Author: Michelle Leder

By now, the news that Hewlett-Packard (HPQ) has agreed to buy Palm (PALM) is well known. But one of the things we like to do here at footnoted is look at the filings for interesting patterns once a deal is announced. It didn’t take us long to find this 8-K that was filed on April 16 shortly after 5 pm.

The filing was short and sweet: one executive was leaving and the company was implementing a retention program for “certain key employees” that gave them restricted stock — and, for two employees, SVP for Global Operations Jeffrey P. Devine and CFO Douglas C. Jeffries, an additional $250,000 cash bonus.

While the 8-K didn’t mention how many restricted shares the executives got, Form 4s for six executives, including Mssrs. Devine and Jeffries, were filed around 7 pm that same day. They all show that the grants were unusually generous: ranging from 175,000 RSUs for SVP for Worldwide Sales Dave Whalen to 275,000 for Devine.

Granted, it was no secret that Palm was being shopped around, even though CEO Jon Rubinstein was widely quoted last week as saying that Palm could remain independent. Given this, one could argue that Palm was doing what it needed to do to maintain some semblance of calm in the company’s executive offices.

Still, both the timing and the sheer generosity do seem somewhat unusual. Although we looked back a few years, we couldn’t find other similar grants of restricted shares to Palm executives. The only thing that comes close is the 215,000 restricted shares that Rubinstein received when he was tapped to be CEO last year.

It’s hard to calculate the exact paper-profit since we don’t know what HP plans to do about these shares and won’t know until additional merger documents are filed. In the proxy that Palm filed last August, it states that “If the successor corporation refuses to assume or substitute for the award, the award will vest in full and become immediately exercisable.” But assuming all of those options vest immediately, the April 16 grants to those six executives add up to just over $8 million. In the proxy, the shares that are subject to vesting and held by Mssrs. Devine and Jeffries are valued at $3 million and $1.9 million respectively, though that was way before this current grant.

One other quick thought about that late Friday 8-K. It was filed the same day that Palm filed this 8-K which noted that the company was lowering its revenue guidance. Now maybe this is all just one giant coincidence. After all, as we say often enough, hindsight is always 20-20. Still, it’s hard not to argue that the series of filings at Palm represents an interesting and unusual pattern.

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Proxy season is almost over and the folks here at footnoted are looking forward to turning our attention over to the first quarter Qs, which have already begun to trickle in. Not that proxies aren’t lots of fun — they’re chock full of all sorts of information. But as with all SEC filings, sometimes what’s not there in black and white is much more interesting than what is there.

That’s why we appreciate footnoted friend Ric Marshall, chief analyst at The Corporate Library bringing something that’s MIA from Owens Corning’s (OC) proxy to our attention: a seemingly important detail from the biography of Audit Committee Chair Norman P. Blake.

You see, Blake, who has been a director at Owens since  1992, used to serve on the board of a company called Enron, something you wouldn’t know unless you went all the way back to the proxy that Owens filed in 2000. And, since most people aren’t likely to do that, they’re left with the extensive bio that Owens Corning does provide on Blake:

Norman P. Blake, Jr 68, formerly Chairman, President and Chief Executive Officer of Comdisco, Inc., global technology services, Rosemont, Illinois, until 2002. Director since 2006; formerly a Director of the Predecessor since 1992. A graduate of Purdue University, Mr. Blake also previously has served as Chief Executive Officer of the United States Olympic Committee; Chairman, President and Chief Executive Officer of Promus Hotel Corporation; Chairman, President and Chief Executive Officer of USF&G Corporation; Chairman, President and Chief Executive Officer of Heller International Corporation of Chicago; and Executive Vice President—Financing Operations, General Electric Credit Corporation, General Electric Company. Mr. Blake is a member of the Purdue Research Foundation, Purdue University’s President’s Council and Dean’s Advisory Council, Krannert School of Management and a member of the Board of Trustees of the Army War College Foundation. He is also a member of the Board of Directors of Keraplast Technologies, Ltd. He received his bachelor’s and master’s degrees from Purdue University and is the recipient of the degree of Doctor of Economics honoris causa from Purdue University, granted jointly by the Krannert School of Management and School of Liberal Arts. He has also been awarded The Ellis Island Medal of Honor.

