March 2, 2011

Directors Under Fire: SEC Charges Accounting Fraud & Insider Trading

Over the past two days, the SEC’s beleaguered Enforcement Division has brought separate earth-shattering cases that go straight to the boardroom. On Monday, the SEC charged three of Point Blank Solutions’ former outside directors (and audit committee members) for their complicity in a massive accounting fraud. Then yesterday, the SEC charged a former McKinsey head of using his position as director for Goldman Sachs and Procter & Gamble for being a tipper in the Galleon insider trading scandal. Here’s an interesting excerpt from this NY Times article:

The case against Mr. Gupta has an unusual procedural twist. Under the Dodd-Frank Act, the S.E.C. can seek a full range of penalties against people not employed by a financial services firm through a relatively streamlined proceeding before an S.E.C. administrative law judge. Historically, if the agency sought penalties against a public company director like Mr. Gupta, it had to sue in federal court, where the defendant has full discovery rights of the SEC’s case, including all of its witnesses.

And here is a sidenote – a quote from Preet Bharara, US Attorney for the Southern District of New York, that I shortened and tweeted last week: “Unfortunately from what I can see, from my vantage point as US Attorney, illegal insider trading is rampant” (this quote was lifted from this insider trading memo by Morrison & Foerster).

Webcast: “Conduct of the Annual Meeting”

Tune in tomorrow for the webcast – “Conduct of the Annual Meeting” – to hear Bret DiMarco of Coherent, Peggy Foran of Prudential, Carl Hagberg, an independent inspector of elections and Editor of The Shareholder Service Optimizer, Kathleen Salmas of Northrup Grumman and John Seethoff of Microsoft discuss all of the thorny annual meeting issues, such as what to do if you need to adjourn the annual meeting, how to handle common and troublesome tabulation issues and how to handle meeting attendees that act inappropriately. Carl has contributed this fantastic set of practical articles on annual meetings as course materials.

Conducting Meaningful Board Evaluations

In this podcast, Denise Kuprionis of Governance Solutions Group explains how to best handle board evaluations, including:

– What are the key elements of a board evaluation?
– What role should the corporate secretary/chief governance officer play in this review process?
– What are the metrics? How should the board measure itself?
– What’s the “so what” after the evaluation is complete?

– Broc Romanek