Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Oct 26, 2012

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The maker of Durex condoms, Reckitt Benckiser Group, announced that the UK-based company failed to disclose that current CEO Rakesh Kapoor had offered up $14 million in corporate shares to borrow a secured loan for himself, according to The Telegraph.

At the time of this scandal, Kapoor was an executive vice president of category development. He informed corporate leadership about his secured loan, which he borrowed over four transactions. Despite informing the company, it was the corporation’s responsibility to inform regulators of such a loan. The Group now claims that it has since tightened internal protocols.

The shares were used as collateral for a secured loan borrowed from Bank of America Merrill Lynch. Kapoor may have been in dire need of cash since the amount of shares he gave up was 85 percent of his total shareholding.

“It sounds more like an embarrassing oversight than a fundamental issue,” said Andrew Wood, an analyst at Sandford C. Bernstein, in an interview with Bloomberg.

In another incident, Freddy Caspers, an executive in charge of Reckitt’s Latin American and Australasian operations, was also found to have sold 200,000 shares in 2008 without informing the market. This was considered a “person discharging managerial responsibility (PDMR).”

While the company refused to explain how this sale of so many shares went unreported for four years, it said in a statement that “to ensure timely disclosure going forward for PDMRs the company has reviewed and updated its internal reporting process,” according to Telegraph.

Lately, the company has been under fire for gluttonous executive pay after it was revealed that former Chief Executive Bart Beckt made $148 million in one year, which prompted an outcry.

This isn’t the first time a UK company has been involved in a secured loan scandal. In 2008, entrepreneur David Ross resigned from the board of directors at National Express and Carphone Warehouse once it was revealed he failed to disclose that he used $23 million in company shares to obtain a $161 million secured loan. Adding to this scandalous affair was the fact that David Ross was a prominent Tory party donor.

The Financial Services Authority will be evaluating Kapoor and Casper’s secured loan actions, but may not take legal action.