
Why I Did Not Go to Jail (2014) - Tomte
http://www.bhorowitz.com/why_i_did_not_go_to_jail
======
lostcolony
'I obviously don’t know what happened at the other company, but I do know that
Michelle had no intention of breaking any laws and no idea that she’d broken
any laws'

This. This is terrifying. We're already in the position, as a society, that
everyone is guilty of something, and it's just whether someone feels like
prosecuting you or not as to whether you'll be penalized.

~~~
JabavuAdams
It's cause for concern, but I don't see how this is different from any other
society or historical period.

~~~
ArkyBeagle
It's somewhat of a departure from say, 50 years ago in the United States of
America. Options are a substitute for salary. Options were invented when
executive salaries were deemed too high.

Now a detail in compensation practice will get you three-plus months in jail.

~~~
PhantomGremlin
_Now a detail in compensation practice will get you three-plus months in jail_

How is it merely a "detail"?

If, on March 31 of a given year, you hand someone a stock option, you don't
get to pick "today" as the lowest price the stock has had in the interval of
March 1 thru March 31.

That's not a "detail". That's not just a small problem with the paperwork.
That's nothing but obvious fraud.

IMO. IANAL. But I've had stock options given to me. And the price was set for
that day, not for some date that was clearly a lie. And this all happened 20+
years ago, long before these sordid SV practices came to light.

Edit: One time my stock option grant was worse than "today". What happened is
we were a small company, the BOD met a few days earlier and approved grants,
my manager didn't give me my grant for a few days. So it was something like
this:

manager: "Here's your stock grant for $20 a share". me: "but the stock closed
today at $18 a share. So I'm already 10% underwater".

Such were the perils of working at a small company that wasn't trying to game
the system.

Not that there weren't ways to change employee compensation. In 2009 (and I'm
sure at various dates before that), many companies went to their stockholders
to ask them to approve re-pricing because employee options were way under
water.

I don't recall the converse ever happening. I'd like to hear of a company
going to its stockholders and asking for approval to tear up grants in the
other direction. Something like this: "we gave out employees stock options at
$10, but the stock is now $30. We want to take back those grants and give them
new ones at the current price". Nope, that doesn't happen.

I.e. there are already many ways companies can legally "cheat" without having
to commit obvious fraud.

~~~
ArkyBeagle
Back-dating options is pretty fishy. Not saying it isn't.

------
DanBC
> I told our employees that there was a difference between accounting fraud
> and accounting mistakes and I believed that Michelle made mistakes at her
> previous company, but did not commit fraud. [...]

> Michelle ultimately served 3½ months in jail for her part in the other
> company’s stock option practice—the same practice that we nearly implemented
> at Opsware. Since we had the same head of finance, we almost certainly would
> have been investigated. I obviously don’t know what happened at the other
> company, but I do know that Michelle had no intention of breaking any laws
> and no idea that she’d broken any laws. The whole thing was a case of the
> old saying: “When the paddy wagon pulls up to the house of ill repute, it
> doesn’t matter what you are doing. Everybody goes to jail.” Once the SEC
> decided that most technology company stock option procedures were not as
> desired, the jail sentences were handed out arbitrarily.

In England it would be unusual to go to jail unless there was intent to
deceive. People don't go to jail because they've made a mistake in their
accounts.

Is that true for the US? Or is this story an example of the massive over-
incarceration the US has?

~~~
pjc50
The UK certainly does have strict liability offences:

[http://www.peterjepson.com/law/A2-2%20Jonathan%20Wight.htm](http://www.peterjepson.com/law/A2-2%20Jonathan%20Wight.htm)

[http://www.drukker.co.uk/publications/reference/strict-
liabi...](http://www.drukker.co.uk/publications/reference/strict-liability/)

It's a little unusual to have strict liability result in jail time for
directors, but this is tax enforcement. See the ongoing Rangers case.

~~~
DanBC
So, I'm not trying to say they wouldn't be found guilty of an offence. I'm
saying that they wouldn't go to jail unless there was recklessness or intent
to deceive.

For a tax offence this would mean they'd have to repay the tax, with some
penalty. Non-payment would then result in a prison sentence.

And I'm only talking about taxes.

------
deedubaya
Wasn't it her job to at least know where the gray areas where? If you know
you're in a gray area, I'd expect you know that you _might_ be breaking the
law.

~~~
mdellabitta
The point of the story is that social proof isn't enough when it comes to
legal matters. The author contrasts his behavior with Michelle's to point out
what can happen when you use social proof rather than direct legal advice.

