­

How come getting convicted of a felony means Martha Stewart is banned for life from being an executive of a public company but not Russ Whitney? Last update 3/10/04 Russ Whitney is a convicted felon. So is Martha Stewart. The cover story in Newsweek' 3/15/04 issue said on page 31, As a convicted felon, Martha faces a lifetime ban from serving as an executive or director of a public company. Whitney keeps saying his felony conviction was a long time ago. He' right. He started his prison sentence for second degree robbery in 1974. But a lifetime ban is a lifetime ban. If anyone knows why Martha Stewart is banned for life from serving as an executive or director of a public company while Russ Whitney is the chairman of the board of directors and chief executive officer of publicly-traded Whitney Information Network, Inc., please explain it to me. I would have thought second-degree robbery would be even more likely to ban you from Wall Street than lying to an FBI agent. One reader wondered if it had to do with the rules of the stock exchanges. He says the over-the-counter bulletin board on which Whitney' company listed has really low standards. I would add that I heard that Whitney wants to move up to the NASDAQ. Do they allow felon directors or executives? According to a Newsweek person, the ban on felon directors is a Securities and Exchange Commission rule. I will try to learn the citation. The reporter who wrote the Newsweek story got the idea that executives cannot be felons from a securities lawyer. I do not know what authority that lawyer was relying on. A reader said he thought the relatively recent (2002) Sarbanes-Oxley Act, also known as the Corporate Fraud Accountability Act, which was passed in response to the recent Wall Street scandals, gave the SEC the authority to bar felon directors or officers from running public companies. Another reader said his business ethics professor thought Newsweek might be referring to Section 21(d)(2) of the 1934 Securities Act which authorizes a court to permanently bar a person convicted of securities fraud or inside trading from serving as a director or officer of companies (1) traded on a national stock exchange or (2) having more than $10 million and at least 500 shareholders. I do not know if the Over The Counter Bulletin Board"”which is where Whitney Information Network, inc. is traded"”is a "stock exchange" as the term is used by the ethics professor. Whitney Information Network, Inc. did not have 500 shareholders last I heard, but they did have more than $10 million of assets. This John T. Reed, a.k.a. John Reed, Jack Reed, 342 Bryan Drive, Alamo, CA 94507, Voice: 925-820-7262, Fax: 925-820-1259, www.johntreed.com

Log in to comment
­