Securities: April 2007 Archives

Scrushy Gets Bargain Settlement in Accounting Fraud Case

Richard Scrushy, the former HealthSouth Corporation Chief Executive, will pay a $81 million settlement in order to end a government lawsuit against him for accounting fraud. However, Scrushy will pay less than $10 million because his attorneys say that Scrushy is running out of money.

Scrushy settles SEC lawsuit for $81M

The Securities and Exchange Commission says that this is one of their largest cases against an individual. Scrushy has not admitted to any wrongdoing, but says that he will give up $77.5 million that the SEC says he gained in the $2.7 billion fraud at HealthSouth and he will pay another $3.5 million in civil penalties. Scrushy will have the amount he owes reduced by $71.5 million because he already paid or forfeited this amount in three other cases related to HealthSouth. Scrushy's attorney, David Russell, says that the amount Scrushy owes "could go down to zero."

Posted by Patricia Bowling at 10:17 PM | Permalink

Wal-Mart Says No Evidence of Surveillance

Wal-Mart Stores Inc. says that they have found no evidence that a fired systems technician listened to its board or spied on shareholders who submitted proposals for its upcoming shareholders meeting. Wal-Mart says that a review by its legal department came up with the findings and added that they were mailing an affidavit and a certification of the review's findings to its shareholder proponents.

Wal-Mart says finds no evidence of surveillance

Wal-Mart has been under increased pressure to open its surveillance records after it admitted having fired security worker Bruce Gabbard for what Wal-Mart says were unauthorized recordings of calls to and from a New York Times reporter. A Wall Street Journal report earlier this month said that Gabbard claimed to be a part of a surveillance operation that spied on Wal-Mart's board and stockholders. Wal-Mart says of the investigation that it "would have been remiss from a corporate security standpoint if it had not taken reasonable steps to make such inquiries about shareholders proponents with a history of disruptive behavior."

Posted by Patricia Bowling at 11:17 PM | Permalink

Ruling Will Clarify Adviser's Duty to Client

A recent ruling by the U.S. Court of Appeals has eliminated a Securities and Exchange Commission regulation, known as the Merrill rule, which exempted brokers from registering as investment advisoers as long as fee-based financial advice is "solely incidental to brokerage services on a customer's account." Under this rule, brokerage houses gained the ability to call themselves financial planners.

Ruling Should Help Clarify Adviser's Duty to Client

Several consumer groups and the Financial Planning Association sued the SEC in 2004, saying that the rule gave brokers an illegal loophole to offer the same advisory services as registered investment advisers without requiring that securities representatives follow high legal client-protection standards. Mercer Bullard, a securities law professor at the University of Mississippi, said that the rule was unfair because "this has the effect of pushing $250 billion of broker assets into noncompliance with the Investment Advisers Act, unless they move very quickly to toe the new regulatory line."

Posted by Patricia Bowling at 10:55 PM | Permalink

Jobs Likely Will Avoid Criminal Charges in Options Probe

It appears that criminal charges against Steve Jobs, the CEO of Apple, are unlikely. Apple has been under investigation over backdating charges for several months now. An examination of the 2001 stock-options grant to Jobs that was backdated using faked documentation shows little, if any, evidence to support charges against Jobs. Although Apple says that Jobs approved backdating at Apple, there is no evidence that he asked his own grant be backdated or tried to cover it up afterward. Consequently, federal investigators likely do not have a case against him.

Apple's Steve Jobs Likely to Avoid Criminal Charges in Options Probe

The decision not to indict Jobs would be very important for Apple and its shareholders; there was concern that Jobs might lose his spot as CEO over the scandal. "When you start thinking about lying, cheating and stealing, there's a mental state that you know what you're doing is wrong," said Jeffrey Bornstein, who is a former federal prosecutor in San Fransisco and who was involved in the Apple case. The Securities and Exchange Commission still can punish or fine Jobs, but has not yet notified Jobs of any civil charges against him.

