Filed under: Private equity industry, Activist investing

When the first signs of a slowdown in private equity were emerging, I and others wondered what effect it would have on activist investors. One of their favorite strategies is buying stakes in undervalued companies and then placing them into the hands of leveraged buyout artists. But with buyouts slowing down, what will activists do?

The Wall Street Journal reports (subscription required) that the credit crunch isn’t slowing them down: “New data compiled by FactSet Shark Watch, which tracks shareholder activism, show that these investors are, well, as active as ever. According to the data, 501 new activist campaigns were waged in 2007, up from 429 the year before. Such campaigns, in fact, picked up steam at the end of the year, with 135 launched in the fourth quarter, the busiest quarter in the past two years.”

This creates a fascinating question for activist observers: What will they push for, with buyouts less of an option than they were not so long?

Carl Icahn may have to invent himself once again. Without the benefit of flush private equity firms to scoop up cheap companies, activists may have to pursue more long-term means of value creation: corporate governance improvements, operational changes, and capital structure revamps.

The activists are staying busy. The question is will they be able to stay successful.

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Filed under: Ripoffs and Scams, Fraud

A former legal secretary in Massachusetts demonstrates for us what not to do: lie about being disabled. Teresa Brooks sued her employer, law firm Peabody & Arnold, saying they fired her because of her disability, a disabling spinal condition. The law firm said she wasn’t disabled at all, and they fired her for lying about it.

The firm knew Brooks had back problems and had provided her with a special chair and with time off for physical therapy. But she claimed she was disabled and couldn’t work at all. Brooks had received some disciplinary notes in her personnel file, and her disability claim came shortly after that. The firm became suspicious after hearing rumors of a trip to Disney World, in spite of her claimed total disability.

So they sent out a private detective, and guess what they found? Brooks was videotaped doing physical things that contradicted her disability claims. She was doing yard work, driving forty minutes, and sitting for hours in front of slot machines, when she had claimed that she couldn’t work because she wasn’t able to sit at her desk. The firm swiftly fired Brooks.
A trial court judge dismissed the case Brooks brought against the firm and an appeals court concurred with the trial court. The law firm wins this one. Brooks wasn’t disabled and was wrong for lying about it.

What’s the moral of the story? Don’t lie about being disabled. There are plenty of ways to find out if you’re disabled or not. And if you know someone who is cheating their employer or insurance company about disability benefits, report them.

An insurance company is happy to send someone with a video camera to tape your neighbor raking his leaves, but they can’t do that unless they know he’s doing it. They’ve simply got too many people on claim to be able to follow each and each one of them. But if they get a reliable tip, they’re apt to follow up on it. Make sure you provide enough details so that the insurance company knows your tip is legitimate and so that they have enough information to begin an investigation.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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Filed under: Ripoffs and Scams

Like most personal finance writers, I don’t think gambling is something people should be doing — Studies have shown that those who play the lottery tend to be the people who can least afford it. But if you’ve an insatiable desire to blow money on games of chance where the odds are hopelessly stacked against you (and are too smart to try day trading), I would suggest bingo.

Why? Because it involves sitting there for a while and slows down the rate at which you can blow money. Playing the Lottery is like throwing a few dollars out the window — at least with bingo, it takes a while to lose your money. And if you can find a really gross bingo hall — filled with cigarette smoke and body odor — that’s even better. You’ll be miserable and won’t be tempted to play for very long. Also, restrict yourself to one or two cards at a time.

A piece in the Wall Street Journal takes a pointless but amusing look (subscription required) at The Bingo Bugle, a newspaper of sorts distributed at bingo games. You have to think this is the kind of journalism that’ll be on the chopping block once Rupert gets around to shaking up the paper.

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Filed under: Entrepreneurship, Ripoffs and Scams

The post-holiday period is a huge time for multi-level marketing recruiting. People are feeling broke from their gift-giving extravagances and, with the housing crisis and general economic malaise, a lot of Americans are looking for additional sources of income.

As Tracy Coenen wrote in this excellent post, network marketing or multi-level marketing is frequently looked to as a potential income source by desperate people, but it’s very important that you say no thanks to anyone who tries to pitch you on it.

If you need more convincing, listen to this excellent interview with Consumer Awareness Institute founder Dr. John M. Taylor. And then visit his website MLM: The Truth, and view his list of red flags if you have any doubt about an opportunity you or someone you know is considering.

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