Joseph Brandon resigned his position as chief executive of Berkshire Hathaway’s General Re insurance group this week. Fraud convictions of four of your former executives will do that to you.

This would be a major blow to Brandon, who many had pegged as a prime contender for the top job at Berkshire Hathaway when Warren Buffett finally decides to hang up his spurs.

Get the details on the Brandon departure via Portfolio.com. Also, note the quote love for Daily Caveat friend-of-the-blog, Professor Peter Henning of the White Collar Prime Prof Blog.

-- MDT

Labels: Berkshire Hathaway Warren Buffet, General Re, Joseph Brandon, Peter Henning

Interesting article from the NJ Star Ledger (which features quote-love for friend of The Daily Caveat Peter Henning) on changing strategies for corporate crime prosecutors. Using the Joe Nacchio trial as a case in point, Henning describes in the article how prosecutors can use insider trading charges against executives as a back door to exploring accounting fraud without having to dive into the treacherous, confusing minutia that comes from attacking corporate accounting head on.

-- MDT

Labels: accounting fraud, insider trading, Joe Nacchio, Peter Henning, prosecution

It can be hard to protest one's innocence when your company is being pursued by regulators for stock option backdating irregularities and some pesky investigator turns up internal company emails with executives talking about "magic backdating ink." Hmmm... I wonder if the feds will show the Mercury Interactive executive team that magical white collar correctional facility? Details (coincidentally) at The Mercury News.

Take note of the quote-love for Mr. Peter Henning, Wayne State business law professor and friend of The Daily Caveat (Peter and I we share a fondness for the exploits of former Louisiana governor, felon and all around colorful character, Edwin Edwards).

You should already be reading Peter's fine White Collar Crime Prof blog, co authored with Ellen Podgor. You'll find more of Peter's recent comments on Mercury Interactive right here.

-- MDT

Labels: backdating, email, Mercury Interative, Peter Henning, stock options

Charges of pretexing used in other instances by HP? Former HP vice president of business development, Karl Lambe's case was dismissed, but his allegations sure are interesting...

Meanwhile, it looks like HP PI, Bryan Wagner, who we las saw pleading guilty and gearing up to testify for the prosecution, won't be facing state charges. Prince among men, Peter Henning at the White Collar Crime Prof blog has the reasons why.

-- MDT

Labels: Bryan Wagner, HP, Karl Lambe, Peter Henning, pretexting

The Department of Justice released new guidelines yesterday regarding the powers and practices allowed for prosecutors pursing corporate investigations. A rollback of prosecutorial power had been called for from a variety of corners and the DOJs action has been expected for a while now. At the heart of the "McNulty Memo," named for Deputy Attorney General, Paul McNulty, are changes in how prosecutors may go about compelling the release of documents from companies. Prosecutors must now receive permission from McNulty himself before asking that a corporation to turn over potentially self incriminating documents.

For a close look at the changes this will bring to courtrooms and corporate boardrooms across our fair, land, you could do worse that to check out Peter Henning and Ellen Podgor's superb White Collar Crime Prof Blog. Mr. Henning is an amigo of The Daily Caveat from the Round Table days and shares your host's affinity for former Louisiana Governor (and current resident of the Oakedale Louisiana Federal Correctional Institution), Edwin Edwards. You may have heard Henning quoted on this subject in a widely run NPR story from yesterday evening. Partner in (white collar) crime, Ellen Podgor's comments on McNulty can be found here.

-- MDT

Labels: Department of Justice, Louisiana, mcnulty memo, Peter Henning, prosecution guidelines, white collar crime

Scotland's Daily Herald (among others) is reporting that harrassment from the FBI may have been a factor in the apparent suicide death of Neil Coulbeck, a former Royal Bank of Scotland employee who has been widely cited as a key source in the investigation of the three former bankers and their apparent ties to the Enron fraud.

The wholse scenario is shades of the Abbey National / Richard Chang case of almost exactly one year ago. Quite eerie, actually. In related news, apparently the NatWest three have touched down in the colonies. Friend of The Daily Caveat, Peter Henning has the details over at The White Collar Crime Prof. Blog.

