Its About Time-Tyco executives get up to 25 years in prison

One can only ask if these sentences of the Tyco executives, set forth in this article are strong enough. Let me know your thoughts.

Link: MSNBC - Ex-Tyco executives get up to 25 years in prison.

Ex-Tyco executives get up to 25 years in prison Kozlowski, Swartz punished for stealing hundreds of millions of dollars The Associated Press Updated: 2:28 p.m. ET Sept. 19, 2005

NEW YORK - L. Dennis Kozlowski, the former CEO of Tyco International Ltd., and former Tyco finance chief Mark Swartz were sentenced Monday to up to 25 years in prison for stealing hundreds of millions of dollars from the company.
The men, who were immediately ordered into custody, will be eligible for parole after serving eight years and four months.
Family members wept in the gallery as the sentences were imposed. Kozlowski was led out of the front of the courtroom in handcuffs as his wife quietly sobbed from a bench three rows back.
State Supreme Court Justice Michael Obus ordered Kozlowski and Swartz to pay a total of $134 million in restitution; in addition, Kozlowski was fined $70 million, Swartz $35 million.
The sentences end a case that exposed the executives’ extravagant lifestyle after they pilfered some $600 million from the company including a $2 million toga birthday party for Kozlowski’s wife on a Mediterranean island and an $18 million Manhattan apartment with a $6,000 shower curtain.

Kozlowski, 58, and Swartz, 44, were convicted in June after a four-month trial on 22 counts of grand larceny, falsifying business records, securities fraud and conspiracy. It was their second trial — the first ended in mistrial after a juror said she received threats following reports that she made an “OK” signal to the defense team.

Kozlowski and Swartz are the latest executives sentenced to prison in a wave of white-collar scandals that shook corporate America and outraged the public after thousands of people lost their jobs and pension nest-eggs.

One-time WorldCom Chairman Bernard Ebbers was sentenced to 25 years in prison for the $11 billion accounting fraud that toppled the telecommunications company that emerged from bankruptcy as MCI Inc. Adelphia Communications Corp. founder John Rigas was sentenced to 15 years in prison for his role in the looting and fraud at the cable TV company. His son and former finance chief, Timothy Rigas, got 20 years.

Enron Corp. founder Kenneth Lay, former CEO Jeffrey Skilling and former top Enron accountant Richard Causey are expected to go to trial in January.

Before Monday’s sentencing, Assistant District Attorney Owen Heimer told the judge that Kozlowski “should not be shown any leniency.”

“He stole. He committed fraud. He committed perjury,” Heimer said. “He engaged in a shocking spree of self-indulgence.”

But Kozlowski asked the judge to be as “lenient as possible” and to consider “all the positive things I have done in my life.” His lawyer, Stephen E. Kaufman, read from letters written on his client’s behalf and said, “He’s a good man. He’s a decent person and his reputation has been tarnished but his life should not be destroyed.”

Swartz also asked for leniency, and his lawyer, Charles A. Stillman, said he was a man of “remarkable decency.”

Kozlowski and Swartz were accused of giving themselves more than $150 million in illegal bonuses and forgiving loans to themselves, besides manipulating the company’s stock price.

The jury deliberated 11 days before returning 22 guilty verdicts out of 23 counts for each defendant. Each was acquitted of a count of falsifying records about company loans for homes in Boca Raton, Fla.

Kozlowski, employed by Tyco from 1975 until 2002, and Swartz, who joined Tyco in 1991 and left in 2002, testified that they never stole anything from Tyco or received anything from the company to which they were not entitled.

They were also quick to point out that unlike the cases at WorldCom and Enron, Tyco continued to thrive after the scandal.

“Tyco is not Enron,” Thomas Curran, a former New York City prosecutor who is now a defense lawyer, said last week. “Tyco is a real company with a real business plan that still employs thousands of people. ... There are no retirees eating cat food because of Dennis Kozlowski.”

Tyco, which has about 250,000 employees and $40 billion in annual revenue, makes electronics and medical supplies and owns the ADT home security business. Nominally based in Bermuda, its operations headquarters are in West Windsor, N.J.

© 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

© 2005 MSNBC.com

URL: http://www.msnbc.msn.com/id/9399803/

Waste Management Pays For Executives' Fraud

Washington (Aug. 30, 2005) - Looking to avoid the publicity of a trial, the country's largest trash hauler will pay $26.8 million to cover most of the costs of a settlement between former executives and the Securities and Exchange Commission.

