Securities: February 2007 Archives

Sanyo Under Investigation for Securities Fraud

Japan's Sanyo Electric Co. revealed that it was being investigated for securities violations after allegations that it underestimated losses. Sanyo is said to be "fully cooperating" with the Japanese authorities. The Kyodo News Agency and Asahi Shimbun said that Sanyo could have underestimated $1.57 billion in losses in the fiscal year that ended in March 2004. The false reporting would have meant Sanyo had made a profit when, in fact, they actually had posted losses.

Sanyo Probed for Securities Fraud

A Securities and Exchange Surveillance Commission spokesman said that their agency could not comment on cases that were in progress. For the fiscal year that ended in March 2004, Sanyo reaped a net profit of $11.6 million, followed by a net loss of $1.13 billion in 2005 and a loss of $1.7 billion in 2006.

Posted by Patricia Bowling at 07:39 PM | Permalink

Backdating Penalties Progressing Slowly

An investigation into the backdating of stock options at more than 100 companies thus far has seen few enforcement actions. The lawyers and executives at the companies being investigated have been waiting to see how investigations by the Securities and Exchange Commission and general attorneys will go. "An enormous market constituency is waiting to see how the government is going to assess these things," said William R. Lucas. Lucas is the co-chairman of the securities practice at Wilmer Hale; Wilmer Hale currently is investigating backdating at UnitedHealth.

The Slow Pace of Justice on Options Backdating

Brocade Communications is one of the companies currently being watched most closely by those interested in the backdating scandal. Brocade was one of the first companies that the government began to look into after backdating became a recognized phenomena. The company restated their earnings from 1999 to 2004. SEC commissioners are said to be divided over penalties for backdating, although SEC chairman Christopher Cox recently said that there was no conflict within the SEC about backdating penalties. While backdating is not necessarily against the law, it can lead to serious accounting, disclosure and tax issues.

Posted by Patricia Bowling at 01:30 PM | Permalink

Judge Will Rule Whether to Free Sheppard

A judge will decide whether Ronald J. Sheppard, the former chief executive of HomeGold Financial, can leave prison while he appeals his conviction for three counts of securities fraud. Sheppard was sentenced earlier this month to 20 years in jail and has been retained at Kirkland Reception and Evaluation Center in Columbia since. Sheppard's appeal could take years to get through court. Investors who lost money due to Sheppard's subprime mortgage business collapse asked the judge not to set Sheppard free.

Judge to rule Monday on whether to free Sheppard

The Attorney General said that Sheppard lied about the financial health of HomeGold to the board members of its Carolina Investors subsidiary. Many of those who were putting money into Carolina Investors were saving for retirement and did not realize that Carolina Investors merely was a fund raising arm for Home Gold. More than 8,000 investors lost more than $277 million when both HomeGold and Carolina Investors filed for bankruptcy in the spring of 2003.

Posted by Patricia Bowling at 12:25 PM | Permalink

No Challenge on Enron Overturned Convictions

A published report says that government prosecutors will not challenge an appeal court's decision to overturn the convictions of former Merrill Lynch & Co. executives. In August, the U.S. Circuit Court of Appeals decided to throw out fraud and conspiracy charges against Daniel Bayly, Merrill Lynch's former head of investment banking, James A. Brown, the former head of the firm's asset lease group, Robert Furst and William Fuhs. However, prosecutors did not say whether Bayly, Brown, and Furst will be retried for their participation in a fraudulent deal that helped Enron to appear profitable.

Fed Won't Fight Overturned Convictions

All four men were convicted for conspiring to help Enron meet earning targets in late 1999 by taking part in a plan in which Merrill Lynch pretended to buy three power barges from Enron. The appeals court decided that federal prosecutors overstepped their boundaries when they presented jurors with a theory that the defendant deprived Enron of its right to their honest services.

Posted by Patricia Bowling at 12:21 AM | Permalink

Funds Hope to Freeze BP's Browne's Millions

Two pension funds asked a court to freeze more than $140 million in retirement pay and other compensation to outgoing BP Plc CEO John Browne. The shareholders say that Browne's pension benefits are excessive and undeserved and ask that Browne not receive the money until legal claims against Browne have unfolded. Browne plans to retire in the end of July, which is 17 months earlier than was originally planned, and he will be succeeded by Tony Hayward.

Funds aim to freeze BP chief John Browne's millions

"Browne is now, it appears, being pushed out of the company but taking with him upward of God knows how many millions and millions of dollars of severance and pension payments," said William Lerach, who is representing the pension plan of U.S. union Unite Here and the London Pensions Fund Authority in the case. While Browne was long considered on the world's most respected business executives, Alaskan oil spills, fatal accidents at refineries, and accusations of fuel market manipulation have hurt his image.

