March 23, 2016 11:30 AM

This morning Amaya Gaming is down 22% to $14.50 on news that’s its CEO is charged with insider trading in relation to the stock. I mentioned in my comment of February 1, 2016 that this was not a company or a CEO that I would be prepared to put a lot of trust in. When Amaya bought a much larger company I expressed skepticism about the deal back on June 15, 2014. Basically there were a lot of reasons to be skeptical about this company. Warren Buffett invests only where he respects, likes and trusts management. It’s very difficult for small investors to know if management should be trusted. But sometimes there are clear red flags.

Our investment reports always include a section on management quality. Often I don’t have much knowledge to indicate whether management can be trusted. But my standard template for company reports forces me to give at least give some thought to management quality. Some of the things that I have considered to be red flags regarding trust include excessive compensation, aggressive approach to adjusted earnings (Valeant, any Gold company I ever looked at), lack of transparency (Bombardier traditionally made almost no mention of government assistance), and use of offshore tax havens (Sino Forest and Valeant).