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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

#71

Post by ZachPruckowski »

jsonne wrote: post #39
bfe wrote: post #30

Earlier quoted context omitted.

If someone doesn't have time to make sure the company has a legally compliant options policy, they don't have time to be the CEO.

I pretty adamantly disagree. A CEO is a specialized role just like any other. I wouldn't expect a developer to know the ins and outs of financial compliance, and the same holds for a CEO and specific compliance rules.

Fundamentally you as CEO are quite literally signing your name to a heck of a lot of policies and financial statements. You don't need to know the exact details of a situation to want to get a second opinion before signing your name on something official and legal that you're mailing into DC.

Re: Why I Did Not Go To Jail

#72

Post by jrells »

metaphorm wrote: post #37
jey wrote: post #25

Earlier quoted context omitted.

What's the supposed rationale for the General Counsel reporting to the CFO in the first place? Isn't a General Counsel supposed to be "general" and not only concerned with financial issues?

that rationale is that obeying the law is a financial decision rather than a moral decision. if the (money) price of breaking the law is less than the profit made by breaking the law, then the CFO will decide to do it. this is THE classic example of corporate sociopathy. unfortunately its still the way a lot of companies do business.

You're confusing law and morality. I think the correlation is mild.

Re: Why I Did Not Go To Jail

#73

Post by Lifescape »

staunch wrote: post #27

or "How I Hired a White Collar Criminal And Avoided Jail" "On May 31, 2007, the Commission charged Abrams and three other former senior Mercury officers with perpetrating a fraudulent and deceptive scheme from 1997 to 2005 to award themselves and other Mercury employees undisclosed, secret compensation by backdating stock option grants and failing to record hundreds of millions of dollars of compensation expense. The…

It's all politics. It's phrased as a "mistake" because anything more would admit to being aware of the fraud, regardless of whether or not that's the case.

Re: Why I Did Not Go To Jail

#74

Post by revelation »

EvanAnderson wrote: post #5

I'm not sure why Ben used a false name for the CFO. One quick search got me her real name, and more details about her eventual indictment.

It makes it easier to pierce the veil of deception ('accounting laws are difficult and may land you in jail', 'the employees benefit', 'she had good intentions') that is offered as fragile support for the big picture conclusion when you are given names to research. Using a false name gives the story this warm fuzzy feeling of a "lecture from the trenches".

Re: Why I Did Not Go To Jail

#75

Post by smsm42 »

ganeumann wrote: post #67
smsm42 wrote: post #51

What I take from this story is that the financial law is so complex and unapproachable one can not reliably navigate it without landing in jail, even being a seasoned professional. The author's council could have given him "yes" answer as easily as "no" answer - many other lawyers obviously did since 200 companies got "yes" answers from their councils. And he'd never known anything was wrong. Basically, one can becom…

There's a big difference between going to your general counsel and asking "Is this legal?" and going to your accountants and saying "Find me a way to make this legal enough." I think the options-backdating was an example of the latter.

In the case described in the story, I don't see any signs of the former. The CFO proposes certain practice, it is not obviously illegal (like not paying taxes or stealing office supplies from competitors at night), hundreds of companies do it, hundreds of lawyers approve it. If the CEO asks the council if it's OK and the council says yes, like hundreds others did, he goes to jail. If he's lucky and the council says no, he gets to write a book "how I almost went to jail but my super-smarts saved me". In both cases I don't see how this situation is good.

Re: Why I Did Not Go To Jail

#77

Post by ZachPruckowski »

EpicEng wrote: post #41
bfe wrote: post #30

Earlier quoted context omitted.

If someone doesn't have time to make sure the company has a legally compliant options policy, they don't have time to be the CEO.

Except they can't, which is why other people are hired to fulfill those roles. I can extend your argument and say that the CEO should be involved in every detail of the company because, after all, "if the CEO doesn't have time to make sure the company [is doing X properly], hey don't have time to be the CEO."

The CEO in the linked piece didn't need to get down into the weeds of the accounting laws, he just needs to know to get a second (outside/unbiased) opinion on anything that smells even faintly and remotely fishy that he's signing off on, and he needs to keep a general eye on principal/agent problems or conflicts of interest in the people he manages.

Re: Why I Did Not Go To Jail

#78

Post by rmrfrmrf »

jsonne wrote: post #39
bfe wrote: post #30

Earlier quoted context omitted.

If someone doesn't have time to make sure the company has a legally compliant options policy, they don't have time to be the CEO.

I pretty adamantly disagree. A CEO is a specialized role just like any other. I wouldn't expect a developer to know the ins and outs of financial compliance, and the same holds for a CEO and specific compliance rules.

Yikes.

Re: Why I Did Not Go To Jail

#79

Post by smsm42 »

rayiner wrote: post #69
smsm42 wrote: post #51

What I take from this story is that the financial law is so complex and unapproachable one can not reliably navigate it without landing in jail, even being a seasoned professional. The author's council could have given him "yes" answer as easily as "no" answer - many other lawyers obviously did since 200 companies got "yes" answers from their councils. And he'd never known anything was wrong. Basically, one can becom…

The premise that the author would've landed in jail for implementing the backdating scheme is flawed. His CFO went to jail, but because in the process of choosing favorable dates for backdating her stock options, she ended up deliberately misstating her income for certain years on her tax returns. By and large, people do not go to jail for simply picking the wrong plausible interpretation of tax or accounting law. Th…

I'm not sure why it matters that much which day options were granted on that it is worth putting people in jail for. The company has right to compensate their workers any way they like. Including giving options for free or for any price they see fit, and doing that any day at any time. Of course, our tax code being as weird and byzantine as it is, that may mean that some ways of giving options may end up in people paying less tax than other ways, and thus we have even more complex and byzantine system of laws that prevent people from taking advantage of it. But I see it as a deficiency of the tax code, which allows you to pay different depending on the various tricks and loopholes.

Now, the part where backdating is hidden from the people who have to have control over the matters - like shareholders - is another matter. That is violation of trust, embezzling and fraud. But I see no sign of it in the story we were told - I see no sign that the dating that was proposed were to be hidden from workers or shareholders.

Re: Why I Did Not Go To Jail

#80

Post by jsonne »

ZachPruckowski wrote: post #71
jsonne wrote: post #39

Earlier quoted context omitted.

I pretty adamantly disagree. A CEO is a specialized role just like any other. I wouldn't expect a developer to know the ins and outs of financial compliance, and the same holds for a CEO and specific compliance rules.

Fundamentally you as CEO are quite literally signing your name to a heck of a lot of policies and financial statements. You don't need to know the exact details of a situation to want to get a second opinion before signing your name on something official and legal that you're mailing into DC.

Which is why you delegate to people you trust like the article spoke about.
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