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The Chronicle's continuing Enron hypocrisy
Being generally an optimistic sort, I keep thinking that the financial crisis of the past year or so will eventually prompt the Houston Chronicle to reconsider its generally biased coverage of the demise of Enron over the past seven...
SCOTUS takes up the honest services issue
Well now, that certainly did not take long, now did it? Just a week after former Enron CEO Jeff Skilling appealed his criminal conviction and monstrous 24-year prison sentence to the U.S. Supreme Court on an allegedly erroneous application...
Another Angry Mob
The Fifth Circuit's decision yesterday reminded us of the angry mob that lynched Jeff Skilling. Now, as this timely Roger Parloff/Fortune article notes, an even larger mob is gathering to lynch the businesspeople who were attempting to save their...
The politics of destruction
In this International Herald Tribune article, Michael Oxley -- the "Oxley" of the Sarbanes-Oxley corporate governance statute -- confirms the vacuous nature of the politicians who passed that destructive law and encouraged the destruction of Arthur Andersen and various Enron...
Previewing the Skilling appeal
Former Enron CEO Jeff Skilling filed a motion for bail pending appeal earlier in the week (download a copy here; Carrie Johnson's WaPo article on the motion is here) and, in so doing, previews the major issues that he will...
Hope for sanity in sentencing of business executives?
Although just one case, at least one federal judge has concluded that the resentment and scapegoating that has driven the criminalization of business during the post-Enron era has gone too far. In this thoughtful sentencing memorandum relating to the conviction...
Speaking of that key evidentiary issue . . .
Peter Lattman posts this interesting piece on the oral argument in the Bernie Ebbers appeal that could well impact the key evidentiary issue in the ongoing trial of former Enron executives Ken Lay and Jeff Skilling. In the Ebbers appeal,...
Emshwiller's Enron surprise
John Emshwiller of the Wall Street Journal ($) weighs in today on the defense strategy of former Enron key executives Ken Lay and Jeff Skilling for their upcoming criminal trial, and he is surprised to find that Lay and Skilling...
The high price of asserting innocence
Last week, former Enron chief accountant Richard Causey pled guilty to a single count of securities fraud and agreed to a seven-year prison term after vigorously defending himself from multiple charges of business crimes for over two years. Had he...
Cashing in on criminalizing business
Eliot Spitzer makes no bones about using his position as New York attorney general to promote his campaign for governor, but he certainly isn't the only lawyer cashing in on the trend of criminalizing business to further one's career. This...
The judge said what?
New York Bankruptcy Judge Prudence Carter Beatty -- who is overseeing the Delta Airlines chapter 11 case -- is apparently somewhat of a live-wire on the bench. The airline pilots union has already asked her to recuse herself over remarks...
Steffy on the sad case of Jamie Olis
Chronicle business columnist Loren Steffy -- who blogs over at Full Disclosure -- does not generally share my view that government has gone overboard in the post-Enron era of criminalizing merely questionable business transactions. However, when it comes to the...
More on the criminalization-of-business lottery
Well, Bernie Ebbers is being allowed to remain free from his effective life sentence during the appeal of his conviction of defrauding WorldCom investors. The basis of the decision to allow Mr. Ebbers to remain free is that there are...
Piling on KPMG
As KPMG attempts to finalize a deferred prosectution agreement with federal prosecutors that would avoid an Arthur Andersen-type indictment and probable meltdown, now they have another front on the criminal battlefield to be worried about: Mississippi likely will file criminal...
The high price of asserting innocence
A frequent topic on this blog has been the government's questionable tactic of bludgeoning business executives into plea bargains by playing on the executive's fear of a draconian prison sentence (often an effective life sentence) if the executive has the...
Heat turned up a notch on Milberg Weiss
This Wall Street Journal ($) article reports that federal investigators have turned up the pressure in its investigation of several prominent plaintiffs class action securities lawyers at the former Milberg, Weiss law firm, including granting immunity to a former Milberg...
CIBC puts Enron class action settlement amount over the WorldCom record
Canadian Imperial Bank of Commerce announced today that it has agreed to pay $2.4 billion to settle the class action securities litigation against the bank arising out of the demise of Enron Corp. in late 2001. The CIBC settlement is...
