busn623 discussion response 3

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I need four responses of at least 150 words each for the below students discussions for this week. Also in the bold below are the questions the students at answering.

Prompt: Review the website of the Securities and Exchange Commission at https://www.sec.gov/litigation/litreleases.shtml

Choose a case listed at the SEC site. Briefly summarize the case and discuss the rule or regulation that was violated. What did the individual or company do in the case that violated the rule or regulation? What is the ethical framework do you observe was followed by the violator(s)? Relate the the business and ethical concepts that you find in the case to the concepts that you have in your text about securities and other business matters. (Be sure to cite.)

Student one:

Securities and Exchange Commission v. Nanotech Engineering, Inc

The securities and Exchange Commission has obtained a restraining order and froze the assets of three executives and a solar panel company. The Nano-Tech company is one of a few businesses owned by Michael Hatton who fraudulently engaged in holdings and offerings provided by the company and its partners. The executives spent millions of dollars on personal items including; luxury cars, cosmetic surgery, yachts, and other expenses. Michael Hatton has prior felony convictions of security fraud and is a target of interest. The investigation is ongoing and new evidence is being revealed. Money laundering was a major player as well in this case because the executives embezzled millions of investor dollars through their other companies.

They violated the securities act in many ways and are facing penalties and restitution charges with permanent injunctions and emergency relief. The ethical framework involved; respect, honesty, and cooperation. The violations were not fair and hurt the people who were trying to work together to make money in a positive productive way. The actions exhibited by the violators was hindering and obstructive and self centered. Its simply illegal and wrong to take someones money they invested and spend it on personal items.

There is still a large number of securities violations and illegal activity yearly, but the numbers have gone down in recent times regardless of the high 75% corruptness index the United States has. “Examining insider-trading civil cases filed by the Securities and Exchange Commission(SEC) from 2003 to 2011, we find that the price impact on insider-trading days is much smaller than the effect documented for the 1980s, consistent with increased fear of prosecution (Guercio: 2017).” This was a common securities breach and violation which is common in society and is something we read about in our text book. Fraudulent activity and disobedience is at the top of the Securities and Exchange Commissions list as far as violations go.

Del Guercio, Diane, Odders-White, Elizabeth, and Ready, Mark. “The Deterrent Effect of the Securities and Exchange Commission’s Enforcement Intensity on Illegal Insider Trading: Evidence from Run-up before News Events.” Journal of Law and Economics (2017): n. pag. Web.

Student two:

The case that I selected for this week’s forum is the December 1st, 2016 case; Securities and Exchange Commission v. Onix Capital LLC and Alberto Chang Rajii, et al. A civil action case that was filed on November 8th, 2016 in the Southern District of Florida. Mr. Chang Rajii, owner of Onix Capital LLC and a Chilean national who fled the US is being charged with investment fraud from a Ponzi scheme that he ran through his company. The company and Mr. Chang Rajii would guarantee their ingenuous investors generous annual returns that range from 12 to 19 percent. They would even bilk investors by telling them that their capital would be invested in promising start-up companies and to top it off, they would falsely claim that Mr. Chang Rajii is an award-winning millionaire with a Masters of Business Administration from Sandford University. Their scheme managed to sell over $5.7 million in “guaranteed” promissory notes and raised more than $1.7 million that was sworn to be invested in companies. However, the funds were sent directly to Mr. Chang Rajii were he would pay off other investors.

During their scheme, Mr. Chang Rajii and his company Onix Capital LLC violated numerous regulations. According to sec.gov, the U.S Securities and Exchange Commission filed that they violated section 17(a) of the Securities Act of 1933, section 10(b) and rule 10b-5 of the Securities Exchange Act of 1934, and section 206(4) and rule 206-4-8(a) of Investment Advisers Act 1940. Due to their false and misleading statements, investors were deceived into conceding their funds in the hands of the company which makes it unlawful. The ethical framework behind their scheme that I have observed is the egoistic approach which is a variation from the utilitarian approach that comes from the consequentialist theory. Their actions to manipulate investors by promising them profitable returns knowingly that they would not invest their money as promised and would withhold the funds for their own need is a decision that was made to fulfill their self-interest.


A Framework for Making Ethical Decisions. (n.d.). Retrieved December 11, 2019, from https://www.brown.edu/academics/science-and-technology-studies/framework-making-ethical-decisions.

Onix Capital LLC and Alberto Chang-Rajii, et al. (Release No. LR-23697; December 1, 2016). (2016, December 1). Retrieved December 11, 2019, from https://www.sec.gov/litigation/litreleases/2016/lr23697.htm.

