• Welcome to The Corporate Insider

    Welcome to The Corporate Insider, a website for workers, consumers, shareholders, academics and members of the press. This site is the internet's resource center for all who are impacted by corporate conduct.

    Recent history has demonstrated that wrongful conduct by corporate insiders can have a devastating impact on corporate stakeholders and observers. From securities fraud which adversely impacts the value of stock to short cuts in the manufacturing process that result in defective products being injected into the marketplace, corporate conduct can be devastating. Yet, it is not so much the conduct of the corporation itself that can be problematic as much as it is the conduct of the corporate insiders who, often times guided by their own self-interest, abuse their corporate mandate to the detriment of stakeholders. In addition to shareholders and consumers, workers lose out when basic wage and hour, benefit, and job safety laws are skirted. Insider wrongdoing has eroded the integrity of many publicly traded corporations, and layoffs and plant closings have caused rising unemployment and the destruction of local economies.

    Why do corporate insiders skirt the law and their obligations to stakeholders? One answer is that misguided executive compensation plans often reward insiders for short term corporate performance as measured by the value of the stock. If not paying workers overtime pay or cutting corners on product safety means profits in the short term, executives who want to see larger year-end bonuses will take the short cuts. While executive compensation plans should be written to properly incentivize insiders, stakeholders can have a real impact by knowing the laws that regulate corporations and taking action to enforce them. These laws range from securities laws to consumer and labor laws. With this in mind, this site has been developed with the intent of providing an overview of the laws that regulate corporate conduct.

and another thing . . .

The Tragedy of the Clemens
Federal prosecutors have indicted former baseball star pitcher, Roger Clemens, for lying to Congress about his alleged use of steroids.

Whether Roger Clemens took steroids and whether, if he took steroids, his statistics need to be placed in a different light undoubtedly is proper banter for the sports pages.

This country has...
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Articles:
  • Corporate Integrity Agreements: Asking the Companies to Police Themselves, Please
    The use of a corporate integrity agreements (“CIA”) in resolving the prosecution of pharmaceutical and medical companies is commonplace. As part of a deferred prosecution agreement, the U.S. Department of Justice, or the U.S. Department of Health and Human Services, Office of Inspector General, will ask the defendant corporation to enter into a CIA to police its behavior and, in part, ensure compliance with the terms of the settlement.
    Read more...

Corporate Insider News:
Two California Firms Charged for Unlawful Short Selling PDF Print E-mail
Washington, D.C., Jan. 26, 2010 — The Securities and Exchange Commission today separately charged two California investment advisory firms for engaging in improper short selling of securities in advance of their participation in a company's secondary offering. These mark the first cases filed under the SEC's amended Rule 105 of Regulation M, which is designed to prohibit manipulative short selling ahead of follow-on securities offerings.

In one case, the SEC charged Los Angeles-based AGB Partners LLC and its principals Gregory A. Bied of Boise, Idaho, and Andrew J. Goldberger of Santa Monica, Calif., finding that they netted thousands of dollars in improper profits by shorting in advance of their purchase of stock in a secondary offering. In the other case, the SEC charged Los Angeles-based Palmyra Capital Advisors LLC, finding that the firm violated short selling rules and improperly profited in three of its managed hedge funds. Both firms have agreed to settle the SEC's charges.

Rule 105 helps prevent abusive short selling and market manipulation by ensuring that offering prices are set by natural forces of supply and demand for the securities in an offering rather than by manipulative activity. Short selling ahead of offerings can reduce the proceeds received by public companies and their shareholders by artificially depressing the market price shortly before the company prices its offering. The SEC amended Rule 105 effective October 2007 to prevent this trading practice known as "shorting into the deal." The revised rule generally prohibits the purchase of offering shares by any person who sold short the same securities within five business days before the pricing of the offering.

"Rule 105 protects the pricing integrity that is essential to the capital raising process," said Marc J. Fagel, Director of the SEC's San Francisco Regional Office. "By engaging in prohibited trading, these firms illicitly profited at the expense of public companies and their shareholders."

The Commission found that AGB Partners violated both the pre- and post-amendment Rule 105 to gain illicit profits. According to the SEC's order, AGB Partners used secondary offering shares in April 2007 to cover a portion of a short position in Boots & Coots International Well Control, Inc. In June 2008, under the amended rule, AGB Partners sold short shares of BGC Partners, Inc. and then purchased BGC Partners shares in the company's secondary offering.

According to the SEC's order, AGB Partners used two accounts. The account that was used for short selling consisted solely of Bied's and Goldberger's personal funds. The other account, a private investment fund they managed for outside clients, was used for participating in the follow-on offerings. Although the amended Rule 105 created an exception to allow otherwise prohibited trades if the trades occur in separate accounts, the SEC's order found that Goldberger's and Bied's close collaboration with the accounts fell outside the separate accounts exception.

In its order against Palmyra, the SEC found that the firm violated Rule 105 in connection with short sales made in advance of a public offering by Capital One Financial Corp., resulting in improper profits of $225,500. Palmyra sold short a total of 50,000 shares of Capital One stock on Sept. 18, 2008, and then received 50,000 shares from Capital One's secondary offering on Sept. 24, 2008.

In settling the SEC's charges without admitting or denying the Commission's findings, AGB Partners, Bied and Goldberger consented to be censured and pay more than $50,000 in disgorgement and penalties. Palmyra Capital consented to be censured and pay more than $330,000 in disgorgement and penalties.
 
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