It might not seem like the biggest problem to many people, but the illegal/unauthorized sales of professional hair products is a big issue in the beauty product industry. I work in this field, and I know all about how you can find professional brands for sale at places like Fred Meyer’s, Walgreens, and Amazon even though they are not supposed to be there. Many professional brands have contractual agreements with the companies they sell to in order to avoid diversion, yet these contracts are constantly broken in secret. Why is this a problem? First of all, the sellers of these products are making money that should be going to the true retailers and salons that sell the products to their clients. Also, these products being sold are typically expired, contaminated, or not the advertised product at all! Using expired or contaminated hair products can leave nasty residue on the scalp and in hair causing many other issues, including infections. Chapter 6 in our textbook briefly mentioned how beauty products are not regulated, and this applies for hair care as well. These secret sales are not usually done by the brand themselves, but hurts them implicitly. Unfortunately, this problem has been going on so long that only the consumers can be the fix for this.

https://www.abcactionnews.com/news/local-news/i-team-investigates/out-of-date-contaminated-and-counterfeit-salon-brands-could-end-up-on-store-shelves

Nineteen years ago on the year 2000 Bridgestone Firestone Tire and Rubber Company installed faulty tires onto Ford trucks and SUVs. In the U.S only it is stated that 271 deaths and 800 injuries were linked to these faulty tires. In Venezuela having 46 deaths linked to the tires and the Middle East having seven deaths. Firestone recalled 6.5 million tires and Ford recalled 13 million tires. It’s crazy how many tires and deaths had to occur for these defective tires to be noticed and I think its safe to assume that any company of any kind that produces something would test for defectiveness. Millions on millions of tires just went by these companies noses and if it weren’t for the legal cases  Henningsen vs. Bloomfield Motors (1960) and Greenman vs. Yuba Power Products (1963), it is possible Firestone and Ford wouldn’t be held accountable if they weren’t be negligent, but those cases make manufacturer’s responsible regardless of negligence when a defective product causes injuries as a result.

References:

https://www.kiplinger.com/slideshow/investing/T052-S000-10-biggest-product-recalls-of-all-time/index.html

https://content.time.com/time/business/article/0,8599,128198,00.html

I chose to research health insurance corporations this week, looking for cases involving mishandling of patient claims. In the 17 years I’ve worked in Patient Finance, I’ve appealed hundreds of high dollar claims that should have been paid by the insurer.

In 2005, United Healthcare acquired Pacificare, and the transition did not go as planned. In an effort to save money, United Healthcare began denying claims for high cost, sometimes life-saving services provided to it’s members. In total, the California Department of Insurance found 908,000 violations against it’s insured members. UHC is looking at a minimum of $91 million in fines, with an additional $82 million in appeal. If the decisions are upheld, this case sets a precedent in protecting insured patients against cost saving tactics by health insurers.

Haefner, M. (n.d.). UnitedHealth faces $91M fine after California court’s fair claims decision: The California Court of Appeal upheld regulations for fair claims settlements after a 10-year legal challenge, paving the way for $91 million in fines against a UnitedHealthcare subsidiary, the California Department of Insurance said Sept. 21. Retrieved from https://www.beckershospitalreview.com/payer-issues/unitedhealth-faces-91m-fine-after-california-court-s-fair-claims-decision.html

https://www.cnn.com/2019/01/28/health/california-supreme-court-insurance-commissioner-decision/index.html

https://list25.com/25-biggest-corporate-scandals-ever/3/

Global Crossing Ltd. could not fight off its debts of $12.4 billion in 2002 and filed for bankruptcy. The debt was shared  by 4 CEO’s that each acquired $23 million in personal loans that ended up being forgiven. This company’s filing for bankruptcy is the 7th largest in American history. The bankruptcy resulted in many losing their jobs.

