Hewlett Packard and Patricia Dunn

Hewlett-Packard's stock recovered yesterday after its board announced the resignation of its Chair following a scandal involving dirty tricks against certain directors.

But the board's actions, before and after the scandal became public, is in itself scandalous.

The woman at the center of it all, Chairwoman Patricia Dunn, apologized yesterday. But the board said she will remain Chair until January and a director after that despite all the embarrassment she has caused shareholders as well as the fact that the story as known thus far certainly reveals poor judgment on her part.

Ms. Dunne certainly knows her way around boards. She is a high-profile player who oversaw the removal of Carly Fiorina as HP's CEO and helped find a replacement.

Apparently, it all began when she became angry after a media outlet quoted an anonymous HP source who reported that a meeting of directors was held at a posh spa in Southern California.

She hired private detectives to find out who was talking to the press.

It's not a good idea for directors to talk to the press about company business but it's not illegal unless it involves confidential, fiduciary board discussions or knowledge.

That certainly wasn't the case here.

By telling the press the board met at a posh spa, the director was disclosing to shareholders that perhaps board venues should be less expensive
.
So what did the Chair do?

She went out and spent more shareholder money hiring detectives to find the director who told shareholders their money was being wasted on fancy meeting venues.

What happened next was not her fault, however, the buck always stops at the top.
The detectives used questionable, possibly illegal, means to unearth her director-culprit.

And they found him: George Keyworth II, a highly respected former science advisor to President Ronald Reagan and director of the physics division at the Los Alamos National Laboratory.

In the spring, she confronted him in front of the board and demanded his resignation but he refused. Then the board banned his re-election as a director.

Another director, famous venture capitalist Tim Perkins, resigned in disgust.

So now what's left is a queen-sized mess.

The FBI yesterday told newspapers that it was looking at whether Ms. Dunn's detectives illegally wiretapped individuals and illegally hacked into their computers.

Ms. Dunn said that the investigators she hired impersonated board members and journalists from the Wall Street Journal, New York Times and other prominent outlets, to acquire their phone records. Ironically, she's a former freelance journalist herself.

Yesterday, she issued a statement to distance herself from the detectives.

"Unfortunately, the investigation, which was conducted with third parties, included certain inappropriate techniques. These went beyond what we understood them to be and I apologize that they were employed," read her statement.
She also tried to defend the need for the investigation.

"These leaks had the potential to affect not only the stock price of HP but also that of other publicly traded companies," she was quoted as saying.

I find that a stretch.

In fact, I think it behooves Ms. Dunn and her board pals to answer some of the following questions raised by all of this.
How much did the posh spa cost shareholders? How many posh spas, jet flights and other perquisites has this board been enjoying?

More importantly, how much has all this damage control as a result of her foolish requisition of detectives cost shareholders?
The private detectives charges?

The crisis management costs?

The legal advice bills as a result of this scandal?

The cost of attorneys going forward now that the police are involved?

What's the damage to the brand Hewlett-Packard as a result of all this unnecessary upheaval?

What's been the reduction in market capitalization?

Who's responsibility was to oversee the efforts of these investigators, along with Ms. Dunn, and how can the board justify keeping either her or others employed?

Lastly, why should any shareholders vote for this board of directors next year?

Tom Cruise Unplugged

It used to be said there's no such thing as bad publicity, but just ask Tom Cruise and Mel Gibson.

Their firings, over bigoted statements, are "brand chill", or a warning to the overpaid members of Hollywood's brat pack that if they too become defective they will be discarded.

In fact, a market correction may be underway, given the fact that Hollywood is embattled. Like overpaid CEOs in sunset industries, these superstars cannot make the case that they should make mega dollars and benefit more than others.

Cruise's goofy Scientology, girlish outbursts about his female friend and dismissiveness of psychiatric drugs led Viacom Chairman Sumner Redstone of Paramount Productions to end a 14-year partnership. He called Cruise's behaviour "suicide" and said it was affecting his box office popularity.

Mr. Redstone estimated that Cruise's "Mission Impossible" sequel should have made US$150 million more than the US$383 million to date due to his offensive remarks.

The "brand discipline" imposed on Mel Gibson is much more severe and permanent. Now in rehab for alcohol problems after his arrest for drunken driving, he is probably finished. Or should be.

His anti-semitic outburst, during his arrest, as well as his arrogant threats toward the police cost him a television series deal immediately. And photos of him with a bevy of young beauties in a bar that night certainly raises questions about his marriage and Catholic faith.

In the days that followed these revelations, Gibson published an apology that repaired nothing.

Today, there are rumors that his next self-financed extravaganza "Apocalypto" may never be released or distributed. If true, that will mean he is financially as well as professionally finuto.

What's interesting about these silver screen dust-ups is that they further underscore an inflection point in the world of entertainment.

Salaries have become so stratospheric that performers are often self-destructive, indulging themselves, morally or otherwise, without regard to others, including their business partners. Think Cruise or Gibson. Think Michael Jackson.

At the same time as the business world has created these monsters, Hollywood is embattled, as are all artistic businesses, as a result of the web and computers.

The music industry will never be the same. But animation and special effects have started to crowd out big-name talent in terms of attracting crowds into movie theatres. These include recent blockbusters such as the "Lord of the Rings", "Harry Potter" or the "Incredibles".

The public also has a thirst for documentaries which take on subjects as diverse as global warming, penguins, McDonald's or President Bush.

Games are also a problem. Video games now earn more revenues than Hollywood's movies, a cross-over that occurred two years ago.

Then there's piracy. The industry is wrestling with the switch to digital filmmaking, which creates significant benefits for studios -- it is cheaper and provides better picture quality -- but will require more attention
to the risk of piracy.

What's also different is how the marketplace has waded into all these issues too, imposing discipline on the studios. Stocks thud with every dud.

So perhaps what we're seeing is a badly needed market correction.

"Many insiders say that only one in 10 bets pays off in movies,"
said Harvard Business School Professor Anita Elberse in an interview with me last year. "If you are looking for a sure return to your investment, you should not invest in movies."

There is also no link between success and star power, she said.

Stars have more staying power because they are, by definition, good at selecting the best scripts and portraying their characters. In addition, they have the best advisors and marketers to enhance their reputations and salaries.

But the payoff is minimal. She examined the financial results of 500 movies since 2001 involving 600 stars to determine whether there was a payoff for the
enormous amounts that movie stars earn.

"There is," she said. "On average, a major star is worth US$3-million revenues."

But to some studios a star is worth much, much more.

Take the all-time record payout which was earned by the mildly talented Keanu Reeves. After turndowns by all the A-list players, even he had to be enticed to lend his name to the "Matrix" movie.

The project caught the public's imagination and his revenue-share, back-end deal ended up giving him the biggest payday ever, or US$225 million.

His salary range went up but his movies since then have been bombs which proves that paying huge sums of money to anyone, whether a talented, known actor or CEO, is no guarantee of success. Or failure.

Jeff Jarvis, Blogger

Jeff Jarvis is a pioneer columnist, blogger, consultant, and professor who believes that journalists and advertisers are impeding the media's transformation.

"I hear complaints from newspaper editors about how hard it is for them to maintain the size of their newsroom," said Mr. Jarvis in a recent interview in New York. "No other industry talks about how to maintain the size of its shop floor. The world's changing and everybody must. It's ridiculous. Newspapers are too wasteful, commoditized and too much about supporting egos."

Mr. Jarvis now writes a blog called BuzzMachine.com, is a consultant to the New York Times, a columnist with the online version of Britain's The Guardian and newly-minted professor at the City University of New York's Graduate School of Journalism.

His credentials as a traditional journalist are also impressive: former columnist with the San Francisco Chronicle, TV critic for TV Guide and People Magazine, creator of Entertainment Weekly and former Sunday Editor and associate publisher of the Daily News.

But today he is an icon among new media types because of his track record and his outspoken criticism of mainstream media and its advertisers.

"The news business sends 15,000 journalists to the two big U.S. political conventions because everybody wants to get a byline from there and who notices bylines?" he said. "My mother didn't even notice my byline when I was writing in a newspaper which she read every day. Most of the news is on C-Span anyway."
Pundits are also over-rated.

"We don't need another TV critic or a movie critic. Movies are the same everywhere so why should every newspaper have a critic? Golf writers too," he said. "Advertisers are way behind and should be demanding more for their dollars or paying less for all that duplication, waste and ego-tripping they are getting."

Television advertisers and execs don't understand the industry is collapsing.

"Neilsen said that the networks are getting 28.8 million on average, the lowest in history," he said. "Meanwhile, uTube [a free web broadcast that uses content from viewers] is getting 100 million viewers a day."

"For example, [comedian host of The Daily Show] Jon Stewart went on CNN's `Crossfire' to kill the program because he hated it. CNN viewership for that show was 150,000 only, which is why it was cancelled," said Mr. Jarvis. "After Stewart's appearance, the show was on various outlets on the web and had an audience of 10 million. So there you have it. 150,000 viewers on CNN versus 10 million. What CNN should have done was put that segment on its website and make a fortune."

He's a champion of so-called "citizen journalists" or people who voluntarily write or broadcast news or opinion pieces on-line. Likewise, he believes that the best critics in our society are bloggers because they are free from constraints, whether it be imposed by owners, advertisers, editors or publishers. An example of his own independence was his recent battle with Dell Computers.

"I bought a Dell laptop that sucked and the service was worse. Finally, in exasperation, I wrote about this on my blog, under the headline `Dell Sucks'. I know it sounds juvenile, but six million people went to my site and thousands commented because the problems were more widespread than just mine," he said.

Mr. Jarvis continued to hammer away at Dell without any reaction until a Houston newspaper called Dell for comment and BusinessWeek featured the company's low stock price and the heavy blog criticism.

