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Download NowWhat happened. Serge Trigano headed the company, Club Med, that his
father had helped to found. Father and son were both on the board of the company,
which is based in France, and the 10 other directors represented eight of Club
Med's biggest shareholders. In autumn 1996, the younger Trigano surprised
stock analysts by predicting only a tiny profit for the year. He told the board,
and one of its most powerful members asked him to hire a consultant to perform
a "strategic audit" of Club Med. At that member's urging, he
chose Bain & Co., which is headquartered in Boston. A Bain partner in France
spent about 3 months on the audit. Club Med did not issue its financial results
for the year ending October 31, 1996, until February 1997, and they shocked
many.
The company lost 740 million francs, or $100 million. As the losses were announced,
Bain issued the first draft of its report, which was highly critical of Club
Med's structure and management. Trigano learned only later that the draft
was widely circulated to board members. Trigano also learned there had been
dozens of other communications among the consultant and board members that he
was never told about.
Knowing that four members already wanted him out, he lobbied the rest, some
of whom promised their support. But the member he had most counted on changed
his mind, and Trigano was forced to resign. He believed that the draft of Bain's
report had led his supporter to renege, so he sued for fraud and conspiracy.
A federal district court sided with Bain, and Trigano appealed to the 1st Circuit,
which covers Maine, Massachusetts, New Hampshire, and Vermont.
What the court said. Appellate judges agreed with the lower court that
Trigano lacked enough evidence to prove his claim. A big factor was that his
board ally was a Japanese CEO, and the allegedly damaging report was written
in French, then translated into English, and from there to Japanese. Who knew
what it said after being translated twice? Or exactly why the ally changed his
mind? The court determined it couldn't provide a conclusive answer to these
questions. Trigano v. Bain & Co., U.S. Court of Appeals for the 1st
Circuit, No. 03-1319 (8/17/04).
Point to remember: Such poor communication certainly looked like
deceit. And some corporate governance experts would suggest that major shareholders
have a conflict of interest as company directors.