Theranos is a prime example of a company being unethical to its consumers. Started by Elizabeth Holmes in 2003, she created a product that was suppose to revolutionize healthcare by being able to detect health problems with just a couple drops of blood. This product was supposed to be cheaper and more convenient and readily assessable for any consumer. After years of dodging and fibbing information about the device, they were finally exposed of using other lab materials and denied any accusation of it, as well telling consumers wrong health information leading them to believe they had issues that weren’t true. Over all, this company did a lot of terrible things and thankfully there was a whistleblower to prevent anymore false claims.

https://www.refinery29.com/en-us/2019/01/222855/theranos-scandal-timeline-what-happened-elizabeth-holmes-documentary

In 2015, one of Japan’s oldest and most established corporations admitted to overstating its profits by nearly $2 billion dollars over the past 7 years (Addady 2015). According to CNN’s Andrew Stevens, investigators claimed that the corporate culture which existed at Toshiba discouraged and intimidated employees from going against the bosses will. As a result, employees were reluctant to speak or act out against the CEO’s inflating its earnings to reach ambitious targets. When this scandal was revealed to the public, billions of dollars were wiped off the share price. Additionally, Toshiba’s reputation took a major hit.

https://www.fortune.com/2018/09/08/toshiba-accounting-scandal/

This week we examined what consumers mean to business. We are the driving force for almost all interactions within the economy. You would think that those that are producing goods and services to the consuming masses would care, yet after reading about Martin Shrkeli and his many accounts of dehumanizing the market for corporate greed, there are signs that they really do not care about anything than the money. He the epitome of the greed that controls Big Pharma. For he is most known for his price gouging of HIV and cancer medication. This hiked price went from 13.50 to 750 USD. He has gone on record to mock any objections to his price hiking with remarks that shame does not affect the price of a share. He goes on to claim that the money he is taking from those that buy into the good, other corporations, and putting those to use in charities. The consumer themselves cannot be angry at him for trying to make money to help those in need. He has since become a convicted felon and has to make up for his misgivings with the payment of heavy fines and the refund of millions back to consumers. I would say that in his case there should be no forgiving what he had done. He has gotten away with so much that one of his many unethical dealings would be bound to catch up to him. In relation the Thanks for Smoking video, he was sending a message that his intentions were to help the masses rather than to help himself. If that were the case Martin, then why increase the price of such a helpful pharmaceutical tool? Then why are you a current convicted felon? Unfortunately he knows the answers, yet he does not care.

Article from the Guardian:

https://www.theguardian.com/business/2016/oct/28/martin-shkreli-daraprim-hiv-drug-price-hike-interview

We’ve all seen examples of scandals come up in the corporate world. Samsung’s exploding phones, Bayer Aspirin’s scandal, and many more. But we’ve also seen scandals of similar scale come up in the sports world, such as when Russia was banned completely from the 2018 Winter Olympics for using performance enhancing drugs. The scandal that resonates the most with me, however, is one that encapsulates both the corporate and the sports world: Lance Armstrong’s doping scandal. For those who don’t know, Lance Armstrong was a professional cyclist. He was diagnosed with testicular cancer in the mid-90’s. While fighting cancer, he created the Livestrong Foundation, which raised money to help cancer patients and fund cancer research. In 1997, he was declared cancer free, and returned to cycling, winning the Tour de France, one of the world’s premier cycling races. He would proceed to win seven straight Tour de France titles, earning tons of money in corporate sponsorships, raising loads of money for the Livestrong Foundation, and cementing himself as an American cycling legend. However, in 2012, the United States Anti-Doping Agency ran an investigation on Armstrong. He was found guilty of doping, and was stripped of his seven titles. In 2013, he admitted to doping in a televised interview, saying that he believed he was “leveling the playing field” by doping, rather than gaining an unfair advantage over competitors. He was also found to have pressured numerous other American cyclists into also taking performance enhancing drugs. He claimed he lost approximately $75 million in a single day after his admission, through his loss of sponsorships and other public support.

https://ethicsunwrapped.utexas.edu/video/armstrongs-doping-downfall

When it comes to a large corporation dropping the ball and negatively impacting consumers, I immediately go back to the recall of the Samsung Galaxy Note 7. I used to work retail for a large cellular company here in town. During the time of the Galaxy Note 7 launch, consumers were eager to get their hands on the latest phone from Samsung. The Samsung Galaxy S series was 1 generation ahead at the time (Note 5 came out during the Galaxy s6). So samsung decided to ultimately skip the Note 6 and named their next Note product the Note 7 to be within the timeframe of the Galaxy S7.