The settlement by Waste Management Inc. was approved in U.S. District Court in Chicago. Originally filed in 2002, the SEC suit had accused Waste Management's founder and former chair, Dean Buntrock, and three other former executives of failing to report expenses, postponing costs and filing false financial statements, in order to meet earnings targets between 1992 and 1997.

A new chief executive of the company ordered a review of the company's accounting practices in late 1997, eventually uncovering the problems and leading to a restatement of $1.7 billion in earnings. At the time, the restatement was the largest in the country's history.

In 2001, Waste Management agreed to pay $457 million to settle a class-action lawsuit alleging securities-law violations, and received about $20 million in a related settlement with now-defunct auditor Arthur Andersen LLP. At the time of that settlement, Buntrock reportedly agreed to pay a $2.3 million fine, and Andersen later paid another $7 million to settle with the SEC.

Company bylaws obligated Waste Management to pay the former executives' legal expenses, including fines. According to filings, Waste Management has already spent $37 million on the SEC investigation and defending the executives, and had estimated the costs of going to trial at another $32.5 million.

Web CPA

Enron Crooks Get Shorter Sentences

Houston federal Judge Ewing Werlein rejected the recommendation of the prosecutors in describing the corporate fraud which stole over $43 million out of the pockets of common investors, as "relatively benign". The Chamber of Commerce----filed amicus briefs for the crooks.See the Wall Street Journal article below:

Link: WSJ.com - Merrill Ex-Officials' Sentences Fall Short of Recommendation.

Merrill Ex-Officials' Sentences Fall Short of Recommendation By JOHN R. EMSHWILLER and KARA SCANNELL Staff Reporters of THE WALL STREET JOURNAL April 22, 2005; Page C3

A federal judge in Houston gave two former Merrill Lynch & Co. officials substantially shorter prison sentences than the government was seeking in a high-profile case that grew out of the Enron Corp. scandal....

RELATED ARTICLE
• Business World Tells Government: Back Off
04/21/05

Yesterday's Merrill sentencing in the so-called "Nigerian barge case" had attracted attention in the business community because of questions over how to calculate investor losses in fraud cases. They also were the first decisions to involve senior corporate defendantsfollowing recent Supreme Court rulings that gave judges more leeway in determining prison terms.

Judge Ewing Werlein, Jr. sentenced former Merrill investment banking chief Daniel Bayly to 30 months in federal prison and James Brown, who headed the brokerage giant's structured-finance group, to a 46-month term.

The federal probation office, with backing from Justice Department prosecutors, had recommended sentences for Messrs. Bayly and Brown of about 15 and 33 years, respectively. Mr. Brown had been convicted on more counts than Mr. Bayly.

The case stemmed from Enron's 1999 sale to Merrill of an interest in some electricity-producing barges off the Nigerian coast. Prosecutors argued that because Enron had secretly guaranteed Merrill against any loss, the sale was a sham, which allowed the energy titan to illegally book $12 million in pretax profit. The government argued that the bogus profits artificially inflated Enron's market capitalization at the time by at least $43.8 million and that this amount should be considered the loss to investors.

In their court filings, the defendants argued that the calculated loss to Enron shareholders should be zero, based partly on the fact that the alleged barge fraud wasn't revealed until after Enron had collapsed into bankruptcy proceedings in December 2001. In an unusual move, the Chamber of Commerce, the nation's biggest business group, filed an amicus brief arguing that the government's approach could discourage legitimate business activities.

While Judge Werlein rejected the government's loss calculation, he didn't completely reject the government's theory of how to calculate the loss. He put the loss around $1.5 million, which was related to the amount of investment-banking fees paid in the barge deal.

The judge described the barge fraud as a relatively "benign" crime in the catalogue of alleged misdeeds that took place at Enron.

Three other defendants convicted in the barge case face a later sentencing date.

Write to John R. Emshwiller at john.emshwiller@wsj.com2 and Kara Scannell at kara.scannell@wsj.com3

URL for this article:
http://online.wsj.com/article/0,,SB111410393680013424,00.html

The SEC and Coke Settle Channel Stuffing Allegations.

The SEC settled major channel-stuffing violations by Coke with no penalty, as the below article makes clear. Maybe the SEC is afraid that Coke will pull the vending machines out of their halls,...

Link: Coke settles with SEC over sales inflation in Japan - Food and Beverage - Company Announcements - SEC.