-- MDT

Labels: Enron, Kroll, Peter Henning

Shades of the Abbey National / Richard Chang case of almost exactly one year ago. Quite eerie, actually. In related news, apparently the NatWest three have touched down in the colonies. Friend of The Daily Caveat, Peter Henning has the details over at The White Collar Crime Prof. Blog.

-- MDT

Labels: Kroll, NatWest Three, Peter Henning

Exactly how they plan to do accomplish this is not exactly clear at this point...but no doubt we'll here more in the near future about the SEC's plans:

Via The Ely Times:

New SEC Guidelines Shield Shareholders

By ELLEN SIMON
AP Business Writer
28 January, 2006

NEW YORK - How can the Securities and Exchange Commission punish corporate crime without punishing shareholders? But even hundreds of millions of dollars in fines at the corporate level did little to compensate shareholders. At the beginning of January, the SEC issued a statement on financial penalties for corporations, saying it will look at "whether the issuer‘s violation has provided an improper benefit to shareholders, or conversely whether the violation has resulted in harm to shareholders. The guidelines are meant to bring "clarity, consistency and predictability" to the SEC‘s enforcement efforts, agency Chairman Christopher Cox said at a news conference.

Atkins called the SEC‘s statement "a more rational and systematic approach to deciding whether to impose penalties on shareholders." "The statement is so general, it really doesn‘t tell you much," said Peter J. Henning, a former senior attorney for the division of enforcement at the SEC who is now a law professor at Wayne State University in Detroit. "It‘s kind of what everyone knew already: If you cooperate, it‘s going to help you. If senior management were involved, it‘s going to be a problem. How extensive the wrongdoing was and what timeframe it covered will be considered." For investors, there is no punishment for corporate crooks that will make them whole.

The SEC imposed fines and restitutions totaling $715 million from Adelphia, but it didn‘t come close to pulling investors out of the red. The company‘s peak market cap, before the scandals and subsequent bankruptcy, was $8.4 billion. "I wish I knew," Henning said. "To this point, no one has come up with one. ... It‘s so much easier if someone steals your purse."

The original article appears here.

-- MDT

Labels: New York AG, Peter Henning

Note the quote-love for friend of The Daily Caveat, Peter Henning of Wayne State University:

Via the Ashville Citizen Times:

...Ingles announced in December 2004 that the SEC was investigating it, and last year the company restated results for its 2002 and 2003 fiscal years and part of FY 2004. The problems, the company said last year, involved the timing of reporting of certain payments from vendors. Vendors sometimes give retailers money or credits for advertising, certain displays of their products or other considerations.

The legal purpose of a Wells Notice is to allow a company to offer information or arguments in its favor before the SEC acts, but it also often triggers negotiations for a settlement, two experts in securities law said.

“As a general rule, when a Wells Notice comes, the staff has decided,” said Mark Astarita, who practices securities law in New York and New Jersey.

Astarita and Peter Henning, a law professor at Wayne State University in Detroit and former attorney at the SEC, said it is rare for information that arises once a Wells Notice is filed to change the SEC staff recommendation...

Check out the full article here...and navigate on over here to find Mr. Henning's fine blog devoted to daily happenings in the world of white collar crime.

Labels: New York AG, Peter Henning

Investment banker John Torkelson served as an expert witness for Milberg Weiss throughout the 1990s. Last year, the U.S. Small Business Administration filed multiple civil suits against Torkelsen and his associates, accusing Torkelson of using his venture capital fund, Acorn Technology Fund to the SBA to swindle millions of dollars. And yet, despite his legal troubles, and Federal prosecutor's obvious interest in his former associates at Milberg, Torkelson had never cooperated with authorities.

The tide appears to have turned last year Torkelson's wife agreed to a plea deal last year on charges relating to their troubles at Acorn. She agreed to cooperate with investigators and Torkelson's tune has since changed as well. He was charged in September with one criminal count of making false statements to the SBA and processed in such a way that he bypassed a grand jury - something it is agreed only occurs when a plea deal is in place. The big question now is what Torkelson's apparent cooperation with prosecutors means for Milberg:

Via Law.com:

Former Expert Witness for Milberg Weiss Gets Plea Deal

Justin Scheck and Sarah Kelley
The Recorder
November 07, 2005

The most conspicuous thing about John Torkelsen's guilty plea Thursday was what it didn't include: an agreement to cooperate in the ongoing probe of the securities plaintiff firm Milberg Weiss and its former lawyers.

