Corporate Governance

United States v. Joseph Nacchio: Judge Krieger Accepts Nacchio?s Waiver of Appearance for June Hearings

Posted on May 06, 2010
In a hearing before Judge Krieger on May 4, 2010, which Mr. Nacchio personally attended, the court found Mr. Nacchio to be 'fully competent' to waive his right to appear at his resentencing hearings in June.  Judge Krieger required the May 4th hearing in response to Mr...

42nd Annual Rocky Mountain Securities Conference Tomorrow

Posted on May 06, 2010
This blog will cover tomorrow's Rocky Mountain Securities Conference in Denver, Colorado.  Among the other excellent presentations, the event showcases Commissioner Elisse Walter in the morning.  She will discuss the SEC's future and efforts to deal with further market regulation and investor protection...

Of Pilgrims and Puritans and the Role of Delaware Courts: In re Revlon (The Role of the Courts)

Posted on May 05, 2010
There can be little doubt that in the securities or derivative suit area counsel for shareholders/investors can have an incentive to settle early and pocket fees (we offer no view on whether that was something that occurred here).  But we would like to point out that this is a problem that has many accomplices, including Delaware...

Of Pilgrims and Puritans and the Role of Delaware Courts: In re Revlon (The Saga Continues)

Posted on May 05, 2010
Although having replaced counsel, VC Laster's ire has not been satiated.  He has instructed replacement counsel to conduct an investigation and given them a specific charge.  As the opinion instructs: At a minimum, New Counsel should explore the following issues using traditional written discovery methods and through depositions: The degree of factual and legal investigation conducted by Old Counsel prior to filing the litigation, commencing settlement discussions, agreeing to the MOU, and agreeing to the Amended MOU; The number of hours expended by Old Counsel during the various phases of the case; The course of the negotiations giving rise to the MOU and Amended MOU; The accuracy of the factual recitals and causal stipulations in the MOU and the Amended MOU; The identity and qualifications of Old Counsel's financial advisor, the terms of the business arrangement with the financial advisor, the amount and nature of the work performed by the financial advisor in this matter and the timing of compensation to the financial advisor, and the substance of the financial advisor's views, and The basis for Old Counsel's determination that the settlement was fair and adequate...

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Of Pilgrims and Puritans and the Role of Delaware Courts: In re Revlon (New York v. Delaware)

Posted on May 04, 2010
In the end, VC Laster opted to replace plaintiffs' counsel with firms that arrived to the case relatively late.  But even here, he did so in a questionable manner. Two firms, Harwood Feffer (New York) and Trinko LLP (New York) filed separate suits raising certain claims on behalf of shareholders who tendered in the exchange...

Of Pilgrims and Puritans and the Role of Delaware Courts: In re Revlon (The Courageous Board)

Posted on May 03, 2010
The criticism of plaintiffs' counsel can also be juxtaposed against VC Laster's treatment of management.  From all appearances, the tender offer submitted to shareholders was a bad deal.  As the opinion describes: This was a case in which the financial advisor to the Special Committee refused to render a fairness opinion on the same Series A Preferred that, with one change, would be offered in the Exchange Offer...

42nd Annual Rocky Mountain Securities Conference

Posted on May 03, 2010
This Friday, May 7, 2010, Denver will host the 42nd Annual Rocky Mountain Securities Conference.  The Race to the Bottom covered this conference in 2008 and 2009.  We will blog the event on May 7th and provide more detailed coverage in the following days...

Of Pilgrims and Puritans and the Role of Delaware Courts: In re Revlon (Frequent Filers)

Posted on April 30, 2010
One of the other unfortunate characterizations in the opinion is the reference to firms that represent shareholders as "repeat players" or "frequent filers."  As the opinion notes:  During the three weeks following the announcement of the Original Merger, four representative actions were filed by familiar repeat players who regularly bring? representative actions on behalf of stockholders with small ownership stakes...

Of Pilgrims and Puritans and the Role of Delaware Courts: In re Revlon (Unflattering Characterizations)

Posted on April 30, 2010
We are discussing In re Revlon. The decision chose to repeat an unflattering description of plaintiffs' counsel used by the defense bar,  As he writes:   "Firms who are early filers are frequently early settlers, leading some wags in the defense bar to label them 'Pilgrims...

