Printable PDFIn an important development for U.S.
Client Alert | October 27, 2010
New York partner Lawrence Zweifach and associate Sophia Khan are the authors of "Recent Developments in Ponzi Scheme Litigation" [PDF] that appeared in Auditor Liability in the Current Environment: How To Protect Yourself published by Practising Law Institute on October 22, 2010.
Client Alert | October 22, 2010
In Quan v. Computer Sciences Corp., __ F.3d __, 2010 U.S. App. Lexis 20199 (9th Cir. 2010), the Ninth Circuit held that the presumption of prudence first articulated by the Third Circuit in Moench v. Robertson, 62 F.3d 553 (3d Cir.
Client Alert | October 15, 2010
On October 8, 2010, the Court of Chancery of Delaware issued an important opinion, Airgas, Inc. v. Air Products & Chemicals, Inc. (Del. Ch. Oct. 8, 2010), with significant implications for public corporations with staggered boards.
Client Alert | October 12, 2010
Investment advisers have a duty to disclose material conflicts of interest to clients. The more difficult question is: "how much disclosure is enough?" In a recent settled enforcement action, the SEC suggests that disclosure of material facts alone may not be sufficient, and that more explicit disclosure is needed when investment advice may result in additional compensation to the adviser.
Client Alert | October 1, 2010
On August 11, 2010, the Delaware Court of Chancery issued an important opinion in the area of stockholder rights plans, or poison pills. Vice Chancellor Strine's opinion in Yucaipa American Alliance Fund II, L.P.
Client Alert | August 17, 2010
While Filings Are Down, Securities Litigation Remains Robust, As Major Cases Await Resolution, and Congress Creates New Litigation Risks for Public Companies and Their Directors and Officers
Client Alert | August 9, 2010
Consistent with the past several years, the first half of 2010 brought several Deferred Prosecution Agreements ("DPAs") and Non-Prosecution Agreements ("NPAs"). Although rarely used a decade ago, such agreements now are an important governmental tool in the fight against corporate crime. DPAs and NPAs are agreements between the government and a corporation whereby the government agrees to defer or forgo criminal charges against the corporation in exchange for adherence to the terms of the agreement. The purpose of DPAs and NPAs is to deter, punish, and reform corporate behavior without imposing collateral consequences on corporations and innocent parties such as employees, local community ties, and shareholders. Not surprisingly, the Departmen
Client Alert | August 5, 2010
In a move that will likely trigger an increase in whistleblower allegations and investigations, on July 23, 2010, the U.S. Securities and Exchange Commission ("Commission") announced that it had awarded a $1 million bounty to Karen Kaiser for providing information and documents leading to the collection of civil penalties in the Commission's insider trading actions in May of this year against Pequot Capital Management, Inc.
Client Alert | July 27, 2010
During the midst of the financial crisis, the continued existence, much less powers, of the Securities and Exchange Commission were in doubt. But in the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Commission emerged with expanded jurisdiction over hedge funds, credit ratings agencies, and governance of public companies, among other areas. To help implement this authority, the Dodd-Frank Act added several new weapons to the Commission's already substantial enforcement arsenal. Some of the provisions are clarifications (such as provisions assuring that certain anti-manipulation provisions extend to all non government securities) or simplify the enforcement process (such as providing for nationwide service of process in civil actions).Several of the p
Client Alert | July 21, 2010
On June 14, 2010, the United States Supreme Court granted a writ of certiorari to review the decision of the Ninth Circuit in Siracusano v. Matrixx Initiatives, Inc., 585 F.3d 1167 (9th Cir.
