CHAPTER 5: ETHICS AND BUSINESS DECISION MAKING 121
was already found.
4) “Best Efforts”-must do everything possible that a reasonable businessman would do to achieve result.
a) Best effort different from guarantee b/c still obligated to perform. Best effort would be to find 3rd party to accomplish buyout.
5) Could have said “Promise to use best efforts” but don’t recall saying that.
Skilling contends that the government improperly withheld Fastow’s statement that the Benefits to Enron document was
inconsistent with his memory because it used the word “promise.” In addition to arguing that this statement contradicts Fastow’s
testimony, Skilling alleges that disclosure would have bolstered his theory of the case and supported his jury instructions argument.
The 302s, however, effectively disclosed the information in these statements. Skilling knew of the content of the interview notes
concerning the Glisan email based upon Fastow’s repeated statements in the 302s that Enron would not repurchase the barges,
because LJM would instead. That is, the 302s did not indicate that Enron was obligated, which is consistent with the information in
the interview notes. Thus, Skilling already had the information necessary to challenge Fastow’s statement that the email “reflected”
the guarantee.
Ben Glisan and Chris Loehr both worked for Fastow, and their testimony corroborated the existence of a guarantee to Merrill
Lynch. Skilling asserts that the government improperly refused to disclose notes that reveal, in Skilling’s words, that
Fastow explained to the Task Force that he
lied
to “subordinates” by “tell [ing] Enron people this was a guarantee” in order to
“motivate” and “light a fire” within Enron to remarket the barges to a third-party.
Skilling argues that the notes reveal that Fastow lied to subordinates, including Glisan and Loehr. If Fastow had lied to Glisan and
Loehr about the existence of a guarantee, so the argument goes, their knowledge of the guarantee could have been based entirely
on lies. If that were the case, Skilling could have used that information to undermine their testimony.
Skilling again misrepresents the interview notes. Nowhere in the notes to which Skilling points does Fastow admit to “lying” to
subordinates. The relevant portion of the interview notes reads,
w/Subordinates
1) Probably used a shorthand word like promise or guarantee as
3) On phone call, didn’t say EN would buy back,-Rep of 3rd Party. Explicit. Internally said Enron would buy back. Unit less
motivated if knew of LJM. “Enron will take necessary steps to make sure you are out of this by June 30.” Reasonable for person
on other end to think Enron.
This statement does not contradict Fastow’s assertions that he made an implicit guarantee to Merrill Lynch. Immediately preceding
these notes, Fastow discussed the guarantee with Merrill Lynch extensively, repeatedly noting that he had made a guarantee in
FN80. Skilling attached an appendix to his supplemental brief containing additional examples of allegedly suppressed and
exculpatory evidence. The district court did not consider four of these examples, and thus we cannot review them on
FN81. We note, however, that another court properly considering these other alleged
Brady
violations may have to
consider their cumulative materiality, if any, alongside the materiality of the alleged
Brady
violations that are now properly
before us.
[35] Considering that we are reviewing the district court’s determination that these interview notes did not contain any
Brady
40. With a criminal history category of I, that yielded a sentencing range under the Guidelines of 292 to 365 months’ imprisonment.
Skilling objected to some of the enhancements at sentencing. The court rejected those objections and sentenced Skilling at the
bottom of the advisory range, or 292 months. On appeal, Skilling specifically objects to the two-level enhancement for obstruction
Cir.2005).
A. Obstruction of Justice
FN82. Section 3C1.1 provides,
If (A) the defendant willfully obstructed or impeded, or attempted to obstruct or impede, the administration of justice
FN83. The government suggests that Skilling waived this argument because he failed to object to the use of this
CHAPTER 5: ETHICS AND BUSINESS DECISION MAKING 123
testimony at sentencing. Skilling counters by drawing our attention to his written objections to the presentence
investigation report, in which he disputed the enhancement. In particular, he stated that because he “was not aware of an
FN84.