While Blake’s membership on Enron’s board has been whitewashed from Owens’ proxy for the past 10 years, this year, it seems even more significant, in light of the SEC’s new rules (pdf) requiring greater disclosure on the background of board members and their qualifications. Indeed, one would think this would be particularly important, given Blake’s role on Owens’ Audit Committee.

“This is clearly a case of compliance with the letter, but NOT the spirit, of the new regs,” Marshall writes. “The lawyers must have had a field day!” Of course, isn’t that what lawyers are trained to do? Earlier today, Owens filed its 10-Q, which makes us wonder what’s been lawyered-out there.

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There’s something of a bond between Qwest Communications (Q) and footnoted. In 2002, my experience as an investor in Qwest prompted me to write Financial Fine Print and the company has been a frequent flyer here on the site, appearing in more posts over the years than any other company.

So when CenturyTel (CTL) and Qwest announced a $22 billion deal (including $11.8 billion of debt) to merge yesterday, we couldn’t just sit around and let it pass without some sort of commentary. We’ve listened to the hour-long conference call and we looked at the accompanying slideshow, both of which are peppered with the usual M&A buzzwords like synergy and transformational (we stopped counting the number of times synergy was used after we got to 10). There’s also a new (and pretty snazzy) website that provides even more information. And, as if that’s not enough, we counted 8 different filings made between the two companies just yesterday.

One of the slides that caught our interest was #14, which shows that while this deal is being billed as a merger of equals, all of the top managers are coming from CenturyTel. Ed Mueller, Qwest’s high-flying Chairman and CEO, will join the board, along with three other members of Qwest’s board. Perhaps that has something to do with Qwest’s stock performance since Mueller came on board in August 2007.

During the call, in response to a question from an analyst — one of the few who thankfully didn’t say congratulations — who asked why would Qwest do a deal now when they were believed to be turning things around, Mueller said he thought it was a really good deal and a really good time. Another analyst — from Goldman Sachs, who did say congratulations — asked CenturyTel CEO Glen Post III the same question, albeit from the other side: was Post worried that Qwest, which was viewed to be improving, might get away? While both CEOs stayed on-script related to the timing and whether there were any other interested parties, we couldn’t help but notice that at least two plaintiff firms have already announced plans to investigate the deal.

While the analysts asked lots of questions about the so-called synergies, one question we didn’t hear was about the hefty severance payments that Qwest executives are likely to receive. Indeed, a quick skim of the proxy that Qwest filed last month includes this pearl:

For Mr. Mueller the term “good reason” also includes a reduction in title, and for Mr. Euteneuer the term “good reason” also includes a reduction in title or a requirement that he report to any person other than our CEO or Board.

Given that clause and in light of slide #14 it seems that Mueller and Euteneuer, and probably a few other Qwest executives, stand to make some good money on the deal. Based on the proxy, which assumes a deal on Dec. 31 and a price of $4.21 for Qwest, Mueller stands to make $24.7 million on the deal and Euteneuer stands to receive $10.6 million. The other three named executives stand to receive $32.3 million. The real numbers will likely be significantly higher, given that the deal stock price works out to about $6.02 a share.

While we’ll still be on the look-out for the merger proxy, which should provide some updated information on those severance payments, it looks like we’ll soon have to hang up on Qwest. But it has been an interesting ride!

Image source: RedHouse Developments

One of the big issues that has popped up since Friday’s surprising announcement by the Securities and Exchange Commission that it was charging Goldman Sachs with fraud is whether Goldman should have been more forthcoming in their routine SEC filings that an investigation was pending.

On Saturday, Bloomberg reported that the investigation began 9 months ago. In today’s Heard on the Street column, the WSJ also dates the Wells Notice to July 2009. Reuters reported that the SEC had issued a Wells Notice six months ago. But whatever the correct date is, one thing is very clear: there was no mention of this in any of Goldman’s filings.