Client Alert | July 15, 2010
I. Overview of the First Half of 2010Nearly a year and a half ago, Mary Schapiro took over as Chairman of the SEC with a promise to reinvigorate the Enforcement Division. Shortly thereafter, Robert Khuzami, the Director of the Division of Enforcement, announced a series of initiatives with the goal of making the Enforcement Division more effective. The first six months of this year have seen those initiatives take shape with a reorganization of the Enforcement Division into specialized units and the formal announcement of a cooperation initiative for individuals. But of greater significance is the extent to which the Enforcement Division is filing cases against major financial institutions and senior executives -- and without negotiating settlements in advance of fi
Client Alert | July 12, 2010
Many consider the False Claims Act (the "FCA") to be the "fastest growing area of federal litigation." At the outset of the federal government's fiscal year 2010, Senator Charles Grassley (R-Iowa) reported that the government had more than 1,000 qui tam cases awaiting its decision on intervention.
Client Alert | July 9, 2010
On January 18, 2010, hundreds of law enforcement agents from the Federal Bureau of Investigation and City of London Police launched a coordinated, bi-continental strike, executing twenty-one search warrants and arresting twenty-two people in what Assistant Attorney General Lanny Breuer described as "the largest action ever undertaken by the Justice Department against individuals for FCPA violations." Thus began the year in Foreign Corrupt Practices Act enforcement, a juggernaut that each annum surpasses the record heights set the year before. This client update provides an overview of the Foreign Corrupt Practices Act ("FCPA") and a survey of FCPA enforcement activities during the first half of 2010. It also analyzes recent enforcement trends and offer
Client Alert | July 8, 2010
In a landmark decision on the extraterritorial application of the United States securities laws, the Supreme Court held today that plaintiffs who purchase securities on foreign exchanges cannot bring a federal securities fraud lawsuit under Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5, promulgated thereunder. See Morrison v. National Australia Bank, 561 U.S.
Client Alert | June 24, 2010
In a recent ruling with important implications for parties structuring minority freeze-out transactions, Vice Chancellor Travis Laster of the Delaware Court of Chancery embraced a unified standard for reviewing such transactions, regardless of whether they are effected by means of a negotiated merger or a unilateral tender offer. In In re CNX Gas Corp.
Client Alert | June 4, 2010
In Actions Under Section 10(b) of Securities Exchange Act of 1934, Statute of Limitations Does Not Begin to Run Until Plaintiffs Have Discovered or Reasonably Could Have Discovered Facts Constituting Securities Fraud, Including ScienterOn April 27, 2010, the United States Supreme Court held that the statute of limitations for private actions claiming securities fraud under Section 10(b) of the Securities Exchange Act of 1934 does not begin to run until plaintiffs have discovered or, with reasonable diligence, could have discovered the facts constituting the fraud, including scienter. The decision in Merck & Co.
Client Alert | April 29, 2010
The United States Sentencing Commission voted unanimously on April 7, 2010 to modify the Federal Sentencing Guidelines for organizations, including the provisions that set forth the attributes of an effective compliance and ethics program. After considering a number of proposed changes to these Guidelines, the Commission voted to:Enhance the report obligations from a compliance officer to the board of directors in order for the compliance program to be deemed effective in all circumstances;Clarify the steps a corporation must take to meet the Commission's requirement for proper remediation in the event criminal conduct occurs;Reject the proposed language that would have mentioned, for the first time, the appointment of monitors as a possible component of the remediation requirement o
Client Alert | April 13, 2010
On March 30, 2010, the Supreme Court issued its decision in Jones v. Harris Associates L.P., No. 08-586. The Court construed Section 36(b) of the Investment Company Act of 1940, which states that investment advisers to mutual funds are deemed to have a fiduciary duty with respect to the receipt of compensation for services and provides a private cause of action for breach of that duty.
Client Alert | March 30, 2010
The financial crisis has placed an ever-increasing number of companies in the position of being confronted with multiple shareholder class actions, SEC investigations, federal grand jury investigations, state attorney general investigations, arbitrations and "opt-out" litigation. In defending these private actions and governmental investigations, companies need to develop global defense strategies so that the defense of each proceeding is carefully coordinated with the defense of all other parallel proceedings.In their article, "Defending Parallel Proceedings: Basic Principles and Tactical Considerations," prepared for Securities Litigation Report (February 2010), Lawrence Zweifach and Eric Creizman discuss the myriad challenges inherent in defending multiple proc
Client Alert | March 23, 2010
Washington, D.C. partner Mark A. Perry is the author of "RICO's Lessons for Loss Causation" [PDF] published in the March 2010 issue of Wall Street Lawyer.
