Recently in Corporate Crimes Category

June 4, 2009

SEC Foreclosing on Mozilo

The SEC (Securities and Exchange commission) has brought civil fraud charges against Angelo Mozilo, the former CEO of Countrywide Financial Corp. The SEC seeks to penalize Mozilo for his alleged fraudulent sale of millions of dollars worth of Countrywide stock. It turns out that Mozilo sold most of his Countrywide stock just before (unknown to the public) Countrywide share prices were about to go in the toilet and the company was on its way to oblivion. The SEC also wants a court to order Mozilo to give back his allegedly ill-gotten gains.

Mozilo's defense will no doubt be that no fraud was involved because he sold his shares pursuant to a pre-arranged plan. A law hideously numbered 17 C.F.R. Sec. 240.10b-5-1(c)(1)(i)(A)(3) allows company big-wigs to insulate themselves from "insider trading" charges (charges that they sold stock based on inside information not available to the general public) by setting up plans for selling a certain number of shares on certain dates.  If Mozilo set up a stock sale plan and stuck to it, his stock sales may have been miraculously well-timed (for him) but not fraudulent.

Based on published reports, there seems little doubt that Mozilo did set up a plan to sell his Countrywide shares.  But it also seems that the plan was no more solid than many of the disastrous mortgages that Countrywide had been peddling to unsuspecting investors.  Mozilo's plan apparently accelerated as Countrywide's stock approached worthlessness. So now it's up to the courts to decide whether Mozilo was incredibly lucky, incredibly greedy, or incredibily fraudulent.  Perhaps he was all 3.

February 11, 2009

Manslaughter Charges for Poisoned Peanut King?

Peanut Corp. of America owner Stewart Parnell apparently sent email messages urging workers at this plant to ship peanut products laced with salmonella bacteria. So far, 9 people have died and hundreds of others have become ill as a result of eating the company's tainted peanuts.  Confronted with his own messages at a Congressional hearing on Feb. 11, 2009, Parnell declined to answer or even to apologize, and instead invoked his Fifth Amendment privilege not to incriminate himself.

If the government has evidence that Parnell (and perhaps other company officials) ordered the shipment of tainted peanuts, they should go to jail. They should be charged with "involuntary manslaughter". Involuntary manslaughter involves reckless disregard of a substantial risk that results in a person's death. That's precisely what we have here -- Parnell knew or should have known that people who eat salmonella-filled peanuts can not only become ill, they might die.

Over the last few years, we've seen a steady parade of criminally rapacious company executives willing to sacrifice their companies' and workers' futures in order to line their offshore bank accounts. Apparently, Parnell and Peanut Corp. of America have gone even further and sacrificed their customers' lives.  If that's what happened, they should be charged with manslaughter. I wonder if their prison meals will include peanut butter and jelly sandwiches?