[lbo-talk] Cohen: Hang a doomsday security around bankers' necks

[c b]

This is a misunderstanding of both terms 'partnership' and 'liability'
... which I think leads to a false sense that something like this
would help. IANAL, but even corporations do not *remove* personal
liability; the 'corporate veil' can always be pierced in the case of
criminal behavior.

Regardless, there's nothing to support this idea that if, for
instance, Lehman Brothers was a pre-IPO-Goldman-style Partnership that
the end result would have been any different than it was.

/jordan

^^^^^^^^^
CB: Yeah, IAAL , but only know this from law school/bar exams. The
corporate veil is pierced for fraud , criminal or civil. And below is
a list of issues courts evidently consider in deciding whether to
pierce it.

As Jordan implies, I think, do individual execs have enough personal
assets to pay the losses that were sustained and save the company ?

On the other hand, maybe the proposals by the article writer Cohan
(putting exec personal assets up directly as security for what ?
grossly negligent acts ? fraudulent acts ? the latter is probably
already a basis for piercing the corporate veil) might change the
conduct of some people, prospectively; they wouldn't gamble so wildly
in the first place.

 However, isn't the big problem that  they use other people's money to
make so much money, not when they rarely fail to as in this crisis.

http://en.wikipedia.org/wiki/Piercing_the_corporate_veil

Factors for courts to consider

   * Absence or inaccuracy of corporate records;

   * Concealment or misrepresentation of members;

   * Failure to maintain arm's length relationships with related entities;

   * Failure to observe corporate formalities in terms of behavior
and documentation;

   * Failure to pay dividends;

   * Intermingling of assets of the corporation and of the shareholder;

   * Manipulation of assets or liabilities to concentrate the assets
or liabilities;

   * Non-functioning corporate officers and/or directors;

   * Other factors the court finds relevant;

   * Significant undercapitalization of the business entity
(capitalization requirements vary based on industry, location, and
specific company circumstances);

   * Siphoning of corporate funds by the dominant shareholder(s);

   * Treatment by an individual of the assets of corporation as his/her own;

   * Was the corporation being used as a "façade" for dominant
shareholder(s) personal dealings; alter ego theory;