SEC and Other Investigations of Illegal Trading

Reuters Business Report

Top 33. Aug 23, 2002 7:29 AM

» Jen_ - Re: Martha Stewart Update

In response to message posted by Kirk:

Martha's in double trouble now - oh what a tangled web....a couple articles from 8/21 Reuters Business Report & 8/22 Forbes.com tell the unraveling sordid story....

Martha Stewart Sued over Sale of Shares

By Gail Appleson

NEW YORK (Reuters) - Investors hurt by the share price drop of Martha Stewart Living Omnimedia sued CEO Martha Stewart and other company insiders on Wednesday, alleging they dumped stock ahead of negative news that the style queen was under investigation for her sale of ImClone System shares.

Defendants in the suit, filed in Manhattan federal court, are homemaking guru Stewart and a group of others, including venture capitalist L. John Doerr and his firm Kleiner Perkins Caufield & Byers. Doerr had been a director of Martha Stewart Living until earlier this year.

The case alleges that Martha Stewart Living insiders sold about 5.3 million shares, making more than $79 million in illegal profits and avoiding losses they would have suffered if the public had known in advance about investigations into Stewart's sale of ImClone stock.

The suit seeks class action status on behalf of investors who bought Martha Stewart Living stock between Jan. 8 and July 24. The case, filed by the major shareholder plaintiff's firm Milberg Weiss Bershad Hynes & Lerach, does not specify an amount of damages.

"The company believes the lawsuit is without foundation and we intend to defend it aggressively," said a spokeswoman for Martha Stewart Living.

A spokesman for Kleiner Perkins could not be immediately reached for comment.

Shares of Martha Stewart Living have lost about half their value since the ImClone share scandal broke in June.

Stewart is being investigated by federal prosecutors, the Securities and Exchange Commission and a Congressional committee related to her sale of ImClone shares a day before ImClone disclosed bad news. On Tuesday, Stewart turned over more than 1,000 pages of documents demanded by a House panel.

The House Energy and Commerce Committee is trying to clear up questions about what, if anything, Stewart knew about trouble at ImClone when she sold almost 4,000 shares on Dec. 27. She has said she sold because she had a pre-existing deal with her broker to dump the stock if the price fell below $60 a share.

On Dec. 28, ImClone announced that the Food and Drug Administration had refused to review its application for its highly touted cancer drug, Erbitux, a shock to investors that sent the company's shares plunging.

ImClone's former chief executive, Samuel Waksal, who is a friend of Stewart's, has been charged with allegedly trying to sell ImClone shares before the FDA news became public and tipping two relatives to unload their shares. Waksal has denied wrongdoing and has pleaded not guilty to securities and bank fraud charges.

The shareholder suit filed on Wednesday alleges that Stewart kicked off insider sales of her own company's stock on Jan. 8 when she sold 3 million shares in a private undisclosed sale.

It alleges that on March 14, through Doerr, Kleiner Perkins Caufield & Byers, sold nearly 2 million shares of Martha Stewart Living stock it held at $14.50 per share in another private transaction. The suit alleges the company's stock was trading publicly at over $19 per share at the time.

With that sale, Doerr, KPCB's designated board member, resigned without giving any public notice, the suit alleges.

The suit further alleges that on March 2 and again on May 2, Martha Stewart Living executives sold millions more of their shares in the company at prices as high as $20 per share.

Shares of Martha Stewart Living closed down 6 cents at $8.99 on the New York Stock Exchange on Wednesday. The shares hit a 52-week high of $20.92 on March 18 and a 52-week low of $6.30 on Aug. 2.

<img src="http://images.forbes.com/images/2002/08/..." width=200 height=250 align="left">Martha Stewart

Martha: In A Class By Herself

Penelope Patsuris

NEW YORK - As the princess of domesticity, and one of few self-made female moguls, Martha Stewart is in a league of her own. And when it comes to her alleged criminal exploits, it seems she's in equally exclusive company.