Client Alert | March 22, 2010
Washington, D.C. partner F. Joseph Warin and associates John Chesley and Patrick Speice are the authors of "Nine Lessons of 2009: The Year-in-Review of Foreign Corrupt Practices Act Enforcement" [PDF] published in the Spring 2010 issue of Securities Regulation Law Journal.Reprinted from Securities Regulation Law Journal, (Vol.
Client Alert | March 15, 2010
On February 26, 2010, the Court of Chancery of the State of Delaware issued an important opinion validating the use of a net operating loss (NOL) shareholder rights plan or poison pill. The case, Selectica, Inc.
Client Alert | March 3, 2010
During the last decade, activist shareholders and corporate governance groups have been fairly successful in pressuring companies to voluntarily surrender a number of anti-takeover defenses, most notably the use of staggered boards and shareholder rights plans (also referred to as "poison pills").
Client Alert | January 28, 2010
Electronic discovery is one of the most rapidly developing and increasingly important areas of interest for our clients. The past year featured the continued refinement of best practices in e-discovery law, as both courts and litigants continued their struggle to balance cost-effective approaches to discovery with the right to equitable access to discoverable information. The coming year is poised to be another one of significant developments. Our Electronic Discovery and Information Law Practice Group will be carefully watching and reporting these developments to you throughout the year.This 2009 year-end update provides an overview and analysis of the recent trends in e-discovery law, as well as a survey of case law developments. For more in-depth treatment of the
Client Alert | January 15, 2010
Plaintiffs Sanctioned for Failure to Implement Proper Litigation Hold and for Conducting Discovery in an "Ignorant and Indifferent Fashion"Although 2010 has just begun, there has already been a significant development in the area of electronic discovery. Judge Shira Scheindlin of the U.S.
Client Alert | January 14, 2010
The SEC yesterday formally released an anticipated new initiative designed to encourage individual and company cooperation with SEC investigations and enforcement actions. The initiative, laid out in a new section of the enforcement manual for the Division of Enforcement entitled "Fostering Cooperation," (the "Initiative") establishes incentives for early, substantial, robust cooperation with the stated goal of ensuring "that potential cooperation arrangements maximize the Commission's law enforcement interests." The Initiative provides guidance for evaluating an individual's cooperation and authorizes new cooperation tools, including cooperation agreements, deferred prosecution agreements and non-prosecution agreements.
Client Alert | January 14, 2010
In our "Mid-Year Review of SEC Enforcement," we reviewed the transformation that had begun at the SEC's Division of Enforcement under the agency's new Chairman, Mary Schapiro, and the Division's new Director, Robert Khuzami, as well as the measurable increase in enforcement activity that had resulted. Since then, Mr.
Client Alert | January 12, 2010
In 2009, the United States government invested trillions of dollars into the economy. Coupled with this unprecedented spending came increased demands for transparency and accountability.
Client Alert | January 8, 2010
Although Deferred Prosecution Agreements ("DPAs") and Non-Prosecution Agreements ("NPAs") were rarely used and hardly discussed a decade ago, in the last several years they have become a hot topic and common aspect of corporate prosecutions: Congress, legal academics, and practitioners—from prosecutors to defense counsel—have weighed in on the Department of Justice's ("DOJ's") use of the agreements. DPAs and NPAs are types of pre-trial agreements whereby the government agrees not to pursue charges against a corporation so long as the corporation abides by the terms of the agreement. Although often similar in content, the emerging difference between a DPA and an NPA is whether a criminal information is filed in a federal court. With
Client Alert | January 7, 2010
New York partner Mark K. Schonfeld is the author of "Courting Cooperators: The SEC's Effort to Motivate Individual Cooperation" [PDF] published in the December 9, 2009 issue of BNA's Corporate Counsel Weekly.Reproduced with permission from Corporate Counsel Weekly Newsletter, 24 CCW 376(Dec.
