2006: The year when I was right on!
No false modesty in this final post for 2006. I was right, so, so right. Not that that helped me keep my job, but at least I have this great blog to brag on . . .
I don't copy and paste much from other articles onto this blog. But sometimes another article is so right on, (and supports everything I've written about) that it can't be said any better. So I've decided to reprint such an article.
Perhaps I should also note that the only difference between my opinions and the mainstream media is that I have sometimes pointed out things before the mainstream media have discovered them, and I've apparently also helped a few investors and hedge funds see through the corporate hype, which they have gratefully written to this blog about. I may also, on occasion, have expressed myself in a more forthright manner than the very polite regular press. Funny thing, though, that same press didn't mind using a strong language after the fact (who thought the WSJ would pen a headline "Off with their heads" as they wrote about Hank Mckinnell and Pfizer). But the same press rarely used such words before the action.
Anyway, I won't keep you in suspense any longer; here is the end of the year corporate summary, from the superb financial journalist Gretchen Morgenson at the New York Times, confirming pretty much everything this blog has written about in 2006. And Gretchen is pretty forthright. She could almost start writing for this blog.
The New York Times
December 31, 2006
A Year to Suspend Disbelief
AS 2006 recedes and investors ponder another round of amazing events in the business world, one theme keeps recurring. It was a year when truth was more audacious than fiction.
A hedge fund loses $6 billion in a week. A chief executive receives an $82 million pension after his company loses billions in shareholder value. A board chairwoman snoops on her fellow directors and journalists. Authorities discover that a throng of executives have spent years shifting stock option dates to fatten already-bulging paychecks.
Not one of these scenes would have been credible had it appeared in a novel. Real life, however, is another matter. And in 2006, investors had to suspend their disbelief almost daily.
It was also a banner year for C.E.O.’s heading to the slammer. Jeffrey K. Skilling, the former chief executive of Enron, was sentenced to 24 years in prison for his role in the fraud and conspiracy at the company.
Sanjay Kumar, former chief executive of Computer Associates, received 12 years’ imprisonment after pleading guilty to fraud and obstruction of justice for participating in a $2.2 billion accounting debacle at his company.
David C. Wittig, former chief executive of Westar Energy, a Kansas utility, got an 18-year sentence for looting millions from the company.
And Stuart Wolff, founder and chief executive of Homestore, an online real estate listings concern, was found guilty of insider trading, lying and conspiring, and received a 15-year sentence.
Happily, as each former executive toddled off to jail, the stock market put in a stellar performance. The Standard & Poor’s 500-stock index rose 13.6 percent for the year and the Dow Jones industrial average even surpassed its Internet bubble high seen back in 2000.
Anthony Trollope, the brilliant depicter of the 19th-century social strata in England, would have appreciated the events of 2006, when truth trumped fiction. And in honor of the rogue at the center of “The Way We Live Now,” the Trollope novel, here are the Augustus Melmotte Annual Prizes.
Mr. Melmotte, who would have been quite at home on the Wall Street of today, was a financier of questionable background who rose in London society on ill-gotten gains. Until, that is, he was found to be a fraud.
The envelopes, please.
THE ‘WHAT WOULD STALIN DO?’ AWARD To Robert L. Nardelli, the lushly compensated chief executive of Home Depot, who ran the company’s annual shareholder meeting like a Gulag chief. No directors appeared, and Home Depot limited questions from its owners to just one per person — and they couldn’t last longer than a minute. When a questioner asked about board independence and conflicts of interest, Mr. Nardelli replied: “This is not the forum in which to address these comments.”
Mr. Nardelli later apologized for the performance. But the damage was done. In late December, an activist shareholder announced plans to propose in 2007 that an independent committee assess Home Depot management. Stay tuned to see if he’ll be forced to make his proposal at the meeting in one minute or less.
