Category Archives: Compliance

Criminal charges for a CEO

Corporations get charged with criminal conduct from time to time.  But seldom does the CEO at the time also get charged.

“Barclays Hit With Fraud Charges,” The Wall Street Journal, June 21, 2017 B1.  Charges of fraud and illegal payments filed against the bank and its former CEO (and a few other executives) in the UK.

As usual, the shareholders get the bill for any fines (and any diminution in share value).  Curiously absent were any charges against the directors of the Bank’s Board at the time.  But maybe the failure of the Board to detect this level of criminal activity will result in civil suits against the directors for negligent supervision.

Maybe Shearman & Stirling can write another report. (See Wells Fargo posts, supra).  Willie Sutton wasn’t the only crook who knew where the money is/was.

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Duty of Directos

One of my common themes is the duty of directors.  They get paid a lot of money to act as fiduciaries for the company’s shareholders.

“Warren Keeps Pressure on Wells,” The Wall Street Journal, June 20, 2017 B10.  Senator Elizabeth Warren (D. Mass.) is leaning on the Federal Reserve (arguably an independent body) to remove 12 directors who served on Wells Fargo’s Board when the account- cramming scandal was going on.  Other problems have emerged at Wells Fargo since then.

The shareholders didn’t/couldn’t vote them out in April, and so far (as I know) the directors haven’t been held personally liable for negligent oversight.  So it’s nice that someone is still pursuing the people in charge at the time that (some of the) bad things were happening.

Some executives got fired or their bonuses were docked.  The shareholders lost a bundle in fines and penalties paid by the company.  It would be nice if the directors were held responsible and accountable — not just to penalize them, but to put other directors on notice of what they are getting paid to do, and for whom.

Would be nice to have a poster child for the director’s duty.

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Surgical precision

How do you deal with claims of sexual harassment?  Have two law firms conduct investigations and fire 20 people.  But will that be the end or the middle?

“Uber Fires Over 20 In Wake Of Probe,” The Wall Street Journal, June 7, 2017 B1.  Over two hundred claims investigated and no action taken in 100 of them.

Were there supervisors who participated or condoned or who failed to notice or respond?  Were there reporting practices and policies in place?  If harassment was “accepted” in the Uber culture, who’s to blame?  HR?  The Board?  Management?  How long had this been going on?  How much will the shareholders have to pay?

A summary of one of the law firm reports is due out soon.

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Rank has its privileges

One might suppose accountability and responsibility apply to CEOs.  Then, again ….

“Gymnastics Boss Paid Severance,” The Wall Street Journal, June 3, 2017 A9.  The CEO, who was nominally in charge when the team doctor for the women’s gymnastics team allegedly abused female gymnasts, gets a $1 million severance package.

One wonders what the Board would have paid him if they fired him for cause.  The gymnastics federation reportedly sat on the results of an internal investigation of the sexual abuse allegations for five weeks.  The CEO said the federation didn’t have an obligation to report sexual abuse by its coaches to law enforcement.  Didn’t the ex-president of Penn State just get sentenced to jail for similar acts or omissions?

One of the Board’s fundamental jobs is to hire the CEO; another is oversight.  Everyone has a duty to report violations of law.  It would appear either the Board or the CEO or the Federation wasn’t doing its or his job.  Maybe the Board gets severance, too.  What do the shareholders get?

The bill.

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Backlog

Travel-related backlog.

Executives do go to jail.  “Ex-VW Official to Stay in Jail,” The Wall Street Journal, May 26, 2017 B3.  The official was head of the environmental and engineering office.  VW had already pleaded guilty to criminal charges in connection with the diesel emissions scandal.  So the company AND some executives are criminally charged!  Guess Sally Yates meant it.  At least for foreign companies.  But no directors have been sued.  Yet.

“FBI Holds Memos for Now,” The Wall Street Journal, May 26, 2017 A4.  Congress wants the memos that ex-Director Comey wrote, but the existence of the special counsel (also the ex-Director) and Congressional “inquiries” have muddied the waters.  Whose information is it, anyway?  And can’t we all look at them together?  Right after Mr. Comey testifies?  Interesting that the FBI can withhold non-privileged memos, whatever their weight may be.

Chairman doesn’t go to jail.  “Leader of Brazil’s JBS Steps Down,” The Wall Street Journal, May 27, 2017 B1.  The bribing scandal in Brazil’s meat-packing industry removes the chairman and his brother from the Board (although the brother remains as CEO).  The chairman signed a plea bargain in exchange for criminal immunity.  Curious about the culture at the company after the plea deal.

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Digging out

I was otherwise engaged last week and missed posting.  Here are some catch-ups.

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Tuesday Twins

“Fund Firm Fires Boss in Purge,” The Wall Street Journal, May 2, 2017 B1. AllianceBernstein fires CEO and drops 9 of 11 directors over concerns about financial performance and future.

Would the company do the same over a violation of law or policy?

“Another Fox News Executive Departs,” The Wall Street Journal, May 2, 2017 B1. Network’s co-president resigns following sexual harassment claims against two others.

Well, go figure; a boss falls on his/her sword after violations of law and/or policy.

This is a man-bites-dog story.  Seldom do the big wigs lose their heads.  And directors?  Hardly ever.

 

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