Corporate Governance - PDF by fsb96139

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     American Bar Association
        Annual Meeting
        Chicago, Illinois
         August 8, 2005


John H. Stout and Thomas S. Fraser
         Attorneys at Law
       Fredrikson & Byron
     Minneapolis, Minnesota
                                                TABLE OF CONTENTS


       INVESTIGATE................................................................................................................. 3

       OVERSIGHT; TOOLS FOR THE PROACTIVE BOARD......................................... 3

       ARISE? .............................................................................................................................. 6

IV.    ASSESSING WHETHER TO INVESTIGATE............................................................. 6

V.     DETERMINING HOW TO INVESTIGATE ................................................................ 7

VI.    DETERMINING SCOPE OF INVESTIGATION ........................................................ 7

       FINDINGS ......................................................................................................................... 8

           1.       The Graham 1 Case: Board obligation to act arises when it is alerted to a problem.

           2.       The Federal Sentencing Guidelines: Organizational sanctions reduced if
                    procedures and processes are in place to prevent and detect wrongdoing, the
                    procedures and processes are functioning and monitored, and the organization
                    acts appropriately when a problem is detected.

           3.       The Caremark 2 Case: A board cannot wait until a problem occurs to act. It must
                    have appropriate procedures and processes in place to discourage and detect
                    wrongdoing, and board must monitor these to see that they are functional. Board
                    must act or see that management acts appropriately when wrongdoing is
                    suspected or discovered.

           4.       The Revised Federal Sentencing Guidelines: The revisions make it clear that the
                    governing authority of an organization is also responsible to see that an ethical,
                    legally compliant culture exists.


           1.       Director Selection. Selection of capable directors, known to be ethical and
                    screened for past legal and ethical issues, who understand the difference between
                    governance and management, are experienced in governance and oversight, and
                    have the time, energy, knowledge, judgment, leadership and courage to
                    effectively discharge their responsibilities as directors.

           2.       CEO Selection. Selection of a CEO, known to be ethical and screened for past
                    legal and ethical issues, who is experienced and committed to building a corporate
                    culture that is ethical and legally compliant, understands the Board/CEO
                    relationship in the governance process, supports a strong governance
                    environment, accepts accountability to the Board for his/her performance.

           3.       Board Leadership. Selection of independent Board leadership with the
                    knowledge and skills to assist the Board and its committees in meeting their

           4.       Periodic Assessments. Periodic independent assessments of the company’s
                    culture, ethics, values and compliance, and the effectiveness of training programs
                    designed to instill appropriate corporate values, familiarize employees with the

    Graham v. Allis-Chalmers Mfg. Co., 188 A.2d 125 (Del. 1963).
    In re Caremark Int’l Derivative Litig., 698 A.2d 959 (Del. Ch. 1996).

      company’s ethics and compliance expectations and assure those expectations are

5.    Oversight Over Compliance Processes and Procedures. Insistence that
      management have in place processes and procedures for preventing and detecting
      violations of laws, regulations, company governing documents and company
      codes of ethical conduct. Oversight over, and periodic assessment of, the efficacy
      of those processes and procedures.

6.    Oversight Over Relations With Key Personnel. Oversight over the evaluation,
      hiring, firing and compensation of employees who are key to assessing and
      shaping the corporation’s financial reporting, human resources, risk
      assessment/management, disclosure, ethical and legal compliance environments,
      e.g., the CFO, controller, internal auditor, risk manager, investor relations officer,
      internal counsel. Periodic one-on-one interviews with these individuals provide
      the Board and its committees with a perspective on the management culture and
      an opportunity for views of these key functions.

7.    Contact With Key Advisors. Independent contact with key corporate advisors:
      outside counsel, independent auditors, various consultants.

8.    Direct Engagement of Key Board Consultants; Oversight Over Other Key
      Providers. Engagement of the independent auditors and compensation
      consultants; oversight over the engagement of outside legal counsel and other key
      advisors to assure that the loyalty of these advisors is to the company and not to
      the personnel at the company who engaged them.

9.    Periodic Engagement of Board Special Counsel/Advisors. Engagement of
      independent counsel and consultants to advise the Board, or Board committees,
      on matters with respect to which the Board requires a “second opinion” or
      advice from a service provider who is not regularly engaged to serve the company
      under management’s direction.

10.   Use of Monitoring Tools. Use of tools such as business intelligence and balanced
      scorecard software to assist with monitoring.

11.   Selective Background Checks. Use of corporate and outside investigatory and
      research resources to scan backgrounds of key people and organizations.

12.   Periodic Use of Search Firms to Identify Director and CEO Candidates. Use of
      search firms and other consultants to assist with the identification and screening
      of director and CEO candidates.

13.   Oversight Over Targets and Incentives. Agreed that plans, targets and
      accountability are good. But not when the targets are unrealistic or the pressures
      or incentives to achieve them so great as to result in deliberate distortions, or the
      inappropriate use of “cutting edge” accounting or business practices. A survey by
      CFO Magazine found that 17% of CFOs, many from the nation’s largest

      companies, had been pressured by CEOs one or more times in the last five years
      to misrepresent financial results. Directors need to be aggressive about
      investigating and ending that pressure.

14.   Oversight Over Corporate Disclosures. Boards are increasingly aware of the
      organization’s responsibility for accurate, complete disclosure to banks, creditors,
      insurance companies, government tax and regulatory authorities, the securities
      markets (in the case of publicly-held companies or organizations which issue
      publicly-held debt) and others who rely on or require the organization’s business
      and financial information. Boards must also be aware of the many ways in which
      the corporation provides information, e.g., public comments by management,
      management conduct, media interviews, press releases, websites, broadcast or
      directed email, regulatory agency filings and a multitude of forms and
      applications for other third parties.