See, e.g., United States v. Kordel,
397 U.S. 1, 11-13, 90 S.Ct. 763, 25 L.Ed.2d 1 (1970);
United States v.
Grunewald,
987 F.2d 531, 534 (8th Cir.1993);
United States v. Robson,
477 F.2d 13, 18 (9th Cir.1973).
Skilling avers that the district court believed that the Enron Task Force and SEC had merged into one prosecutorial team and that
the SEC had acted on the Task Force’s behalf in connection with Skilling’s criminal case. Assuming that they had in fact merged,
and that by the time of his testimony the SEC was deliberately misleading Skilling as to the nature of the investigation, the issue of
involve a defendant who gives incriminating, but truthful, testimony.
See Tweel,
550 F.2d at 298 (providing copies of tax returns).
The reason for our concern in these cases is that the government should not use deceit to encourage a defendant to cooperate in
a civil investigation during which he in essence incriminates himself. But where, as here, a defendant’s own false testimony is used
against him, we have no such concerns. After all, Skilling has not provided us with any justification for his lying under oath in a
purely civil proceeding.
[38] We review the district court’s decision that the Retirement Plans are “financial institutions” de novo, because it is an issue of
law.
United States v. Soileau,
309 F.3d 877, 878-79 (5th Cir.2002). The Guidelines section at issue, § 2F1.1(b)(8), provides, “If the
offense (A) substantially jeopardized the safety and soundness of a financial institution; … increase by 4 levels.” As used in the
Guidelines, “financial institution”
is defined to include any institution described in 18 U.S.C. §§ 20, 656, 657, 1005–1007, and 1014; any state or foreign bank, trust
U.S.S.G. § 2F1.1 cmt. 19.
The definition does not explicitly mention retirement plans, such as the two at issue here, even though neither is a particularly
novel retirement vehicle. The question is whether the Retirement Plans are “pension funds” or whether they fall into the “any similar
entity” catch-all.
The government, relying on BLACK’S LAW DICTIONARY, argues that the Retirement Plans are in fact “pension funds.” Black’s
does not define “pension fund” but does define “pension plan.” The government equates these terms, and we see no reason not to
do so as well. Black’s defines “pension plan” in two ways:
1. Under ERISA, any plan, fund, or program established or maintained by an employer or an employee organization that
2. Under the Internal Revenue Code, an employer’s plan established and maintained primarily to provide systematically for the
payment of definitely determinable benefits to employees over a period of years, usu. for life, after retirement.
BLACK’S LAW DICTIONARY 1170 (8th ed.2004) (paragraph break added). This definition, unfortunately, is unhelpful in settling
FN85. Contrary to the government’s argument, Black’s defines “pension” as “[a] fixed sum paid regularly to a person.”
BLACK’S LAW DICTIONARY 1170 (8th ed.2004). This leads to the assumption that a pension fund, or pension plan,
without any statutory gloss, would be a plan that promised a fixed sum at regular intervals. The Retirement Plans do not
provide this.
If the Retirement Plans are not “pension funds,” another option is to determine whether the Retirement Plans fall into the
(2008). Because both sides have made reasonable arguments as to the meaning of “financial institution,” this case falls within the
rule, and we resolve any doubts in favor of Skilling. The court therefore erred in applying this enhancement.
In sum, although the district court properly applied the obstruction of justice enhancement, it incorrectly applied an enhancement
Case 5.2
S.D.N.Y.,2010.
Krasner v. HSH Nordbank AG
680 F.Supp.2d 502, 108 Fair Empl.Prac.Cas. (BNA) 531
United States District Court,
FN1. Because “individuals are not subject to liability under Title VII,”
Patane v. Clark,
508 F.3d 106, 110 (2d Cir.2007) (per
curiam), plaintiff does not bring Title VII claims against Kiser, and charges him only with primary violations of the NYSHRL
FN2. The following facts, taken from plaintiff’s complaint, or from documents integral to it, are construed in a light most
favorable to plaintiff and assumed to be true for purposes of these motions to dismiss.
