Copyright © 2002 The International
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Angry about their losses, some big investors are offering their lawyers Wild West-style "bounties" to go after the lavish personal wealth of executives accused of ruining some of America's larger companies. The investors, mostly pension funds, have trained their crosshairs on targets that include the Canadian cattle ranch of Bernard Ebbers, founder and former chief executive of WorldCom, the telecommunications company that is in bankruptcy proceedings. Another target is the Impressionist paintings in the collection of L. Dennis Kozlowski, the high-living former chief executive of the troubled conglomerate Tyco International, who has been indicted on corporate fraud charges. The lawsuits, of course, could last for years, and the defendants have legal tools to protect themselves. But specialists in corporate law say the bounty hunting has escalated the pressure on executives who may have assumed that their own assets were insulated. "If these individuals are found to have been grossly negligent or intentionally deceitful, it's highly likely that the liability will be their personal liability," said William Allen, director of the Center for Law and Business at New York University. The California State Teachers' Retirement System, in a securities-fraud lawsuit filed with two other California pension funds against WorldCom, is offering its outside lawyers a 2.5 percent bounty on top of a base fee of 12 percent if they recover "significant" personal assets of any of WorldCom's top managers. "Part of the idea is to recover as much as we can, but part of the idea is also deterrence," said Christopher Waddell, the chief lawyer for the teachers' fund, which has around $100 billion in assets. Bounties reflect a growing desire by powerful institutional shareholders for retribution against executives they deem responsible for losses. "We can't let megahouses and tens and sometimes hundreds of millions of dollars be kept by these corporate rogues," said Melvyn Weiss, a class-action lawyer whose New York-based firm, Milberg Weiss Bershad Hynes Lerach, represents the California teachers' fund as lead plaintiff in the WorldCom suit. The bounties are also an indication of the scale of losses felt by shareholders in damaged companies such as Enron, WorldCom, Tyco, Adelphia Communications and Rite Aid. By some estimates, investors in Tyco lost $60 billion. "We're going to go after the paintings, the yacht, the apartments, everything," said Jay Eisenhofer, a lawyer at Grant Eisenhofer in Wilmington, Delaware, which represents the Teachers' Retirement System of Louisiana and the Louisiana State Employees' Retirement System in a lawsuit against Tyco. But despite their aggressive stance, shareholders and their lawyers may find it difficult to make executives pay up. Historically, securities-fraud cases have been difficult to prove. Some states - including Enron's home state, Texas, and Florida, where many executives own lavish homes - have "debtors' paradise" laws protecting assets. Copyright © 2002 The International Herald Tribune |