15.   Oversight Over Compensation and Perks. Boards must be aware of the corrosive
      effect on the corporate culture, particularly trust, which can result from poor
      compensation practices at the Board and management levels. In this regard the
      issue is not just the amount of compensation; it is the incenting of certain
      performance. Boards should review compensation plans for senior executives and
      other managers to assure improper behavior is not incentified.

      •   Boards must realize that excessive director and executive compensation
          reflects poorly on their independence, integrity and judgment.

      •   The bottom line is that Boards must assure that management establishes
          compensation and incentives for any group in the context of an overall
          compensation philosophy for the organization which is in fact, and perception,

16.   Oversight Over Conflicts of Interest. Boards must carefully assess actual and
      perceived conflicts of interest. Conflicts of interest in general, but particularly
      involving directors, senior management and key advisors, must be properly
      reviewed, and independent advice sought where necessary. Like the
      compensation issues, unresolved or poorly resolved conflicts of interest reflect
      badly on Boards’ independence, integrity and judgment, and can have a corrosive
      effect on a corporation’s culture.

17.   Scanning Information Sources. From analyst reports to internet sites to blogs
      there is a great deal of information that circulates about a company. Periodic
      review of that information can alert a Board to issues that need to be addressed.

18.   Awareness of Signals. Boards must be extremely conscious of the signals they
      send to the organizations they govern. Signals which come from their own
      conduct, who they nominate as directors, who they hire as the CEO, what conduct
      they endorse, what values they espouse directly and indirectly, and how they deal
      with behavior which is antithetical to, and situations which test, those values.

       19.   Sensitivity to Reputational Issues. For most organizations their reputations and
             goodwill are among their most valuable assets. Boards must be alert to individual
             and organizational conduct which may compromise a company’s reputation for
             integrity and trustworthiness with its various stakeholders.

       20.   Conducting Investigations. The Board and its committees have the authority and
             responsibility to investigate situations which call for further inquiry. That is the
             subject of Sections III, IV, V and VI.

       21.   Good Governance Practices. A strong governance environment is the ultimate
             Board tool. Good governance in actuality, not just in appearance. Good
             governance is about organization, process, education and EXECUTION. And
             finally EVALUATION -- evaluation of management, principally the CEO,
             evaluation of the Board, and evaluation of directors.


       1.    Notice by Observation. Organization put on notice by observation of conduct
             which does not comply, or is suspected not to comply, with corporate law,
             corporate governing documents, corporate codes of conduct, corporate policies or
             expected norms of conduct.

       2.    Internal Complaints. Organization put on notice by internal complaint or concern.

             •   The Sherron Watkins letter.

       3.    Regulators. Notice from regulatory or governmental authorities or governmental
             offices charged with investigation.

       4.    Failure to Certify. Failure to properly certify when required or appropriately
             respond to questionnaires soliciting information or assurances.

       5.    Internal Officers and Others. Information obtained from observations of CEO,
             CFO, internal counsel, internal auditors, human resource personnel and/or risk
             management personnel.

       6.    External Sources. Information obtained from external sources – e.g., auditors,
             counsel, consultants, and others having relations with the company, e.g., vendors
             and customers.


       1.    Review the Notification. Consider the nature of the notification.

             •   Credibility of the source.

             •   Nature of the acts complained of.

           •   Who is implicated? Another employee?           Middle management?        Senior
               management? A Board member?

           •   An isolated complaint, or related to other concerns/complaints?

      2.   Responding to the Notice. Initial response.

           •   Review corporate policies to ascertain appropriate procedure.           Follow
               prescribed processes unless good reason for deviation.

           •   Further inquiry. By whom? Of whom?

           •   Preserving evidence.

           •   Alerting appropriate management and Board personnel.


      1.   Issue Review. Understanding the issues involved.

      2.   Who is Involved? Assessing who is implicated.

      3.   Oversight Team. Selecting the appropriate team to oversee the investigation.

           •   Management.

           •   Management and Board/Board committee.

           •   Board/Board committee.

      4.   Resources. Determining whether to use internal or external resources.

           •   Could senior management be implicated?

           •   Seriousness of the alleged misconduct; e.g., financial manipulation, SEC
               violations, possible criminal violations, violation of codes of ethical conduct.

           •   Independence and objectivity can be extremely important to the credibility of
               the findings and resulting actions. Concerns re management control of
               process, sometimes framed as cost control.

           •   Issues of privilege.

           •   Issues of disclosure.


      1.   Controlling the Scope. Who controls “scope” issues?

             •   The “Enron” scope problem.

             •   Initial scope needs to be agreed on between responsible corporate oversight
                 group and lead investigator.

        2.   Dialogue Concerning Scope. Issues of scope as ongoing dialogue between lead
             investigator and corporate oversight group.

             •   Importance of addressing the initially understood issues, and those discovered
                 during investigation.

             •   Importance of going beyond the specific issues to the corporate
                 “environment” or “context” within which the conduct being investigated

                    Revised Federal Sentencing Guidelines reference the governing
                    authorities’ responsibilities for an ethical, legally compliant culture.

                    Are weaknesses in Board or committee oversight implicated?

        3.   Limits. How far is far enough?

             •   Is there room for “cost-benefit” analyses?

             •   Is there room for “probability” analyses?