Posted by Patricia Bowling at 12:06 AM | Permalink

You Tube's Anti-Piracy Plan Criticized

The media industry says that YouTube's plan to offer anti-piracy tools only to companies that have distribution deals with YouTube is "unacceptable." YouTube plans to introduce technology that would help media companies identify pirated videos uploaded by users.

YouTube's anti-piracy policy draws criticism

MySpace, YouTube's biggest competitor, says that it will offer copyright protection for free. A spokesman for Viacom Inc. said that YouTube's "proposition that they will only protect copyrighted content if there's a business deal in place is unacceptable." Viacom has become the leader of dissent against YouTube, trying to prevent YouTube from becoming the iTunes of online video. In a statement, YouTube said that the process of identifying copyrighted materials is not an automated process and requires the cooperation of media company partners.

Posted by Patricia Bowling at 01:30 PM | Permalink

Ex-Take-Two Head Pleads Guilty to Backdating

Ryan Brant, the ex-CEO of the video game publisher Take-Two, pleaded guilty to charges of backdating and agreed to pay $7.3 million to settle two options-related cases. Brant is Take-Two's founder. He apologized for his actions: "I am deeply sorry for my role in the inappropriate manner Take-Two granted incentive stock options. I accept responsibility for my actions, and apologize to the company's shareholders."

Ex-Take-Two head pleads guilty to backdating

Brant's plea settled a criminal case that was brought about by the Manhattan District Attorney's office and a civil action brought by the Securities and Exchange Commission. As a part of the settlement, Brant agreed not to hold control management positions at the company.

Posted by Patricia Bowling at 11:03 AM | Permalink

SEC Ends Probe Into Guess President

The Securities and Exchange Commission has ended its investigation into Guess? Inc. President and CEO Carlos Alerini and says it will not recommend any action against Alberini. Alberini had been the leader of the shoe company Footstar when it because to have problems with its accounting.

SEC Ends Probe Into Guess President

Footstar restated earnings in 2003 from 1997-2002 that were $53 million lower than initially reported. Footstar faced further difficulties after KMart, its top distributor, filed for bankruptcy. Alberini signed with Guess in 2000 and helped drastically turn the company around when its earnings were declining and the company was close to violating a $125 million credit agreement.

Posted by Patricia Bowling at 07:10 PM | Permalink

Man Indicted in Securities and Wire Fraud Scheme

Jack A. Calvin, of Ozark, Missouri, has been indicted by a federal grand jury for his role in a scheme to defraud 115 investors of more than $2.8 million in a securities fraud and wire fraud scheme. Count one of the federal indictment says that Calvin participated in a conspiracy to commit securities fraud from January 1999 to March 2002. Calvin played the role of the primary promoter of Growth Benefit Systems, which the indictment describes as being a "sham letter of credit trading program."

Ozark Man Indicted in Securities and Wire Fraud Scheme

The indictment says that Calvin went though GBS and other individuals to represent to investors that their funds would be pooled and used in a trading program that would return 20% a month. Calvin and others spent the $2.8 million he had raised from 115 investors for personal benefit or to pay "commissions" to themselves or to others who had helped commit the fraud.

One Million Women Could Sue Wal-Mart in Bias Class Action

The largest sex discrimination lawsuit in U.S. history has taken a step forward after a ruling by a federal appeals court that says a complaint brought by six women in 2001 can proceed as a class-action case against Wal-Mart. The ruling means that over one million past and present women workers have the opportunity to seek compensation; a lawsuit could ultimately cost Wal-Mart billions of dollars. The panel of three judges did not discuss the merits of the case. Wal-Mart said it will fight the lawsuit, initially by asking the appeals court to reconsider their decision and ultimately taking the case to the Supreme Court.

One Million Women Could Sue Wal-Mart in Sex Bias Class Action

Wal-Mart says that the circumstances of the original case could not apply to the two million women who have been employed by Wal-Mart since December 1998. Theodore Boutrous, the lead defense lawyer for Wal-Mart, says that "Wal-Mart has a strong anti-discrimination policy" and that the decisions made over six years at 3,400 stores by thousands of individual managers "cannot be tried in one fell swoop in a nationwide class-action lawsuit."

