Risk & Compliance

Hopkins to Join Citigroup

Former CFO of Boeing signs on with Citigroup; also spent stormy year at Lucent. Plus: Tyco director agrees to give back CIT finders fee, former Enr...
Stephen TaubDecember 18, 2002

She’s back.

Deborah Hopkins, who in 2000 was named the second most powerful woman in American business by Fortunemagazine, has returned to the corporate world, joining Citigroup as head of corporate strategy and a member of the company’s management committee.

As you know, Hopkins is noted for shaking up Boeing’s accounting procedures while she was chief financial officer at the aerospace specialist. But she got even more attention in her last gig: CFO at Lucent Technologies. Hopkins spent one stormy year at the embattled telco before resigning.

“Debby brings to Citigroup a broad range of skills in financial operations, strategic planning, operational management, mergers and acquisitions, as well as a record of leadership from an extensive career at several global corporations, including Lucent, Boeing, General Motors and Unisys,” said Sandy Weill, Citigroup’s chairman and CEO, in a statement. “I have known Debby for nearly four years and there are few people with as much energy, experience and drive.”

Hopkins was most recently a senior partner at Marakon Associates, an international consulting firm.

Hopkins’s legacy at Lucent is spotty at best. When she left in May 2001, the crumbling telecom company’s stock had dropped to $9.06. Lucent common was trading at $46.82 when she was hired.

The company was in the process of cutting 16,000 jobs and dramatically scaling back its product lines and businesses. Then-CEO Rich McGinn, who had recruited Hopkins, was fired six months later.

In August, Lucent said the U.S. Attorney’s Office in Newark, New Jersey, was investigating its software-licensing agreement with WinStar Communications Inc., a former Lucent customer that filed for bankruptcy protection in April 2001.

Lucent had disclosed an accounting error of about $125 million to the Securities and Exchange Commission in November 2000 for its third fiscal quarter of that year. However, Lucent management insists the company is not the target of the federal investigation.

Hopkins and Lucent chairman Henry Schacht said in depositions that Lucent booked some sales at the expense of future results in 1999 and 2000, according to Bloomberg, citing documents from a wrongful-termination lawsuit filed against the company.

The wire service reported that Hopkins said in her 303-page deposition that, as of September 2000, the company had been “pulling up,” or giving customers incentives to order products sooner than they had planned initially. “I’m aware that Lucent had been doing pull-ups for two years.”

Some portfolio managers thought Hopkins would be a good fit at Citigroup. “I never found her to be particularly insightful at Lucent,” Bruce Bartlett, who manages $8 billion in stocks at Oppenheimer Funds, told Bloomberg. “She struck me as a yes person, rather than someone who sets her own agenda. But that’s fine for everybody who works for Sandy.”

Hopkins’s reputation at Boeing, where she worked for 16 months prior to joining Lucent, was much more auspicious. She is credited with playing a major role in overhauling the aircraft maker’s operations and management.

She also tried to revamp Boeing’s accounting practices. She made program managers accountable to finance executives in each division, demanding that each sale turn a profit, explained Bloomberg. She also developed Boeing’s “value scorecard,” which tracks cuts in overhead, factory space, and the supplier base on a quarterly basis.

She even led Boeing’s diversification, building an Internet trading exchange and an aircraft-leasing business.

Hopkins received a salary of $650,000 and a $4 million signing bonus from Lucent and $450,000 from Boeing.

Tyco Board Member Settles Charges

Frank Walsh Jr., the former Tyco International Ltd. director and corporate-governance committee member, yesterday agreed to pay $22.5 million to settle criminal and civil charges brought by the SEC. The commission asserted that Walsh secretly received a hefty fee for brokering the $9.2 billion acquisition of CIT Group Inc. in 2001.

Walsh is the fourth former Tyco executive to face criminal charges since June. Former chief executive L. Dennis Kozlowski and former chief financial officer Mark Swartz were charged in September with stealing $600 million from the company in unauthorized compensation and fraudulent stock gains. Former general counsel Mark Belnick was charged with falsifying records to hide $14 million in company loans.

All three have pleaded not guilty.

Under his plea pact, Walsh will not be required to serve any time in jail. He agreed to return the $20 million finder’s fee that he received from the company, and to pay a $2.5 million fine to New York City and the state to help compensate the cost of prosecution.

Walsh, without admitting or denying the allegations, agreed to be permanently barred from serving as an officer or director of a publicly held company.

The SEC alleged that Walsh failed to disclose he received a $20 million finder’s fee for arranging a meeting of the companies’ CEOs to discuss a possible merger. Tyco paid $10 million to Walsh and $10 million to the Community Foundation of New Jersey, a charity selected by Walsh.

According to the complaint, Kozlowski, then Tyco’s CEO, had proposed that if the transaction was successfully completed, Walsh would be paid the finder’s fee.

