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Why I Did Not Go To Jail

bhorowitz.com

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Re: Why I Did Not Go To Jail

#11

Post by Avenger42 »

jamesaguilar wrote: post #8

Just curious. Suppose you did your due diligence, asked your general counsel, and they said, "It's within the law, go for it." Then, acting on their advice, you did the same thing this person did. Would you go to jail for the same amount of time in both cases? E: Name removed to protect the accused, although it's thin protection indeed considering her name is disclosed elsewhere in this thread.

Presumably at that point your general counsel will inform your defense counsel of the legal theory upon which he told you to "go for it", and you'll see whether it holds up at trial.

Re: Why I Did Not Go To Jail

#12

Post by rayiner »

Accounting compliance is serious business, for the simple reason that when irregularities cause a company to restate its books and tens of millions of dollars just vanish, it can be very difficult to tell the difference between honest mistake and purposeful manipulation.

That said, there is a bit more to the story than revealed in the article. From what I can tell, the criminal charges and jail time was for income tax evasion in connection with the backdating of stock options: http://www.law360.com/articles/229277/ex-mercury-cfo-gets-4-.... Specifically, the process of her backdating her options resulted in her filing tax returns understating her income: http://www.justice.gov/usao/can/news/2010/2010_09_16_abrams.....

Re: Why I Did Not Go To Jail

#14

Post by LanceH »

etjossem wrote: post #3

A relevant litigation release: http://www.sec.gov/litigation/litreleases/2009/lr20964.htm And a description of the practice in question: http://en.wikipedia.org/wiki/Options_backdating

What is described here doesn't sound strictly illegal.

It is my understanding that most of the options violations (of various forms) stem from not carrying the options as the liabilities they are. It was usually pricing them at zero cost until exercised as many companies did, or backdating them and drastically changing their value.

Re: Why I Did Not Go To Jail

#16

Post by cperciva »

First, when we started the company, Marc and I agreed that the company’s General Counsel would always report directly to me. This is different than in many technology companies where the General Counsel reports to the Chief Financial Officer.

This needs to be in bold 72-point font. Corporate behaviour aligns with corporate structure, and if the General Counsel is subordinate to the Chief Financial Officer, complying with the law will inevitably be secondary to making money.

If you want to avoid jail time, you should either have General Counsel reporting to the CEO or General Counsel / Chief Legal Officer appointed by and reporting to the board.

Re: Why I Did Not Go To Jail

#17

Post by rayiner »

jamesaguilar wrote: post #8

Just curious. Suppose you did your due diligence, asked your general counsel, and they said, "It's within the law, go for it." Then, acting on their advice, you did the same thing this person did. Would you go to jail for the same amount of time in both cases? E: Name removed to protect the accused, although it's thin protection indeed considering her name is disclosed elsewhere in this thread.

Almost always, something like this just results in a civil investigation and monetary penalties if the SEC concludes you did something not-kosher. The criminal indictment for "Michelle" was for tax evasion linked to the back dating: http://ww2.cfo.com/accounting-tax/2008/04/mercury-interactiv.... In general, tax crimes require a high standard of "willful" violation in which the defendant purposefully violates a known legal obligation. A violation based on a good faith reliance on a reasonable (or sometimes even unreasonable) interpretation of the tax law will not meet the standard: http://en.wikipedia.org/wiki/Cheek_v._United_States.

Re: Why I Did Not Go To Jail

#18

Post by Jgrubb »

maratd wrote: post #15

Unrelated to the story, there is a dead comment on this thread. It looks like it was written by a racist bot? What? Why is somebody paying money to do this?

Probably a month ago I noticed a dead comment that was a lot like that one. It was posted by some user with an account a good bit older than mine, which makes it fairly old at this point. The user's whole comment history was filled with comments exactly like that, many a day. Felt like peeking behind something I shouldn't have.

edit: yeah, that's the guy.

Re: Why I Did Not Go To Jail

#19

Post by Nicholas_C »

bfe wrote: post #6

Just as it's hard to tell if someone's a good coder without yourself being a good coder, it's hard to tell if an attorney or financial expert is giving you good advice without seeking for yourself a basic understanding of the legal or financial issues. A good attorney or financial expert will help you understand the issues enough for yourself to see why their evaluation makes sense. It's not good enough to just compl…

>Always do and trust own analysis (with an attorney or expert you trust when needed) instead of falling for the lure of "it's fine with these other experts so it should be fine for us."

I think the problem arises when you're a CEO/Executive of a company and don't have time to do this yourself.

Re: Why I Did Not Go To Jail

#20

Post by benched »

maratd wrote: post #15

Unrelated to the story, there is a dead comment on this thread. It looks like it was written by a racist bot? What? Why is somebody paying money to do this?

It's not a bot, but an individual. If you're interested in some back story:

http://www.youtube.com/user/losethos

http://www.templeos.org/

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