Posted by Patricia Bowling at 06:36 PM | Permalink

Bush's Uncle Reviewed in Options Investigation

President George W. Bush's uncle, William H.T. "Bucky" Bush, is under investigation for having been a part of outside directors at a defense contractor who were given about $6 million in unauthorized pay from an options backdating scheme. Bush and other non-employee directors who served on the board of Engineered Support Systems, which now is owned by DRA Technologies, may have benefited from stock options not approved by shareholders. Securities investigators say that Bush and other non-employee directors are not accused of any wrongdoing. The Securities and Exchange Commission complaint says that "as a result [of backdating], the company provided significant additional compensation to its outside directors beyond what shareholders had approved. These same directors later realized approximately $6 million from the exercise of their additional stock options."

Bush's Uncle Fingered in Options Investigation

The complaint does not say how much Bush and other directors gained from a total of 132,000 shares of unauthorized shares. Bush could not be reached for comment.

Posted by Patricia Bowling at 06:13 PM | Permalink

Ex-Hund Fund Manager Charged With Fraud

John H. Whittier, the former head of Idaho hedge-fund company Wood River Capital Management LLC, has been indicted on criminal charges that he engaged in a securities fraud scheme that allegedly cost investors $88 million. The U.S. Attorney's office said that Whittier was charged with securities fraud, failure to disclose a beneficial interest in 5% or more in a publicly traded security and two counts of failing to disclose a beneficial interest of 10% or more in a publicly traded security.

Ex-Hedge Fund Manager Charged With Fraud

Whittier faces 20 years in prison for each count. Prosecutors say that Whittier planned to defraud investors in the company's U.S. based hedge funds by gaining beneficial ownership by more than 70% of the common stock of EndWave without disclosing ownership, as required by the Securities and Exchange Commission.

Posted by Patricia Bowling at 12:01 PM | Permalink

No Jail Time for ex-Cendant Financial Chief

Cosmo Corigliano, a former financial chief at a predecessor company of Cendant, was sentenced to six months of house arrest for his part in the largest accounting scandal of the 1990s. Corigliano pleaded guilty to fraud in 2000 and faced a prison term of several years. However, U.S. District Judge Alan Nevas decided against prison time for Corigliano's "extraordinary" cooperation in the prosecutions of ex-Cendant Chairman Walter Forbes and former Vice Chairman Kirk Shelton.

No jail time for ex-Cendant financial chief

Forbes was found guilty in October of organizing a fraud to increase profits at Cendant, a real estate and travel company that now operates as Avis Budget Group. Shelton was convicted of fraud in January 2005 and was sentenced to 10 years in jail. Forbes and Shelton have been asked to pay $3.3 billion in restitution; it is unclear how much of this the men will be able to pay.

Posted by Patricia Bowling at 12:39 PM | Permalink

Judge Overturns Conviction of ex-Enron Exec

A federal judge has overturned the jury conviction of Kevin Howard. Howard was a former executive in Enron Corp.'s broadband unit and was found guilty in May 2006 of five counts of conspiracy, wire fraud and falsifying books related to his role in hiding the broadband unit's weak finances.

Judge Overturns Conviction of ex-Enron Exec

The judges on the appeals court said that the convictions of the Merrill bankers had to be overturned because of the flawed use of the honest services theory, which involves the breach of honest services owed under a contract. Judge Vanessa Gilmore said that the appeals court had changed "the law on what constitutes honest services wire fraud" and also cited false jury instructions as reasons as to why one count of Howard's conviction should be overturned. Howard's co-defendant, Michael Krautz, was acquitted on the same five charges. Judge Gilmore's order does not rule out the possibility of a third trial for Howard.

Posted by Patricia Bowling at 12:09 PM | Permalink

Dell Investors File Suit

A group of Dell investors has filed a lawsuit, saying that the company used illegal accounting methods to hide secret kickback payments paid by Intel. Intel made these payments in order to assure that Dell only used Intel processors in its PCs. The investors filing the suit also asked that the U.S. District Court in Austin, Texas allow the case to have case-action status.

Dell investors file suit over accounting practices

These investors say that Dell's profits were inflated by hundreds of millions of dollars. Dell already is struggling through a difficult period; its CEO Kevin Rollins resigned this week and HP replaced Dell as the world's largest PC seller after Dell missed its earnings target. Several lawsuits already are surrounding the company; a federal investigation is looking into Dell's accounting practices and Intel has been ordered to share information about allegations that it paid illegal rebates to dissuade PC retailers from using AMD processors instead of Intel's.

Posted by Patricia Bowling at 11:18 AM | Permalink

Backdating Played Part in CVS Deal

Caremark Rx directors say a large part of their support for a merger with CVS Corp. came because the merger offered them protection against allegations of options backdating, says a lawsuit filed by Express Scripts. Express Scripts says that Caremark directors violated their fiduciary duties by supporting the CVS-Caremark merger.

