FTE Networks Inc. Scandal and Its Legal and Ethical Implications (Essay Sample)

FTE Networks Inc. Scandal
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Institution
Course Title
Instructor’s Name
Date
SEC.gov (2022).SEC Charges Executives of Network Infrastructure Company with Accounting Fraud. Sec.gov. Retrieved 3 September 2022, from https://www.sec.gov/news/press-release/2021-127.
Summary of the Situation (FTE Networks Inc. Scandal)
The SEC on 15 July 2021, charged a network infrastructure company executive with accounting fraud. The accounting fraud by executives involved inflating the company’s earnings by 108% and embezzling the company's millions of money for personal use (SEC.gov, 2022). CEO and CFO misappropriated the company’s money by paying for personal expenses unrelated to company activities and illegally increasing their salaries. Also, the executives concealed the issuance of NYSE’s convertible notes worth 22.7 million dollars (SEC.gov 2022). According to the SEC, the CEO and CFO misled FTE's accountants and auditors about the convertible notes' terms, which made them not account for or disclose them in financial reports.
Legal and Ethical Implication of the Action as Applied to Business
The legal implication is that once company executives inflate the company’s earnings they are charged by SEC with charged with violation of anti-fraud and proxy solicitation because they violated securities laws (SEC.gov, 2022). This can lead to permanent injunctions and penalties. It also leads to the retrieval of equity-based benefits paid to the company