One of your important clients is Valeant, an embattled pharmaceuticals company. You are aware that there is intense public and political scrutiny surrounding the companys strategy of exponential price increases on life saving medicines. For instance, one of the U.S. Senators investigating Valeants pricing practices, stated that, "We need to get to the bottom of why were seeing huge spikes in drug prices that seemingly have no relationship to research and development costs." Mike Pearson, the Valeant CEO has decided to down once a replacement is found (i.e. hes being forced out), wrote a letter to Valeant employees following a further decline in the companys stock price on the news of poor quarterly results. In part, the letter states the following: Restoring the publics confidence will take time and I want to apologize directly to each of you for the distractions this intense scrutiny is causing you. I know you want to wake up happy to come to work every day, and over the past few months, that has been difficult. Please know that I am working as hard as I can to turn things around, and I believe we will. I truly believe we have the right fundamentals in place: a great set of products and brands; loyal physicians, patients and customers, and most of all, youour employees worldwide who are doing everything you can to provide important medicines to our patients and the doctors who depend on them. It is because of you that Im confident we can get past this period of uncertainty, restore our reputation and make you all feel proud once again to work at Valeant. Assume that the company is undergoing some major internal discussions about what issues are responsible for the companys woes and what reforms could help get the company back on track. A. Should Valeant keep drug prices affordable or can it make pharmaceutical pricing decisions based solely on maximizing shareholder returns? Pick a side, state yes or no and give a brief reason why your position is correct. This answer should be no more than 3-4 sentences. B. While you are working as a CPA for Valeant you are having lunch with your client contact, Pat, a Valeant manager. Pat mentions that the company is planning on acquiring another publically traded company called PharmaCom, Inc. (PCI) in the next month because Valeant executives believe that PCI is undervalued. Based on what you know, can you legally purchase PCI stock at this time? Answer yes or no and then discuss in detail why your answer is correct. Question 2 (Antitrust): A. Indian Coffee of Pittsburgh, Pennsylvania, marketed vacuum-packed coffee under the Breakfast Cheer brand name in the Pittsburgh and Cleveland, Ohio, areas. Folger Coffee, a leading coffee seller, began selling coffee in Pittsburgh. In order to make inroads into the new territory, Folger sold its coffee at greatly reduced prices. At first, Indian Coffee met Folgers prices but could not continue operating at such a reduced price and was forced out of the market. Indian Coffee brings an antitrust action. Explain whether Folger has violated antitrust laws. B. Sony and Samsung closely monitor each other's actions regarding the sale of consumer electronic products. Each corporation tries to match the others product designs and specifications, prices, and advertising strategies. As a result, the two corporations have similar products, prices, and profits. Is this a violation of the antitrust laws? Question 3 (Bankruptcy): What is the difference between Chapters 7, 11, and 13 of the Bankruptcy Code? (Please limit this answer to no more than half a page). Question 4 (Choose Question A or B below you only need to answer 1 of them) Option A (Accountants Legal Liability): Arthur Young & Co., a firm of certified public accountants, was the independent auditor for Amerada Hess Corporation. During its review of Ameradas financial statements as required by federal securities laws, Young confirmed Ameradas statement of its contingent tax liabilities and prepared tax accrual work papers. These work papers, which pertained to Youngs evaluation of Ameradas reserves for contingent tax liabilities, included discussions of questionable positions Amerada might have taken on its tax returns. The Internal Revenue Service (IRS) initiated a criminal investigation of Ameradas tax returns when, during a routine audit, it discovered questionable payments made by Amerada from a special disbursement account. The IRS summoned Young to make available all its information relating to Amerada, including the tax accrual work papers. Amerada instructed Young not to obey the summons. The IRS then brought an action against Young to enforce the administrative summons. (a)What are the arguments that Young must turn over the work papers? (b)What are the arguments that the work papers are protected from government summons? (c)Who should prevail? Explain.