Posted by Patricia Bowling at 10:12 PM | Permalink

U.S. Adds Whistleblower Complaint Against IT Companies

The U.S. Justice Department says that they will file a civil complaint in federal court against Hewlett-Packard, Sun Microsystems, and Accenture. The companies allegedly "solicited and provided improper payments" on government contracts. Allegations followed after a private lawsuit said that the companies submitted false claims about hardware and services on "numerous government contracts from the late 1990s to the present."

U.S. joins whistleblower case against IT companies

The private lawsuit says that the companies made payments to special companies with which they had global "alliance relationships." The government's lawsuit says that these relationships resulted in kickbacks and led to undisclosed conflicts on interest.

Posted by Patricia Bowling at 09:52 PM | Permalink

Slew of Civil Actions Awaits Nacchio

Joe Nacchio, the former Qwest CEO who recently was convicted of 19 criminal insider-trading charges, still faces civil fraud charges from the Securities and Exchange Commission, securities fraud class action lawsuits by Qwest investors, and other smaller civil actions. The civil fraud suits extend a long period of time, from 1999 to 2002. The recent ruling against Nacchio likely will have an impact on the case. "Joe Nacchio's conviction would make the SEC case against him considerably easier, given the higher burden of proof on the criminal side," said Diana Powell, a former SEC lawyer.

Slate of civil actions awaits

The SEC says that Nacchio planned a $3 billion financial fraud between 1999 and 2002 and asks for $216 million in "ill-gotten" gains. Federal officials want to prevent Nacchio from becoming an officer in a publicly held company in the future. Defense attorneys argue that "Nacchio can't be held responsible for all these things."

Posted by Patricia Bowling at 02:26 PM | Permalink

Fraud Suit Against NYSE Chief Proceeds

A fraud and breach of fiduciary duty lawsuit against New York Stock Exchange Chief Executive John Thain has been given permission to proceed. However, the charges in the lawsuit against the New York Stock Exchange itself have been dismissed. The case has been in stalemate since 2005, when an NYSE seatholder said that Thain lied about the NYSE's future merger with Archipelago at a meeting. The seatholder says that the NYSE and Thain both misled shareholders about the future of the exchange.

Fraud Suit Against NYSE Chief Moves Ahead

Four seatholders have sued both the NYSE and Thain, asking for damages for lost gains in the sale of their seats. One seatholder sold her seat for $1.54 million weeks before the merger was announced in March 2005. However, once the merger was announced, seats escalated in price to as much as $3.25 million. The trial is set for September.

Posted by Patricia Bowling at 12:18 AM | Permalink

Wal-Mart in Spy Scandal

A state investigator recommended that Wal-Mart's board of directors should open an independent investigation of claims that Wal-Mart spied on shareholders and suppliers. William Atwood, the executive director of the Illinois State Board of Investment, said that Wal-Mart could have avoided the surveillance scandal if they had not declined a proposal from a group of large investors in 2005 to instill an independent committee to review company policies.

Wal-Mart in spy scandal

Atwood says that "this case personifies why such external insight is required." Currently, the Illinois State Board of Investment owns about 456,000 shares of Wal-Mart stock. John Simley, a spokesperson at Wal-Mart, did not comment on the case.

Posted by Patricia Bowling at 11:57 PM | Permalink

Nacchio Trial Resumes

The defense attorneys in Joe Nacchio's insider trading case ended their case without calling Nacchio to testify about the $101 million in stock sales that he is accused of selling illegally. Nacchio used to be the head of Qwest Communications. However, U.S. District Judge Edward Nottingham said that prosecutors can reopen their case in order to being financial analyst David Weinstein to testify. The defense attorney, Herbert Stern, called three witnesses over two days.