"The point was the stock price and other problems at Dell were not my fault," he said. "We, the mob, were the leading indicators of what was going on at the company. We are the canaries in the mine and it's actually a business benefit for companies to read these blogs."

Eventually, the company began addressing the issues raised by Mr. Jarvis and others.

"It's certainly a mistake to think that public relations is about telling people things and not about listening to what people are saying," he said.

Likewise, he believes that citizen journalists and blogs provide needed analysis or, in the case of CBS and Dan Rather, raise important questions concerning mainstream media accuracy.

He said only a few companies have transformed themselves.

A Nashville TV station pays bloggers to shoot video of news events for them and has a blog editor to coordinate these submissions. A local California newspaper, completely written by readers and citizen journalists, was launched last year and was immediately profitable.

Britain's Guardian has a web-first newsroom policy, meaning that all "scoops" must immediately be published on-line, rather than held for the print edition the next day.

"This is the crown jewels of journalism, the scoop, but it opens up the process. There is no such thing as a scoop anymore that lasts for more than two seconds anyway," he said. "And people with cameras and notepads on the ground can find out news that no newspaper or TV station can afford to dig up. That's the beauty of the new media."

Claude Lamoureux on Canadian Governance

The C$96-billion Ontario Teachers Pension Plan only invests in stocks that trade in the U.S. because investor protection is superior there, says CEO Claude Lamoureux.

"When we buy stocks in the U.S., or trade stocks in the U.S., we're protected by U.S. laws. It's easier to sue there to protect your investment, laws are tougher and they are also more owner friendly," he said in a telephone interview this week.

The Teachers' pension plan, second largest in Canada after the Caisse de Depot et Placements du Quebec, has been drawn into legal skirmishes involving Nortel networks (settled out of court) and Biovail. Both cases were based in the U.S. where laws and courts are more helpful.

"No one ever goes to jail for these crimes in Canada. Look at Bre-X or YBM. It's only U.S. regulators who take rigorous action," he said. "As a result, the best way in Canada to steal money is to wear a nice suit and do it in your office instead of taking a gun and holding up a store."

He believes that the biggest problem is the failure on the part of politicians to understand the failings and need for reform.

For instance, Canada has too many competing jurisdictions with the provinces controlling securities laws and the feds, criminal laws. I asked him about other issues such as the fact that the RCMP's white-collar crime section has been inadequately funded by Ottawa for a decade and that prosecutors in Canada are civil servants, often naïve or very politicized.

"Something's got to be done because the public is being taken for a ride and it just goes on and on," he said. "I'm not blaming the securities regulators in Canada. They even say there are jurisdictional issues. There is also little recognition on the part of legislators as to the importance of this. It's not like healthcare and there's a perception that this is a victimless crime. It isn't. People are being stolen from."

Mr. Lamoureux is hopeful that a task force, which is currently working on these problems, will come up with helpful recommendations that will be adopted by politicians.

"It's the system that has to be looked at, as opposed to the people involved," he said. "In the case of a large institution, we are protected because we can always try to sue. But the individual investor is stuck."

A glaring example of Canada's inadequate investor protection involved the issue of market timing and late trading among certain mutual funds and others, he said.

"Look at what happened in Canada about late trading," he said. "A few corporations paid fines, but they stole money from members of the funds. It became difficult to know who personally did it, the names were buried. And the fines were small."

Late trading and market timing was started in the U.S., but justice was more appropriate.
"There were huge fines and in the U.S., people are still being prosecuted over it. They will go to jail. Here, nobody was prosecuted," he said.

The biggest embarrassment was Bre-X, a C$9-billion gold swindle.
"Here's a case where everybody knows there was a problem and nothing has happened," he said. "Another was YBM which was an outright fraud. The securities commission went after a few board members, but none of the owners and managers were extradited to stand trial."

"There was a lack of oversight by the board, but at the end of the day management is responsible. How many got prosecuted? Or are wanted on warrants?" he said.

These companies show that criminals can operate in Canada with impunity, he said.
Another worrisome development is that even though the dreadful Vancouver Stock Exchange was shut down, many of the same questionable promoters are now selling shares to the public through pink sheets or over-the-counter vehicles.

"There are more scandals in the small cap stock sector because there are no big institutions as investors and analysts don't cover them. They fly under the radar," he said. "The people behind some of those scams just changed places, but they are still operating within Canada."

Mr. Lamoureux is also a fan of Washington's Sarbanes Oxley laws which have become controversial in the U.S. because of the additional costs public companies incur to comply.

"Section 404, requiring audit controls went a bit overboard and should be modified, but in general it's good protection," he said. "The fact that 15% of companies had to issue re-statements demonstrates there was a need to have better controls."

Bill Gates & Warren Buffett on Estate Taxes

The Republicans, fearing a bloodbath in this fall's mid-terms, have honed a cynical compromise. Most seem ready to agree to boost minimum wages by US$2.10 an hour to US$7.25 within a decade in order to camouflage their attempt to scrap estate taxes for a few thousand super wealthy.

But the camouflage isn't working, thanks to America's two richest individuals Warren Buffett and Bill Gates. Both are totally opposed to scrapping estate taxes which, by the way, Canada scrapped in 1972 and replaced with a 25% capital gains tax upon death or departure.

The two most successful men in the United States oppose scrapping estate taxes based on the indisputable logic that such taxes are absolutely essential in order to foster free enterprise.

This is because such taxes mitigate the creation of an elite which can control the economy and politics, thus removing opportunities for new, smarter players. Look at Latin America or Saudi Arabia if you think unfettered inherited wealth builds sound economies and good societies.

Warren Buffett described the rationale behind estate taxes best: "Repealing estate taxes is equivalent to choosing the 2020 Olympic Team by picking the eldest sons of the gold-medal winners in the 2000 Olympics."

He made that statement the day he announced that his wealth was mostly going to the Bill and Melinda Gates Foundation (and four smaller foundations to be run by his three children). The Gates Foundation finances social development and healthcare projects that governments and the private sector have neglected.

Mr. Buffett and Mr. Gates not only oppose scrapping the tax but favor increasing it. Gates' father, a Seattle attorney, leads the political movement in favor of higher taxes.

Despite the compelling logic, the Republicans seem to be listening to the lobbyists on behalf of the richest families who have spent US$500 million since 1994 lobbying to repeal the taxes, according to U.S. think tanks Public Citizen and United for a Fair Economy.

By the way, these estate taxes are rarely paid to governments. The wealthy have a choice: pay the money to the government or set up a bona fide foundation and give it away.

And that's another benefit derived from the taxes. These foundations fill a void that's often missing. These foundations and families divest their wealth to build hospitals, universities or to make contributions to social development projects, foreign aid schemes, public-interest research or the arts.

It's a win-win situation for the public.
And estate taxes are one of the main reasons why Americans are roughly four times' more charitable than Canadians on a per capita basis.

Currently, the taxes in the United States are punitive and can total 90% in some regions. There is a federal estate tax of 55% on estates worth US$2 million or more and, in addition, most state governments impose a death duty.

By contrast, Canada is unique among developed nations in that it has no estate taxes.
Worse than that, Canada also allows its wealthiest citizens to pay a 25% departure tax on wealth created in Canada and then move to tax-free or lower tax offshore havens forever so they never have to pay taxes again.

This is what Canadian families headed by tycoons such as Frank Stronach, Michael deGroote and the billionaire Irvings of New Brunswick, among others, have done with their wealth.

While this is not illegal, morality is another matter. People who have made fortunes should pay back the country that gave them the opportunity to become wealthy. So should their offspring and their offsprings' offspring.

By contrast, the U.S. taxes its wealthiest citizens when they die but also wherever they live even if they have renounced their citizenship.

Mr. Buffett, who lives in a house he bought for $31,500 even though he is the world's smartest stock market investor, also articulated estate taxes as an important cornerstone of social justice.

"It's in keeping with the idea of equality of opportunity in this country, not giving incredible head starts to certain people who were very selective about the womb from which they emerged," he said.

He chose the Bill and Melinda Gates Foundation to give his US$31 billion to because he said the couple has demonstrated that it knows how to do its due diligence so that its "giving" is leveraged and provides sufficient scale to make a difference.

The Gates' Foundation has a very small staff and prefers partnerships or networks as a giving strategy. But it is selective in how to hands out funds.

For instance, the Foundation has provided badly needed technology to 11,000 public libraries in the U.S. It has given US$100 million to 8% of New York City's public high schools providing they met certain curriculum criteria. And it just announced US$237 million in grants to several research groups to come up with a vaccine against AIDs providing they all agreed to cooperate and to share their results globally for others to work on.

Teck Cominco, Wal-Mart and Cows

My bet is that Teck Cominco Inc. will end up buying Inco Ltd. and create another Canadian powerhouse in the mining world. To that end, the Vancouver base metal giant upped the ante this Monday.
But the market is saying that the bidding war is probably not over.
Within minutes of Teck's announcement of a higher, more cash-rich bid, the hedge funds bet on a bidding war between Teck and rival Phelps Dodge Corp. of Phoenix, and possibly others.
So I consulted my guru, Terry Ortsland, who was the only one to suggest in this column weeks ago that Phelps Dodge would bid for Inco.
"The knee jerk reaction by the hedge funds this week is that the bids will continue to go up and so far they've been proven right," said Terry, a mining consultant.
Naturally, Teck's CEO Don Lindsay tried his best to dampen the expectation of a bidding war. He said Teck would not chase Inco's stock price upward, but his quoted remarks still leave the door open.
When asked by Reuters if this was Teck's final offer, he said: "I can say it's a very full offer; a very fair offer and that we will only do what makes sense for Teck Cominco's shareholders."
In other words, possibly yes and possibly no.
"I think Teck is a serious, very mathematical company and the numbers right now are pretty stretched," said Terry. "On the other hand, Inco has got a scarcity value - it's the only one in the world with all these attributes: It has huge projects, growth, market share and technology."
Inco also has a good presence in China and Asia which is worth a premium, plus it is also a technology play.
"Nickel is the only commodity that has technology associated with it. It is pretty complicated to produce nickel compared to copper or other metals," he said. "So it deserves a premium in terms of technology. So this company's worth a number which nobody seems to pin down."
Besides being gobbled up by a mining company, Terry believes that institutions and consumers may want to snap up Inco, possibly as partners with Teck or others.
"You've got the stainless steel companies, trading companies and state-owned enterprises," he said. "You've also got financial institutions with trillions of dollars who are looking for investment vehicles at the end of the day."
The August 16 Teck deadline is a challenge for Phelps because it needs lots of approvals whereas Teck's on a fast track, he added.
"And there's no doubt that Teck's offer is superior."