Client Alert | December 9, 2009
Los Angeles partner Gareth Evans and associate Alexander Mircheff are the authors of "Pleading Scienter in the Ninth Circuit: Did Tellabs Really Change Much?" [PDF] published in the August 17, 2009 issue of Bloomberg Law Reports - Securities Law.
Client Alert | August 17, 2009
New York partner Mark K. Schonfeld and Washington, D.C. associate Matthew R. Estabrook are the authors of "Using SOX 'Clawback' Against Uncharged Execs?" [PDF] published online by Law360 on August 13, 2009 at law360.com.
Article | August 13, 2009
In his first speech as Director of the SEC's Division of Enforcement, on August 5, 2009, Robert Khuzami announced changes underway in the Division's procedures and organization that are intended to strengthen the agency's enforcement program. Mr.
Client Alert | August 6, 2009
In a settled enforcement action instituted July 21, 2009, the SEC provided significant guidance on the filing obligations of institutional investors under Section 13(d) of the Securities Exchange Act of 1934. Specifically, the guidance addresses the meaning of the "ordinary course of business" prong of Rule 13d-1(b)(1)(i) and reflects an expansive interpretation of Section 13(d). The SEC's administrative order found that the respondent, a registered hedge fund adviser, Perry Corp., should have filed a Schedule 13D within 10 days of acquiring beneficial ownership of more than five percent of the shares of Mylan Inc.
Client Alert | July 27, 2009
In a case that raises important questions about the nature and scope of the remedy provided in Section 304 of Sarbanes-Oxley Act of 2002, the SEC on July 22, 2009, filed a civil suit seeking to "claw back" compensation from a former chief executive officer who has not been accused of any securities law violation. The case is SEC v. Jenkins, Case 2:09-cv-01510-JWS (D.
Client Alert | July 27, 2009
Washington, D.C. partner F. Joseph Warin, associates Michael Diamant and Matthew P. Hampton are the authors of 'Use of “Conscious Avoidance” Doctrine in Frederic Bourke Conviction Expands Corporate Executives’ FCPA Exposure' published in the July 22, 2009 issue of Securities Docket.
Client Alert | July 22, 2009
Los Angeles partner Gareth Evans is the author of "The Recorder: Access Granted" [PDF] published in the July 15, 2009 issue of The Recorder. Reprinted with permissions from the July 15, 2009 edition of The Recorder.
Client Alert | July 15, 2009
The frenetic pace of False Claims Act ("FCA") activity in 2008 has continued into the first half of 2009. In addition to record-breaking FCA settlements in several industries, we have witnessed substantial amendments to the federal statute itself.
Client Alert | July 13, 2009
Without question, the first six months of 2009 have been a period of sharply increased enforcement activity at the Securities and Exchange Commission. The financial crisis, the new administration, new SEC leadership, increased funding and the focus of Congress and the media have all combined to encourage heightened government scrutiny. And even though it has only been a few months since a new Chairman took office, already there are tangible signs that the SEC has taken a more aggressive enforcement posture. In this alert, we review the changes the new SEC leadership has instituted and is considering, the observable impact of the new administration on enforcement activity and significant cases in key areas that reflect the agency's evolving enforcement program.I.
Client Alert | July 9, 2009
DPAs and NPAs, Too Much of A Good Thing?Although virtually unheard of a decade ago, Deferred Prosecution Agreements ("DPAs") and Non-Prosecution Agreements ("NPAs") are a growing phenomenon in corporate prosecutions. Essentially, DPAs and NPAs are agreements whereby the government agrees not to prosecute a corporation so long as the corporation abides by the terms of the agreement. The key distinction between a DPA and an NPA is whether or not charges are filed against the corporation: with a DPA the government files criminal charges with the court, while with an NPA nothing is filed with the court so long as the corporation completes the terms of the agreement--the agreement is strictly between the government and the corporation.Following the collapse
Client Alert | July 8, 2009
As the inauguration of Barack Obama in January 2009 ushered in a new U.S.