There, Krasner alleges, he encountered an atmosphere infected with overt sexism, where career “advancement based on sexual
Id.
112-13.) Krasner found these various references offensive, as did one of the two staffers. (
Id.
¶¶ 111-13.) Kiser also pressured
male subordinates, such as Krasner, to go to strip clubs with him when on business trips abroad. (
Id.
114.) On one occasion,
Krasner was coerced into entering a German strip club with Kiser, and witnessed Kiser engaging in sexual acts with the strippers
but successfully resisted Kiser’s urging that he do the same. (
Id.
¶¶ 114-15.) During this experience, Krasner was “extremely
FN3. Krasner also injects into his complaint allegations concerning two other relationships between, on the one hand,
Kiser and Bernhard, and on the other, female “work subordinates” turned spouses who received preferential treatment as
a result of those relationships. (
Id.
¶¶ 87-90.) Neither of these relationships occurred in HSH’s New York Office; however,
Krasner alleges that the majority of employees in that office were aware of Kiser’s and Bernhard’s history. (
Id.
)
21-24.) Campfield was given a separate office and a laptop computer, while similar requests by another (unnamed) female
employee with more experience than Campfield were denied. (
Id.
¶¶ 97-99.) FN4 The reasons for the disparity did not escape this
woman, who wrote, in an email to a former employee: “I guess if I want to sit in an office and have a laptop, I better start handing
out some blow jobs.” (
Id.
¶ 97.)
FN4. It is unclear from the complaint whether the office and laptop allegations concern events that occurred during
Krasner’s tenure with HSH, or more recently. As discussed below, however, in neither circumstance would this incident
bolster Krasner’s case.
33).
Krasner was directed to come to Kiser’s office at the start of the next business day, for the first glimpse of this “new” Kiser. (
Id.
35.) Kiser told Krasner to organize a departmental meeting to address the “turbulence” caused by his leadership. (
Id.
36.)
Krasner viewed this call to hold a meeting-which ultimately never came to pass-as an “empty and retaliatory” threat. (
Id.
38.)
Although the meeting never occurred, Kiser’s attacks on Krasner continued over the next few days, with Kiser accusing Krasner of
running a dysfunctional department and calling him the “laughing–stock of the company.” (
Id.
39.) These words stood in stark
FN5. Krasner leaves the content and tenor of this email to the imagination.
The next day, on September 19, Krasner again turned to the Human Resources department, this time with a written complaint,
reiterating his belief that Kiser was violating the company’s ethics policy and creating an unprofessional environment through his
relationship with Campfield. (
Id.
¶¶ 47-48; Karnofsky Decl. Ex. C.) This eight-page document did not raise any issues concerning
Kiser’s alleged transgressions beyond those related to the preferential treatment bestowed on Campfield, nor did it address any
of (1) the reduction of his responsibilities following the restructuring; (2) the failure to work satisfactorily with Kiser; (3)
insubordination to Kiser; and (4) overall failure of performance. (
Id.
71.) Krasner contends that these stated reasons were
pretexts for Kiser’s retaliation for exposing the Campfield relationship. (
See id.
¶¶ 72-76.) This retaliation, Krasner alleges, is in
violation of federal, state and city law, as well as of the company’s own Code of Ethics, which was in place at all times during his
tenure with HSH. (
Id.
¶¶ 76-77.) According to Krasner, HSH’s Code of Ethics prohibited it from firing an employee in retaliation for
sufficiency of plaintiff’s claim for relief.
See Patane,
508 F.3d at 111-12. In considering the legal sufficiency, a court must accept as
true all well-pleaded facts in the complaint and draw all reasonable inferences in plaintiff’s favor.
ATSI Commc’ns, Inc. v. Shaar
Fund, Ltd.,
493 F.3d 87, 98 (2d Cir.2007). This presumption of truth, however, does not extend to legal conclusions.
Ashcroft v.
