What sorts of punishments await way-ward CFOs in this new era of corporate reform? For Richard K. Halford, former CFO of Kansas City, Missouri-based Owl Securities and Investments, it was not hard time, but public soul-baring.
Halford pleaded guilty last fall to violating the Foreign Corrupt Practices Act as well as to three counts of tax evasion after his company's grand but dubious scheme to build a port and beach resort in Costa Rica fell apart under federal scrutiny.
His cooperation helped the Feds win a two-and-a-half-year jail term and a $60,000 fine for OSI investor Robert King, and earned Halford probation and 1,000 hours of community service, including delivering lectures about his new understanding of the evils of corporate wrongdoing.
OSI's effort to secure a land concession in Costa Rica, Feds say, included conspiracy to bribe officials there. But money from investors, including King, also funded an extravagant lifestyle for CEO Stephen Kingsley that included fancy cars and huge tabs at strip clubs. Charged with a string of federal offenses, Kingsley began wearing an FBI wire to implicate his colleagues.
Then, in a bizarre twist, Kingsley attempted to stage his own abduction — apparently to escape prosecution — but suffered a fatal heart attack while wrapping his ankles in duct tape on a Missouri River bank near the OSI offices. Police noted that he was wearing latex gloves, presumably to keep his fingerprints off the tape, say sources.
As part of his restitution, Halford was supposed to perform a tell-all act of contrition before a class of University of Kansas business students. Assistant professor Christopher Anderson, who set up the talk, says Halford seemed sorry, even tearing up at one point. But Halford's version wasn't quite complete, says Anderson. "He didn't mention all these salacious details."
Sadly for Halford, Eric Palmer of the Kansas City Star attended the class and pressed him for details about Kingsley's demise and the strippers. Palmer reports that even Halford's probation officer found his talk less than forthcoming, a situation he assured the reporter would be corrected in future lectures.
Boards: The End of Actors as Directors?
We're sure that Priscilla Presley, Alexander M. Haig Jr., and Francis Ford Coppola are valued members of the board of MGM Inc., upon which they all sit. But we wonder what all the new director-independence and financial-literacy requirements will mean for the future of celebrity board members.
"I think we're going to see the name value of celebrity directors easing out," says Ralph Ward, publisher of the newsletter Boardroom Insider. Financial-literacy requirements may make a celebrity less...desirable, shall we say, as a board member.
On the other hand, who's more independent than a movie star? "Right now there's more concern about having independent directors lacking any ties to the company than having financial literacy, so there's really mixed incentives here," says Ward.
Celebs themselves may start dropping off boards, especially if they want to avoid the unpleasantness now facing basketball legend Kareem Abdul-Jabbar, former Rams running back Eric Dickerson, former Oakland A's pitcher Vida Blue, Olympic gold-medal sprinter Michael Johnson, and boxer Laila Ali. These sports stars, along with other officers and directors of now-defunct health-and-fitness company Znetix, are being sued by the company's receiver to recover some of the $91 million in investor cash that founder Kevin Lawrence allegedly blew on wine, women, and song.
The suit claims the celebs "should have known that they were not performing their duties in a manner that was in the best interest of Znetix." This assumes the stars knew what those duties were; we can only hope they know what D&O insurance is.