Lawyers Want Dishonest Corporate Execs to Return Illegal Earnings
DALLAS – In the wake of the corporate meltdowns that have rattled consumer confidence and the stock market, lawyers for both investors and employees of the fallen companies want greedy CEOs to cough up some cash.
Attorneys representing investors and employees from embattled firms like Enron and Global Crossing (GBLXQ) think it's only fair that the CEOs who contributed to their ruin hand over some of the money they made at the companies' expense.
"The amount of personal wealth that has been extracted from companies by some executives is obscene," said Lynn Sarko, a plaintiff’s attorney from Kellor and Rohrback. "It’s clearly obscene when the company fails or crashes or there is massive fraud on that executive’s watch."
Critics point to the residence of former Global Crossing CEO Gary Winnick -- which happens to be the most expensive home in Los Angeles. Winnick earned a staggering $600 million in the three years before the company went bankrupt.
The $19 million interest-free loan received by former Tyco International (TYC) head Dennis Kozlowski -- a debt that was eventually forgiven -- has also raised more than a few eyebrows. Tyco, which is currently under investigation, has been brought up on numerous charges, including a claim that executives didn’t disclose their true compensation levels.
And who can forget the luxury homes of former Enron execs, who netted millions in stock sales and bonuses, just before the company went bankrupt and laid off thousands of employees?
"It’s fair game to go after personal assets," said Thomas R. Ajamie, attorney at law from Schirrmeister Ajamie LLP. "You don’t see it a lot, so Enron may be breaking new ground."
Legal observers say plaintiffs will have to show that a CEO intentionally withheld or presented misleading information to investors.
"Our system depends on being able to make claims in a courtroom," said Jacks C. Nickens, an attorney for Enron executives. "Then it will be more easily determined what is fair."
The suits are especially difficult in states where laws allow defendants to protect much of their wealth in their homes.
Some say no lawsuit can touch former Enron chief Kenneth Lay, who lives in a $7 million Houston condo.
"You cannot go after a homestead in Texas," said Wayne Risoli, a litigation manager at Chamberlain, Hrdlicka, White, Williams & Martin. "You see these officers in Florida, Tennessee and California building $50 million houses. Those will always be their assets."