Iqbal,
— U.S. —-, 129 S.Ct. 1937, 1949-50, 173 L.Ed.2d 868 (2009). Although a motion to dismiss is generally limited to the facts
presented in the complaint, documents that are “integral” to the complaint may also be considered, even if neither physically
(2002) (setting rule for Title VII discrimination claim);
Williams v. New York City Hous. Auth.,
458 F.3d 67, 72 (2d Cir.2006) (per
curiam) (finding
Swierkiewicz’s
holding equally applicable to retaliation claims). Rather, the “ordinary rules for assessing the
sufficiency of a complaint” under Federal Rule of Civil Procedure 8(a)‘s notice pleading standard applies.
Swierkiewicz,
534 U.S. at
511, 122 S.Ct. 992 (2002);
Kassner v. 2nd Ave. Deli. Inc.,
496 F.3d 229, 237, 241 (2d Cir.2007). This requires only a “short and
plain statement of the claim,” Fed. R. Civ. Pro. 8(a), with sufficient factual “heft ‘to sho[w] that the pleader is entitled to relief.’ ”
Bell
Cir.2001). These three elements are termed, respectively, the objective, subjective, and prohibited causal factor requirements.
Brown v. Henderson,
257 F.3d 246, 252 (2d Cir.2001);
Gregory,
243 F.3d at 691-92.FN6
FN6. There also must be a basis to hold an employer liable for a hostile environment created by its employees.
Petrosino
v. Bell Atlantic,
385 F.3d 210, 225 (2d Cir.2004). Because Krasner alleges that the hostile environment was created by
Mem. 2.).)
See Mack,
326 F.3d at 123 (“[I]t is only when a supervisor with immediate (or successively higher) authority
over the employee has engaged in the complained of conduct that the employer may be subject to vicarious liability.
CHAPTER 5: ETHICS AND BUSINESS DECISION MAKING 129
Employers are not, by contrast, vicariously liable for hostile work environment created by a mere co-worker of the victim.”
(internal citations, quotation marks and punctuation omitted).) It is unnecessary to resolve this issue because, as will be
him or her to hostile working conditions) “because of such individual’s … sex.” 42 U.S.C. § 2000e-2(a)(1). The prohibited causal
factor requirement thus flows directly from the text of Title VII, and from the very essence of its nature as an
anti-discrimination
law.
[14] It follows “that mistreatment at work, whether through subjection to a hostile environment or through such coercive
deprivations as being fired or being denied a promotion, is actionable under Title VII only when it occurs because of an employee’s
sex, or other protected characteristic.”
Brown,
257 F.3d at 252, citing
Oncale v. Sundowner Offshore Servs., Inc.,
523 U.S. 75, 79-
to show that the allegedly harassing conduct was motivated by gender, or that gender played a motivating part in an employment
decision, a[ ]male plaintiff must show that one of the reasons for the harassment or the decision was that [ ]he was a[ ]man.”
Galdieri-Ambrosini,
136 F.3d at 289 (internal quotation marks omitted). In the end, what matters is “how the employer would have
treated the plaintiff had [ ]he been of a different sex.”
Brown,
257 F.3d at 254 (emphases omitted). The prohibited causal factor
requirement makes clear that a sexually “hostile environment” in the Title VII context is not one that is bad for all living things in a
15.) Even the allegations of “widespread sexual favoritism” through male supervisors’ relationships with female subordinates reveal
that this purported favoritism is alleged by Krasner to disadvantage
women
(by subjecting them to differential demands for sexual
favors), not
men
(by denying them advantages open to compliant women). That is, Krasner does not allege that these relationships
were harmful to men (such as himself) because his gender prevented him from receiving career advancement in exchange for
sexual favors; rather, Krasner alleges that the resulting favoritism conveyed through these relationships promoted a “sexist image
Cir.1998) (noting that the EEOC has not explained why men may recover by demonstrating that the workplace is hostile towards
women). The Second Circuit has never endorsed such a position and this Court sees no sound reason to.FN7 Krasner’s concern for
FN7. Indeed, far from endorsing it, the Second Circuit has repeatedly questioned whether a male employee would have
standing to pursue such a third-party discrimination claim.