“Walsh served as chairman of Tyco’s compensation committee and a member of Tyco’s corporate governance committee,” said Thomas C. Newkirk, SEC associate director of enforcement, in a statement. “Shareholders entrusted him with the responsibility of watching out for their interests in Tyco’s boardroom and executive suite. Instead, Mr. Walsh himself took secret compensation and kept those same shareholders in the dark.”

“I have attempted throughout my life to hold myself to the highest levels of personal and professional conduct,” Walsh reportedly said at a court hearing. “I deeply regret my conduct in this instance.”

Former Enron Treasurer to Repay Gains

Former Enron treasurer Ben Glisan says he will return all the money he earned from an investment in one of that company’s off-balance-sheet partnerships. That partnership is central to criminal charges against others at the bankrupt energy trader, according to the Houston Chronicle, citing court documents.

Glisan reportedly made $1 million on a $5,800 investment in an Enron-related partnership called Southampton.

Glisan acknowledges he received about $1.04 million from the Southampton deal and paid $412,000 in taxes in April 2001. But the onetime Enron treasurer says he didn’t believe there was anything improper about the transaction at the time, according to the paper’s account.

He decided to return the difference ($628,744) after reviewing documents related to criminal charges against former Enron chief financial officer Andrew Fastow and former finance executive Michael Kopper, according to the documents.

“I consent to this payment despite my honest belief that I was an innocent owner of that money,” Glisan reportedly wrote.

Glisan served as treasurer from 2000 until he was fired in February for his role in the Southampton partnership.

Andersen’s Temple in the Crosshairs

Former Arthur Andersen in-house counsel, Nancy Temple, could soon come under legal fire.

Members of the House Energy and Commerce Committee said in a letter sent to Attorney General John Ashcroft that Temple should be investigated for lying when she testified before the panel in January, according to published reports.

“We urge you to vigorously pursue a criminal investigation into this matter,” the letter to Ashcroft reportedly said.

Temple is the person at Andersen who sent an E-mail reminder about the firm’s policy for retaining material.

“It might be useful to consider reminding the [Enron] engagement team of our documentation and retention policy,” Temple reportedly said in the E-mail. “It will be helpful to make sure that we have complied with the policy.”

When she testified before the House committee in January, she said that E-mail was a response to questions from an Andersen employee about how to properly document accounting issues, according to Bloomberg.

“I never counseled any destruction or shredding of documents,” Temple reportedly told the committee.

A number of committee members, however, don’t see it that way. “Ms. Temple sought to cloak her Oct. 12 e-mail in a false light of innocence,” wrote half a dozen committee members.

During Andersen’s trial earlier this year, former Andersen partner David Duncan, who led the Enron audit team, said he interpreted the E-mail as an instruction to shred documents.

Duncan is currently awaiting sentencing after pleading guilty to one felony count of obstructing justice by ordering thousands of Enron documents destroyed between October 23 and November 9, 2001.

The committee also claims Temple lied when she denied discussing with Andersen officials the possibility of lawsuits and criminal charges in the Enron case, according to published accounts.

The shredding of documents related to its Enron audit ultimately led to Andersen’s conviction in June on one count of obstruction of justice. In late August the accounting firm shut down its U.S. operations.

Now on Video: House Party IV (The Enron Years)

It hasn’t exactly been a great fortnight for President Bush. First, Senate Majority Leader Trent Lott gets ensnared in an ugly imbroglio. Then, bellwether corporation McDonald’s announces its first-ever quarterly loss. And finally, Bush is caught on tape yukking it up with some former Enron executives.

Here’s the story on that one: it seems that five years before Enron Corp. collapsed from a huge accounting scandal, a number of top executives were making light of their accounting practices in a series of skits taped at a party, according to the Houston Chronicle.

The videotape was made at a going-away party for former Enron president Rich Kinder.

The tape includes nearly half an hour of absurd skits, songs, and testimonials by executives and luminaries, including President Bush, according to the paper.

In fact, at the party, then—Texas Gov. George W. Bush apparently pleaded with Kinder: “Don’t leave Texas. You’re too good a man.”

The elder Bush told Kinder: “You have been fantastic to the Bush family. I don’t think anybody did more than you did to support George.”

In one reported skit, former administrative executive Peggy Menchaca played the part of Kinder receiving a budget report from then-president Jeffrey Skilling, who played himself. When the “Kinder” character questioned whether Skilling could pull off 600 percent revenue growth for the next year, Skilling apparently responds: “We’re going to move from mark-to-market accounting to something I call HFV, or hypothetical future value accounting. If we do that, we can add a kazillion dollars to the bottom line.”

Incredibly, Richard Causey, the former chief accounting officer, jokingly noted, “I’ve been on the job for a week managing earnings, and it’s easier than I thought it would be. I can’t even count fast enough with the earnings rolling in.”

Funny stuff—in 1998.