It was widely reported yesterday that efforts are underway to pressure the SEC into requiring more disclosure about the risks associated with climate change. As noted in this Washington Post article, “[n]ow a group of state officials, state pension fund managers and environmental organizations are pressing the SEC to force all public companies to come up with something more useful to investors. Among those who signed the formal petition were Bill Lockyer, California treasurer; Alex Sink, Florida’s chief financial officer; and Richard Moore, North Carolina treasurer. In the petition, to be filed today, the group is asking the commission to require companies to assess and disclose their financial risks from climate change and legislation.”
The group’s 116-page petition is unusual in that it is not a traditional rulemaking petition, which typically asks the SEC to amend its rules to address a particular issue. Rather, the group’s petition seeks Commission interpretive guidance clarifying that, under existing law, companies are required to disclose material information related to climate change. The types of things that the group thinks companies must disclose, depending on the circumstances, are:
– Physical risks arising from climate change that are considered material to operations or financial condition;
– Financial risk and opportunities associated with “present or probable greenhouse gas regulation;” and
– Legal proceedings associated with climate change.
Appendix G of the petition lays out the proposed guidance that the group would like to see the SEC adopt, and it includes an analysis of the applicable GAAP and Regulation S-K requirements that could require disclosure about climate change issues. In addition to submitting the petition, the group also sent a letter to Corp Fin, asking that the Division not necessarily wait for Commission interpretive guidance, but rather pay close attention now to climate change risks when reviewing periodic reports.
These latest communications with the SEC are the culmination of several years of efforts to compel action on climate change disclosure. A group including many of the same investors – organized as the Investor Network on Climate Risk – wrote a letter to Chairman Cox last year, although – according to news reports – previous efforts such as this letter have gone unanswered. In the letter, the group noted efforts dating back to 2004 to have the SEC take additional steps under existing disclosure requirements to elicit better disclosure about climate risk in filings. In addition, that group asked the SEC to revise or change the Staff’s interpretation of Rule 14a-8’s ordinary business exclusion so that companies would be required to include shareholder proposals requesting a report on financial risks due to climate change.
These on-going efforts with respect to climate change reflect the broader trend that SEC disclosure requirements always seem to be a focal point for addressing the issue of the day. Whether it is Year 2000 risks (remember that?), business with countries subject to economic sanctions, computer security risks, the crisis in Darfur or other significant issues, there is often an effort on the part of investors, interest groups and legislators to compel some sort of disclosure in SEC filings. Often, the problem with these efforts is they don’t focus on what information is material to investors, and they rarely recognize that a “one size fits all” approach doesn’t work when it comes to assessing materiality and the applicability of existing disclosure requirements. Climate change may very well stand apart from these other issues when it comes to materiality judgments, given the significant impact that climate change may ultimately have on many companies.
The State of Climate Change Disclosure Today
The group submitting the petition to the SEC indicates that disclosure about climate change in public filings has been “scant and inconsistent.” The group singles out Exxon Mobil and Allstate for their failures to adequately disclose the risks associated with climate change. A January 2007 study by Ceres and the Calvert Group indicated that companies comprising the S&P 500 were doing a poor job of disclosing climate change risks, both through their public filings and the Carbon Disclosure Project questionnaire process.
If you missed our June webconference “Tackling Global Warming: Challenges for Boards and their Advisors,” it is not too late to listen to the audio archive and review the great course materials. In the course materials for the panel entitled “Disclosure Obligations under SEC and Other Regulatory Frameworks,” Miranda Anderson of David Gardiner & Associates outlines some key information about voluntary climate change disclosure. With respect to SEC disclosure, she notes dramatic improvements over the past 5 years in the quantity and quality of disclosure about climate change risk, particularly among electric utilities and in the oil and gas sector. Insurers, automakers and the petrochemical industry have not done as well in this area.
Beyond disclosure concerns about climate change, companies need to focus on other important issues, such as the board’s fiduciary duties, D&O insurance, contracts and due diligence. All of these topics are covered in the “Tackling Global Warming” webconference. We have posted lots of other useful resources in our “Climate Change” Practice Area.
