Securities Law

Mark Cuban Wants to Pay Government Attorneys to Get Off Their Butts

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I’d love for Mark Cuban to own my basketball team. He’s a self-made billionaire who focuses on the fans and (for all the bluster) leaves the basketball decisions to basketball people. Compare that to current Knicks Owner James Dolan — a man living off of his daddy’s success, who thinks he’s smarter than he really is, who has run the once-proud Knicks franchise into the ground, and who may be in romantic love with Isiah Thomas. You’d take Cuban any day of the week over little Jimmy.

You’d probably take Cuban as a client as well. Stephen Best, the Dewey & LeBoeuf attorney currently representing Cuban in his SEC insider trading case, seems to be happy with his client. And we haven’t even seen his legal fees.

But if you are one of Cuban’s adversaries, it must be brutal. To paraphrase Rory Breaker, if the milk’s sour, Mark Cuban ain’t the kind of pussy to drink it. NBA referees know that. And SEC attorneys are about to learn the same lesson…

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Racial Quotas? So Ordered! (Or, Judge of the Day: Harold Baer)

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We’ve come a long way from the days when federal courts issued orders banning racial discrimination. Now federal judges hand down orders mandating, or at least encouraging, race-based discrimination.

As reported in the American Lawyer, earlier this week Judge Harold Baer (S.D.N.Y.) issued an unusual order. On Monday, Judge Baer directed two firms serving as lead counsel in a securities class action to “make every effort” to staff the case with at least one minority and one woman:

ORDERED that Co-Lead Counsel, Robbins Geller Rudman & Dowd LLP and Labaton Sucharow LLP, shall make every effort to assign to this matter at least one minority lawyer and one woman lawyer with requisite experience….

If federal judges can run school districts and prison systems, law firms should be a piece of cake, right?

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Who’s Afraid of the Big Bad Rakoff?

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Judge Jed Rakoff: A bank's nightmare?

Since Judge Denny Chin is moving on up to the Second Circuit, the S.D.N.Y. cases pending before him have to be redistributed. Lawyers for Bank of America, which has 15 civil shareholder lawsuits on Chin’s docket, sent the chief judge a letter requesting that the cases be reassigned using a lottery system. As we mentioned in Morning Docket, Cleary Gottlieb, Davis Polk, and Wachtell Lipton all signed the letter.

Why did they need to send this special letter? Because they were scared of B of A landing again in the lap of Judge Jed Rakoff, says the Wall Street Journal:

Judge Rakoff disappointed bank executives last year when he rejected a $30 million settlement with the Securities and Exchange Commission, which had charged the bank with misleading shareholders about bonuses paid prior to the Merrill merger. The New York judge reluctantly approved a new $150 million agreement in February but called it “half-baked justice at best.”

One of the pending shareholder cases accuses the bank of failing to “disclose billions in Merrill losses before shareholders approved the deal in December 2008.”

Apparently, the lawyers debated whether or not to name Judge Rakoff in their letter, thus making it clear that he was the particular judge they hoped to avoid. They ultimately decided to name names.

They were successful in steering their cases clear of Rakoff, though the chief judge claims the letter wasn’t a factor in her decision to assign the cases to Judge Kevin Castel (aka the John Gotti judge). How did she decide?

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SEC Accuses Goldman Sachs of Hypocrisy in Civil Suit

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The Securities and Exchange Commission filed a civil suit against Goldman Sachs this morning. According to the SEC, Goldman is guilty of taking a “do what I say, not what I do” approach to mortgaged-backed securities.

Well, d’uh. That’s why Goldman isn’t suckling on the federal teat right now.

The SEC claims Goldman sold a financial instrument that they knew was going to fail, while at the same time taking short positions against that instrument.

Goldman denies the charges:

The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation.

Am Law Daily reports that Sullivan & Cromwell partner Richard Klapper will be representing Goldman in this matter.

Let’s unpack the SEC’s complaint (pdf). Whether or not the SEC prevails in this civil litigation, their complaint certainly succeeds in making Goldman look very shady — the company’s stock tanked this morning.

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Quote of the Weekend: Bad Math

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They’re overlawyered. They’re poisoned by lawyers.


– Harry Markopolos, on what’s wrong with the SEC.

