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September 29, 2003

Why the Name?

Stephen Bainbridge's entertaining corporate-law-and-wine blog, ProfessorBainbridge.com, very kindly describes this blog as "The oddly named, but always worth reading, By No Other blawg . . . ." The name comes from what I thought was the Ben Franklin saying, "Experience is the best teacher, but a fool will learn by no other." Unfortunately, I just learned in a Google search that the saying is usually quoted as, "Experience is a dear teacher, but a fool will learn from no other" (emphasis added).

I should have remembered the wise counsel of a friend and former law partner. Some years ago, he jokingly chastised one of my then-fellow associates who, in drafting a brief, had misstated a procedural rule. He said, "That's why we buy you the $*^#% books, so you can look these things up."

I suppose I could change the name of this blog, but what the heck, the name is a useful object lesson in itself . . . .

September 29, 2003 | Permalink | Comments (0) | TrackBack

Surreptitious Contract Changes II

This weekend I posted a clause with a representation that no unmarked changes had been made to a contract, to provide a reasonable basis for signing the electronically-negotiated contract without reading the final hard copy. Today, in a very thoughtful commentary on his Corporate Law Blog, Mike O'Sullivan offers a more rigorous clause that contains both a representation and a warranty, "to also cover all redlining failures (intentional or unintentional) and to make it easier to reform the agreement under the doctrines of mutual or unilateral mistake:"

No Unidentified Changes. Each party represents and warrants that each version of this agreement distributed by such party to the other party clearly identifies each change (other than minor non-textual changes in formatting) in the version from the prior version distributed from one party to the other, with the full text of each addition being double-underlined and the full text of each deletion being struck-through. Each party acknowledges that, when such party distributed changes to this agreement, the other party was entitled to rely on the drafting party's identification of changes without further investigation. If the drafting party fails to identify any changes, the drafting party is deemed to have intentionally failed to identify those changes and this agreement shall be reformed, at the non-drafting party's option, to omit any unidentified additions or include any unidentified deletions made by the drafting party. For purposes of this section, any drafting action taken by a party's counsel or other advisors shall be deemed to have been taken by the party

This would be a great clause for deals such as the M&A; work that Mike does, particularly where the parties aren't trying to establish a long-term relationship. (For that kind of contract, however, I think I would probably continue to read carefully the final, hard-copy document, just as he does.)

The clause I posted is designed for higher-volume, long-term-relationship work such as software license agreements. It balances some competing considerations with the intent of trying to get sales deals closed while still providing acceptable legal protection. The clause includes a representation, not a warranty; that was intentional. Let me outline some of the thinking that went into the specific wording of the clause -- please feel free to shoot at it.

  • At the end of a fiscal quarter, when a lot of sales contracts are in negotiation at once, negotiator time is a scarce resource that has to be used economically. You want to provide as much legal protection for your client as practicable, but as the clock runs down on the quarter, you also want to try to timely get the customer's ink on the signature line.
  • The customer's contract negotiator also has limited time, and might not be a lawyer. The last thing your sales people want is for the negotiator to get nervous about your language and, taking the path of least resistance, to put your deal aside until next quarter.
  • In my experience, a representation clause comes across as "softer" than a warranty clause, and is less likely to trigger a visceral objection from the other side.
  • Theoretically, a representation has different legal consequences than a warranty. But in many vendor-customer situations -- particularly longer-term, high-dollar relationships such as some software license agreements -- the differences likely will be academic:
    • In my experience, high-dollar vendors are keenly interested in preserving their customer relationships if at all possible -- they generally don't want to file a lawsuit against a customer except as a last resort.
    • If a customer were unintentionally to make a material change in the contract without marking it, the odds are high that the vendor and customer would try to work things out amicably. In that situation, the mere existence of the representation clause would bestow a fair degree of moral- and bargaining leverage on the vendor. (It's something I could go to my counterpart with and ask, "can't we do something about this?")
    • Whether the change in the contract was truly unintentional might well come down to the credibility of the customer's witnesses -- not a comfortable situation for the customer to be in. As Mike points out, if a jury were to conclude that a customer had deliberately sneaked in a material unmarked change in the contract, that likely would be fraud under my clause, giving rise among other things to the possibility of punitive damages. That likely would give the vendor even more bargaining power in negotiations to fix the contract wording.