Client Alert | July 7, 2009
Alert: Potential Trap for the Unwary re Inaccessible InformationGovernor Schwarzenegger yesterday signed into law Assembly Bill 5, the "Electronic Discovery Act," enacting significant electronic discovery amendments to the California Code of Civil Procedure. Because the legislature deemed it "urgency" legislation, it is effective immediately. Although the legislation largely follows the 2006 electronic discovery amendments to the Federal Rules of Civil Procedure, it differs in its treatment of inaccessible information (such as backup tapes) and in its safe harbor for lost information. Of particular note, the Bill requires parties in their written responses to document requests to object to the production of inaccessible information to preserve th
Client Alert | June 30, 2009
In three opinions issued between May 18 and 29, 2009, the Delaware Chancery Court has provided guidance on several key electronic discovery issues--triggering of the duty to preserve electronically stored information (“ESI”) and the scope of that duty; spoliation of evidence and the factors used to determine sanctions; and cost-shifting in relation to inaccessible data.
Client Alert | June 19, 2009
Current market conditions have produced an uptick in unsolicited merger and acquisition activity, as well as shareholder activist campaigns. However, many unsolicited bidders and activists have been forced to rethink their strategies by the presence of change-in-control put provisions in the documents governing their targets’ publicly traded debt. These provisions--commonly referred to as "poison puts"--are not an uncommon feature of publicly traded debt and other finance instruments and give bondholders and other creditors the right to call the issuer’s debt upon the occurrence of certain fundamental change-in-control events. Such events often include a forced change in the composition of a majority of the issuer’s board (a so-called "continuing dire
Client Alert | June 8, 2009
For the past several months, we have advised you of various plans announced by the Securities and Exchange Commission ("SEC") to revitalize its enforcement activities (see Gibson Dunn's May 11, 2009 Update on newly appointed Direct of Enforcement Robert Khuzami's plans). Demonstrating the adage that actions speak louder than words, the SEC on June 1, 2009 obtained a jury verdict against the former CEO of Kmart Corp for misleading investors about inventory levels and liquidity levels as the company was approaching a January 2002 bankruptcy filing. The SEC proceeded with the trial even though it dealt with conduct that took place over seven years ago, an arbitration panel had absolved the CEO of similar charges in 2005, and after the CFO had consented to
Client Alert | June 4, 2009
This week Pequot Capital Management announced that it will wind down in the wake of public disclosures that the government has reopened a previously closed investigation of potential insider trading. The announcement is a stark reminder of the high costs that can be imposed by a pending government investigation irrespective of the outcome and reinforces the need to (1) prevent investigations, and, if they cannot be avoided, (2) conclude them successfully and rapidly.
Client Alert | May 28, 2009
On May 26, 2009, the United States Supreme Court granted certiorari in Merck & Co. v. Reynolds, No.
Client Alert | May 27, 2009
On May 20, 2009, President Obama signed into law significant changes to the False Claims Act, 31 U.S.C. § 3729 et seq. ("FCA"). The amendments will increase the liability exposure of every company that does business with the federal government and of every company that supplies goods or services that are reimbursed by federal government dollars. This update provides an overview of the changes brought about by the new law, which (among other things), legislatively overturns the Supreme Court's 9-0 ruling last term in Allison Engine Co., Inc.
Client Alert | May 26, 2009
The Securities and Exchange Commission's newly-appointed Director of the Division of Enforcement, Robert Khuzami, outlined a plan of aggressive enforcement of securities laws during his testimony to the U.S.
Client Alert | May 11, 2009