Law on Affairs

People who live in 21st century have spend one-third of their life in the area called “the office”. Back to 1980’s people traditionally meet each other at school, family events, religious service, neighborhood or even at leisure time. There were where men and women built relationship, date and turned to marriage. Nowadays, when most people spending 40 hours per week working, workplace become a natural place where person can meet other individuals that share similar backgrounds and interests. As a result, many end-up dating people they work with, which certainly comes as no surprise.

The workplace also has become the first place for married people who engage in infidelity to meet the other person. As women make advances everywhere in society, the old clichi?? about the boss and the young secretary carrying on an affair has been overshadowed by an increase in the number of men and women who work together – by means being peer, subordinate and superior or a colleague in the same industry, was equals becoming romantically involved1. The old separation of the sexes has passed and old boundaries to interaction have been replaced by no boundaries.

Hearing about the “guys from work” or the “girls at the office” has transformed in the “gang at work”. As we all know, people begin to get to know one another well when working together. The coed workplace offers lots of interaction, teamwork, travel, projects and longer work hours, all of which lead to members of the opposite sex who share many common attributes growing close. The unavoidable closeness, commonalities in life and the amount of time together can lead to friendship. They end up spending a great deal of time, on occasion more time than they spend at home, with this new “friend” so the friendship can become very deep.

These friendships can quickly lead to strong emotional attachments. Strong emotional attachments with the opposite sex can often lead to romance. The most noticeable theme is that they work together, grow to understand one another and “relate” better to this co-worker than they do to their spouse. The co-worker friend offers someone who relates to talk with the topic that known by both of you, someone who empathizes with them and does not bring any of the stress that home often has, making them all the more attractive.

This paper would show us how this kind of romance at the workplace, a lovey-dovey secret story, which later culminated with unpredictable result, a sacking, a sued filed or even months in jail. How a simple conversation with the loves one can drag and drop a prospective chief executive officer (CEO) into two waves insider trading scandal. Another story even showing the tragic story of a golden CEO, happy before with his wife and two-kids, was sacking in just a blink of an eye only because a sexual harassment allegation that later stated as something without facts.

This paper will discuss those cases by the legal point of view also considering the policy and ethics and its impact in each business. Last but not the least, this paper also gives a brief comparison about how if those cases happen in Indonesia. Company Policies Some companies have policies that discourage its employees from dating one another or having a workplace romance even with business partner from different office, while other companies do not have a problem with any employee personal relationship at the workplace.

Even if their companies regulate employee relationship, they only manage the marriage relationship and not covered the dating or affair, for the married employees. Basically all businesses, whether have policies or not, only interested in productivity and commitment to of their employees to deliver expected outcomes. A company has no said in how is the employee arranging their personal life. But when people start to become attracted to each other, the workplace can become a place where productivity may become affected by personal drama.

Developing a policy on dating or affair for employees can become a very touchy subject as some employees feel their company cannot dictate how their employees conduct their lives outside the workplace. But when the potential exists for personal lives to interfere with productivity or a possibility of harmed the company material information and secret, then the company may be justified in stepping in and creating a policy against people dating their co-worker or making an intimate relationship with business partner.

The point is, regardless of the situation and what reason behind company policy related with romance issue, personal relationships in the workplace should not be taken lightly, as sometimes that relationship can lead to a long list of complications, not to mention that they can also cause a valuable employee to leave the company for insignificant reason. Speaking of policies, for more than decade, many big-public companies in the United States awoke to the suppressed problem of sexual harassment in the workplace.

Companies have become increasingly aware of the cost of harassment. According to one study, sexual harassment costs a typical Fortune 500 company approximately $7 million annually in turnover, absenteeism, reduced productivity and in-house complaint procedures2. Firms that fail to prevent sexual harassment can face exorbitant legal expenses, penalties and damage awards. A typical case costs a company at least $150,000 to defend3, and the average verdict in favor of a victim is approximately $350,000.