No fine for Coke in 'channel-stuffing' SEC: Beverage behemoth to continue 'remedial actions' By William Spain, MarketWatch Last Update: 1:15 PM ET April 18, 2005

CHICAGO (MarketWatch) - The Securities and Exchange Commission said Monday that it has accepted a settlement offer from Coca-Cola Co. in a case involving "channel-stuffing" by a Japanese subsidiary that inflated the beverage behemoth's sales -- and allowed it to meet Wall Street's profit expectations for eight quarters in the late 1990s.

Although the company garnered hundreds of millions of dollars in extra revenues from the practice, it will pay nothing to settle the charges.
The SEC found that Coca-Cola (KO: news, chart, profile) filed false and misleading statements -- a charge the company neither admits nor denies -- and the company is being punished by little more than a requirement it continue to undertake "remedial efforts" that are already underway.
Regulators found that, at or near the end of each reporting period between 1997 and 1999, the company used a practice in Japan known as "gallon pushing" for the purpose of pulling sales forward. To pull it off, Japanese bottlers were offered extended credit terms to buy beverage concentrate they would likely not have purchased until a later quarter.

The practice typically added 1 cent to 2 cents a share to Coca-Cola's quarterly numbers -- and was the difference in 8 out of the 12 quarters between meeting and missing analysts' consensus earnings estimates, the SEC said.

All the while, the company kept mum about the practice, failing to disclose it in its periodic reports. The bill eventually came due in January of 2000 when the company said that a worldwide concentrate inventory reduction would have an impact of 11 cents to 13 cents per share on its first-half earnings. More than a nickel of that was from an anticipated drop in Japanese sales brought on by the inventory build-ups.

"Coca-Cola misled investors by failing to disclose end of period practices that impacted the company's likely future operating results," said Richard Wessel, head of the SEC's Atlanta office, in the settlement announcement.

To get off the hook, Coca-Cola promised to abide by a cease-and-desist order that found violations of antifraud and reporting requirements while taking "steps to strengthen its internal disclosure review process to prevent future violations," the SEC said.

In a letter to employees, Coca-Cola CEO Neville Isdell noted that the settlement does not involve monetary penalties and that the company was told another investigation by the Department of Justice has been closed.

The latter probe involved a lawsuit by a whistleblower who claimed that he was fired for reporting various frauds and accounting irregularities at the company.

"We will not comment on specific allegations," he wrote. "The measures identified in this settlement and those we have taken over the past few years are an important step forward in ensuring our systems continually improve."

Shares of Coca-Cola were down 30 cents to $40.99 in afternoon trading.

William Spain is a reporter for MarketWatch in Chicago.






Copyright © 2005 MarketWatch, Inc. All rights reserved.

Enron Former Directors Agree To Settle Class Actions

Following on the heels of the Worldcom directors settlement, former Enron Directors have agreed to pitch in $13 million of their own money to settle securities fraud charges against them. My firm represents the lead plaintiff, the University of California, so other than the article below, I will say nothing:

Link: washingtonpost.com: Former Directors Agree To Settle Class Actions.

Former Directors Agree To Settle Class Actions Enron, WorldCom Officials to Pay Out of Pocket , by Ben White, Washington Post Staff Writer Saturday, January 8, 2005; Page E01

A group of former Enron Corp. directors has agreed to a $168 million settlement of their portion of a class-action securities lawsuit. Insurance will pick up most of the cost, but under the terms of the deal, the former Enron directors will personally pay $13 million.

The announcement of the deal, made by the University of California, lead plaintiff in the Enron class-action case, came on the same day that the lead plaintiff in the WorldCom class-action suit formally announced a $54 million settlement covering 10 former WorldCom directors. WorldCom directors will pay $18 million from their own pockets.

The twin settlements highlight a new phase in the backlash against corporate wrongdoing in which board members are being pushed to bear much higher personal costs for failures in supervision. Liability for official actions is generally covered by insurance: It was nearly unheard of for directors to pay personally, particularly in the amounts announced this week.

The Enron directors covered by the settlement admit no wrongdoing. Plaintiffs in the case have accused directors of selling Enron shares after the company began to give false financial information to the public. The agreement to pay back some trading profits came even though a federal judge in Houston in 2003 dismissed insider trading and fraud charges leveled at the former directors.

The Enron directors' settlement was the fourth reached in a massive class-action case in which shareholders seek to recover losses they suffered in the collapse of the Houston-based energy trader. Investment banking firm Lehman Brothers agreed to a $222.5 million settlement in October, Bank of America to a $69 million settlement in July, and the international unit of now-defunct accountant Arthur Andersen agreed to a $40 million settlement in July 2002.

Claims remain against a number of major banks that handled Enron transactions, against Arthur Andersen and against a number of former Enron officers.