        1.   Review Board Responsibilities and Practices. Consider Board, Board committee
             and management oversight responsibilities and practices in the context of
             investigation findings. Are improvements needed or appropriate?

        2.   Review Company Policies and Practices. Consider corporate policies, procedures
             and practices in context of investigation findings. Are improvements needed or


JOHN H. STOUT 612.492.7012

                                                           ÷ University of Michigan Law School, J.D., 1967
                                                           ÷ Carleton College, B.A., 1962

                                                           Bar Admissions
                                                           ÷ Minnesota, 1967

                                                           Professional Activities
                                                           ÷ American Bar Association, Committee on Corporate
                                                              Governance, Sub-Committee on International
                                                              Corporate Governance; Sub-Committee on Corporate
                                                              Governance Guidelines (co-chair)
                                                           ÷ American Bar Association, Coordinating Committee
                                                              on Nonprofit Governance
                                                           ÷ Minnesota State Bar Association
                                                           ÷ Hennepin County Bar Association
                                                           ÷ National Association of Corporate Directors
                                                              (member, Board of Directors)
John practices in business organization, finance and       ÷ National Association of Corporate Directors,
                                                              Minnesota Chapter President
governance at Fredrikson & Byron. John represents          ÷ National Association of Corporate Directors Blue
family-owned, closely-held and publicly-owned                 Ribbon Commissions on Board Leadership and
                                                              Director Professionalism
businesses in governance, financial, commercial,           ÷ National Association of Corporate Directors Best
intellectual property, and international business             Practices Council on Preventing and Detecting Fraud
                                                              and Other Illegal Activities
matters. He advises executives, boards of directors,       ÷ Metropolitan Economic Develop ment Association
board committees and individual directors and officers        (co-founder, past Chairman, Secretary and Director)
                                                           ÷ Milestone Growth Fund (co-founder, Chairman,
of for profit and nonprofit organizations on
                                                              Secretary and Director)
governance, risk assessment, legal compliance, and the     ÷ Minnesota Film Board (co-founder, past Chairman
                                                              and Director)
legal implications of business strategies and decisions.
He currently serves as an expert witness on board and      Selected Publications & Presentations
                                                           ÷ Presentation, Haml ine University School of Law,
committee governance/performance in two securities
                                                              “The Board’s Role in Compliance,” March 2005
fraud lawsuits, and frequently writes and speaks on        ÷ “Assessing the Risk of Corporate Directorships,”
corporate governance issues.                                  article in NACD’s Directors Monthly, February 2005
                                                           ÷ Presentations, Society of Corporate Compliance and
                                                              Ethics workshops, “Failure to Comply and the Role
John chairs Fredrikson’s Corporate Governance                 of Governance,” Minneapolis, Chicago, Philadelphia,
                                                              Washington, D.C., Atlanta, Dallas, Los Angeles, San
Group and co-chairs its Advertising, Media &                  Francisco, October-November, 2004.
Entertainment Group. He also is a member of                ÷ The Boardroom View - Directors weigh in on the
                                                              annual meeting, article in Boardroom Briefing, a joint
Fredrikson’s Corporate, Securities, Mergers &                 publication of Directors & Boards Magazine and
Acquisitions, International and Health Law groups.            National Association of Corporate Directors, October
John is an Adjunct Professor at the University of St.      ÷ Presentation, annual meeting of Society of Corporate
Thomas Law School, Minneapolis, Minnesota, where              Compliance and Ethics, “Role of Governance in
                                                              Compliance,” Seattle, Washington, August 24, 2004
he taught a seminar on corporate governance during         ÷ Presentation, meeting of Corporate Committee, Trans
the 2004-2005 academic year.                                  European Law Firms Alliance, “Corporate
    Governance and the Liability of Boards of                   International and Fredrikson & Byron, November 19,
    Directors,” Hamburg, Germany, June 4-5, 2004                2002
÷   Presentation, meeting of Corporate Committee, Trans     ÷   “Corporate Ethics, Governance and Entrepreneurial
    European Law Firms Alliance, “Corporate                     Leadership,” panel discussion, The Collaborative,
    Governance and Organizational Integrity,” Hamburg,          November 13, 2002
    Germany, June 4-5, 2004                                 ÷   “How Boards and Companies are Responding to
÷   Presentation, University of St. Thomas School of            Increased Regulation, Shareholder Activism and a
    Law, “Corporate Responsibility-Compliance,                  Distrustful Marketplace,” presentation, National
    Prevention and Best Practices,” April 20, 2004              Association of Corporate Directors, October 17, 2002
÷   Presentation, Minnesota Council of Accounting           ÷   “Implications for Charitable Organizations of Recent
    Educators, “Corporate Governance and the Liability          Corporate Governance Failures,” presentation,
    of Boards of Directors,” April 16, 2004                     National Association of Attorneys General/National
÷   Presentation, American Bar Association Committees           Association Of State Charity Officials, October 7,
    on Nonprofit Corporations and Health Law, “Hot              2002
    Topics and Current Developments in Nonprofit            ÷   “Twelve Lessons For Corporate Directors From
    Corporations Law,” April 3, 2004                            Recent Governance Failures,” Star Tribune,
÷   Presentation, American Bar Association Committees           September 29, 2002
    on Nonprofit Corporations and Health Law, “To Pay       ÷   “The Tortoise Becomes a Hare,” article commenting
    or Not to Pay – And How Much: Director and                  on recent proposed changes to New York Stock
    Executive Compensation Dilemmas in Nonprofit                Exchange listing standards published in Business
    Healthcare and Other Nonprofit Corporations,”               Forum, Star Tribune , July 2002
    April 2, 2004                                           ÷   “Corporate Governance After Enron,” outline and
÷   Presentation, Minnesota State Bar Association,              presentation, Ethics Officer Association & United
    Health Law Section, “The Impact of Sarbanes-Oxley           States Sentencing Commission regional forum
    on Ethics and Governance,” Mayo Clinic, March 19,           entitled “Shaping To morrow’s Debate – Ethics,
    2004                                                        Compliance and the Organizational Sentencing
÷   Presentation, University of St. Thomas Law Journal          Guidelines/The Role of Corporate Governance in
    Symposium, “Understanding the Intersection of               Overseeing an Effective Program,” June 2002.
    Business and Legal Ethics— Corporate Governance         ÷   “Corporate Governance After Enron,” presentation,
    and Organizational Integrity,” March 6, 2004                Wedlake Bell, London, April 2002.
÷   Presentation, Corporate Governance and                  ÷   “Corporate Governance: The Issue is Integrity,”
    Organizational Integrity, American Refugee                  article published in National Association of
    Committee, February 29, 2004                                Corporate Directors’ newsletter, Director’s Monthly,
÷   Presentation, Creating Value Through Corporate              March 2002.
    Governance and Leadership, Right Management             ÷   “When Governance Goes Awry,” article published in
    Consultants’ Executive Briefing, February 18, 2004          Business Forum, Star Tribune, February 2002.
÷   Presentation, Corporate Governance and Ethics,          ÷   “Principles and Process of Corporate Governance;
    World Bank, Washington, D.C., international                 Current Issues,” outline and presentation, Caux
    teleconference, December 11, 2003                           Round Table, Singapore, September 2000, and
÷   Presentation, Women on Boards, November 5, 2003             Minnesota Institute of Legal Education, October
÷   “Avoiding the Limelight: Lapses in Corporate Ethics         2000 (co-authored with Professor Thomas E.
    Programs and How to Prevent Future Shocks,”                 Holloran).
    Presentation, NACD Annual Corporate Governance          ÷   “Principles and Processes of Corporate Governance;
    Conference, October 20, 2003                                Current Issues,” presentation, Thai Directors
÷   “Ethics in the Boardroom -- Setting the Right Tone at       Institute, Bangkok, Thailand, September 2000.
    the Top,” Presentation, Fredrikson & Byron              ÷   “Creating an Effective Board of Directors for a
    Corporate Governance Series, October 17, 2003               Family-Owned Company,” outline and presentation,
÷   Corporate Governance Presentation, Twin Cities              YPO Chapter, Amman, Jordan, September 2000.
    Harvard Business School Club, August 19, 2003
÷   “Road to Better Reputations Will Not Be Smooth or       Honors & Distinctions
    Painless,” The Business Journal, May 2, 2003            ÷ Super Lawyer – entertainment, securities & venture
÷   Corporate Governance Presentation, Minnesota State         finance, mergers and acquisitions, entertainment,
    Bar Association, Health Law Section, April 18, 2003        Law & Politics Magazine, Twin Cities Business
÷   “Directors Views on Effective & Successful                 Monthly, 1998-2004
    Governance and the 29th Annual Board of Directors       ÷ Business Journal’s Minority Business Advocate of
    Study,” presentation, co-hosted by Korn/Ferry              the Year, June 2003
÷ American Bar Association Section of Business Law
  1997 Public Service Award, March 1997
÷ Distinguished Legal Service Award, Corporate Legal
  Times, September 1997
÷ Lifetime Achievement Award, Metropolitan
  Economic Development Association, May 1997
÷ Carleton College Award for Distinguished
  Achievement, June 1992

