Business Digest: Skilling seeks shorter jail term; ‘negligence’ toppled MF Global

April 4, 2013
SECURITIES
Skilling negotiating shorter prison term

Jeffrey Skilling, the former Enron chief executive serving a 24-year prison term over the energy company’s spectacular collapse, may get a chance to leave prison early.

The Department of Justice has notified victims of Enron’s fraud and 2001 bankruptcy that prosecutors may enter an agreement with Skilling that could result in a resentencing.

Skilling, 59, has served about 6 1 / 4 years in prison following his May 2006 conviction by a Houston federal jury on 19 counts of securities fraud, conspiracy, insider trading and lying to auditors.

It is unclear by how much Skilling’s sentence could be reduced, and a Justice Department official said no agreement has been reached. CNBC, the television business channel, said prosecutors and Skilling’s attorneys have been negotiating a shorter term.

Skilling has maintained his innocence and, according to court filings, has been pursuing a new trial. He is scheduled to leave prison in February 2028, assuming good behavior, according to federal prison records.

Daniel Petrocelli, an attorney for Skilling, could not be reached Thursday for comment.

Once ranked seventh on the Fortune 500 list of large U.S. companies, Enron went bankrupt Dec. 2, 2001. Its demise led to reforms including the federal Sarbanes-Oxley Act of 2002.

— Reuters

FINANCE
‘Negligence’ cited in
MF Global collapse

The “negligent conduct” of chief executive Jon S. Corzine and other officers of the MF Global Holdings brokerage contributed to the firm’s dramatic collapse in 2011, according to a report by the bankruptcy trustee.

Former FBI director Louis Freeh’s report said that the failure of MF Global’s officers contributed to losses of as much as $2.1 billion and adds to the growing number of reports and investigations pointing to their liability.

Freeh has prepared a lawsuit against former executives for breaches of fiduciary duty but had not filed it pending the outcome of talks with a mediator appointed in a separate securities class action, according to the report.

Freeh’s 124-page document blamed the collapse on “the risky business strategy engineered and executed by Corzine and other officers and their failure to improve the company’s inadequate systems.”

A spokesman for Corzine dismissed the report as “Monday-morning quarterbacking” that ignores that Corzine took over a money-losing business and with board oversight began to improve its performance.

MF Global collapsed into bankruptcy in October 2011, less than two years after Corzine, a former New Jersey governor and Goldman Sachs chief, became chief executive.

— Reuters

Also in Business

l  Shares of Best Buy jumped 16 percent Thursday after it announced plans to create store-within-store kiosks for Samsung products at 1,400 Best Buy and Best Buy Mobile stores. Shops will offer the full range of Samsung’s mobile products, including smartphones, tablets, laptops, cameras and accessories. The move shows “a very high-profile consumer electronics vendor still finds Best Buy a relevant distribution outlet,” said Morningstar analyst R.J. Hottovy. It’s also a way for Samsung to carve out dedicated retail space without investing in overhead necessary to open its own stores, such as its chief rival, Apple, has done.

l  Hewlett-Packard, under heavy fire from investors over several recent multibillion-dollar bungles and other corporate missteps, said Thursday that Chairman Ray Lane will give up his post and two other board members will resign. Lane, whom some critics had unsuccessfully sought to oust at the company’s annual stockholders meeting last month, will remain as a director and be replaced on an interim basis as chairman by director Ralph Whitworth. Two other much-criticized directors — John Hammergren and G. Kennedy Thompson — will resign from the board, the company said. Both had narrowly survived a vote to remove them from the board during the March meeting.

l  Travel guru Arthur Frommer has reacquired rights to his travel guidebook brand from Google and said he intends to resume publishing Frommer guidebooks. Google acquired the Frommer brand last summer from the Wiley publishing company, but last month Skift.com reported that Google was “quietly pulling the plug” on publishing Frommer’s books. Frommer, 83, and Google confirmed Wednesday that the brand was returned to its founder. The terms of the deal between Google and Frommer were not disclosed.

l  The Justice Department on Thursday sued a New York mortgage company that it said defrauded the federal government into insuring poor quality home loans, costing taxpayers millions of dollars. In a civil lawsuit filed in Manhattan federal court, the Department of Justice said Golden First Mortgage and its president, David Movtady, “repeatedly lied” to the government between 2002 and 2010 to win Federal Housing Administration insurance for its home loans. Samuel Rosenberg, a lawyer for the defendants, declined to comment.

— From news services

Coming Today

l  8:30 a.m.: March jobs report released.

l  8:30 a.m.: International trade data released.