Student three:

From 2007 to September 2015, Volkswagen Aktiengesellshaft or more commonly known as VW, misled U.S. consumers, investors and regulators in the attempt to market their clean diesel vehicles. Diesel engines are known for their ability to have more power while getting better mileage but they can be very dirty and they add more pollutants to the environment that a gasoline engine. In an attempt to change people’s minds about this, VW created what they called a “clean diesel” vehicle. VW was able to raise billions of dollars in the bond market from investors as they marketed this clean emission type of vehicle. When the vehicles were being investigated because of complaints about how “unclean” their diesel emissions where, VW perpetuated the myth and continued the charade, lying to U.S. authorities. The SEC complaint charged VW with violating the antifraud provisions of the federal securities laws.

What did the individual or company do in the case that violated the rule or regulation? What is the ethical framework do you observe was followed by the violator(s)? Relate the business and ethical concepts that you find in the case to the concepts that you have in your text about securities and other business matters.

The problem VW ran into was when they created this diesel engine vehicle it did not burn as clean as they were promoting. Knowing it was impossible to go back to the drawing board they created a device which would reduce emissions when it sensed the vehicle was being used on a treadmill to test emissions. Once the vehicle sensed it was back on the road it would reverse back to emitting the high level of pollutants they claimed their clean diesels didn’t do (sec.gov, 2019). During 2014 and 2015, VW issued more than $13 billion in bonds and asset-backed securities in the US market knowing full well their vehicle was not performing to the level the public had believed (SEC, 2019). During this time VW made many false and misleading statements about the vehicles as well as their finances. These bonds had very favorable rates for VW all because of the ability of the company to deliver a clean diesel vehicle.

In the text is says “the law does not prohibit risky stock offerings” but it outlaws the non-disclosure of such risks (Lieberman, Siedel, Mayer, & Warner, 2012). If VW would have just marketed the vehicle as a diesel they would have been fine but they used that “clean diesel technology” to gain investors and that is where they went wrong. Also when the truth came out VW had a chance to come clean but they insisted and doubled down on the lie. VW made many missteps but when they made false statements about the products, they were defrauding the investors while gaining an advantage to their finances.


Lieberman, J., Siedel, G., Mayer, D., & Warner, D. (2012). Partnerships: General characteristics and formation. In Business law and the legal environment.

sec.gov. (2019). Retrieved from https://www.sec.gov/litigation/complaints/2019/com…

SEC. (2019, March 15). SEC Charges Volkswagen, Former CEO With Defrauding Bond Investors During “Clean Diesel” Emissions Fraud. Retrieved from https://www.sec.gov/news/press-release/2019-34

Student four:

This week I will be looking at the case of Securities and Exchange Commission (SEC) v. Volkswagen Aktiengesellschaft (VW), et al, which was initiated on 15 March 2019 (United States Securities and Exchange Commission v. Volkswagen Aktiengesellschaft, Martin Winterkorn, Volkswagen Group of America Finance, LLC, and VW Credit, Inc., 2019). The SEC oversees the issuance of corporate securities and other investments, by corporations, and also monitors the practices of the stock exchanges (Mayer, Warner, Siedel, Lieberman, & Martina, n.d.). In this case the SEC alleges that VW “made false and misleading statements to investors and underwriters about vehicle quality, environmental compliance, and VW’s financial standing.”(ref). The reason that this case was brought in by the SEC was because of VW made large profits as a result of their false statements about their vehicles. They were able to sell securities in their company at a much higher rate than would have been the case if they were providing accurate reporting on the quality of their vehicles and their environmental compliance.

The ethical framework under which VW conducted these alleged incidents was that of Utilitarianism. Under utilitarianism, the right choice from an ethical point of view would be for the company to choose the course of action that would produce the greatest amount of usefulness (Mayer et al., n.d.). In this case, VW chose to falsify reports on vehicle quality and environmental compliance in order to maximize company profits. These action would produce the greatest amount of usefulness, compared to delivering accurate reporting. If VW did submit accurate vehicle quality, and environmental compliance reports then they would not be able to sell their securities for the same amount. If they did want to sell at the same level, they would have to spend much more money to raise the quality of their vehicles and environmental compliance. In the mind of VW, false reporting would be much more useful compared to accurate reporting and then paying to correct their problems.



Mayer, D., Warner, D., Siedel, G., Lieberman, J., & Martina, A. (n.d.). Business law and legal environment. Washington, D.C.: Saylor Foundation. Retrieved from https://saylordotorg.github.io/text_business-law-a…

United States Securities and Exchange Commission v. Volkswagen Aktiengesellschaft, Martin Winterkorn, Volkswagen Group of America Finance, LLC, and VW Credit, Inc., 3:19-cv-01391 (United States District Court Northern District of California San Francisco Division March 14, 2019).

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