The Centro Director 's Penalty

In this case, there are several conspirators who is involved in the fraud receiving punishment from either SEC or federal government. Robert Levin, the AMRE executive and major stockholder, and Dennie D.Brown, the company’s chief accounting officer, were subject to the punishment in the form of a huge amount of fine by the SEC and the federal government. This punishment came from reasons. After AMRE going public, the company have the obligation to publish its financial reports but its performance did not meet expectation. The investigation by SEC shows that Robert took the first step of this scam, fearing the sharp drop of AMRE’s stock price because of the poor performance of company. He abetted Brown, to practice three main schemes to present a false appearance of profitable and pleasant financial reports. Firstly, they instructed Walter W.Richardson, the company’s vice president of data processing, to enter fictitious unset leads in the lead bank and they originally deferred the advertising cost mutiplying “cost per lead” and “unset leads” amount, so that they deferred a portion of its advertising costs in an asset account. The capitalizing of advertising expenses allowed them to inflate the net income for the first quarter of fiscal 1988. Secondly, at the end of the third and fourth quarters of fiscal 1988, they added fictitious inventory to AMRE’s ending inventory records, and prepared bogus inventory count sheets for the auditors. Thirdly, they overstated the percentage

The Molex Corporation is an electronic connector manufacturing firm, which is based in Illinois. This company is facing a financial reporting problem in which the financial statements were overstated. Joe King ,the CEO of the company, was appointed in July of 2001, and was responsible for managing and inventory control, among other very important duties. Diane Bullock was hired in 2003, to replace the previous CFO. Both Bullock and King were being accused of what? by the external auditors, Deloitte & Touche, for not disclosing an 8 million pre-tax inventory valuation error.

Meanwhile, company officials say they still plan to request a hearing before an administrative law judge instead of the district board. The judge’s decision would be non-binding but could be used in a lawsuit if the board acted against his or her findings.

The SEC’s Division of Corporate Finance will delve into the materiality of the litigation and what was the
reason for omission of the same from the prior year’s 10-K, when disclosure should have been necessary as well. There was no 8-K filed about the matter also which is odd given that a class action lawsuit of this magnitude should be considered a significant

The prosecutor in the case stated his view clearly after the verdict and sentence were pronounced. He was accurate. It was a case of betrayal, he said, "betrayal of CEO's who betrayed the shareholders."

The Appellate and trial court decisions were affirmed and the Court found for the Defendant. The Court held that ‘piercing the corporate veil’ is invoked to ‘prevent fraud or to achieve equity’. In this case the Court found no evidence of fraud, misrepresentation nor illegality. Although the defendant controlled Westerlea’s affairs, Westerlea maintained an outward appearance of aDseparate corporate identity at all times. Further, the creditors were not misled, there was no fraud, and Defendant performed no act to cause injury to the creditors of Westerlea by depletion of assets or otherwise.

Bennett, 47 N.Y.2d 619 (N.Y. 1979) states, “the responsibility for business judgments must rest with the corporate directors; their individual capabilities and experience peculiarly qualify them for the discharge of that responsibility.” In other words, the court will allow some leeway in their corporate decisions due to their background and experience so the business judgment rule will apply. This case presents a three-person select committee that serves on behalf of the entire board of directors to handle special litigation for this corporation. A shareholder’s derivative action was brought against four of the board of directors in which this special litigation committee decided to terminate it. The shareholder’s felt this was unfair since the three-person committee is not a full representation of the board and the shareholders therefore, they should not be able to make those decisions. The three-person committee is unaffiliated with the 15 member board to keep decisions of the corporation fair. The court of appeals found no evidence proving the three-person committee was not unable to represent the full board and is protected by their decisions under the business judgment

RULE: The Delaware General Corporation Law expressly empowers a board of directors to appoint committees and to delegate them a broad range of responsibilities, which may include setting executive compensation. The business judgment rule clearly states that the directors of a corporation should act in an informed and intelligent way. This includes acting on behalf of the company in their honest belief that the action that took place, was in the best interest of the company.

This review will address several issues associated with the legal, business, and ethics related to the case. First, it will address the legality of the case by reviewing the definition and analysis of General Investment (GI) as a holder in due course. Next, this review will analyze the business effects

Rationale: The court found extreme negligence concerning fiduciary duty on the part of the corporate directors because they did

This document is part of a LexisNexis suite of Banking and Finance Law precedents prepared with the assistance of Specialist Editors Geoff Geha Partner, Clayton Utz and Karen Lee, Principal & Consultant, Legal Know-How.

HARRIS, Jason. Relief from liability for company directors : recent developments and their implications. [online]. UNIVERSITY OF WESTERN SYDNEY LAW REVIEW; (12) 2008: 152-175. Availability: ISSN: 1446-9294. [cited 22 Aug 15].

The article “The Strange Case of Long Island Savings Bank - Or How a Contract Self-Destructed into Voidness“ briefly discusses the court case, which involves James J. Conway, Jr., chairman and CEO of Long Island Saving Bank. The article involves everything about the case such as the misdeeds of Conway for his own benefits. Being a CEO and chairman, Conway was also a partner in a law firm. The firm was controlled by him and his daughter. In the firm he also hired his daughter-in-law, who was also the director of the firm and salaried officer.

QSGI Inc. and Mr. Cummings was charged during the time of 2008 and the first quarter of 2009, that he “was aware during the relevant period of deficiencies in and the circumvention of internal controls relating to inventory and the resulting falsification of the Company’s books and records. He also participated in the decision, on occasion during the relevant period, to improperly accelerate by up to a week recognition on QSGI’s books and records of accounts receivable and receipt of inventory in order to increase the borrowing base available under a revolving credit facility with the Company’s chief creditor. Cummings withheld this information from the Company’s external auditors in connection with their audit of the financial statements for the fiscal year ended December 31, 2008 and review of the financial statements for the quarter ended

The Securities and Exchange Commission charged the company with securities fraud for which the company had to pay $50 million penalty which was expected to be distributed to the investors through a Fair Fund. The four former executives who were charged with negligent conduct agreed to settle the case without admitting or denying the allegations: