Daily Archives: November 19, 2005

Is the Lord of Regulation also the Lord of Compensation?

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spitzernew10.jpgFollowing on the theme from this earlier post, this Kimberly Strassel/Wall Street Journal ($) op-ed examines the deposition testimony that is emanating from New York Attorney General Eliot Spitzer‘s lawsuit to recover alleged overcompensation paid by the New York Stock Exchange to former NYSE CEO Richard Grasso in connection with Mr. Grasso’s $140 million pay and retirement package. Ms. Strassel reports that the deposition testimony from the NYSE directors is contradicting Spitzer’s theory of the case, which is that the directors were given incomplete information regarding Grasso’s pay package and that they shirked their duty to evaluate the compensation arrangement fully. Noting Ms. Strassel’s piece, Larry Ribstein points out the transparent nature of the legal issue and the political purpose of the Grasso lawsuit, and provides the following “money” observation:

Spitzer is attempting to collect the rent on this litigation for his gubernatorial campaign. . . .
An imponderable here is where Spitzer gets off second-guessing a compensation decision. Shouldnít this be subject to the business judgment rule which, after all, gave the Disney board considerable coverage in the Ovitz affair? Well, the NYSE is a non-profit, and so gets Spitzerís solicitous stewardship under an arguably stricter rule. But one wonders why the business judgment rule wouldn’t apply here, since non-profits have to operate under the same conditions in hiring executives that the for-profits do, and courts aren’t any better able to review compensation in a non-profit.

Fifth Circuit schedules return to New Orleans

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5th Cir logo11.gifThe Fifth Circuit Court of Appeals, which relocated temporarily to Houston in the aftermath of Hurricane Katrina (earlier posts here and here), issued this press release yesterday in which it made public its plans for returning to New Orleans next month. The court will begin moving back Dec. 16 and will be closed until Jan. 8, during which time only emergency matters will be handled. The court originally had planned to move to Baton Rouge as an intermediate step before returning to its longtime home in New Orleans’ John Minor Wisdom Court of Appeals Building. However, conditions in New Orleans are stable enough to allow the 135 employees of the Court to return home. The Court has been using makeshift work spaces in the Bob Casey U.S. Courthouse in downtown Houston over the past couple of months.

Lay-Skilling-Causey witness intimidation allegations scheduled for hearing

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LaySkillingCausey.gifThis Mary Flood/Chronicle article reports that U.S. District Judge Sim Lake has scheduled a hearing in the Enron Task Force’s legacy case against former key Enron executives Ken Lay, Jeff Skilling and Richard Causey over the defendants’ allegations that the Task Force has engaged in wide-ranging witness intimidation in an effort to suppress exculpatory testimony in favor of the defendants, whose criminal trial is scheduled to commence in less than two months.
Ms. Flood reports that Judge Lake has ordered two Houston criminal defense attorneys and four of their clients to testify in the hearing. The two attorneys are Bob Sussman and Wendell Odom, and one of the client that will be called is Larry Lawyer, a former mid-level Enron executive who previously pled guilty under a cooperation agreement to a tax-related charge arising from a payment that he received in connection with one of former Enron CFO Andy Fastow’s infamous deals in which Fastow and several of his Enron associates enriched themselves.
The witness intimidation issue has been festering throughout both of the prior Enron-related criminal trials. It first arose in connection with the trial of the Nigerian Barge case in which the Task Force effectively suppressed exculpatory testimony for the defendants in that case by fingering as unindicted co-conspirators dozens of former Enron and Merrill Lynch executives who were involved in the transaction that was the basis of the prosecution. Every one of the unindicted co-conspirators declined to testify in the Nigerian Barge trial on the basis of their Fifth Amendment privilege against self-incrimination. Consequently, four Merrill Lynch executives are serving prison sentences without having had the opportunity to present substantial amounts of exculpatory testimony and related evidence to the jury.

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