Leibovitz,
252 F.3d at 186 (noting that several circuits have
found prudential standing concerns to preclude men from pursuing discrimination claims based on their opposition to
discrimination against women, but finding the issue inapposite because plaintiff, a female, was a member of the protected
class she claimed was discriminated against);
see also Wimmer v. Suffolk County Police Dep’t,
176 F.3d 125, 136 n. 5
man’s hostile environment claim,” based on others’ sexual relationships, “although theoretically possible, will be much harder to
plead and prove” because “men’s sexuality does not define men as men in this society”). It is entirely possible that a workplace that
discriminates against women may also discriminate against men.
See Brown,
257 F.3d at 254-55 (“[T]here might even be
circumstances that are actionable under Title VII when both men and women suffer sexually discriminatory harms in the same
workplace, but for different reasons.”). This may occur, for example, if the sexualized atmosphere of the workplace created a
harassment committed directly against [Krasner]”-either when viewed in isolation or in conjunction with any potential discrimination
against women-“support a claim that [he] is being harassed because he is a
male
employee.”
Stoner,
2002 WL 523270, at *21.
The primary animator of the complaint is what Krasner terms the “egregious effects of Kiser’s favoritism” towards Campfield upon
plaintiff himself. (P. Mem. 9.) These include permitting Campfield’s insubordination through text messaging on company devices;
asking Campfield to organize a company golf outing when he (and Colamaria) were ordinarily responsible for organizing this type
FN8. Indeed, Krasner also alleges-in an attempt to bolster the overall egregiousness of Kiser’s actions-that Colamaria too
was a victim of Kiser’s favoritism of Campfield. Kiser, it is alleged, twice favored Campfield over Colamaria in assigning
tasks ordinarily handled by Colamaria to Campfield. (P. Mem. 9; Compl. 25, 30.) Far from supporting Krasner’s
discrimination claim, however, the fact that Colamaria, who is female, was also adversely impacted by Kiser’s paramour
preference supports the conclusion that Krasner was not discriminated against because of his sex. The same is true with
FN9. Krasner attempts to distinguish
DeCintio
on the grounds that it did not involve a claim of sexual harassment. (P.
Mem. 9 n. 6.) The proposed distinction is artificial, for the relevant consideration-that to violate Title VII, any
discrimination, be it via harassment or otherwise, must be on account of sex-is constant throughout the range of Title VII
discrimination jurisprudence. Indeed, in rejecting DeCintio’s effort to expand Title VII’s definition of “sex” “to include an
ongoing, voluntary, romantic engagement,”
DeCintio
noted that all Title VII claims-including sexual harassment claims-
FN10. The sole allegation from which a logical inference could be drawn that the objectionable conduct would not have
occurred had Krasner been female is that concerning the strip club. It is clear, however, that this single incident in which
he was forced to observe Kiser indulging himself with strippers falls short of the requisite level of objective severity to be
actionable.
See, e.g., Aulicino v. New York City Dep’t of Homeless Servs.,
580 F.3d 73, 82-83 (2d Cir.2009);
Alfano,
294
F.3d at 374 (to meet the objective threshold, generally, “incidents must be more than episodic; they must be sufficiently
must be dismissed. It is well established that Title VII “does not set forth ‘a general civility code for the American workplace,’ ”
Burlington N. & Santa Fe Ry. Co. v. White,
548 U.S. 53, 68, 126 S.Ct. 2405, 165 L.Ed.2d 345 (2006), quoting
Oncale,
523 U.S. at
80, 118 S.Ct. 998, but rather is limited to the prevention of discrimination based on gender (or other protected characteristics). The
prohibited causal factor requirement plays a critical role-in conjunction with the other elements of a hostile environment claim-in
ensuring that “the federal courts [do not] become a court of personnel appeals.”
