It looks like Andrew Fastow is going solo.
The indicted former Enron chief financial officer will not be tried with his two co-defendants, according to an order issued late Thursday by a Houston judge and reported by the Houston Chronicle.
United States District Judge Kenneth Hoyt scheduled Fastow’s trial for April 20, 2004.
The trial for former Enron finance executive Dan Boyle has been set for August 17, 2004. The third defendant, former Enron treasurer Ben Glisan Jr., is trying to hammer out a plea bargain that could be announced as early as this week; if he does go to trial, it is scheduled for July 20, 2004.
Hoyt reportedly separated the three trials “because of the magnitude of the evidence, the potential length of the trial, the number of counts in the indictment against Andrew S. Fastow as opposed to the co-defendant, as well as the impact that such evidence may have on a jury.”
The three were named in May in a 109-count indictment, on charges including fraud, money laundering, conspiracy, securities fraud, and insider trading.
The judge’s order comes on the heels of a court filing by the Chronicle requesting that Hoyt unseal transcripts and open hearings to the public.
Severing Severance at Freddie Mac
A federal regulator has asked Freddie Mac to retroactively fire two former top executives for cause so that they can be denied hefty severance payments.
The Office of Federal Housing Enterprise Oversight (OFHEO), which regulates the embattled mortgage financier, has initiated proceedings to retroactively fire former chief executive Leland C. Brendsel and former chief financial officer Vaughn A. Clarke as of June 6, according to published reports.
Freddie Mac accepted their resignations that day when the company disclosed it had discovered evidence of document tampering and accounting errors.
The announcement triggered probes by the U.S. Attorney in the Eastern District of Virginia, the Securities and Exchange Commission, and OFHEO.
If the individuals are denied their severance, it would cost Brendsel more than $23 million in cash and stock-related compensation due when he quit, according to published reports. Clarke could wind up losing nearly $1 million, said The Washington Post,citing documents released by the regulators.
The Post reported that Shaun F. O’Malley, chairman of Freddie Mac’s board, responded late yesterday in a letter to OFHEO saying that the company will comply with any “valid and effective order” that the regulators issue. But until the board receives such an order, it “is required by law” to abide by employment contracts it signed with Brendsel and Clarke unless those obligations are “superseded by valid authority,” O’Malley reportedly said.
According to the Post, Lawrence Z. Lorber, an attorney for Brendsel, said that “a decision was made in June that there was no basis to terminate Mr. Brendsel for cause, and there is no basis to change that determination.” An attorney for Clarke did not return calls, added the paper.
Hevesi Calls for Investor Activism
New York State Comptroller Alan Hevesi, who oversees $90 billion in pension funds, has called for large institutional investors and individuals to form an activist group that will police poorly behaving companies.
Hevesi proposed a National Coalition of Corporate Reform, which would pursue its efforts through lobbying, litigation, proxy voting, and intervention in the regulatory process, according to Reuters.
He said supporters of his idea include the treasurers of California and North Carolina and labor leaders such as the presidents of the A.F.L.-C.I.O. and the American Federation of State, County and Municipal Employees, according to The New York Times.
“NCCR will unite institutional and individual investors, labor leaders, corporate CEOs, elected officials and community leaders in support of a program of corporate governance reforms, regulation and legislation,” Hevesi reportedly said. He unveiled his plan Wednesday in San Diego, in a keynote speech at the fall meeting of the Council of Institutional Investors.
He called on investors to use lawsuits as a means of obtaining restitution and reforming corporate governance. “NCCR will support shareholder suits and seek changes in laws and regulations that limit their ability to obtain justice and reform,” he reportedly said.
Hevesi was inspired, of course, by the large number of accounting scandals and other misdeeds, which cost New York State an estimated $1 billion in lost tax revenues and cost New York City $260 million, according to a report he issued on August 20. The report adds that New York City’s pension system lost nearly $7 billion from accounting problems that led to earnings restatements and plunging stock prices, according to published accounts.
An organizational meeting is planned for early October.
Are Smaller Companies Ready for the Unexpected?
Nearly all small and midsize businesses have taken at least some steps to protect themselves against an emergency, according to a recent survey conducted by The Hartford Financial Services Group.
The survey found that 97 percent of 225 small and midsize businesses (fewer than 500 employees) have at least one plan in case of an undefined emergency. On average, survey respondents have four different types of plans in place.
The most common procedure is backing up data and records (84 percent), usually by copying it to discs or tapes. A smaller number of businesses email files to another location; some also print out paper copies.
Only 61 percent have procedures for reporting acts of workplace violence, 53 percent have taken measures to prevent unauthorized entry into buildings, and 44 percent have plans protecting their operations and employees in the event of natural disasters.
Only 26 percent of the surveyed companies have steps in place for handling suspicious mail or packages; the same percentage conduct periodic emergency evacuation drills, and 24 percent have crisis management teams to interact with employees during emergencies. Only 12 percent of the surveyed companies have procedures to follow in the event of terrorism.
CFOs on the Move
- After searching for a new chief financial officer for nearly a year, Chubb Corp. finally found one — and it didn’t have to look too far. The insurer tapped Michael O’Reilly, who has been with the company since 1969, when he joined as a securities analyst in the investment department.
- Gap Inc. named Nicholas A. Severino divisional chief financial officer for the Gap brand. He will oversee all financial aspects of Gap’s U.S. business. Severino joins Gap Inc. from Sears, Roebuck and Co., where he had worked since 1994 in various financial positions, most recently as vice president, finance, for Sears Retail and Related Services.
- Tickets.com named Christian Henry as CFO, replacing Eric Bauer, who left to serve as CFO of Banana Republic, a division of Gap Inc. Henry recently served as vice president, finance, as well as corporate controller of Affymetrix Inc.
- Sola International Inc., which designs and makes lenses for eyeglasses, said Ronald Dutt has been named executive vice president and chief financial officer, replacing Steven Neil, who resigned in June. Dutt most recently served as CFO and senior vice president of DHL Americas in San Francisco, a division of Belgium-based DHL, the air-express delivery company.
- H&R Block Inc. said CFO Frank Cotroneo will leave the company on October 31 to pursue other opportunities. He joined the company as CFO in February 2000, after serving as CFO of Mastercard International, where he worked for 11 years.
- TNS named David Corless as chief financial officer, North America. Formerly based in London as director of business evaluation and development, Corless will relocate to New York City.
- PriceSmart Inc. said CFO Allan Youngberg is leaving the company and named vice chairman James Cahill to the additional role of interim CFO.