Retail Battles
Wal-Mart Stores Inc. continues to be attacked from many sides. This week, it announced that it will write off US$1 billion after selling its chain of 85 stores in Germany to a retail rival. German unions attacked its hours and its products made by underpaid Chinese workers.
At home, Wal-Mart faces trouble too.
The state of Maryland passed a law requiring any retailer with 10,000 or more employees to earmark 8% of employee salaries towards their health care or write a cheque to the government for the difference. The argument was that Wal-Mart's failure to provide health-care benefits cost Maryland's taxpayers millions because workers are forced many to use the state-supported health care plan Medicaid. Wal-Mart won that case recently, but Maryland's appealing.
Then a few weeks ago, Chicago's city council passed a "living wage" ordinance requiring any "big box" stores (read Wal-Mart and Target Inc.) to pay workers at least US$10 an hour plus US$3 an hour in benefits.


Mad About the Cows
Two interesting developments were announced by agriculture officials in Washington about one week apart. But both are linked.
First, Washington announced that it would cut back its national program to test for mad-cow disease. Then this week it announced that it won't open up the border to more Canadian live cattle since seven cases of mad-cow were discovered north of the border.
Here's the point: the cases were discovered because Canada is being more aggressive and thorough in terms of its testing of cattle. At the same time, the Americans are retreating from testing which makes their cattle look healthier than they probably are.
Put another way, if Canada tested as often as the Americans have there probably wouldn't have been any cases discovered. (By the way, none of these cases got into the food chain.)
So the question north of the border becomes, why not cut back testing to American levels?

30

Gossip

Diane Francis Post column for Saturday Post July 15:

Enron Corp.'s disgraced former Chair and CEO Ken Lay was no sooner laid to rest this week at a VIP-laced funeral, than the rumor mill launched again.
What were the circumstances of his death? Did he have access to his medicine? Did he stop taking it?
Most importantly, does this actually mean, as reports have stated, that his death will erase his conviction and that the government cannot seize his tens of millions of dollars worth of ill-gotten gains?
"There has been no evidence of foul play in this unfortunate death," said Houston lawyer Michael Wynne, who attended much of the Enron trial. He's with Yetter & Warden.
"But his death means that the criminal case will be abated which means that it will be legally treated as if he was never even charged," he said in a telephone interview this week. "This is because his death means he has no opportunity to pursue an appeal."
However, the government and others have other options to pursue.
"There are many civil proceedings against his estate, a class action from shareholders, others from employees and several more," he said. "There is a lower burden of proof in civil matters. And history cannot be erased. A jury found him guilty of crimes, beyond a reasonable doubt."
Another remedy for the government is to pursue forfeiture through the Securities & Exchange Commission, he said.

Genghis "Con" Got Smart Again
Several weeks ago, Mongolia threatened to shut down its mining boom, led by hundreds of Canadians, by proposing confiscatory royalties on production.
There was an immediate outcry. Myself and others urged Ottawa to issue a stern diplomatic rebuke on the basis that hundreds of millions of dollars' worth of Canadian savings were directly and indirectly at stake invested through stakes in Canadian mining ventures.
Good news is that Mongolia.
"Mining is back in the saddle," said mining consultant and analyst Terry Ortsland in an email to me this week. I joined up last year with him and others to tour Mongolia and its promising government and industry. "Now they have much better mining laws and taxation details has been enacted. Reality sank in - and that was fast!!"
Also quick off the mark to congratulate Mongolia for coming to its senses is the biggest single player there - Ivanhoe Mines Ltd.
It has invested hundreds of millions and made a huge copper/gold discovery in the Gobi.
Mongolia's amended Minerals Law extends the time to 30 years that binding contracts with the regime will last if more than US$300 million is invested, according to an Ivanhoe press release. Also, the government also agreed to appoint impartial international advisors to help craft these contracts with mining companies.

Red Tape Remedy
Dealing with governments is always a nightmare even when regimes play fair with investors.
For years, Felicia Salomon dreaded the countless compliance forms and documents she had to wade through constantly as in-house counsel for a Canadian insurance conglomerate.
Three years ago, she decided to harness technology to overcome such legal drudgery and started a soft-ware based legal consulting firm called Corporate Responsibility System Technologies Ltd, in Toronto. The company just opened a New York City office.
Her system has boiled down all the overlapping regulatory and legal frameworks into simple templates, or modules, based on the separate compliance requirements, be they a stock exchange, securities commission or financial institutional watchdog.
Her modules translate complex legalese into simple English, and allows corporate users to easily follow instructions and fill in the blanks. Client companies pays fees and get logins to access the modules off a browser. Training takes only hours.
"For instance, it took us four to six hours to train 50 users at the Royal and SunAlliance [Insurance] in groups of three or four," she said. "We've taken some of the chore out of it."

Wall Street Looks After Number One
All the concerns about excessive executive compensation have fallen on deaf ears when it comes to America's biggest financial gatekeepers. Some breathtaking wealth has been accumulated by the big five CEOs, according to recent newspaper reports.
James Cayne, Chair and CEO of Bear Stearns Cos. is worth US$1B in stock, according to recent estimates; Goldman Sachs Group Inc. CEO Henry Paulson is worth US$749.2 million; Lehman Brothers Holdings Inc. CEO Richard Fuld, US$851 million; American Express Co. CEO Ken Cheanult, US$332 million and Bank of America Corp. CEO Kenneth Lewis, US$331.4 million.

Madison Avenue Buzz

Diane Francis column Friday Post July 7:




Procter & Gamble is the world's biggest advertiser, spending US$4.6 billion in 2005, or as much as a small Canadian province.
This giant has stayed ahead of the curve, and its competition, for decades by clever marketing which has turned its brands into household words. Its mega-sellers include Crest toothpaste, Tide, Clairol, Pampers, Pantene and Mr. Clean.
But worrisome to the advrtising world - and the media companies it subsidizes -- is the fact that for the past two years P&G has cut spending by more than the rate of inflation.
This is due to a number of reasons. For starters, marketing shifts online which is cheaper than traditional media outlets. And advertising cuts also occur after merger activity. Last year, P&G's overall advertising budget fell 3.7% as it absorbed gigantic Gillette, took on more overheads and rationalized marketing efforts.
But P&G has also just undertaken an initiative that bypasses advertising agencies and media alike and competes with them. It is called Vocalpoint and is a unique word-of-mouth network created in order to sell and research products.
P&G has recruited 600,000 "moms", who have visited its website, Vocalpoint.com and signed on as volunteers. They are handpicked because of their extensive social connections, through volunteer, theatre, sports, church, work or other activities. They must have children under the age of 19 years. They are called "connectors".
They are given products for free to test, then asked to comment online weekly. Some unlaunched products are being tested by these "Moms".
"Vocalpoint is a word-of-mouth advocacy program that focuses on the thoughts and opinions of `Moms'," said P&G spokesperson Robyn Schroeder in a recent telephone interview. "It was nationally launched in February following test markets in Buffalo, Tulsa and Columbus. At P&G, we know that moms express terrific ideas and want to communicate with companies in a way that will allow their point-of-view to be heard. Vocalpoint provides them with that vehicle, as well as, gives them a first hand look at products or services to share with their social networks."
P&G won't say how big their budget is to create this network, or how many people are employed recruiting, training and dealing with this giant army of "Moms".
But the subsidiary, Vocalpoint, is also becoming a profit center because it is selling its word-of-mouth and research services to other corporations.
"About 50% of our effort is as an outsource advocacy program for other companies," she said.
Vocalpoint came out of our successful word-of-mouth marketing program involving teens called Tremor.
"It began five years ago and is still in existence today to provide teens with cool new products and services that allows them to influence marketers and manufacturers," she said. "We have 250,000 teens in our database."


Dollars follow Eyeballs

The name of the game in advertising is determining how to get your message in front of as many "eyeballs" as possible. That's why research into how people spend time with various forms of media is critical.
PriceWaterhouseCoopers and Knowledge Networks came up with some interesting research recently.
Currently, consumers spend 51% of their media time watching television; 23% listening to radio; 15% on the Internet; 3% reading magazines; 3% playing videogames and 4% reading newspapers.
Over time, this pie has been divided up differently and obviously the eyeballs focused on the Internet have been followed by an increase in online advertising. In 1997, online advertising revenue in the U.S. was only US$1 billion and last year exceeded US$12.5 billion. That figure still represents only 5% of the total amount spent on advertising but is expected to grow dramatically.


The British are Coming

The British media has been characterized by a broadcast oligopoly, dominated by the BBC, and, at the same time, wild and healthy competition in the print media with a plethora of newspapers and magazines.
But the old dowager of broadcasters, the BeeB, has certainly taken a page from its print cousins in the UK and launched an aggressive global branding initiative that is starting to position it as a worldbeater in many markets.
Recently, a giant billboard in Times Square heralded to the marketing mavens in this city, the BBC's arrival and ambition in this huge economy.
The network's also been very successful already. Its radio news and feature broadcasts are now heard daily throughout the United States on most National Public Radio affiliates. Its television coverage has insinuated itself on cable line-ups in most regions of the U.S. and around the world.
Most impressive, is the fact that its website has become one of the top ten worldwide, in terms of hits - bigger than any of the U.S. networks.
Besides that, it just launched an Arab-language television service to tap into that half-a-billion-plus marketplace.
Also interesting to note, and unconnected, is a milestone recently passed by another British media institution - the venerable, wonderful Economist magazine. It just surpassed the one million circulation mark worldwide.