Since we tend to spend a lot of time here at footnoted taking deep dives into the filings and routinely report on regulatory actions like Wells Notices, we decided to put this issue under the proverbial microscope. As with a lot of things in SEC filings, it all boils down to an issue of materiality: was the existence of the Wells Notice material enough to Goldman that it required disclosure? The rules on materiality are pretty vague and it’s now clear that Goldman’s attorneys came to the conclusion that the Wells Notice was not material, even if the market seems to disagree.

Given Goldman’s size and the amount listed in the complaint, reasonable people can certainly argue that the Wells Notice was not material, even if other companies routinely file 8Ks for far less serious interactions with the SEC, like responding to a comment letter or an informal investigation.

At a breakfast this morning at the National Press Club that Theo attended, David Z. Seide, a partner with Curtis, Mallet-Prevost, Colt & Mosle in Washington and former Assistant US Attorney in Los Angeles said, ”This is a bet-the-franchise kind of thing, it’s their whole business model.” And that’s the job of a disclosure attorney, “you have to look into the future and figure it out,” he added. George B. Curtis, a partner at Gibson Dunn & Crutcher in Washington, DC., a former Regional and Deputy Director of the SEC’s Division of Enforcement between 2006-2009, noted that “There’s no bright line.”

If Goldman’s argument was that the Wells Notice was not material, they may see some challenges from other very large companies that have disclosed Wells Notices in the past. A quick skim of Morningstar Document Research of companies over $50 billion in market cap that have disclosed the existence of Wells Notices in the past turns up General Electric (GE), Bank of America (BAC), UBS (UBS) and units of both Berkshire Hathaway (BRK.A) and of JP Morgan Chase (JPM).

If disclosing a Wells Notice was material enough for these companies, why was it not material enough for Goldman?

Image source: Faiz Scientific

We’ve seen a lot of crazy disclosures over the years here at footnoted. But the 8-K that teen retailer Abercrombie & Fitch (ANF) filed yesterday has to be one of the wackiest we’ve ever seen. So much so, that it made us recall the words of Phil Rizzuto when we spotted it: “Holy Cannoli”.

As the filing notes, CEO Michael Jeffries, who has a penchant for using ANF’s corporate jet for personal use, racking up over $1 million in a year when Abercrombie’s stock fell by over 60%, will receive $4 million not to use the corporate jet as much under his amended employment contract filed yesterday. If Jeffries spends over $200,000 a year on personal use, he’ll have to (insert huge sigh here) reach into his own pocket!

The amendment is short and sweet and very much written in legalese. Here’s a snip:

The Executive shall be provided, at the expense of the Company, with limited use of a private aircraft for personal travel, both within and outside North America; provided, however, that the incremental cost to the Company of such personal use (as determined by the Company for purposes of Item 402 of SEC Regulation S-K) for each fiscal year during the Term ending on or after January 29, 2011 shall not exceed $200,000… In consideration of the Executive entering into this Amendment, concurrently with the execution of this Amendment, the Company shall pay the Executive a lump sum cash payment in the amount of $4,000,000.

With Abercrombie stock sharply outperforming this year, it may seem easier for investors to swallow, or at least not complain as vociferously. Still, you have to wonder what ANF’s board was thinking here when they made this decision. Perhaps, cannolis were served at the meeting?

Image source: Davio’s

Nearly a decade ago, I penned a short story for the now-defunct Mutual Funds magazine about a company called Mirant. The gist of the story was that while Mirant looked, smelled and was even created in the image of Enron, it was not another Enron. No siree Bob! Indeed, several analysts (whose firms had no doubt been involved in the underwriting when Mirant went public in 2001) swore that this company was different.

When Mirant filed for bankruptcy in 2003, I felt pretty guilty and often wondered how many people had bought that stock based on that short article (which I’ve been unable to find online or I would post). By then, Mutual Funds had been shuttered by Time and footnoted.org wasn’t yet up and running, so I had no place to give my mea culpa. But with yesterday’s news that Mirant (MIR) and RRI Energy (RRI) planned to merge, I decided to take a closer look at some of the filings.

While most of the top executives involved in the Mirant debacle — today’s Atlanta Journal-Constitution recounts the various twists and turns — that cost shareholders billions of dollars have long since moved on, the current crop of executives — several of whom were at the company in the early part of the decade — will do very well post-deal, according to the proxy that Mirant filed last month.

