Stock analyst guilty in Hardee's extortion

ST. LOUIS -- A Wyoming stock analyst admitted in federal court Thursday that he threatened to damage the reputation and stock of the parent company of the Hardee's fast-food chain if they didn't hire him as a consultant for $300,000.

C. Clive Munro, 54, pleaded guilty to a felony count of committing interstate threats. As part of a plea deal, prosecutors agreed to drop felony charges of extortion, wire fraud and securities fraud.

Munro pressed CKE Restaurants Inc. to hire him as a consultant for $25,000 per month for a year, then when rebuffed issued a negative report that caused a substantial drop in the company's stock price, wiping out $160 million in market value. The stock since has recovered.

Munro, arrested in October at his home in Cheyenne, Wyo., faces up to two years in prison and $250,000 in fines when sentenced May 12.

As part of the plea deal, the U.S. government agreed not to pursue any additional charges in Missouri or Wyoming.

"A corrupt financial analyst can affect millions of dollars worth of investments and individuals' life savings and retirement plans," federal prosecutor James Martin said. "As a result of his greed and stupidity, the defendant now faces the likely prospect of significant time behind bars."

After his guilty plea, Munro deferred a reporter's questions to his attorney Richard Sindel, who attributed his client's in-court admission to "quite difficult soul-searching."

Munro could have faced up to 49 years in prison and a $1 million fine.

CKE Restaurants, based in Carpinteria, Calif., runs the Carl's Jr. and La Salsa restaurant chains along with St. Louis-based Hardee's Food Systems.

"What we really wanted was for our stockholders to have accurate and unprejudiced information," Andrew F. Puzder, CKE's president and chief executive, said in a statement Thursday evening. "We're glad this was resolved without the need to go to trial."

Munro is an independent stock analyst who produces research reports about restaurant companies. Federal prosecutors offered this account of his misconduct:

In an e-mail to Puzder and CKE chief financial officer Ted Abajian on April 3, 2003, Munro allegedly offered to provide consulting services to CKE. The CKE officials did not respond.

When Munro again contacted Puzder in January 2004, Puzder said it would be inappropriate to hire Munro since Munro wrote analysis reports about the company.

In August, Munro published a report critical of CKE, suggesting that the company's "slowing growth" could lower the stock price and that investors should sell their shares.

Over the ensuing several business days, the company's stock price dropped $2 per share -- $160 million in market capitalization. Prosecutors have said previous Munro reports about CKE generally had been favorable.

On Sept. 15, Munro allegedly sent an e-mail to at least one client with another negative analysis of Hardee's and CKE, then followed that up with an e-mail to Puzder.

"Hi Andy," prosecutors say it read, "If you were smart, you would hire me at $25K per month for 12 months (for half my time) and take me out of the game. Plus, you would have vastly improved your relations with investors, and you might have avoided some of the current problems with Hardee's. So far this year, this would have saved you $160 million in lost market value. That certainly beats shutting me out of asking questions on conference calls. You are getting some bad advice. Clive."

CKE officials alerted authorities, and the FBI taped telephone and in-person conversations in which Munro again said he would stop writing negative reports in exchange for money.