Stewart is currently under investigation for insider trading and obstruction of justice related to the ImClone Systems (nasdaq: IMCL) scandal. Now she faces a lawsuit filed by a Martha Stewart Living Omnimedia (nyse: MSO) shareholder at the U.S. District Court in Manhattan, charging that she improperly sold shares of her own company, knowing they would plummet when the ImClone scandal broke. The suit, which also names several other MSO officers, accuses them of unloading a total of $79 million worth of stock.

With this insider-trading double whammy, it appears Stewart is breaking new ground yet again. "I don't know of a precedent where one insider-trading investigation regarding the shares of one company have then triggered another insider-trading investigation pertaining to a different company," says Harvard Law professor John Coates.

Until now, Stewart's biggest problem has been the fact that she sold 4,000 shares of ImClone Systems the day before the stock tanked. Shares dropped when the news broke that its cancer drug Erbitux would not be approved by the Food and Drug Administration. She and her good friend Samuel Waksal, who at the time was chief executive of ImClone, happened to share the same stockbroker. Authorities are investigating whether Stewart had knowledge of the FDA rejection ahead of the market.

Martha's mess got worse when she averred that she and her broker had a standing agreement to sell her ImClone shares if they sank lower than $60, only to have that story refuted by the broker's assistant. That episode succeeded in putting obstruction-of-justice charges in play.

Waksal, meanwhile, has since been indicted on insider-trading charges, and investigators are now questioning whether Waksal lied to the House of Representatives' Energy and Commerce Committee.

Since one of the first steps in any ImClone investigation into Stewart would involve calling her, it's likely that Stewart knew of the ImClone investigation soon after it was launched. But Harvard's Coates says that whether or not Stewart knew of the investigation when she sold her own company's shares is not necessarily the crux of the matter.

"If it turns out that she is innocent in the ImClone matter, then the mere fact that there was an investigation isn't necessarily material to shares of Martha Stewart Living," says Coates. "The Securities and Exchange Commission is constantly investigating unusual trading activity." Basically this case is going to have to work backwards. If the ImClone investigation doesn't amount to anything, then knowledge of it would not be considered material.

But a guilty verdict for Stewart in the ImClone case would make that investigation extremely pertinent to her shareholders, who depend upon her image and credibility to personify the company.

In other words, the outcome of the new suit hinges upon the resolution of the ImClone investigation. And that of course is hardly proceeding apace, what with Stewart disingenuously responding to a request for documents from the House Energy and Commerce Committee by submitting redacted papers.

Watch for more of Martha's bad manners to materialize as things get messier.

....Jen

-- posted by Jen_

Top 34. Sep 2, 2002 3:30 PM

» Kirk - Martha Stewart Living... behind bars

.
In response to message posted by Jen_:

From http://www.madblast.com/view.cfm?type=Pi...

-- posted by Kirk

http://www.siliconinvestor.com/stocktalk...

Top 35. Sep 5, 2002 10:14 AM

» Kirk - Ex-WorldCom Execs Plead Innocent

Ex-WorldCom Execs Plead Innocent
Wednesday September 4, 1:37 pm ET
By Gail Appleson

NEW YORK (Reuters) - WorldCom Inc.'s (Other OTC:WCOEQ.PK - News) former top finance executive pleaded not guilty on Wednesday to charges he orchestrated one of the largest corporate accounting scandals in U.S. history by masking billions of dollars in expenses at the telecommunications giant.

At the arraignment, federal prosecutors also said their probe into WorldCom's $7.68 billion in accounting misstatements was continuing, and they expect more charges to be brought, possibly against additional defendants.

Scott Sullivan, 40, WorldCom's former chief financial officer, entered his not guilty plea in Manhattan federal court to charges that he was behind a scheme aimed at artificially inflating WorldCom's earnings by hiding expenses. The indictment charges that the scheme allowed WorldCom to report earnings inflated by some $5 billion over more than 18 months.

Sullivan -- a resident of Boca Raton, Florida -- remains free on a $10 million personal recognizance bond that was set when he was first arrested last month. WorldCom fired Sullivan in June, alleging he masterminded the accounting debacle.

