Business Finance
MBA605 Mercy College of Health Sciences Midnight Journal Entry Case Study


Mercy College of Health Sciences

Question Description


Need assistance with writing case study. Professor grades extremely hard so you have to follow guidelines that he provided below. I also attached an example and his feedback to one of my recent papers. You can use as a guide.

Please take a few minutes to read the following.

To begin, please review the details as to what is expected for these business case papers. All details can be found on page 9 of the syllabus. To reiterate and also attached:

-Papers are to be a minimum of 3 pages, maximum 4 pages, not including the cover page and references.

-Papers are to be double spaced. Margins are to be 1 inch all around; 12 point Times New Roman font.

-You need to use at least 3 trusted sources OTHER than the case study itself.

-At Mercy College, APA format is used – please review APA guidelines for proper formatting of the cover page; running head; pagination; in-text citations; references page (not Works Cited).

You may want to use the grading rubric that is found on page 9 in the syllabus as an outline for your paper to ensure that you fully answer all parts of the assignment question. To reiterate, the multi-pronged assignment question and response will contain the following separate and distinct sections in your paper submission including:

-Concise Introduction

-Concise Summary of the Case Study (be sure to always cite the case study itself!!)

-Critical Evaluation of the case study issues from the perspective of Business

-Critical Evaluation of the case study issues from the perspective of Government

-Critical Evaluation of the case study issues from the perspective of Society

-Critical Evaluation of the how the case study issues from the three perspective Inter-Relate

-Concise Conclusion

Failing to fully answer any part of the above sections will result in points being deducted from your grade. Please note that if you do not include subsection headings, it must be absolutely clear what part of the multi-pronged assignment question you are answering.

Please be sure to consistently include in-text citations for ALL of the material you use from other sources which is not your own independent thoughts and words. Citations are needed for material that is both paraphrased as well as material which is quoted. By not including an in-text citation, the material presents as if it is your own independent thought and writing, which can be construed as plagiarism, if and when it is material taken from another source.

Please note that the case study itself needs to be cited. There are different ways to incorporate in-text citations into your writing, you can find examples online. But it is imperative that you include the citations.

Furthermore, in-text citations are used to show the source that supports your assertions as part of the critical evaluation process. Without citations, the assertion being made reads as a personal opinion and not critical evaluation of the issue because you are not showing from what trusted source you are obtaining the information to support your statement. Any assertion needs to be ‘validated’ by finding support for the assertion from a trusted source. The citation of the trusted source tells the reader from where the support is coming from.

Regarding critical evaluation and what it means to critically evaluate, please review the Blackboard content regarding Critical Evaluation; supporting assertions with citations from trusted sources; and review the examples provided as well as watch the video.

Additionally, these business case papers should not merely be a recap of the events written about in the case study. You need to clearly identify the issue(s) and analyze those issues from the various perspectives (i.e. business, government, society).

As I stated on the conference calls, these case studies were written a few years ago – much has happened with these companies in the real world since the publication of these case studies. I encourage you to do research on the companies, persons, issues, etc. which are being written about and incorporate more timely research findings into your analysis. You might ask yourself:

What has happened to the company? Has it gone out of business? What has occurred with its stock/valuation over the years? What has happened to senior management? What has been the company’s impact on society? How has society reacted to learning about the company’s actions? How has government intervened in these issues? Has new legislation been created because of these issues? What has been this impact? Etc. Note that this list is not all encompassing by can provide you will questions to spur your analysis and critical evaluation of the issues you are reading in the case studies.

Please also carefully proofread your work prior to submission to avoid submitting papers that contain spelling, grammar, and syntax errors. There are writing resources available in the library and you can speak with your graduate advisor to find out additional resources if necessary.

Please see resources attached and please follow instructor scoring guide.

