Criminal Capitalism The Story of 2006
Date: Monday, January 01 2007
In business the stories of 2006 that dominated the news were about the continuing expose of criminal capitalism, as a way of doing business.
Not as an abberation but as the way business is done, until someone is caught.
Whether with their fingers in the till or by refusing to pay for services rendered.
Though this business review missed my favorite story about the high tech media company that gave out backdated stock options to dead board members. Even Joe Volpe couldn't top that.
Corporate Crime Was the news story of 2006.
"Conrad Black missed his three-peat as Canadian Business Newsmaker of the year, finishing a solid second behind Finance Minister Jim Flaherty, while the fallen media lord awaits trial in March in Chicago on charges of racketeering, money laundering, fraud and tax evasion.
But Black enlivened 2006 with a theatrical libel case against biographer Peter Newman, winning a statement of regret and dropping a $2-million lawsuit. Later in the year, the publishers of a new muckraking Black biography gleefully quoted his published opinion of the book in their advertising: "smut-mongering... malodorous pot-boiler... sewage."
In a more uplifting piece of litigation, Victoria's Secret sued Canadian lingerie retailer La Senza in March, seeking $1 million for alleged violation of its push-up-bra intellectual property. The suit was dropped late in the year as Victoria's Secret parent company Limited Brands bought La Senza for $710 million.
The year's corporate legal misadventures featured an admission in May by WestJet Airlines that its "highest management levels" were involved in a scheme to steal sensitive information from Air Canada, which had sued for $220 million. WestJet paid $5.5 million in costs and made a $10-million donation to charity.
Canadian-born former WorldCom CEO Bernie Ebbers, 65, drove his Mercedes-Benz up to the gates of a Louisiana prison to start a 25-year term for the telecom company's US$11-billion fraud.
On the same late-September day, Andrew Fastow was sentenced to six years for his role as chief financial officer in the 2001 collapse of Enron Corp. A month later, ex-Enron CEO Jeffrey Skilling got a 24-year sentence.
Enron founder Kenneth Lay had died of heart failure in July, after being convicted with Skilling in the massive fraud.
America didn't have a monopoly on the fallen mighty: the founder of Korea's collapsed Daewoo conglomerate, Kim Woo-choong, was sentenced to 10 years for embezzlement and fraud. He was also ordered to disgorge US$22 billion.
And Hyundai Motor chairman Chung Mong-koo spent two months in jail before apologizing for setting up slush funds with embezzled money.
Lower on the pecking order of commercial criminality, a California couple who put a severed finger into a bowl of Wendy's chili and tried to extort money from the fast-food chain received prison sentences in January. Jaime Plascencia got a 12-year term and Anna Ayala received a nine-year sentence. On the bright side, she bragged that other prisoners were asking for her autograph.
Wendy's International was in the news again in March when it spun off Tim Hortons Inc. in an initial public offering that had investors lining up like deprived caffeine junkies at Canada's favourite doughnut-shop chain. The issue price in Toronto was $27 and the stock peaked at C$37.99 on its first day. It dipped under $27 during the summer before ending 2006 in the $33 range.
Back on the crime beat, as gasoline prices topped US$3 a gallon last spring, service stations across America reported fuel-related offences ranging from driving off without paying to posing as an employee and draining gasoline from underground tanks.
It was the worst of times for David Edmondson, who resigned as CEO of Radio Shack in February after it came to light that his claim to have university degrees in theology and psychology was false. His departure came after a 62 per cent tumble in the U.S. electronics retailer's quarterly earnings. In June, Edmondson was sentenced to 30 days in jail for drunk driving.
In another case of impaired judgment, Jim Whitehouse, a former RBC Dominion Securities vice-president, had his wrongful-dismissal suit quashed. He had been fired for drunkenly taking a prostitute to the firm's Calgary office at night and leaving her there alone after a dispute over her fee."
[Proofreader's note: this article was edited for spelling and typos on January 2, 2007]