Ethical Obligations and Decision Making in Accounting, 4/e 1
Case 3-6 Bennie and the Jets (a GVV case)
Bennie Gordon graduated with a Masters in Accounting two years ago and now works as an
accounting manager at the division level at Jet Energy Company, a company headquartered in
Winston-Salem, North Carolina. Jet Energy is a regulated utility company by the state and
provides electricity to 7 million customers in southern states. Jet Energy is allowed a rate of
return on operating income at a maximum rate of 12.5 percent on electricity it sells. If the
company is earning more than that, regulators can cut the rate that it charges to customers.
After two years of being silent, Gordon decided it was time to address the issue. He knows his
options include to report the matter to top management and/or the North Carolina Utilities
Commission.
Questions
1. What process would you recommend Bennie Gordon follow in bringing his concerns
out in the open? Do these include whistleblowing?
Gordon should discuss the situation with his boss, Higgins. He should do research on the
correct accounting and disclosure requirements under GAAP and regulations for utility
companies in North Carolina, and others states served by Jet Energy. He should
document his findings and suggested adjusting journal entries in a memo to Higgins. The
Ethical Obligations and Decision Making in Accounting, 4/e 2
2. Assume you are in Bennie’s best friend and he asks you for advice. Consider the
following in putting together a plan of action for Bennie to follow.
o What are the ethical values that should be front and center in deciding how
best to advise Bennie on what to do?
o What reasons and rationalizations do you anticipate may be lodged by
stakeholders based on the advice you might give? How would you counter
them?
o What levers can Bennie use to influence those that might disagree with him?
o What is your final advice to Bennie and why?
Bennie should be motivated by the values of honesty, fairness, integrity, objectivity,
responsibility, professional care, and placing the public first (e.g., customers, state of
North Carolina, regulators, and creditors). It may be challenging because he has known
about the fraud for two years and has done nothing so he can be implicated by his silence.
The length of the fraud implies that it may be standard practice in the industry, which
may be a rationalization he needs to counter. Other reasons and rationalizations that
might be made to Bennie include that the practice does not harm the customers or other
stakeholders and may even help since the utility does have to ask for rate increases and
that the rebates are immaterial compared to total insurance premiums paid.