Doesn't "Full Disclosure" Mean, Well, FULL Disclosure?

Apparently not.

At least not according to Fidelity National Financial, the title insurance company.

Yesterday's New York Times carried an article by Diana Henriques, outlining a series of lawsuits stemming from a mortgage fraud scheme -- litigation which was not disclosed to shareholders until October 2009, three years after the first suits were filed, and two years after the primary wrongdoer had pleaded guilty.

Let's think about this for just a moment. If you were contemplating an investment in Fidelity National (the company is publicly traded), wouldn't you think outstanding suits against the company might be a fact that you would want to calculate into your investment decision? Yeah, me too. Especially as Fidelity's "chairman has said the settled claims [the last round of claims are going to trial shortly] exceed $83 million, before insurance -- a bit more than its latest quarter's profits -- and some of its insurers are balking at the legal bills and losses."

According to regulatory guidelines, companies must disclose "any material pending legal proceedings, other than ordinary routine litigation incidental to the business."

What's your definition of "ordinary routine litigation incidental to the business"?

Henriques quotes Mark Schiffman, Fidelity's senior vp and chief litigation counsel, as saying that the case "presented little risk of damages" and so did not warrant disclosure ... at least until the damages turned out to be pretty substantial.

I vote, instead, with Harvey Pitt, former SEC chairman, who said, "The first thing any corporate director should ask when someone raises credible allegations of wrongdoing against any company is not whether you can win a case, but what if it's true."

Fidelity dismissed the guilty employees more than a year ago, because of poor performance not because of "dishonest or fraudulent conduct," Schiffman said. The plaintiffs' lawyer in the upcoming suit argues that point, "noting that the company is trying to collect under insurance policies meant specifically to protect it from harm by dishonest employees."

Full disclosure -- that is to say really full disclosure -- when the fraud was first uncovered and the guilty party admitted guilt might have saved the company both some dollars and a lot of ugly publicity....