a range of credible and current sources

sometimes relevant
• Analysis demonstrates some

able to using examples
• Meaning is unclear
• Many of the aspects of the

•

Grammar, spelling and punctuation are flawless, which allows the reader to focus on the message.
Document professionally presented in terms of KBS guidelines and assignment instructions
In-text referencing and reference list format correct
No plagiarism
Clearly identifies where breaches occur
Analysis demonstrates comprehensive understanding and valid judgement, supported by a substantial range of credible and current sources
Sentences and paragraphs are well structured and clear so the reader can focus on what is written.
Vocabulary is professional, appropriate and extensive Grammar, spelling and punctuation are flawless, which allows the reader to focus on the message.
Document professionally presented in terms of KBS guidelines and assignment instructions
In-text referencing and reference list format correct
No plagiarism
Clearly identifies preventative steps using high quality examples All aspects of the discussion are relevant
Analysis demonstrates comprehensive understanding and valid judgement, supported by a substantial range of credible and current sources

• Document professionally presented in terms of KBS guidelines and assignment instructions with minimal exceptions

• Document professionally presented in terms of KBS guidelines and assignment instructions with some exceptions

• Document professionally presented in terms of KBS guidelines and assignment instructions with a number of exceptions

• The main points and new technical terms are not explained, or are ambiguous

•

• Document poorly presented and does not comply with KBS guidelines and assignment instructions

•

• No plagiarism

• No plagiarism

• No apparent incidents of plagiarism

•

• Analysis demonstrates an in- depth understanding and sound judgement, supported by a wide range of credible and current sources

• Analysis demonstrates a sound understanding and judgement, supported by a range of credible and current sources

• Analysis demonstrates some understanding and judgement, supported by some sources but not always credible and current

where breaches occur • Analysis does not

•

• Sentences and paragraphs are consistently well structured
• Vocabulary is comprehensive

• Sentences and paragraphs are mainly well structured

• Sentences and paragraphs are readable but with grammatical errors

• •

• Minimal errors in grammar, spelling and punctuation
• Document professionally

spelling and punctuation • Document professionally

• Many grammatical, vocabulary and spelling errors

•

• In-text referencing and reference list format correct with limited errors

• In-text referencing and reference list format correct with some errors

• In-text referencing and reference list format contains significant errors

• Document poorly presented and does not comply with KBS guidelines and assignment instructions

•

COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969

• In-text referencing and reference list format correct with limited errors

• In-text referencing and reference list format correct with some errors

• In-text referencing and reference list format contains significant errors

• In-text referencing and reference list format incorrect or omitted

presented in terms of KBS guidelines and assignment instructions with minimal exceptions

presented in terms of KBS guidelines and assignment instructions with some exceptions

presented in terms of KBS guidelines and assignment instructions with a number of exceptions

• The main points and new technical terms are not explained, or are ambiguous

• No plagiarism

• No apparent incidents of plagiarism

depth understanding and sound judgement, supported by a wide range of credible and current sources

understanding and judgement, supported by some sources but not always credible and current

discussion are not relevant • Analysis does not

• Vocabulary is sound
• Some errors in grammar, spelling and punctuation • Document professionally

• Vocabulary is limited
• Substantial errors in grammar,

• Comments are poorly structured and unclear

• No plagiarism

• In-text referencing and reference list format incorrect or omitted

• Sentences and paragraphs are

• Sentences and paragraphs are

demonstrate an understanding and is not

This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B.

preventative steps and not

Total /35

• Sentences and paragraphs are well structured and clear so the reader can focus on what is written.

• Sentences and paragraphs are consistently well structured
• Vocabulary is comprehensive

mainly well structured
• Vocabulary is sound
• Some errors in grammar,

readable but with grammatical

supported by credible and current sources (does not use minimum references)

• Vocabulary is professional, appropriate and extensive

presented in terms of KBS guidelines and assignment instructions with some exceptions

spelling and punctuation • Document professionally

• Many grammatical, vocabulary and spelling errors

• Grammar, spelling and punctuation are flawless, which allows the reader to focus on the message.

presented in terms of KBS guidelines and assignment instructions with minimal exceptions

• In-text referencing and reference list format correct with some errors

presented in terms of KBS guidelines and assignment instructions with a number of exceptions

• The main points and new technical terms are not explained, or are ambiguous

• Document professionally presented in terms of KBS guidelines and assignment instructions

• In-text referencing and reference list format correct with limited errors

• No plagiarism

• In-text referencing and reference list format contains significant errors

• Document poorly presented and does not comply with KBS guidelines and assignment instructions

• In-text referencing and reference list format correct

• In-text referencing and reference list format incorrect or omitted

• No plagiarism

COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969

• Minimal errors in grammar, spelling and punctuation
• Document professionally

spelling and punctuation • Document professionally

errors
• Vocabulary is limited
• Substantial errors in grammar,

• Comments are poorly structured and unclear

• No plagiarism

• No apparent incidents of plagiarism

This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B.

• Evidence of plagiarism