ACCOUNTING ETHICS:

Krispy Kreme Doughnut, Inc. sells donuts through its network of stores owned and operated by independent franchisees. Franchisees criticized Krispy Kreme's former CEO, Scott Livengood, for forcing companies with which Krispy Kreme did business to contribute $500,000 to sponsor a "storytelling festival" in the hometown of Mr. Livengood's wife. According to an independent investigation, this expenditure benefited Mr. Livengood and his wife, but did not provide Krispy Kreme with any marketing or promotional benefits.

1. Was Mr. Livengood's insistence that these companies fund the storytelling festival ethical?
2. Did Mr. Livengood likely have an improper tax motivation for structuring the funding of the storytelling festival in this manner?