Question: John Johnson is the majority stockholder in Johnson s Landscape Company

John Johnson is the majority stockholder in Johnson’s Landscape Company, ­owning 52% of the company’s stock. John asked his accountant to prepare a ­capital investment analysis for the purchase of new mowers. John used the analysis to ­persuade a loan officer at the local bank to loan the company $ 100,000. Once the loan was secured, John used the cash to remodel his home, updating the kitchen and bathrooms, installing new flooring, and adding a pool.

1. Are John’s actions fraudulent? Why or why not? Does John’s percentage of ­ownership affect your answer?
2. What steps could the bank take to prevent this type of activity?

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  • CreatedJanuary 16, 2015
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