In response to a private message from Petrengr1, here is some info on an important issue--the indemfication of the officers and directors of IOC. Current corporate practice is to provide indemnification of officers and directors for actions that they take while performing their corporate duties. This is done to minimize or eliminate any personal liability for actions taken on behalf of the corporation. IOC has taken this step by providing indemnification policies and indemnifiction insurance for all of its corporate officers and directors. As Pet pointed out to me, there are two issues that are relevant here.

First is the difficulty in serving legal papers on any of the IOC BOD or officers. This was noted in the Exxon Deal MIC as follows [which again, PET pointed out]:

 "The enforcement by investors of civil liabilities under the United States securities laws may be affected adversely by the fact that InterOil is organized under the laws of a jurisdiction other than the United States, that all of its respective officers and directors are residents of countries other than the United States, that some or all of the experts named in this Information Circular may be residents of countries other than the United States, or that all or a substantial portion of the assets of InterOil, such directors, officers and experts may be located outside the United States. As a result, it may be difficult or impossible for Shareholders resident in the United States to effect service of process within the United States upon InterOil, their respective officers and directors or the experts named herein, or to realize against them on judgments of courts of the United States. In addition, Shareholders resident in the United States should not assume that the courts of Canada: (a) would enforce judgments of United States courts obtained in actions against such persons predicated upon civil liabilities under the securities laws of the United States or any state within the United States; or (b) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under the securities laws of the United States or any state within the United States."

Essentially, if you can't serve legal papers [ie. subpoenas, notices, etc.] on someone, you can't go forward with a lawsuit against that person in either the US or Canada.

Which brings us to the second point that PET brought up. Even if you were able to servce process on Hession or the BOD, all of these people have been very thoroughly indemnified against any lawsuit claims, damages, or monetary awards by IOC policy and by the Indemnification insurance that IOC has taken out that covers them. This is all covered in the revised Bylaws of IOC [which came into effect shortly before Hession was brought in as CEO]. The language of the Indemnification sections of the Bylaws contain some of the worst legalease language that I have ever encountered, but it is written to cover virtually every possible contingency where a officer or director might be hauled into court based on their actions while serving as an officer or director of IOC. I've included portions of the Bylaws relating to Indemnificaton, with one sentence of this policy highlighted, for your amusement:

INDEMNITIES TO DIRECTORS AND OTHERS 30. (l) The Corporation shall indemnify a director or officer, a former director or officer or any other individual permitted by the Act to be so indemnified in the manner and to the fullest extent permitted by the Act. Without limiting the generality of the foregoing, subject to the provisions of the Act, except in respect of an action by or on behalf of the Corporation or body corporate to procure a judgment in its favour, the Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation or a person who acts or acted at the Corporation's request as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor (or, if permitted by the Act, of another entity or an individual acting in a similar capacity of another entity) and the director's or officer's (or, if permitted by the Act, such individual's) heirs and legal representatives, against all costs, charges and expenses, including costs incurred in the defence of an action or proceeding and an amount paid to settle an action or satisfy a judgment, reasonably incurred by such director or officer in respect of any civil, criminal or administrative action or proceeding (or, if permitted by the Act, any investigative action or proceeding) to which the director or officer (or, if permitted by the Act, such individual) is made a party (or, if permitted by the Act, is otherwise involved) by reason of being or having been a director or officer of the Corporation or body corporate (or, if permitted by the Act, is otherwise involved because of that association with the Corporation or other entity), if: (a) the director or officer (or, if permitted by the Act, such individual) acted honestly and in good faith with a view to the best interests of the Corporation (or, if permitted by the Act, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the Corporation's request); and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the director or officer (or, if permitted by the Act, such individual) had reasonable grounds for believing that the director's or officer's (or, if permitted by the Act, such individual's) conduct was lawful.

The point of all of this is that even if one were to be able to secure service of process on any of the officers or directors of IOC, and even if they could be hauled into court and found to have breached their fiduciary duites to the shareholders of IOC, the IOC corporate indemnification policies and insurance would likely still shield them from any monetary damage awards. The IOC indemnification policy has a high bar for indemnification not to apply to an officer or director. Basically, such person would have to be found to have acted dishonestly and in bad faith against the best interests of the corporation, and then, only if the person did not have reasonable grounds to believe that they were acting unlawfully. This is a very high legal bar to surmount--essentially one of intent to deceive or defraud, very difficult to prove in court. Particularly if Hession or the BOD received any instructions from the IOC legal counsel that their actions were lawful [which is very likely]. Note that this is quite likely--not that their actions were lawful, but only that they had reasonable grounds to believe that they were. Advice from a lawyer regarding your actions being legal is all that is necessary to defend against such an attempt to remove the legal shelter of full indemnification. And you can bet that these people were covering their butts in everyway possible.