Shortly after the release, there were reports around the globe of the battery overheating leading to the phone exploding. I distinctly remember reading reports on phones abruptly exploding in people’s pockets leading to second degree burns. I also recall seeing footage of a Jeep that was set ablaze and completely destroyed due to a Galaxy Note 7 that was left in the vehicle. Luckily there were no reports of anyone dying in relation to the Galaxy Note 7 battery issues, but there was definitely potential for casualties. i have to give props to my former employer’s quality assurance team for keeping the phones in warehouse (eventually sending back to Samsung) during that controversial period. Our company was able to avoid potential disasters.

This was a huge deal for Samsung given that they were releasing one of the most anticipated smartphones of the year. The rush to release resulted in a manufacturer defect in the battery resulting in phones being set ablaze. There were even reports of replacement phones catching fire. Eventually Samsung discontinued production of the Galaxy Note 7. It just goes show that Samsung was so eager to hit the marketplace before the competitors (Apple in this instance), that they rushed their product resulting in lawsuits, consumer injuries, and a distrust between consumer and seller. While Samsung is still a relevant entity and his since regained trust in its products, there was a time where people were wary of purchasing anything samsung.

I’ve attached video compilation of the Galaxy Note 7 which also shows some of the reports that I mentioned above.

I picked a recent topic called Operation Varsity Blues. William Rick Singer, the founder of   Edge College & Career Network also known as “The Key,” was accused of accepting over 25 million dollars in bribery to accept students into elite colleges such as Yale University, Georgetown University, and Stanford University by falsely claiming a student as a competitive athlete and illegally boosting a student’s SAT scores. I choose this topic because it greatly impacts the education system in the U.S. if anyone can just pay for; rather than earn the acceptance into those elite schools, it lowers the value of earning it since there have been at least 50 cases that have been opened.

REFERENCES:

https://www.nbcnews.com/news/us-news/alleged-mastermind-cheating-scandal-involving-lori-laughlin-wore-wire-expose-n982421

https://www.justice.gov/usao-ma/investigations-college-admissions-and-testing-bribery-scheme

After a bit of research, I had come across a teething tablet that is used for babies to help with the pain they are having due to their teeth coming in. This product was used at all hours of the day as well as night to ensure a more comfortable feeling for the newborn at this time in their lives. The reason for the FDA banned this product is because of the inconsistent amounts of belladonna alkaloids that were found in each product. Belladonna poses a serious health hazard for children as the effects of this chemical are wide ranged and quite uncertain. This is an example of mislabeling as they were putting an exact dosage on every product produced but failed to meet what each label was reading.

I believe the outcome was necessary and ethical because of the amount of uncertainty this teething tablet could impose on children who were using this product. This product was officially recalled in October of 2016 and was removed from the shelves of all stores selling this item. I believe this is unethical and egregious because this company was labeling their product with what the consumers thought were facts knowing completely that they had no idea how much of this chemical was used in the making of each and every one of these teething tablets. Although the CEO and chairman of Standard Homeopathic Company released a statement apologizing I still do not believe it is right because I feel they are only sorry because they were caught.

References:

Office of Regulatory Affairs. “Standard Homeopathic Company Issues Nationwide Recall of Hyland’s Baby Teething Tablets and Hyland’s Baby Nighttime Teething Tablets Due to Mislabeling.” U.S. Food and Drug Administration. FDA, n.d. Web. 29 June 2019.

After looking at other people’s research such as plane recalls, vehicle disasters, fraud, and other things, I chose the incident that happened in 1982 which was the Tylenol Recall (Stockton, 2016). In the northern Illinois area in the summer of 1982, reports started to escalate about cyanide poisoning from Tylenol pain-reliever pills where adults and children suddenly started dying. The authorities said that the poison came from an Extra Strength Tylenol bottle which is the most common pain reliever in the country during that time. According to Stockton, an unknown poisoner took the medicines off the shelves and contaminated them with potassium cyanide, and returned the bottles back on the shelves (Stockton, 2016).

Johnson & Johnson, who was the parent company for Tylenol, acted immediately by preventing any retailers from selling their Tylenol bottles for safety purposes. The company recalled 31 million bottles of Tylenol products which estimated at roughly $100 million (Stockton, 2016). Johnson & Johnson came up with a new design for their medicine bottles which is a tamper-proof bottle to prevent any tampering on their products. Due to this incident, Johnson & Johnson’s share price with Tylenol tremendously decreased because of the number of deaths reported and the number of recall bottles. However, their immediate actions helped them solve the problem and prevented any more deaths, which caused the company to rise back from the dead after several months and even surpassed their pre-recall price by the end of 1983. According to Stockton, Johnson & Johnson company pointed out that while bad things can happen to good companies, the damage can be controlled with a quick response and obvious good-faith efforts to protect customers (Stockton, 2016).