Alfano,
294 F.3d at 377. “Everyone can be
CHAPTER 5: ETHICS AND BUSINESS DECISION MAKING 133
III. Title VII Retaliation Claim
[27][28] Title VII also contains an anti-retaliation provision forbidding “discriminat[ion] against” an employee for “oppos[ing] any
practice made an unlawful employment practice” by Title VII. 42 U.S.C. § 2000e-3(a). Unlike the substantive anti-discrimination
provision, which “seeks to prevent injury to individuals based on who they are, i.e., their status[,][t]he anti-retaliation provision
2405. Thus, “[e]ven if an employee is not the victim of prohibited discrimination, Title VII protects [the employee] against retaliation
for protesting against such discrimination,”
Galdieri-Ambrosini,
136 F.3d at 285, because “[u]nlike the harassment claim, [plaintiff’s]
discriminatory retaliation claim may succeed on a theory that the defendants terminated him for reporting discrimination against
others, because the act of reporting is statutorily protected,”
Smith,
148 F.Supp.2d at 311.
Cir.1988). “The law protects employees [who] … make[ ] informal protests of discrimination, including making complaints to
management, so long as the employee has a good faith, reasonable belief that the underlying challenged actions of the employer
violated the law.”
Gregory,
243 F.3d at 700-01 (internal citations and quotation marks omitted). Reasonableness also plays a role
in the second element, for “implicit in the requirement that the employer have been aware of the protected activity is the
requirement that it understood, or could reasonably have understood, that the plaintiff’s opposition was directed at conduct
relationship on Krasner and on the department. (P. Mem. 3-4.)
As discussed above,
supra
Pt. II, the law is clear that preferential treatment of a paramour is not unlawful because it does not
discriminate against anyone on account of his or her gender.
E.g., DeCintio,
807 F.2d at 308. Krasner argues that he nevertheless
had a subjective good faith belief that the conduct he complained of was discriminatory, and that this is all that is required.
Krasner’s own characterization of his internal complaints, however, is entirely gender-neutral. Krasner consistently describes his
FN11. Although this document is not attached to the complaint, Krasner’s relies on it in bringing this action, rendering the
document “integral” to the complaint and properly considered on a Rule 12(b)(6) motion to dismiss.
See Mangiafico,
471
F.3d at 398.
[33] But even giving Krasner the benefit of the doubt, and assuming, arguendo, that he genuinely possessed a reasonable belief
FN12. The situation could be different if Krasner’s complaints suggested that the relationship was not, in fact, consensual
because in that case, there would be a possibility that Campfield herself was being sexually harassed. In such a case, the
“relationship” itself could be discriminatory on account of Campfield’s gender and complaining about it could be protected
activity. At no point, however, does Krasner ever suggest this situation, nor would his internal complaints have put HSH
on notice that Krasner may have thought this type of discrimination to be occurring.
protected activity.
Soliman,
2004 WL 1124689, at *13 (“Because [the defendant] would not have understood that [the plaintiff’s
complaints] had anything to do with sexual harassment, [any] subsequent retaliation cannot, as a matter of law, amount to an
unlawful retaliation under Title VII.”). Accordingly, the Title VII retaliation claim (Count Two) will be dismissed with prejudice.
IV. Remaining Claims
[35] Krasner also asserts a number of claims under New York State and New York City law. First, under the NYSHRL and
considered under the pendant jurisdiction doctrine-judicial economy, convenience, fairness, and comity-will point toward declining
to exercise jurisdiction over the remaining state-law claims.”);
Menes v. City Univ. of N.Y. Hunter Coll.,
578 F.Supp.2d 598, 620 &
n. 18 (S.D.N.Y.2008) (dismissing NYSHRL and NYCHRL claims after dismissal of all federal claims, including parallel Title VII
claim). The only federal claims having been dismissed, the Court declines to exercise supplemental jurisdiction over the remaining
claims. Krasner’s claims under New York State and New York City law (Counts Three through Thirteen) are therefore dismissed,
Case 5.3
474 F.3d 822
FOG CUTTER CAPITAL GROUP INC., Petitioner
v.