– The “Downturn” Roadmap: Parsing the Shift in Deal Terms
– The “Downturn” Roadmap: A European Perspective
– What Does “Material” Mean?
– Four Things Buyers Need to Know About Successor Liability
– Some Thoughts on Appraisal Under Delaware Law
– The SEC Staff’s Comment Letters: Termination and Change-in-Control Arrangements
A handful of members have recently told me that their client have gotten over 15 executive compensation comments on IPO filings sometime during the past month. I believe that this is a marked departure from the Staff’s practice since the SEC adopted new comp rules a year ago as the Staff had been avoiding providing many exec comp comments on registration statements (with some exceptions). I guess now that the Staff is sending comment letters devoted to compensation issues as part of its compensation review project, this area is “fair game.”
In addition to our comprehensive guidance regarding the Staff’s comment letters in the Sept-Oct issue of The Corporate Executive, a number of firms have issued memos about the comment letters. We have posted these memos in our “The SEC’s New Rules” Practice Area on CompensationStandards.com.
Crunch Time!
Three weeks until our “2nd Annual Executive Compensation Disclosure Conference.” Most law firms have re-upped their firmwide license so that everyone in the firm can take in this practical Conference via video webcast. However, it’s always surprising how some folks wait until the very last minute to register.
And note that for just $200 more, your firm can get a firmwide license to all three of our October Conferences via our “Member Appreciation Package.” Here is the agenda for all three of these Conferences.
If you need help navigating what you should do to register – or have a budget issue – I urge you to contact me (here is my contact info) – or our HQ at 925.685.5111 or info@thecorporatecounsel.net.
Workpaper Confidentiality, the IRS and FIN 48
A recent case may serve as a blueprint for companies to preserve claims of work product protection for their tax documents, including those documents that support their FIN 48 determinations. As you may recall from an earlier blog, the IRS reportedly is reading FIN 48 disclosures (as well as SEC comment letters and responses) to assist them in finding companies to challenge.
On Friday, the Washington Post ran this article about SEC Commissioner Campos’ departure and the Commission in general. Here is an excerpt from the article:
“To give both sides their say, Cox voted this summer to support each of the competing plans. The SEC is tentatively scheduled to revisit the subject at a public meeting in November. Cox’s position as the man in the middle will only intensify after Campos’s departure.
Meanwhile, Nazareth, the other Democrat on the panel, has removed her name from consideration for reappointment and told friends she would like to leave the SEC by the end of the year, adding another layer of uncertainty. Her term expired in June, but she is able to remain in her post for up to 18 months.”
Three Rule Changes for Nasdaq Companies
Over the last several weeks, the SEC has issued three releases approving amendments to the rules of the Nasdaq Stock Market:
1. Web Site Posting of Annual Report – Amended rules to permit companies to distribute annual reports by posting them on corporate web sites, which would require that they issue a press release providing information on the report’s availability – and clarified that the annual report requirement can be satisfied by providing the company’s annual filing with the SEC.
2. Quarterly Change in Number of Outstanding Shares – Amended rules to require that US companies that file with the SEC late must notify Nasdaq of quarterly changes in the number of shares outstanding so that Nasdaq may assess its fees for the listing of additional shares.
3. Discretionary Authority – Modified its discretionary authority provision – which is IM-4300 – to expand and clarify certain of the factors used in its exercise of discretionary authority where an individual employed by a company has a history of regulatory misconduct.
A Relatively Rare Form S-8 Case
A few weeks ago, the Ninth Circuit dealt – in SEC v. Phan – with how Form S-8 can (and cannot) be used. In this Section 5 case, the defendants (a CEO and his company) had used the automatically effective Form S-8 to raise capital for the cash-strapped company. Initially, the defendants registered on Form S-8 to compensate a consultant – but then they changed how they used the shares.
The Judge found that the Form S-8 could not be used by the issuer to register the resale of shares. However, the court also found that the fact that the ultimate transaction differed from the one registered on the Form S-8 didn’t establish – as a matter of law – that the defendants made a material misstatement. We have posted a copy of the opinion in our “Form S-8″ Practice Area.
According to this MSNBC article, the SEC’s Enforcement Division has established four working groups to focus on the discrete issues associated with each one. The working groups are: subprime lending; hedge funds and insider trading; option backdating; and muni-bond offerings.
