A few weeks back, the New York Supreme Court sided with Eliot Spitzer by partially denying summary judgment and finding the former CEO of McLeodUSA liable for “spinning” (i.e. accepting IPO shares from the same brokerage firm that his company used as an investment banker). Here is a copy of the court’s decision – and a copy of the complaint.

Here is an excerpt from a related WSJ article: “A New York state court recently found former telecommunications executive Clark E. McLeod liable for receiving hot new stocks in his personal brokerage account. The rationale: His company was sending business to the same securities firm, Citigroup Inc.’s Salomon Smith Barney, that doled him the new stocks.

That is a big change. Previously, “spinning” of initial public offerings of stock involved a direct quid pro quo. In a common form, securities firms allocated IPOs to the personal accounts of corporate executives, so the shares could then be sold, or “spun,” for quick profits — in exchange for business from the executives’ companies.

IPO shares are coveted because they often surge on their first trading day. Spinning has raised concerns among investors that the IPO market is rigged.

Bottom line: Senior executives now could skate on thin legal ice if they receive IPO shares from a Wall Street firm with which their company at some point does business, and don’t disclose it to their board or shareholders.”

Disclosures of Internal Controls Remediation

We continue to update our “Internal Controls” Practice Area in a variety of ways, including this section on “Remediation of Internal Controls.” Thanks to Bob Dow, we just added Form 10-K disclosures from Maxtor Corp.; Flowserve Corp.; and ITT Educational Services.

March E-Minders is Up!

We have posted the March issue of our popular email newsletter. I’m heading to “SEC Speaks” tomorrow and unlikely to blog. Ugh, the Corp Fin panel is not until early Saturday morning…

On Monday, the FASB and IASB issued a memorandum of understanding in which they laid out a detailed work plan to narrow differences between their standards – with a goal of substantially completing this process in eleven specified areas by 2008 (and take a hard look at ten other areas).

For those following this important development closely, you know that the SEC’s willingness to downsize its requirement that non-US issuers fully reconcile their financials when registering securities in the US is conditioned on this convergence effort. Reconciliation is unpopular in the European Union – but convergence hasn’t been widely popular either as there are concerns that it could lead to the creation of overly theoretical accounting standards. Learn more in our “Globalization of Accounting Standards” Practice Area.

How to Find a Company’s CGQ

Occasionally I get asked how someone can check a company’s corporate governance rating, as assigned by ISS (ie. the “CGQ”). You can obtain a company’s CGQ by going to Yahoo Finance, entering the company’s stock symbol in the “Get Quotes” search tool – and then hit “company profile” on the bottom right side of the page.

Then, you will see the CGQ on the right side under a “Corporate Governance” header. Two separate ratings are generated for each company; one compared with other companies in the same index and within the company’s industry group. Oddly, I don’t believe you can obtain these ratings on ISS’ own site. Learn more about how CGQ ratings are compiled in our “Governance Ratings” Practice Area.

ISS’ New “Corporate Governance” Blog

ISS has launched a new “Corporate Governance Blog” and it looks quite promising. I wonder what the average shelf life of a blogger is these days. It seems that many blogs start off with a bang amid much enthusiasm – and then they trail off within a few months.

Much like the typical New Year’s resolution (here is a history lesson on why we even bother to make those resolutions every year). How you doing on your resolutions? Did you hoard a box of Tamiflu like you promised yourself?