Buad 301

HYDROFUIT INC. ANALYSIS

1. Problem Statement: Megabank manager Judson Dillon needs to decide whether to invest in HF Inc. based upon the risk of employing illegal immigrants.

2. Core issue: Judson needs to weigh the investment decision on whether or not a.) Is this an industry standard to hire illegal immigrants even though there are laws to prohibit that practice? b.) Can really anything be done about it on a practical level? What’s the significance of investing under these stipulations? What impact will that have on Megabank? Credibility? Legal problems? Liability? Bad press?

Factors:

1. Illegal Immigration.

a. Legal issues include new laws that inhibit the hiring of illegal immigrants

b. Fines may start at $250 per infraction.

Pros vs. Cons of Illegal Immigration:

Pros: cheap labor, proximity = accessibility, abundant workforce, low turnover , practical aspect of the industry, a legal system that is inequipped to solve the problem, and execute unfavorable jobs in the US. Legally a company was fined for “knowingly” hiring illegal immigrants. This buffers against any prosecution or bad press. Avoid litigation from migrant workers feeling violated for prosecution, especially considering the unprecedented case involving the Stranos, who merely felt they were following the law only to being successfully sued by the labor in question. The issuance of ATM cards which safeguarded against the rigors of thorough identification procedures and cut costs of wire transfers and fees. U.S economy is heavily dependent on the agricultural industry that is fueled by migrant workers. Megabank could fracture relationships with the agricultural industry if they are viewed as an organization that scrutinizes the practice of hiring illegals, which is a common place occurrence.

a. Cons: produces symptoms that include smuggling, trafficking, higher crime rates, the influx of “coyotes”, reports that Al-Qaeda has been in cahoots with Honduran “coyotes”. Fines from the government, takes jobs away from legal immigrants and legal citizens, financial unaccountability. Undesirable publicity from creating ATM cards for their migrant workers to avoid accountability of funds. A substantial amount of migrant workers crossing the border illegally are close in proximity to Hydrofruit therefore increasing potential exposure to scrutiny from the press and government agencies.

2. Upward Mobility in Megabank

a. Opportunity to serve on the board of directors if investment proves sound, job stability at risk? Needs to implement due diligence.

b. Annual returns would yield 25 to 35% range. Was approved by the investment committee.

Possible solutions:

1. Invest in Hydrofruit Inc.

a. Personal gain – leverage increase in influence, pay, salary, and reach in the Megabank.

b. Company benefit – Increase revenue 25-35%.

c. Lower risk – due to IRCA pilot program by Hydrofruit alleviating any legal liability that was intentional. This action taken by HF acts as a buffer for legal persecution of hiring illegal immigrants.

d. 10% of the workforce is undocumented, which is significant because the process for identifying these illegal workers and attributing fines takes more than the seasonal workload that is being executed by this 10%. Therefore the risk is low for any kind legal backlash.

e. “Reasonableness” clause reduces legal implications as the law stipulates that employers are not required to enforce the law when it comes to identifying illegal workers.

2. Walking Away from Investment with HF

a. Credibility, reputation, ethical concerns (does Judson want to be responsible for investing in a company knowing it engages in illegal hiring practices).

b. There is a strong possibility of a follow up to the failed bill in 2005 which Congress attempted to enact, that raises the penalty of hiring illegal immigrants to a felony status. Although the bill failed to pass, it raised awareness and could potentially mobilize a counter movement to the migrant labor force. Felony charges are considered criminal in nature which would drastically affect the company’s reputation and status, and possibly dissolve the company due to the fact that high level executives could face prison time.

c. “Reasonableness” clause is suspect due to the ambiguity of its application and definition. What is to say that a particular court may not deny the reasonableness practice implemented by HF, therefore causing a huge risk for Megabank.