February 24, 2005
Enron Court Preliminarily Approves Director Settlement
On CompensationStandards.com – in the “WorldCom Settlement Analysis” page in the “Hot Topics” box – we have posted the order of the Southern District of Texas District Court that preliminarily approves the proposed settlement with outside directors that includes $13 million of their personal funds. As you may recall, this amount is based on 10% of their net gain on sales of certain Enron stock including certain stock options.
Learn what this all means for director’s pocketbooks on next Thursday’s webcast on CompensationStandards.com – “Steps to Take: How to Avoid Director Liability After WorldCom, Enron and Disney” – featuring John Olson of Gibson Dunn; Marty Lipton of Wachtell Lipton; Frank Balotti of Richards Layton; and Rich Koppes of Jones Day.
Judge Orders Reinstatement for 1st Sarbanes-Oxley Whistleblower
An article on Law.com reports that a DOL judge ruled last week that Cardinal Bancshares is required to reinstate a former employee who had blown the whistle on its accounting practices and pay him nearly $65k in back pay/damages and $108k in legal fees. Last year, this whistleblower was the first person to win protection under Section 806 of Sarbanes-Oxley.
The DOL opinion sets out specific terms and conditions, and rebuts point-by-point arguments by Cardinal Bankshares that bringing the whistleblower back would be too onerous. The bank plans to file an appeal with the DOL Administrative Review Board over the next week. If that board decides not to take up the case, then the bank will consider whether to appeal it to a federal court.
Since Sarbanes-Oxley took effect, whistleblowers have filed 144 claims with the Department of Labor. The Cardinal Bancshares whistleblower is one of just three workers to win protection so far. Another 16 cases have ended in settlements.
Impact of SEC’s Letter on Lease Accounting
Today’s Washington Post carries an article that notes the dramatic impact of the letter on lease accounting from the SEC’s Chief Accountant on some retailers, causing restatements. The letter was issued two weeks ago. I have heard a number of complaints from members on how the letter is wreaking havoc on their 404 plans.