Chairman and CEO Edward Muller, for example, who has been at the helm since 2005, stands to make $16.6 million, the filing notes. Meanwhile, the five other top executives listed in the filing stand to collectively receive $14.2 million as a result of the change in control. A quick skim of the proxy shows that three of those other top execs, including CFO William Holden III, John O’Neal and Anne Clearly, were all part of the old Mirant — the one that essentially imploded in Enron-like fashion. Meanwhile, a quick look at Mirant’s chart post-bankruptcy shows that shareholders seem to have taken it on the chin yet again. Perhaps that’s why several attorneys are already beginning to question this deal.

Image source: Francisco DaCosta

While we don’t usually pay much attention to companies under $250M in market cap, there was something about the 10-K filed by tiny Industry Concept Holdings (INHL) that caught our attention. It wasn’t just because it was filed late on Friday on a day when the market was closed, though that certainly piqued our initial interest. But as we started to skim the filing, we realized that it seemed to have more in common with Page Six or People Magazine than the typical dry SEC filing.

That’s because the filing was a virtual panoply of bold-faced names. Brad Pitt and Angelina Jolie were mentioned in the filing when the company noted that “One of Brad Pitt and Angelina Jolie’s toddlers wore Primp in the 2008 “People” magazine spread, the most expensive celebrity photo in the magazine’s history.” So too was Sasha Obama, who the filing notes wore “a Primp hoodie for her first day of school following the move to the White House.” So too was Jessica Simpson, who currently hosts the VH-1 reality show, “The Price of Beauty”. Keep in mind that the biggest names normally found in most SEC filings are former Senators, Members of Congress, or Governors who, once they leave office, often find their way into some lucrative board of directors gig. And it’s hard to compare Tommy Thompson’s star-power to that of Brad Pitt, no matter how hard one tries.

Still, just like the annoying person at the cocktail party that insists on dropping A-list names to prove their self-worth, dropping A-list names in an SEC filing seems to be about as effective, at least judging by the company’s stock, which appears to have last traded on Feb. 10. Which just goes to show you: name-dropping will only get you so far.

It’s no secret that WellPoint (WLP) CEO Angela Braly has been front and center during the long healthcare debate. In late February, she was summoned to Washington to testify before Congress and explain why some customers of WellPoint subsidiary Anthem Blue Cross were expected to see their premiums jump by 39%. In posts like this one on Firedoglake, Braly and her company were virtually hung in effigy.

So perhaps it’s not much of a surprise to read about sharply increased security costs for Braly in the proxy that WellPoint filed late Friday. Last year, the company spent $151K to provide additional security to Braly “in light of growing concerns regarding the safety of Ms. Braly and her family as a result of the national health care debate.” The $151K covered “personal security during travel, a security-enhanced vehicle and in-home security.” A quick skim of the 2008 proxy shows that these expenses appear to be new.

Of course, these additional expenses weren’t just approved after a quick skim of some liberal blogs. Consultants were hired, who, needless to say, concluded that the expenses were in fact necessary. Here’s a snip from the filing:

In 2009, we consulted with external security experts and reviewed the personal safety and security policy in effect for our executives. As a result of this study, the Committee approved enhanced safety and security benefits for Ms. Braly including travel security, home security and an increase to her cash Directed Executive Compensation benefit in order to generally cover her personal costs related to these additional security measures.

Still, given that Braly’s public profile and subsequent flogging didn’t really become significant until February once Anthem customers began receiving notices of those hefty premium hikes, one can only imagine how much higher those security costs will be for 2010.

Image source: Department of the Interior

Today is one of those rare days when the markets are closed, but the SEC is open. And judging by our inbox so far, companies are certainly using this rare occurrence to happily file away undistracted by Mr. Market. We’ve already counted over 100 new alerts and it’s just 10:30 now. Since today is a holiday for us too, we’ll be posting our best finds over on FootnotedPro, our subscription-only site.

Happy Friday!

Image Source: Buena Vista Pictures

Three years ago, we “awarded” Aaron’s (AAN) the highly prestigious footnote of the year for its disclosure that it had spent $260K to sponsor two race car drivers who happened to be related to a top Aaron’s executive. Last year, that number blossomed to $1.6 million and the executive — Bill Butler Jr. — is now the company’s chief operating officer.