From a historical perspective, the formation of working groups is somewhat unusual, but not unprecedented. To me, they seem like common sense. Nearly everyone in the Enforcement Division is a generalist that takes on any – and all – types of cases. Now it looks like the Division is formally setting up these groups to specialize in certain types of cases. Precedents include the group that focused on muni securities cases in the mid- to late-’90s, the formation of the Internet enforcement group in the mid-’90s and the formation of the Accounting Fraud Task Force around 2000.
The Proper Valuation of ESOARS
Armed with an independent study, the Council of Institutional Investors continues to lobby the SEC to rescind its endorsement of ESOARS. Recall that I’ve blogged several times about ESOARS – it’s a derivative instrument invented by Zions Bancorp to establish market values for stock option grants. We have more information on this instrument in our “ESOARS” Practice Area.
In this podcast, Greta Hotopp of Compensation Valuation provides some insight into ESOARS (the Compensation Valuation study is the one cited by CII), including:
– Why did you conduct a study of Zions Bancorp’s ESOARS?
– Did your evaluation indicate that these ESOARS would allow for true price discovery?
– What other findings were made during your evaluation?
Accounting Issues for ESOARS?
A while back, there was a flurry of articles about accounting uncertainty that may derail the expansion of the market for ESOARS. Here is an excerpt from one of those articles:
“While critics have focused on whether auctions are a valid way to value stock options, a sleeper issue is how to account for such financial instruments, a seemingly technical question that could make or break the market for such products. ‘We are in talks with FASB to try to get our Esoars instruments treated as equity,’ said Zions vice president Evan Hill.
Deeming such products to be equities would be the best possible result for Zions, although it may delay trading until 2008. However, if standard-setters decide such products are a liability, they likely would be categorized as derivatives, dealing a one-two punch that could boost costs and volatility and raise valuation questions anew, making the tracking instrument far less appealing to companies looking for new ways to value employee stock options.
The reason: derivatives must be marked to market, generally each quarter. While the accounting for employee stock option grants wouldn’t change under such an approach, companies would have to reassess any tracking instrument used in valuing those options. That might require frequent auctions, or reverting to options-pricing models, defeating the purpose of using Esoars-type products. Another downside is that as a liability, any increase in the value of the tracking securities would be treated as an expense, reducing earnings.
‘I don’t see it as deal killer, I see it as a deal complicator,” said Hill. He predicted that some companies wouldn’t object to using Esoars, even if they must be accounted for as a liability, but acknowledged others might decide that “it’s just more headache than it’s worth.'”
Before he left the SEC, Chief Economist Chester Spatt puzzled aloud as to how accounting policy can reward innovative approaches in a speech. Here is an excerpt:
“An interesting challenge with respect to fair value accounting is how can accounting policy reward innovative approaches? To the extent that the goal of accounting policy is to replicate a particular measurement objective, how can innovative ways to define or reach that objective be encouraged? Indeed, from the perspective of a registrant it is plausible that the goal is to minimize the expense being measured rather than measuring the expenses more accurately. This suggests potential tension between designs that are of interest to registrants and those that measure the expense more accurately, especially if the out-of-pocket cost of implementing that market-based approach exceeds that of implementing the model alternative.”
Don’t Forget to Register for the “Chicago” Concert
I will be seeing many of you at the “15th Annual NASPP Conference” in a few weeks. For those of you who need a break, don’t forget to take advantage of the free “Chicago” concert on Tuesday, October 9th. You must register in advance to attend this event – and space is limited. Even if you don’t really like the band, there is something unique about attending an event with a group of fellow conference attendees that changes the nature of the conference.
I remember the mad panic last year when folks were trying to register at the last minute for Huey Lewis. It was too late and they were bummed. Don’t be that person.
Remember that the concert is offered to NASPP Conference session attendees only (also the NASPP cannot accommodate guests for the concert). Thanks to Fidelity Investments for co-sponsoring this event with the NASPP!
Our Fall 2007 Issue of Compensation Standards print newsletter is now available. We’ve been giving this valuable newsletter to you free all year in an effort to get the “responsible” message in front of directors. This print newsletter is written with directors in mind, short and to the point – and practical.
