You can tell governance in the United States is upside-down when a mere Lt. Commander in the U.S. Coast Guard can force a state’s governor — in this case Louisiana Governor Bobby Jindal — to stand down barges saving the state’s coast line from an oil spill. Not to mention that the spill itself is the proximate result of Coast Guard and other federal-government misfeasance. Continue reading →
When a prominent Houston attorney advocates exonerating a convicted Enron executive you have to believe — as I have long argued — that something is seriously wrong with the conviction. In his excellent post, The Reeling Prosecution in the Skilling Case, Houston Attorney Tom Kirkendall explains why the U.S. Supreme Court should (and likely will) let Jeff Skilling out of jail when it hears his case.
For those with short attention spans, the bottom line is that Jeff Skilling was convicted and sent to jail for 24 years (a sentence recently set aside by the 5th Circuit Court of Appeals in a weirdly self-contradictory opinion) because a Houston jury, poisoned by months of anti-Skilling and anti-Enron propaganda, decided that Skilling exercised bad business judgment as Enron’s CEO during the company’s death spiral. The jury’s theory, doubtless buttressed by years of education and experience running companies in the complex energy derivatives markets, was apparently that any business executive dumb enough or nice enough to try to rescue the jobs and retirement plans of thousands of employees from a perfect market storm had damn-well better save the company or get ready for the guillotine.
Skilling’s conviction and sentence are shocking. Compelling evidence of Skilling’s innocence (and the prosecution’s guilt) is provided by his 209-page Petition for Writ of Certiorari.
One prong of Skilling’s defense is that “honest services wire fraud,” codified at 8 U.S.C. § 1346, is chaotic nonsense that fosters politically-motivated witch hunts any time a big company’s stock plunges in value for whatever reason. Kirkendall notes: Continue reading →
The federal False Claims Act (FCA) encourages private whistleblowers to sue, usually in partnership with the U.S. Department of Justice, to recover federal funds allegedly misspent by individuals, companies or local government agencies.
Rewards of blowing the whistle can be very substantial — up to 30% of the government’s recovery plus attorneys fees — but would-be whistleblowers must satisfy a number of stringent rules. One of these is the so-called “public disclosure bar” of 31 U.S.C. § 3730(e)(4)(A) that bars most claims based on publicly available information the disputed definition of which is now before the U.S. Supreme Court in Graham County Soil & Water District, et al., v. U.S. ex rel Wilson (08-304). Continue reading →
At this point, a voice inside my head keeps screaming, “What about Madoff?!” The FCPA violation alleged here is essentially a victimless crime, functionally a penny-ante “bailout” of a few Nigerians that actually helped the companies’ shareholders. Yet, this SEC complaint is undersigned by no fewer than six SEC attorneys who, judging from the factual timeline, were busily engaged on this case — together with uncounted DOJ counterparts — over at least the past five years while Bernie Madoff made off with $30-50 billion belonging to investors. Continue reading →
On Wednesday last week, while most of the nation was transfixed by “stimulus plan” negotiations, the U.S. House Capital Markets Subcommittee held a little-noticed hearing, featuring uber securities sleuth Harry Markopolos, that could rock U.S. securities regulation to its core. As a financial markets player, attorney and professor for over twenty years, I have seen some amazing things in domestic and international financial markets. However . . .
Nothing in my recollection quite equals the drubbing that Markopolos unleashed on the SEC last Wednesday morning. The first 64 pages of Markopolos’ written testimony should be required reading for every financial markets professional and, drumroll, every U.S. senator and representative with a hand in upcoming securities-market legislation. To hear Markopolos tell it, what we need at the SEC is not more money but more brains and fewer arrogant attorneys.
The U.S. Department of Justice announced, December 3, that MedQuist, Inc. has settled two False Claims Act suits, responding to allegations of over-billing for transcription services performed between between 1998 and 2004. False Claims Act cases often cover six years of activity because the False Claims Act statute of limitations generally extends six years from a defendant’s filing of a false claim for payment: Continue reading →
Johnathan Weil called on Citigroup today to “properly confess” the “rot on Citigroup’s $2.1 trillion balance sheet.” Weil is sure the rot is there because if it weren’t Citigroup “wouldn’t have needed last week’s government rescue [including] a new $20 billion investment by the Treasury Department, plus a guarantee covering about $306 billion of the bank’s assets against most losses.” I beg to differ.
The “rot” may well be an illusion created by poorly-drafted accounting principles applied in draconian fashion by auditors spooked by the specter of ruinous lawsuits. Citigroup’s request for government assistance may well be an appropriate strategic response to the illusion. In the market place, a good illusion beats a bad reality most any day.
Weil assumes facts not in evidence and arguably misapplies SEC regulations in demanding the Citi book losses now. Under SEC rules, Citigroup would be obligated to “confess” losses on Form 8-Konly if Citi’s board concludes that a material charge for impairment is required under generally accepted accounting principles. If the board either has concluded that such a charge is not required or has not yet concluded that one is, no Form 8-K confession is called for. Continue reading →
Citigroup appears to have even less of a claim on Wachovia than I previously thought, on the basis of transaction documents posted late Sunday night by the New York Times (copy below the jump). The documents include an affidavit of Wachovia CEO Robert Steele and the Wachovia-Wells Fargo merger agreement. It appears, from these documents and others filed earlier by Citigroup, that if there’s a bad corporate citizen in this game, it’s Citigroup. Continue reading →
Yesterday, the SEC charged former Kellogg, Brown & Root, Inc. (KBR) executive Albert Jackson Stanley with participating in a “scheme” to win more than $6 billion in construction contracts by bribing Nigerian government officials. According to the SEC, “The contracts were awarded to a four-company joint venture of which The M.W. Kellogg Company, and later KBR, was a member.
The SEC’s complaint in the case — filed at Houston, in the U.S. District Court for the Southern District of Texas — can be accessed here and the SEC’s press release, here. Continue reading →
Before he died, in 1960, Earl Long managed to serve three times as Governor of Louisiana and — despite widely acknowledged corruption — not a day in prison. In the context of today’s plague of litigation and over-zealous white collar prosecution, some might find helpful this advice of Governor Long:
Don’t write anything you can phone. Don’t phone anything you can talk. Don’t talk anything you can whisper. Don’t whisper anything you can smile. Don’t smile anything you can nod. Don’t nod anything you can wink.