The Cooper Companies, recently indicted in an alleged junk bond scam, has retained the former head of the American Bar Association's task force on insider trading regulation as special counsel.
In addition to naming attorney John F. Olson as special counsel to advise it in corporate governance matters, the company's board of directors also named a new management committee.
The committee will help "maintain oversight over the management and direction of the company's businesses" while the board continues searching for a new chief executive officer, a Cooper release says.
The company is seeking a chief executive officer to replace former co-chairmen of the board Gary Alan Singer and Bruce D. Sturman, both of whom left in May, a spokeswoman for the company said.
"Basically, this is just to reassure shareholders that the company is continuing on its course," spokeswoman Marisa A. Heine said.
Singer is currently taking a paid leave of absence as requested by the board. Sturman was suspended, also with pay, Heine said.
Both Singer and the Cooper companies were named in a federal criminal indictment and a civil injunctive action by the Securities and Exchange Commission, according to the U.S. Attorney's office for the Southern District of New York. They are scheduled to be arraigned on those charges today, a spokeswoman for the U.S. Attorney's office said. Sturman was not charged, Heine said.
The new management committee will be made up of three board members who are not employed by the company and who were not directors at the time of the alleged misdeeds, according to a company release. Matters ordinarily requiring a chief executive officer's approval will require concurrence of the management committee, the release says.
The release adds that Olson is a senior partner at Gibson, Dunn & Crutcher, which has never represented the company, its officers, or directors. Heine said Olson's role will be confined to corporate governance matters, adding that his experience in that area led the board to select him.
Olson currently is chairman of the American Bar Association's Committee of Federal Regulation of Securities.
Singer and the Cooper Cos. were indicted Nov. 10 in Manhattan Federal Court. Singer was charged with violations of the federal Racketeer Influenced and Corrupt Organizations Act, money laundering, and mail and wire fraud statutes, according to the U.S. Attorney's release.
The indictment also charges the publically held Cooper Cos. with violating federal criminal laws, including the mail and wire fraud statutes.
"It is regrettable that the innocent investors of Cooper Cos. must suffer the indignity of formal charges against their corporation," Otto G. Obermaier, United States Attorney for the Southern District, said in the release. "But as is made evident by the civil complaint simultaneously being filed by the United States Securities and Exchange Commission, Cooper Companies has done little, if anything, to rectify the prior wrongdoing."
Arthur C. Bass, acting chairman of Cooper's board of directors, said in his company's release, "The board wants to emphasize that, in connection with government investigations, the company has furnished more than 130 thousand pages of documents and the testimony of many of its employees. Despite these government proceedings and the other material litigation to which the company has been subjected, we have continued to focus on operating issues."
According to the U.S. attorney's release, the charges stem from a scheme by Singer and others to "frontrun" junk bond purchases by the Keystone Custodian Funds Inc., a group of mutual funds.
The indictment charges that Singer was key to the scheme, which allegedly involved bribing G. Albert Griggs Jr., a former Keystone bond analyst, to obtain confidential information concerning the Keystone Funds' investment plans.
The suit alleges that around February 1991, Singer forged a secret agreement with Griggs whereby Griggs would give Singer confidential information concerning his recommendations to Keystone about various bonds and when Keystone expected to purchase them.
The pair allegedly agreed that based on that information, Cooper companies would buy those bonds before the funds did. Griggs would then allegedly push to get Keystone to buy the junk bonds Cooper had purchased as soon as possible. Singer and Griggs would then allegedly share in the profits.
Heine said Cooper plans to defend itself vigorously against the charges.
In other news, holders of $319 million of El Paso Electric Co.'s first and second mortgage bonds opposed the company's amended reorganization plan and disclosure statement, which a Federal Bankruptcy court approved Monday.
"In order to force a weak capital structure and below-market interest rates on its most senior creditors, El Paso Electric has proposed a plan that is predicated on unattainable conditions," Wilbur L. Ross Jr., senior managing director of Rothschild Inc., said in a release. Rothschild serves as financial adviser to the secured bondholders. "It is unfortunate that the company is not willing to make itself creditworthy. We hope that they will revise the plan so that a prompt, consensual deal results," Ross added.
Henry Quintana, supervisor of corporate communications at El Paso Electric, said, "Everybody will have a chance to vote on or by Jan. 14, 1993." Voting on the proposed plan begins Dec. 8.
In secondary trading, high-yield bonds gained about 1/2 point. High-grade corporate bonds moved in line with Treasuries, though one trader noted some slight widening toward day's end.
Tenneco Inc. issued a two-part offering totaling $400 million. The first tranche consisted of $250 million of 8% notes due 1999. The noncallable notes were priced at 99.418 to yield 8.11%, or 170 basis points over seven-year Treasuries.
The second piece consisted of $150 million of 9% debentures due 2012. The noncallable debentures were priced at 98.855 to yield 9.125%, or 160 basis points over 30-year Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB-minus. First Boston Corp. lead managed the offering.
Federal National Mortgage Association issued $200 million of 5.40% notes due 1995 at par. The noncallable notes were priced to yield 25 basis points over comparable Treasuries. Lehman Brothers sole managed the offering.
Huntington Bancshares issued $150 million of 7.875% subordinated notes due 2002. The noncallable notes were priced at 99.148 to yield 8%, or 118 basis points over comparable Treasuries. Moody's rates the offering Baa1, while Standard & Poor's rates it BBB-plus. Lehman Brothers lead managed the offering.
Central Fidelity Banks issued $150 million of 8.15% subordinated notes due 2002 at par. The noncallable notes were priced to yield 135 basis points over comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's Corp. rates it BBB. Salomon Brothers Inc. sole managed the offering.
Capital Reinsurance Corp. issued $75 million of 7.75% debentures due 2002. The noncallable debentures were priced at 99.50 to yield 7.822%, or 100 basis points over comparable Treasuries. Moody's rates the offering Aa3, while Standard & Poor's rates it A-plus. Goldman, Sachs & Co. lead managed the offering.
Arrow Electronics issued $125 million of 5.75% convertible subordinated debentures due 2002. Noncallable for three years, the bonds convert into common stock at $33.125 a share, a 25% conversion premium. Moody's rates the offering Ba3, while Standard & Poor's rates it B-plus. Donaldson, Lufkin & Jenrette Securities Corp. lead managed the offering.