Sign up today for these free issues. Remember you can sign up to receive multiple copies so you can deliver them to your directors – or you can sign up your directors so they receive them directly from us.
It’s important that directors continue to read about responsible practices. Other publications that cater to directors are not wed to this concept. For example, a recent issue of a board publication has a nice piece about “What to Do About Those Outrageous CEO Severance Deals” – but it only skims the surface, without guidance about how to unwind these arrangements (compare how our Summer Issue tackles this challenge). More shocking, the same issue includes pieces about “How to Buy a Yacht” and “Taking Spouses on Board Trips is ‘Educational and Enjoyable’.”
Not to pick on any particular publication – because nearly all of them fail to inject any sense of “do the right thing” in their commentary – but it’s high time all of us take responsibility for good governance. And one of your roles in this mission is to ensure that your directors get the materials that will help them walk the responsible path – like this issue will help directors meet the SEC’s new, higher CD&A “Analysis” expectations.
Bad Hair Day
Someone certainly has a bad attitude in this new segment of the “Sarbanes-Oxley Report” entitled “Bad Hair Day.” This is a “must watch” video for “Matrix” fans. Has Billy Broc walked off the set for good?
Changes to Two FINRA Proposals: Conflicts and Shelf Offerings
FINRA has filed an amendment to its proposal that would significantly amend Rule 2720, which regulates conflicts of interest for firms that participate in an offering of their own securities or those of a parent or other affiliate. The original proposal was issued in April 2006.
FINRA has also filed a 5th amendment to its proposal that regulates the underwriting terms and arrangements for shelf offerings under Rule 2710. The proposal was first published for comment in 2004. We have posted these proposals in our “Underwriting Arrangements” Practice Area.
Last week, the FASB voted to add a comprehensive project to reexamine FAS 5. As described in this handout, the project will have three phases. Phase 1 will address inconsistencies between proposed FAS 141R regarding business combinations and FAS 5. Phase 2 relates to eliciting enhanced disclosures under FAS 5. Phase 3 is “a long-term project to comprehensively reconsider all accounting models for contingencies.” See more on FEI’s “Financial Reporting Blog.”
What Does a New World Accounting Order Mean for Audit Committees?
KPMG’s Audit Committee Institute has conducted this interesting interview with former FASB Chair Dennis Beresford (who is the audit committee chair for Kimberly-Clark Corp., Legg Mason and Fannie Mae). Dennis believes it’s unlikely that many U.S. companies will begin using IFRS in the next few years – but that this could change over time.
Speaking of Broadridge, don’t forget the panel – “Solicitation, Media, and IR Strategies: After E-Proxy and the Loss of Broker Non-Votes” – which will include an update from Broadridge about what challenges (and opportunities) have been faced by companies trying voluntary e-proxy so far. This will help you to avoid the obstacles and mistakes incurred by those companies that were “early movers.”
You can choose to attend solely this Conference – or for just a little bit more, you can also take in these two Conferences – the “Tackling Your 2008 Compensation Disclosures: The 2nd Annual Proxy Disclosure Conference” and “4th Annual Executive Compensation Conference” – online via our “Member Appreciation Package.”
Hat tip to Mike Melbinger’s blog on this: Yesterday, the IRS released Notice 2007-78 offering transition relief for certain provisions of Code Sec. 409A that previously had a December 31, 2007 deadline. Specifically, Notice 2007-78:
– Extends to December 31, 2008, the deadline to adopt documents and amendments that comply with Section 409A, subject to limited requirements regarding the timely written designation of a time and form of payment.
– Provides guidance and additional relief addressing certain issues raised by the application to employment agreements and cashout features of Section 409A and the final regulations (Mike promises to blog more on this later today).
– Announces that the Treasury Department and the IRS anticipate issuing guidance containing a limited voluntary compliance program that will permit taxpayers to correct certain unintentional operational violations of 409A.
How Much Do You Know? The SEC’s Executive Compensation Comment Letters
People dug the “Pro or Troll” quiz on TheCorporateCounsel.net, so I thought we would post one on CompensationStandards.com devoted to the SEC’s executive compensation letters. Give it a whirl – “Are You a Pro or Troll?”