But in the preliminary proxy that the company filed late Friday, Aaron’s said that when the sponsorship of the Robert Richardson racing team ended last year, the company chose not to renew despite the fact that “Motor sports promotions and sponsorships are an integral part of the Company’s marketing programs.” Butler’s son, Ken Butler III, drove the No. 23 Aaron’s Chevy for 18 races last year. The filing provides no other details on the end of the relationship though a quick skim of Richardson’s site shows that Aaron’s is no longer a sponsor.

But according to this article Aaron’s may not have given up on NASCAR after all. It’s just giving up on sponsoring the Butler boys. In honor of the company’s 55th anniversary, the company plans to sponsor Michael Waltrip’s return to racing at Talladega next month. (As we footnoted back in 2006, Walltrip’s company helped to train the Butler boys in the art of racing). There’s no details on the deal, but then again, unlike the Butler boys, Waltrip is not a related party and it’s hard to imagine that the price-tag would be considered material.

Image source: Jayski’s Silly Season

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Thanks to a bunch of talented people at Morningstar, we’re relaunching footnotedPro, our subscription-only service, tomorrow to coincide with the start of what’s a new quarter for many people. It has a new dedicated website and will provide a more efficient back-end. Of course, the real meat is the content — based on my years of digging deep into SEC filings. Now that Sonya and Theo are up and running, I’ll be spending the bulk of my time focused on footnotedPro and hope that you’ll consider subscribing.

One of the big sticking points on the road to President Obama signing the Affordable Health Care for America Act earlier today was the debate over so-called Cadillac health care plans. The Senate bill wanted to impose a hefty tax on these luxe plans and the House bill didn’t, out of some misplaced fear that this would impact teachers and coal miners, instead of top corporate executives. The compromise is that a 40% excise tax will not begin to take effect until 2018, which should hopefully be enough time for Goldman Sachs (GS) to work on reining in its seemingly runaway health care costs for its top executives.

In the preliminary proxy that Goldman filed on Friday, it noted that the cost of premiums for its “executive medical and dental plan” cost nearly $57,000 last year for all but one of its top five executives. Just to put that into perspective, that’s a 40% increase from the premiums that Goldman paid for the top executives in 2008, according to last year’s proxy. Under the new law, a 40% excise tax kicks in for employer-provided plans that cost more than $27,500  a year for a family.

As we’re starting to see in proxy after proxy this season, Goldman is hardly the only company spending big bucks on executive health care. But as we’ve footnoted before,  at a time when the average family policy costs $13,375, a policy that costs four times as much hardly seems like it’s worth special protection from Congress. Of course, worrying about teachers and coal miners is a lot more appealing to most members of Congress than worrying about top corporate executives at companies like Goldman.

Image source: Cadillac

As we flipped through the preliminary proxy that supermarket chain Safeway (SWY) filed the other day, we found ourselves humming “Let’s Call the Whole Thing Off” — that song by the Gershwin Brothers that was famously sung by Louis Armstrong and Ella Fitzgerald:

You say either and I say either, You say neither and I say neither
Either, either Neither, neither, Let’s call the whole thing off.

You like potato and I like potahto, You like tomato and I like tomahto.

Potato, potahto, Tomato, tomahto, Let’s call the whole thing off

The reason? In a section of the proxy that begins on pg. 30, the company talks about the “modest death benefits” that the company provides to senior vice presidents or higher. The section goes on to note that these benefits were modified in December 2008 to make them less prevalent and that they are no longer available for any employee hired after Dec. 15, 2008.

But deeper into the proxy, there’s a shareholder proposal from the AFSCME Employees Pension Plan that doesn’t see the death benefits as being quite so modest. Instead, they describe them as “golden coffins”, which seems more than a pronunciation preference to us. Here’s a snip:

In our view, golden coffin payments—making payouts to senior executive’s beneficiaries based on salary and bonus that have not been earned by the executive prior to death and/or making post-death payments in lieu of perquisites—are not consistent with these principles. According to the 2009 proxy statement, Safeway provides a special death benefit to all named executive officers that results in a payment of four times salary, up to $4 million maximum, if the executive dies in office or after retirement.