So, on balance, for high-volume, high-dollar, long-term agreements, I prefer a simple representation that the customer is likely to accept readily, over a more-complete warranty-and-reformation clause that might require more time for customer legal review. That won't be the case in for all situations -- and for an M&A; deal, a clause like Mike's could well be superior -- but it seems to work well in a lot of cases.

Thanks to Mike for his response.

September 29, 2003 in Contracts | Permalink | Comments (0) | TrackBack

September 27, 2003

TrackBacks

If you blog, you should use TrackBacks. I just figured out how, by watching the 2-minute QuickTime movie (9 MB) available on the Movable Type explanation of TrackBack. Here's another explanation that was helpful, at the Cruft Box blog.

September 27, 2003 | Permalink | Comments (0) | TrackBack

Surreptitious Contract Changes

It's the end of the fiscal quarter, and so a lot of contracts are being negotiated. These days, most contract negotiations are done electronically. I email you a Word document. You email me a "redline" with revision marks and maybe some comments. We talk by phone. Repeat as necessary. In the end, however, we're probably going to want a handwritten signature on a hard copy of the final contract.

Suppose I send you a signed original contract and ask you to countersign and return it. Do you do a word-for-word comparison, to make sure the hard copy matches the agreed electronic document? If you do, you're spending time that surely could be put to better use. But if you don't, how do you know I didn't surreptitiously change something before printing the document for signature?

The overwhelming majority of lawyers would never try to pull something so underhanded. It's stupid -- if you were to get caught, your reputation could be severely damaged. Other lawyers might start refusing to deal with you. Your negotiation partner (turned enemy) could well report you to the state bar.

But I know two lawyers who, years ago, unwittingly let their clients sign "bogus" documents that way. Needless to say, their clients weren't pleased.

A few years ago, as I started doing more and more contract negotiations electronically, I drafted a clause to address the surreptitious-changes issue. In recent days I've had several lawyers tell me that they loved the clause and intended to steal it. Here's the latest version:

No Unannounced Modifications to Signature Documents. The parties have reviewed (and, if applicable, negotiated) this Agreement in its electronic form. They desire to be able to sign the hard-copy version without having to re-read it to confirm that no unauthorized changes were made before the final printout. Toward that end, by signing and delivering this Agreement and/or any schedule, exhibit, amendment, or addendum thereto, now or in the future, each party will be deemed to represent to the other that the signing party has not made any material change to such document from the draft(s) originally provided to the other party by the signing party, or vice versa, unless the signing party has expressly called such changes to the other party’s attention in writing (e.g., by “red-lining” the document or by a comment memo or email).

At least with this clause, each side has an indisputably reasonable basis for assuming that the other side isn't playing dirty. They therefore shouldn't have to worry about re-reading the hard-copy document before signing it. (It might still make sense to re-read the hard copy anyway, just to make sure it says what you really want it to say.)

If you've got any suggestions for improving this clause -- or war stories about situations where the clause would have come in handy -- please post them in a comment.

September 27, 2003 in Contracts | Permalink | Comments (1) | TrackBack

September 26, 2003

Altered (Document) States

The SEC continues its enforcement efforts, yesterday announcing that criminal charges had been filed against a former E&Y; accountant for allegedly altering and destroying documents to obstruct an investigation. The SEC's press release pretty much speaks for itself (bold-faced emphasis is mine):

Thomas C. Trauger, a former Ernst & Young partner who allegedly altered and destroyed audit working papers, was arrested this morning by FBI agents on criminal charges for obstructing investigations by both the Office of the Comptroller of the Currency and the Securities and Exchange Commission. * * *

. . . The complaint contains two counts: one count charging Mr. Trauger with obstructing the examination of a financial institution and one count charging falsification of records in a federal investigation in violation of the Sarbanes-Oxley Act of 2002. * * *

According to the allegations in the criminal action, . . . Mr. Trauger . . . began to alter and destroy copies of working papers related to E&Y;'s audit work for its client NextCard, Inc. . . . The document destruction allegedly occurred after the working papers had been completed and during an OCC examination of NextCard's banking subsidiary, NextBank. * * *

. . . Finally, the complaint alleges that in April 2003, Mr. Trauger gave sworn testimony to the SEC related to NextCard where he allegedly concealed his alteration and destruction of documents when questioned about his role in the production of E&Y;'s audit working papers to the OCC. * * *

In announcing the charges, U.S. Attorney Kevin V. Ryan said, "This is one of the first cases in the country in which an auditor has been accused of destroying key documents in an effort to obstruct an investigation. . . . The U.S. Attorney's Office will bring those professionals to justice who join in the criminal acts they are supposed to uncover and expose."