Ebbers receives an effective life sentence
Former WorldCom CEO 63 year old Bernard J. Ebbers received a 25 year sentence for his conviction on charges of securities fraud, conspiracy and seven counts of filing false reports with regulators relating to an a multi-billion accounting fraud...
No fan of Lerach
In this NY Times op-ed, Joseph Nocera tees off on the lead Enron class action securities fraud plaintiffs' lawyer, William Lerach, who has his share of troubles these days (noted here and here). After noting Larry Ribstein's compliment of Mr....
More on the Sihpol acquittal
The Sihpol acquittal from last week has generated much needed criticism of the demagogic ways of New York AG Eliot Spitzer, including this Wall Street Journal ($) editorial the day after the acquittal. While the WSJ editorial rightly criticizes Mr....
JP Morgan Chase settles Enron class action
On the heels of Citigroup's settlement last week, J.P. Morgan Chase & Co. elected to avoid the risk of being placed in the "last to settle" position that it found itself in the WorldCom class action securities fraud litigation and...
Citi settles Enron civil securities fraud claims
Citigroup Inc., the nation's largest financial institution, announced this morning that it has agreed to pay $2 billion to settle class-action claims over its role in the sale of Enron Corp. stock and bonds prior to the company's collapse into...
What killed Arthur Andersen?
One of the most difficult lessons to learn in becoming a wise counselor is to say "no" to a good client that desires to do something wrong. In this NY Times op-ed, Times business writer Floyd Norris observes that the...
The Chronicle makes a point about DeLay that it failed to make about Enron
A good, old-fashioned snit between Texas political opponents gave the Houston Chronicle an opportunity this week to make a good point about the rule of law and the integrity of governmental investigations. But in so doing, the Chronicle highlighted its...
It continues to get worse for AIG
Following on this progression of damaging public disclosures over the past several months, American International Group Inc. announced yesterday, as this NY Times article reports, that the company has decided to delay for a third time the publication of its...
AIG's Enronesque experience continues
As noted in this previous post, the reason that Enron crashed was that its business model required that its customers rely on the company's financial integrity and not necessarily on the company's net worth. Accordingly, when Enron's financial integrity came...
Andersen finally settles with WorldCom
The last defendant standing in the WorldCom securities fraud litigation stood down on Monday as Arthur Andersen announced that it had settled with the WorldCom class for $65 million. The settlement occurred at the beginning of the fifth week of...
The Lord of Regulation's abuse of power
In this Wall Street Journal ($) op-ed, Chief Executive magazine editor William J. Holstein addresses a common theme of this blog -- namely, the dubious motives and methods behind New York AG ("Attorney General" or "Aspiring Governor," take your pick)...
JPMorgan Chase wins a key decision in Enron-related litigation
Only a week after agreeing to an embarrassing $2 billion settlement arising from its role as an underwriter of WorldCom bonds, JPMorgan Chase got some good news yesterday in a securities fraud case arising from its somewhat different dealings with...
Not good legal advertising
This Wall Street Journal article ($) reports on one of the biggest litigation miscalculations of the past several years -- Skadden Arps' partner Jay Kasner's recommendation to JP Morgan Chase and other WorldCom underwriters that they reject an earlier settlement...
Former WorldCom chairman finally settles
Former WorldCom chairman Bert C. Roberts, Jr. -- the final settlement holdout among WorldCom Inc.'s former outside directors -- agreed to settle the WorldCom investors' class-action lawsuit claims against him for $5.5 million, including $4.5 million out of his own...
WorldCom directors settle (again)
Eleven of WorldCom Inc.'s former directors who served on the WorldCom board between 1999 and 2002 yesterday agreed to revive a settlement that the District Court had earlier rejected (see earlier posts here and here) under which the directors agreed...
Outside directors' liability
Bernard S. Black, a University of Texas Law School professor, contributed to this timely article that summarizes the landscape of outside directors' liability to investor lawsuits in the wake of the recent Enron and WorldCom directors' settlements. The article nicely...