WorldCom's former director of general accounting, Buford Yates, 46, also pleaded not guilty to his alleged role in the conspiracy. Yates -- who lives in Brandon, Mississippi -- was released on a personal recognizance bond of $500,000.

Both men were named in a seven-count indictment last week accusing them of one count of securities fraud, conspiracy to commit securities fraud, and fraud in connection with the purchase or sale of securities. It also charges them with three counts of making false filings with the Securities and Exchange Commission.

The conspiracy count carries a possible maximum five-year prison term and a $250,000 fine. The securities fraud and false filings charges each carry a possible maximum term of 10 years and $1 million fines.

WorldCom, the nation's No. 2 long-distance carrier, filed the world's largest bankruptcy in July as it buckled under $40 billion in debt and the huge accounting fraud. The Clinton, Mississippi-based company has also been sued by the SEC.

The indictment alleges that the defendants and their co-conspirators began an illegal scheme in October 2000 aimed at hiding expenses, thereby inflating WorldCom earnings to meet Wall Street expectations. The court papers allege the scheme lasted through this June.

MORE CHARGES LIKELY, OTHERS EYED

Government prosecutors said the probe was continuing and more charges were probable.

"The government is continuing its investigation and we do plan to supersede at some point to add charges to the same scheme and potentially to add defendants," David Anders, assistant U.S. Attorney, told U.S. District Judge Barbara Jones.

On Tuesday, Anders said the government was in plea negotiations with David Myers, WorldCom's former controller. Myers was arrested last month with Sullivan on a criminal complaint, but he has not yet been indicted.

Myers was freed on a $2 million personal recognizance bond.

Last week, when prosecutors announced the indictments of Sullivan and Yates, the government implicated Myers and two other WorldCom accounting executives as unindicted co-conspirators.

Anders told Jones that a trial would last three to four weeks, but the judge did not set a trial date because the government said additional charges were expected.

During the hearing, Yates' lawyer David Schertler said he planned to file a motion asking that the case against his client be moved to federal court in Jackson, Mississippi. He said he planned to file the motion within 30 days.

-- posted by Kirk

http://biz.yahoo.com/prnews/020912/nyth0...

Top 36. Sep 12, 2002 8:28 AM

» Kirk - Tyco Files Suit Against Former CEO Kozlowski

All I can say is "Get that bastard and lock him away for life" if these charges are proven.

Press Release Source: Tyco International Ltd.

Tyco Files Suit Against Former Chairman and CEO, L. Dennis Kozlowski for Misappropriating Money and Assets From the Company

Tyco Says Kozlowski Abused Trust Put in Him by the Board and Engaged in Concerted Pattern of Conduct to Conceal His Larcenous Acts From the Board; Complaint States Kozlowski Abused Relocation and Key Employee Loan Programs, Obtaining Loans Under False Pretenses and Using Programs to Fund Personal Expenditures; Company Says Kozlowski Took Unauthorized Bonuses, Took Credit for Charitable Contributions Paid by Company and Engaged in Self-Dealing Transactions Involving Company Assets That Were Used by Him and His Family; Misused Company Funds Were Expensed in Prior Financial Statements; Company Seeking to Recover Funds Plus Damages; No Material Adjustments to Prior Statements Expected
Thursday September 12, 11:19 am ET

PEMBROKE, Bermuda, Sept. 12 /PRNewswire-FirstCall/ -- Tyco International (NYSE: TYC; BSX; LSE: TYI) today announced that it has filed suit against its former Chairman and Chief Executive Officer, L. Dennis Kozlowski, charging that he misappropriated money and assets from the Company and engaged in a concerted pattern of conduct to conceal larcenous acts from the Board of Directors.

The lawsuit accuses Kozlowski of fraud and self-dealing that included, among other actions: abusing Tyco's relocation and Key Employee Loan programs and obtaining under false pretenses loans that he used to fund personal expenditures; misappropriating for himself over $100 million, including unauthorized bonuses totaling $58 million and unauthorized loans of over $43 million; taking personal credit for more than $43 million in charitable donations that actually were made by Tyco; and engaging in a number of self-dealing transactions involving property he sold the Company at inflated prices and real estate that was used by him and his family without compensating Tyco.

