06-25-2003, 03:01 PM | #1 |
40th Level Warrior
Join Date: July 11, 2002
Location: Chicago, IL
Posts: 11,916
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Get ready to be pissed:
Xerox's bylaws indemnify its executives on certain claims -- including legal consequences of their business mistakes (including, you will see, disgorgement of profits demands). The company also buys Director and Officer ("D&O") insurance policies to cover such losses. This is common in corporate America. The Economist (6/14-6/20/03) says this must be added to the list of moral hazards. Why? Well, two weeks ago the SEC meted out punishment to Paul Allaire, boss of Xerox in the late 1990s, when the company injected non-existent profits into its accounts to the amount of $1.4 billion. The SEC ordered Allaire to pay $1M in fines and disgorge $7.6M in gains he made out of the fraud. Since the company indemnifies the $7.6M (and the $11.8M assessed to other officers), Mr. Allaire walks away with a tidy $6.6M profit. Plus, as insurers resist fraud claims, he leaves in his wake the likelihood of pending litigation between Xerox and its insurers over the D&O policy. That's a lot of waste of company (and stockholder) money in at least two companies so one fat can can waddle away in satisfaction. Oh, and Xerox stock prices dropped last week -- more fallout caused by these actions. There is good news: job security for lawyers. [ 06-25-2003, 03:02 PM: Message edited by: Timber Loftis ] |
06-25-2003, 03:07 PM | #2 |
Symbol of Moradin
Join Date: June 5, 2002
Location: Slovenia,Ljubljana
Age: 36
Posts: 8,554
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No comment . [img]tongue.gif[/img] |
06-25-2003, 03:11 PM | #3 |
Guest
Posts: n/a
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Business as usual in corporate America eh? |
06-25-2003, 03:46 PM | #4 |
Drow Priestess
Join Date: March 13, 2001
Location: a hidden sanctorum high above the metroplex
Age: 54
Posts: 4,037
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And here I thought he was talking about the old film with Fred MacMurray (who commits both murder and insurance fraud). [img]graemlins/laugh3.gif[/img]
Reminds me of the joke about the actuary who started having a heart attack and quickly threw himself down the stairs, because the likelihood of dying of both causes was so low. (ok...so I'm weird)
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Everything may be explained by a conspiracy theory. All conspiracy theories are true. No matter how thinly you slice it, it's still bologna. |
06-25-2003, 04:42 PM | #5 |
Silver Dragon
Join Date: March 4, 2001
Location: Knoxville, TN USA
Age: 60
Posts: 1,641
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Oh yeah! Got to keep those lawyers busy!!! If they are up there feeding on the big boys, they can't be feeding on us little ones!!!...
... Sorry TL couldn't resist.
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Sir Taliesin<br /><br />Hello... Good bye. |
06-25-2003, 04:46 PM | #6 | |
Ra
Join Date: March 26, 2002
Location: Finland
Age: 36
Posts: 2,323
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Quote:
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If the radiance of a thousand suns were to burst forth at once in the sky, that would be like the splendor of the Mighty One. "I am become death, the destroyer of worlds." |
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06-25-2003, 05:12 PM | #7 |
Ironworks Moderator
Join Date: March 1, 2001
Location: Scotland
Posts: 2,788
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Does it not go.
Insurance Company "This was fraud - insurance contracts operate on the principal of uberrimae fidae, therefore, unless the terms of the contract of insurance specically include indemnity for fraud or other illegal activities by an officer of the corporation, we won't pay out" Xerox CEO "Dammit - we've been slapped by a mighty big damages suit against an execitive which won't be covered by our insurers. Quick, phone our retained council Sue, Grabbit and Runne, and get those shysters to recover as much as possible from the bastard that landed us in this pickle. Oh, and while your at it, get them to sue our auditors for failing to uncover this. Also, get another firm of management consultants (not Accenture - heaven help us) to show us how to cover our asses in future, just so we can show the stockholders that we're sincere in our desire to clean house. Finally, if I don't see some mid level suits falling past my window in the next five minutes, there will be hell to pay (as long as I'm not paying). Now get to work, and don't try calling me for the next few hours, I'll be shredding." Problem solved [img]smile.gif[/img]
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Regards Mouse (Occasional crooner and all round friendly Scottish rodent) |
06-25-2003, 05:19 PM | #8 |
40th Level Warrior
Join Date: July 11, 2002
Location: Chicago, IL
Posts: 11,916
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Did you work for Enron, Mouse??
Actually, probably won't work that way. In that day and age (a short time past, I know), these were probably appropriate business decisions -- everyone was doing it. The excess $$ in profits he made likely come from sale of his stock options at increased market values, which would have been fine too. Remember, the Business Judgment Rule (BJR) is a PROTECTION for officers, not a definition of liabilty. |
06-25-2003, 05:28 PM | #9 |
Ironworks Moderator
Join Date: March 1, 2001
Location: Scotland
Posts: 2,788
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Nope, I worked out that business strategy in my own (warped) head [img]graemlins/wow.gif[/img]
As for protection of company officers, here in the UK, the primary responsibilities are to operate in accordance with The Companies Acts and generally in the best interests of the share/stockholders. They do have certain immunities, but I doubt if they would protect them from "unjust enrichment" or any form of insider trading.
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Regards Mouse (Occasional crooner and all round friendly Scottish rodent) |
06-25-2003, 05:59 PM | #10 |
40th Level Warrior
Join Date: July 11, 2002
Location: Chicago, IL
Posts: 11,916
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Sounds similar to the BJR, Mouse. But, in the days when "everybody did it" inflating your stock value WAS good business judgment -- and benefitted all shareholders, not just those officers who held stock options.
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