September 26, 2003 in Accounting, Criminal Penalties, Securities law, SEC regs / actions | Permalink | Comments (0) | TrackBack

September 25, 2003

Insider Trading is Bad Enough;
Lying to the SEC About It Is Worse

In the latest insider-trading bust, the SEC settled a case with a North Carolina lawyer who was accused of trading on inside information concerning a client of his law firm. The lawyer allegedly netted a whopping $4,272 in profits, which he disgorged as part of the settlement (and in addition he paid an identical amount as a civil penalty). It appears he also got fired.

Mike O'Sullivan notes, in his Corporate Law Blog, that the North Carolina lawyer "has already lost his job at the law firm. It's unlikely he will ever earn a dime with his J.D. ever again -- even if he isn't disbarred, who'd hire him? . . . [H]ow long will it take him to earn back the trust and respect he frittered away?" Bruce Carton points out, in his Securities Litigation Watch blog, that the case is "a reminder that there really is no de minimis exception for persons who would engage in insider trading--if the SEC thinks they have the goods on you, they'll bring the case for deterrent value alone."

* * * * *

It could have been worse -- as a Philadelphia lawyer found out a few years ago in a different insider-trading case.

In that case, the Philadelphia lawyer, via a client, learned some confidential information about an upcoming acquisition. He bought 500 shares of the target company, then sold it after the acquisition was announced.

Here's where it got worse: SEC lawyers called up the lawyer and interviewed him about his stock trade. During the converesation, the lawyer "knowingly and willfully made a false statement when, asked about the reasons for his purchase, he failed to disclose that he had been informed of [the acquisition]."

So, not only did the SEC bring a civil case, it also referred the matter to the U.S. Attorney's office. The lawyer pleaded guilty to a one-count criminal information alleging that he had made false statements to federal officials in violation of 18 U.S.C. § 1001 -- which is a felony punishable by up to five years' imprisonment.

This lawyer had been the head of the corporate department of a Philadelphia-based law firm. He also was on the board of directors of the client that had disclosed the confidential information to him. What was he thinking?

I wasn't able to find out whether the lawyer went to prison. He did get suspended from practicing law for one year (he was later reinstated). I couldn't find him in the Martindale-Hubbell on-line database of attorneys, which makes me wonder whether he's still in practice.

LESSONS:

1. If you trade on inside information, the SEC won't care how small your trade was or how little money you made.

2. If SEC investigators think you've lied to them, or withheld information from them, the range of possible bad things that could happen to you will expand dramatically.

3. Trading on inside information is a Bad Career Move. It likely won't matter what a stellar performer you were before -- as one of my Navy shipmates once said, "ten thousand attaboys can get wiped out in an instant by one aw-sh_t."

September 25, 2003 in Criminal Penalties, Embarrassments / Bad Career Moves, Securities law, SEC regs / actions | Permalink | Comments (0) | TrackBack

September 24, 2003

Hide Outside Comp, Forfeit Your Salary?

Last week the Second Circuit federal court of appeals in New York really dropped the hammer on an investment banker. The banker was a nominal partner in a small investment banking firm.

The banker had received stock, options, and cash compensation from certain of his firm's client companies that he was personally involved with. That was a problem: Under his employment agreement with his firm, all of that compensation was to have gone to the firm. Moreover, it seems the banker never mentioned to his firm what he was getting from these companies.

The banker left his firm to join one of the client companies as chairman and CEO. It was an amicable parting -- at first. But as he and the firm tried to sort out what the firm owed him, the firm tumbled to some of the outside comp that he had been receiving. That didn't go over very well.

Both sides filed lawsuits. When the dust settled, the appellate court held that, under New York law, the banker had been a "faithless servant" for receiving, and failing to disclose, his compensation from the client companies. Because the disloyalty had been so extensive, the court said, the banker had to forfeit all compensation paid to him by the firm -- including his salary -- from the time of his first act of disloyalty.

You can read the court's opinion at the Second Circuit's Web site -- look up case no. 02-7928, Phansalkar v. Andersen Weinroth.