This is the second year that AFSCME has submitted this proposal. But last year, Safeway didn’t use the word modest to describe the perk. In any event, shareholders defeated the proposal with 132 million votes cast in favor and 214 million in opposition.

What would Louis and Ella have to say about all of this?

But oh, if we call the whole thing off Then we must part
And oh, if we ever part, then that might break my heart

I was in Chicago earlier this week working on some integration issues with the folks at Morningstar, but found time to tape this video on proxy season which is going on right now. You can watch the video here:

Last August, Boeing (BA) announced a management reshuffling that included the departure of Scott Carson, who had been running the company’s Commercial Airplanes unit. The release, which was dated Aug. 31 — when few people were likely paying attention, given how sleepy things are at the end of August — noted that the changes would be effective the very next day. As the release noted, Carson planned to continue working through the end of 2009 to “ensure a smooth transition”.

Fast forward to yesterday when Boeing filed an 8-K with this consulting agreeement for Carson — something that we don’t recall reading about in the Aug. 31 press release. A quick scan of Boeing’s current releases also comes up empty, despite the fact that Boeing plans to pay Carson $1.5 million as a retainer over the next two years. As the contract notes, Carson will serve as a consultant through March 2012. In exchange for the fee, which essentially works out to his base compensation, he’ll be required to work “no more than 75 hours a month.”

Since it’s probably a pretty safe assumption that Carson was working 75 hours a week (if not more) when he was running the Commercial Airplanes unit, the consulting agreement works out to a pretty nice raise. We also didn’t see anything in the contract that precludes Carson from spending some of the non-Boeing hours — there’s roughly 730 hours in a typical month — consulting for anyone else.

That’s not to say the contract doesn’t have its restrictions. Boeing won’t pay for any alcoholic beverages and the contract won’t enable Carson to wine and dine on Boeing’s dime. Indeed, the agreement is pretty strict on this point, noting that “No entertainment is authorized under this Agreement and no entertainment expenses will be reimbursed. Entertainment includes the purchase of meals or refreshments for any individual (including Boeing employees) other than you.”

Still, given that this deal is essentially part-time work for full-time pay, we’re guessing that Carson won’t sweat too much having to dip into his pocket for some Glenlivet every now and then.

Image source: Glenlivet

We’ve certainly picked on cruise line Carnival Corp. (CCL) and its Chairman and CEO, Micky Arison over the years for some unusual perks like Miami Heat tickets and corporate jet usage (see here and here among others). But as we were reading the company’s recent proxy, we actually came across a footnote that seemed worth spotlighting as a gold star:

Pursuant to Mr. Arison’s request Carnival Corporation donated the entire amount of Mr. Arison’s Non-Equity Incentive Plan Compensation to the following relief organizations: UNICEF, the University of Miami’s Project Medishare, American Red Cross, and Save the Children to aid in the relief efforts in Haiti following the devastating earthquake in January 2010.

What’s surprising here is that this is the type of thing a company — particularly one as media savvy as Carnival, which counts over 13,000 followers on Twitter — would tout in a press release as opposed to burying in a footnote to a proxy statement. While Carnival did put out a press release announcing a $5 million corporate donation to Haiti relief efforts back on Jan. 18 and even quoted Arison in the release, the only disclosure about Arison’s personal donation was that footnote in the proxy statement. A Carnival spokeswoman confirmed this morning that Arison’s $2.2 million donation was part of the $5 million announced in January.

If companies start burying good things in the footnotes in their routine filings, what’s next? World peace?

Image source: Carnival Cruise Lines

On Tuesday, after the market closed, Bowne & Co. (BNE) announced that it was being acquired by RR Donnelly (RRD) for $481 million, or about $11.50 a share. Given that Bowne stock closed at $6.97 on Tuesday, there were no doubt some smiles on a few investors’ faces over the news.