The lawsuit seeks to recover all funds misappropriated from Tyco for Kozlowski himself or awarded by Kozlowski to his senior executives and key managers without appropriate authorization from the Compensation Committee of the Board of Directors, plus damages and other forms of relief. Although the actual amounts are to be determined when the lawsuit goes to trial, the Company specified that it will seek, at a minimum, the recovery of all unauthorized compensation paid by Kozlowski to other employees from 1997 to 2002, repayment of outstanding loans he improperly borrowed from Tyco, and the forfeiture of all income and benefits received by him from 1997 to 2002.

This filing is a result of the previously announced internal investigation being conducted by the outside law firm Boies, Schiller & Flexner.

The Company said that Mr. Kozlowski's misuse of funds and assets, while unauthorized, have already been expensed in Tyco's prior financial statements. It does seek through the lawsuit to recover these monies plus damages. The Company does not expect to make material adjustments to its prior financial statements as a consequence of the internal investigation to date.

Kozlowski Breached Fiduciary Duties and Violated Trust

In a statement, the Company said, "As Tyco's Chairman and Chief Executive Officer from July 1992 through June 3, 2002, Mr. Kozlowski was one of the highest, if not the highest, compensated executive in the country. Despite his being paid handsomely, he misappropriated hundreds of millions of dollars from Tyco that have not been repaid. He failed to inform, and actively concealed from, the Compensation Committee the true facts about his compensation."

The Company also said, "Kozlowski was required to act honestly and in good faith with a view to the best interests of the Company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Kozlowski breached these duties to the Company and, as a result, the Company has been damaged in an amount that far exceeds the amounts that Kozlowski directly misappropriated for himself. To hold him accountable for his misconduct, we seek not only full payment for the funds he misappropriated but also punitive damages for the serious harm he did to Tyco and its shareholders."

Specific Actions by Kozlowski

Among the specific actions through which Kozlowski failed in his duties to Tyco are:

* Abuse of New York Relocation Program -- In 1995, after he decided to
relocate to New York City, Kozlowski transformed a Compensation
Committee-approved relocation program intended for all employees into a
special program for a few senior executives that was never sanctioned
by the Board. Kozlowski obtained these substantial benefits under the
unapproved, transformed plan:

-- Beginning in July 1997, he rented a lavish Fifth Avenue apartment in
New York at an annual rent of $264,000, paid for by the Company.
-- He used an interest-free loan to buy a Company-owned, $7-million
Park Avenue apartment, at depreciated book value and without
appraisals, which he never occupied and instead deeded to his
ex-wife a few months after the purchase.
-- He sold his Exeter, New Hampshire home to the Company for
significantly more than its market value, resulting in a $3-million
overpayment to him by Tyco.
-- He had the Company purchase a second, more extravagant, Fifth Avenue
apartment in 2001 for $16.8 million, plus $3 million in improvements
and $11 million in furnishings, without disclosing to the Board or
its Compensation or Audit Committees that this home was paid for by
Tyco and carried by the Company as a corporate asset.
-- He "grossed up" the benefits he received under the program to
insulate himself from New York State income tax liability related to
the relocation to New York.

Kozlowski knew that the benefits to him and other key executives under
such a program required Compensation Committee approval and never
sought such approval from the Board.

* Abuse of Key Employee Loan Program -- The long-standing Key Employee
Loan Program (KEL) was designed to encourage stock ownership by
executives by obviating their need to liquidate shares to meet tax
liabilities. However, Kozlowski systematically abused this program,
turning it into a personal line of credit. From 1997 to 2002, he took
more than 200 loans from the program, borrowing more than $274 million,
of which more than $245 million was not used in accordance with the
purpose of the program. Instead, he used these funds for a wide
variety of personal needs, including purchases of everything from
homes, yachts, antiques and furniture to payments to his domestic help.