September 24, 2003 in Embarrassments / Bad Career Moves | Permalink | Comments (0) | TrackBack

LOI Disclaimer Clause Rescues Investment Bank

Many letters of intent contain a clause stating that the parties do not intend to enter into a contract at that time and that neither party will be bound except by a final, formal, signed, written agreement. Earlier this month, such a clause rescued an investment bank from a lawsuit over a failed IPO.

The players in this saga were Schneider Securities and its would-be client Café La France, apparently a Starbucks wannabe. In 1996, Schneider and Café La France signed a letter of intent for an IPO. For several months they made extensive preparations for the IPO, but they never signed the final underwriting agreement. For a variety of reasons, the relationship deteriorated, and Schneider began to get uncomfortable with the deal. Eventually another investment bank appeared on the scene, and Schneider withdrew from the deal, saying that it considered itself fired. The new investment bank proceeded with the IPO, which didn't go nearly as well as hoped. Café La France ultimately withdrew its registration statement, returned the money it had raised, and did the all-American thing: it filed a lawsuit against Schneider.

At the conclusion of the trial, the judge made short work of Café's claims against Schneider, primarily because the LOI between Café and Schneider had created only a few binding legal obligations and had expressly disavowed all others:

This document is a statement of intent. Its execution does not, either expressly or by implication constitute a binding agreement by [the parties] to undertake the financing outlined above or an agreement to enter into an underwriting agreement except as set forth in paragraphs 5(d), 8 and 9 hereof. Any legal obligations between the parties shall be only as set forth in a duly negotiated and executed underwriting agreement (the "Underwriting Agreement").

Café tried to claim that Schneider was nevertheless obligated to market the IPO under a combined written and oral contract. The judge would have none of it. He said that "Café may have expected Schneider to [market the IPO], and at some point Schneider may have intended to, but that expectation was not *incorporated into the binding portions of the LOI." (Emphasis added.) He also said that:

[T]he LOI bound the parties . . . only to paragraphs 5(d), 8 and 9, and that in the absence of an underwriting agreement there would be no other legal obligations with respect to the IPO. Schneider has not breached any of those provisions, and in fact, appears to have exercised its right, memorialized in paragraph 8, not to proceed with the offering if "in its sole judgment ... information comes to [Schneider's] attention relating to the Company, its management or its position in the industry which would, in its sole judgment, preclude a successful offering." [Emphasis by the court]

LESSON: Business people like LOIs for various reasons. But from a lawyer's perspective, the real title of such a document should be "letter of non-intent."

(Café La France, Inc. v. Schneider Securities, Inc., D. Rhode Island, Sept. 8, 2003.)

September 24, 2003 in Contracts | Permalink | Comments (0) | TrackBack

September 23, 2003

California Anti-Spam Law - Welcome, Plaintiffs' Bar

California has just enacted a tough new anti-spam law. See these NY Times and CNET stories. The text of the new law is here. Effective January 1, 2004, the new law:

  • bans essentially all unsolicited commercial email advertisements sent to or from California, except to people who (i) have provided "direct consent" to receiving ads from the advertiser, or (ii) have a pre-existing or current business relationship with the advertiser;
  • requires commercial email ads sent to pre-existing or current relationships to include an "opt-out" capability, either by email or by toll-free number;
  • imposes liquidated damages of $1,000 per email, up to $1 million per email campaign; and
  • perhaps most significantly, allows recipients, ISPs, and the state attorney general to file lawsuits against spammers.

Boy, the plaintiffs' lawyers must be salivating over this one.

If your company sends out email blasts from a California location, the new law will cramp your style severely. If your company isn't in California, you may end up with a tough choice: Either figure out which addresses on your email lists are in California, or comply with the California rules for all your emailings.

Here's an excerpt from the introduction to the bill:

The bill would . . . prohibit a person or entity located in California from initiating or advertising in unsolicited commercial e-mail advertisements. The bill would prohibit a person or entity not located in California from initiating or advertising in unsolicited commercial e-mail advertisements sent to a California e-mail address. The bill would also prohibit a person or entity from collecting e-mail addresses or registering multiple e-mail addresses for the purpose of initiating or advertising in an unsolicited vommercial e-mail advertisement from California or to a California e-mail address. The bill would prohibit a person or entity from using a commercial e-mail advertisement containing certain falsified, misrepresented, obscured, or misleading information.