...It has long been thought that any plea deal between Torkelsen and prosecutors would hinge on his willingness to provide information to Los Angeles federal prosecutors. They've spent the past five years investigating charges that Milberg Weiss and former top partner William Lerach paid illegal kickbacks to lead plaintiffs in securities class actions. Lerach formed his own firm, San Diego-based Lerach Coughlin Stoia Geller Rudman & Robbins, last year.

A source familiar with the Torkelsen investigation said prosecutors last year were confident that they could put Torkelsen in jail for 10 to 15 years and that a plea deal for less than 10 could indicate cooperation. But the plea agreement detailed in a letter from D.C. Assistant U.S. Attorney John Griffith does not explicitly say whether Torkelsen is cooperating.

"There's nothing in this plea agreement that suggests cooperation," said Leo Cunningham, a former assistant U.S. attorney for the Northern District of California and a partner at Wilson Sonsini Goodrich & Rosati. "Then again, for those of us who can get crafty about it, it doesn't foreclose cooperation." Preston Burton, a D.C.-based partner at Orrick, Herrington & Sutcliffe and a former D.C. assistant U.S. attorney, agreed. "There is no way to determine from the language in this plea agreement whether he is or isn't," he said.

Cunningham, Burton and other former federal prosecutors said that plea agreements based on cooperation generally make that requirement explicit. But, they agreed, in cases where prosecutors don't want the names of cooperators to become public, they often go to lengths to keep such information under wraps...

The full Recorder article appears here.

Check out this early October piece for more background on Torkelson's Milberg connections. If you want the skinny on Torkelson's attempts to get over on the SBA, then this is the article for you. And by all means check out he sage wisdom offered on the case by friend of Caveat, Peter Henning at the White Collar Crime Prof Blog.

-- MDT

Labels: background checks, Melvyn Weiss, Peter Henning

The Daily Caveat previously wrote about the shenanhigans at media giant Hollinger (here and here). This morning, The White Collar Crime Prof Blog has the latest on the indictments that have been handed down in the case.

Government Indicts Media Executive, Attorney, and Corp.

Friday, August 19, 2005

The former publisher of the Chicago Sun-Times, along with a lawyer for Hollinger International have been indicted. Additionally, the company that controlled Hollinger International - The Ravelston Corp. Ltd. was also indicted. See DOJ press release here. The press release states that the indictment was for "federal fraud charges for allegedly fraudulently diverting from the U.S.-based Hollinger newspaper holding company more than $32 million through a complex series of self dealing transactions."

The 27 page indictment presents seven counts of mail and wire fraud. Interestingly, 18 U.C.S. sec. 1346, the intangible right to honest services is used in the indictment. The charges against in-house counsel are premised on an alleged "fiduciary duty of undivided loyalty to International, which among other things, required [the attorney] to provide honest services to International, to disclose all material facts regarding all related party transactions to International's Audit Committee, and to refrain from assisting others in any breach of fiduciary duty against International."

Check out the full tag-team post from Ellen Podgor and Peter Henning (with lots of helpful links) right here.

-- MDT

Labels: Peter Henning

The Christopher Cox enigma continues. There has been a great deal of quiet nashing of teeth that has gone on regarding Cox's essentially unopposed nomination and confirmation as the new SEC chair. But who is this guy, really, and what does he mean for the SEC? By his own statements, Cox is a supporter of the SEC's recent reforms and on-going activist position. By the accounts of others, however, he's a one-man deregulatory dervish waiting to happen.

Round and round and round it goes...and where he stops? Well, who knows?

