I haven’t been paying much attention to Gretchen Morgenson lately, but like the tree falling in the proverbial forest her journalistic efforts have continued unabated. Today she’s again attacking Sunrise Senior Living.
I discussed her previous attack on the same company for alleged insider trading by members of the board. She had scant factual basis for the charge, but she did have a grudge against the main offender – Thomas Donahue, CEO of the US Chamber of Commerce. As I noted:
Donahue and his organization are frequent critics of corporate reform, and particularly of SOX. So it would help Morgenson's cause to discredit him. And so she tries to do in this column, by essentially accusing him of insider trading. She says: "While no one has been charged with trading on nonpublic information, the timing is interesting."
She uses today’s column as an excuse to repeat the charges, though she adds no new basis for them, and notes no legal action based on them.
The rest of the column notes that the same company is hung up on a looming face-off between federal securities laws and state laws. Federal rules require audited financials for a proxy statement, which must be circulated in order to solicit proxies for an annual meeting. But Sunrise’s financials are hung up over an accounting restatement. Meanwhile, a Delaware state law deadline for holding an annual meeting is looming.
I wrote about a previous such "chicken game" in Delaware, which a Delaware judge resolved by hitting the accelerator: requiring the meeting per state law despite the non-compliance with federal law. I noted that “as the SEC and Congress seek increasingly to federalize corporate law, these confrontations are likely to become more common.”
The real problem here is the web of regulation and federal-state conflicts the company is caught up in, though of course Gretchen would rather have us see another morality tale about her beloved shareholders being trampled on.
Amid all of this, Morgenson notes that Sunrise’s shares are up 26% this year. Presumably Morgenson is going to keep after the company until that disturbing trend is reversed.
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