Given this, we decided to go back and look at some of Bowne’s recent filings and we weren’t all that surprised to find a number of large funds that seem to have piled in to Bowne in a very large way — filing 13Gs, the form required when the position exceeds 5% — with near-perfect timing (Please see correction to this post below). Indeed, we counted four funds that filed 13Gs since the beginning of this month: Robeco Investment Management, Capital World Investors, Lord Abbett, and Steinberg Asset Management. Two other large funds — Dimensional Fund Advsiors and Wellington Asset Management — recently added to their positions in Bowne, according to the filings. BlackRock (BLK) also disclosed a new position in Bowne, though that was almost certainly due to the Friday night dump we footnoted earlier this month that was related to the acquisition of Barclay’s Global Investors.

A quick scan of Steinberg’s most recent 13F, which was filed just last week, shows that the stake in Bowne was worth just shy of $13 million on Dec. 31 at the time of the filing on Feb. 16. It’s not clear from the filings what the cost-basis was so it’s impossible to calculate the exact return, but given the sharp appreciation in the stock as a result of the M&A news we’re pretty sure that whoever made that decision to pile into Bowne in such a large way received a hearty congrats on Tuesday afternoon.

CORRECTION: As an anonymous commenter points out, I got the filing requirements for 13Gs and 13Ds mixed up in my head. As a result, the fact that four 13Gs were filed in February isn’t so unusual since the rules say that new 13Gs must be filed 45 days after the calendar year in which the position was established (which kind of makes them useless in my book, but that’s a different story!). As the commenter suggested, I went back and pulled the 13Fs for the four funds and found that 3 of the 4 started buying shares of Bowne during the quarter ended Sept. 30, 2009. The fourth fund — Lord Abbett — has had a position in Bowne since the end of December 2008. I apologize for this error and very much appreciate the anonymous person who brought it to my attention.

Image source: Angela Rutherford

Earlier today, we looked at Toyota’s own disclosures about the massive recall. But there’s also been a number of other companies that are disclosing all sorts of things related to the recall.

Among them was CTS (CTS), which disclosed in the 10-K that it filed yesterday that it too had received subpoenas. Here’s a snip from that filing:

We manufacture accelerator pedal assemblies for a number of automobile manufacturers, including subsidiaries of Toyota Motor Corporation (“Toyota”). We have supplied accelerator pedal assemblies to Toyota since the 2005 model year. Sales to Toyota have accounted for approximately 3.2%, 2.5% and 1.9% of our annual revenue for the years ended December 31, 2009, 2008 and 2007, respectively. We manufacture all pedal assemblies to specifications approved by the customer, including Toyota…One United States Attorney and the Securities and Exchange Commission have issued subpoenas to us regarding the facts and circumstances surrounding the Toyota voluntary pedal recall.

CTS doesn’t provide any additional details in the filing and earlier news releases by the company, including this one from Jan. 29 try to distance the company from Toyota’s problems. Still, it’s hard to spin a subpoena from a US Attorney. If nothing else, it’s a distraction, not to mention hefty legal fees.

We also found a few other companies — primarily in the automotive space — that have managed to work the Toyota recall into their filings. One surprise was from Priceline (PCLN), which in their 10-K filed last week included the Toyota recall as a risk factor, noting that it could create “further strain on rental car companies’ fleets and increased retail rental car rates.”

Also including the Toyota recall in their risk factors was AutoNation (AN), which noted that it owns 21 Lexus and Toyota dealerships. Group 1 Automotive (GPI) didn’t list the recall as a risk factor, but noted in its 10-K that the recall could have a material impact on the company’s results because Toyota brands accounted for over 36% percent of sales in 2009. And AK Steel (AKS) noted that Toyota was an important customer and that the recall could have a “negative impact” on demand for the company’s products.

UPDATE 6:15 pm: Add Penske Automotive Group (PAG) to the list of companies warning about the Toyota recall in their 10Ks.

Image source: Nick Ut/Associated Press

This morning, a lot of attention will be focused on Toyota Motors (TM) CEO Akio Toyoda, who will start testifying around 11 am est before the House Oversight Committee. Given this, we decided to take a look at both Toyota’s recent filings and those of some other companies and came up with some interesting finds. This post deals with a specific Toyota filing. Later today, we’ll post our other finds.