Link:

https://allthatsinteresting.com/worst-product-recalls

References

Stockton, Richard. 2016. Three Massive Product Recalls, and The Chilling Circumstances Behind Them. April 11. Accessed June 29, 2019. https://allthatsinteresting.com/worst-product-recalls.

For module 6, I chose a very recent scandal in 2018 called the Facebook-Cambridge Analytica data scandal. Cambridge Analytica was able to harvest the personal data of millions of people on Facebook, without consent, using it for political advertising purposes. The data was used by various political organizations to attempt to influence public opinion. Politicians paid Cambridge Analytica to obtain data from the breach. It was said that information from the breach caused political gain for the 2015 and 2016 campaigns of the United States involving Donald Trump and Ted Cruz. Not only that, but the 2016 Brexit vote as well as the 2018 Mexican general election. The Scandal was brought to light in 2018 when a former Cambridge Analytica employee Christopher Wylie shared the knowledge of what Cambridge Analytica was doing. This prompted an apology by Facebook CEO Mark Zuckerberg calling in an “issue,” a “mistake,” and a “breach of trust.”

Facebook-Cambridge Analytica Scandal Article: https://www.nytimes.com/2018/04/04/us/politics/cambridge-analytica-scandal-fallout.html

After doing some research I decided to go with the Boeing 737 grounding by the FAA. In a rush to get a new more fuel efficient plane on to the market to compete with a new Airbus   model. It is reported that Boeing may have cut corners and received from the FAA a much more lenient safety certification approval. This rush in production lead to hundreds of people being killed in multiple crashes. The United States FAA was the last ground the 737. Whether it was faulty censors or lack of pilot training it is clear that all safety protocols and precautions had not been followed prior to it being released to market.

https://www.forbes.com/sites/danpontefract/2019/03/18/boeings-737-max-crisis-is-a-leadership-issue/#2a369ec46a0a

After a bit of research, I found out about the company from Italy called Parmalat. The company name refers to the Italian town, Parma, and the Italian word for milk, latte. We in the United States know of Parma from the cheese, and prosciutto ham. Calisto Tanzi came from 3 generations of proscuitto production. His “entreprenurial break’ came from UHT, ultra hot temperature, which is a way of producing milk that does not require refrigeration, therefore producing longer lasting milk. It was a huge hit with citizens Europe-wide. The Tanzi family was nicknamed “Italian royalty’, always acting in a humble and approachable manner, never flaunting fame or fortune, creating intense loyalty of support. Once used as a successful model in European business schools, failed ventures, however, were kept secret from the public and investors. They had a multitude of shell companies tied to various fiscal safe havens that helped the misbelief continue. After being audited, it was discovered that Parmalat and its daughter companies were not only bankrupt, but almost $20 billion in debt to Bank of America, Citigroup, and a number of other banks. There were also various personal accounts tied to Tanzi family members, totaling hundreds of millions of dollars.

https://www.nbcnews.com/id/4030254/ns/world_news/t/parmas-god-falls-sky/#.XRQZzIyIa-o

Firestone 500 Steel Belted Radials

In the late 1960’s — 1970, feeling the pressure from competitors, Firestone Tire began developing the all new steel belted tire named the “Firestone 500’.   By 1972 Firestone began producing and distributing their new technologically advanced tire.   However, with little R & D time the tire immediately began having serious problems.   The problem was identified, by Firestone, as the steel belts separating from the tire tread and/or inner tire body due to adhesive failure.   Even though there were serious safety issues with the tire Firestone continued to produce and distribute the product.   Only after 1000’s of reported accidents and up to 40 known fatalities was Firestone forced to recall their tires.   In 1978 Firestone had produced over 23 million of the defective tires between 1972 and 1980, most of which were recalled.   Firestone was not only held accountable for the recall, but was also fined by the US Government.