Of Pilgrims and Puritans and the Role of Delaware Courts: In re Revlon

Posted on April 29, 2010
We've been busy with other matters but need to turn to a truly remarkable opinion, In re Revlon Shareholders Litigation, another bit of evidence that VC Laster does not intend to be a shrinking violet on the Delaware Chancery Court.  The catalyst for the sometimes sarcastic 44 page tome was a motion before VC Laster to revise the leadership structure for the firms representing plaintiffs...

Of Pilgrims and Puritans and the Role of Delaware Courts: In re Revlon (The Concerns)

Posted on April 29, 2010
VC Laster has a number of concerns with plaintiffs' counsel in this case.   There were two problems that ran through the opinion.  First, he viewed the case as not having been adequately prosecuted.  As he writes: I find that Old Counsel has not provided adequate representation in this case...

Financial Derivatives: The Basics

Posted on April 28, 2010
Recently, financial instruments known as derivatives have become ubiquitous.  As such, this post sets forth basic information necessary to understand these exotic financial instruments.  The term financial derivative refers to a (1) contractual arrangement between two or more parties (2) that specifies the terms of a future transaction, (3) which ultimately derives value from an underlying asset or metric ('underlying')...

Football and Financial Reform

Posted on April 28, 2010
Financial reform is still stalled in the Senate.  On Monday and Tuesday of this week, all of the Republican Senators and one Democrat voted to block any debate on financial reform legislation. Without 60 votes, the clock is stopped, we are stuck...

Financial Derivatives: Credit and Mortgage Products in SEC v. Goldman Sachs & Co.

Posted on April 28, 2010
A complex financial derivative structure exists at the center of the Securities Exchange Commission's ('SEC') complaint against Goldman Sachs & Co. and its vice president Fabrice Tourre (collectively, 'Goldman').  We previously discussed the SEC's allegations...

The Return of Glass Steagall (Part 1)

Posted on April 27, 2010
One of the mistakes made in the anti-regulation era was the decision to repeal Glass-Steagall.  Glass-Steagall separated commercial banking (deposit taking) from investment banking (underwriting).  It was a vestige of the Great Depression when commercial banks were punished for the country's economic collapse and were required to divest themselves of their investment banking functions...

United States v. Joseph Nacchio: Dates set for Phase I and II of Resentencing Hearing

Posted on April 27, 2010
In an order by Judge Krieger on April 22, 2010, the court re-set the two sentencing hearings as follows: Phase I – the evidentiary phase or hearing on "gain" will be held on June 22, 2010 beginning at 8:30am and will continue as necessary to the following day...

The Return of Glass Steagall (Part 2)

Posted on April 27, 2010
So how might this new form of Glass Steagall emerge?  Under the Dodd Bill in the Senate Banking Committee and under the derivatives bill adopted by the Senate Committee on Agriculture, commercial banks would have some serious limits on their securities activities...

Merck v. Reynolds and the Statute of Limitations Under Rule 10b-5

Posted on April 27, 2010
The Supreme Court today issued a unanimous opinion reversing a lower court opinion on the statute of limitations under Rule 10b-5.  The opinion is here.  The statute begins to run upon "discovery of the facts constituting the violation."  28 U...

The SEC and the Rogue Inspector General

Posted on April 26, 2010
We were dismayed at the leaks that revealed confidential discussions taking place at a closed Commission meeting about the Goldman case.  We are equally dismayed at the recent announcement by the SEC's Inspector General that he intends to look into allegations that the Goldman case was deliberately timed to coincide with financial reform efforts...

ABA Business Law Section Spring Meeting: Thank You from the Race to the Bottom

Posted on April 26, 2010
The Race to the Bottom wants to thank the American Bar Association Business Law Section for inviting us to attend its Spring Meeting in Denver, Colorado.  We also appreciate the opportunity to attend the Business Law Section's Lunch Meeting, which featured Harry C...

