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That's a lot of fraud

Did you know that the president has a Corporate Fraud Task Force? That's right, he does. It's led by the deputy attorney general, whoever that is.

Anyway, this task force has apparently been very busy. Over a five-year period since its inception, the task force claims 1,236 corporate fraud convictions, including 214 CEOs and presidents, 53 CFOs, 23 corporate counsels, and 129 vice presidents.

That's a lot of fraud. Who knew there were so many dysfunctional executives in this great nation? The dark side of greed and capitalism must be pretty attractive, huh?

I also wonder … Read more

Former CEO of body-armor maker indicted in $200 million fraud

Just when you think you've seen it all and covered this stuff to death, another (alleged) greedy sociopath comes along with even more creative ways of defrauding investors.

David Brooks, former CEO of body-armor manufacturer DHB Industries, has been indicted by the feds on a laundry list of charges that include conspiracy, securities fraud, insider trading, tax evasion, and obstruction of justice.

The company's former COO, Sandra Hatfield, and CFO, Dawn Schlegel, were also indicted on similar charges.

Brooks and his cronies allegedly (it's always allegedly) used false accounting entries to inflate profit margins, filed misleading SEC reports, pumped up the company's stock ten-fold, and cashed out to the tune of $200 million.

The scandal also includes millions in unreported bonus payments and Brooks' use of company funds for all the usual personal excesses: luxury cars, vacations, jewelry, lavish parties, and to fund other family-owned businesses. But there are excesses I've never seen before: cosmetic surgery and the purchase of an armored vehicle for the family's use.

I've got to ask, what exactly does a family need an armored vehicle for?… Read more

The seven deadly sins of corporate dysfunctionality

This blog's supposed to be about corporate dysfunctionality, but somehow we've gotten sidetracked. We've never really looked at the big picture. The big picture is this: a reasonably significant percentage of executives and their boards are dysfunctional.

What do I mean by that? I mean they shouldn't be doing some of the things they're doing, and those things can get them in big trouble with a variety of law enforcement agencies. Why do they do it? Who knows.

As for you good folks--investors and employees--well, I don't want to be an alarmist, but if … Read more

Why mergers fail

Mergers and acquisitions, M&A, business development, strategic development, corporate development, there are lots of names for the business of acquiring companies. They all sound important, even exciting. But whoever said, "may you live in exciting times," didn't necessarily mean that to be a prophecy of good things to come.

On the contrary, if you're like most investors, employees or executives, it's more of a curse. You see, in the corporate world, exciting usually means risky. And there's probably nothing riskier or more prone to failure than merging with another company.

I can … Read more

More unsolicited advice for CEOs

I realize that the advice I give CEOs may fall on deaf ears. Still, that's a lot of ears; they can't all be deaf. And if a board director, a staff member, a good friend or a gutsy employee was to forward this link, isn't a good CEO obligated to at least take a look? I know, I won't hold my breath.

Still, the CEOs of the future need to know this stuff. Now that's a thought.

Assuming somebody's getting something out of all this, today's unsolicited advice is about the business. Many technology CEOs are surprisingly short on what it really takes to build a profitable, growing company in today's competitive marketplace. This is the biggest challenge for any CEO of any company. It's not the kind of thing you learn in executive MBA school.

In many cases, and this is especially true in small- to mid-size technology companies, CEOs play to their strengths and ignore weak areas. It's human behavior. Unfortunately, they're not getting the guidance they need from their boards or others.

And that brings us to what is, without a doubt, the shortest version you'll ever see of what every CEO of every technology company needs to know about running the business, along with a few links for more info.… Read more

CEO exit packages are out of control

When most of us quit a job, we give two weeks notice, collect our final check and we're out the door. Maybe we have some stock options to exercise within 30 days, but that's about it. When we get fired it's even simpler - same thing except no notice.

In a prior post, we discussed strategies for negotiating an exit package - a sort of self-inflicted layoff. If you're lucky and a great negotiator, that might get you a few months of salary, stock option vesting, and extension of benefits, depending on your management level and longevity with the company.