THE ‘WHERE ARE SHAREHOLDERS’ PENSIONS?’ AWARD To Hank McKinnell, the former chief executive of Pfizer, who received an $82 million pension even as shareholders lost $137 billion on his watch. But that wasn’t all Mr. McKinnell received. Just before Christmas, Pfizer disclosed that he would receive about $200 million in stock, pension, deferred compensation and perquisites upon his departure from the company. Shareholders even had to pay $305,644 to cover Mr. McKinnell’s unused vacation days. Cheesy.
THE DOG ATE MY E-MAIL AWARD To Morgan Stanley, accused by regulators at the NASD of using the 9/11 attacks on the World Trade Center as an excuse not to cough up e-mail records that aggrieved clients needed for their arbitration cases. In fact, millions of these supposedly destroyed e-mails were available shortly after the disaster but were not produced for investors. The case was the latest in a string of stonewalling tactics by the firm.
THE THREE TIMES A CHARM AWARD To federal prosecutors who won a conviction of Walter A. Forbes, left, the former chief executive and head book-cooker of the Cendant Corporation, on the third try. Mr. Forbes, whose fraud occurred so long ago — eight years — that it is barely remembered, awaits sentencing. When he resigned from the company long ago, he said he would repay his $47 million in severance if he were convicted of a crime. Anyone think that promise will be kept?
THE OWNERS DON’T MIND A LITTLE CHISELING AWARD To Dr. William W. McGuire, founder and former chief executive of the UnitedHealth Group, who came under fire for receiving stock options that were artificially backdated to bolster their value. Speaking to The Associated Press in April, six months before he resigned under pressure from the company, Dr. McGuire played down his well-timed option grants with this comment: “This isn’t a giveaway of money that occurs out of the premiums of health care recipients. These are shareholder dollars.” Well, in that case, go right ahead.
THE HOW TO BLOW THROUGH $6 BILLION AWARD To Amaranth Advisors, a hedge fund that said it was up 25 percent one day and that was practically kaput the next week. Wrong-way bets on natural gas prices made $6 billion evaporate almost overnight. It takes skill to lose that much money that fast.
THE FOLLOW THE MONEY AWARD To James B. Lockhart III, the director of the Office of Federal Housing and Enterprise Oversight, who sued Franklin D. Raines, the former chief executive of Fannie Mae, the mortgage giant, to recover about $85 million in bonuses he received but did not earn. After the oversight office spent more than two years dissecting the giant accounting fraud at Fannie Mae, the company had to reduce its earnings from 2001 to 2004 by $6.3 billion. By suing Mr. Raines and two other executives, Mr. Lockhart hopes to get back some of the bonuses generated by the fraud. Congratulations, Mr. Lockhart. Perhaps your suit will encourage similar actions at other companies.
THE BUNGLING GUMSHOES AWARD To Patricia C. Dunn, right, the former chairwoman of Hewlett-Packard, and her band of goofy snoops who failed in their efforts to identify and punish a board member considered too talkative. Ms. Dunn oversaw the hiring of private investigators who improperly secured directors’ phone records as well as those of financial and technology reporters. The company also tried to dupe a reporter into revealing sources through the use of a tracking technology embedded in an e-mail message.
The California attorney general’s office charged Ms. Dunn with four felony counts in connection with the snooping; she has maintained her innocence and is contesting the charges, arguing that company lawyers had approved all the fun and games — proving yet again that what is legally defensible is not always sensible.
HAPPY NEW YEAR TO BIG BLUE AND ALL THE OTHER BIG CORPORATIONS WITH CORPORATE COMPLIANCE OFFICERS, BLUE BOOKS OF BUSINESS ETHICS, COMPLIANCE GUIDELINES, ETHICS HOTLINES, OPEN DOOR POLICIES, EMPLOYEE SURVEYS WITH LEADING QUESTIONS AND DELETED UNCOMFORTABLE QUESTIONS, AND OTHER BULLSHIT TO MAKE US BELIEVE YOU ARE REALLY REALLY REALLY HONEST.
WELCOME TO 2007.