I signed the settlement documents as your representative firmly convinced that a settlement is a more reasonable way for us to move forward in the process than a hearing.
I’d be willing to wager the most likely reason for Chairman Kubke’s conclusion is that the insurance company saw they had no hope of winning this case and the best they could do was minimize the damage. When they petitioned the ASC panel to have the hearing delayed until the representative action was done, it cost around $50K for a hearing lasting a bit over a day. Considering that counsel for the respondants were talking about needing three or more months for testimony and witnesses, it’s not much of a stretch to speculate that the projected cost to defend this case would come in way over $500K.
This leads to a risk analysis – settle the case now and pay $500K in fines, or pay more than $500K in legal fees and risk having to pay substantially higher fines? I fully expect the insurer called a meeting “This is what’s going to happen next. You either agree to this or we walk away.”
And lets not forget that the CEF and DIL representative actions are still waiting in the wings, with two (2) $5M D&O policies hanging in the balance. Any evidence the ASC submitted in this case would almost certainly show up in the representative actions. By settling the ASC case before the ASC’s evidence was presented, counsel for the respondents might prevent that from happening.
The men who were named in the settlement were named representatives of the Board and of the District administration in general, and signed as representatives. The payment, then, is being paid out by those ware being represented, not by individuals, and the amounts will be covered by our insurance policy.
If the insurer paid the fine, the named respondents were still barred from securities-related work in the future.
There’s also something known as subrogation where
- damage is caused,
- an insurance claim is made,
- the insurer pays the claim,
- the insurer then sues the parties that caused the damage to recover all or part of the claim.
D&O insurance is about protecting directors that are making a good-faith effort to do the right thing. It is not about absolving directors for recklessly breaking the law. I would not be surprised if, when everything is said and done, the insurance company went after the named respondents in the representative actions to recover some of its costs.
The settlement itself is not part of any lawsuit,…
To clarify –
- A lawsuit is a civil matter involving a dispute between two or more parties
- A criminal proceeding is where the government files charges against someone for breaking the law. (1)
Strictly speaking Chairman Kubke is correct – but the inference is misleading because even though the ASC’s action wasn’t part of a lawsuit, it was part of a criminal proceeding, which I submit is a far more serious matter and should be treated as such.
…but has to do with a branch of the Government that deals with a particular set of regulations and standards and has its own responsibilities to meet.
The ASC is a “branch of Government” the same way the RCMP is “a branch of government” – both of them are charged with enforcing the laws of the land, and both can charge people with criminal offences. Depending on the case and the charges involved, both agencies can request all manner of punishment up to and including jail time on conviction.
The legal, law suit, part of things, in the way that we usually think of legal things, comes next as the Representative Action and its defence proceeds
The representative action is a civil action which puts it in the “lawsuit” category, so on this Chairman Kubke is correct. I would differ on the “in the way we usually think of things” phrasing as I don’t think many people make the distinction between “lawsuit” and “criminal proceeding” when it comes to court cases.
- You can read more about this topic at the Canadian Department of Justice