Business Law and Ethical Conduct Practice Flashcards

These flashcards cover key concepts from the lecture including corporate ethics, the Enron scandal, federal statutes (FCPA, SOX), litigation procedures, torts, contract law under the UCC, business entities, and SEC regulations.

Board of Directors

A group tasked with compiling management information to create By-laws and a code of conduct; must be independent (not employees) as mandated by the Sarbanes-Oxley Act of 2002.

Enron Scandal

A $2001$ corporate fraud case involving a Houston-based energy giant that used mark-to-market accounting and off-the-books partnerships to hide billions in debt, leading to the dissolution of Arthur Andersen LLP.

PLE

The three criteria business decisions must meet: Profitable, Legal, and Ethical.

Foreign Corrupt Practices Act of 1977 (FCPA)

A US federal law prohibiting the bribery of foreign officials to obtain business and requiring companies to maintain accurate, transparent records and working internal controls.

Sarbanes-Oxley Act of 2002 (SOX)

Legislation enacted to protect investors by improving the accuracy of financial disclosures, mandating strict internal controls, and requiring 401k diversification with no more than $10\%$ in the employee's own company.

Public Company Accounting Oversight Board (PCAOB)

A professional association firm oversight body that evaluates audits to ensure audit quality and identify deficiencies.

Insider Trading

A situation where an individual is considered to have an unfair advantage in comparison to the public regarding securities information.

Recusal

The withdrawal of a judge, prosecutor, or juror from a case due to a conflict of interest or lack of impartiality.

Supremacy Clause

A constitutional provision establishing that Federal law prevails over state law.

Commerce Clause

The provision granting the Federal Government authority over transportation and trade between states (interstate trade).

Discovery

A litigation phase involving the exchange of information through Bill of Particulars, depositions (examinations before trial), and expert witness disclosure.

Arbitration

A formal alternative dispute resolution method that is binding, where a hearing officer acts as the trier of fact and law.

Mediation

An informal alternative dispute resolution method that is non-binding and confidential, facilitated by a hearing officer.

Assault

An intentional tort that creates a reasonable apprehension of fear of imminent harm.

Battery

An actual act to inflict harm or offensive bodily contact.

Defamation

Harm to dignity categorized as Libel if written or Slander if spoken; truth serves as the absolute defense.

Comparative Negligence

The legal defense used in New York where fault is allocated between the plaintiff and defendant to equal $100\%$, replacing contributory negligence.

Strict Liability

Liability without fault, applied to activities involving high risk or serious harm, such as NYS Labor Law Scaffold Law (Section 240).

Design Defect

An inherent flaw in a product's blueprint or structure that makes it unsafe even when manufactured correctly.

Uniform Commercial Code (UCC)

A set of rules for contracts involving the sale (Article 2) or leasing (Article 2A) of tangible, movable personal property.

Statute of Frauds

A rule requiring certain contracts to be in writing, including sales of goods for $500$ or more and leases for $1,000$ or more.

Promissory Estoppel

A legal principle that stops a person from going back on a promise even if a legal contract does not exist, often used to prevent injustice.

Fiduciary Duty

The high standard of care, loyalty, and obedience required of partners in a business relationship.

Articles of Organization

The formal document filed with the NYS Secretary of State to form a Limited Liability Company (LLC).

Disgorgement

A legal remedy requiring a party to give up profits obtained through illegal acts, such as securities violations, to prevent unjust enrichment.

Form 10-K

An annual report required by the 1934 Securities Act providing ongoing financial disclosure for public corporations.

Proxy Statement

A mandatory SEC document sent to shareholders before meetings to provide information on voting matters like electing directors or executive compensation.