Here is a little snippet regarding a questionable—usually illegal stock market practice that I came across while doing research for my book, Crossing the Cult, which will be published this month or next.
Devon nods in acknowledgment but is none too enthusiastic about where all of this is headed.
“So, a little legal tutorial for all of us. Let’s start with the greenmail issues with some history. Paying greenmail became controversial in the eighties. Long before that stock market critics viewed it as harmful to U.S. business interests and wanted it to be made criminal, but the courts were slow to act. The critics argued that greenmail is little more than a bribe, and bribes in the stock market are illegal. What produced progress came with litigation instituted by corporate shareholders. They protested the obvious: greenmail during takeover bids is frequently just a means of extorting profits. It wasn’t until well into the nineties that state legislatures began to take an interest. One of the examples–which is taught in law schools–is when a famous corporate raider used greenmail to try and take over Disney in 1984. He bought nearly six and a half percent of Disney stock before the corporation execs caught on. They almost immediately announced a nearly $400 million acquisition of their own stock to make the company less attractive and that stopped the takeover. The corporate raider gracefully accepted that he had failed and cried all the way to the bank to deposit his nearly $60 million profit.
“Of course, that was a very expensive alternative for the Disney board, even with their vast resources. Then the stockholders weighed in. Later that same year, the stockholders sued the directors of the corporation and the corporate raider and won an injunction—one of the very few judgments which pointed the legal finger at greenmail practices themselves as constituting unjust enrichment. The poor raider had to return all but about twenty million dollars. Strange as it may seem, he was not all that upset at losing the suit. Disney got a wrist slap and had to promise not to do it again. There were those who charged that Disney’s caving in to greenmail was the equivalent of embezzlement by the directors and out-and-out blackmail by the corporate raiders.