Ethics Newsline®

NEW YORK
Wall Street weathered high drama last week, with legal reversals, financial disclosures, and a high-profile settlement putting the spotlight on alleged insider dealing and negligence. Among the developments:

• A federal judge last week scuttled January’s highly publicized settlement requiring 10 former WorldCom directors to ante up $18 million in personal funds for failing to spot bookkeeping fraud at the telecom giant. The deal, which cleared the directors of any further liability, was rejected on a technicality, with the judge saying it unfairly left 16 investment banks holding the bag for the whole fraud when the case goes to court. Due to last week’s decision, the 10 directors may face even higher penalties if the case goes to trial, as scheduled, at the end of the month, reported the Washington Post.
• An independent report into the salary and benefits awarded to ousted New York Stock Exchange (NYSE) head Richard Grasso last week slammed both Grasso and the NYSE board for poor governance and excessive payments. The so-called Webb Report claimed that Grasso had improper and “unfettered authority” to select the board members determining his compensation, leading to a committee populated by people “with whom he had or developed friendships or personal relationships.” The report said Grasso also chose people who were highly paid and therefore unlikely to object to his own unusually high compensation, which the report said was “far beyond reasonable” to the tune of an excessive $113.6 million, reported the New York Times. New York State Attorney General Eliot Spitzer sued the NYSE last May in a bid to force the return of much of Grasso’s pay.
• Spitzer also made headway in his efforts seeking atonement for alleged collusion by the world’s largest insurance broker, Marsh & McLennan Cos., which agreed last week to a settlement of $850 million. The payment will be used to compensate the firm’s U.S. clients from 2001 to 2004, reported the Reuters news agency. The settlement, which did not require the company to admit wrongdoing, is roughly equal to the $845 million in fees collected by Marsh on transactions linked to alleged bid rigging.