JP Morgan Chase settles WorldCom class action
J.P. Morgan Chase & Co. became the final major holdout in WorldCom investor class-action lawsuit to settle as it agreed to pay a cool $2 billion in the WorldCom settlement pot. The settlement came a day before jury selection was...
Meanwhile, over at AIG and Berkshire . . .
And while the business and legal worlds focus on the implications of the Ebbers conviction, this NY Times article reports on the uneasiness at Berkshire Hathaway as New York Attorney General Eliot Spitzer carves another notch in his anti-business...
The "honest idiot" defense fails
Bernie Ebbers' honest idiot defense fails as he is convicted on all counts. The conviction is further bad news for former Enron chairman Ken Lay and former CEO Jeff Skilling who are claiming -- as did Mr. Ebbers -- that...
More courthouse steps settlements in WorldCom class action
Deutsche Bank AG, German bank WestLB AG and Italian bank Caboto Holding Sim joined most of the other financial institution-defendants in the WorldCom class action yesterday in agreeing to settle fraud allegations for their participation in the sale of WorldCom...
Four more banks settle WorldCom claims
The "courthouse steps" settlements continued Tuesday in the class action lawsuit over the WorldCom accounting scandal as four more financial institution-defendants reached deals with the plaintiffs in which the defendants agreed to pay a total of $428.5 million. Earlier posts...
More WorldCom settlements
On the heels of BofA's settlement earlier in the week, more "courthouse steps" settlements in the WorldCom shareholder class action lawsuit took place on on Friday as four investment banks settled claims arising from their involvement in underwriting bond sales...
B of A settles in WorldCom class action
In two weeks, the trial cranks up of claims by investors and creditors who lost billions in the WorldCom accounting scandal against WorldCom's former underwriters, outside directors, and Arthur Andersen. Consequently, over the next several weeks, there will probably be...
The regulatory-induced syndrome of irrational exuberance
Temple University mathematics professor John Allen Paulos, author of Innumeracy (Hill 2001) and the more recent A Mathematician Plays the Stock Market (Basic 2003), wrote this insightful Wall Street Journal ($) op-ed yesterday in which he describes how even a...
Ebbers is going to testify
In the key strategic decision of the criminal trial of former WorldCom CEO Bernard Ebbers, Reid Weingarten advised U.S. District Judge Barbara Jones on Friday that he intends to call his client Mr. Ebbers to the stand on Monday. The...
Ebbers criminal trial winding down?
In a somewhat shocking development to a world conditioned to prolonged white collar criminal prosecutions, the prosecution in the criminal trial of former WorldCom CEO Bernard Ebbers announced yesterday that it will not be calling any further witnesses from the...
A lawyer you will be hearing about in the Enron case soon
This NY Times article profiles Reid Weingarten, the Washington, D.C.-based criminal defense attorney who is currently representing former WorldCom CEO Bernard Ebbers in his criminal trial. Mr. Weingarten is also representing former Enron chief accountant Richard Causey in his criminal...
WorldCom directors settlement on the rocks
Less than a month after it was announced, the tentative settlement by 10 of 12 WorldCom Inc. directors to pay $54 million (including $18 million out of their own pockets) to settle the class-action claims against them has collapsed after...
Why hasn't the Disney-Ovitz case settled?
Given the high stakes of the ongoing Disney-Ovitz trial, a reader asks Professor Ribstein that question, and the Professor speculates that the reason is the importance of the case. Having been involved in similar high stakes cases, that's certainly one...
Harvard Prof not impressed with Enron directors' settlement
Lucian Bebchuk is a professor at Harvard Law School and a co-author of Pay Without Performance: The Unfulfilled Promise of Executive Compensation. In this NY Times op-ed, Professor Bebchuk takes dead aim at the recent Enron directors' settlement and he...
The lagging reform movement in corporate governance
The NY Times' Kurt Eichenwald, who has been covering the Enron scandal and other post-Dotcom business busts over the past several years, reviews in this NY times article the current status of the lagging government reform movement in regard to...
The honest idiot defense
In this article, NY Times business columnist Floyd Norris notes the common defense that the various indicted CEO's of the business world are using these days to defend themselves against criminal charges -- i.e., that the executive was "honestly ignorant"...