* Unauthorized Credits to KEL Program -- To offset his indebtedness to
Tyco, without the knowledge or approval of the Board, Kozlowski
directed Chief Financial Officer Mark Swartz to effect credits of
$25 million to Kozlowski's KEL account and $12.5 million to Swartz's
account. (When the Board learned of these unauthorized journal entries
during the course of the investigation, it directed that they be
reversed.) Kozlowski continued to abuse the KEL program, and when he
left the Company on June 3, 2002, he owed this program $43,840,461,
plus interest, all of which is due.

* Unauthorized Florida Relocation Program -- After the 1997 reverse
merger with ADT, Kozlowski decided to relocate more than 40 corporate
employees to ADT's U.S. headquarters in Boca Raton, Florida and created
a new relocation program by appropriating the terms of the earlier New
York program. He circumvented the need for Compensation Committee
approval of this program by creating a program somewhat similar to the
New York program. As in New York, he created two versions of the
program, one for general use that met the IRS standards and a second
for the use of a few executives. Without changing his primary
residence, Kozlowski used this program to obtain $29,756,110 in
interest-free loans to assemble five lots into a compound and build an
estate in an exclusive Boca enclave called "The Sanctuary." Kozlowski
did not obtain Compensation Committee approval of this program and
concealed these benefits from the Board.

* "TyCom Bonus" -- Unauthorized Forgiveness of Relocation Loans -- In
September 2000, Kozlowski still owed Tyco more than $37 million, so he
"contrived, promoted and fraudulently executed" a plan to obtain
relief. He falsely informed the Senior VP of Human Resources that the
Board had decided to forgive all of the Florida relocation loans to the
more than 40 employees - and to "gross up" this benefit by making each
employee whole on an after-tax basis for the forgiveness -- as a reward
for completion of the TyCom IPO. The unauthorized loan and gross-up
program was in addition to a more limited program of cash bonuses and
restricted stock awards that the Compensation Committee -- unaware of
the Kozlowski program -- approved the next month. Kozlowski's
unauthorized program cost Tyco close to $100 million, including
Kozlowski's share of $32,644,338.

* Unauthorized "ADT Automotive Bonus" -- In November 2000, still pressed
by his indebtedness to Tyco, Kozlowski contrived another special bonus
program. This bonus was supposed to recognize executives for
contributions to the divestiture of Tyco's ADT Automotive business via
cash and "relocation" benefits, even though the beneficiaries had
already recovered the grossed-up cost of their "relocations" under the
TyCom forgiveness bonus. This "bonus" cost Tyco nearly $56 million, of
which $25.6 million benefited Kozlowski. As with the "TyCom Bonus,"
Kozlowski led other executives to believe the program was Board
approved, which it was not. Adding everything up, including his
authorized compensation and the money misappropriated as purported
compensation, Kozlowski's income from Tyco in 2000, as reported to the
IRS, was an incredible $137,491,353.39.

* Fraudulently Procured Retention Agreement -- In 2001, Kozlowski pressed
the Company to sign a retention agreement, which among other things,
provided for ongoing compensation and benefits for three years
following age 62. The monetary value of this provision, as approved by
the Compensation Committee, would have been approximately $20 million.
However, he fraudulently deceived the Committee into amending the
compensation formula that, unbeknownst to the Committee, would have
resulted in a ten-fold increase in the compensation that would be due
to him.

* Unauthorized Payment to Walsh -- In early 2001, Kozlowski approved the
payment of a $20-million finder's fee to then-director Frank Walsh in
connection with the acquisition of The CIT Group. Kozlowski and Walsh
concealed this payment from the Board, which did not become aware of it
until reading a draft proxy in January 2002 and demanded immediate
repayment. The Board was galvanized into action by this payment and,
in February 2002, undertook a review of all transactions involving
senior management. Also, in early May 2002, the Board hired
independent counsel, Boies Schiller & Flexner, to represent the Company
with regard to the Walsh matter.

* Frustration of Board's Investigation -- As a result of the Walsh
payment, the Board began a wide-ranging investigation into the
activities of Kozlowski and other senior managers. Throughout early
2002, while paying lip service to the heightened Board oversight, at no
time did Kozlowski disclose the enormous compensation he had taken for
himself and others over the past several years. From February through
May 2002, Kozlowski continued to conceal the facts from the Board and
attempted to delay and frustrate the investigation.

