Case Study
Response 1
The three main directors involved in this case were Daniel Wilkie who was the chief operating officer, Timothy Mainprize who was the chief financial officer and Stephen Burroughs who was the company’s manager (Lampe, 2005).
Response 2
The three directors were charged with charges of deceiving auditors and dishonesty. Wilkie was charged with two offences of dishonesty as a company’s officer and misleading an auditor of the company, Mainprize was also charged with the same three offences and Burroughs was charged with a misleading a company’s auditor offence. The three directors made the auditors and the investors of the company believe that it was adequately reserved. In other words, they made these auditors and investors believe the company had attained an $8.6 million profit whereas it had actually incurred a $ 19.1 million loss.
Between 1 March and 6 May in the year 1998, Wilkie and Mainprize, on behalf of the company, arranged with General Cologne Reinsurance Australia, that they (FAI) would pay a premium of $67.5 million if they (General Cologne) would give back a reinsurance benefit of $65 million. Between 23 June and 26 June 1998, the same two executives made another deal with the same reinsurance company (General Cologne). This time FAI paid a premium of $89.7 million so that they could retain a benefit of $87 million. In another occasion between the 26 June and September 9 1998, the two men made another deal with the same company, General Cologne. This time, FAI paid $ 12.5 million of which no reinsurance could be recovered. All three men agreed to mislead the auditor about all these dealings (Lampe, 2005).
Response 3
A separate legal entity describes a legal entity that has a separate accountability to that of its owners. This mostly refers to corporations or limited liability companies. In other words, this type of entity has some similar rights in law as in the case of a person. For example, this entity can enter into contracts. In the same way, it can also be sued. It also caters for its own debts and benefits from the credit owed. In this case, FAI General Insurance is a separate legal entity. However, the directors of the companies were charged with offenses (Marson 10).
One of the reasons why they were taken to court is that they gave a false representation of information, which is an offense. The other reason is that they were entering into these deals on behalf of the company. In other world, they were the company when they were initiating these deals. Another reason is that they misguided an auditor, with the purpose of misleading the beneficiaries and the people who have an interest in the company’s financial statements. This is an offence. Separate legal entities have an advantage in cases when matters of breaching of contracts are concerned (Harris et al. 50). However, these were criminal offences performed by individuals on behalf of a company with the aim of misguiding the stakeholders, shareholders and other beneficiaries of the financial reports.
Response 4
The three executives breached the honesty law and the presenting true and fair financial statements of the company. They all entered into agreements that were aimed at misguiding the company auditors and giving a false representation of the company’s financial position. Misguiding the auditor was one offence, misguiding the company’s beneficiaries and being dishonest were the three offences. All these offences were done willfully (Bainbridge & Stephen 15).
Works Cited
Bainbridge, Stephen and Stephen Bainbridge. Corporate Law. New York, N.Y: Foundation Press, 2009. Print.
Harris, Jason, Anil Hargovan, and Michael Adams. Australian Corporate Law. Chatswood N.S.W: LexisNexis Butterworths, 2007. Print.
Lampe, Anne. “Trio Masked Sick FAI, Says Crown.” The Sydney Morning Herald, 13 September 2005. Web. 21 July 2011.
Marson, James. Business Law. Oxford, UK: Oxford University Press, 2009. Print.
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