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April 4, 2013
SECURITIES
Skilling negotiating shorter prison term

Jeffrey Skilling, the former Enron chief executive serving a 24-year prison term over the energy company’s spectacular collapse, may get a chance to leave prison early.

The Department of Justice has notified victims of Enron’s fraud and 2001 bankruptcy that prosecutors may enter an agreement with Skilling that could result in a resentencing.

Skilling, 59, has served about 6 1 / 4 years in prison following his May 2006 conviction by a Houston federal jury on 19 counts of securities fraud, conspiracy, insider trading and lying to auditors.

It is unclear by how much Skilling’s sentence could be reduced, and a Justice Department official said no agreement has been reached. CNBC, the television business channel, said prosecutors and Skilling’s attorneys have been negotiating a shorter term.

Skilling has maintained his innocence and, according to court filings, has been pursuing a new trial. He is scheduled to leave prison in February 2028, assuming good behavior, according to federal prison records.

Daniel Petrocelli, an attorney for Skilling, could not be reached Thursday for comment.

Once ranked seventh on the Fortune 500 list of large U.S. companies, Enron went bankrupt Dec. 2, 2001. Its demise led to reforms including the federal Sarbanes-Oxley Act of 2002.

— Reuters

FINANCE
‘Negligence’ cited in
MF Global collapse

The “negligent conduct” of chief executive Jon S. Corzine and other officers of the MF Global Holdings brokerage contributed to the firm’s dramatic collapse in 2011, according to a report by the bankruptcy trustee.

Former FBI director Louis Freeh’s report said that the failure of MF Global’s officers contributed to losses of as much as $2.1 billion and adds to the growing number of reports and investigations pointing to their liability.

Freeh has prepared a lawsuit against former executives for breaches of fiduciary duty but had not filed it pending the outcome of talks with a mediator appointed in a separate securities class action, according to the report.

Freeh’s 124-page document blamed the collapse on “the risky business strategy engineered and executed by Corzine and other officers and their failure to improve the company’s inadequate systems.”

A spokesman for Corzine dismissed the report as “Monday-morning quarterbacking” that ignores that Corzine took over a money-losing business and with board oversight began to improve its performance.

MF Global collapsed into bankruptcy in October 2011, less than two years after Corzine, a former New Jersey governor and Goldman Sachs chief, became chief executive.

— Reuters

Also in Business

l  Shares of Best Buy jumped 16 percent Thursday after it announced plans to create store-within-store kiosks for Samsung products at 1,400 Best Buy and Best Buy Mobile stores. Shops will offer the full range of Samsung’s mobile products, including smartphones, tablets, laptops, cameras and accessories. The move shows “a very high-profile consumer electronics vendor still finds Best Buy a relevant distribution outlet,” said Morningstar analyst R.J. Hottovy. It’s also a way for Samsung to carve out dedicated retail space without investing in overhead necessary to open its own stores, such as its chief rival, Apple, has done.

l  Hewlett-Packard, under heavy fire from investors over several recent multibillion-dollar bungles and other corporate missteps, said Thursday that Chairman Ray Lane will give up his post and two other board members will resign. Lane, whom some critics had unsuccessfully sought to oust at the company’s annual stockholders meeting last month, will remain as a director and be replaced on an interim basis as chairman by director Ralph Whitworth. Two other much-criticized directors — John Hammergren and G. Kennedy Thompson — will resign from the board, the company said. Both had narrowly survived a vote to remove them from the board during the March meeting.

l  Travel guru Arthur Frommer has reacquired rights to his travel guidebook brand from Google and said he intends to resume publishing Frommer guidebooks. Google acquired the Frommer brand last summer from the Wiley publishing company, but last month Skift.com reported that Google was “quietly pulling the plug” on publishing Frommer’s books. Frommer, 83, and Google confirmed Wednesday that the brand was returned to its founder. The terms of the deal between Google and Frommer were not disclosed.

l  The Justice Department on Thursday sued a New York mortgage company that it said defrauded the federal government into insuring poor quality home loans, costing taxpayers millions of dollars. In a civil lawsuit filed in Manhattan federal court, the Department of Justice said Golden First Mortgage and its president, David Movtady, “repeatedly lied” to the government between 2002 and 2010 to win Federal Housing Administration insurance for its home loans. Samuel Rosenberg, a lawyer for the defendants, declined to comment.

— From news services

Coming Today

l  8:30 a.m.: March jobs report released.

l  8:30 a.m.: International trade data released.

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