Diane Francis on Business Issues

Monday, July 17, 2006

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.

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