TSX versus AIM

Diane Francis Saturday Post Column July 8:

Figures show that the Toronto Stock Exchange remains the world's pre-eminent market for mining stocks and is holding its own despite aggressive competition from London's AIM "junior" exchange.

"There is a significant part of the AIM story that's not being reported," said Kevan Cowan, Senior VP for the TSX and its venture exchange. "AIM is a media darling but the inter-listed picture is not being shown. Of the 42 Canadian companies listed on AIM, 36 are inter-listed back in Canada. They're not bypassing the Canadian market but are accessing AIM for additional capital."

And the lion's share of the after-market trading for these companies occurs in Toronto, in some cases 90% or more, he said.
But some eyebrows were raised this spring when Canaccord Adams snagged a L20 million IPO on AIM, not the TSX, for Waterloo technology company, Sandvine. Were promising Canadian companies going to start to bypass the national exchange?

TSX officials say that their figures show that Toronto has little, if anything, to worry about concerning the fast-growing AIM market.

They say that AIM should only be compared to a combination of the TSX and TSX Venture Exchange, and not just the Venture Exchange, because the average market cap of AIM and TSX companies are comparable.

"50% of AIM and TSX companies have a market cap of C$50 million to C$250 million. 90% of the companies on the Venture Exchange are less than C$25 million in size," he said.

What's undeniable is that AIM has grown rapidly in the past three years, garnering more listings than the NYSE, Nasdaq and the TSX. But here are some figures comparing Canada's exchange and AIM:

-- The TSX and TSX composites outperformed AIM and the London Stock Exchange between 2001 and 2005 with the TSX up 46.6%; TSX Venture 115.8% and Footsie, AIM 16.5%.

-- On the all-important mining side, Canada continues to dominate, raising C$7.9 billion in equity for listed mining companies in 2005 compared to only $2.2 billion raised on the both the LSE and AIM.

-- In 2005, Toronto had 1,192 listed mining companies and London only 183 but some British listings are global giants such as Rio Tinto Zinc. The result of this is that the overall market caps of the exchanges are similar. Toronto's mining companies at the end of 2005 were worth C$207.2 billion and London's (including AIM) C$266.3 billion.

-- AIM has 220 international listings compared to TSX's 165 at the end of 2005.

-- TSX surpassed AIM in terms of total equity capital raised, quoted market value of listed issuers and by value traded. For instance, in 2005 equity capital raised by TSX/TSX Venture was C$55 billion compared to AIM's C$20 billion.

-- TSX/TSX Venture surpassed LSE/AIM in the mining and oil & gas sectors by number of issuers, new listings and equity capital raised. In addition, TSX/TSX Venture far surpassed AIM in the mining and oil & gas sectors by value traded.

-- In 2005, there were only three Canadian "by-passers" solely listed on AIM, BDI Mining Corp., Hard Assets Inc. and Sanatana Diamonds Inc.

Mr. Cowan, in charge of business development for the TSX Group, said the exchange is also aggressively seeking American and other international listings, as is AIM. The angle here is that these companies can list in Canada, benefit from North American following and yet avoid the cost and complexity of Sarbanes Oxley filings. Time zones are the same, as is the legal system and business culture.

"We are looking at listings in three areas -- mining, oil & gas and, with great traction, small and medium enterprise generally," he said.

TSX officials have zeroed in on small and medium American firms to explain the benefits of the "Canadian option" for their IPOs.

(AIM has even fewer regulatory requirements and has an unusual governance model that outsources regulation and monitoring of listed companies to designated investment bankers, called NOMADs or Nominated Advisors.)

"Our standards are higher than the AIM regime, but we don't require the most expensive requirement under Sarbanes Oxley which is 404 or the internal control certification by an external auditor. Securities commissions have decided not to require this here," said Mr. Cowan.

Marketing efforts have yielded some results and last year the TSX listed 21 U.S. companies, a number which has grown for three years in a row.

"An American company that lists only in Canada has to comply with Canadian reporting issuer requirements," he said.

If such companies eventually acquire a large base of American shareholders then they would have to comply with all the U.S. requirements.

Also, some Canadian companies with listings south of the border are analyzing the costs of complying with the American red tape, possibly with a view toward listing only on the TSX, say industry sources.

Canaccord's Coup

Diane francis column friday June 28 out of LONDON


This spring, Toronto's Bay Street stood to attention when the Toronto Stock Exchange was bypassed and Waterloo Ontario technology star, Sandvine, did a C$300 million IPO on to London Stock Exchange's AIM junior market.

Its lead underwriter, called a NOMAD on AIM, was Canaccord Capital Inc. of Vancouver through its London operation called Canaccord Adams.

"Sandvine is a world class company with global ambitions which can list on any exchange," said London managing director Neil Johnson. "That certainly sent a message. We are also working on a Silicon Valley venture which will shortly be listed on AIM and probably no where else."

In fact, he predicts that the next wave of listings, by venture capital start-ups that have matured, will go on AIM for a variety of reasons and not traditional stock exchanges where red tape and costs are excessive.

"Many of these companies are ready for an exit and AIM has become an ideal, and the most reasonable, exit strategy for ambitious companies," he said.

What's most unique and controversial about AIM is its leaping success (twice as many listings last year and this year so far as the Nasdaq and NYSE combined). Canaccord is the biggest investment banker on AIM and the only Canadian one.

AIM (Alternative Investment Market) began in 1995 and is now Europe's second largest with 1,650 listed companies, and three times' the market capitalization of the TSX Venture Exchange.

Roughly 16% of listed companies are Canadian but these companies represent nearly one-third of the value of the exchange.
What Toronto officials should note, and others in Europe have, is that AIM's governance model is more effective, translates into cheaper listing costs and provides a nifty way for smaller entities around the cumbersome Sarbanes Oxley.

"The one-size-fits-all regulatory framework is a problem for smaller companies when it comes to Sarbanes Oxley," said Mr. Johnson.

Governance on AIM, essentially, has been outsourced to professionals and not bureaucrats without real world experience.

Each listed company is brought into the market by a NOMAD, or Nominated Advisor, which is responsible for its compliance thereafter. NOMADs are carefully scrutinized by the London Exchange and British regulatory authorities and must be licensed and established for some time in Britain.

In return for monitoring and mentoring, NOMADs make fees and get underwriting opportunities.

"We are on the hook every day for our listed companies. My license to do business is at stake," said Mr. Johnson.

Of the 85 people in Canaccord's London office (it has 1,500 worldwide), 22 people are in its NOMAD department. Each of its dozens of listings have two persons assigned who monitor and sign off on financial or news release information.

AIM also requires research for all its listings, unlike other exchanges. NOMADs must assign a research analyst to report on the progress of the listed companies in their stable.

The system depends on the quality and integrity of AIM's 85 NOMADs which is why it takes months for interested brokers to pass muster. Some four licenses have been lifted since 1995, but none in recent years, said an AIM spokesperson.

Savings are significant for companies like Sandvine: AIM listings cost US$900,000 compared to US$2 million on NASDAQ and slightly less on the TSE.

Ongoing compliance costs can be as high as US$2.5 million per year south of the border and less than US$1 million a year on AIM.

"Nine of 20 biggest AIM companies are Canadian such as First Quantum, Yamana, Bema Gold, First Calgary, Oilexco, Sandvine and Canaccord Capital Inc.," said Mr. Johnson. "Since we bought Adams Harkness in the U.S. last year, we have sensed great interest this year in the U.S. from boutiques that want a relationship with a NOMAD to take companies public to law firms there just checking out the AIM process."

The world's biggest institutional investors have also taken notice.

"They are here now investing," said Mr. Johnson. The biggest participants are Fidelity, Artemis, Schroder Investment Management, Merrill Lynch, UBS, Invesco, Goldman Sachs, JP Morgan and Prudential, to name a few.
AIM is also now very efficient, he said.

"We measure liquidity to capitalization and 90% of AIM's value (L74 billion) is traded annually," said Mr. Johnson. "This is more liquidity than the TSE and TSX."

The system of NOMADs deploys the old boys' network to police the market by deputizing them to mentor and monitor their listings. By contrast the U.S. system is a rules-based one which has become too expensive and a field day for lawyers. Toronto is somewhere inbetween.

But the Toronto Stock Exchange, with its old boy network, could easily adopt the AIM system and perhaps offer a more convenient alternative to American companies than London has, he said.

Members of the TSE should take note.

30

Canaccord's Coup

Diane francis column friday June 28 out of LONDON


This spring, Toronto's Bay Street stood to attention when the Toronto Stock Exchange was bypassed and Waterloo Ontario technology star, Sandvine, did a C$300 million IPO on to London Stock Exchange's AIM junior market.

Its lead underwriter, called a NOMAD on AIM, was Canaccord Capital Inc. of Vancouver through its London operation called Canaccord Adams.

"Sandvine is a world class company with global ambitions which can list on any exchange," said London managing director Neil Johnson. "That certainly sent a message. We are also working on a Silicon Valley venture which will shortly be listed on AIM and probably no where else."

In fact, he predicts that the next wave of listings, by venture capital start-ups that have matured, will go on AIM for a variety of reasons and not traditional stock exchanges where red tape and costs are excessive.

"Many of these companies are ready for an exit and AIM has become an ideal, and the most reasonable, exit strategy for ambitious companies," he said.