Service Areas
÷ Corporate Governance, Chair
÷ Securities
÷ Mergers & Acquisitions
÷ International
÷ Advertising, Media & Entertainment, Co-Chair
                                                      44th Floor                Tel 416 863 0900
                                                      1 First Canadian Place    Fax 416 863 0871
                                                      Toronto Canada M5X 1B1

                                                       Dir 416 863 5592
                                                       Fax 416 863 0871


Carol Hansell
Carol Hansell is a partner practising corporate, commercial and securities law. She acts for
both private and public corporations on a variety of matters, including acquisitions,
financings and reorganizations.

Carol has a particular expertise in corporate governance and is recognized as a leading
practitioner by Law Business Research's International Who's Who of Corporate Governance
Lawyers. She regularly advises boards and their committees in the context of transactions
and on their governance practices generally. She has written and published a number of
papers, articles and commentaries on this topic and has also spoken widely in the area. Carol
is the author of What Directors Need to Know: Corporate Governance, a resource for
corporate directors, and Directors and Officers in Canada: Law and Practice, a loose-leaf
service, and is a contributing editor to Corporate Governance, a quarterly journal published
by Federated Press. She served as a member of staff for The Toronto Stock Exchange's
Committee on Corporate Governance in Canada (which produced the Dey Report) and
provided advice to the Joint Committee on Corporate Governance (which produced the
Saucier Report). Carol is also Co-Chair of the Corporate Governance (International
Developments) subcommittee of the American Bar Association.

