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StartupGrunt 12/4/2012 | 7:31:50 PM
re: Fraud Case Hangs Over Fore Fat Cats Optics Mgmt wrote:

> Companies are supposed to do a
> thing called "Due Diligence"
> before they buy a company. They
> talk to customers and make many
> visits to the company they are
> courting.

As someone who has been through due diligence (both sending and receiving sides) several times, I have seen how the acquiring company can fail to see the warts on any company they are seriously looking at. I've seen "one issue" due diligence teams focus on completely irrelevant stuff to the exclusion of what would have really foretold disaster. For example, they might have Learned From Experience that Bad Things can happen if inventory levels aren't counted properly, and completely miss the fact that there are no new design wins in the pipeline, or those that are there are about to dry up.

But the real trump card is the greed of those that benefit. Before the bubble burst there was a perception that any acquisition at all was OK because the stock of the post-M&A company is just going to go up anyway. That illusion is now for the most part gone, but it persisted well beyond 2Q 2001.
gardner 12/4/2012 | 7:31:49 PM
re: Fraud Case Hangs Over Fore Fat Cats
I'll bet some poor slobs at Marconi are left cleaning up the mess created by folks that have since left, and used the acquisition as means to further their own career--worked then but won't work now!


This seems to be a common theme of the 90's bubble. With so much flux and job hopping a lot of folks managed to climb to positions they had no qualifications for, benefit enormously and then move on to the next company to hornswoggle. How do you folks think the bubble will affect the practice of business in the long run? Will it result in a swing toward more governmental oversight? A greater emphasis on values and ethics? Harder nosed accounting? Clearly the system must respond when so many have been harmed but "How?" is the question. Is the bloom off the VC rose? Are people likely to become cynical and reject the system or are they likely to change it to make the depredations of the 90s less likely to happen again? What do people here think? Also I would like to see some comment by the editors of LR. The wild ride of the 20's and 30's produced some substantive and long lived changes to the world economic system. Will the wild ride of the 90s do the same?
optiboom 12/4/2012 | 7:31:49 PM
re: Fraud Case Hangs Over Fore Fat Cats Harvey Mudd,

You have it backwards! I agree with post #5 that the blame is clearly on the back of the Marconi execs. Ultimately, it may be a combination of incompetence, tempered with greed and self-promoting gratification ("get my name on a deal") that caused them to overlook the obvious.

When an acquisition allows any key individuals to leave, shame on the acquirer. Lucent, for example has structured several acquisitions to immediately vest all employess - what possible sense does that make? No matter how much integrity an individual may possess, if you give them a bucket of cash and have no restrictions on the subsequent length of employment, they will leave (unless you believe in the tooth fairy).

I'll bet some poor slobs at Marconi are left cleaning up the mess created by folks that have since left, and used the acquisition as means to further their own career--worked then but won't work now!

Opti
nonobvious 12/4/2012 | 7:31:48 PM
re: Fraud Case Hangs Over Fore Fat Cats > As one of the ex FORE employee I must say that
> it would, probably, be very difficult to find
> more unethical managers than those from FORE.

The original FORE management was ethical but the folks that ended up running the company in the later years were indeed dirtbags.
HarveyMudd 12/4/2012 | 7:31:47 PM
re: Fraud Case Hangs Over Fore Fat Cats The US Court System is very ad hoc and as such any law suite against the former Fore executives would not suceed in the US federal corts. Similarlt the SEC would not take any action or even investigate the corrupt executives from Fore.

If permissible under the international law, corruption and deception should be broght up in the UK courts.

It is not a mere civel case, the Fore executives should be arrested and criminal charges be broght against them.

The problem with the most merger and acquisition is that most of the deal is kept secret until the day of signing. This in itself creates oportunities for deception and corruption.

Unfortunately the US Government is not very sensitive to corruption and deception. The US government, for example, SEC would not never bring charges against the insider trading that recently occured at Juniper Networks.

Fore Systems, bought several companies like Berkeley Networks in order to increase its market valuation. This in itself is a deceptive activity.
flanker 12/4/2012 | 7:31:46 PM
re: Fraud Case Hangs Over Fore Fat Cats The wild ride of the 20's and 30's produced some substantive and long lived changes to the world economic system

Ahh, yes. Would that we were cursed with the political and economic 'genius' of Franklin Delano Roosevelt and John Maynard Keynes. 32 quarters of shrinking GDP (that is, *after* FDR was elected) and record unemployment levels.

moguefett 12/4/2012 | 7:31:45 PM
re: Fraud Case Hangs Over Fore Fat Cats Okay, so what could be the outcome of the trial? Would it bring back the shareholders losses and the future of Marconi? Believe it or not Im actually going to agree for once with Harveys relentless pessimism and anger on a couple of points on his posts.
Although considering that this is a journalistic site, theses accusations , if true , should have severely negative repercussions for those involved including imprisonment and proceeds should be revoked and distributed to shareholders. This seems an awfully complicated task and should be a hard earned lesson in tightening SEC regulation confinements in the future as an example.
What I cant reason with is that Marconi was willing to violate and be decietful over a dying approach in telecommunicaions equipment. I know the aquisition came at the pinnacle of this market so I assume like alot of people they were not anticipating that emerging disruptive technologies and all around increasing lack of consumer confidence was going to play such an insrumental role in the performance of the economy.
If the sector experienced continued growth, it succeeded, then hey , nobody asks because we made us money! But if the opposite occures, be prepared to pay the piper,thus blowing up their covert stipulations and uncovering the gruesome details.
BLAH BLAH BLAH, BLAH BLAH BLAH!
rjmcmahon 12/4/2012 | 7:31:44 PM
re: Fraud Case Hangs Over Fore Fat Cats Believe it or not I'm actually going to agree for once with Harveys relentless pessimism and anger on a couple of points on his posts.
____________________________________

Harvey posts reveal relentless *cynicism* rather than relentless *pessimism* to me.

While cynicism may be a way for a capitalist society to cope with a substantial loss of paper wealth, moving past the cynicism and creating new wealth does seem required if such a society is to progress.

Smokey 12/4/2012 | 7:31:40 PM
re: Fraud Case Hangs Over Fore Fat Cats The stock situation may not be right...but it had nothing to do with Marconi's demise. The amazing combination of arrogance and incompetence on the part of Marconi's executives is what should have been illegal.
netgenius 12/4/2012 | 7:31:30 PM
re: Fraud Case Hangs Over Fore Fat Cats Why give cash or stock????? I can see why the Marconi Execs that made this decesion are gone. Were they businessmen or just clueless Lords and Sirs?

Give unvested options. The decision to give cash was stupid!

Marconi also cashed out vested and unvested options for all FORE employees...cha ching.

This seems to be a clear case of the Brits being snookered. Tally Ho!
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