What's most unique and controversial about AIM is its leaping success (twice as many listings last year and this year so far as the Nasdaq and NYSE combined). Canaccord is the biggest investment banker on AIM and the only Canadian one.

AIM (Alternative Investment Market) began in 1995 and is now Europe's second largest with 1,650 listed companies, and three times' the market capitalization of the TSX Venture Exchange.

Roughly 16% of listed companies are Canadian but these companies represent nearly one-third of the value of the exchange.
What Toronto officials should note, and others in Europe have, is that AIM's governance model is more effective, translates into cheaper listing costs and provides a nifty way for smaller entities around the cumbersome Sarbanes Oxley.

"The one-size-fits-all regulatory framework is a problem for smaller companies when it comes to Sarbanes Oxley," said Mr. Johnson.

Governance on AIM, essentially, has been outsourced to professionals and not bureaucrats without real world experience.

Each listed company is brought into the market by a NOMAD, or Nominated Advisor, which is responsible for its compliance thereafter. NOMADs are carefully scrutinized by the London Exchange and British regulatory authorities and must be licensed and established for some time in Britain.

In return for monitoring and mentoring, NOMADs make fees and get underwriting opportunities.

"We are on the hook every day for our listed companies. My license to do business is at stake," said Mr. Johnson.

Of the 85 people in Canaccord's London office (it has 1,500 worldwide), 22 people are in its NOMAD department. Each of its dozens of listings have two persons assigned who monitor and sign off on financial or news release information.

AIM also requires research for all its listings, unlike other exchanges. NOMADs must assign a research analyst to report on the progress of the listed companies in their stable.

The system depends on the quality and integrity of AIM's 85 NOMADs which is why it takes months for interested brokers to pass muster. Some four licenses have been lifted since 1995, but none in recent years, said an AIM spokesperson.

Savings are significant for companies like Sandvine: AIM listings cost US$900,000 compared to US$2 million on NASDAQ and slightly less on the TSE.

Ongoing compliance costs can be as high as US$2.5 million per year south of the border and less than US$1 million a year on AIM.

"Nine of 20 biggest AIM companies are Canadian such as First Quantum, Yamana, Bema Gold, First Calgary, Oilexco, Sandvine and Canaccord Capital Inc.," said Mr. Johnson. "Since we bought Adams Harkness in the U.S. last year, we have sensed great interest this year in the U.S. from boutiques that want a relationship with a NOMAD to take companies public to law firms there just checking out the AIM process."

The world's biggest institutional investors have also taken notice.

"They are here now investing," said Mr. Johnson. The biggest participants are Fidelity, Artemis, Schroder Investment Management, Merrill Lynch, UBS, Invesco, Goldman Sachs, JP Morgan and Prudential, to name a few.

AIM is also now very efficient, he said.

"We measure liquidity to capitalization and 90% of AIM's value (L74 billion) is traded annually," said Mr. Johnson. "This is more liquidity than the TSE and TSX."

The system of NOMADs deploys the old boys' network to police the market by deputizing them to mentor and monitor their listings. By contrast the U.S. system is a rules-based one which has become too expensive and a field day for lawyers. Toronto is somewhere inbetween.

But the Toronto Stock Exchange, with its old boy network, could easily adopt the AIM system and perhaps offer a more convenient alternative to American companies than London has, he said.

Members of the TSE should take note.

Pardon Me, Mr. Lay?

Di francis column june 27 National Post


Speculation is that President George Bush will grant a Presidential Pardon in 2008 to former Enron Chair, Kenneth Lay.

"It's certainly a consideration and I'm sure he [Lay] has attorneys working on that," said high profile Houston lawyer Michael J. Wynne in a telephone interview this week.

He's a partner with Houston's Yetter & Warden, LLP, a former prosecutor and white collar crime specialist who sat through the lengthy Enron proceedings.

"Pardons are granted at the end of the Presidential term and Mr. Lay and the President's families are friends," he said.

Several blogs in Washington and Texas have spread the pardon information and the White House has been strangely silent.
"Mr. Lay hasn't been sentenced but there's a good chance that by that time [end of Bush term in 2008] Mr. Lay will have served a couple of years, be an old and broken man and have developed health complications," he said. "And that invites speculation the President may consider a pardon."

Mr. Lay and Skilling were convicted of multiple counts of fraud in relation to the Enron bankruptcy. The Judge in the case, Sim Lake, is a tough conservative who was appointed to the bench by Ronald Reagan and is likely to hand out maximum sentences.

"Personally, I believe a pardon would be an injustice and a shame, considering all the resources spent on this case and considering all the people who were hurt by Mr. Lay's crimes," said Mr. Wynne. "But it's not something to be dismissed because the families were friends and two years from now Enron will be off the radar screen it's on now and the President would have that prerogative."

Pardons are commonplace, even controversial ones.

For instance, former President Bill Clinton besmirched his reputation after he granted pardons to many crooks. He pardoned a convicted friend of his brother-in-law's plus gave another to notorious fugitive Marc Rich, accused of hundreds of millions in tax evasion, but whose former wife was a big financial supporter of President Clinton's.

Another new development is that Mr. Skilling may have burned through tens of millions of dollars set aside for his defense. His own attorney was quoted in Houston newspapers last week as saying he's been owed legal fees for months.

"His lawyer is saying that he's out of money and is asking the courts for permission to get [Skilling] money the government has frozen," said Joel Androphy, a partner with Houston's Berg & Androphy.

"But no one knows what Skilling's financial situation is, or what he is worth, because of all the privacy laws around the world," he added.
Mr. Skilling put up his own millions for bail, but Mr. Lay - a flight risk - had to ask his five children to put their houses and personal assets up as bail to prevent him from fleeing.

The consequences of their convictions will be pretty dire, said Mr. Androphy. He attended much of the trial and believes that the sentences will be lengthy and served in the "Big House".

"The traditional view of this is that they will get 25 and 30 years," he said in an interview. "They won't be in a maximum security prison, but if you get a large number of years, the chance of serving in a minimum security prison are reduced."
Messrs. Lay and Skilling are expected to appeal, and Mr. Skilling last week filed a precursor to that asking that the convictions be thrown out for insufficient evidence.

Mr. Androphy feels the two have little to hope for, either in terms of an appeal or leniency.

"The only hope? If the Democrats win the Presidency in 2008, then everybody on the courts of appeal [in 50 states] resign and the Democratic President appoints all new appellate judges," he said. "This would change the complexion of the court, which is very conservative, but it won't happen."

Mr. Androphy also said an appeal will be difficult because the Enron trial was fair with good representation on both sides.
"I attended a fair amount of the trial and the government satisfied all of the elements. There was plenty of evidence," he said.
The appeals may attack the venue, as being unfair to the accused because it where so many Texans lost their livelihoods and savings.

"It's unlikely an appeal court would entertain reversing the judge who ruled on the venue," said. Mr. Androphy "Besides, both sides expressed satisfaction with the ultimate jury pool when they were chosen."

Look Out Traditional Stock Exchanges

Diane Francis Saturday June 24:


LONDON -- This week, London's junior exchange, called AIM for Alternative Investment Market, celebrated its 11th birthday and business, and prospects, have never been better.

AIM is starting to shake up the stock market scene around the world. This is because it has a unique governance model which results in lower costs and more research coverage for companies. It's also an "incubator" for the London Stock Exchange which in 2005 attracted more IPOs than NASDAQ and the NYSE combined. This year, so far, IPOs for AIM are nearly double the two American exchanges.

Attempts in post-Enron Corporation America to exempt medium and small cap companies from the costs and burden of Sarbanes-Oxley have failed this year. The result is a flood of interest in AIM from North America as well as other jurisdictions.

It costs US$900,000 to be listed on AIM; US$2 million on NASDAQ and the TSX Venture Exchange is somewhere in the middle in costs, according to Neil Johnson, managing director of Canaccord Adams Limited, the only Canadian player on AIM. Ongoing compliance costs can be as high as US$2.5 million south of the border and less than US$1 million a year on AIM.

Anne Mouliere is the head of Business Development in North America for AIM and talked with Diane Francis last week in London.

Q. How would you gauge current interest in AIM?
A. "We now have 1,650 companies and they are from around the world, China, Russia, Ukraine, Kazakhstan, the Middle East, Canada, Australia and the U.S. In the last two years the success we enjoyed is from international interest and involvement which has totally exploded. We have 35 Canadian companies and get six or seven a year. Most have no listing in Canada."

"We first went to Canada in 2000 and AIM was a different market then than it is today. We went to Canada and Australia first because they had similar securities models to the UK and were commonwealth countries."

Q. How about U.S. companies?
A. "Eighteen months ago we saw U.S. companies starting to do IPOs and now we're seeing alot of interest for IPOs. We have 45 U.S. copanies on AIM now and they are not interlisted anywhere at all. It's also important to note that we are not another NASDAQ or technology exchange. We have technology, biotech, retail and resource companies. We have venture-capital backed companies from California and Boston. AIM companies range in size from US$15 million market capitalization up to US$1 billion, but that's only after they've grown on AIM. The average raise is US$14 million."

Q. How do you prevent AIM from cannibalizing the LSE?
A. "If a company is too big -- such as already US$1 billion in market capitalization -- we suggest they should list on the main market. We now have 15 companies on AIM that are about that size but they have grown on AIM over a few years. We let companies join but always say that when they are compliant to the requirements of the LSE eventually, we expect them to join it. But we wouldn't force them to move."

Q. How quickly is the exchange growing and what's the future?
A. "Last year we had 519 new joiners. In the first quarter of 2006, we have had about 100, so it may be less than 2005's number but they are bigger companies."

Q. How much of a role does the cost of compliance in the U.S. and Sarbanes Oxley play in terms of the exploding interest in AIM?