Firestone article can be found here:

https://www.autosafety.org/firestone-500-steel-belted-radials/

The toy company, Mattel, was involved in one of the biggest recalls in its history in 2007. These toys contained things like lead and small magnets.  Some toys that were recalled that summer were found to be extremely dangerous to children, like the small magnets that were able to be swallowed by small children.  As a result of these recalls, safety concerns have increased. Some toy companies have increased safety checks and have investigated their toys that are manufactured in China. In addition, one contract manufacturer in China, has lost their export license and went out of business, as the result of using lead paint on Mattel toys.

https://www.nytimes.com/2007/08/15/business/worldbusiness/15imports.html

In 2014, Snapchat was charged by the FTC for using ambiguity and concealment of facts as forms of deception to their consumers. They were ambiguous in informing their consumers that the photos and messages sent on the app would disappear after a set time. What they failed to mention was that there were ways for recipients to save photos without informing the sender. For example, with an Apple device there is a method that one can screenshot a photo without a notification being sent to the sender. There was also a feature that allowed users to connect the app to their phone numbers to find friends but these numbers were not verified which lead to photos and messages being sent to the wrong people. This lack of security allowed hackers to track down 4.6 million usernames and phone numbers. The case between Snapchat and the FTC was settled in an agreement to be truthful with their privacy promises to consumers and be monitored by a privacy program professional for the next 20 years. This caused the FTC to be more aware and strict in ensuring that companies market their apps honestly to consumers and held mobile app companies to higher standards.

https://www.ftc.gov/news-events/press-releases/2014/05/snapchat-settles-ftc-charges-promises-disappearing-messages-were

https://www.thoughtco.com/martha-stewarts-insider-trading-case-1146196

Not even the world’s most famous homemaker could escape the lure of corporate corruption when profit is involved. Dec 2001, Martha Stewart was involved in an insider trading triangle with the ImClone Systems CEO and her broker from Merrill Lynch. ImClone, a biotech corporation, was unable to get approval by the FDA of a large product which ended up dropping the publicly traded company’s stock price 16%. Before the information of the disapproved drug was made public, the former CEO sold $5 million in shares. Martha Stewart was informed of the disapproved medication and shares being sold, from the ImClone CEO by her broker with Merrill Lynch 2 days before it was made public, and was able to act on the insider information before the public. The tip Martha Stewart got allowed her to sell all her shares which saved a lose of $51,200. Martha ended up serving 5 months in federal prison, fined 4 times the amount she avoided losing in stocks, followed by 2 years of supervision. Oddly enough the public view of her is better than ever, this exposure didn’t weaken her current audience, and expanded the demographics of her brand.

https://www.washingtonpost.com/wp-dyn/articles/A33838-2004Mar5.html

Volkswagen Emissions Scandal

In 2014, a group of scientist from West Virginia discovered that Volkswagen had cheated on an emission test. It was later revealed by Volkswagen that this effected 11 million vehicles worldwide.   The test made the emissions seem cleaner than they really were; when in reality, the emissions were up to 40 times higher than the legal limits. Volkswagen lied to their customers and the regulators involved. The numbers produced from the test were great, but the program cheated by putting on a performance during the test. Ethically, Volkswagen failed on many accounts. They lied and manipulated to increase profits. Consumers had no way of knowing this was happening and trusted the corporation. These corporations look to cheat the consumers based on their shear size and reach. They believe we are easy to take advantage of and they can get away with things that are ethically wrong. In the end, Volkswagen did the right thing by first giving compensation for lost value and later buying back or fixing the cars. Public image is key and even with all the power a corporation may have, a scandal can break a corporation.

https://money.cnn.com/2016/09/08/investing/wells-fargo-created-phony-accounts-bank-fees/index.html

In 2016 society learned of the fraudulent behavior of the popular Wells Fargo Bank. Employees had created “ghost’ accounts and submitted credit card applications in customers names that they had not signed up for. Then these customers were unaware of these accounts and cards but were still paying fees to the bank. This was not just one employee creating these unauthorized accounts, but about 5,300 employees were taking part in this unethical behavior since 2011. Wells Fargo came out and made a statement saying they fired the employees with unethical behavior over the period of time they realized these events were taking place. Of course, this did not sit well with current customers of Wells Fargo because they did not know if they could trust the bank anymore, especially with such a large amount of employees creating these unauthorized accounts. In the end Well Fargo lost many customers and have been trying to reestablish their ethical name ever since.