It will take you less than a minute to complete the five-question quiz. It will score your answers as you go—and let you know how you compare against your peers. All participation is completely anonymous.
Don’t Miss the Fancy Course Materials
Fyi, there will be a bunch of these fun quizzes available as part of the online experience when you watch the video webcast of “Tackling Your 2008 Compensation Disclosures: The 2nd Annual Proxy Disclosure Conference.” There will be a quiz that goes along with each panel, so you will be able to evaluate how much you learned compared to the other several thousand watching online.
In addition, each panel will include a set of the popular “Essential Practice Tips You Oughta Know” – as well as a compilation of the Staff’s comments that pertain to that panel’s topic area. No other conference provides as much practical information as this one. Register today!
The Evolution of Deal Rooms
In this DealLawyers.com podcast, Joel Lessem, the CEO of Firmex, explains how deal rooms are evolving, including:
– How are your deal rooms different from your competitors?
– How do you see the use of deal rooms evolving?
– What are some surprising ways that deal rooms are being used?
Thanks to Stephen Davis of Davis Global Investors for allowing us to blog this article from a recent issue of his “Global Proxy Watch“:
“Behind the scenes, the world’s two biggest proxy advisors are in a fit of restructuring that promises again to reshape the global governance industry and, possibly, ignite a regulatory backlash, GPW has learned. Among fast-paced developments:
Xinhua Finance (XF) has secretly decided to sell Glass Lewis (GL) just nine months after buying it for US$45 million. The move comes hard on the heels of the Shanghai-based firm’s own in-house governance scandal, which triggered a stock plunge and brand damage at XF, and key staff and client defections at GL (GPW XI-21, 22, 25, 27). CEO Fredy Bush has apparently hired a merchant banker to shop the proxy advisor, with eyes on a deal as early as next month. The frontrunning contender so far: none other than RiskMetrics (RM), owner of rival industry giant Institutional Shareholder Services (ISS). At least one other unidentified company is also mulling a bid, while a private equity firm has pushed Xinhua to sell it GL at about half the purchase price.
RiskMetrics has the cash and ISS the motive to take over GL. Ex-CEO John Connolly had made serial efforts to buy the four-year old competitor. But if ISS and GL now combine, the unit will dominate more than 80% of the market—gaining potential new pricing power and clout. Experts predict such a deal would likely draw scrutiny by securities regulators, antitrust authorities and politicians in North America, Europe and, possibly, Australia. They could join those in the market worried that a single US firm could hold a near monopoly in the highly sensitive business of advising how shareowners vote on everything from board elections to mergers and acquisitions worldwide.
Still, GL-ISS nuptials could boost proxy firms that remain—such as Proxy Governance and Egan-Jones in the US, and ECGS in Europe. Equally, a takeover could spur market interest in specialist stewardship firms such as F&C, Governance for Owners and Hermes EOS. They would all be trolling for fund clients bent on service alternatives to the industry leader.
RiskMetrics, meanwhile, is rumored to have taken another transformative step. Sources say it opened confidential talks with US Securities and Exchange Commission officials in advance of filing formal IPO documents that would allow it to launch as a publicly traded company. Perhaps in preparation, RM will inform clients Monday that, as part of internal integration, all its products will carry the RiskMetrics label as of Sept. 17. The move, in effect, demotes the 27-year old ISS brand. Governance services will now be marketed under the RiskMetrics name.
Expect an IPO to rekindle debate about whether public ownership—or another buyer—might affect the quality or content of RM advice. Last month the US Government Accountability Office (GAO) concluded in a report that “potential conflicts of interest can arise” at proxy firms, but that the SEC had “not identified any major violations.” It also asserted that it is relatively easy for rivals to enter the industry, so fears of ISS monopoly power are overblown. Some industry watchers dismissed the GAO report as superficial. But expect its findings to fortify defenders of any RM takeover of GL.”
The Board’s Role for Internal Investigations
In this podcast, Dave Taylor of Perkins Coie provides some insight into what the board’s role for internal investigations, including:
– Why are there more board-directed investigations?