A. "U.S. interest is high and Sarbanes Oxley plays a part. Companies are saying they can comply with the rules, but the cost and disturbance to management is unaffordable. Legal firms are checking this exchange out in significant numbers. Another benefit for companies who list on AIM is the analyst coverage which is superior to coverage on NASDAQ or other exchanges. This is an advantage that the big exchanges don't provide."

"Each company has a Nominated Advisor, called a NOMAD, which monitors compliance and is there to service the company on an ongoing basis by providing research to institutional investors. Unlike NASDAQ or other exchanges, this means that every listed company has at least one research analyst from day one covering them."

Q. Are there imitators yet in Canada or elsewhere?
A. "Euronext has launched something similar and so has the Dublin Exchange. But the reality is we have a community in London that, for 200 years, has existed to serve small and medium cap companies. It takes time to build a market like AIM."

Q. AIM outsources regulation to NOMADS which some criticize as letting the monkeys guard the bananas. How does the LSE regulate these NOMAD regulators?

A. "First we have a process that takes months before we licence a NOMAD. Their role is to bring the right companies to market. And we are very tough when we regulate NOMADs. We can remove their licences. Impose public sanctions. So they are very careful about who they list. We took three or four licenses away five years ago, but none since. We also want NOMADs who have been established in London for some time. NOMADs need to have a reputation to lose and to be responsible on an ongoing basis."

Taking on the Big Board

Diane francis column Wednesday Post May 31

NEW YORK CITY - Bay Street maverick Tom Caldwell roughly made his clients C$100 million in profit accumulating seats on the Big Board before it went public this year. But it was a hard-fought battle which pitted Caldwell against the old boys' network which calls itself the New York Stock Exchange.

Now, just weeks after celebrating, (he bought himself a pick-up truck), he finds himself disgruntled again with the New York Stock Exchange management and its board of directors because they have gotten caught up in a trans-Atlantic stock exchange merger fever.

Last week, the NYSE made a US$10.22-billion merger offer with Euronext NV, which runs the smallish Paris, Brussels, Amsterdam and Lisbon Stock Exchanges.

"The timing is not right and the price is not right," said Tom in a telephone interview. "There's not enough industry experience on the NYSE board. It's the same management and there seems to be little understanding of the incredible asset they have which they haven't capitalized on as yet."

By the way, NYSE boards have been mostly populated by members of the old boys' network, former politicians or celebrities. Even Martha Stewart was on the board despite the fact her company was listed. Many of its traders are under investigation as is its former CEO, Dick Grasso, for getting a retirement payout of US$139.2 million.

These days, Tom Caldwell and his clients are the third largest shareholders (with about 3%) in the widely held public company, called NYSE Group Inc. If given a chance to vote on the merger with Euronext, which isn't the case so far, he said he would oppose.

"I would vote no, with the caveat that I've been wrong before," he said. In 1998, he opposed the conversion of the Toronto Stock Exchange into a public company, but admits his mistake. "Those [Toronto] seats went from C$50,000 to C$31 million. It was the deal of a lifetime. And that exchange is really well-managed."

Now a profit-seeking public entity, Toronto's margins are 50% compared with the fledgling public entity in New York with margins of only 3.4%.

That's why a merger is premature because valuations aren't based on realizable margins, he said. After the Toronto home run, Tom searched the globe for exchange investment prospects and first zeroed in on New York. In August 2003, he bought the first seat for a record price of US$2 million, then led the charge to take that exchange public.

During that time, compensation (Grasso's) and trading scandals dogged the place, plunging the value of seats to as low as US$975,000 in early 2005 but the Caldwell group kept acquiring.

"Toronto and London had already gone this route and it was proven," he said. "It was amazing how many people did not see this. A little guy from Toronto shouldn't have been able to go into the heart of capitalism and in 18 months change it. But Wall Street is extremely parochial, full of pride and hubris. They feel that if something does not happen there, it hasn't happened."

The current exchange takeover fever began to spread in 2004 when Germany's Deutsche Borse bid for the London Stock Exchange. Rebuffed, Deutsche then bid this year for Euronext only to be rejected last week in favor of the NYSE offer. In the meantime, NASDAQ approached London, was rejected but has 24% of its stock, an expensive proposition given that it has no access to LSE cash flow. Deutsche Borse operates the Frankfurt and Eurex derivatives exchanges.

The NYSE's pursuit of Euronext frustrates Tom because it took him months and great effort to convince the sleepy NYSE board, management and members to convert seats into shares and go public, only to find that the same sleepy management is now jumping prematurely on a buyout strategy.

"The NYSE is not far enough along in its own development to be doing a merger. The stock is undervalued because management has not realized efficiencies," he said. "This is taking a great asset and reducing it to a good asset."

The NYSE Group Inc. has been talking with the Chicago Mercantile Exchange Holdings Inc. and the company should be pursuing this plus other strategies like regional consolidation and maximization of profitability, he believes.

"I would also like to see this exchange lobby Washington to ease up on the more onerous parts of Sarbanes Oxley, one of the underlying root causes for these cross-border transactions," he said.

Cultural differences will also make matters difficult, he said. "Brussels must approve the deal and is busy trying to regulate the size of bananas. Then there's Paris which thinks its exchange is the center of the universe and then there's the business culture in France where a deal generally lasts as long as you're shaking hands and sitting in the same room."

Caldwell's clients have holdings in Hong Kong, Johannesburg, London, Osaka, Toronto, the Chicago Board Options Exchange and the International Stock Exchange.

"Exchanges are like buying toll roads," he said. "We like them."

Enron Victims Unite

Diane Francis column for Friday Post June 3: (out of New York)


An online gambling giant is offering Enron Corp. victims a chance to recoup losses by betting on the combined sentence that its convicted former CEOs will get in September.

BetUS.com has posted the following odds for punters willing to wager between US$5 and US$1,500 a pop: 15 to 2 odds that Jeff Skilling and Ken Lay get zero jail time. Five to 2 odds that the two net a combined 10 years or less and 7 to 1 odds that they will be hit with 71 years of sentence or more.

"We're mostly a casino and sports-betting site, but we are starting to offer people the chance to make wacky wagers like this one," said spokesman Chris Bennett in a telephone interview this week.

Punters can also bet on whether President George Bush will fall below 30% in popularity. "This was a big one around the Washington DC area," he said.

And most recently, an unannounced thus far, the site began taking bets on Belinda Stronach and Bill Clinton future sightings. This is because of all the hype and buzz around Hillary Clinton running for the Presidency and mentions about Bill-and-Belinda in supermarket tabloids. The odds? 500 to one that Bill and Belinda marry by 2010.

Another "wacky wager" is a bet -- 100,000 to one -- as to whether the world is going to end on June 6, 2006 (the storied 666) as some believe is prophesied in the book of Revelations.

"About two dozen have bet yes that it will end," he said. _Question is, how do they hope to collect their winnings?


The Next Bad Thing

Even though Messrs. Skilling and Lay may face serious slammer time, the plundering of America's ownership class by its managerial class continues apace.

Last week, a timely piece written online by former SEC Chairman Harvey Pitt led this week to precipitous action by The Nasdaq Stock Market Inc.

"Justice has been served to ex-Enron CEOs Kenneth Lay and Jeffery Skilling, but the water isn't safe yet," wrote Mr. Pitt in a U.S. newspaper. He is now CEO of business consultants Kalorama Partners. "There's a new kind of fiduciary misconduct floating around: options backdating."

This involves dating options to insure that executives can profit. If true, this is immoral, and possibly illegal, because options are supposed to be dated and priced sometime in the future to provide incentives to managers to enhance profits and performance.

The exchange is considering delisting companies under investigation for manipulation of stock options, reducing trading and cutting the prices of their shares, according to Bloomberg this week. So far, Altera Corp. and Vitesse Semiconductor Corp. have been sent delisting notices due to late filings and concerns about their stock options. Mercury Interactive Corp. and Nyfix Inc. have been dropped.

Others being considered for delisting include Juniper Networks Inc. of Sunnydale, Calif., the world's No. 2 supplier of equipment to direct Internet traffic; San Jose, Calif.-based KLA-Tencor Corp., the biggest maker of chip-testing equipment; and New York's Comverse Technology Inc., the world's largest manufacturer of voice-mail software. All three trade on the Nasdaq.

"Already, CEOs of several companies have resigned, been discharged or been placed on administrative leave pending the outcome of internal and governmental reviews," wrote Mr. Pitt. "It [backdating] renders a company's proxy materials false and misleading. Backdating also means a corporate document used to permit access to corporate assets has been falsified, a violation of the Foreign Corrupt Practices Act. Moreover, if backdating occurs without the compensation committee's knowledge, illegal insider trading may also have occurred."

There are also tax and accounting implications, he pointed out.

Speaking of Regulatory Issues _Toronto lawyer Felicia Salomon dreaded the countless compliance forms and documents she had to wade through constantly as in-house counsel for a decentralized insurance conglomerate operating in many jurisdictions.

Three years ago, she decided to harness technology to overcome such legal drudgery and started a software-based legal consulting firm called Corporate Responsibility System Technologies Ltd. in Toronto. It just opened an office in New York City.

Her company simplifies the process by boiling down the overlapping regulatory and legal frameworks into simple templates, or modules, be the regulations imposed by a stock exchange, securities commission or financial institutional watchdog.

Among her dozen or so large clients are Royal and SunAlliance, Assurant and Metropolitan Life. _"We aim at cutting your red tape," she said. "Companies still need their law firms for complicated matters or strategy but not for these routine, commoditized compliance processes."

A Critical Lawsuit

Diane Francis column May 31 Post:


The Supreme Court of Canada has decided to hear a case this fall that
has sweeping implications for business, individuals and the legal
profession.

The case pits Stephen Cheikes, an American who ran a movie tax
shelter business in Vancouver, against his former Canadian lawyer Robert Strother as well as against Mr. Strother's former law firm, Davis & Co., the second largest firm in British Columbia.