Carol serves on the board of directors of the Public Sector Pension Investment Board, a
Crown corporation that invests cash flows from the pension plans of the federal public
service, Canadian Forces and R.C.M.P. She also sits on the corporate governance committee
of the board of directors of Toronto East General Hospital and of Altruvest Charitable
Services as well as on the Advisory Board of the Literary Review of Canada. She was a
director and Vice Chair of the Institute of Corporate Directors, a past director of the Centre
for Ethics and Corporate Policy in Canada and a member of the faculty of the National
Association of Corporate Directors, a Washington-based organization focusing on board
leadership issues.
Page 2

Carol has had extensive involvement in the development of public policy. She is a member
of the Securities Advisory Committee ("SAC"), which provides advice and assistance to the
Ontario Securities Commission. She was a member of the Five Year Review Committee, the
Advisory Committee established by the Minister of Finance to review securities laws in
Ontario. She has also served as a Commissioner on the Blue Ribbon Commission on the role
of the board of directors in corporate strategy established by the National Association of
Corporate Directors in Washington, D.C. and on the working group considering issues of
directors' liability in connection with proposed reforms to the Bankruptcy and Insolvency

Carol teaches in the Directors Education Program jointly offered by the Institute of
Corporate Directors and the Rotman School of Management. She is a course director and
member of faculty for the National Securities Law LL.M. Program at Osgoode Hall Law
School. In 2002, Carol was appointed as an Adjunct Professor of Osgoode Hall Law School.
Carol has taught courses on corporate and securities law, financial statements, transactions
and negotiation skills and has chaired and spoken at conferences on a variety of corporate
and securities law topics for a number of law schools, business schools and conference
organizations. She serves on the Canada-Russia Corporate Governance Advisory Council
established by the Schulich School of Business.

Carol is recognized in the Canadian Legal LEXPERT Directory in the areas of mergers and
acquisitions and corporate and commercial law. She received a B.A. in History from the
University of Western Ontario in 1981, an M.A. in International Relations from the
University of Toronto in 1982 as well as an LL.B. from Osgoode Hall Law School and an
M.B.A. from the Schulich School of Business at York University in 1986.
THOMAS S. FRASER 612.492.7028

                                                          ÷ Harvard Law School, J.D., 1976
                                                          ÷ University of Minnesota, B.A., Economics, 1973
                                                          ÷ Dartmouth College, 1969-1970

                                                          Bar Admissions
                                                          ÷ Minnesota, 1976
                                                          ÷ U.S. District Court for the District of Minnesota
                                                          ÷ U.S. District Court for the District of Columbia
                                                          ÷ Fifth Circuit Court of Appeals
                                                          ÷ Eighth Circuit Court of Appeals
                                                          ÷ D. C. Circuit Court of Appeals
                                                          ÷ Federal Circuit Court of Appeals
                                                          ÷ United States Supreme Court