So, when we exit a company through whichever door, we're talking a few thousand bucks if you're a regular Joe, maybe up to six figures if you're a VP who's been with the company a while.

CEO exit packages are similar in concept to those mere mortals might hope to negotiate, but that's where the similarity ends. The end result is more like hitting the lottery.… Read more

Are technology CEOs overpaid?

CEO compensation. That's all you have to say to get some people jumping up and down, screaming, and sputtering like raving lunatics. Me, I'm not sure how I feel about executive pay. After all, I was an executive, even a CEO, however briefly. But don't hold that against me.

In any case, I'll try to come up with an objective position by the end of the post.

In the meantime, let's take a look at some CEOs of high-profile, publicly traded technology companies. To be sure, these folks have some things in common. They shoulder a great deal of responsibility and risk; they have really tough jobs; and like it or not, they make tons of dough.

Do shareholders always get their money's worth? Well, not exactly.

Let's start with Mark Hurd of Hewlett-Packard. In fiscal 2006, Mark's total compensation--including equity-based compensation--was at least $19 million. That's a lot of money, right? Let's reserve judgment for the moment.

HP's performance during that time frame was $92 billion in revenue, $6 billion in net income, and $2.18 earnings per share. The stock responded accordingly; shareholders were treated to a market cap gain of $28 billion. For every dollar earned, Hurd returned roughly $1,500 to shareholders. I'd say he earned his keep.… Read more

Rambus' board and the CEO's wife

Rambus needs more controversy and scandal like the Internet needs more bloggers and porn. As mired in legal trouble as this company is, you've really got to do something egregious to get noticed.

According to a story by The Recorder, a California legal paper, the wife of Rambus CEO Harold Hughes did just that. Nancy Hughes anonymously posted 170 messages on a popular investor message board over a 10-month period. In her posts, clarissamehitable--alias Nancy Hughes--vigorously defended her embattled husband, and criticized current and former members of the company's management team.

Nancy's posts were so obviously those of a Rambus insider that they aroused not only the suspicion of other posters on the board, but company officials, as well. Rambus brought in outside legal counsel to head up an investigation, which ultimately turned up none other than Hughes' wife.

According to a company spokeswoman, Rambus' board of directors concluded that there was no wrongdoing on the part of either Hughes.

What's troubling is that Nancy was pegged as an insider for good reason. If some of her posts were not inside information, they certainly appear to come razor close to crossing the line. And there's evidence that someone may have removed some of her posts from the message board.

Full disclosure: I was an executive officer of Rambus from 2002 to 2003 and I am a shareholder. I have never posted on an investor message board and neither has my wife...as far as I know.… Read more

Wanted: ethically challenged workers for executive positions

Ever wonder where your career is heading? Well, let me ask you this:

Are you capable of moral flexibility? Good at covering things up without getting caught? Know what plausible deniability is? Then you just might be a candidate for executive management.

Or, are you in a complete state of denial about your future, a goody two shoes content to let management use you for toilet paper for the next 10 or 20 years?

Want to know what the future holds for you? Then get out your pen and paper and take this quiz, if you dare. Scoring is at the end. Hey, no cheating!

1. Corporate fraud happens: a) rarely b) more often than you think c) sooner or later d) whenever the greedy SOBs can get away with it

2. Executives who defraud shareholders should be: a) slapped on the wrist b) fined c) fined and imprisoned d) forced to watch reruns of The Anna Nicole Show

3. Greed is: a) what I live for b) for lack of a better term, good c) fine in moderation d) the sin of capitalist dogs; long live Karl Marx and the revolution

4. Most board directors: a) have shareholders' interests at heart b) do a reasonably competent job of oversight c) are bought and paid for by the CEO d) are tired old farts that are desperate to be relevant

5. Executive compensation in corporate America: a) is reasonable, CEOs deserve what they get b) is a little hard to swallow, sometimes c) is excessive and out of control d) inflames my hemorrhoids every time I read a proxy statement

… Read more