The Supreme Court of Canada's decision in this matter will determine what duties and loyalties lawyers and their firms owe to their clients.

Mr. Cheikes started Monarch Entertainment Corporation in 1993 and hired the lawyers. It was successful.

Then in 1997, he said Mr. Strother advised him he could not legally operate his tax shelter business because of tax rule changes. So he shut operations down in fall 1997 and asked Mr. Strother to find ways to comply so that Monarch could re-open.

A year later, in 1998, he found out that Mr. Strother had become a 50-per-cent partner in a movie tax shelter business, called Sentinel Hill, and that Davis & Co. were its attorneys.

He also discovered that from 1998 to 2002, Sentinel Hill made C$140 million in total profits, Mr. Strother made C$32 million for himself and that Davis & Co. had been paid C$9 million in fees.

By the time, Monarch discovered this competing enterprise it was too
late to catch up so it sued in early 1999. Mr. Cheikes sued both parties for breach of fiduciary trust as well as breach of an obligation of client confidentiality.

In 2003, the B.C. Supreme Court found no wrongdoing, but in 2005 the British Columbia Court of Appeal overturned that decision and found the lawyer and firm guilty.

Mr. Strother was ordered to pay back the C$32 million he had made and Davis & Co. was ordered to pay back C$7 million of the C$9 million in fees to Mr. Cheikes and his partners.

The high-stakes case was appealed again and the Supreme Court of Canada has granted leave to appeal, likely in October. This is not surprising. The case has been widely circulated and discussed within the legal profession for months. Even the Canadian Bar Association is intervening.

"This is a case of grave consequence to the citizens of this country,"
said Mr. Cheikes in a recent telephone interview.

"To summarize, this is what happened to us," said Mr. Cheikes. "Myself and others created a new business opportunity; we hired a large law firm for five years; that law firm advised us to close down because laws had changed; then that law firm and its lawyer failed to advise us that they were mistaken and that the law would permit us to restart our business; and then our lawyer and our firm got into the same business without telling us."

Clearly, the case is important because a lawyer who ends up in
competition with a client is of great concern to everyone. So are the
issues involved in the previous court decisions.

The lower court agreed with Mr. Strother when he argued that because
Monarch had shut its doors on his advice he had no obligation to correct his mistaken legal advice even though it had led to the shutdown.

The lower court also agreed with Davis & Co. which argued that it should be
able to represent two competitors in a business without being obliged to
tell one what the other is doing.

But the B.C. Appeal Court disagreed.

"Mr. Strother was a lawyer and there are duties which lawyers have to
clients," said Mr. Cheikes. "The Court of Appeal said he had an
obligation to tell us that he was wrong initially in his interpretation
of the Tax Act. Because he didn't, the court ordered him to give us all
his profits. The law firm was ordered to give us only part of the fees
they earned. But they should pay us all fees because we hired the law
firm and we believe that both Strother and the firm should be liable. If this case loses, how can anyone in Canada trust their lawyers?"

Keevil's Great Idea

Diane Francis column for Saturday Post May 20:

Peter Brown thinks he knows who's going to win the takeover battle underway in Canada's mining sector.
"If I was a betting man I'd bet Teck [Cominco Inc.] wins Inco [Ltd.] because its Chairman Norman Keevil won't lose," said Peter Brown, founder, Chairman and CEO of Canaccord Capital Inc. in Vancouver, Canada's biggest independent investment bank.
"In 40 years, Teck's gone from a $20-million market cap, and two mines with two years' reserves left, to this huge base metals conglomerate," he said in a recent telephone interview. "The company was built with the right combination of science, geology, innovation and guts and I don't think it stops here. Norman is a builder. He would like Teck to be an RTZ."

Norman Keevil Jr. is a geologist with a PhD whose late father invented mining technologies that are still in use today. Mr. Keevil and his family control the company with 50% of its restricted, high-vote stock. His well-heeled partners in this stock include Japan's Sumitomo Metals Mining America Inc. and the Caisse de Depot et Placements du Quebec. There is also Middle Eastern money.

Thus far, Teck's strategy has been cunning.

Teck bid for Inco even though Inco had negotiated a friendly takeover of Falconbridge Inc. which Teck said it has no desire to own. In fact, Teck's bid was based on Inco dropping the Falconbridge merger.

This opened the door for Swiss-based Xstrata PLC, which owns 19.9% of Falconbridge, but had blessed the Inco-Falconbridge merger, to bid for the rest of the company it did not already own. That's what happened this week which is not only predictable but might be exactly what Teck wanted.
Now it looks as though Inco and Xstrata may become embroiled in an expensive bidding war for Falconbridge and Teck appears to be in the best position.

-- If Xstrata outbids Inco for Falconbridge, then Teck will capture Inco then make a joint venture deal of some description with Xstrata regarding Falconbridge's Sudbury nickel operations in order to realize sizeable synergies by eliminating duplication.

-- On the other hand, if Inco outbids Xstrata for Falconbridge, its own stock value will be reduced, making Teck's takeover offer more tempting to Inco shareholders. Teck may also join forces with partners to buy Inco/Falconbridge.

-- Alternatively, if Xstrata appears to be willing to overpay for Falconbridge, then Inco may be agreeable to joining forces with Teck to help snatch it away from Xstrata.

This, to many, is the most likely outcome and would result in a three-way mining powerhouse.

(It's interesting to note that Teck made a quick $500 million windfall on a bet of C$100 million from Inco when it bought the Voisey's Bay nickel discovery from Robert Friedland.)

While Teck has become the cat amongst the pigeons, the aggressive mining company isn't the only game around in Canada. One intriguing possibility is gigantic Alcan Inc. of Montreal, says Terry Ortslan, mining consultant in a recent interview.
"I think Alcan is a very real possibility," he said.

That's not as odd as some may think. Alcan is big enough to buy Inco and Falconbridge. Also, buying base-metal mining outfits has been a successful strategy for its rival Alcoa, the world's biggest aluminium company. Likewise, Australian mining giant BHP Billiton of Australia is involved in aluminium along with nickel, copper and other commodities.

"This is going to be a big battle because Inco is the ultimate prize in the mining industry. The others won't let this go away without a fight. Perhaps Teck's owners will form partnerships to get it," said Mr. Ortslan.

There are two other possible foreign bidders such as Brazil's Companhia Vale do Rio Doce or CVRD.

"It has a commitment to diversify and has been making large takeovers," said Mr. Ortslan. "It also looked at Noranda."

The other takeover possibility is America's largest mining company, Phelps Dodge Corp., flush with cash and more worried than most miners are about operating mines in hostile, increasingly anti-American, jurisdictions around the world. Assets in safe, democratic, friendly Canada might even net a premium to such a company.

The consensus is that the Chinese government, embarrassed by Ottawa's rebuff of its planned takeover of Noranda Inc. months ago, will take a pass.

Politics will continue be important in this one. The election of a minority Tory government may make a foreign takeover easier but cannot be considered a green light.

In fact, a foreign predator would create problems for the fledgling government because there would be a big political pushback on the part of the New Democrats and Liberals. There may also be a backlash by the public against any foreigners buying a national treasure such as Sudbury'a and Voisey Bay's rich nickel deposits.

Clearly, the best outcome for Canada in the current mining bidding wars would be if Teck Cominco Ltd. or another Canadian succeeds in buying Inco Ltd. as well as Falconbridge Ltd.

But Teck's restricted share ownership structure may become a problem unless Teck's board agrees to tender their high-votes for regular shares at a reasonable ratio. There have been indications the board will do this.

Whatever the outcome, Canada deserves an aggressive base-metal player that's a world-beater. A three-way merger would create a C$50-billion mega-miner and rank as the fourth largest mining corporation in the world.

Mexicans, Courts and Russians

Diane Francis column Friday Post May 19:

NEW YORK CITY - The President's speech to the nation this week about the Mexican border was purposely ambivalent because it was really about oil and election votes.

Sending National Guards to the border appeases certain elements in U.S. society who are concerned about the flood of cheap labor.

But his proposals to grant amnesty to 11 million illegals already here (on top of 32 million legally here) and to pave the way for more immigration appeases Hispanic-American voters and the Mexican government.

It also sends a signal to Mexicans and others to get into the country illegally because citizenship is eventual. I would speculate a flood in coming months.

Nearly 25% of all Mexicans now live in the U.S. and immigration has been a safety valve for a country that finds it impossible to create enough new jobs every year for its growing population. Besides that, Mexicans in the U.S. send home billions of dollars every year in "remittances" to loved ones, helping bolster its economy.

But Bush's speech, highlighted as an important national address, was also about oil.

Mexico is America's second biggest supplier of oil, after Canada, and any draconian action by Washington to truly seal the border and keep out Mexicans would guarantee that the next President of Mexico to be elected this summer will adopt a very populist, anti-gringo attitude.

He may even be tempted, with an intransigent America, to pull a Hugo Chavez and divert oil production to others such as China.

Too little too late
This week, eBay Inc. won its case at the U.S. Supreme Court which decided to reduce the imposition of injunctions in patent infringement cases.

Unfortunately, the unanimous decision was ten weeks late for Canada's Research in Motion Ltd. That company, faced with a ruinous injunction in a patent infringement dispute, was forced to settle for US$612.5 million.

RIM's lawyers tried but failed to convince the judge to wait for the outcome of this Supreme Court decision but the judge ordered the two sides to strike a deal or have one imposed on them.

RIM paid the huge sum as settlement and also had to sign away any opportunity to benefit from the eBay decision.
Until this unanimous decision, injunctions, such as RIM faced, have been automatic and forced many companies to settle prematurely rather than be driven out of business.

It was legalized extortion in some cases.

This decision directly benefits eBay Inc. which was sued by a competitor in 2001 claiming infringement of a "business method" patent.

