Penn Square Bank & Down Corning Bankruptcy Essay

According to Norm Bowie, sometimes being moral enhances the bottom border rather than sign ups it (Hartman, 2005, p108). Unfortunately, in the instances of Penn public square fag endt building and the Dow Corning camberruptcy, that may non take over been the case. The avocation will examine the particulars of these situations and discuss the honorable issues present for each.Penn public square BankPenn form Bank was a small bank that played a large exercise in the Oklahoma banking crisis of the early 1980s. In an effort to maximize on the cabbage of the booming oil industry, the upper steering of Penn Square Bank cut corners in several areas of its new lending division. enfranchisement to take million-dollar loans became lax. Collateral valuation and tax enhancement impute entry was severely over estimated with erupt arrest of the funding to support such claims. contri unlesse contracts were with casual deals and unspecific terms. Credit was wide based upo n unverified personal garner paid for by the client. These reenforcement errors conduct to loans not properly secured (Caskey, 1985).In addition, Penn Square was more and more money, which assistd errors in revenue recognition as the bank reliable over estimated valuation claims without requiring loan or interest payments. Thus, on paper the bank looked successful without ever possessing the funds to support its lending endeavors. Finally, credit was extended without unbent verification of asset valuation or proper documentation, and re-extended when the client could not relieve oneself the payments necessary to support the lofty loans (Caskey, 1985). apiece of Penn Square Banks marchs represents a form of financial statement cunning, which guide to its downfall in 1982. According to pseudo Examination, there are three ways to warn financial statement impostor (1) reduce the pressure to commit the fraud, (2) reduce the opportunity to commit the fraud, and (3) reduce t he rationalisation of the fraud (Wells, 2005). However, in this instance, most if not all of the fraud committed can be attributed to demanding goals set by Penn present Bank possessor, Bill Jennings.As explained by Hartman, the driving force of profit maximation created a business environment to facilitate fraud (2005). Because profit was the sole motivator, documentation was inadequate, collateral valuation and revenue recognition was overstated, and credit extension was unverified and inferior. Instead, Penn Square Bank should take a leak considered the following measuresAn relapse or review board should be been established to oversee verification of credit or collateral valuation and envision the risk associated with each loan.Documentation requirements should subscribe been heavily implement and maintained by the review board.Contract and loan deals should have been regulated to the pipice with strict documentation requirements.Disclosures should have been made re garding the neglect of loan and interest payments.Asset valuation and revenue recognition should have been accurately portray to investors, clients, and potential buyers.Upper management should have established company ethical standards and enforced these standards with strict consequences for violation without exception. Unfortunately, all the measures to deter fraud that should have been considered were undermined by the owners overwhelming demand for success. Thus, Jennings fate to maximize profits and increase sales created the pressure, opportunity, and rationalization to commit each proceeding of fraud.Dow Corning BankruptcyDow Corning Corporation is the big lay down in silicone and silicone-based material wareion. unless in 1995, the company filed for Chapter 11 unsuccessful person to protect itself from lawsuits regarding their silicone-based breast plants. Some advocated that the action was an effort to vitiate compensating women for their injuries (Book review, 1996, p7). However, according to Hartman, Chapter 11 nonstarter is think to protect companies from creditors eon it undergoes restructuring in an effort to stave off liquidation. By doing so, the company continues business, pays taxes, and provide jobs but is allowed time to reorganize to triumph over its economic hardship (Hartman, 2005).The ethical quarrel is to use Chapter 11 as it is intended as a restructuring tool to avoid losing everything rather than file for Chapter 11 as a way of cheating its creditors out of owed money. Hartman suggests that what is ethical in regard to failure is to go beyond what the laws require and instigate the debt agreements made with creditors (Hartman, 2005). Dow Corning seemed to have that same perspective. lodge historic period later the company emerged from bankruptcy after settling the lawsuits for a payout of $3.3 one thousand million over the next 15 years (Arndt, 2004).During the time under Chapter 11, the company reorganised&nb spitself to refocus silicone production to build up fabrics, materials, and pharmaceutical products (Arndt, 2004). These sales and expanding markets will help Dow Corning to pay its debts to the 300,000 women named in the settlement (Sissell, 2004). Thus, Dow Corning is Chapter 11 bankruptcy free but as yet upholding its ethical obligation to the wronged party and its creditors.Although Dow Cornings actions following the Chapter 11 emergence was ethically sound, its actions leading to the filing was anything but. Problems with Dow Cornings silicone breast implants began as early as 1984 when they lost a lawsuit claiming the implant caused medical illness such as autoimmune disease.During the investigation for this lawsuit, lawyers found usher showing Dow Corning executives were aware of complaints from doctors, concerns about the lack of long-term testing, and cases of the implant bursting during surgery. In addition, the withdraw that supposedly proved the effectiveness and gu ard of the product revealed detrimental long-term make on the animals under experimentation (Book review, 1996).However, throughout all the breast implant concerns, elaborate Corning continued to advocate the safety of their product going as far as to hire high profile and exceedingly expensive teams of legal and public dealings specialists. In addition, allegations were present of executives attempting to destroy call forth internal documents suggesting upper management was essay to cover up its liability in the claims. The 1984 lawsuit found Dow Corning guilty of fraud and deceit stating the company provided inferior and fractional information by understating the risks to make an advised decision (Book review, 1996). More important, it revealed the unethical doings of the executives and company as a whole.