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[ira01]

I kind of agree with Moth's point, though: while the regulators just got 1 million bucks, we are getting nothing. Why is that right?

Certainly.  I see his point also.  But it seems to me we are likely to come out farther ahead if Prosper is required to repurchase all defaulted, charged off, and 4+ loans instead of waiting and depending on PMI or their agent to properly service the still active loans.  I think the CA suit can pursue Larsen and others to find sufficient funds for everybody, including the large lenders like carrey79, Fred, Pensioner et al.

Don't forget the VC funders who are probably not amused to learn that PMI is in violation of securities laws.  They will line up their lawyers to get a piece of their $20 million back.

Prosper got $40M of VC, not $20M.  But I agree that they are probably not amused, and are looking for a way to get some money back.  Of course the ones that sit on Prosper's Board are going to have their own problems.

There is not an umlimited pot of money from which all of us (lenders, employees, lawyers, VC funders, creditors, regulators) can draw from.

Whenever someone who is not a lender gets money from the pot, that is less money that lenders can hope to recover.

While this is usually true, in this case it may well not be.  It appears that there may be an unlimited pot here (or at least unlimited enough for all practical purposes) due to the presence of numerous other deep-pockets besides Prosper.  Larsen alone has deep enough pockets to make everyone whole, if his pockets can be tapped.

[CleanRivers]

While this is usually true, in this case it may well not be.  It appears that there may be an unlimited pot here (or at least unlimited enough for all practical purposes) due to the presence of numerous other deep-pockets besides Prosper.  Larsen alone has deep enough pockets to make everyone whole, if his pockets can be tapped.

Why is Larsen considered to have deep pockets in this economy? Any money he has made in previous "businesses" were probably invested in stocks.  How much would he have left? He may not have as much as we think he does.
I really hope I am thinking wrong.

[God-Father]

Do we believe board members are equally liable as executives?  For some reason I thought this was not true.   

Speaking of deep pockets, isn't there a big wig from eBay on the board?

[ira01]

While this is usually true, in this case it may well not be.  It appears that there may be an unlimited pot here (or at least unlimited enough for all practical purposes) due to the presence of numerous other deep-pockets besides Prosper.  Larsen alone has deep enough pockets to make everyone whole, if his pockets can be tapped.

Why is Larsen considered to have deep pockets in this economy? Any money he has made in previous "businesses" were probably invested in stocks.  How much would he have left? He may not have as much as we think he does.
I really hope I am thinking wrong.

A quick search didn't tell me how much Larsen sold his E-Loan stake for, but I did find one article that said that when E-Loan went public, Larsen's stake was worth $200 million.  Even if it was worth less when he sold it (and it might have been worth more), and even if he subsequently lost a bundle in the current stock market slide, Larsen still has plenty of money.

[Elmslice]

Do we believe board members are equally liable as executives?  For some reason I thought this was not true.   

I know of an example where board members wound up paying their own money (not just insurance proceeds) to settle lawsuits:  WorldCom.  I couldn't remember all of the details almost four years on but found a Wash Post article:
 

NEW YORK, Jan. 5 -- Ten former outside directors of WorldCom Inc. have tentatively agreed to pay $54 million -- including $18 million out of their own pockets -- to settle part of a class-action securities lawsuit stemming from the company's accounting scandal.

The proposed deal would be the largest of its kind and requires the 10 directors to pay more than 20 percent of their combined net worth, according to lawyers on both sides of the negotiations. WorldCom's directors liability insurance carriers would pick up the remaining $36 million.

Link: http://www.washingtonpost.com/wp-dyn/articles/A52026-2005Jan5.html

I'm sure that WorldCom being a public corporation, and the sheer size of the fraud, had a lot to do with the size of the settlement.  There was a lot of outrage at the board for being asleep while supposedly on watch while the executives of the company cooked the books. 

Also in the course of looking this up I found a blog entry from a law professor talking about this case but which also goes into a lot of detail about board liability generally:  http://busmovie.typepad.com/ideoblog/2005/01/the_worldcom_se.html

[Chamatrain]

Do we believe board members are equally liable as executives?  For some reason I thought this was not true.   

Speaking of deep pockets, isn't there a big wig from eBay on the board?

Yes, I believe that.  And I personally know that board members for non-profits can be held liable for things they are not even aware of.  Moral of that story:  If you want to "help" your community, make really, really sure that you have really, really good D&O insurance.

[GLeaderAccountantsChoice]

Prosper's civil liability for failure to comply with the 1933 Act's registration requirement can take the form of consideration paid for the security, plus interest, less the amount of any income received thereon, or damages in the event a "lender" no longer owns the security.  In most instances, an action must be brought within one year of a discovery of an untruth or omission in the registration statement or one year after the discovery should have been made by the exercise of due diligence.  Actions based on violation of the Act's registration requirements must be brought within one year of the violation.


... still not a lawyer.

[ira01]

Prosper's civil liability for failure to comply with the 1933 Act's registration requirement can take the form of consideration paid for the security, plus interest, less the amount of any income received thereon, or damages in the event a "lender" no longer owns the security.  In most instances, an action must be brought within one year of a discovery of an untruth or omission in the registration statement or one year after the discovery should have been made by the exercise of due diligence.  Actions based on violation of the Act's registration requirements must be brought within one year of the violation.

Prosper was continuing to make public statements that they were not required to register, even after LC's return to business (i.e., within the last month or two).  Thus, I doubt they are going to be able to argue that lenders should have known more than a year ago that Prosper really was required to register, notwithstanding prosper's assurances to the contrary.