Unformatted Attachment Preview

For the exclusive use of S. Campbell, 2019. NA0180 The Midnight Journal Entry Anne T. Lawrence, San José State University O n an overcast afternoon in Portland, Oregon, on Friday, March 28, 2003, Richard Okumoto intently studied a set of hard-copy accounting documents called “adjusting journal entries” spread out on his desk. He had been appointed chief financial officer (CFO) of Electro Scientific Industries, Inc. (ESI), a multi-million-dollar equipment manufacturer, just a few weeks earlier. Okumoto was in the midst of closing the company’s books for the third quarter of fiscal year 2003, which ended February 28. An experienced executive who had served as CFO for several other technology firms, Okumoto was familiar with the task, which normally would be routine. But this time, he felt that something was seriously amiss. When reviewing the company’s recent results, he had noticed a sharp dip in accrued liabilities between the two quarters ending May 31 (the last quarter of the 2002 fiscal year) and August 31 (the first quarter of the current fiscal year). Now, looking at the detailed journal entries his staff had provided, he noticed that several significant accounting entries had been made around midnight on September 12, 2002. The entries made that September evening had significantly changed the company’s results for the quarter ending August 31, 2002, a few days before they were reported to the Securities and Exchange Commission. He later recalled: The fact that the time stamps [on the journal entries] were midnight through one o’clock in the morning made me believe they were having difficulties closing the quarter. Not just because of accounting difficulties, but because they were having difficulties finding the right answers. My initial reaction was, even given a difficult quarterly close, if the team was working that late at night, that wasn’t typical. From the pass codes required by the accounting software, Okumoto could see who had made the entries. They included James Dooley, then the company’s acting chief operating officer and now the CEO, the corporate controller, and several senior members of the finance team. One midnight journal entry in particular drew the new CFO’s attention. The late-night team had wiped out an accrued liability of $977,000 associated with the anticipated cost of retirement and severance benefits to company employees in Japan, Korea, and Taiwan. That entry, and several smaller ones, all of which were favorable to Copyright © 2012 by the Case Research Journal and Anne T. Lawrence. The author developed this case to provide a basis for class discussion rather than to illustrate either the effective or ineffective handling of a managerial situation. An earlier version of this case was presented at NACRA’s annual meeting in San Antonio, Texas, October 2011. The author gratefully acknowledges the assistance of Richard Okumoto and the thoughtful comments of the editor, Deborah Ettington, and three anonymous reviewers. The Midnight Journal Entry 137 This document is authorized for use only by Sade Campbell in MBAA605 - Summer 2019-1 taught by DANIEL CUTTER, Mercy College from May 2019 to Nov 2019. For the exclusive use of S. Campbell, 2019. net income, had the cumulative effect of permitting the company to report earnings of $0.01 per share for the quarter ending August 31, 2002, rather than a loss. When he realized that, Okumoto recalled, he felt “a sinking feeling in my gut.” He asked himself, “What happened here? At that time of night? All of the changes in a single direction? What’s going on?” He was sure something was not right. Richard Okumoto Born in 1952, Richard Okumoto was raised with his four siblings in a JapaneseAmerican family in a low-income, African-American neighborhood that bordered the Pepper Street Projects of Pasadena, California. He explained how his parents’ experiences had shaped their outlook: My parents grew up during the depression years. Dad farmed with relatives, and Mom grew up tending 3,000 chickens on a three-acre ranch in Gardena, California. Shortly after the Pearl Harbor attack by the Japanese, my parents were relocated under Executive Order 9066 [under which persons of Japanese ancestry on the West Coast were sent to relocation camps during World War II]. They met and married in a relocation camp. During their incarceration, their families could not make their payments. Dad and his relatives lost their land, and Mom’s parents lost their chicken ranch. After those experiences, my father was committed to having no debt. He built our family home in 1955, with the idea of paying off the loan in eight years. In 1962, Okumoto’s father, who worked as a gardener, landscaper, and salesman of Japanese mutual funds, was disabled in a serious auto accident. Fortunately, by then, he had almost paid off the loan on their home, so the family was able to survive financially. After the accident, Okumoto’s mother took a job cleaning homes to help support her five children. Okumoto described his relationship with his mother: She and I had an especially close bond. Shortly before my dad’s accident, both her parents had died. I was the one who supported her through a very difficult year. As a result, she always treated me differently from the other kids—almost like an adult. The Okumoto family’s financial situation after the accident was difficult. Okumoto had vivid memories of how they coped: Money was very short. We had to account for every penny. Every week, my mother wrote down in a leather-bound journal everything she earned and everything we spent in the household, down to the penny. Every week, from the time I was ten years old, she went through that with me. We lived on a cash basis. There was no credit card, no second mortgage. In that situation, budgeting became extremely important. Her comment to me was, “You can’t complain [about what you don’t have] unless you understand what’s happening.” Those were her ground rules. He added this comment about his mother’s values: The ethics of doing the right thing become very important, because that’s really all you have. [My mother] instilled in me at an early age, regardless of what else you do, always take the high road, always do the right thing. That has influenced me throughout my career. After high school, Okumoto attended San José State University, where he completed an undergraduate degree in accounting in 1974 and attended the MBA program from 1975 to 1978. He soon embarked on a highly successful career in finance. Over the next two-and-a-half