Via Bloomberg:

SEC's Cox May Not Relax Rules, Fines, Disappointing Business

Aug. 1, 2005
By Lawrence Arnold
Bloomberg News

Christopher Cox, the newly confirmed chairman of the U.S. Securities and Exchange Commission, may not offer much regulatory relief to the businesses that backed his 16- year career in the House of Representatives. During his confirmation hearing before the Senate Banking Committee last week, Cox, a 52-year-old California Republican, alleviated concerns among some lawmakers that he would undo SEC regulations imposed under his predecessor, William Donaldson.

"He clearly took positions which are consensus-building, in terms of not wanting to reopen recent tough votes, not wanting to step back on the enforcement program,'' said Joel Seligman, an securities law expert who's now president of the University of Rochester in New York. ``That's what people, particularly on the Democratic Party side, wanted to hear.''

The Senate unanimously confirmed Cox late July 29, after his pledge to be a strong regulator averted a fight over his pro- business record in Congress. Senators also confirmed Roel Campos and Annette Nazareth as the two Democratic members of the five- member commission. Cox will serve until June 2009, Nazareth, 49, until June 2007. Campos, 56, who first became a commissioner in 2002, will remain until June 2010.

"The broad bipartisan support for his nomination underscores the quality of leadership and breadth of experience that Chris Cox brings to his new post,'' Paul Schott Stevens, president of the Investment Company Institute, said in a statement. "A strong, effective SEC is a matter of vital importance to mutual funds and their shareholders.''

Donaldson, who like Cox was an appointee of President George W. Bush, defied his fellow Republicans by voting with the commission's two Democrats during the past three years to impose new regulations on hedge funds, mutual funds and stock trading.

In his career as a congressman, Cox backed reductions in the taxation of dividends and capital gains, rules making it harder for investors to sue public companies and legislation banning state taxes on purchases from online retailers.

The SEC will probably become ``somewhat more pragmatic'' under Cox, said Robert Hillman, who teaches securities law at the University of California, Davis, Law School. ``I don't expect the SEC to be sharply divided on this, because I don't think Chairman Cox is going to be especially radical in trying to implement reforms.'' Among Cox's first challenges will be a U.S. Chamber of Commerce lawsuit. The business lobby opposed an SEC rule requiring that the chairman and 75 percent of the directors of a mutual fund be independent from its management company.

Donaldson, in one of his last acts as chairman, on June 29 cast the deciding vote to push through the mutual fund governance rule a second time. It had been rejected by a federal court eight days earlier. Donaldson, 74, ignored criticism from lawmakers, ex- SEC officials and business groups that the SEC was rushing the vote to prevent Cox from reconsidering the rule.

Cox has the chance to ``improve securities regulation by returning balance to the process and eliminating costly and unnecessary regulations,'' Daniel Ludeman, chief executive officer of Richmond, Virginia-based Wachovia Securities and chairman of the 600-member Securities Industry Association, said in a statement.

The Chamber of Commerce proposes that the SEC stop assessing large civil fines against companies and focus instead on punishing individuals. That may be a long shot, as the agency probably will feel pressure to continue imposing hefty penalties as a deterrent, said Peter Henning, who teaches courses in securities litigation and white-collar crime at Wayne State University Law School in Detroit. "People like to see large fines,'' Henning said. ``That plays well in the media too.''

In March, Time Warner Inc. agreed to pay $300 million to settle an agency probe, and Qwest Communications International Inc. last year accepted a plan to pay $250 million to settle allegations of accounting fraud. Neither company admitted or denied wrongdoing.

Cox has represented a heavily Republican congressional district in Orange County, California, since 1989. He will resign the House seat to take his new post at the SEC. Bush helped clear a path for Cox's confirmation by nominating Campos to a second term and Nazareth to a first term, as recommended by leading Senate Democrats. The package deal appealed to both parties.

Nazareth, the SEC's director of market regulation, will succeed Commissioner Harvey Goldschmid, who is leaving to return to teaching at Columbia University's law school. Campos, a former corporate lawyer, worked as a federal prosecutor at the U.S. Attorney's office in Los Angeles and co- founded a radio broadcasting company, El Dorado Communications Inc., in Houston before joining the SEC.

The original article appears here. And please also note the quotes in the above article from Daily Caveat friend, Peter Henning of the White Collar Crim Prof. Blog.

-- MDT

Labels: Peter Henning