Monday, November 17, 2008
Fraud on the Court!
"Hip clothing retailer American Apparel Inc. [AAI] earlier this year agreed to pay a former female employee $1.3 million to settle a sexual-harassment claim involving its chief executive. But there was a catch: She had to keep the settlement's existence a secret; and instead participate in an arbitration proceeding, with a preordained outcome that would allow Chief Executive Dov Charney to publicly declare victory. ... The plaintiff in the harassment case refused to go through with the arbitration, even though [AAI] claims the scheme was her attorney's idea in the first place. ... The day before the trial was to begin, according to court documents, the parties struck a deal in which [AAI] agreed to pay Ms. Nelson $1.3 million, without admitting liability. ... The arbitrator would decide the case solely on one precedent case that [AAI] presumably saw as favorable, and it would result in a decision stating, among other things, that Mr. Charney 'never sexualized, propositioned or made any sexual advances of any nature whatsoever towards Mary Nelson.' ... The arbitration was aborted and the $1.3 million was never paid, [AAI] says. ... In the process, however, the appeals court took issue with what it described as the 'potential illegality of the "arbitration" clause ... with its goal of issuing a press release for the purpose of misleading journalists and the public.' The court went on to say that 'the proposed press release is materially misleading--among other things, no real arbitration of a dispute occurred and [the] plaintiff received $1.3 million in compensation.' ... The court said Mr. [Keith] Fink [Nelson's lawyer] refused to participate in the arbitration on the grounds it was a 'sham.' The company's settlement wasn't disclosed to investors or the [SEC]', Nicholas Casey at the WSJ, 4 November 2008.
Uh oh, a collusive settlement. Will the California courts instigate disbarment proceedings against all attorneys involved in this? Will the SEC open a securities fraud file? If not, why not?