While Enron and Dynegy executives were trying to work out the details of their pending merger, William McLucas, one of Enron’s outside lawyers began questioning Jeff Skilling about the Southampton partnership and LJM. These were two of the several entities that put large amounts of money into the pockets of Enron executives.
Skilling claimed he knew nothing about the fact that Andy Fastow, Enron’s former CFO, received $35 million from LJM in the prior two years. Fastow had told the Enron board of directors that Skilling had approved each deal done by LJM. Skilling denied it.The attorney brought out an approval sheet for an LJM deal named Margaux. The sheet had Skilling’s signature on it.
“You signed this one,” McLucas said. “There is a list of questions with answers, and you signed it.”
“Now, wait a minute,” Skilling shot back. “My signature doesn’t mean I’ve reviewed these questions independently and satisfied myself the answers are right.”
McLucas crossed his arms. “What does it mean, then?”
Skilling pointed at the signature page. “Right here, I saw Causey and Buy already signed,” he said. “The fact that they signed it was good enough for me to sign without reviewing the same facts again.”
So was Skilling just trying to get out of responsibility for that deal, or did he really not examine the terms of the deal before he approved it?
Recently, New Jersey.s Committee on Attorney Advertising ruled that advertising done by lawyers in “New Jersey Super Lawyers” violates attorney professional conduct rules. New Jersey is the first state to make such a rule about “Super Lawyers”.
The Super Lawyers publication is done in 21 states, and is clearly labeled as an advertising supplement by the publishers. Approximately 5% of a state’s attorneys are selected for inclusion in the publication.
The basis for New Jersey’s ruling is that the designation of “Super Lawyer” could give a buyer of legal services a false impression. Such a designation is considered to be “comparative” which is prohibited in lawyer advertising. That is, the publication could wrongly lead a consumer to believe that an attorney in this publication is better than one who is not.
The committee handing down the ruling believed that the publishers don’t provide enough information on the methodology used to award the Super Lawyer designation. The committee believes that the rankings are arbitrary. The publisher, however says that there is extensive research that goes into the awarding of the title.
The state cannot prevent the publication from being published and distributed in New Jersey, however, lawyers who advertise in the publication could be subject to sanctions. The company that puts out the publication is appealing the ruling.
The [tag]American Institute of Certified Public Accountants[/tag] ([tag]AICPA[/tag]) has been losing ground ever since the accounting scandals that started in 2001. Now, they may be headed for even more problems.
The organization decided this year to move many of its functions from New Jersey, New York, Texas, and Washington D.C. to Durham, North Carolina. About 400 jobs are being affected, and only about 50 employees have decided to make the move.
The AICPA has lost influence since the accounting scandals partly because it lost duties to [tag]PCAOB[/tag], the [tag]Public Company Accounting Oversight Board[/tag]. The PCAOB now sets the standards used to audit public companies instead of the AICPA. Currently, the AICPA has about 330,000 members, and is still the largest professional membership group for accountants. The organization says that the consolidation and move will save $10 million per year.
Chewco, one of the special purpose entities (SPE) that Enron used to enhance its financial statements, was under examination by the Arthur Andersen accountants. Specifically, they came across a letter that indicated that six million dollars from JEDI (another SPE) would fund a reserve account.
This was the proof of a secret side agreement used to get the Chewco deal closed. The six million dollars had been placed in a reserve account to secure a portion of the money provided by Barclays Bank. Enron could argue all it wanted that Barclays’s cash was really equity and not a loan. It didn’t matter anymore. Chewco had been constructed with exactly three percent independent equity. With six million dollars secured, Barclays did not have that cash at risk. Even assuming Barclays’s money was equity, Chewco was short the three percent by at least six million dollars.
There could no longer be any question. The accounting failed. Chewco was not a valid special-purpose entity. It was Enron.