At the top of the list was this 6-K filed by Toyota on Monday. While the news of the grand jury subpoena from the Southern District of New York — as a quick reminder, that’s a criminal issue — was reported, we were more interested in the timing of the 6K. Specifically, how did Toyota receive a grand jury subpoena on Feb. 8 and wait until Feb. 22 to disclose this to their investors? After checking with a few experts, including The Corporate Counsel, Broc Romanek, it became increasingly clear that the disclosure rules for foreign-based companies — even those whose ADRs trade here in the US — are pretty vague. So vague in fact that one attorney we spoke to said that the SEC isn’t even really aware of them!

Now if Toyota shares traded here, the rules on something like this — it seems hard to argue that a grand jury subpoena isn’t material — would be pretty clear: they would have four business days to disclose this in an 8K, which probably would have required disclosure by Feb. 12, or perhaps Feb. 16 at the latest, to account for the President’s Day holiday. But Toyota waited a full extra week. Yesterday afternoon, Broc put us in touch with Walter Van Dorn Jr., a partner at Sonnenschein Nath & Rosenthal, and he said the SEC rules essentially say that the company is required to file promptly with the home country and with the SEC after that. “But the SEC doesn’t know exactly what those rules are,” Van Dorn Jr. said, which means that even if Toyota took its time to let investors know about the subpoena, the SEC wouldn’t necessarily know this.

Although we left several messages with the SEC. we’ve yet to hear back from them. But Kazu Tomita, the general manager for the Tokyo Stock Exchange’s New York City office confirmed that the rules basically say that the company is required to disclose the information “as soon as possible” or “as soon as they recognize the fact”. Though he declined to comment on the specifics here, he suggested that the delay could be due to the time it took for the New York issued subpoena to get to Toyota’s headquarters in Tokyo and then for Toyota to file the 6K with the SEC.

That seems like a bit of a stretch to us, unless the subpoena was sent by carrier pigeon to Tokyo — something we’re trying to confirm with New York’s Southern District. Not to mention the fact that if the SEC really doesn’t know the rules for this sort of disclosure, how are investors supposed to trust anything that is disclosed in 6Ks?

UPDATE 12:15 pm: Mio Maeshima, an old friend of mine in Tokyo who served as my translator when I had a journalism fellowship there, checked the TSE’s website and found that Toyota also filed the subpoena disclosure with the TSE on Feb. 22. But given the rules that Mio translated for me — and the requirement that Toyota was required to notify investors of “a government ministry or agency’s accusation of law violation against the company” — it still raises questions on why it took so long for Toyota to disclose this to investors.

Image source: Nick Ut/Associated Press

This morning’s NY Times had an interesting story about the Obama Administration going after what it describes as “excessive rate increases” that some health insurance companies — the article talks about Anthem Blue Cross specifically, a subsidiary of WellPoint (WLP) — are trying to pass along to their subscribers.

And just last week, a friend of mine who runs a small business, told me that her insurance company — United Healthcare (UNH) — planned to increase her rates by nearly 50% come March 1. So perhaps it’s not much of a surprise that WellCare (WCG) had this new warning — a risk factor — in the 10-K that it filed last week:

Negative publicity regarding the managed care industry may have a material adverse effect on our business, financial condition, results of operations and cash flows.

The managed care industry historically has been subject to negative publicity. This publicity may result in increased legislation, regulation and review of industry practices and, in some cases, litigation. For example, the Obama Administration and certain members of Congress have been questioning the profits of health insurance plans and the percentage of premiums paid that are going directly to health care benefits. These inquiries have resulted in news reports that are generally negative to the health insurance industry. These factors may have a material adverse effect on our ability to market our products and services, require us to change our products and services and increase regulatory or legal burdens under which we operate, further increasing the costs of doing business and materially adversely affecting our business, financial condition, results of operations and cash flows.

Now there’s probably very few places in the world where a company can get away with a 38% (or 50% in the case of my friend) price hike and not suffer some sort of negative publicity. So complaining about it — or listing it as a risk factor that could have a material adverse impact — seems particularly ironic, given that there’s an easy enough solution: don’t do it.

As footnoted regulars know, SEC filings aren’t always that much fun. But this video, which I shot for CBS Moneywatch, tries to look at the lighter side of digging through filings. As an added plus, it shows how hard Kumara, the brain behind footnoted, really works.