Large companies don’t want to disclose litigation contingencies to investors

businessvaluaton.com is following the story of the August 18th letter signed by a host of Association of  Corporate Counsel’s leading members.   ACC and many of their members believe that the proposed disclosure requirements about impending risks from litigation will alert the tort bar to insurance and other funds that can be pursued–delaying settlements and counterproductively inducing more litigation.

FASB had dropped this proposal in 2008, and recently reintroduced it, causing ACC’s response.  Some commentators feel that FASB, facing the twin threats of Bob Herz’ early retirement, and the increasing dominance of IASB, is struggling anyway–so now’s a good time to go on the offensive regarding fair value issues.

Among those signing ACC’s letter were its key officers, including Patricia Hatler, chief legal and governance officer at the Nationwide Mutual Insurance Company; J. Alberto Gonzalez-Pita, general counsel of HCP, Inc.; Jonathan Oviatt, chief legal officer of the Mayo Clinic; Michele Gatto, corporate services & chief legal officer at the National Life Group; and Bradford Smith, general counsel of Microsoft Corporation and chair of the ACC Board Advocacy Committee.

Will the outcome of this regulatory issue influence the way private business owners and investors look at the value of small businesses? At this time, bv.com believes the answer is “no.”   Disclosure standards in private deals remain the same;  if there is “known or knowable” litigation in the works, it better come out during due diligence, or there will be problems after the deal closes.