This bill would authorize the recipient of a commercial e-mail advertisement transmitted in violation of these prohibitions, the electronic mail service provider, or the Attorney General to bring an action to recover actual damages and would authorize these parties to recover liquidated damages of $1,000 per transmitted message up to $1,000,000 per incident, as defined, subject to reduction by a court for specified reasons. The bill would provide for an award of reasonable attorney's fees and costs to a prevailing plaintiff.

The introduction to the bill states that prohibited spamming is a crime, but that wasn't clear to me from the bill's text.

The Times article notes that some fear a wave of largely-frivolous litigation; that the law may be subject to constitutional challenge under the Commerce Clause; and that pending federal legislation, which isn't as tough, may end up preempting harsher state laws like the new California statute.

September 23, 2003 in Criminal Penalties, Marketing | Permalink | Comments (1) | TrackBack

Hope They Didn't Spend All the Money

Shortly before Enron filed its bankruptcy petition, it made accelerated payments of deferred compensation to certain executives, to the tune of some $53 million. Yesterday, a bankruptcy judge ruled that those payments had to be thrown back into the general pot that will be shared by the unsecured creditors. See this Associated Press story for more details.

The execs apparently will be entitled to their proportionate share of the unsecured-creditors' pot. Any guesses on how much they'll eventually see?

The basis for the judge's order seems to have been that the deferred-comp payments constituted "avoidable preferences" under the Bankruptcy Code. For some general information on that subject, see, e.g., a site called Moran Law.

September 23, 2003 in Bankruptcy, Leadership and Management | Permalink | Comments (1) | TrackBack

September 20, 2003

Good Personnel Records Save the Day for A & F

Abercrombie & Fitch fired one of its New York City security supervisors for poor performance. She filed a lawsuit, claiming among other things that she had been fired because she was African-American.

A&F; won the case without even having to go through a trial, primarily because the fired employee's manager had kept good personnel records to document her poor performance over several years.

A&F; moved for summary judgment, which is a judgment without a trial based on undisputed material facts. The purpose of a trial is to establish the facts on which a judgment will be based. If either party can show that the "material" (outcome-affecting) facts are not genuinely disputed, then legally there's no need for a trial, and the judge can simply render judgment.

* * *

It appears that the fired security supevisor's performance wasn't stellar. According to the court's opinion, during one evaluation period the fired supervisor had busted only nine shoplifters and fingered only one employee thief, while others in the same job had busted between 109 and 317 shoplifters. Moreover, in the fired employee's store during that period, the overall theft rate was more than 9%, while the company-wide average was only 5.67%.

* * *

Poor performance, however, didn't necesarily mean that A&F; would win. To defeat A&F;'s summary judgment motion, the fired employee had merely to come forward with at least some non-trivial evidence that A&F; had intended to racially discriminate against her. That would have shown the existence of a genuine issue of material fact. This in turn would have entitled the fired employee to have a jury hear the evidence, evaluate witness credibility, and weigh the conflicting evidence. The jury then would decide whether A&F; had racially discriminated against her.

* * *

In their summary-judgment motion, A&F;'s lawyers wielded a not-so-secret weapon. For several years, the fired woman’s supervisor at A&F; had regularly met with her to review her performance. He had prepared written evaluations showing poor performance, and had provided her with copies. He had also prepared written performance-improvement plans for her, and had gotten her to sign them. All those documents presumably were in the woman’s personnel file. A&F;'s lawyers used them, along with the supervisor's affidavit, in support of A&F;'s motion for summary judgment.

A&F; thus was able to put forward solid, documentary evidence that it had indeed terminated the woman for poor performance. Note that A&F; didn't try to rely solely on its manager's hindsight recollection about the woman's performance, which her attorney doubtless would have characterized as self-serving. Instead, it brought contemporaneous documentary evidence to bear.

* * *

In rulling on A&F;'s summary judgment motion, the judge focused on A&F;'s documentary evidence and its manager's affidavit, and on the fired employee's failure to put forth any substantial evidence of discriminatory intent. The judge ruled that there was no genuine dispute concerning any material fact, and threw out the fired employee's case. (Khan vs. Abercrombie & Fitch, Inc., Sept. 17, 2003)

September 20, 2003 in Doing It Right Pays Off, Leadership and Management, Litigation, Record-keeping | Permalink | Comments (0) | TrackBack

September 19, 2003

Why Shareholders Should Come Third - Great Post

There's a great post today on Mike O'Sullivan's Corporate Law Blog. It summarizes former Medtronic CEO Bill George's recent Fortune magazine article about why CEOs should concentrate on pleasing customers, then employees, then shareholders. Not to be missed.

