Odogwu Casino, Inc. Racquel and Danielle were shareholders in Odogwu Casino, Inc., which operated a casino in West Baltimore. Racquel owned 51 percent of the stock and Danielle owned 49 percent. Danielle managed the casino, which Racquel typically visited once a week. At the end of 2013, an accounting audit showed that the cash on hand was less than the amount posted in the casino’s books. Later, more shortfalls were discovered. In December 2014, Racquel, and her team of accountants, did a complete audit. Danielle was unable to account for $1,650,230 in missing cash. Racquel then kept all of the casino’s most recent profits, including Danielle’s $980,909 share. And, without telling Danielle, Racquel sold the casino for $5,400,000 and kept all of the proceeds. Discuss.
- The presentation of your paper shall adhere to the following structure:
- Issue – Identify the issue(s) (Each issue must have its own IRAC)
- Rule – Identify and explain/define the applicable rule(s), term(s), or concept(s)
- Analysis – Apply the applicable rule, term, or concept to the facts. And, present arguments for both sides.
- Conclusion – Pick one side and give a conclusion
Odogwu Casino, Inc
Different issues surround the case of Odogwu Casino, Inc. first is the issue of the deficit of the amount of cash at hand and the amount posted in the casino books. It is clear that there are financial mismanagement in the casino because more shortfalls were discovered and Danielle was not in a position to explain the missing amount. The second issue arises from the action that Racquel takes by keeping all the Casino’s profit even the share that is supposed to be Danielle’s. She also goes ahead and sales the Casino without the knowledge of her collaborate and keep all the proceeds. Danielle and Racquel are partners and they both own the Casino. It is therefore expected that the proceeds from the sale of the casino are shared.
Raquel is the manager of the business and she is accountable for all the operations in the business. She should be able to account for the finances. However, if she is not accountable legal action can be taken against her. Secondly, Raquel has the highest share percentage in the business and therefore she can make a decision on aspects about the Casino and inform Danielle. Danielle has no option but to go with the decision of the majority percentage of the business. Lastly, the Proceeds from the business are supposed to be shared as the partners agree. The proceeds from the sale should be shared based on the percentage of the shares each member owns in the business.
Danielle mismanaged the organizational finances and as the manager, she should take responsibility. She has the overall mandate to oversee the different organizational operations. However, Racquel should have taken legal action on the matter and not taking matters on her own hands. The act of taking Danielle’s share of proceeds may not be acceptable by the law governing partnerships unless that business had its own guidelines (Morse, 2010). The issues will mainly depend on whether the partners have guidelines on how to operate the business or they are guided by the partnership acts. According to the act the partners and the business are not a separate entity and therefore the liabilities and the profits are owned by the partners. The business faced a financial challenge and the partners had a responsibility to own the liability. However, Racquel does not own the challenge liabilities and blames it on her partner.
The fact that Danielle is the manager and that she is a shareholder should not be intertwined. The two are different and therefore she should have had a share of the proceeds as a partner and at the same time take the responsibility as a manager. Racquel has the right to make a decision affecting the business for she is the major shareholder. It was therefore her responsibility to decide on how to go about when selling the business. However, the law dictates that the partners have to be informed and therefore she should have informed Danielle. Danielle is responsible for the loss that the business experienced. However, her mistakes as a manager should not be used to deny her the rights of a partner. Racquel can argue that she took the Danielle’s share of profit and proceeds after the sale because she is responsible for the loss the business experienced. This may be depicted as a way to compensate the amount that cannot be accounted.
There are different challenges facing the Casino and the issues need to be solved guided by the laws of a partnership. If the partnership did not have written guidelines, the general partnership acts should guide the different issues. Danielle has the right as a partner and she deserves the share of her proceeds from the sale and the profits. However, Racquel has the right to take legal action due to the mismanagement issues.