An AP story (here) quotes Attorney General Alberto Gonzales as stating that W. Mark Felt probably will not be prosecuted for his disclosures as "Deep Throat" to Washington Post reporters Woodward and Bernstein.  Gonzales noted that the DOJ "has a lot of other priorities."  Imagine prosecuting a 91-year-old man for helping to bring down a corrupt President (regardless of his motivation at the time, which was likely tied to his loyalty to J. Edgar Hoover) — in a District of Columbia courtroom, no less. "Well, duh!" (as a teenage member of my household would happily say). (ph)

Christine Hurt on the Conglomerate blog (a very worthwhile read) has a review (here) of the movie Enron: The Smartest Guys in the Room, along with an interesting commentary interchange with John Steele (including reference to Body Heat, perhaps the only movie that hinges on the Rule Against Perpetuities).

Things at venerable Wall Street investment bank and brokerage firm Morgan Stanley aren’t going particularly well these days.  There is a fight between the old guard from the investment banking side of the firm (called the "Group of 8") seeking the ouster of CEO Phillip Purcell, who comes from the brokerage side of the firm (Dean Witter and all those nattering clients).  This week, a jury in Florida hit the firm with a $1.45 billion judgment for defrauding Ronald Perelman in the sale of Coleman Co. to Morgan Stanley client Sunbeam (see earlier posts here and here), a corporation the was cooking its books while buying the maker of (among other things) grills — there’s something ironic in there, but I’ll leave it be for now.  So, when things go bad, what’s a company to do?  Why, try to punish the media for reporting all this information, of course, and make sure former employees say good things about you.

From the blog PR Machine (here) comes an amendment Morgan Stanley is sending to media outlets at which it purchases advertising: "In the event that objectionable editorial coverage is planned, agency must be notified as a last-minute change may be necessary. If an issue arises after-hours or a call cannot be made, immediately cancel all Morgan Stanley ads for a minimum of 48 hours."  God forbid the media be critical of a company that keeps shooting itself in the foot . . . oops, I think that’s objectionable editorial coverage.  Darn!

In order to maintain support among even its departed troops, Morgan Stanley revealed the following terms of a severance agreement with two former senior investment bankers, one of whom is the highly regarded Joseph Perella, that explains what is meant by "good behavior" to earn a bonus payout from the firm (Form 8-K here):

"Good Behavior" means that (1) through December 31, 2005 (a) the individual has not committed any act that would constitute a "Cancellation Event" (as defined in the applicable settlement and release agreement) and (b) unless waived in writing by the Board of Directors of the Company, the individual will not support or associate himself with the so-called "Group of 8" or become part of any  management team sponsored by such group and (2) through the Termination Date the individual (a) proactively assists in key employee retention efforts, (b) supports the Company and his colleagues in a positive manner, (c) assists in client relationship efforts where helpful or necessary, (d) remains employed by the Company (unless sooner terminated by the Company) and (e) assists in the orderly transition of his duties.

One for all and all for one, especially when it’s worth a $6.4 million bonus. (ph)

Are the Boy Scouts having issues?  According to the Atlanta Jrl Constitution here, an audit is examining the reporting of membership in the Boy Scouts.  The AJC article, although speaking mainly to the Atlanta area, also notes that:

"The FBI is looking into allegations of membership inflation involving the Greater Alabama Council, which governs troops in the northeastern part of that state. Membership rolls in Tampa, Dallas and Oregon also have been questioned."

If the investigation finds evidence of inflated reporting to "boost financial support," will DOJ be looking to prosecute the Boy Scouts and will the investigation be of individuals or the organization?  Is there a local United States Attorney who would be willing to present evidence to a grand jury to investigate these allegations? 

(esp)

Unfortunately, it sounds like there might be some outside interference in the upcoming David Rosen trial (reported here) that starts today. Yahoo reports here that "A conservative watchdog group with a history of dogging the Clintons urged a Senate panel on Monday to investigate Sen. Hillary Rodham Clinton over a Hollywood fundraiser for which a former staffer faces charges." 

The Rosen indictment, however, appears to present a different picture.  There is NO mention in this indictment of Clinton’s involvement in any criminal activity  and there is NO mention in the indictment of her overseeing this individual in any criminal activity.   The indictment even goes so far as to omit her name.   

