Eisner Award Winner
From Nicholas Kristof at helenair.com:
I'm pleased to announce the first annual Michael Eisner Award for Corporate Misgovernance....
So I've decided to offer my own prize for executive greed. My aim is to honor those who, in the spirit of Eisner's pioneering achievements in rapacity, have been so visionary in ripping off shareholders and aggrandizing themselves that they deserve special recognition.
The winner of the Eisner award will receive a shower curtain, in honor of the $6,000 floral-patterned shower curtain that Tyco's shareholders unwittingly bought for their former CEO, Dennis Kozlowski. This year's grand-prize shower curtain is a lovely translucent model that comes with metal grommets to prevent tearing, suction cups to stick to the wall, and even an anti-mildew treatment! And it cost just $5.96....
The winner of the first annual Michael Eisner Award is Andrew Wiederhorn, the chairman and chief executive of the Fog Cutter Capital Group, a publicly held company based here in Portland. Actually, as the company's Web site notes, without further explanation, "Wiederhorn is currently on a leave of absence from the company."
Yes, he is on leave — because he's in federal prison....
A year ago, facing indictment on dozens of charges that could have sent him to prison for life, Wiederhorn pleaded guilty to federal charges related to an unlawful gratuity and filing a false tax return. He was sentenced to 18 months in prison and required to pay $2 million in restitution.
That's when the Fog Cutter board displayed spine-tingling chutzpah. The board announced that it would continue to employ Wiederhorn at full salary while he is behind bars, and it even granted him a leave of absence payment of $2 million to make up for the restitution he had to pay. Nasdaq was so disgusted that it delisted the company....
Lanny Davis, counsel to Fog Cutter...[said that] the Fog Cutter board is acting in the interest of shareholders by keeping Wiederhorn happy so that he will return to the company after his release in October. "He's the genius behind the company," Davis said.
And that, I think, is the problem: Corporate America has nurtured a cult of chief executives, hailing them as geniuses and then excusing their misconduct and megalomania....I can't think of a board that has ever so disgraced the principles of corporate governance by overpaying a CEO even as he sits in prison....
Williamette Week Online dug into some of the sordid details back in June 2004:
Here at the Rogue Desk, we consider Wiederhorn one of the outstanding con artists of the decade. But he was aided and abetted by a cast of minor-league bozos, buffoons and bumblers who, we believe, deserve broader recognition:
There's Grayson, whose complex deals with Wiederhorn were first disclosed by WW in October 1998, and his son, Barclay, who covered up his dad's desperate financial position from rank-and-file union members who invested their retirement funds with them. There are the corrupt union officials who looked the other way while enjoying hunting and fishing expeditions on the Graysons' dime.
But most galling is the behavior of Fog Cutter's board of directors. In theory, the board of a publicly traded company is supposed to look after shareholders' interests. In fact, these six pinheads gave Wiederhorn a platinum parachute. It didn't hurt that one of the directors, Donald Berchtold, is Wiederhorn's father-in-law. Another, University of Southern California business school prof David Dale-Johnson, was recently given a job at Fog Cutter. A third, Ray Mathis, is an ex-FBI official and former head of the Citizens Crime Commission, a local nonprofit whose 2003 awards ceremony was underwritten by--you guessed it--Fog Cutter. Paging Eliot Spitzer....
The Portland Tribune dug into some of the legal (or illegal) aspects of the arrangement later in 2004:
Federal prisons don’t allow inmates to conduct business while they’re in prison. They don’t even allow them to talk to visitors, make phone calls or e-mail or write letters about any aspect of their business while they’re in prison....
[W]ritten statements from Fog Cutter, and the language of Wiederhorn’s “leave of absence” agreement, strongly implied the company would be using Wiederhorn’s knowledge and expertise during his prison time....
And that expectation seems to jibe with parts of the 4,000-word white paper that the Fog Cutter board released early last month in the wake of local and national outrage over the company’s leave of absence agreement with Wiederhorn. That agreement called for keeping Wiederhorn as co-chief executive of the company, continuing to pay his $350,000 annual salary and giving him the $2 million leave of absence payment.
The $2 million matched the amount that Wiederhorn, in his guilty plea, agreed to pay as restitution to those victimized by the collapse of Portland investment firm Capital Consultants....
[T]he language of the leave of absence agreement with the board states that during his prison time Wiederhorn would "to the extent reasonably possible, continue to assist the company’s interim and existing management, respond to questions and inquiries concerning the company’s business, strategy and plans, provide advice on implementing the company’s business plan for 2004 and 2005, and provide advice and assistance on such other matters as the board may reasonably request."
Prison rules will prohibit any of that from happening.
And prison officials will be watching and listening....
Still, even with the prison rules, Wiederhorn will be working.
All medically able federal prisoners are required to work prison jobs such as food service worker, orderly, plumber, painter and groundskeeper, said Traci Billingsly, a spokeswoman for the federal Bureau of Prisons.
An average work day is about seven hours, Billingsly said. Inmates are paid between 12 cents and 40 cents per hour.
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