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x Failing to file reports required under the Bank Secrecy Act resulted in payment of
fines of $40 million and $10 million in civil penalties. Claims against directors
dismissed. Stone v. Ritter.

x Approving an employment contract for a former president, as well as impliedly
approving a non-fault termination, that resulted in payments to the former
president allegedly totaling more than $140 million for barely one year of service.
Dismissal of claims against directors after a long, painful and very public trial
upheld on appeal. In re Walt Disney Co. Derivative Litigation 906 A.2d 27 (Del.
2006).

x Approving excessive compensation and forgiveness of loans to chief executive
officer. Denied motion to dismiss claims against directors before trial. Official
Committee of Unsecured Creditors of Integrated Health, Services, Inc. v. Elkins,
C.A. No. 20228-NC (Del. Ch. Aug. 24, 2004).

x Failing to respond to four formal warning letters from the FDA from 1993 to 1999
for failure to meet required standards for the manufacture of in vitrio diagnostic
kits resulting a $100 million fine and the ordered destruction of unused inventory,
causing Abbott to record a total charge of $168 million to its earnings. Reversed
dismissal of claims against directors by lower court before trial. Abbot
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Laboratories Derivative Shareholders Litigation, 325 F.3d 795 (7 Cir. 2003).

F. Director Independence

In a transaction or decision in which directors have a conflict of interest, the board of
directors has the burden of showing that the transaction or decision is entirely fair to the
corporation. If, however, the transaction or decision is made by a fully functioning
independent committee of independent directors, the burden shifts to a plaintiff to prove
that the transaction is unfair. In re Emerging Communications, Inc. Shareholders
Litigation.

x In In re Oracle Corp. Derivative Litigation, 824 A.2d 917 (Del. Ch. June 12, 2003),
the court denied the motion of a special committee of directors to terminate a
shareholder derivative lawsuit alleging three directors engaged in insider trading
because the two members of the special committee failed to show they were
independent. The court found the relationships among the special committee
members, both of whom were tenured faculty professors of Stanford University, and
the directors, who were alumni of and major contributors to Stanford, were “too vivid
to be ignored.” A director’s independence may be comprised if he or she is beholden
to an interested person. Beholden, in the court’s view, does not mean just owing in
the financial sense; rather, it could also flow out of “personal and other relationships”
to the interested party.

x In Beam v. Stewart, 845 A.2d 1040 (Del. 2004), director independence was came up
when a shareholder sued the corporation, its majority shareholder (Martha Stewart),
and five other members of the board of directors, for injury to the corporation
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