So Dick Fuld, as you know, sold his wife their Florida mansion for $100. As we mentioned yesterday, it was probably some kind of asset protection safeguard, on the off chance that Fuld has to declare bankruptcy once the hoards of lawyers go after him. On that level it makes sense.
But on another level, from a public perception standpoint, it’s a horrible idea. When you face the prospect of a white-collar criminal case, it’s all about perception. Detroit execs won’t get in trouble for the collapse of the autos because the issues seem to be bigger than them, and they’ve also played out over a long period of time.
Tom Kirkendall notes the other way it can play out:
However, beyond the civil liability concerns, the main reason that Fuld should not have engaged in this type of transfer under his particular circumstances is simply that it looks bad. Real bad. Not only to potential creditors, but more importantly, to prosecutors who will make the decision on whether to indict Fuld. And, most importantly, to jurors who will decide Fuld’s fate.
For example, remember the criminal case against former Enron chairman, Ken Lay? The prosecutors conceded (bragged?) afterward that it was a very weak case. So, rather than focus on the supposed criminal conduct, the prosecutors hammered away on Lay’s indiscrete use of his personal line of credit with the company.
If Fuld is indicted, then you can rest assured that prosecutors will bring his recent transfer to his wife to the attention of the judge during proceedings over the amount of his bond pending trial. And although the transfer has nothing to do with the probable criminal charges against Fuld (i.e., violating the obligation to throw in the towel), prosecutors will try to use it anyway to make him look tricky in the eyes of jurors.
Remember, too, Dennis Kozlowski’s shower curtain. We’re pretty sure it wasn’t illegal to buy an expensive shower curtain, but it became the definitive story of his downfall. No wonder Thain is paying back his office expenses.