decades, he held increasingly responsible roles at a number of high-technology companies in the Silicon Valley, including Fairchild Semiconductor, 138 Case Research Journal • Volume 32 • Issue 2 • Spring 2012 This document is authorized for use only by Sade Campbell in MBAA605 - Summer 2019-1 taught by DANIEL CUTTER, Mercy College from May 2019 to Nov 2019. For the exclusive use of S. Campbell, 2019. Novellus Systems, Measurex, Credence Systems, and Photon Dynamics. Okumoto admired a number of managers he had worked for, who had set high professional and ethical standards for him and his co-workers. He felt fortunate to have had three exceptional mentors: Woody Spedden, the CEO of Credence Systems; Jim Hefferman, his boss at Fairchild and later at Measurex; and Don Waite, the CFO at Measurex who later took over that position at Seagate Technologies. “All three individuals upheld the highest integrity,” Okumoto recalled. “Aside from the technical training I received from them, I got a strong ethical grounding. They would always tell me to ask myself—what are your obligations to others?” Electro Scientific Industries, Inc. Electro Scientific Industries, Inc., the company that Okumoto joined as CFO in early 2003, was the second-largest technology company in Oregon, trailing only Tektronix in size. Based in Portland, the company was founded in 1944 as Brown Engineering to make test and measurement equipment. As technology evolved, so did the company’s products. In the 1960s, the firm—by then called ESI—moved into lasers, and later developed applications of laser technology for the emerging semiconductor industry. ESI went public on the NASDAQ exchange in 1983. In 2003, ESI’s core business was providing precision production equipment to electronics firms. The company manufactured equipment that was used in the production of a wide range of electronics products, such as computers, cellular phones, home entertainment systems, automotive electronics, electronic games, and personal digital devices. Its products included advanced laser systems, test equipment, and packaging systems, among others. The company’s customers included many leading electronics firms, including AMD, Ericsson, IBM, Samsung, Hitachi, Flextronics, Honeywell, and Lucent. Seventy percent of ESI’s sales were outside the United States, mainly in Asia and Europe. The company owned and operated manufacturing facilities in Portland and Klamath Falls, Oregon, and in Escondido, California, and operated sales offices in many countries. In 2002, it employed 875 people and reported sales revenue of $167 million (down from $472 million the prior year). Like many firms in the electronics industry, ESI was badly battered by the economic downturn that began in 2001. After achieving record sales and income in the fiscal year ending May 31, 2001, the company’s financial results declined precipitously in FY 2002, as shown in Exhibit A. Sales and profits had continued to decline in the first half of FY 2003. Exhibit A: Electro Scientific Industries, Selected Sales and Income Data*, 1998–2002 1998 1999 2000 2001 2002 Net sales 252,134 197,118 299,419 471,853 166,545 Net income (loss) 22,347 7,528 40,860 99,933 (15,961) Net income (loss) per share 0.89 0.29 1.55 3.71 (0.58) *Data refer to fiscal years ending May 31. All data are given in thousands of dollars, except per share data. Source: ESI 2002 Annual Report. The Midnight Journal Entry 139 This document is authorized for use only by Sade Campbell in MBAA605 - Summer 2019-1 taught by DANIEL CUTTER, Mercy College from May 2019 to Nov 2019. For the exclusive use of S. Campbell, 2019. The company noted in its 2002 annual report: In fiscal year 2002, ESI weathered the worst downturn in the electronics industry in over 30 years . . . We are conducting a thorough review of our overall market strategy as well as product line strategies to assure that they will generate significant shareholder returns over the inevitable cycles in our industry. To cut costs, the company initiated a shutdown of its Escondido facility, consolidating its operations in Portland. It divested several underperforming lines of business and sought to invest in areas it saw as promising through partnerships and, potentially, acquisitions. It also informally explored a merger with another firm in southern California. In early 2002, Don VanLuvanee, the company’s long-time CEO, suffered a stroke and was no longer able to serve. The board appointed David Bolender, the former CEO of Protocol Systems and a director since 1988, to step in as acting CEO until it could find a permanent replacement. At that time, the board also elevated James Dooley, who had been serving as the firm’s chief financial officer, to the role of acting chief operating officer to run the company’s day-to-day affairs. In December 2002, the board promoted Dooley to the position of chief executive officer, and Bolender became chairman of the board. (Executives and directors of ESI named in the case, and their positions, are summarized in Exhibit B.) Exhibit B: Executives and Directors of Electro Scientific Industries, Inc. (Listed in Order of Mention) Richard Okumoto Chief Financial Officer (CFO) James T. “Jim” Dooley Acting Chief Operating Officer (COO), early 2002–December 2002 Don VanLuvanee Former CEO David F. Bolender Acting CEO, early 2002–December 2002 John “Jack” Isselmann, Jr. General Counsel Mike Tetsui Manager, Japanese Office Barry L. Harmon Former Chief Financial Officer (CFO) Gerald F. “Jerry” Taylor Director and Member of the Audit Committee Jon D. Tompkins Director Chief Executive Officer (CEO), December 2002– Chairman of the Board, December 2002– Director and Member of the Audit Committee Closing the Quarter Shortly after Dooley became CEO, Okumoto was recruited as chief financial officer. He started work on February 17, 2003. I was excited about the job. I thought it might be my last one in the industry. The company, management, and employees—all had a long history of stability. To me, it was another walk down the path of hard work, a fresh chance to apply my skills in strategic planning and execution as well as to implement the new Sarbanes-Oxley compliance rules. 