by Kurt Schulzke on March 25, 2008
What do Enron and Bear Stearns have in common? If you’re a Bear Stearns exec, you’d better hope the answer is “not much.” At least you won’t have to litigate in Houston. New York’s a bigger, better melting pot when it comes to judges and juries. Prosecutors and governors? Don’t change the subject!
Today, a colleague wrote: “Do you think Skilling is innocent including of the insider trading charge?” Here’s my relatively off-the-cuff answer, understanding that a few months ago I did a presentation on the subject of “honest services fraud,” the legal theory on which Skilling was presumably sent to jail. For some accounting professionals and jilted investors — who want to believe that there’s only one true “net income” for any company in a given year and that someone must be at fault any time a stock “goes south” — this won’t go down easy. I feel confident, however, that fairness will eventually trump emotion. [click to continue...]
by Kurt Schulzke on March 20, 2008
It was bound to happen some time. It’s what you get, as a European company, for daring to market your shares (usually in the form of ADRs) in the United States. By providing extensive disclosures about how Jerome Kerviel whacked the the bank for nearly € 5 billion, SocGen also empowered Weiss & Lurie, an American law firm, to subject SocGen to Wall Street’s equivalent of the Star Chamber. [click to continue...]
by Kurt Schulzke on March 12, 2008
The SocGen debate continues. Thanks to Gaute Solheim who commented yesterday as follows:
[Quoting Kurt Schulzke]: “The gains and losses were all a single product of the rogue behavior of a single trader who was discovered and ushered out of the company very early in 2008.”
I am not able to follow your logic here. If the rogue behaviour had resulted in record gains in early 2008, and he had been ushered out of the company for trading outside his limits, would it then be more “true and fair” to put all the gains from all the different trades he did in the 2007 result since they were “a single product”?
I have a hard time figuring out where in the IFRS a persons intent for “rogue behaviour” is treated as a cause to bundle together independent trades that otherwise would be handled independently. As you understand I am not convinced yet.
I do agree with you that IFRS is a step in the right direction, but I still suspect that SG stepped out of line here.
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by Kurt Schulzke on March 11, 2008
Yesterday, in response to Floyd Norris, I offered what may fairly be read as a “clean opinion” on Societe Generale’s use of the IFRS “true and fair view” override to report in 2007 (instead of 2008) its net loss from the Kerviel debacle. Mr. Norris today responded with his entry, “Defending SocGen.” Truth is, my message yesterday wasn’t intended so much as a defense of SocGen’s accounting as of IFRS generally. But having taking up the SocGen gauntlet, I feel somewhat honor-bound to carry it at least for a while. [click to continue...]
by Kurt Schulzke on March 10, 2008
When it comes to IFRS, some Wall Street pundits need to breathe into a paper bag. Last week, Floyd Norris (pic, left), in his NYT piece, “Loophole Lets Bank Rewrite the Calendar,” did all he could to ignite “a debate over how well international accounting standards [known as "IFRS"] can be policed in a world with no international regulatory body.”
To hear Floyd tell it, IFRS are a sort of financial three-alarm fire extinguishable only by direct U.S. regulation. The U.S. has done such a good job with our own mortgage meltdown, surely we can be trusted with a broader international regulatory portfolio? Here’s Floyd: [click to continue...]
by Kurt Schulzke on March 3, 2008
Sumter, South Carolina orthopedic surgeon Michael Drakeford’s qui tam suit — originally filed in 2005 against Tuomey Regional Medical Center — is moving forward, according to recent reports by The State.com and Modern Healthcare Online. Dr. Drakeford was the original plaintiff. However, as is typical in whistleblower cases, the U.S. Justice Department has “intervened” as lead plaintiff. The DOJ’s intervention greatly increases the likelihood of a payment by Tuomey through settlement or trial. This is good news for Drakeford who as the qui tam plaintiff stands to win between 15 and 25 percent of any recovery from Tuomey. [click to continue...]
