September 19, 2006
Deferred Prosecution Agreement
At least 16 publicly traded companies have agreed to deferred prosecution agreements to protect the themselves from criminal indictment. Many of the agreements put a court-approved overseer in place to monitor the company's compliance with the agreement's requirements. This is not a harmless move. The overseer at Bristol-Myers Squibb, a former federal district court judge Frederick B. Lacey, was apparently instrumental in the firing of the company's CEO. The rub is that the CEO did not violate any provisions in the deferred prosecution agreement; the CEO, according to the New York Times (Stephanie Saul, "A Corporate Nanny Turns Assertive" (great piece Stephanie!)), was responsible for a poor "corporate culture" of "secrecy and poor internal communications." In essence, a retired federal district court judge fires the CEO for screwing up a patent dispute negotiation because the CEO did not run the details of the negotiation by the board. The second guessing was easy; had the CEO run the negotiations by the board the board would have helped him put together a successful deal. No business judgment rule here. The lesson is also easy for CEOs: turn a former federal district court judge free in your company and you had better be perfect in your business decisions as well as your legal compliance.
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Is there a list somewhere of all the publicly traded companies who have entered into these agreements? Or just companies in general who have entered into these?
Posted by: Moe | Sep 22, 2006 3:16:27 PM