And that it how it came to pass that Enron was going to have to recognize losses from these entities on its own financial statements. The entities were really not independent, so their financial results were Enron’s financial results. The vehicles that Enron executives used to move losses off Enron’s financial statements failed.
Wisconsin recently enacted a law which prohibits companies from implanting tiny computer chips under employees’ skin, also known as [tag]RFID[/tag] (Radio Frequency Identification) michrochip implant.
The small chips are used to track the movements of people, and may have been used by some employers to track employee activities. RFID tags are normally attached to products or animals, and radio waves are used to identify the chips. For example, chips like this can be used on products instead of the bar codes that are traditionally used at store checkouts.
Under the new law, any employer who requires a person to receive a [tag]microchip implant[/tag] will be fined $10,000 per day until the microchip is removed. While the chips could be useful to help positively identify employees and give them access to secure areas of companies, the risk exists that someone could cut the chips out of people and use them nefariously.
In order to prevent the kinds of fraud and abuse that went on after Hurricane Katrina, the Federal Emergency Management Agency (FEMA) is changing the way it distributes emergency aid.
The changes include the following: Continue reading
The partners at Arthur Andersen were having another argument about the management of the Enron account. As usual, Enron executives were throwing their weight around and trying to dictate who could be involved on their engagement. Specifically, they didn’t want Carl Bass to work on their account because he fought for the proper accounting treatment of items, not the creative ways that Enron used to enhance their financial statements. Continue reading
John Maloney, a former Green Bay police officer who was convicted of killing his wife, Sandy Maloney, in 1998 is seeking a pardon from the governor.
The defense strategy used by Attorney Jerry Boyle in the 1999 trial was to concede that the death of the estranged wife was a murder, but that the killer was Maloney’s girlfriend, Tracey Hellenbrand.
Hellenbrand, an ex-IRS special agent worked with law enforcement to get a videotaped confession from Maloney. The videotaping took place in a Las Vegas hotel, and included were sexual acts and hours of arguing. Maloney eventually made statements in the hotel room that indicated that he was at Sandy’s house on the night of the murder.
Maloney now says that he did not want to use Boyle’s strategy of pointing the finger at an alternate suspect. He says that instead, he (Maloney) wanted to argue that Sandy was dead from alcohol poisoning at the time the fire started, and that the fire was an accident.
Maloney was convicted of first-degree intentional homicide, arson, and mutilation of a corpse. He received a life sentence, and is eligible for parole in 2024. All appeals to the State Supreme Court have been exhausted, and a pardon is Maloney’s last chance.
Mary Ellen Wilson, a former office manager at Gentle Family Dentistry in New Berlin, was sentenced to 3 years in prison for stealing over $350,000 from the dental practice. Her [tag]prison[/tag] term will be followed by 5 years on extended supervision and 20 years of probation.
Wilson, 56, pleaded guilty to 5 counts of theft for stealing the money from her employer over a period of 5 years. Police were contacted by the clinic on April 19, 2005 with a report that a significant embezzlement had occurred, and the perpetrator had confessed that morning. The clinic operator was suspicious when the IRS contacted the dental practice to inquire about unpaid payroll taxes since 2000.
The theft scheme involved Wilson cutting checks to herself rather than making tax payments. In addition, she stole cash from the dental office. Wilson used the money for gambling, travel, clothing, and home furnishings. She said at the sentencing hearing that she was truly sorry and :
“My stealing from Gentle Family Dentistry has touched many lives. I have disgraced myself and embarrassed my family. I should have thought about all of this before I started stealing.”
CBS Corp. filed an appeal of the Federal Communications Commision’s (FCC) fine against 20 CFS stations for the airing of the flashing of Janet Jackson’s breat during the 2004 Super Bowl. Each station has been fined $27,500, and the total is therefore $550,000.
The FCC has been assessing larger fines for indecency. The largest came in March 2006, which the CBS show “Without a Trace” was fine $3.6 million. CBS says it has taken steps to ensure that something like this will not happen again.