[bamalucky]

Prosper was continuing to make public statements that they were not required to register

I think they even had a press release

[GLeaderAccountantsChoice]

Prosper's civil liability for failure to comply with the 1933 Act's registration requirement can take the form of consideration paid for the security, plus interest, less the amount of any income received thereon, or damages in the event a "lender" no longer owns the security.  In most instances, an action must be brought within one year of a discovery of an untruth or omission in the registration statement or one year after the discovery should have been made by the exercise of due diligence.  Actions based on violation of the Act's registration requirements must be brought within one year of the violation.

Prosper was continuing to make public statements that they were not required to register, even after LC's return to business (i.e., within the last month or two).  Thus, I doubt they are going to be able to argue that lenders should have known more than a year ago that Prosper really was required to register, notwithstanding prosper's assurances to the contrary.

My non-lawyer interpretation is that Prosper's case falls under the definition of the later bolded sentence above, aka failure to file.  The first bolded sentence is referring to when a registration statement is filed that contains misleading or fraudulent information.  Perhaps I'm misinterpreting that.  I don't have the actual language in front of me.

[ira01]

Prosper's civil liability for failure to comply with the 1933 Act's registration requirement can take the form of consideration paid for the security, plus interest, less the amount of any income received thereon, or damages in the event a "lender" no longer owns the security.  In most instances, an action must be brought within one year of a discovery of an untruth or omission in the registration statement or one year after the discovery should have been made by the exercise of due diligence.  Actions based on violation of the Act's registration requirements must be brought within one year of the violation.

Prosper was continuing to make public statements that they were not required to register, even after LC's return to business (i.e., within the last month or two).  Thus, I doubt they are going to be able to argue that lenders should have known more than a year ago that Prosper really was required to register, notwithstanding prosper's assurances to the contrary.

My non-lawyer interpretation is that Prosper's case falls under the definition of the later bolded sentence above, aka failure to file.  The first bolded sentence is referring to when a registration statement is filed that contains misleading or fraudulent information.  Perhaps I'm misinterpreting that.  I don't have the actual language in front of me.

From just the snippets you provided, it's hard to tell.  But in any event, Prosper would probably be estopped from raising the statute of limitations, due to its affirmative representations that registration was not required.  You don't get to trick people into not suing until the statute of limitations has run, and then say "gotcha."

[Cushie]

Do we believe board members are equally liable as executives?  For some reason I thought this was not true.   

Speaking of deep pockets, isn't there a big wig from eBay on the board?

Yes, I believe that.  And I personally know that board members for non-profits can be held liable for things they are not even aware of.  Moral of that story:  If you want to "help" your community, make really, really sure that you have really, really good D&O insurance.

D&O?  Maybe you mean E&O (errors and omissions)?

[Shenandoah]

Do we believe board members are equally liable as executives?  For some reason I thought this was not true.   

Speaking of deep pockets, isn't there a big wig from eBay on the board?

Yes, I believe that.  And I personally know that board members for non-profits can be held liable for things they are not even aware of.  Moral of that story:  If you want to "help" your community, make really, really sure that you have really, really good D&O insurance.

D&O?  Maybe you mean E&O (errors and omissions)?

D&O is Directors and Officers insurance.

[beerbud1]

Cushie Take a Look and see here:

http://www.insurepro.net/html/directors_and_officers_explained.asp

    What is Directors and Officers Insurance?
  Directors and Officers Liability Insurance provides financial protection for the directors and officers of your company in the event they are sued in conjunction with the performance of their duties as they relate to the company. Think of Directors and Officers Insurance as a management Errors and Omissions policy.

Directors & Officers Liability Insurance can usually include Employment Practices Liability and sometimes Fiduciary Liability. The former involves harassment and discrimination suits, and is where the majority of your exposure will be.

Directors and Officers Insurance is often confused with Errors & Omissions Liability. The two are not synonymous; Errors & Omissions is concerned with performance failures and negligence with respect to your products and services, not the performance and duties of management. Generally it is a good idea to carry both Directors and Officers Liability Insurance and Errors and Omissions Liability Insurance.
 
    
  
 
  When do I need Directors & Officers Insurance?
  You need Directors and Officers Liability insurance when you assemble a board of directors. They will frequently make the requirement.

Investors, especially Venture Capitalists, will also usually require that you show evidence of Directors & Officers Liability insurance as part of the conditions of funding your company.

Also having employees opens management up to employment practices lawsuits - which usually can be covered under D & O insurance.
 
    
  
 
  Why do I need Directors and Officers Liability Insurance?
  First, you need Directors & Officers Insurance because claims from stockholders, employees, and clients will be made against the company, AND against the directors of the company. Since a director can be held personally responsible for acts of the company, most directors and officers will demand to be protected rather than put their personal assets at stake.

Secondly, you need Directors and Officers Insurance because: Investors and members of your board of directors will not be willing to risk their personal assets to serve as a corporate director or officer, no matter how heartfelt their belief in your company.

Lastly, employment practices suits constitute the single largest area of claim activity under D&O policies. Over 50% of D&O claims are employment practices related.
 

Bolding is mine
 

[Cushie]

Do we believe board members are equally liable as executives?  For some reason I thought this was not true.   

Speaking of deep pockets, isn't there a big wig from eBay on the board?

Yes, I believe that.  And I personally know that board members for non-profits can be held liable for things they are not even aware of.  Moral of that story:  If you want to "help" your community, make really, really sure that you have really, really good D&O insurance.

D&O?  Maybe you mean E&O (errors and omissions)?

D&O is Directors and Officers insurance.

Oh yeah, duh.  I'm in E&O mode since hubs has to buy some and it's spendy.