– How do whistleblower complaints change the nature of an investigation?
– What is the board’s role in an investigation?
– What are pitfalls that boards should avoid during an investigation?
Court Upholds SEC’s Refusal to Comply with FOIA Request
A few weeks ago, CFO.com ran this article that notes that the US District Court of Minnesota sided with the SEC regarding the agency’s refusal to comply with a FOIA request that had been submitted by SEC Insight. This case had been going on for a few years; here is an old blog noting how the SEC lost the first round of this litigation.
In this appeal – although the SEC ultimately turned over some of the requested documents – the US District Court upheld the agency’s refusal to produce the rest. However, Judge Paul Magnuson said the SEC’s behavior in the case caused the court “great frustration.” We’ve posted a copy of the court opinion in our “Confidential Treatment Requests” Practice Area.
[Saturday’s WSJ had a funny “Salt and Pepper” cartoon featuring three cavemen around a fire: “Someday you be household name, Blog.” Hmm, archive of the cartoon seems to be have removed – offensive to cavemen?]
On Wednesday, SEC Chairman Cox spent the first three of his six minutes on CNBC’s Squawk Box talking about the SEC Staff’s first wave of comment letters related to its executive compensation review project. Here is the archived video.
Note that the Chairman didn’t specify how many “hundreds” of comment letters will ultimately be sent by Corp Fin. That’s something that isn’t clear now, but probably will be mentioned in the Staff’s upcoming Report.
Also note that not all of the Staff’s comment letters have been faxed out yet. So far, just a first wave has been sent – another wave should be coming in the near future. That should keep some of you on edge…
The Corporate Executive: A Special September-October Issue
Our Sept-Oct issue of the The Corporate Executive is being dropped in the mail today. It provides comprehensive analysis and guidance regarding the Staff’s comment letters. The issue includes sections on:
– Analysis and Guidance: The Staff’s Executive Compensation Comment Letters
– How to Respond to the Comments
– Overall Observations on the Staff’s Comments
– Putting the “A” Back Into CD&A
– Performance-Based Pay Disclosure
– Benchmarking
– Termination and Change-in-Control Arrangements
– Notable Comments on Compensation Tables, Corporate Governance Disclosures and Related Person Transaction Policies
Here is a blurred copy of the issue so non-subscribers can get a sense of what its like. Try a No-Risk Trial for 2008 and get this issue (and rest of 2007) for free. If you are a subscriber, you should be receiving your issue early next week – please don’t call us to get it rushed…
Canada Delays Adopting New Executive Compensation Rules
Recently, the Canadian regulators issued this delaying notice, announcing that it was postponing the adoption of amended executive compensation rules. The proposed rules are fairly similar to what the SEC adopted last summer (see our “International” Practice Area on CompensationStandards.com for firm memos regarding the proposals).
Canadian regulators still hope to adopt new rules, it just needs more time to analyze the comment letters it has received – and they won’t finish that review in time to get new rules out for next year’s proxy season. Looks like about 50 comment letters were submitted, a drop in the bucket compared to the thousands that the SEC’s rulemaking garnered…
I’ve started doing the prep calls with the panels for our “Tackling Your 2008 Compensation Disclosures: The 2nd Annual Proxy Disclosure Conference” – and it’s amazing how much there will be to cover, even though we all have a year under our belt under the SEC’s new rules. And that doesn’t even take into account the flurry of SEC comment letters that just came out.
For example, during the “Analyzing the Equity-Based Tables” panel (featuring the SEC’s Paula Dubberly, Howard Dicker, Alan Kailer and Martha Steinman), you will learn:
– How to properly classify an equity award from an accounting perspective (lots of companies made errors) – and what to do next year, if you got it wrong this year
– How many of your numbers will change columns from one year to next – and how to avoid pitfalls
– What are the latest trends in grant practices – and how that impacts your disclosure
– What are the SEC comments (and latest positions) on the equity-based tables, including the challenging comments regarding performance targets
You can catch this critical Conference either live in San Francisco or via video webcast. Remember how practical last year’s Conference was – this year will be no different: Register today!
