Former Employee Wins $4.1 Billion, Dr. Evil Award
An arbitrator recently awarded $4.1 billion in favor of the former chief marketing officer of iFreedom Communications Inc., finding that iFreedom breached his employment contract by firing him without cause. You read that right: $4.1 billion, with a "b." U.S. Dollars, not Zimbabwean. Don't believe us? You can read the opinion yourself: Chester v. iFreedom Communications Inc.
$4.1 billion dollars. That's a ton of money. Boatloads of money. In fact, that's so much money, we are awarding Mr. Chester our First Annual Dr. Evil Award! Congratulations!
So, how did Chester rack up $4.1 billion in damages? The employment agreement guaranteed him a salary of $12,000 a month plus commissions of 5 percent of gross sales; if he was fired without cause, he would continue to receive commissions. iFreedom also was supposed to provide Chester with 1.1 million shares of common stock upon hiring and another 600,000 shares if he met certain sales targets . Apparently, iFreedom did really, really well. Sales, stock and interest added up, and in a big way.
How can employers avoid owing an ex-employee billions? First, be careful drafting employment agreements! A carefully drafted agreement could have avoided this massive liability. Second, if the agreement requires "cause" for termination, make sure such cause actually exists before pulling the trigger on someone. Finally, if you get sued and the other side is seeking billions of dollars, hire a decent lawyer and don't try to represent yourself. It turns out the founder of iFreedom (a non-lawyer) represented the company by himself. Oops.
Siemens Settles FCPA Case for Record $800 Million
On December 15, German engineering company Siemens AG and three of its subsidiaries pleaded guilty to multiple violations of the Foreign Corrupt Practices Act (FCPA). Siemens also reached a settlement agreement with the Securities and Exchange Commission (SEC) under which Siemens will pay a record $800 million (a $450 million criminal fine and $350 million in disgorgement of profits ) and retain an independent compliance monitor for a four-year term. Combined with penalties levied by the German government, Siemens will pay a total of $1.6 billion to settle the bribery charges. That's no typo: $1.6 billion. That's a Dr. Evil ransom.
What did Siemens allegedly do that was so bad? According to the U.S. Attorney General's office, among other things, Siemens paid over $800 million in bribes to foreign officials. Perhaps Siemens didn't realize that the FCPA makes it illegal to bribe a foreign official to get business. The FCPA also requires issuers (companies whose stocks trade on U.S. exchanges) to have internal controls and to maintain accurate books and records.
Want to avoid ending up paying $1.6 billion to settle a case? The U.S. Department of Justice has published this handy Layperson's Guide to the FCPA. If you do business overseas, be sure that your employees are trained on the FCPA and understand the limitations it places on their actions abroad.
Former Official Sues NASCAR for Race, Sex Harassment
Today's big news: Former NASCAR technical inspector Mauricia Grant filed suit against the auto racing league for sexual and racial harassment, discrimination and retaliation, seeking $225 million dollars. According to Grant's complaint, she was referred to as "Nappy Headed Mo" and "Queen Sheba" by co-workers, was often told she worked on "colored people time" and was frightened by one official who routinely made references to the Ku Klux Klan. In addition, Grant said she was subjected to sexual advances from male co-workers, two of whom allegedly exposed themselves to her, and graphic and lewd jokes. Two weeks after Grant complained about this treatment, she was terminated. If Grant's claims have merit, she's certainly entitled to just compensation. But whenever I see a plaintiff ask for huge sums of money (and for an employment case, $225 million is "huge"), this is the image it conjures in my mind.
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