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Backdating Deflating: William McGuire Gives Back $620 Million, Criminal Prosecution Unlikely

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Although it was billed as the latest financial crime of the century, backdating is turning out to have some very minor results. Few prosecutions, stalled or failed lawsuits and increasingly fading from its never prominent place in the ranks of public concerns. But this doesn’t mean the panic hasn’t had serious costs. Public companies have lost a number of top executives and a handful of the accused have been actually prosecuted as criminals
Yesterday we got the news that former UnitedHealth Group executive William McGuire had agreed to forfeit $620 million in compensation to settle backdating is giving back $620 million in compensation to settle backdating claims. It’s unlikely that he will face any criminal charges.
As Larry Ribstein points out today, this is in marked contrast to the fate of Brocade's former hr director, Stephanie Jensen, who never personally benefitted from backdating but who was found guilty of two criminal counts. “In one the chief executive and main beneficiary likely will walk away with hundreds of millions of dollars. In the other, an underling who didn't profit from the offenses likely will go to jail,” Ribstein points out.
The point isn’t that McGuire needs to serve jail time. Rather, the point Ribstein is making here is that the criminal process is wildly inappropriate for these kind of cases. It amounts, Ribstein writes, to a corporate crime lottery: the winners pay fines and the losers go to jail.
“These two cases are only the most recent examples of the lottery in action. Not much is gained from criminalizing this conduct over the many remedies, including the corporation's own right of recovery, available for any wrongs that occurred (mostly inadequate disclosure). But much is lost from the odor of injustice that wafts over these disparate results,” he writes.
The backdating lottery continues [Ideoblog]