In the SEC’s Enforcement Division’s Crosshairs: General Counsels
Following up on my blog that linked to an article that blamed lawyers for option backdating, Keith Bishop has compiled this lengthy list of SEC Enforcement actions against general counsels so far this year. As you can see, the actions aren’t limited to backdating:
– On January 10th, the SEC announced that it had settled civil fraud charges against the former general counsel of Comverse Technology, William Sorin, under an agreement which provides for the payment of over $3 million in civil penalties, disgorgement, and prejudgment interest, a permanent injunction, a permanent officer-and-director bar, and suspension from appearing or practicing before the SEC as an attorney.
– On February 28th, the SEC filed a complaint charging Kent Roberts, the former general counsel and corporate secretary of McAfee, with securities fraud for wrongfully re-pricing McAfee stock option grants awarded to him and others in an effort to secretly increase the value of the grants.
– On March 1st, the SEC filed a complaint against Randi Collotta, a compliance officer and lawyer, alleging that she provided material, nonpublic information concerning upcoming corporate acquisitions involving Morgan Stanley’s investment banking clients to a registered representative at a Florida broker-dealer.
– On March 28th, the SEC charged two former in-house attorneys of Enron Corp., Jordan Mintz, a former Enron Vice President and General Counsel of Enron’s Global Finance group and Rex Rogers, a former Enron Vice President and Associate General Counsel, in connection with a fraudulent scheme to make material misrepresentations in, and to omit material disclosures from, Enron’s public filings.
– On April 2nd, the SEC filed suit against Christi Sulzbach, the former general counsel at Tenet Healthcare. The suit charges that Tenet, through the general counsel and other executives, misled the investing public by failing to disclose Tenet’s strategy, its impact on revenues and earnings, and its unsustainability in the portion of its public filings with the Commission known as MD&A.
– On April 5th, the SEC issued an Order Instituting Administrative Proceedings pursuant to Rule 102(e) of the Commission’s Rules of Practice, Making Findings, and Imposing Remedial Sanctions against Myron Olesnyckyj. Olesnyckyj served as General Counsel of Monster Worldwide.
– On April 18th, the SEC filed a civil injunctive action against Kevin Heron, the former general counsel, corporate secretary, and chief insider trading compliance officer of Amkor Technology. The complaint alleges that alleges that over a two-year period, Heron illegally traded in Amkor securities prior to five Amkor public announcements relating to financial results and company business transactions.
– On April 24th, the SEC filed a civil suit against Nancy Heinen, the former general counsel at Apple, saying her actions led to “fraudulent” stock option backdating at the company.
– On May 31st, the SEC filed civil fraud charges against California-based software maker Mercury Interactive and four former senior officers of Mercury, including its former General Counsel, Susan Skaer. The SEC alleges that the former senior officers perpetrated a fraudulent and deceptive scheme from 1997 to 2005 to award themselves and other employees undisclosed, secret compensation by backdating stock option grants, failing to record hundreds of millions of dollars of compensation expense, and falsifying documents to further this scheme.
– On June 6th, the SEC instituted Rule 102(e) administrative proceedings against Chris Gunderson, the General Counsel of Universal Express. The SEC’s proceedings are based upon an injunction issued in February 2007 by the U.S. District Court for the Southern District of New York.
– On August 3rd, the SEC announced that a federal jury found Michael Pietrzak and Maurice Furlong liable for securities fraud and other charges in their operation of Hexagon Consolidated Companies of America, a development stage mining company headquartered in Reno. Pietrzak was HCCA’s general counsel, CFO, and executive secretary, as well as a director. (The SEC filed this case in 2003).
– On August 28th, the SEC charged Lisa Berry with routinely backdating option grants from 1997 to 2003, first as General Counsel of KLA-Tencor Corporation and then as General Counsel of Juniper Networks. The Commission alleges that Berry’s misconduct caused the two companies to conceal hundreds of millions of dollars in stock option compensation expenses relating to undisclosed in-the-money options provided to company executives and employees.
The D&O Insurance Market Is Soft
This month’s Directors & Boards’ e-briefing includes a piece by Holland & Knight about “The D&O Insurance Market Is Soft.” Funny how everything has its cycles – not too long ago, the D&O insurance market was rock hard…