Enron outside directors settlement
On the heels of this post earlier this week about the impending outside directors' settlement in the WorldCom case, this NY Times article reports on the impending $168 million settlement involving the class action securities fraud and related claims against...
WorldCom outside directors settlement
10 of the 12 former outside directors of WorldCom Inc. have agreed in principle to pay $18 million out of their own pockets as a part of a $54 million settlement of the class-action lawsuit that WorldCom bondholders and shareholders...
An annuity for auditors
Don't miss Holman Jenkins, Jr.'s Business World column this week in the Wall Street Journal ($) in which he reviews the rather remarkable effects of the Sarbanes-Oxley legislation, which was Congress' knee-jerk public relations reaction to the WorldCom and Enron...
Fannie Mae Enron?
This Wall Street Journal ($) editorial examines the recent report issued by the Office of Federal Housing Enterprise Oversight (Ofheo) in regard to Fannie Mae's accounting machinations and what it found is troubling, to say the least. By improperly delaying...
"We'll Getcha & Mangle Ya"
New York-based Weil, Gotshal & Manges is a major international law firm that is particularly well-known in bankruptcy and reorganization circles. The firm is counsel for the debtors-in-possession in both the Enron and MCI/WorldCom reorganization cases, which are two of...
The importance of good timing in going bust
This NY Times article provides a fine report on the demise of Global Crossing, Ltd., the telecommunications company that went down under suspicious circumstances at the same time as Enron Corp. was cratering. However, unlike Enron, the Justice Department established...
J.P. Morgan ups ante in Enron litigation
In announcing its second quarter results today, J.P. Morgan Chase & Co. announced that it has increased its total litigation reserve to $4.7 billion before taxes. The reserve covers Morgan's contingent liability in the ongoing Enron civil litigation and other...
KPMG tax shelter snags some big fish
A KPMG tax shelter that the Internal Revenue Service last year declared abusive snared a group of prominent American companies, reflecting the popularity of efforts to reduce corporate taxes has become. Here are earlier posts on KPMG's mounting problems relating...
Institutional litigation reserves increasing
On the heels of the news of Citigroup's WorldCom settlement and increase in litigation reserves for other (i.e., Enron) investor litigation, this Wall Street Journal ($) article reports on the pressure that other financial services firms are facing to increase...
Citigroup WorldCom settlement: one down, Enron to go
This NY Times article reports on the settlement of the WorldCom class action lawsuit against Citigroup. The $2.65 billion settlement is the largest ever by a bank, brokerage firm or auditor to settle an investor fraud case based on the...
SEC files unusual brief in WorldCom "fraud on the market" class action
This NY Times article reports on an unusual brief that the Securities and Exchange Commission has filed in Citigroup's appeal of the class certification order in the WorldCom class action securities fraud case. This particular appeal involves the "fraud on...
Waste Management names new CEO reshuffles top management
Houston-based Waste Management named David P. Steiner to succeed A. Maurice Myers as chief executive officer. Mr. Myers will remain as chairman until November, when he will retire. Upon Mr. Myers' retirement, board Director John Pope, a former president and...
If Ebbers Masterminded the Fraud, Why Didn't He Sell More Stock?
Floyd Norris is one of the most insightful business reporters for the NY Times. In this column today, Mr. Norris raises the issue that, if former WorldCom CEO Bernie Ebbers really masterminded an elaborate fraud at WorldCom, why didn't he...
WorldCom's Ebbers indicted, CFO Sullivan plea bargains
Bernie J. Ebbers, the former CEO and and co-founder of WorldCom Inc., was indicted today on three criminal charges that accuse him of directing and participating in one of the biggest frauds in the history of American business. Although Scott...
The Law of Unintended Consequences
In the aftermath of Enron's demise, Congressmen fell over themselves in self-righteous indignation proposing legislation that would ensure that such a debacle would never occur again. Not only does the nature of man ensure that another Enron debacle will occur,...
CFO's: Beware of this Award
Paul Krugman pens a review in this week's NY Times Review of Books in which he makes the following observation: In 1998, CFO Magazine gave an Excellence award to Scott Sullivan, the chief financial executive of WorldCom. In 1999 it...
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