The bottom line is that, despite wanting desperately to punish the CEO and BOD for their flagrant misconduct, it would be very difficult to do so in light of 1] the difficulty in serving any legal papers on the IOC CEO or BOD, and 2] the current IOC indemnification policies and the corporate insurance that shelter the officers and directors from any personal liability.

I suggest that we channel our collective anger at Hession and the BOD into trying to insure that IOC's shareholders receive an adequate value for their shares. While this may involve a special meeting to remove the BOD and CEO,  I believe that tilting at the windmill of finding criminal culpability in their actions would be counterproductive.

2126 - In your opinion, could SEC or FINRA take action against them?  Some of us have issued a complaint against CEO/BOD insider trading, etc.  As an NYSE listed company, I can't imagine they can indemnify against those (and other) regs.

'Li'loilady' pid='77476' d Wrote:

2126 - In your opinion, could SEC or FINRA take action against them?  Some of us have issued a complaint against CEO/BOD insider trading, etc.  As an NYSE listed company, I can't imagine they can indemnify against those (and other) regs.

The SEC and FINRA can indeed take action against the BOD and CEO. However, issue #1 would still apply. How to actually serve papers on persons without US citizenship and without their presence in the US? Addtionally, if the IOC people can show that they reasonably felt they were acting lawfully [by virtue of a legal opinion by IOC legal counsel, for example], the indemnification policies in the corporate bylaws of IOC would still shield them from any personal liability. Such is the power of indemnification.

'2126' pid='77478' dateline='<a href="tel:1478651 Wrote:

'Li'loilady' pid='77476' dateline='<a href="tel:147 Wrote:

2126 - In your opinion, could SEC or FINRA take action against them?  Some of us have issued a complaint against CEO/BOD insider trading, etc.  As an NYSE listed company, I can't imagine they can indemnify against those (and other) regs.

The SEC and FINRA can indeed take action against the BOD and CEO. However, issue #1 would still apply. How to actually serve papers on persons without US citizenship and without their presence in the US? Addtionally, if the IOC people can show that they reasonably felt they were acting lawfully [by virtue of a legal opinion by IOC legal counsel, for example], the indemnification policies in the corporate bylaws of IOC would still shield them from any personal liability. Such is the power of indemnification.

Thanks for your response, 2126.  I hope I'm not trying your patience, but I'd like to ask a clarifying, pinpointed question re: insider trading.   Would not a CEO and BOD be responsible to know they were in violation of these (world-famous) regulations no matter what an attorney had said?  Due diligence?  Otherwise couldn't any company indemnify themselves to this extent?  That's assuming they did consult an attorney on those trades and he said, "Sure.  No prob.  I think I'll buy me a slew of shares, too, right after we get out of this meeting with the XOM attorneys!"

If Katy, or anyone else w/ contract expertise has an informed opinion to offer up, go for it!

Thanks guys.

'2126' pid='77463' datel Wrote:

In response to a private message from Petrengr1, here is some info on an important issue--the indemfication of the officers and directors of IOC. Current corporate practice is to provide indemnification of officers and directors for actions that they take while performing their corporate duties. This is done to minimize or eliminate any personal liability for actions taken on behalf of the corporation. IOC has taken this step by providing indemnification policies and indemnifiction insurance for all of its corporate officers and directors. As Pet pointed out to me, there are two issues that are relevant here.

First is the difficulty in serving legal papers on any of the IOC BOD or officers. This was noted in the Exxon Deal MIC as follows [which again, PET pointed out]:

 "The enforcement by investors of civil liabilities under the United States securities laws may be affected adversely by the fact that InterOil is organized under the laws of a jurisdiction other than the United States, that all of its respective officers and directors are residents of countries other than the United States, that some or all of the experts named in this Information Circular may be residents of countries other than the United States, or that all or a substantial portion of the assets of InterOil, such directors, officers and experts may be located outside the United States. As a result, it may be difficult or impossible for Shareholders resident in the United States to effect service of process within the United States upon InterOil, their respective officers and directors or the experts named herein, or to realize against them on judgments of courts of the United States. In addition, Shareholders resident in the United States should not assume that the courts of Canada: (a) would enforce judgments of United States courts obtained in actions against such persons predicated upon civil liabilities under the securities laws of the United States or any state within the United States; or (b) would enforce, in original actions, liabilities against such persons predicated upon civil liabilities under the securities laws of the United States or any state within the United States."