September 19, 2003 in Litigation, Securities law, SEC regs / actions | Permalink | Comments (0) | TrackBack

September 17, 2003

Yet Another "You Fired Me Because I Blew the Whistle" Case Settled for Almost $1M

The press is reporting the settlement of yet another wrongful-termination case grounded on a former employee's claim that she was fired for whistleblowing. The employer paid nearly $1 million -- almost half of which goes to the fomer employee's attorney, according to the employer's Web site -- after having spent more than $300K defending the case. See this story at the law.com Web site. This story illustrates the hazards of letting an employee go if the employee had any connection at all with uncovering alleged corporate improprieties.

The story is also a nice opportunity to recall the wisdom of keeping fair and accurate written records to document employee performance. If you're a manager who wants to get rid of a worthless employee, don't believe that your cheery smile and golden voice alone will convince a jury that the employee really did deserve firing. Juries often discount witness testimony, especially by defendants seen as trying to make excuses for their actions. Juries also tend to believe written business records and other contemporaneous documentary evidence. So if you keep decent records about your employees, you'll be better armed if you ever find yourself in a lawsuit -- and good records might even help you be a better boss.

September 17, 2003 in Accounting, Leadership and Management, Record-keeping | Permalink | Comments (0) | TrackBack

September 16, 2003

Side Letter in Sales Deal Leads to SEC Fraud Suit

Last week the SEC announced that it had filed a civil lawsuit against a former Logicon executive who allegedly placed a $7 million order with Legato Systems that included a secret side letter giving Logicon the right to cancel its purchase. According to the SEC, the Logicon executive not only knew that Legato planned to fraudulently misstate its financial results, he even advised Legato's sales people how to conceal the cancellation right from the Legato finance department.

LESSON: The SEC's news release quoted Helane L. Morrison, District Administrator for the Commission's San Francisco District Office, as saying, "Sales executives who book phony deals often rely on assistance from people who work for their customers. Today's action highlights the Commission's resolve to hold such persons responsible when they knowingly assist in fraudulent revenue recognition practices."

September 16, 2003 in Accounting, Contracts, Embarrassments / Bad Career Moves, Purchasing, Sales, Securities law, SEC regs / actions | Permalink | Comments (0) | TrackBack

September 15, 2003

Taco Bell Learns $42MM Lesson That Idea Sources Can Haunt You

The New York Lawyer reports that Taco Bell was hit with a $41.9 million jury verdict for allegedly stealing the idea for the talking-Chihuahua advertising campaign. Thanks to Martin Schwimmer's Trademark Blog for the pointer to this story.

The Taco Bell case illustrates a harsh fact of life for established companies: If you enter into discussions to use a smaller company's ideas or concepts, you'd better be really, really careful if you subsequently decide to go it alone -- you may find it very difficult to convince a jury that you (re-)developed the ideas or concepts on your own.

For another example of how juries can react in situations like this, see Celeritas Technologies vs. Rockwell International. In that case, Rockwell had engaged in preliminary discussions with Celeritas about some ideas for improving wireless modems that Celeritas's technology guy had developed. Rockwell decided to go it alone, and Celeritas sued. At trial, the jury simply did not believe that Rockwell had independently created the technology after its discussions with Celeritas. Nor did the jury believe that Celeritas's technology could not be a trade secret because it was already in the public domain (although the appeals court later held that Celeritas's patent was invalid because of a prior published article that described similar technology). In all, Rockwell was hit with a damages verdict totalling over $58 million. (Disclosure: I was one of the members of Rockwell's trial team.)

September 15, 2003 in Marketing, R&D; | Permalink | Comments (0) | TrackBack

September 12, 2003

Big Fine for Helping Customer Cover Up Business Losses

Insurance giant American International Group was hit with a $10 million fine for doing a deal with one of its customers that was supposed to look like insurance for the customer but in fact was designed to reduce the financial loss reported by the customer. Compounding AIG's problem was that the SEC was reportedly infuriated by AIG's withholding of documents. See the New York Times article (free subscription required).

September 12, 2003 in Embarrassments / Bad Career Moves, Sales, Securities law, SEC regs / actions | Permalink | Comments (0) | TrackBack