“Mr. Sokol has said he does not think he has done anything wrong; Mr. Buffett has said he does not think Mr. Sokol did anything illegal.”

Posted on April 21, 2011 by mmjdiary

Yes, there is a difference between “illegal” and “wrong.”  Many things are legal, but they just ain’t right.  Mr. Buffett’s choice of that one word is telling. From a New York Times story on a Berkshire Hathaway shareholder suit brought because of Mr. Sokol’s purchase of shares in a company Berkshire would later explore for acquisition.  Mr. Sokol has resigned.

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“The words expressed do not reflect my feelings toward the gay and lesbian communities and were not mean to offend anyone.” Kobe Bryant

Posted on April 15, 2011 by mmjdiary

Note to Mr. Bryant’s handlers/PR team and the NBA:  Apologizing for offending someone is not an apology.  Mr. Bryant needs to apologize because what he did was wrong, period.  We made this point back during the Super Bowl XXXVIII wardrobe malfunction of Janet Jackson via Justin Timberlake.  We don’t measure right and wrong by reaction, we measure wrong by, well, whether something is wrong.  Mr. Kobe should say as much, or hire someone to say it for him.

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“Neither Dave nor I feel his Lubrizol purchases were in any way unlawful.”

Posted on April 9, 2011 by mmjdiary

Warren Buffett, in announcing the departure of his heir apparent, David Sokol, from the company after Mr. Sokol’s advance purchase of shares in a Berkshire acquisition emerged.  Oh, great Oracle of Omaha — as a new acquaintance shared with me, “You can’t talk your way out of something behavior got you into.” See “From the Legal Side” for more details.

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On the Insider Trading Front

Posted on April 9, 2011 by mmjdiary

What is it about non-public information that is so difficult to understand?  This week alone – April 1- April 8, we had a heck of a run:

  • Adam Smith, formerly an analyst and trader with Galleon (and no relation to Adam Smith of “Wealth of Nations” fame) testified at Raj Rajaratnam’s insider trading trial Continue reading →
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When You Have a Problem, Fix It Straight Away: Southwest Airlines Shows Us How It’s Done

Posted on April 9, 2011 by mmjdiary

It was not an April Fool’s Day joke when, as a comedian says, Southwest’s flight from Phoenix to Sacramento took off as a hard top and landed as a convertible. The fuselage of one of the airline’s Boeing 737 jets ripped open at 34,000 feet, forcing  Continue reading →

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The Tell-Tale Tote Bag

Posted on April 9, 2011 by mmjdiary

Hannah’s mother wanted the Elizabeth Arden perfume set for Christmas, and the big red tote bag that came with it  — FREE!  Hannah schlepped to the mall, an experience she detested.  At the Elizabeth Arden counter she asked for the special gift set, and the clerk took the big stuffed tote bag down from the display and explained, “And you get this lovely tote bag for free!”  Hannah explained that the red tote bag was why “Mom” was so precise in her gift demand this year.  As the clerk tried to up-sell, Hannah was thinking, “How do I walk out of the store Continue reading →

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The Eagle Scout and the Interview

Posted on April 9, 2011 by mmjdiary

A delightful young man was applying for a job.  His resumé listed that he had attained the rank of Star Scout. Another young man applying for the job listed on his resumé that he had attained the rank of Eagle Scout.  When the alleged Eagle Scout went in for his interview, a panel member asked him to recite the Scout oath.  He did not know the Scout oath. He admitted sheepishly that he had forgotten it. When he left the room, the panel member told the others, “He’s lying about being an Eagle Scout.  If he were, he would know the Scout oath.”  When the Star Scout applicant Continue reading →

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“Libya is a kleptocracy in which the regime – either the al-Qadhafi[sic] family itself or its close political allies – has a direct stake in anything worth buying, selling or owning.”