140 Case Research Journal • Volume 32 • Issue 2 • Spring 2012 This document is authorized for use only by Sade Campbell in MBAA605 - Summer 2019-1 taught by DANIEL CUTTER, Mercy College from May 2019 to Nov 2019. For the exclusive use of S. Campbell, 2019. His first task was to prepare for the FY 2003 third quarter close. In reviewing the company’s books for the past several quarters, he soon noticed a sharp downward spike in the balance of accrued liabilities. He noted that fact for further investigation. In addition to closing the quarter, several other items required Okumoto’s attention. Just one week into his new job, on February 24, he got an email from John (“Jack”) Isselmann, Jr., the general counsel, asking him to forward to the manager of the Japanese office, Mike Tetsui, a set of revised work rules (terms of employment) for ESI’s Japanese employees. As a newcomer, Okumoto knew little of the background or why he had been asked to do this, but complied with the general counsel’s request, sending on to the Japanese office manager the revised work rules. Okumoto received the following reply from Tetsui on March 2: I have read the proposed work rule and found no section of [sic] retirement fund. I do not know what is the intention of removing that section, but it is a huge impact on each employee we have…I do not think I can get concents [sic] from [ESI’s Japanese] employees without reasonable change in retirement benefit. Please let me know how you would like me to proceed. Okumoto recalled: My first response was, “uh-oh.” There was a big disconnect between what I had been told and Mike’s reply. I had assumed that the Japanese had already been informed of the cancellation of their retirement benefits and agreed to the changes. It was clear they had not. In a prior job at Novellus Systems, Okumoto had set up that company’s Japanese operations, and he was aware that Japanese work rules were normally filed with the government. Regulators were very strict about altering any documented benefits. Accordingly, Okumoto believed that ESI was obligated to pay benefits that had been promised to employees, and he told Isselmann this. Okumoto also expressed the opinion that employees, if dissatisfied with the revised rules, could take the matter before the Japanese labor board, and that this would be a “quantifiable event” that would have to be recorded on the books as a liability. Isselmann responded that he was unfamiliar with Japanese law. On March 4, Okumoto spoke with CEO James Dooley about his concerns that the reversal of benefits for Japanese, Korean, and Taiwanese employees might expose ESI to litigation, and this could affect the accounting treatment of the event. Dooley strongly disagreed. Okumoto recalled: He told me that everything had been cleared with everyone. He said there was full information. There was full disclosure. He emphasized that KPMG [ESI’s external auditor], the company’s own legal staff, and the board had all signed off on it. He said I should “just get past it.” Okumoto was concerned about this conversation, particularly because the CEO seemed so defensive. On March 11, Okumoto met again with Dooley, this time to discuss Okumoto’s upcoming presentation to the audit committee. The new CFO recommended that the company delay announcing its third quarter earnings and restate its first and second quarter earnings to report correctly the $977,000 in liabilities associated with the anticipated cost of retirement benefits for its Asian employees. Okumoto explained his view that not reporting these liabilities had violated Generally Accepted Accounting Principles. At that point, Okumoto recalled, Dooley became visibly upset. The Midnight Journal Entry 141 This document is authorized for use only by Sade Campbell in MBAA605 - Summer 2019-1 taught by DANIEL CUTTER, Mercy College from May 2019 to Nov 2019. For the exclusive use of S. Campbell, 2019. The CEO—all six feet-six inches and 280 pounds of him—turned an angry red and told me again to just get past this. That’s when I knew that this was going to be swept under the rug. It was clear I was not part of the club. Then Jim said, “If I’ve got to reverse this entry, I’ll quit.” The “MoFo” Memorandum On March 13, Okumoto attended a meeting of the board of directors’ audit committee. Also present at that meeting, in addition to the audit committee members, were Dooley, Isselmann, and several senior managers. At the meeting, Okumoto recommended that the company’s financial statements for the previous two quarters be restated, and that it hire an independent accounting firm to conduct an audit of the Asian benefits issue. Dooley countered that everyone had been fully informed of the reversal and had “bought off” on it. The audit committee declined Okumoto’s suggestion that an independent accounting firm be brought in, but it did direct Barry Harmon (formerly ESI’s CFO and a member of the audit committee), Okumoto, and Isselmann to lead an internal investigation into the matter. After the audit committee meeting, Isselmann came into the CFO’s office. Okumoto recalled: He closed the door and just broke down. He told me that after the benefits reversal in September he had asked MoFo [Morrison Foerster, an outside law firm on retainer to ESI] to review its legality. MoFo had advised it was illegal to cancel the retirement benefits without employee consent. He said he had immediately shown the memo to Dooley, who had brow-beat him, intimidated him, and essentially boxed him into a corner. I believed this, because in one meeting I actually saw Jim stand up and tower over Jack, who was only 5 feet 6. I watched Jim almost physically overtake him. Jack was a young guy, pretty inexperienced, and his job at ESI was his first in the industry. On his way out, Isselmann handed Okumoto some documents. From the documents, Okumoto learned that on October 3, 2002, Isselmann had written MoFo, asking for an opinion on whether or not it would be legal for the company to terminate the Asian employees’ retirement benefits unilaterally. In his letter, Isselmann had pointed out that the rules had been distributed to employees but had not been submitted to the relevant government agency. On October 7, Toshihiro So, a Japanese labor and employment attorney affiliated with Morrison Foerster, responded to Isselmann’s request. The MoFo memo, now in Okumoto’s hands, read in part: Retirement allowances are not a legal requirement [in Japan]. However, once the company agrees to pay retirement allowances in Rules of Employment (even though they have not been submitted to the relevant government agency), the company is obliged to pay them in accordance with the Rules and cannot remove them at the company’s discretion. According to Japanese case laws, as a general rule, …the deprivation of previously acquired rights by newly drawn up or changed ...
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Running Head: CASE STUDY