* Failure to Report Subpoena to Board -- On May 3, 2002, in the course of
investigating Kozlowski's failure to pay state sales taxes, the
Manhattan District Attorney served Kozlowski with a subpoena for
records relating to his compensation and his recent purchases.
Kozlowlski had an affirmative duty to inform the Board of this, but
failed to do so. In fact, he did not inform the Board until May 31,
the day he learned he was to be indicted.

* Charitable Contributions -- From 1997 to 2002, Kozlowski committed
donations and pledges to charitable organizations with Company money
amounting to more than $106 million. At least $43 million of these
donations were made for his personal benefit or were represented as his
personal donations. For example, in 2001, Kozlowski donated
$1.3 million of Company money to the Nantucket Conservation Foundation,
Inc., which in turn purchased property adjacent to Kozlowski's own
Nantucket estate to prevent future development of the land. He also
pledged $10 million to the California International Sailing Association
in his name. Other Tyco contributions were made in his name to
schools, colleges, hospitals, and Nantucket institutions with which he
had a personal connection.

* Other Elements of Kozlowski's Fraud and Self-Dealing -- Other actions
by Kozlowski that formed a pattern of fraud and self-dealing included
expensing to the Company the following items, among others:

-- Millions of dollars for the personal use of his various residences
and purchases of furniture and other items for these residences;
-- $700,000 for a personal investment in the movie, "Endurance;"
-- More than $1 million for a lavish celebration of his wife's birthday
in Sardinia, Italy;
-- Reimbursement for $1 million of business expenses without proper
documentation for such items as jewelry, clothing, wine, club
membership dues, flowers and a private venture; and.
-- At least $110,000 for the corporate use of his personal yacht, the
"Endeavour."

About Tyco International Ltd.

Tyco International Ltd. is a diversified manufacturing and service company. Tyco is the world's largest manufacturer and servicer of electrical and electronic components; the world's largest designer, manufacturer, installer and servicer of undersea telecommunications systems; the world's largest manufacturer, installer and provider of fire protection systems and electronic security services; and the world's largest manufacturer of specialty valves. Tyco also holds strong leadership positions in disposable medical products and plastics and adhesives. Tyco operates in over 100 countries and had fiscal 2001 revenues from continuing operations of approximately $34 billion.

-- posted by Kirk

Top 37. Sep 16, 2002 5:28 PM

» Sinewave - More Corporate Crimes and Misdemeanors

SEC Chairman says more indictments upcoming; who will be next? Elsewhere: companies woefully unprepared for crisis, and can it be -- an IPO this week?

Stephen Taub, CFO.com
September 16, 2002

Last week, former Tyco Intl. CFO Mark Swartz was hauled off to the Manhattan District Attorney's office, where he was charged with stealing $170 million from the once high-flying conglomerate. In the weeks before Swartz's arrest, former WorldCom CFO Scott Sullivan and former Adelphia CEO John Rigas also found themselves on the wrong end of government indictments.

But apparently, these three high-profile cases only marked the opening salvo of the government's assault on corporate crime. It appears that more corporate executives will be charged with corruption over the next few weeks.

Or at least, that was the message delivered by Securities and Exchange Commission chairman Harvey Pitt the same day that Swartz and ex-Tyco CEO Dennis Kozlowski were arrested and charged with grand larceny and securities law violations.

"I expect this week and in the following weeks we will see more high-profile indictments of people who abused their public trust," Harvey Pitt told BBC radio in an interview last Thursday. "A number of high profile officials will find themselves in the spotlight for potential criminal sanctions like jail time."

Who are the possible candidates?

There don't seem to be too many left, actually. Federal officials have already indicted former executives from Tyco, Enron, WorldCom, Adelphia, RiteAid and ImClone.

Of course, the heat is intensifying under Martha Stewart, who is currently being investigated for alleged insider trading violations stemming from her sales of ImClone stock.

Other high-profile execs who are reportedly in the cross-hairs of the Justice Department and SEC include former Enron CFO Andrew Fastow and Enron executives Jeffrey Skilling and Kenneth Lay. The two agencies are also reportedly probing Global Crossing, along with WorldCom's Bernard Ebbers.