ABA Business Law Section Spring Meeting: Moving from the Year of Outrage to the Year of Reform in Executive Compensation

Posted on April 26, 2010
This blog's coverage of the ABA Business Law Spring Section Meeting continues with a program entitled 'Executive Compensation Update: What's New for Spring.'  This was a very impressive and timely panel, consisting of parters specializing in executive compensation from Milbank Twed Hadley & McCloy LLP and Alston & Bird LLP as well as a principal from the compensation consulting company, Compensia Inc...

Shareholder Proposals and Corporate Resistance: Apache v. Chevedden (The Courts not the Commission)

Posted on April 25, 2010
In early January of this year, Apache Corporation took an unusual approach towards a shareholder proposal under Rule 14a-8.  Rather than seek permission from the Securities and Exchange Commission to exclude the proposal, the usual approach, the company instead filed suit (Apache v...

Statutory Interpretation and Primary Liability: S.E.C. v. Tambone

Posted on April 24, 2010
In Securities and Exchange Comm'n v. Tambone, No. 07-1384, 2010 WL 796996 (1st Cir. Mar. 10, 2010), the First Circuit Court of Appeals in an en banc decision held the SEC failed to sufficiently allege that a registered broker-dealer's senior executives made false statements of material facts under Rule 10b-5 of the Securities Exchange Act of 1934 where they allegedly distributed but did not otherwise "make" the false statements...

ABA Business Law Section Spring Meeting: Shareholder Activism 2010 and Proxy Participation

Posted on April 24, 2010
This blog's coverage of the ABA Business Law Spring Section Meeting continues with a very interesting program entitled 'Proxy Solicitations and Shareholders' Meetings: Grit, Grids, and Other New Issues.'  This was a very interesting panel, featuring board of director advisor/defense counsel, proxy solicitation firms, third party director recommendation firms, and even the SEC Director of the Division of Corporate Finance...

AnchorBank, FSB v. Hofer: The Barriers of Loss Causation

Posted on April 24, 2010
In AnchorBank, FSB v. Hofer, No. 09-CV-610-SLC, 2010 WL 842172 (W.D. Wis. Mar. 5, 2010), the court granted defendant Hofer's motion to dismiss.  The court held plaintiffs failed to adequately plead loss causation and reliance under the Private Securities Litigation Reform Act's heightened pleading standards...

The BRIC Project -- China -- An Introduction to Corporate Governance in China

Posted on April 23, 2010
The People's Republic of China is a member of the 'BRIC' group (Brazil, Russia, India and China) of emerging markets.  While it is universally understood that China has grown since the 1970's by privatizing certain segments of its economy, its corporate governance (gongsi zhili) structures are still developing...

ABA Business Law Section Spring Meeting: Fraud Carve Outs in M&A Acquisition Agreements

Posted on April 23, 2010
At yesterday's ABA Business Law Spring Section Meeting in Denver, Colorado the program opened with several interesting sessions including 'Contractual Limitations on Seller Liability in M&A Transactions.'   The presenters on this panel were Byron Egan (Jackson Walker LLP), Patricia Vella (Morris, Nichols, Arsht & Tunnell), and Glenn West (Weil, Gotschal & Manges LLP)...

Corporate Governance in India: A Review of Regulatory Structures

Posted on April 23, 2010
This is the first of a series of posts examining India's corporate governance practices in contribution towards Race to the Bottom's BRIC Project.  This post presents the framework of corporate governance in India by examining the nation's regulatory structures...

ABA Business Law Section Spring Meeting: The Importance of Process

Posted on April 23, 2010
Attending yesterday's session at the ABA Spring Meeting on 'Identifying and Addressing Liability Concerns of Private Company Directors and Officers' was a thorough overview of director and officer duties under Delaware law, an area not unfamiliar to this blog...

The Goldman Poll:

Posted on April 23, 2010
Broc Romanek over at The Corporate Counsel Blog has the results of his poll on the outcome of SEC v. Goldman.  Here are the results: - It will drag on in courts for years - 20/7% - It will be settled within a few months - 28.9% - Some mid-level Goldman staffer thrown under bus - 29...

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