What important is many companies had enhanced their policies by adding this harassment issue and put them into company code of conduct in order to avoid any liabilities – penalties, bad reputation and bad impact to company’s stock price, related to sexual harassment at the office or company’s plant. In order to take an active role in the prevention of insider trading violations by its officers, directors, employees and other related individuals, almost all public or even private companies have adopted the policies and procedures described in insider trading policy (depend on each company).

Basically, prohibits trading based on material, nonpublic information regarding the company (“Inside Information”). This kind of policy applies to all transactions in the company’s securities, including common stock, options for common stock and any other securities the company may issue from time to time, such as preferred stock, warrants and convertible debentures, as well as to derivative securities relating to the company’s stock, whether or not issued by the company, such as exchange-traded options.

It applies to all officers of the company, all members of the company’s Board of Directors (BOD), and all employees of, and consultants and contractors to, the company and its subsidiaries, as well as family members of such persons, and others who receive or have access to material nonpublic information regarding the company. A Disaster No. 1 : When Sharing Information Culminated in Prison At 7:30 in the morning on October 16th, 2009, Robert Moffat had already been at his desk at International Business Machines Corporation’s (IBM) headquarters in Armonk, New York for an hour and a half.

As he had almost every day in his 31-year career at the company, he had left home at 5:30 AM to get a jump on work. At the same time, five FBI agents stood on the porch of his home. “Open the door,” one of the agents said to Mrs. Amor Moffat. “We’re here to arrest Robert Moffat. ” Moffat, 54, the senior vice president of IBM’s systems and technology group, was the most prominent tech executive that considered a candidate to succeed Samuel Palmisano as IBM’s CEO. He whom pleaded guilty in the Galleon Group LLC insider-trading scheme, had an “intimate relationship” with accused tipster Danielle Chiesi, 43.

Chiesi, a former teenage beauty queen, was a woman for whom business information was the ticket to gratification. She arrested on the same day as Moffat, maintained a stable of highly placed sources at the tech companies she covered for New Castle, a hedge fund company. The ballad of Moffat and Chiesi is a classic tale of desire and betrayal. Chiesi had an affair with Moffat, but the person she truly loved was her boss, Mark Kurland, 60, the co-founder of New Castle. But Kurland wouldn’t leave his wife and ultimately renounced Chiesi.

In the summer of 2008, Advanced Micro Devices Corporation (AMD) was in talks to spin off its manufacturing business, Fabco, creating a joint venture that would be 50% owned by a Middle Eastern sovereign wealth fund. IBM was involved in the discussions because it had been asked by AMD to provide a license for the use of its technology as part of the reorganization. Moffat was IBM’s point man for the talks. While at the court Moffat admitted that he had gave information that was material and non public to Chiesi as he known as a trader at a hedge fund and that she specialized in technology stocks at New Castle.

He told her about a pending corporate reorganization at AMD. Around September 2008, he told Chiesi that Lenovo’s earnings during the pending quarter were poor. Moffat learned about this because Lenovo had purchased IBM’s personal computing business several years ago and, as a result, he was asked to serve as a non-voting member of the Board of Directors of Lenovo. Last, he stated to her, that sales of IBM Systems X servers were not good and that the other servers were meeting his expectations.

Kerry Lawrence, one of Moffat’s attorney emphasized that his client did not actually trade on any of the information disclosed to Chiesi and received no money for the illegal leaks. 4 Chiesi told Kurkland about the AMD information that been updated by Moffat. New Castle bought 199,400 shares of AMD. Kurland wasn’t the only person to whom Chiesi was giving information. She was also feeding the information she gleaned from Moffat to her friend Raj Rajaratnam. Rajaratnam, 52, then was one of the 300 richest men in the world, with a net worth of around $1. 8 billion.