Nacchio Trial Resumes

Nacchio, 57, is believed to have illegally sold stock based on nonpublic information that Qwest was not living up to financial predictions. Each of the 42 insider trading counts against Nacchio carries a penalty of up to 10 years in jail and a $1 million fine. Testimony suggests that Nacchio sold his shares of the company at a greater rate once insiders began to realize that the Qwest's financial outlook would not meet expectations.

Posted by Patricia Bowling at 11:38 PM | Permalink

Merck Wins Dismissal of Securities Fraud Cases

Merck & Co. has won a dismissal of federal securities lawsuits that say Merck defrauded investors before it withdrew Vioxx from the market in September 2004. Investors filing the lawsuit say that Merck was aware of Vioxx's health effects before it was pulled from the market. Kent Jarrell, a Merck spokesman, says of the ruling, "we're very satisfied that the judge agreed with out arguments." However, Darren Robins, a San Diego-based lawyer representing shareholders, said that, "the abuses surrounding Vioxx are some of the most egregious in recent memory. The dismissal of this case is a very unfortunate development for the company's shareholders at the time this all occurred.''

Merck Wins Dismissal of Vioxx Securities Fraud Suits

U.S. District Court Judge Stanley Chesler said that "[investors] have not argued that they conducted a diligent investigation, and nothing in the complaint demonstrates that they were unable to uncover pertinent information during the limitations period."

Posted by Patricia Bowling at 10:38 PM | Permalink

Kumar Ordered to Pay $1 Billion

Sanjay Kumar, the former CEO of Computer Associates International Inc., has been ordered to pay more than $1 billion in restitution to those who were victimized by securities fraud he committed while heading the company. $225 million already has been put into a victim's fund. Sanjay Kumar has 18 months to pay the rest of the $52 million. Kumar was released from an $8 million fine that was imposed on him in November. Kumar currently is serving 12 years in prison for charges of obstruction of justice and fraud charges.

CA's Kumar Ordered to Pay $1 Billion

Kumar and Stephen Richards, CA's former worldwide sales head, both pleaded guilty to charges of fraudulent accounting practices, including having falsely reported hundreds of dollars for licensing agreements during fiscal quarters in which the deals had not yet been completed.

Posted by Patricia Bowling at 10:20 PM | Permalink

Toshiba Files Against DVD Companies

Toshiba says that it has taken legal action against 17 vendors and importers of DVDs. Toshiba also has complained to the US International Trade Commission in the hopes that the group will stop companies from importing DVD technology into the United States.

Toshiba Sues Swarm of DVD Firms

Daewoo Electronics, Dongguan GVG Digital Technology, Dongguan Tonic Electronics, Dongguan Xin Lian Digital Technology, GVG Digital Technology Holdings, Star Light Electronics, jWin Electronics, Starlight International Holdings, Starlight Marketing, Tonic Digital Products Limited, Tonic DVB Marketing, Tonic Electronics Limited, Tonic Trading, and Tonic Technology all are named in the suit. All of these companies make or import DVD payers, recorders, or related products to the United States. Toshiba wants damages and a halt to imports.

Posted by Patricia Bowling at 11:17 AM | Permalink

Class Action Filed Against Arotech Corp.

The first class action lawsuit has been filed against Arotech Corp. on the behalf of investors who had stock in Arotech Corp. between March 31, 2005 and November 14, 2005. Arotech and its officers and directors have been accused of creating misleading and false statements that caused investors to believe that it was meeting or exceeding profit expectations. However, over this time period, Arotech actually was acquired by Armour of America for $22 million, which was not a part of any plan.

KGS Reveals Initial Filing of Shareholder Securities Fraud Class Action Lawsuit Against Arotech

Several weeks after Arotech went through a $17 million debt conversion, investors realized that they likely were suffering major losses. Arotech is accused of having told investors of the company's financial struggles too late. As a result of Arotech's disclosures about its financial health, the following day, shares of Arotech fell by almost 27 percent.

