Diane Francis on Business Issues

Saturday, June 03, 2006

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."


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