A couple of decades ago, a friend was defending a case that involved a corporate entity named “LHIW, Inc.” The case seemed defensible for a while. Then, during a deposition, opposing counsel thought to ask a witness what the heck “LHIW, Inc.,” stood for.
Suffice it to say that it’s tough to defend a transaction that involves a shell company named “Let’s Hope It Works, Inc.”
Ten years ago, a company was spinning off the piece of its business that was saddled with product liability exposure. The transaction would create one new, clean company and one tainted company that would spend its days defending itself or paying claims over time. Did the internal corporate documents really have to refer to the two new entities as “GoodCo” and “CrapCo”?
Why did I flash back to those memories? Because I recently ran across a situation where someone cleverly named an investment vehicle “SNP, Inc.” That was fine and good until someone thought to ask what “SNP, Inc.,” stood for. Naturally: “Should Not Participate, Inc.”
The more things change, the more they stay the same. But I have a proposal on this front . . .
Corporate America must henceforth name all of its shell companies after Disney characters.
No more “raptors”!
No more “death stars”!
No more projects named “Piranha”!
This is not funny anymore.
I understand that the cutthroat business guys think it’s cute to name the shell companies after predators and villains. And I hate to be a spoilsport. But when the litigation rolls around, atmospherics matter. When we learned that Enron’s special purpose entities were called “raptors,” we also realized that Enron couldn’t risk trying those cases.
From here on out, let’s insist on projects named “Winnie the Pooh.” (We could follow the story line and call it “Pooh,” for short. Tell your business guys not to accidentally drop the “h.”)
I’ll defend project “Kermit.” I’ll defend “Miss Piggy.” I’ll defend Big Bird, and Elmo, and both Mickey and Minnie. “Cookie Monster” comes closer to the line, but I’ll take it.
But you’ll need a fancier lawyer than I am to defend another project “Velociraptor,” “Darth Vader,” or “Vulture.”
This should be an easy rule to enforce, don’t you think? Just tell the folks in finance that it’s Disney characters or bust. That rule is simple, easy to remember, and will make us feel a whole lot more comfortable when we’re standing before twelve good men and true.
I think my proposal is a great one. LHIW!
Mark Herrmann is the Vice President and Chief Counsel – Litigation at Aon, the world’s leading provider of risk management services, insurance and reinsurance brokerage, and human capital and management consulting. He is the author of The Curmudgeon’s Guide to Practicing Law (affiliate link). You can reach him by email at [email protected].