Posted on April 9, 2011 by mmjdiary

State Department cable 2009.  When trade with Libya was reopened in 2004, the hope was for “normalization of Col. Muammar el-Qaddafi.”  Instead, “It was a deal with the devil.”  And Satan is still in charge. Companies pay signing bonuses to do business in Libya, and Coca-Cola Continue reading →

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Stunning, Even by Goldman’s Liberal Definition of Fiduciary

Posted on March 31, 2011 by mmjdiary

In the summer of 2010, Clearwire Corp. hired Goldman Sachs to offer its advice on whether the company should sell its wireless division to Sprint.  In February 2011, Goldman let the Clearwire folks know that it was resigning its position of trust with them in order to work for Sprint!  Sprint is, of course, now the majority owner of Clearwire, and Clearwire is considering selling the rest of what it has to Sprint.

The Wall Street Journal commented, in charitable fashion, that investment banking can be a “sharp-elbowed business” and “no-holds-barred world.”[1] Ah, but moving from the seller to the buyer is a new twist.  The term “adviser” means that the advisee has brought the adviser in on sensitive information.  Indeed, it might be safe to say that the adviser knows how the board leans, why it leans that way, and Continue reading →

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In the this may never be over department . . . Former Enron Executive Sentenced

Posted on March 31, 2011 by mmjdiary

Rex Shelby, a former Enron broadband executive was sentenced to two years of probation for his role in exaggerating the performance of the broadband unit.  The charges had been brought in 2003, so the wheels of justice do grind slowly.  It seems Mr. Shelby and others touted Enron Broadband as a really money maker to analysts, thus causing the company’s stock to jump Continue reading →

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A Set-Back for Redemption

Posted on March 31, 2011 by mmjdiary

Barry Minkow was but 21 years old when he created ZZZZ Best, a carpet-cleaning company that was a classic Ponzi scheme.  Mr. Minkow defrauded investors of $300 million and even duped Oprah inot being a believer in his entrepreneurship before his fake credit card charges emerged, with the result being a spool unwinding, the discovery of securities fraud at ZZZZ Best,  57 counts of fraud charges for Mr. Minkow, and 7 years in prison.

But, he emerged a converted man.  He had a jailhouse ministry that was so effective that his 25-year sentence was reduced to the 7 he served. Upon his release, he became the pastor at the Community Bible Church in San Diego and a fraud detector extraordinaire. He was all Continue reading →

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“If I’m the audit partner and I have concluded that what we are doing is correct and consistent with [standards], I don’t know why I would take that to the audit committee, as I’m the expert.”

Posted on March 18, 2011 by mmjdiary

Randolph Beatty, dean of the Leventhal School of Accounting at the University of Southern California Marshall School of Business.  Oh, dear dean, you do so when your client has  spun off $50 billion in debt, as Lehamn Brothers did. Because Ernst & Young did not run the letter vs. spirit of the Repo 105 standard by the audit committee, it may be left holding the bag.  The Feds say they don’t have enough to charge anyone at Lehman, but E & Y, well, it has a fight on its hand.

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What’s the Matter with the SEC? Funny Farm Redux

Posted on March 11, 2011 by mmjdiary

 

We need not go back to the SEC’s missed Madoff opportunities or its unwillingness to shut down the Stanford Ponzi operation because it was a little too complex to fit within the performance evaluation slam-dunks its lawyers needed. The SEC is a troubled agency with the hits that just keep on coming.

We learned a week ago from a government audit of its books that the SEC, if it were a publicly traded company, would not be able to get its financials or internal controls certified.  We learn this week that the agency charged with policing directors and officers of publicly traded companies for their conflicts of interest missed a big in its own general counsel. 

Former SEC General Counsel David Becker had inherited $2 million from his mother’s Madoff account.  Mr. Becker disclosed this tidbit after he joined the agency.  The agency’s ethics counsel cleared Mr. Becker Continue reading →

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He should not lead.

Posted on March 10, 2011 by mmjdiary

Scott Bundgaard, the Senate Majority Leader in the Arizona Senate had a late-night side-of-the-road ruckus with his ex-girlfriend.  “Ruckus” may be charitable because the story keeps changing.  True enough, the judicial process on domestic violence charges have not run their course, and there is that presumption of innocence.  Wait-and-see is appropriate for allowing him to retain his senate seat.  However, he should not lead.  A leader under such a cloud sets a tone at the top that should trouble the members of his party because their decision to retain him as their leader astonishes the public.  It is in no one’s self-interest to allow him to keep his position, not even his own.  Mr. Bundgaard needs the time to sort through both the criminal justice system and a complex personal life.

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