                                                          Judicial Clerkship
                                                          ÷ Honorable Earl R. Larson, U.S. District Court,
                                                             Minnesota, 1976-77
Tom is a shareholder, board member, and chair of the
                                                          Related Experience
Litigation Group at Fredrikson & Byron. He                ÷ Special Assistant Attorney General, Minnesota
concentrates in corporate and commercial litigation in       (Solicitor General and Tort Claims Divisions), 1977-
both state and federal courts.
                                                          Professional Activities
                                                          ÷ Member, Federal Practice Committee (D. Minn)
Tom’s business litigation practice includes shareholder
and partnership disputes, business valuation cases,       ÷ Federal Bar Association
                                                          ÷ American Bar Association, Litigation, Antitrust, and
class actions, securities claims, antitrust, insurance
                                                             Torts & Insurance Practice Section
coverage, and health law disputes.                        ÷ Lawyer Trust Account Board, member, 1996-2002;
                                                             Chair, 2000-02, appointed by Minnesota Supreme
Tom has lectured at seminars and law schools and has      ÷ Minnesota State Bar Association, Chair, Judicial
published articles o n trial practice, shareholder           Administration Committee, 1990-1991; Member,
                                                             Complex Litigation Task Force, 1991 -92; Member,
disputes, D&O liability, evidence, ADR and Rule 11.          Judicial Elections Task Force, 1997
He has arbitrated and mediated over 300 cases as a        ÷ Hennepin County Bar Association, Past Chair, Bench
                                                             & Bar Committee, Member
neutral. He has been appointed a special master,          ÷ Hennepin County Volunteer Lawyers Network,
referee, receiver, arbitrator and mediator by federal        Volunteer Attorney, Past Chair and Director
                                                          ÷ Past faculty member, NITA, and Min nesota
and state courts.                                            Advocacy Institute
                                                          ÷ Pro bono attorney, Louisiana death penalty cases;
                                                             Centre for Asian & Pacific Islanders; Minnesota Civil
                                                             Liberties Union
                                                          ÷ Arbitrator and Mediator, Mediation Center, American
                                                             Arbitration Association, U.S. Arbitration and
                                                             Mediation of Minnesota, Center for Public Resources
                                                          ÷ Minnesota Advocates for Human Rights, Founding
                                                             Member, Board of Directors, 1983-1988
                                                          ÷ Co-founder and Member, Board of Directors,
                                                             Mediation Center, St. Paul, Minnesota, 1982 -1986
÷ The Fund for the Legal Aid Society, Member, Board      ÷   “Alternative Dispute Resolution – Customizing &
  of Directors, 1992-present; Chair, 2002 -04                Streamlining,” MILE, December 4, 1997
                                                         ÷   Contributing editor, “Notes and Trends – Civil
Honors & Distinctions                                        Litigation” column, Bench & Bar of Minnesota,
÷ Listed, The Best Lawyers in America, Chambers              1990-96
  USA: America’s Leading Lawyers, “Super Lawyer,”        ÷   “How NOT to Mediate,” Alternative Dispute
  (Business Litigation and ADR), Minnesota Law &             Resolution to Achieve Maximum Results, MILE,
  Politics                                                   November 20 & December 18, 1996
÷ Civil Trial Specialist, certified by Minnesota State   ÷   “How to Try a Case to the Bench,” Skills Training
  Bar Association, 1993-present                              (Faculty) Minnesota State Bar Association, May 20-
÷ “Judge’s Choice” Award, Minnesota Lawyer, 1991             22, 1996
÷ Qualified Neutral under Rule 114, Minnesota General    ÷   “Strategic Approaches to Minnesota Evidence,”
  Rules of Practice, 1994-present                            Sustaining Success in the Courtroom (Discussion
                                                             Leader) MILE, October 31 and November 1, 1996
Selected Publications & Presentations                    ÷   “Dissenter’s Rights,” Minority Shareholder Disputes
÷ “Death Penalty in Louisiana,” co-authored with John        (Chair), MILE, January 26, 1995
   Koneck and Clint Cutler, 35 U. TOL. L. REV. 617       ÷   “Focus on Mediation,” 9 ADR Methods: How Best
   (2004)                                                    to Represent Your Client in Each Process, Minnesota
÷ “Dissenters Rights Law in Five Easy Pieces,” co-           State Bar Association, May 23, 1995
   authored with James E. Dorsey, December 2003          ÷   “Remedies for Breach of Contract,” Third Annual
÷ “Dissenters’ Rights in Minnesota,” co-authored with        Civil Litigation Institute (Lecture) Minnesota State
   James E. Dorsey and Emily E. Duke, No vember,             Bar Association, November 13, 1995
   2002                                                  ÷   “Alternative Dispute Resolution,” Alternative
÷ “Mediation and Arbitration: A View From the                Dispute Resolution Conference (Co-Chair) MILE,
   Neutrals,” co-authored with R. Solum and R.               November 16, 1995
   Schiefelbein, The Hennepin Lawyer, September 2002     ÷   “Valuing Closely Held Corporations,” Financial
÷ “Conflict Management & Dispute Resolution,”                Fraud Litigation, MILE, December 1, 1995
   Minnesota State Bar Association, September 18,        ÷   “Mediation,” Hennepin County District Court Law
   2000                                                      Clerk Task Force CLE, January 20, 1994
÷ “Minorit y Shareholder Disputes,” (Moderator)          ÷   “Dissenter’s Rights in Minnesota,” Corporate
   MILE, March 1, 2000                                       Practice Institute, MILE, May 5, 1994
÷ “Mediating Employment Cases,” (Panelist)               ÷   “Costs of Aggression: An Update on Rule 11,”
   Minnesota Institute of Legal Education, March 17,         Bench & Bar of Minnesota, April 1993 (Co-authored
   1999                                                      with Laurie Miller)
÷ “Business and Commercial Litigation in Federal
   Courts: A Review,” The Bench & Bar of Minnesota,      Service Areas
   March 1999                                            ÷ Litigation
÷ “Dissenters’ Rights in Minnesota,” MILE, April 21,     ÷ Business Litigation
   1999                                                  ÷ Antitrust Litigation
÷ “Refining the ADR Process,” (Panel Moderator)          ÷ Shareholder Litigation
   MILE, December 4, 1998                                ÷ Medical Practices Defense
÷ “Unique Employment Problems in Family-Owned            ÷ Health Care Fraud & Compliance
   and Closely-Held Businesses,” 15th Annual Upper       ÷ Securities Litigation
   Midwest Employment Law Institute, May 28, 1998        ÷ White Collar Criminal Defense
÷ “Preventing, Litigating & Managing Minority            ÷ Insurance Coverage Litigation
   Shareholder Disputes,” Update on Dissenters’ Rights   ÷ Corporate Governance
   and “Fair Value” in Minnesota (Chair) MILE,           ÷ Alternative Dispute Resolution
   January 15, 1997
÷ “Civil War in ADR,” (Panelist) Conflict Management
   and Dispute Resolution Section Mini-Convention,
   June 19, 1997
÷ “Squeeze -Out of Bank Minority Shareholders,”
   MILE, November 18, 1997
÷ “The Basics of Alternative Dispute Resolution,” The
   Annual Nuts & Bolts CLE for New Lawyers,
   November 20, 1997
                                                                     GERALD T. FUJIMOTO
                                        CPA - California , Alaska, Hawaii, Montana, Washington
                                                                     Financial Advisory Services
                                                                   Forensic and Dispute Services
                                                          Deloitte & Touche LLP, San Francisco

Mr. Fujimoto is a partner in Deloitte’s Financial Advisory Services practice with over 20 years of
experience in conducting audits, forensic investigations and providing litigation support. He is the western
region leader for corporate investigations and also focuses on white collar criminal, SEC enforcement
and securities class-action and derivative litigation defenses. Mr. Fujimoto also leads Deloitte’s Royalty
and Revenue Recovery Services and it’s Forensic Audit Assistance Services for the Northern California
and Pacific Northwest region. Prior to joining Deloitte’s FAS practice, Mr. Fujimoto was an audit
partner in Deloitte’s Consumer Business practice. He has extensive experience in complex accounting
areas such as revenue recognition, accounting for and the timing of reserves, restructuring charges and
purchase accounting. Mr. Fujimoto has experience testifying as an expert witness and has been a
frequent speaker on corporate governance matters.