The Sri Lankan native’s hedge fund, Galleon, was worth around $7 billion at its peak. His sources of business information included highly placed individuals at McKinsey & Co. and Intel Corp. By the end of September, New Castle had upped its stake in AMD to 2. 3 million shares. Galleon owned more than 8 million shares. What they didn’t realize was that the government was listening to their telephone conversations. The feds had been investigating Rajaratnam since 2007. The probe had started with information supplied by a confidential informant and then led to a tap on the Galleon head’s phone.

By the summer of 2008 wiretaps expanded to include other associates of Rajaratnam’s, including Chiesi. In addition to recording her conversation with Moffat about the AMD deal, the government soon was gathering evidence suggesting that Moffat was telling Chiesi about confidential results at IBM and about takeover talks between IBM and Sun. According to the government, Galleon and New Castle made $20. 8 million from insider information provided by Chiesi and other sources. On a rainy March morning in New York, Moffat, accompanied by his lawyer, Lawrence, raised his right hand and swore to tell the truth.

Then, voice trembling, he admitted guilt. “I disclosed this information to Ms. Chiesi intentionally, and I knew that what I was doing was wrong,” he said in his allocution, describing Chiesi as a “friend”. Moffat was allowed to remain free on bail that day. Prosecutors are expected to recommend that he spend six months in prison, the minimum in the sentencing guidelines. Mark Kurland was the first of the Galleon defendants to be sentenced. He admitted his crimes but attempted to minimize their significance, saying he was only a “minor” player in the ring.

Kurland argued he was significantly less culpable than Moffat, the tipper, and should receive a similarly light sentence. He then sentenced to 27 months in prison5. Kurkland and Moffat are among 21 people charged since October in two waves of insider-trading arrests. Of that initial group, only Chiesi and Rajaratnam have pleaded not guilty to charges of securities fraud and conspiracy. Some of Chiesi’s other friends have also paid a price, including friends who have not been implicated in wrongdoing. Among them was John Joyce, IBM’s former CFO, who introduced Chiesi and Moffat.

Hector Ruiz, the former CEO of AMD, is under investigation by federal authorities in connection with his dealings with Chiesi, according to a person familiar with his legal situation. A Disaster No. 2 : The Sacking of Golden CEO “Dear Mr. Hurd,” began the note that Mark Hurd read on June, 29th 2010 in his office at Hewlett-Packard. Co (HP) “Please be advised that we represent Ms. Jodie Fisher regarding her claims… against Hewlett-Packard (‘HP’) and you, Mr. Mark Hurd, as an individual. ” Thus began one of the oddest episodes in the annals of Silicon Valley, in which a vaunted leader fell from grace under murky circumstances.

HP chairman, president and CEO Mark Hurd, 53, the buttoned-down golden boy the company brought in to clean up the mess left by his ousted predecessor Carly Fiorina (a stock slide contributed by HP controversial acquisition of Compaq Computer Corporation6), the guy who delivered on that charter beyond the company’s wildest expectations (doubled HP’s revenue and share price7), quit suddenly on Friday evening, August 6th 2010 after a weeks-old company investigation by outside and inside legal counsel of sexual harassment charges.

Hurd was accused by Jodie Fisher, 50, a female marketing contractor hired to represent HP at high-level customer and executive summit events. In addition to working with HP, Fisher which represented by celebrity lawyer Gloria Allred , also appeared as a contestant on NBC reality show “Age of Love” and acted in a string of low-budget softcore pornography movies during the 1980s and 1990s. Before the investigation, the entire board had been pleased with Hurd’s performance and unanimous in wishing to keep him, two of the people familiar with the matter said.

The planned August 5th mediation would have let HP lawyers, Covington & Burling LLP see evidence behind the sexual-harassment claim and allowed them to question Fisher. The mediation never happened, instead Hurd surprised the board by settling a sexual-harassment claim before directors could learn more about the incident (Fisher claims Hurd settled the sexual harassment claim privately)8. Found tried to conceal a relationship with his accuser, the board no longer had confidence that Hurd was being straight with them.

