Modell owned 80 percent of the Cleveland Stadium Corporation and 53 percent of the Cleveland Browns Football
Modell owned 80 percent of the Cleveland Stadium Corporation (Stadium) and 53 percent of the Cleveland Browns Football Company (Browns). Gries owned 43 percent of Browns. The Browns’ board consisted of Modell, the outside lawyer for both corporations, three individuals employed by both corporations, and Gries. Modell proposed that the Browns buy the Stadium for $6 million. Gries objected, saying that the Stadium appraised for only $2 million. The Browns’ board approved the purchase nonetheless (all directors other than Gries voting in favor). Gries commenced a shareholders derivative suit seeking to rescind the purchase. Who should win? See Gries Sports Enterprises v. Cleveland Browns Football Company, 496 N.E.2d 959 (Ohio S. Ct. 1986).
A Fortune 500 CFO admits to having deliberately treated $4 billion in operating expenses as assets, thereby allowing the corporation to show profits instead of losses. The auditor never detected this. The corporation’s stock drops 95 percent and bond covenants related to billions in debt are breached. At its peak price last year, the CFO sold stock (acquired through options) for $15 million, generating a $10 million gain.