Essentially, if you can't serve legal papers [ie. subpoenas, notices, etc.] on someone, you can't go forward with a lawsuit against that person in either the US or Canada.

Which brings us to the second point that PET brought up. Even if you were able to servce process on Hession or the BOD, all of these people have been very thoroughly indemnified against any lawsuit claims, damages, or monetary awards by IOC policy and by the Indemnification insurance that IOC has taken out that covers them. This is all covered in the revised Bylaws of IOC [which came into effect shortly before Hession was brought in as CEO]. The language of the Indemnification sections of the Bylaws contain some of the worst legalease language that I have ever encountered, but it is written to cover virtually every possible contingency where a officer or director might be hauled into court based on their actions while serving as an officer or director of IOC. I've included portions of the Bylaws relating to Indemnificaton, with one sentence of this policy highlighted, for your amusement:

INDEMNITIES TO DIRECTORS AND OTHERS 30. (l) The Corporation shall indemnify a director or officer, a former director or officer or any other individual permitted by the Act to be so indemnified in the manner and to the fullest extent permitted by the Act. Without limiting the generality of the foregoing, subject to the provisions of the Act, except in respect of an action by or on behalf of the Corporation or body corporate to procure a judgment in its favour, the Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation or a person who acts or acted at the Corporation's request as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor (or, if permitted by the Act, of another entity or an individual acting in a similar capacity of another entity) and the director's or officer's (or, if permitted by the Act, such individual's) heirs and legal representatives, against all costs, charges and expenses, including costs incurred in the defence of an action or proceeding and an amount paid to settle an action or satisfy a judgment, reasonably incurred by such director or officer in respect of any civil, criminal or administrative action or proceeding (or, if permitted by the Act, any investigative action or proceeding) to which the director or officer (or, if permitted by the Act, such individual) is made a party (or, if permitted by the Act, is otherwise involved) by reason of being or having been a director or officer of the Corporation or body corporate (or, if permitted by the Act, is otherwise involved because of that association with the Corporation or other entity), if: (a) the director or officer (or, if permitted by the Act, such individual) acted honestly and in good faith with a view to the best interests of the Corporation (or, if permitted by the Act, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the Corporation's request); and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the director or officer (or, if permitted by the Act, such individual) had reasonable grounds for believing that the director's or officer's (or, if permitted by the Act, such individual's) conduct was lawful.

The point of all of this is that even if one were to be able to secure service of process on any of the officers or directors of IOC, and even if they could be hauled into court and found to have breached their fiduciary duites to the shareholders of IOC, the IOC corporate indemnification policies and insurance would likely still shield them from any monetary damage awards. The IOC indemnification policy has a high bar for indemnification not to apply to an officer or director. Basically, such person would have to be found to have acted dishonestly and in bad faith against the best interests of the corporation, and then, only if the person did not have reasonable grounds to believe that they were acting unlawfully. This is a very high legal bar to surmount--essentially one of intent to deceive or defraud, very difficult to prove in court. Particularly if Hession or the BOD received any instructions from the IOC legal counsel that their actions were lawful [which is very likely]. Note that this is quite likely--not that their actions were lawful, but only that they had reasonable grounds to believe that they were. Advice from a lawyer regarding your actions being legal is all that is necessary to defend against such an attempt to remove the legal shelter of full indemnification. And you can bet that these people were covering their butts in everyway possible.

The bottom line is that, despite wanting desperately to punish the CEO and BOD for their flagrant misconduct, it would be very difficult to do so in light of 1] the difficulty in serving any legal papers on the IOC CEO or BOD, and 2] the current IOC indemnification policies and the corporate insurance that shelter the officers and directors from any personal liability.

I suggest that we channel our collective anger at Hession and the BOD into trying to insure that IOC's shareholders receive an adequate value for their shares. While this may involve a special meeting to remove the BOD and CEO,  I believe that tilting at the windmill of finding criminal culpability in their actions would be counterproductive.

While the BOD will not have personal liability,  the courts,  not IOC by laws, determine what is breach of fiduciary relationship.   Blind acceptance of corporate legal is not a defense..   They have to act as reasonable prudent persons under the circumstances.

They have clearly breached their fiduciary duty by self dealing.  The  directors insurance of IOC is on the hook in my opinion.  I have requsted a copy of their insurance.

I have a JD 1976.