"The settlement is very significant in holding these outside directors at least partially responsible," said William Lerach, lead attorney for the shareholders. "Hopefully, this will help send a message to corporate boardrooms of the importance of directors performing their legal duties.''

Among former directors contributing personal funds were Wendy Gramm, former chairwoman of the Commodities Future Trading Commission and wife of former senator Phil Gramm, and Robert Jaedicke, former dean of the Stanford Business School. In total, 18 former Enron directors joined the settlement but only 10 contributed personal funds.

The WorldCom deal, announced by New York State Comptroller Alan G. Hevesi, resolves claims against the 10 directors in a larger shareholder class-action suit scheduled to go to court next month. Under the terms of the agreement, the group will personally pay a total of $18 million, an amount equal to slightly more than 20 percent of the directors' combined net worth, not including primary residences and retirement accounts. Insurance companies will pay the other $36 million.

It could not be determined yesterday how the payments will be divided among the 10, although Hevesi said one of the group has filed for bankruptcy and will not pay. He declined to identify who.

Each director is required to pay at least the amount he or she received in compensation from WorldCom during the period covered by the lawsuit. Hevesi said another party would cover the bankrupt director's compensation repayment.

In announcing the agreement, Hevesi rejected arguments that forcing directors to pay out of their own pockets would deter people from serving on boards in the future. Generally, companies or insurers cover any litigation costs directors incur as a result of their official duties.

Hevesi said instead that the ruling would help directors perform better in the future.

"The job of directors is to be a fiduciary on behalf of shareholders, to demand documents, to ask tough questions of management," he said. "We believe this settlement will empower directors to do this."

Asked if the settlement could have a chilling effect on would-be board members, Hevesi said, "I believe it will have a chilling effect on any prospective board member whose motivation is not to do their job, who sees serving on a board as a social club."

Hevesi, who is sole trustee of New York's $120 billion public pension fund, is the court-appointed lead plaintiff in the WorldCom shareholder class-action suit.

The 10 former directors who settled were James C. Allen, Judith C. Areen, Carl J. Aycock, Max E. Bobbitt Jr., Clifford L. Alexander Jr., Stiles A. Kellett Jr., Gordon S. Macklin, John A. Porter, Lawrence C. Tucker and the estate of John W. Sidgmore.

Two other former WorldCom outside directors, Bert C. Roberts Jr. and Francesco Galesi, did not join the settlement. Attorneys for Roberts and Galesi declined to comment.

All of the former directors who agreed to settle either declined to comment or did not return calls. Attorneys for the directors also declined to comment publicly. Peter Lucht, a spokesman for WorldCom, now called MCI Inc., also declined to discuss the settlement.

The agreement was formally submitted Friday to U.S. District Judge Denise L. Cote, who is overseeing the WorldCom class-action suit. But approval of the settlement is not expected to come for several months.

Remaining defendants in the case include 16 investment banks that helped WorldCom issue stocks and bonds and Arthur Andersen, the now-defunct accounting firm that signed off on WorldCom's books. In May 2004, Citigroup Inc. agreed to pay $2.6 billion to settle its part of the case. Citigroup's investment banking arm was among the biggest underwriters of WorldCom securities.

Hevesi said on Friday that court-ordered settlement talks with all remaining defendants in the case were ongoing. But he also said he is prepared to litigate the case, which is scheduled to begin Feb. 28.

Several former WorldCom officials have already pleaded guilty to fraud charges, including former chief financial officer Scott D. Sullivan. Former WorldCom chairman and chief executive Bernard J. Ebbers is scheduled to go on trial on charges of securities fraud this month.

Hevesi said on Friday that he insisted that the former WorldCom directors pay a significant portion themselves in order to send a message to other directors.

"I felt personally that this would be unfair and not a deterrent for future failure on the part of the directors if they were not held personally liable," he said.

Hevesi said he did not know how much each individual director would pay. One person familiar with the case, who asked not to be identified by name because all parties had agreed not to discuss the matter publicly, said some of the directors thought they could have won at trial but did not want to risk what could have been liability well in excess of the amount of the settlement.

The directors' position was complicated when the judge overseeing the case ruled last month that a prospectus issued before a massive WorldCom bond offering in 2001 included false and misleading statements.

Under federal securities law, that ruling meant the burden of proof in the case would have fallen on the directors to demonstrate that they conducted a thorough review and could not possibly have known the prospectus was misleading.

Staff researcher Meg Smith contributed to this report.

© 2005 The Washington Post Company