EXPERIENCE                   Corporate Investigations and Securities Litigation
                             Participated in numerous forensic investigations including leading a team on
                             an investigation of corporate governance matters at a fortune 100 company.
                             Additionally led corporate investigations and securities litigation cases
                             focused on allegations of accounting improprieties including: improper
                             revenue recognition, improper capitalization of expenses, inappropriate
                             timing and recognition of various types of reserves, inappropriate
                             intercompany transactions as well as allegations of governance issues
                             including allegations against Board members, audit committee members and
                             company officers.

                             Forensic Audit Assistance : Assisted numerous audits in the
                             implementation of fraud procedures within the financial statement audit.
                             Authored several internal articles on the appropriate consideration and
                             utilization of forensic assistance in the course of an audit.

                             Revenue recognition related consulting: Consulted with numerous
                             companies in understanding and accounting for various types of revenue
                             recognition matters including: arrangements with multiple deliveries, sell in
                             versus sell through, bill and hold, delivery and performance and up-front
                                                                 GERALD T. FUJIMOTO
                                                                                          Page 2

                   Inventory consulting: Consulted with numerous companies in various
                   inventory related issues including: Inventory costing issues including
                   capitalization policies, changes in methodology, treatment of vendor
                   discounts, temporary versus permanent markdowns, lower of cost or
                   market and other writedown issues, inventory obsolescence issues,
                   discounts and allowances, return-to-vendor issues, inventory supply chain
                   management, inventory transfer and cut-off issues, and inventory systems

                   Corporate Governance: Frequently consulted with companies and audit
                   committees on corporate governance matters including audit committee
                   responsibilities, Sarbanes-Oxley compliance.

                   Other consulting: Frequently consulted with companies numerous
                   accounting related matters including leasing, treasury, accounts payable and
                   equity issues.

                   Initial Public Offerings: Assisted in over 20 initial and secondary public
                   offerings of stock or debt for such clients as Ross Stores, Inc. (stock), Cost
                   Plus, Inc. (stock), Restoration Hardware, Inc. (stock), Williams Sonoma,
                   Inc. (stock), Longs Drug Stores, inc. (debt), The Office Club, Inc. (stock),
                   Golden West Financial Corporation (numerous debt offerings)

                   Mergers and Acquisitions: Lead or assisted in numerous due diligence
                   efforts on mergers and acquisitions ranging from $10 million to over $1

PUBLICATIONS AND   §   Speaker at Directors Roundtable on corporate investigations in a
PRESENTATIONS          Sarbanes world (3/05)

                   §   Speaker at Financial Executives International seminar on corporate
                       investigations (11/04)

                   §   Speaker at Institute of Internal Auditors seminar on corporate
                       investigations (11/04)

                   §   Speaker at Stanford Directors College (6/04)

                   §   Radio show guest on Business America Radio discussing the value of
                       an intellectual property royalty investigations (4/04)

                   §   Speaker at Sarbanes-Oxley conference for Silicon Valley sponsored by
                                                            GERALD T. FUJIMOTO
                                                                                      Page 3

                   Gray Cary law firm (5/03)

               §   Speaker on Sarbanes-Oxley and its affect on senior corporate
                   executives as part of corporate governance event sponsored by the Lee
                   Hecht Harrison Leadership group (5/03)

               §   Speaker on recent accounting changes at a “Current Developments in
                   Federal Securities Law” sponsored by American Bar Association and
                   American Law Association (7/03)

PROFESSIONAL   §   American Institute of Certified Public Accountants
AFFILIATIONS   §   California Society of Certified Public Accountants
               §   Associate Member of Certified Fraud Examiners

EDUCATION      §   B.S. Business Administration, University of California, Berkeley
                                     ALAN STEWART, CA•IFA

Education and Employment Experience

Mr. Stewart graduated from the University of Glasgow, Scotland where he obtained a Bachelor of
Accountancy. He is a Chartered Accountant in Canada and Scotland and is designated as a specialist in
Forensic and Investigative Accounting by The Institute of Chartered Accountants in Ontario. Prior to
specializing in forensic accounting in 1989, Alan trained with a big 5 accounting firm in Glasgow,
Scotland, where he later helped establish the Forensic and Investigative Accounting practice in the
Glasgow office. He is a Principal of Kroll Lindquist Avey in Toronto.

Alan has worked on hundreds of investigative and litigation support assignments, and has been involved
in every aspect of a case, including strategic planning, interviewing witnesses and suspects, detailed
analysis and model building and assistance with all phases of discovery and expert testimony at
deposition and trial. Representative assignments on which Mr. Stewart has worked included:

        o Fraud Investigations                           o Lost Profits/Economic Damages
        o Special Committee Investigations               o Fidelity Bond Claims
        o Accounting Investigations                      o Business Interruption Claims

Alan specializes in investigations in the financial services industry. Over the last 15 years, he has led
numerous high profile, complex investigations into the many problems that can occur in that industry.
He has an in depth knowledge of the industry, including compliance practices and procedures, and the
types of problems which can arise. The cases which he has led include:

Select Experience

•       Financial Derivatives – Retained to investigate a complex structured financing scheme with
        which concerns had arisen. The investigation uncovered hidden interests in offshore counter
        parties to some of the underlying financial instruments. This enabled the client to take
        appropriate risk and employment decisions with the financial instruments and the parties

•       Foreign Exchange Contracts - Retained to investigate the use of forward foreign exchange
        contracts in a hedging scheme to create losses for tax purposes. This required a detailed analysis
        of the transactions undertaken by many different parties in numerous currencies to explain the
        underlying economic substance and effects of the scheme.

•       Insider Trading - Alan led a high profile investigation on behalf of a large bank owned brokerage
        into concerns that had arisen about insider trading.

