new corporate law in Wisconsin
This is a discussion on new corporate law in Wisconsin within the Other Business & Finance Law Issues forum, part of the BUSINESS & FINANCE LAW category; I am one of the victims of this company's outright fraud in my opinion, and breach of its duties. I ...
|POST NEW QUESTION|
||Thread Tools||Search this Thread||Rate Thread||Display Modes|
|Jan 3rd, 2009, 09:12 PM||#1|
new corporate law in Wisconsin
I am one of the victims of this company's outright fraud in my opinion, and breach of its duties. I would encourage world law direct and all of its lawyers to please watch this case and please support the receiver!!
Case could rewrite corporate law in Wisconsin
A case before the Wisconsin Supreme Court could have a major impact on the power of corporations and their relationships with unions, banks and vendors.
The court will decide whether owners can make business decisions for their personal benefit at the expense of creditors, workers and the corporations themselves or whether they have obligations to those interests. Oral arguments are set for Jan. 7.
The case involves the former owners of a company in Lancaster, Wis., about 80 miles west of Madison, that manufactures components for stereo speakers. The company, then known as Communications Products Corp., defaulted on loans in 2003 and went into receivership owing more than $1 million to a bank and local businesses.
The owners -- Daniel Virnich and Jack Moores -- received more than $10 million from the company over a 14-year period through salaries, management fees, cash withdrawals and by charging excessive rates for leasing it equipment. Neither ran its day-to-day operations.
Their payments continued in the final years even as the company struggled to pay bills, took out more debt and could not competitively price its product. Dozens of workers lost their jobs and the company refused to pay employee bonuses required in its union contract.
Acting at the request of the bank, a judge declared the company insolvent in 2003 and appointed a receiver to manage it. The receiver filed suit against Virnich and Moores on behalf of the company, alleging they breached their fiduciary duties by taking excessive compensation and engaging in self-dealing.
Virnich and Moores argued they could not be sued by the company they owned because they were its only shareholders and were free to manage it for their benefit. They said they approved and disclosed the payments and transactions that were at issue and courts should not be allowed to second-guess their decisions.
A judge rejected that argument and a jury in 2006 ordered Virnich and Moores to pay $6.5 million in damages. They appealed the verdict, which the bank is ready to collect by trying to seize Virnich's $2 million Colorado mansion and other assets.
An appeals court sent the case straight to the Supreme Court because of its statewide significance and conflicting previous decisions.
Wisconsin Manufacturers & Commerce, the powerful business lobby, told the appeals court last year that ruling against the owners would have a chilling impact on business. The case could allow the courts to interfere with business decisions and deter investors by allowing creditors to go after their personal assets when businesses fail, WMC warned.
Its brief called the compensation and leasing transactions by Virnich and Moores reasonable and common.
"This is not about some bad actors using a company for concealment or fraud to gain some advantage," it warned. "Rather, this case is about a good corporate citizen acting pursuant to sound business judgment and long-standing principles of corporate governance to maximize the benefits of the legal processes."
However, WMC decided to sit out the case once it reached the Supreme Court, a spokesman said. WMC has spent millions to help elect two conservative-leaning justices, Annette Ziegler and Michael Gableman, in recent years but has faced a backlash for negative campaign tactics.
Meanwhile, the Wisconsin Bankers Association and a union that represents workers at the company have urged the court to uphold the jury's award.
If the owners win this case, banks could no longer assume that corporations have any obligation to repay their loans, the bankers association warned. Banks would be forced to increase their oversight of loans, requiring personal guarantees and more frequent independent audits to protect their money, its friend-of-the-court brief said.
"It will significantly raise the costs of lending, and therefore of doing business, to the benefit of no one except perhaps the independent auditors and those insiders who wish to engage in inappropriate insider activities," association lawyer John Knight wrote.
William Haus, a lawyer for Sheet Metal Workers Local Union 565, said the company's workers suffered at the owners' expense by getting lower wages and benefits than they should have.
Giving owners the power to enrich themselves at the expense of the company would weaken collective bargaining agreements and companies' duties to meet their obligations, he said.
The company, which is now called Loudspeaker Components LLC and operating under different owners, has for decades been one of the larger private employers in Grant County. Vice President Brian Haas said he felt the previous owners had been unfairly portrayed as greedy and the lawsuit is "a dark cloud that keeps hanging over this business."
"Not a lot has really changed here," he said. "We worked hard to repair this company and I think we've done a good job with that."
|Bookmark & Share|
|Thread Tools||Search this Thread|
|Display Modes||Rate This Thread|
|Thread||Thread Starter||Forum||Replies||Last Post|
|Need Help with Wisconsin Traffic Law||lawabiding2610||Traffic & Speeding Tickets||0||Sep 11th, 2011 12:03 AM|
|Corporate Law Firms' Billing Rates Continue to Climb||WSJ Law Blog||Attorneys & Legal Ethics||0||Dec 6th, 2010 03:00 PM|
|Age of reason law - Wisconsin||Unregistered||Car Accident Claims||2||Aug 16th, 2010 12:48 AM|
|Probation Law in the State of Wisconsin||Unregistered||Other Criminal Law Matters||1||Jun 16th, 2010 07:07 PM|
|Sotomayor Issues Challenge to a Century of Corporate Law||forum_admin||Other Business & Finance Law Issues||0||Sep 16th, 2009 08:25 PM|