Even Federal Reserve Chairman Alan Greenspan was moved to comment on the rash of scandals involving top corporate executives. Last week, Greenspan reportedly said: "There were a large number of egregious acts . . . larger than I would like to have seen. The problem essentially rested with the chief executive officer and those chief executive officers who [wanted] to spin the accounting system in order to give the impression of success where success did not exist."

Corporate Crisis Counseling
How prepared is your company for a major calamity? Does it have a plan in place to deal with one?

Turns out 47 percent of companies responding to a KPMG survey said they do not have a crisis preparedness plan in place. What’s more, 20 percent didn’t even rate crisis preparedness as a priority.

"These numbers surprised us, considering that how well you prepare for a crisis of any magnitude can make or break your organization in the marketplace if a major event does occur,” said Stuart Campbell, U.S. partner in charge for KPMG's risk and advisory services practice. "With the definition of corporate crisis having been rewritten so many times in the past year, companies should no longer soft-pedal crisis planning."

The widespread unpreparedness is disturbing, given that 81 percent of respondents said they continue to believe that their companies are susceptible to a serious breach in operations.

Remarkably, 94 percent said they were confident or very confident that they could rebound swiftly from an interruption to business.

A strange response, considering about half of the respondent said they do not have an established process to analyze crisis preparedness.

"How would they know if they can rebound quickly, when fewer than half have adopted a process for analyzing their preparedness?" Campbell asks. "Companies that emphasize recovery over planning are engaging in flawed thinking. The focus should be on preventive measures and proactive control."

KPMG also pointed out that 17 percent of respondents said that board members are not involved in crisis preparedness.

One final number to contemplate: 40 percent of businesses that suffer a disaster go out of business within two years, according to KPMG.

KPMG surveyed top-ranking executives, including chief executive officers, chief financial officers, chief operating officers and chief risk officers, of 135 companies with $500 million or more in revenue. It should be noted that KPMG offers risk management and disaster recovery consulting services.

Continues...... CFO.com

-- posted by Sinewave

Top 38. Sep 20, 2002 7:11 AM

» Kirk - SSB & Grubman - Securities Fraud

.
To:Richard Palm who started this subject
From: Gottfried Friday, Sep 20, 2002 6:40 AM
Respond to of 3124

OT *** THE NASD PLANS TO FILE administrative securities-fraud charges against Salomon Smith Barney and its former telecom analyst Jack Grubman. The charges would stem from the firm's positive research reports on Winstar, a telecom company and Salomon investment-banking client that filed for bankruptcy-law protection last year. (See more coverage.)[snip]
subscribers http://online.wsj.com/article/0,,SB10324...

-- posted by Kirk

Top 39. Sep 23, 2002 10:54 AM

» Kirk - Rigas Family Members Indicted

.
This reads like a Mafia indictment! The Rigas family probably hurt more people than the mafia... especially those of us who owned smaller companies that suppied telecom equipment to Adelphia and the thousands of honest employees that have lost jobs as companies like CACS cut jobs to try to remain in business.

Reuters Business Report

Rigas Family Members Indicted

Monday September 23, 1:16 pm ET

NEW YORK (Reuters) - Three members of the Rigas family were indicted on fraud charges on Monday, paving the way for the former executives of Adelphia Communications Corp. to stand trial for allegedly looting the troubled cable operator.

Former Adelphia Chief Executive John Rigas, 77; Timothy Rigas, 46, a former chief financial officer, and Michael Rigas, 48, a former executive vice president of operations, were named in the indictment filed in Manhattan federal court.

The three were previously charged in a criminal complaint filed by prosecutors in July. The indictment, which allows for a trial, replaces the complaint.

The complaint had alleged the defendants conspired to commit securities, wire and bank fraud. It charged the former executives with improperly using company funds for everything from personal loans to constructing a $13 million golf course on the senior Rigas' property to shuttling family members back and forth from a safari vacation in Africa.