Those contributed to HP’s board voted unanimously to ask for Hurd’s resignation. Based on the investigation it was determined that Fisher’s claim of sexual harassment was not supported by the facts. HP delicately says they had a “close personal relationship,” but neither Hurd or Fisher party claims a sexual relationship. While the company determined that Hurd didn’t harass Fisher, it found that she received numerous inappropriate payments, around $20,000 from HP during her two years as a marketing contractor.

On the next day after Hurd’s resignation, the internal memorandum had written: “… Mark’s resignation was submitted at the request of the company’s Board of Directors as a result of inappropriate behavior in which he engaged that violated HP’s Standards of Business Conduct and undermined his ability to continue to lead the company”9 The investigation did reveal. The law firm’s review found expense-account irregularities.

The investigators told of a half-dozen dinners with notations saying Mr. Hurd had dined with Dennis Lynch – Hurd’s security guard, on occasions when Lynch said he wasn’t present and when Hurd actually dined with Fisher. A computer forensics showed that on April 27, 2009, Hurd Googled “Jodie Fisher video” and then accessed “erotic4u. com” to view more than 30 web pages, including ones showing scenes of Fisher in the 1997 adult film “Passion and Romance: Ocean of Dreams.

It was found that Hurd had failed to disclose a close personal relationship he had with the marketing contractor that constituted a conflict of interest, failed to maintain accurate expense reports, and misused company assets. Once, Hurd said in his statement: “As the investigation progressed, I realized there were instances in which I did not live up to the standards and principles of trust, respect and integrity that I have espoused at HP and which have guided me throughout my career… ” Hurd is due to receive a severance payment of $12. million, plus other benefits that include restricted HP shares. All told, Hurd may receive $40 million to $50 million, according to an estimate by Frank Glasser, CEO of Veritas Executive Compensation Consultants LLC in San Francisco. On August 12th 2010, HP faces a lawsuit over the departure of Mark Hurd from shareholders angry at the massive payoff he received and accusing the board of failing in their legal duties.

The lawsuit, filed for shareholders by a Connecticut-based law firm in Santa Clara County Superior Court against both HP and Hurd, alleges that: … as a result of Hurd’s, Lesjak’s, and the HP board’s shortcomings, HP lost significant credibility, and the market punished HP (and its shareholders) upon the 8/6/10 revelation of Hurd’s termination – slashing its stock rating and erasing over $9 billion in market capitalization when the company’s stock resumed trading on 8/9/10″10 The board, mostly appointed by Hurd, is accused of gross mismanagement, waste of corporate assets, violating the California corporation code, misappropriating information, and unjust enrichment.

The suit filed by Scott+Scott LLP lists HP shareholder, the Brockton Contributory Retirement System. It also aims to reclaim Hurd’s severance package for HP (Hurd’s million golden parachute is too high), and to enforce governance changes on the board. Working alongside the California attorney general’s office, which had launched a criminal investigation into the affair, Mary Blasy, an attorney of Scott+Scott LLP negotiated a settlement under which HP agreed to a host of corporate governance changes.

They included the appointment of more independent directors, the establishment of a host of “ethics and compliance” VPs, executive committees and training programs, and revisions of the company’s standards of business conduct. HP also agreed to pay $6. 3 million in attorney’s fees. The disaster is keep on going. Tuesday, September 7th, sued its ousted CEO Mark Hurd to block him from going to work for Oracle as co-president. HP has taken its civil case to California’s Superior Court in Santa Clara alleging misappropriation of trade secrets11.

It claims Hurd can’t possibly do his new job at Oracle without putting HP in peril and complains that it paid him tens of millions of dollars in severance to sit on the sidelines and keep its secrets for two years (Parts of the Agreement Regarding Confidential Information and Proprietary Developments – the “Trade Secret Protection Agreements”, signed by Hurd on February 6, 2008, February 26, 2009, and February 12, 2010, can be found in the complaint (sections 28-32)). It is suing him under a confidentiality agreement, not a non-compete agreement.