Perhaps the most fascinating aspect of the Yahoo report is that it reports that "Judicial Watch President Tom Fitton" was "equat[ing] her situation with the ethics controversy surrounding House Majority Leader Tom DeLay, R-Texas, who has been criticized for privately funded travel." We reported on Tom DeLay’s financial issues here.

Hopefully, politics will not interfere in the trial of David Rosen, who stands charged with four counts of a 1001 violation.  It’s a sad day when politics becomes a part of our criminal justice process.

(esp)

This trial will definitely be a "must watch" for those who enjoy media related trials.  According to the New York Times, "David F. Rosen, the former fund-raising director for Senator Hillary Rodham Clinton, will go on trial on charges that he illegally underreported the cost of a fund-raiser held for Mrs. Clinton’s 2000 Senate campaign." (see here)  The site for the case is LA, and the essence of the case as noted by the New York Times are allegations that Rosen " falsely reported that the gala cost $401,419 when it actually cost at least $1.2 million." 

One has to feel sorry for those who become targets because they are associated with prominent people who are constantly being scrutinized.  On the other hand, one who associates with people of this stature must realize in advance that someone will always be looking over their shoulder on every move they make.  The question here will be whether Rosen can standup to this scrutiny and walk out of the courtroom even after every piece of paper is fully examined. 

On the sidelines of this case you have some who are just ready to jump on any word, phrase, or comment that tarnishes the name of Hillary Clinton.   Interestingly, I have to give the prosecutors in this case applause for trying hard to keep some of the politics out of the case.  The indictment speaks to "Senator A." (see here).

(esp)

The Washington Post presents a very compelling article here on who paidd for Rep. Tom DeLay’s  trip in 2000 to Scotland and England. They even seem to have the documentation in that the article states,

"The documents obtained by The Washington Post, including receipts for his hotel stays in Scotland and London and billings for his golfing during the trip at the famed St. Andrews course in Scotland, substantiate for the first time that some of DeLay’s expenses on the trip were billed to charge cards used by the two lobbyists."

Several interesting things here: 

1) Why is a newspaper doing the investigation as opposed to the law enforcement or others; and if others are investigating why is it taking so long – the alleged year is 2000?

2) Are we talking possible ethics violations, or could criminal charges be considered here?  18 USC 1346, the "intangible right of honest services," permits mail and wire fraud charges merely on a material, intentional, deprivation of honest services that uses an "interstate carrier," the mails, or the wires. It’s an absurd statute that permits prosecutors incredible breadth to charge conduct that might normally not be considered criminal – conduct that is merely unethical.  Although, some judges have appropriately dismissed prosecutorial charges that have been premised on mere unethical behavior. 

3) The Washington Post states regarding DeLay that, "[h]e has also said he had no way of knowing that any lobbyist might have financially supported the trip, either directly or through reimbursements to the nonprofit organization." The "ignorant CEO defense"? 

4) If it had occurred in NY would Spitzer be investigating it?

(esp)

Viacom Inc. disclosed the pay packages for its top three executives, and I think they are offensive, although certainly not criminal because the company’s board approved them and the information has been properly disclosed. The company’s proxy statement, filed yesterday with the SEC (available here), discloses that Sumner Redstone, the CEO and controlling shareholder (he owns 71% of the Class A shares), and co-presidents Tom Freston and Leslie Moonves, received the following compensation in 2004 (amounts rounded):

Redstone:  Salary $5m, Bonus $16.5m, and Stock Options $34.5m = $56 million

Freston:  Salary $4.2m, Bonus $16m, and Stock Options $32.1m = $52 million

Moonves:  Salary $5.7m, Bonus $14m, and Stock Options $32.1m = $52 million

These payments came during a year when Viacom’s stock price declined over 15%, and the company’s market capitalization dropped $17.5 billion.  The company stated that executive compensation is not tied to the stock price, a measure that led executives at other companies to pump up their earnings to inflate their stock price.  That said, it’s hard to figure out the basis for such generous compensation, especially when Freston and Moonves are sharing a job previously held by Mel Karmazin alone.  Just to add fuel to the fire, Freston and Moonves were reimbursed by the company for the amount it would have cost to put them up in hotels while staying at homes they own in Los Angeles and New York, respectively.  There’s nothing like getting paid to sleep in your own house.  The members of Viacom’s compensation committee are: Robert D. Walter (Chair), Jan Leschly, Frederic V. Salerno, and William Schwartz. No, avarice is not a crime, although it can certainly lead to it. (ph)