Posted by Patricia Bowling at 10:52 AM | Permalink

Expert Charged With Securities Fraud

Al Parish, who served as a source of advice for many business leaders in South Carolina, was charged with securities fraud related to his company. Parish, 49, is an economics professor at Charleston Southern University and is well known in the area for his extravagant tastes, said that he had amnesia and checked himself into a Charleston hospital after federal investigators questioned him about $134 million that was missing from the five investment pools that he managed.

Business guru faces fraud claim

The five charges of fraud that were filed by the Securities and Exchange Commission shocked local leaders who use Parish's predictions to help them make business decisions and to determine the health of the economy. The SEC says that Parish told 300 investors that funds were trading at a profit when the funds were not trading profitably at all. Gary Loftus, the director of Coastal Carolina University's Center for Economic and Community Development, said of Parish: "We knew he was flashy and flamboyant, but nobody every thought about anything like this."

Posted by Patricia Bowling at 11:45 PM | Permalink

Ex-Tyco Chief Says He's "Absolutely Not Guilty"

Dennis Kozlowski, the former Tyco International Ltd. Chief, says that he is "absolutely not guilty" of the charges that have landed him a prison sentence of up to 25 years. Kozlowski told "60 Minutes" that "there was no criminal intent" in any of his actions and he believes he was convicted because jurors assume that someone making $100 million a year must be doing something illegal. He added that his case was ruled unfairly because it was confused with accounting scandals at WorldCom and Enron instead of being treated as a dispute over pay.

Ex-Tyco Chief Says He's "Absolutely Not Guilty"

Kozlowski and Tyco's former finance chief Mark Swartz were convicted in June 2005 of having stolen more than $150 million from Tyco. Kozlowski is said to have used company money to fund an elaborate birthday party and to buy a $6,000 shower curtain. In addition to his prison sentence, Kozlowski has agreed to pay $21.2 in taxes, fines, and penalties.

Posted by Patricia Bowling at 02:27 PM | Permalink

Ex-Auto Parts CEO Charged With Fraud

David Stockman, a former chief executive of Collins & Aikman, and seven other former company officials, were charged with fraud and conspiracy related to believed financial misdeeds at the bankrupt auto parts manufacturer. Stockman and three others are believed to have misled investors about the company's financial state. Four other former company officials already have pleaded guilty to charges in the case.

Ex-Auto Parts CEO Charged With Fraud

Stockman "hid the full truth from the company's investors and lenders," says Manhattan U.S. Attorney Michael Garcia. Garcia added that Stockman and others "resorted to lies, tricks, and fraud" to help Collins & Aikman's financial performance when the company was unable to boost performance legitimately. Stockman is a former Michigan congressman and the head of the Office of Management and Budget during the Reagan administration.

Posted by Patricia Bowling at 02:10 PM | Permalink

April 30, 2007

Scrushy Gets Bargain Settlement in Accounting Fraud Case

April 27, 2007

Wal-Mart Says No Evidence of Surveillance

April 26, 2007

Ruling Will Clarify Adviser's Duty to Client

April 25, 2007

Jobs Likely Will Avoid Criminal Charges in Options Probe

April 24, 2007

U.S. Adds Whistleblower Complaint Against IT Companies

April 23, 2007

Slew of Civil Actions Awaits Nacchio

April 20, 2007

Fraud Suit Against NYSE Chief Proceeds

April 19, 2007

Wal-Mart in Spy Scandal

April 18, 2007

Nacchio Trial Resumes

April 17, 2007

Merck Wins Dismissal of Securities Fraud Cases

April 16, 2007

Kumar Ordered to Pay $1 Billion

April 13, 2007

Toshiba Files Against DVD Companies

April 12, 2007

Class Action Filed Against Arotech Corp.

April 11, 2007

Expert Charged With Securities Fraud

April 10, 2007

Ex-Tyco Chief Says He's "Absolutely Not Guilty"

April 09, 2007

Ex-Auto Parts CEO Charged With Fraud