121–130 of 195 posts
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…
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…
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Earlier quoted context omitted.
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 n…
1. Loads of companies were doing it. 2. When this company wanted to do it, their counsel said it was illegal, so they didn't.
Given those facts, we can't say that the other 200 companies were simply flummoxed by a too-complex regulatory framework. They may just have well had their own meetings and said, "This looks fishy, but everyone else is doing it, and we get more money." Or maybe they did no due diligence at all, and just did it anyway. Once caught, obviously many people would claim an honest misunderstanding, whether or not there was one.
Frankly, I'm skeptical of the whole, "the jail sentences were handed out arbitrarily" angle. It seems the opposite of arbitrary -- the person who instituted an illegal policy in multiple companies was punished. The law may be complex, but when you're making C-level salaries, I'm sorry but you're expected to figure out if you're committing a crime or not.
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…
> 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. Because this story was written by a liar and/or idiot. Option accounting law is simple and clear. Market value – exercise price = loss taken by shareholders. This goes in the quarterly report so the shareholders know how much they spent…
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Not to be cynical, but isn't this why "consulting firms" exist? Part of their job is to just some "reputable" outside justification for something someone internally wants to do anyway. It's to cover their ass. When there are mass layoffs, they hire "consultants". Because nobody inside wants to really take responsibility for the decision. It's better politically to have it come from some "outside objective analysis" (…
The way you describe it they are the worst sort of consultants. I once worked on a project that a big 5 consulting firm was charging 1.7 million to deliver. After 6 months, a tech savvy guy convinced the CEO to hire me for 3 months to sort everything out. I came in, had systems up and running partially (but delivering useful results) in 2 weeks. Then I spent the rest of the 3 months delivering every deliverable that…
>The whole thing was a case of the old saying: “When the paddy wagon pulls up to the house of ill repute, it doesn’t matter what you are doing. Everybody goes to jail.” I've never heard this saying, and Google comes up with nothing. Maybe this is a paraphrase of one of those raps Ben likes?
Earlier quoted context omitted.
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 n…
I'm not sure that conclusion is warranted. Here's what we know: 1. Loads of companies were doing it. 2. When this company wanted to do it, their counsel said it was illegal, so they didn't. Given those facts, we can't say that the other 200 companies were simply flummoxed by a too-complex regulatory framework. They may just have well had their own meetings and said, "This looks fishy, but everyone else is doing it, a…
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…
I bit OT, but I saw something similar once where the head of QA reported to the director of development. So the guy in charge of QA's annual raise/bonus/etc was himself compensated based on hitting release deadlines. I wonder how people here would have set that up differently.
This isn't OT at all since most HN readers won't be CEOs of publicly traded companies. Your situation is far more common.
A good guide for this is how the FDA manages Good Manufacturing Practice (similar to ISO 9000 except focused on, you know getting shit done instead of getting hung up on the process). One important part is the distribution of responsibility. They get extremely upset by situations like the one you describe specifically because of the possibility of undue influence on the results. Manufacturing, R&D, QA and QC have to be organized to ensure proper independence.
(Which also means if you hear about scummy behaviour from a drug company: that flows from the top).
-d
PS: little known fact: the FDA has armed enforcement personnel who WILL storm through the door in some cases where they believe fraud could be involved in endangering people. I know of cases of this on the pharma side at least -- the food side may be more lax.
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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?
Often all or most administrative (read: non-revenue-generating, non-operational) functions for the company fall under the CFO--simply because the finance function is administrative but the CFO pretty much has to report to the CEO. The GC is administrative--as is HR, real estate, etc.--so they all often report to the CFO.
Fortunately I/T seems to be on it way out, though regrettably slowly.