If EGMI was a fraud, what might an eventual recovery look like?
Many are assuming there will be only a few cents on the dollar, if that, but could this not be way too low?
If there was a fraud involving low or no actual sales and missing cash then I would guess that the auditors would be held at least partially responsible. Mendoza Berger is a fairly good sized regional firm and they do audits for a number of public companies so they should have insurance coverage of at least several 10's of millions $. There is the liability insurance carried by EGMI itself,if they have it. There are the personal holdings of the management and board, past and present, which I hate to say, but includes the estate of the former COB, Lord Steinberg, which is extensive. With losses of less than $100MM in mkt cap we might make up more than normal in these sorts of deals.
I know these cases can take quite a bit of time and are costly, but it seems to me that there are some deep pockets involved here and recovery might not be as low as we have been assuming.
I'm not of the opinion this is a fraud, but I certainly concede it could be and I'd be interested to hear from members more knowledgeable than me on what we might expect in the eventuality. It would be particularly interesting to have some idea of how much insurance a firm like Mendoza might carry.