Express Scripts says backdating plays part in CVS deal

The lawsuit was filed in Delaware Chancery Court and says that a $675 million break-up fee and other parts of the CVS-Caremark deal caused Caremark's board not to act in the best interest of shareholders. Express Scripts hopes that the court with find the merger unlawful and void the deal. Caremark is the U.S.'s number 2 pharmacy-benefits manager and CVS is the U.S.'s number 2 retail-drug chain. The merger planned to combine the $21 billion in stocks of the two companies to create a new dynamic in the pharmaceutical business. Express Scripts is the U.S.'s number 3 pharmacy-benefits manager.

Posted by Patricia Bowling at 11:18 AM | Permalink

Delta Execs Cleared in Options Scandal

Delta says that an internal investigation has cleared it and its executives of any backdating. A recent Securities and Exchange Commission filing said that Delta Petroleum's special board committee found "deficiencies in the documentation of (the company's) option grants in prior years," but said "there was no evidence of option backdating or other misconduct by our executives or directors in the timing or selection of our option grant dates." The committee concluded that no evidence from the investigation "would cause us to conclude that our prior accounting for stock option grants was incorrect in any material respect."

Delta clears execs in options scandal

Delta formed a special board committee to investigate the backdating allegations. The SEC opened an informal inquiry after the U.S. attorney for the Southern District of New York subpoenaed Delta Petroleum. In four of the last eight years, when Delta Petroleum had issued stock options to its top executives, it gave them with an exercise price equal to the stock's 52-week low. Delta faces a shareholder lawsuit against the options but has filed motions to dismiss the lawsuit.

Posted by Patricia Bowling at 02:06 AM | Permalink

Judge Won't Block Nardelli's Severance

A Georgia state judge refused to block the severance pay of former Home Depot Chairman and Chief Executive Robert Nardelli, but is allowing the plaintiffs in the case more time to gather information. Nardelli left Home Depot earlier in January in a mutual decision with the board. He was given a severance pay of $210 million.

Judge won't block Nardelli's huge severance

Home Depot shareholders had wanted to halt Nardelli's severance pay, saying that former Home Depot executives and board members had given back-dated stock options and approved excessive pay. Nardelli's severance package included a cash severance of $20 million and invested deferred stock awards of about $77 million. The severance pay upset shareholders who already had said Nardelli was overpaid during his time at Home Depot.

Posted by Patricia Bowling at 08:37 PM | Permalink

Jobs Probed about Options Scandal

The Securities and Exchange Commission and the Justice Department questioned Apple's CEO Steve Jobs about backdated stock options last week, according to a recent report. Apple is under investigation after admitting that it issued thousands of backdated options.

U.S. probes Jobs in Apple's options scandal

SEC officials began questioning a stock options grant that was given to Jobs. The grant had a false date of October 2001. Company records were faked in order to give the impression that the options had been approved at a board meeting that never had occurred. An internal Apple investigation found Jobs free of fault, but has no effect on the federal probe. Apple was not immediately available for comment.

Related Links:
Legal View: Securities
The Latest on Apple's Options Mess
U.S. said to probe Apple's Jobs' options
The Apple iWash: Steve Jobs's premature exoneration
Apple Stock Options Scandal, Feds Begin Investigation

Posted by Patricia Bowling at 08:18 PM | Permalink

February 28, 2007

Sanyo Under Investigation for Securities Fraud

February 27, 2007

Backdating Penalties Progressing Slowly

February 26, 2007

Judge Will Rule Whether to Free Sheppard

February 23, 2007

No Challenge on Enron Overturned Convictions

February 22, 2007

Funds Hope to Freeze BP's Browne's Millions

February 21, 2007

You Tube's Anti-Piracy Plan Criticized

February 20, 2007

Ex-Take-Two Head Pleads Guilty to Backdating

February 16, 2007

SEC Ends Probe Into Guess President

February 15, 2007

Man Indicted in Securities and Wire Fraud Scheme

February 14, 2007

One Million Women Could Sue Wal-Mart in Bias Class Action

February 13, 2007

Bush's Uncle Reviewed in Options Investigation

February 12, 2007

Ex-Hund Fund Manager Charged With Fraud

February 09, 2007

No Jail Time for ex-Cendant Financial Chief

February 08, 2007

Judge Overturns Conviction of ex-Enron Exec

February 07, 2007

Dell Investors File Suit

February 06, 2007

Backdating Played Part in CVS Deal

February 05, 2007

Delta Execs Cleared in Options Scandal

February 02, 2007

Judge Won't Block Nardelli's Severance

February 01, 2007

Jobs Probed about Options Scandal