Corporate Governance

  • June 29, 2011

    The Supreme Court in a decision issued earlier this month may have blocked one route for stockholders to challenge corporate fraud, but in doing so, may have “inadvertently left open a far more dangerous path for the plaintiffs’ bar: claims under the Racketeer Influenced and Corrupt Organizations Act, or RICO,” writes Howard A. Fischer for Thomson Reuters Accelus.

    Fischer, a senior trial counsel in the New York Regional Office of the Securities and Exchange Commission, analyzes the 5-4 decision in Janus Capital Group, Inc. v. First Derivative Traders, and concludes that the high court majority led by Justice Clarence Thomas may have unwittingly provided “the plaintiffs’ bar with a potential weapon far more powerful than the one it takes away. The Supreme Court appears to have ignored the warning of George Santayana that those who cannot learn from history are doomed to repeat it.”

  • January 13, 2011
    The U.S. Justice Department may be preparing a legal action against Google's plan to extend its tentacles further into the travel business.

    Bloomberg reports that DOJ is "preparing for a possible antitrust lawsuit" to prevent the Internet advertising giant from acquiring ITA Software Inc., which "provides online airline flight and ticket information."

    Several software and online travel companies, such as Expedia and Travelocity are opposing Google's expansion plans. Pamela Jones, a former member of the Federal Trade Commission Pamela Jones told Bloomberg that she believes Google's ambitions do rankle federal law.

    "I believe the Google-ITA deal is uncompetitive and should be challenged," Jones said. "It's a dominant firm expanding in an adjacent market acquiring ITA, and the effect would be to dominate flight search."

    Bloomberg notes the speed with which Google, the mega-advertising cyberspace business, is seeking to expand its empire, by "spending about $1.6 billion on more than 20 companies in the first nine months of last year, according to regulatory filings."

    The American Consumer Institute Center for Citizen Research, a public interest group, also lauded the report that DOJ may be moving forward with a legal challenge to Google's plan.

    Steve Pociask, president of the group, said, "Google's acquisition of ITA would give it dominant control of online travel search, which would lead to less choice and higher prices for consumers."

     

  • January 10, 2011
    A former N.Y. broker accused by the Securities and Exchange Commission of seriously mishandling a charity's brokerage accounts marks a "new low for con men everywhere," reports The Huffington Post.

    The recent SEC investigation resulted in forcing an end to the brokerage career of Paul George Chironis, who has also agreed to pay $350,000 to the Sisters of Charity, a "group of mostly elderly nuns in the Bronx." The SEC concluded that Chironis had manipulated the charity's brokerage accounts to maximize profits for himself.

    The Post reports:

    According to the SEC's order, Chironis defrauded the nuns from January 2007 to January 2008 by churning the two accounts with low-risk tolerance that held primarily mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, as well as certain closed-end bond funds. The order further found that Chironis charged the nuns' accounts excessive and undisclosed markups and markdowns in riskless principal transactions.

    George S. Canellos, director of the SEC's New York Regional Office, said in a statement, "Chironis's irresponsible actions virtually guaranteed the convent's accounts would lose money due to the undisclosed and excessive costs being incurred while Chironis focused on generating substantial commissions for himself."

  • January 6, 2011
    Although many Tea Partiers proclaim to be populists and staunch defenders of the Constitution, a look behind their lofty rhetoric reveals yet another political group devoted to corporate interests, according to a new study by Jamie Raskin, a Maryland state senator and law professor at American University.

    Raskin, also a senior fellow at People For the American Way, writes in "Corporate Infusion: What the Tea Party's Really Serving America," that the "Tea Party movement dresses up its agenda in populist, constitutional and libertarian rhetoric but these gestures are almost always in service of a conservative corporate agenda."

    A century ago, Raskin notes, populists fought "against the ‘coercive potential of the emerging corporate state,' in the words of historian Lawrence Goodwyn (Democratic Promise, 1976). They fought hard for the Constitution to be a charter of democratic rights, freedoms and powers that could enable the people to achieve collective social progress."

    Moreover, Raskin notes the "striking historical irony" of the movement's use of the Tea Party moniker.

    Raskin writes:

    The original Boston Tea Party was a mass popular movement against the special favors and subsidies that the British parliament conferred upon the East India Company, a rapacious corporation that cultivated cozy relations with politicians and an official monopoly on trade with the Far East. When the managers of the East India Company found themselves on the verge of bankruptcy because of their wild and predatory behavior, the Parliament bailed them out by passing the Tea Act of 1773, which exempted the company from having to pay any and all of the taxes that England imposed on colonial merchants, thus essentially extending the company's monopolistic favor to North America.

    This act of corporate welfare and favoritism on behalf of a corporate giant with no connection to the towns and farms of the local communities --not unlike the sweetheart deals and bail-outs regularly cooked up in our time for major corporations-harmed local merchants and was an assault on fair trade in the colonies . It aroused an enormous public fury. Opposition to the bloated subsidies for the East India Company exploded in a spectacular outbreak of anti-British and anti-corporate civil disobedience on December 16, 1773 when patriots disguised as Mohawk Indians boarded three of the company's ships and poured the ample contents of the tea chests into Boston Harbor. This was the Boston Tea Party.

    Today's 'Tea Party' movement arises in a moment of far greater corporate misfeasance and political corruption. However, it remains curiously silent on even the most shocking corporate crimes and depredations. These misdeeds have been made possible by deregulation, weak oversight, cozy relationships among government officials and lobbyists and executives, and the capturing of regulatory agencies by the regulated industries. A Tea Party that lived up to its honorable name today would have spent the 2010 election demanding that the government bring to justice the large corporations that caused far more harm to Americans over the last decade than the East India Company ever did.

     

  • January 5, 2011
    The soon-to-be chairman of the House Oversight and Government Reform Committee, Rep. Darrell Issa, is helping stoke a popular right-wing sentiment that the Obama administration is wildly anti-business.

    The New York Times reports that last month, Issa (pictured) "dispatched letters to 150 companies" asking them which federal regulations they believe should be rewritten. The newspaper said Issa's action prompted predictable responses from the two major political parties, with Republicans bemoaning a heavy-handed government under the Obama administration and Democrats saying Republicans are tied to closely to powerful corporate interests.

    The nonprofit public interest group, Public Citizen blasted Issa's move saying, "Rather than providing a platform for presentation of a corporate wish list, Representative Issa should be subjecting corporate claims to the withering scrutiny he promises for the Obama administration. It's time we ended the Kabuki theater of corporate whining, and got on with the serious business of creating jobs and making America safer and cleaner."

    While the new House majority may, not surprisingly, be aligning itself with big businesses, some public interest groups are raising concerns that the conservative wing of the Supreme Court is increasingly supportive of corporate interests. Last year, the Constitutional Accountability Center (CAC) issued a report that the Roberts Court's five conservative justices tend to side with corporate interests.