The Price of Cooperation
As president, talking to the board is likely part of your job description. But “cooperation” with an investigation? That may be another matter.
United Rentals disclosed yesterday that it had fired president/CFO John Milne, because he “has been unwilling to respond to questions of the special committee of the board reviewing matters relating to the previously disclosed SEC inquiry of the company.” More on the event in an 8-K filed by URI.
CFO.com probes further, mentioning that Mr. Milne had been given a 30-day deadline to comply with a “mandate” to cooperate with the special committee on investigations into company accounting practices.
Mr. Milne, through a spokesperson, told Reuters that the CFO does not agree with the board’s decision:
“In his view, the unwillingness of the Board’s Special Committee to agree to mutually acceptable terms precipitated his decision not to submit to an interview. This does not constitute grounds for termination with cause,” the spokesman said.
Mr. Milne is likely somewhat constrained right now in what he is saying. Mr. Milne’s titles included president, CFO, chief acquisition officer, and secretary–a rather non-conventional way to parcel out executive duties.
Moving beyond the United Rentals matter, the notion of “cooperating” with internal corporate investigations is becoming more of a vexing issue for companies and their general counsel. Professor Peter Henning covers this angle in the ongoing tax shelter investigation at KPMG. (Thanks to Tom Kirkendall for this pointer).
If federal agencies and prosecutors continue to equate “cooperation” with turning over all information and essentially forcing all involved to talk (or be terminated by the company, likely with cause asserted), executives will have some very difficult decisions to make.
Check your by-laws (indemnification?), employment agreement (definition of “for cause”) and D&O policies (which can exclude coverage for some intentional or illegal acts). See also definition #2 of cooperate.
Update (18 Aug 05): The New York Times reports this morning about KPMG’s new legal offensive against former clients. Seems rather risky, but KPMG is walking a tightrope right now between civil suits and the ongoing government investigation. Professor Ribstein weighs in as well.