SECURITIES AND EXCHANGE COMMISSION, Respondent.
No. 06-1071.
NASD “will exercise broad discretionary authority over the initial and continued inclusion of securities in Nasdaq in order to
maintain the quality and public confidence in its market.” NASD Marketplace Rule 4300. To that end, the NASD will delist
securities if, in its “opinion,” events occur that render it “inadvisable or unwarranted” to continue listing the securities “even though
the securities meet all enumerated criteria for” listing.
Id.
For Fog Cutter, the disqualifying events centered on the criminal investigation, indictment, and conviction of its Chief Executive
On June 2, 2004, the day before Wiederhorn entered into the plea deal, he finalized a leave-of-absence agreement with Fog
Cutter. The agreement acknowledged Wiederhorn’s plea agreement and imminent incarceration, and provided that during his
absence he would retain his titles and responsibilities.
Fog Cutter agreed to pay Wiederhorn his $350,000 annual salary, bonuses, and other benefits while he was imprisoned. The
company also agreed to pay him a $2 million “leave of absence payment” to retain his “good will, cooperation and continuing
public interest.”
id.
Fog Cutter applied to the Securities and Exchange Commission for review of the Council’s decision. The
Commission dismissed the application for review, focusing, as had NASD, on Wiederhorn’s status as a convicted felon and the
Board’s actions supporting and retaining Wiederhorn on the Board and in management.
Fog Cutter’s main complaint is that the Commission failed to take into account the company’s sound business reasons for acting as
it did. The decision to enter into the leave-of-absence agreement was, Fog Cutter argues, in the best interest of its shareholders.
$4.75 million in a year in which it reported a $3.93 million net loss. We know as well that Fog Cutter handed Wiederhorn a $2
million bonus right before he went off to prison, a bonus stemming directly from the consequences of Wiederhorn’s criminal activity.
Under Section 19(f) of the Exchange Act, , the Commission must dismiss an application for review of an NASD delisting order if (1)
the “specific grounds” “exist in fact,” (2) the decision was in accordance with NASD rules, (3) the rules are and were applied in a
manner consistent with the Exchange Act, and (4) the decision imposes no unnecessary or inappropriate burden on competition
granted Wiederhorn in 2003 while he was under investigation. Wiederhorn’s employment agreement stated that if terminated “for
cause,” he was entitled only to his base salary through the date of termination and payment of unreimbursed business expenses.
If it terminated Wiederhorn without cause, Fog Cutter would have owed him three times his annual salary, three times his largest
annual bonus from the last three years, unreimbursed business expenses, and accrued but unpaid base salary and bonuses-which
Fog Cutter estimates would amount to $6 million-all as a lump-sum payment within ten days. Before the amendment to
capricious for the Commission to find that Wiederhorn exercised thorough control over the Board, and to find this troubling. We
agree that the Board provided little or no check on Wiederhorn’s conduct, and that the Board’s actions only aggravated the
concerns Wiederhorn’s conviction and imprisonment raised.
That Fog Cutter did not itself violate the securities laws and that it disclosed the relevant events does not demonstrate any error in
the delisting decision. The NASD’s rules state that it may apply criteria more stringent than the minimum standards for listing.
renders delisting decisions. The Commission’s role is as a reviewing body, not an initiator.
In delisting Fog Cutter, the NASD was concerned with the integrity and the public’s perception of the Nasdaq exchange in light of
both Wiederhorn’s legal troubles and the Board’s ongoing acquiescence to his demands. The Commission amply supported these
concerns and was well within its authority to dismiss Fog Cutter’s application for review of the NASD’s delisting decision. We
therefore deny Fog Cutter’s petition for judicial review.
So ordered.