John Rigas, a pioneer of the cable industry who started Adelphia in 1952 with a $300 check, and the other executives resigned in May from the company, which filed for Chapter 11 bankruptcy protection in June.

-- posted by Kirk

Top 40. Sep 25, 2002 11:49 AM

» Kirk - Homestore.com NAILED by the Feds!

.
I LOVE IT.

ATTY General John Ashcroft is reading off the long list of charges against the insiders of homestore.com

Good to see the justice department going after REAL criminals. Perhaps they can let the cancer suffering marajuana smokers in Santa Cruz alone and get some more REAL CROOKS like these?

-- posted by Kirk

Top 41. Sep 25, 2002 2:10 PM

» Kirk - Re: Homestore.com NAILED by the Feds!

In response to message posted by Kirk:

9/25/2002 04:38 PM
Story provided by Reuters

Homestore Execs Agree to Plead Guilty

By Deborah Charles

WASHINGTON (Reuters) - Three former executives of online real estate firm Homestore Inc. (HOMS) have agreed to plead guilty to fraudulently inflating the company's revenue, U.S. Attorney General John Ashcroft said on Wednesday.

The U.S. government filed a criminal information in Los Angeles charging Homestore's former Chief Operating Officer John Giesecke and former Chief Financial Officer Joseph Shew with conspiracy to commit securities fraud.

Giesecke was also charged with wire fraud and former vice president John DeSimone was charged with insider trading.

In plea agreements filed on Wednesday, the three men agreed to cooperate with the ongoing investigation into Homestore.

Ashcroft told a news conference that Homestore had fraudulently recognized about $46.4 million in bogus revenue in the first three quarters of fiscal 2001.

But, he said no charges would be brought against Homestore itself because the company cooperated in the investigation into extensive accounting errors.

The California-based company said last year it would launch an internal audit into its accounting. The deals it was looking into reportedly involved companies including America Online, the Internet arm of media giant AOL Time Warner Inc (AOL) .

Ashcroft would not comment when asked if AOL was being investigated in connection with the Homestore case.

In August, AOL Time Warner said America Online may have improperly accounted for three advertising deals with revenue totaling $49 million.

One source said on Wednesday the Securities and Exchange Commission informed AOL that it was not a target in the Homestore investigation but was a third-party witness.

COMPLICATED SCHEME, 'BOGUS REVENUE'

The three executives are to be arraigned in Los Angeles next month.

The SEC filed civil charges against them, and though none of the men admitted or denied the SEC's allegations they agreed to return $5 million to shareholders to pay back the money they fraudulently earned in trading profits plus interest.

Shew and Giesecke were permanently banned from serving as officers or directors of a public company while DeSimone was barred from those roles for 10 years.

Ashcroft said the action against Homestore showed that the government would pursue corporate law breakers regardless of the size or prominence of the company.

"So whether you are an executive at a Fortune 100 firm or an Internet start-up, if you victimize investors and employees, you will face investigation, prosecution and prison for your crimes," he said.

Ashcroft said Giesecke and Shew joined in a scheme from March 2001 to December 2001 to defraud investors by manipulating Homestore's reported revenue.

The conspiracy involved an illegal practice known as "round-tripping," when a company fraudulently inflates the revenue it reports to the investing public.

The round-trip transactions involved the flow of money out of Homestore through middlemen, then back to Homestore so the company could claim those funds as new revenue even though the transactions never had an economic effect on the company.

One example outlined in the criminal information involves an agreement Homestore entered in the first two quarters of 2001 with a "major media company."

In the deal, Homestore agreed to refer advertisers to the media company to purchase online advertising. The company then agreed to buy online advertising from Homestore, dependent on the amount of advertising purchased by Homestore's referrals.

The company paid about $49.8 million to the advertisers in 16 separate transactions in first and second quarters of 2001.

The advertisers then paid about $45.1 million to the media company to buy online ads. Homestore recognized about $36.7 million in revenue from the media company's related purchase of advertising and Homestore included the "bogus" revenue from the transactions in its financial statements. (Additional reporting by James Vicini and Reshma Kapadia)

-- posted by Kirk