The Midnight Journal Entry Case Study



The Midnight Journal Entry Case Study
Mergers and acquisitions are common among the United States of America airline
companies just as they are in other sectors of business and economy. Therefore, the
announcement of a pending merger by two of the country's biggest domestic airliners American
Airline and US Airways was a regular occurrence in the business world. However, the move by
the Government of the United States through the Department of Justice to file a lawsuit against
the merger on August 13, 2013, came as a shock to significant stakeholders in the American
aviation industry. The decision to block the merger was especially shocking since both DOJ and
FTC charged with regulating competition had allowed mergers unblocked for a decade as well as
permit the merger of United Airlines and Intercontinental barely two years before in 2011.
Summary of the Case Study
Up until 1978, the airline industry in America was highly regulated with bodies such as
Civil Aeronautics Board charged with regulating fares and the Federal Aviation Administration
charged with regulating airline safety. However, stiff regulation had reduced the aviation
industry into a monopolized sector with very high tariffs and low completion. With its ban,
competition increased and new airlines established, but they struggled with their legacy
competitors. While the airline industry struggled in the 80s due to increased competition, the 90s
were much better since the balance had been restored. The next decade though became the
harshest for airline companies due to the September 11 terrorist attacks, recession, high fuel
prices, high labor costs, and competition from low-cost carriers. However, these airlines devised



mergers and reconstructions as a way to remain afloat in the challenging economic times, a move
that seems to have worked for US Airways and America West; Continental and Northwest
among others. At the turn of 2011, the major airlines in the country had reduced to five, showing
how successful mergers were at the time. Consequently, enhanced network destinations and
increased economic bases turned the fortunes of bankrupt airlines. It is within this backdrop that
American Airlines opted for a merger with the approval of a judge in September 2012 following
a declaration of bankruptcy in the previous year (Anjani, 2019).
Case Study Evaluation
The merger between the two largest American airline companies by passenger capacity
brings out different meanings to different groups of stakeholders. While the merger could be
good for the company and the aviation business, it may be a disaster for the Government, and to
the community, they may be happy with what they get. An evaluation of the impact of the
merger in regards to the various groups of people affected by the move is thus a necessity and
forms the subject of the paper herein.
Business Perspective
From a business' point of view, American Airlines is a struggling company that n...

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