•       Investment Adviser Fraud - Assisted a broker dealer on several occasions in conducting
        investigations into alleged fraudulent behaviour by its investment advisors. As part of these
        assignments, the initial investigation assisted the client in identifying and dealing with the
        problem, and the subsequent analysis enabled the client to deal appropriately with its clients and
        the regulators and to file claims under fidelity bonds. Our reports were used to support the
        fidelity claims, in civil litigation and to initiate complaints to law enforcement.

•       Regulatory and Court Appointed Investigations - Assisted the Ontario Securities Commission
        on two investigations into alleged accounting irregularities and fraud by registrant companies.
        These assignments involved working closely with enforcement staff of the regulator (counsel and
        inves tigators) in conducting the investigations and in drafting the allegations. As part of
        settlements reached between the Ontario and British Columbia Securities Commissions and two
        registrant dealers, Alan was appointed to review the compliance procedures and practices of the
        dealers and to recommend improvements. Also appointed by the Ontario Court to be Inspector
        and Receiver over a number of failed limited partnerships and a fledgling public company, all of
        which had been involved in “prime bank note” frauds on the public. We were successful in
        recovering more than $1MM from offshore jurisdictions for the investors.

•       Mutual Fund Dealer Fraud - Assisted one of Canada’s largest independent mutual fund dealers
        in the investigation of complaints against one of its salesmen. The investigation resulted in the
        termination of the salesman, who was eventually convicted of fraud. Our interviews,
        investigation and analysis identified the unique circumstances with respect to each of the several
        victims of the fraud, enabling an appropriate settlement to be reached with all clients and a
        fidelity bond claim to be successfully filed by the mutual fund dealer. Our report was also used
        as a basis of a complaint to the police, and in dealing with the securities regulators.

•       Broker Dealer Internal Investigations - On numerous occasions, conducted internal
        investigations on behalf of large, medium and small sized brokerage houses into a variety of
        conduct inside the brokerage firm, which gave rise to concerns over such activities as stock
        manipulation, insider trading, unauthorized distribution of securities and fraudulent activity by

Professional Affiliations

Canadian Institute of Chartered Accountants (designated as a specialist in investigative and forensic
Institute of Chartered Accountants of Ontario (1996)
Institute of Chartered Accountants of Scotland (1989)

Selected Presentations

“Accounting Fraud Investigations,” Ontario Securities Commission

“Money Laundering,” the Jamaica Institute of Bankers

“Fraud Level II,” Ontario Police College

“Fraud Investigation,” UIC Investigators

Various internal training seminars for Kroll Lindquist Avey, including courses on “Investigations in the
Securities Industry” and “Fraud Investigation”
Media Appearances

Alan has been featured on the cover of both Canadian Business magazine and Lexpert. He has appeared
as a guest expert on Report on Business TV and several radio stations and has been quoted in newspaper
articles, including the Hamilton Spectator.

Expert Testimony Experience

June 2005 – OSC vs Andrew Rankin

September 2003 – Douglas Kerr et al. v. Danier Leather Inc. et al
Ontario Superior of Justice #98-CV-158675 – expert testimony at trial

November 1998 – Hillmer v. Nadal
Ontario Court of Justice (General Division) #71751/91Q – expert testimony at trial
B. Todd Jones, Partner
Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis office

B. Todd Jones joined Robins, Kaplan, Miller & Ciresi L.L.P. as a partner in 2001 following his
tenure as United States Attorney for the District of Minnesota. Mr. Jones’ current pratice is
focused on complex business litigation and white-collar criminal defense. As U.S. Attorney, Mr.
Jones served as one of 18 United States Attorneys from around the country selected by Attorney
General Janet Reno who constituted the Attorney General Advisory Committee. He led this
group in 2000 through the end of the Clinton Administration. He recently chaired a U.S.
Sentencing Commission ad hoc group examining the federal organizational sentencing
guidelines. Mr. Jones is a Fellow in the American College of Trial Lawyers, a graduate of
Macalester College (B.A. 1979) and the University of Minnesota Law School (J.D. 1983).

Word 20111206.1
                                                                  The Boeing Company
                                                                  100 N. Riverside
                                                                  Chicago, IL 60606-1596


                                   M. MARTHA RIES
                     Vice President – Ethics and Business Conduct
                             Office of Internal Governance

         M. Martha Ries is vice president – Ethics and Business Conduct, Office of
Internal Governance. She is responsible for companywide internal policies and
procedures, regulatory tracking, operational activities and compliance related to the
Ethics and Business Conduct organization. Ries -- an experienced business and
litigation attorney -- has served in various legal capacities at the company. Now based
in Chicago, she was appointed to her current assignment in March 2004.
       In 1997, she joined Boeing in Seattle as litigation counsel, where she focused on
commercial litigation and investigations. Three years later, she was named chief
counsel of Commercial Aviation Services within Boeing Commercial Airplanes and in
2003 was appointed to lead the attorneys representing the Army Systems group within
Integrated Defense Systems in Philadelphia and obtain defense experience.
       Ries began her law career as a judicial clerk at the Missouri Supreme Court. She
then served as a trial attorney in the Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, Washington, D.C., where she litigated international trade and
customs law issues before going into private practice in a large Seattle law firm in 1990.
For almost a decade, she focused on litigation and international regulatory work and
represented various corporations.
       A native of St. Louis, she earned a bachelor of arts degree in French and
Psychology from Boston College and a juris doctorate from St. Louis University School
of Law. Ries is member of the state bars of the District of Columbia, Washington and
Date: May 2004

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