The Supreme Court not only changed the rules for patent disputes in this week's long-awaited decision but also restricted the use of injunctions involving rights-holding companies (a non-operating entity which sued RIM) or involving "business method" patents. The court called them at times "vague" patents.


Russia Inc.
This summer the world's biggest IPO, for as much as US$20 billion is expected take place involving OAO Rosneft, Russia's third largest oil giant.

To date, there have been 30 IPOs, raising US$22 billion, in lockstep with the bull market in Russia, thanks to soaring commodity prices. GDP growth in Russia has averaged 7% per year since 1999.

But there is general skepticism about recent Russian IPOs and specific skepticism about Rosneft which this week announced that its proven reserves of oil and natural gas rose by 18% higher in 2005.

(Rosneft is third biggest behind OAO Gazprom and OAO Lukoil. Its new reserves are higher than any oil company outside Russia except Exxon Mobil Corp.)

Rosneft's lead underwriter is Morgan Stanley and there is speculation that this IPO will be postponed until the fall and may only raise US$10 billion. In part, that may be due to higher oil and gas prices and a reduced need to raise money on capital markets on the part of the company.

But that may be an excuse.

Russian IPOs don't have a good reputation these days. For starters, there's OAO Yukos, bankrupted by edict through trumped up charges leveled against its politically ambitious officers for tax evasion.

The concern with a Rosneft IPO is that the company acquired Yukos assets which had been confiscated by the government and are subject to legal challenge.

Another case in point occurred in April when Morgan Stanley suddenly pulled out of an IPO for a Russian meat production company.

Then there is the fact that many newly floated companies have posted disappointing earnings and poor results due to news which had not been disclosed to prospective shareholders.

Russia presents grave political risks for investors. Among them are the levying of unpredictable taxes, government interference, lack of minority shareholder rights, corruption and a strategy by wealthy Russians to liquidate before the 2008 President election. Current President Vladimir Putin is not allowed to run for a third term unless the constitution is ignored.

30

Revenge of the Atomic Ayatollahs

Diane Francis column Friday May 12:

There's a new oil "cartel" more powerful than OPEC and led by the Atomic Ayatollahs of Iran.

The other "cartel" members are Russia and Venezuela - a troika responsible for scaring everyone, thus creating an "anxiety" premium for oil and gold prices.

In the past year, gold and oil have both leaped by more than 50% in price or nearly US$700 per ounce of gold and US$70 a barrel for oil.

And there's little doubt, given the leadership in these three countries, combined with the geopolitics involved, that these three, by luck or guile, will help hike the price of oil to at least US$100 a barrel in pretty short order.

(Caveat is that they aren't really disciplined and run the risk of breaking the cardinal rule of cartels: don't be too greedy. If price hikes are too much too soon, they can bring about substitution (such as mandated hybrid cars) or recessions, either of which would result in price declines.)

But in the medium term, going long on oil and gold seem unassailable strategies, just based on the situation at hand.
By far, the biggest contributor to the "anxiety premium" is the controversy concerning Iran's nuclear program and its failure to fully cooperate with nuclear inspection authorities.

Messages are somewhat mixed, and often frightening, and Iran's true motives are unknown. Perhaps the country merely wants to exploit nuclear power so it can export more oil to others for cash. Perhaps the country wants to join the neighborhood's nuclear club (India, Pakistan, Israel) for its own protection. Perhaps its Persian leaders are frightened of the 300 million volatile Arabs who have attacked in the past and surround them.

Perhaps the Ayatollahs are playing the oil futures markets. Perhaps the Iranians intend to create weapons of mass destruction and hold the world hostage through its network of terrorists. Or perhaps all of the above.

What is known is that every time Iran's slightly unhinged, designated spokesman, President Mahmoud Ahmadinejad, opens his mouth the prices of oil and gold jump. And so does the value of Iran's treasury.

The country is the world's fourth largest producer, exporting nearly four million barrels a day. At current prices, that's US$102 billion a year. This is so significant that any possibility that its production would be curtailed sends prices upward.
Iran's production could be reduced by any number of events from United Nations sanctions to military intervention. It could also be cut back on purpose by Iran in protest or to make prices rise higher.

For these reasons, the Iranian issue will continue to add to global anxieties for some time to come.

Another worry is that the American president has been sabre rattling, worrisome given his track record of launching a trillion-dollar war in Iraq without proper due diligence.

The American position concerning Iran is counter-productive. Asking the UN Security Council to threaten sanctions then military intervention is impossible because the Russians will veto any such strategy as will China which signed a US$100-billion deal to buy 125,000 barrels of oil a day from Iran for ten years.

Worse, forcing the matter onto the UN debating society will actually insure that the issue remains above the fold in the world's newspapers, thus contributing even greater anxiety for markets.

Another question is why the urgency?

Most experts agree that the Iranians are years away from such bomb technology, if in fact that's their goal. And while nobody wants every tinpot dictatorship and theocracy to have a bomb, Iran is hardly the biggest culprit.

North Korea has a bomb already, and an even crazier leader and yet a solution there has been left to the neighbors to fix.
It's also interesting to note that Iran is getting hassled even though American allies such as India, Pakistan and Israel already have bombs and have refused to sign the non-proliferation treaty. Iran is a signator.

While India and Israel are benign democracies, Pakistan is not. It's currently run by a military dictator who a friend on the wrist who was exposed for exporting nuclear bomb technology to North Korea, Iran and others around the world.

While Iran remains the focus of most oil anxiety, there are two others playing the game: Russian President Vladimir Putin (wouldn't you love to see his investment portfolio) and Venezuela's populist President Hugo Chavez.

Russia has been scaring everybody by pushing around oil companies inside the country and pushing around neighbors and Western Europe over gas supplies.

Russia is hooked on high oil prices as the world's second largest exporter, some eight million barrels daily, and has been able to mask poor governance with surging oil cash flows.

Tnen there is Venezuela where anti-Americanism reigns, political turmoil continues and whose leader has frightened markets with nationalization plans that are guaranteed to reduce production in the long run.

Fight the Sarbanes Oxley Blues

Diane Francis column May 11

For years, Felicia Salomon dreaded the countless compliance forms and documents she had to wade through constantly as in-house counsel for a decentralized insurance conglomerate operating in many jurisdictions.

Three years ago, she decided to harness technology to overcome such legal drudgery and started a soft-ware based legal consulting firm called Corporate Responsibility System Technologies Ltd, in Toronto and New York City.

"We try and cut the red tape," she said in a recent interview in Toronto.
Her company simplifies the process tedious form-filling and other compliance requirements which cost companies and financial institutions billions of dollars collectively.

And the paper burden has become worse than ever. Globalization, the complexity of regulations, the number of laws and new regulatory agencies to deal with specialties such as money laundering or terrorism are making business life more complicated.

And new laws have made compliance more legally hazardous as well as expensive. High profile scandals have led to increased liability for officers and directors. For instance, CEOs must sign off on financial statements in the U.S. and the Ontario Securities Commission's Bill 198 requires CFOs to do the same. In Ontario, officers must also sign off that they have monitored their compliance and financial processes and they must create and monitor codes of ethics.

Penalties for non-compliance have also been hoisted. Fines in Canada can be as high as 5% of a public corporation’s market capitalization or C$1 million, whichever is greater.

Besides that, bad publicity arising from non-compliance can ruin reputations and destroy a corporation’s goodwill or investor support.

Corporate Responsibility System Technology’s software and data bases are updated continuously in the U.S. and Canada. They are also audited and approved by top law firms in their various sectors or jurisdictions to assure clients that they are meeting all compliance requirements.

Her company is an idea whose time has come. ?Her system has boiled down all the overlapping regulatory and legal frameworks into simple templates, or modules, based on the separate compliance requirements, be they a stock exchange, securities commission or financial institutional watchdog.

Her modules translate complex legalese into simple English, and allows corporate users to easily follow instructions and fill in the blanks. Client companies pays fees and get logins to access the modules off a browser. Training takes only hours.

“For instance, it took us four to six hours to train 50 users at the Royal and SunAlliance [Insurance] in groups of three or four,” she said.

Complete modules are available for publicly listed companies in the U.S. so they can comply with the Securities & Exchange Commission and Sarbanes-Oxley filings as well as the requirements imposed by the New York Stock Exchange, NASDAQ and American Stock Exchange. In Canada, her programs help public companies in Canada with securities and exchange requirements and also help insurance companies, banks and other financial institutions across North America file with their appropriate regulators.

The result is huge cost savings because her system means that compliance functionaries don't have to reinvent the wheel, hire outside consultants or find their own shortcuts.

"Our charges for a TSX company could be C$20,000 to C$35,000 a year, depending on the company. This would compare to C$100,000 to do it themselves or through counsel," she said.

Companies still require legal advice for complicated matters, she said, but her process reduces the cost of what's known in the profession as "commodity practice" -- or those compliance functions that common to everyone.

"Companies still need counsel to answer difficult questions," she said. ?
The company started three years ago and took two years to develop its legal modules. Now it's rolling out marketing efforts and seeking venture capital backing to offer services across North America. So far, she has landed a dozen clients and recently opened an office in New York City. Besides, Royal and SunAlliance, she has as clients Assurant and recently Metropolitan Life, among others.

Doing business with such large entities is beginning to lead to more opportunities because compliance requirements vary around the world.

"Assurant is a client and our process is being adapted for use in its Florida, Brazilian and British operations,” she said. “This potential could be enormous.”

Public companies and financial institutions are in greatest need of “automated” compliance help. The insurance world, south of the border, is heavily regulated and national companies must comply with various legislation in each of the 50 states.

Her firm also does custom work and consulting. It’s been approached to devise compliance systems for the Patriot Act, Food and Drug Act and various environmental laws.

"Compliance was the thing I hated to do the most and always procrastinated doing when I was a corporate lawyer," she said. "We've taken some of the chore away."