Job of the Week: A Very Unusual Opportunity

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Thumbnail image for Job of the Week Lateral Link ATL logo.gifPosition: Corporate and securities attorney
Location: Los Angeles, CA
Description: Unique opportunity at a West Los Angeles firm that functions as the principal in-house counsel for an incredibly sophisticated family office. This position is for an experienced corporate and securities attorney who possesses extensive experience in the regulatory, compliance, and enforcement issues confronted by participants in the securities markets. Candidates must have sound business ethics and substantial experience in representing brokerage firms, investment advisors and/or hedge funds. The firm currently has four attorneys, all with significant experience working on investment partnerships, commercial and industrial real estate projects, and other business transactions.
The candidate should have 10+ years of quality legal experience, preferably at an Am Law 100 law firm, exhibiting a progression of responsibility and leadership and/or in an in-house position at a firm that participates in the securities markets. Candidate must show initiative in pursuing appropriate timely and effective solutions to complex issues and business strategies. No book of business is necessary.
For more information about this position, please contact Betsy Sandler at bsandler@laterallink.com. If you are a Lateral Link member, please see Position #5812 on the Lateral Link site. If you are not a Lateral Link member, you can sign up for free at www.laterallink.com.
Earlier: Prior Job of the Week listings

Elena Kagan: Solicitous of Shareholders

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Elena Kagan 3 Harvard Law School Above the Law Elana Kagan Elena Kagen.jpgYou can’t go two clicks on the internet today without hearing something about the new term of the Supreme Court (or the NFL playoffs, or porn). I’ve got to agree with the WSJ Law Blog’s Ashby Jones that the most interesting SCOTUS related piece comes via Bloomberg and talks about Solicitor General Elena Kagan’s willingness to defend shareholder rights. The Law Blog summarizes Kagan’s pro-shareholder stances:

Exhibit A: In a case against Merck, Kagan’s office is asking the court to let shareholders wait longer to sue companies for securities fraud. The justices are considering whether to allow a lawsuit by investors who say the drugmaker deceived them about the risks posed by its Vioxx painkiller.
But Exhibit B is the case folks are buzzing about: Kagan and SEC lawyers are urging the court to ease the way for investors to sue mutual fund managers over their fees. The fund industry aims to avert more lawsuits by the 90 million investors who together hold $11 trillion in U.S. mutual funds.

Why worry about potentially messy government regulation of business when you can just sue the bastards?
More details from the Bloomberg article after the jump.

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‘Run, Forrest, Run!’ (And then go get a J.D.)

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scott black child marathon runner.jpgThe New York City marathon happens this Sunday. We know many lawyers who will be running it, and we wish them luck.

The marathon did not impose a minimum age until 1981 (16, raised to 18 in 1988). Pegged to the upcoming marathon, the New York Times had a fascinating article earlier this week about child marathoners, focusing on Wesley Paul, Scott Black (pictured), and Howie Breinan:

The adventures of Paul, Black and Breinan offer a glimpse into a forgotten aspect of the running boom of the late 1970s. Preternaturally self-disciplined, they were among about 75 children (ages 8 to 13) who tackled the early years of the New York City Marathon in a time of novelty and naïveté….

With no conclusive study, physicians still debate risks to children who compete in marathons, like muscular-skeletal injuries, stunted growth, burnout, parental pressures and the ability to handle heat stress.

Another risk: going on to become a securities lawyer. Two out of the three child marathoners profiled by the Times now practice in that field.

Scott Black is a senior trial lawyer at the Securities and Exchange Commission in New York (after several years at Wachtell Lipton, where he worked with Lat on a number of cases). Wesley Paul is a partner at Michelman & Robinson, where he practices corporate and securities law.

We touched base with Black and Paul to ask about possible connections between their running and legal careers. Read more, after the jump.

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Morning Docket 02.24.09

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cross.jpg

* SCOTUS will look at the separation of church and state when they decide whether “a cross to honor fallen soldiers can stand in a national preserve in California.” [The Los Angeles Times]

* Lawyers say Madoff must have had help with his Ponzi scheme. [Bloomberg]

* Attorney General Eric Holder visited Guantanamo yesterday to see what is needed to close the prison. [The Associated Press]

* Meanwhile, a Pentagon official who inspected Guantanamo at Obama’s request is under fire from human rights activists for filing a report (which declares Gitmo humane) that is little more than good public relations for the administration. [The New York Times]

* What do you do when your boss gets indicted for securities fraud? You get another job. A team of seven bankruptcy lawyers left Dreier LLP for Epstein Becker Green. [EBG]

* A federal judge encouraged the Obama administration to decide whether to keep pursuing a case against 11 Vietnam War Veterans accused of trying to overthrow Laos’s communist government. [The Associated Press]

* Judge says: UBS must respond to the U.S. lawsuit seeking disclosure of 52,000 names of people who allegedly used Swiss accounts for tax evasion. [Bloomberg]

Is Wachtell Now A Branch Of Government?
Should They Be?

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wachtell logo.jpgNot that anybody asked them, but Wachtell has decided to weigh in on the financial crisis. According to Am Law Daily, Wachtell wants short-selling to stop:

So say several memorandums penned during the past week by executive committee cochair and banking transactions rainmaker Edward Herlihy, 14-year SEC veteran and firm of counsel Theodore Levine, and associate Carmen Woo.

“In today’s markets, short sales continue to be at record levels, there are false rumors in the marketplace about the demise of financial firms, bear raids and abusive short selling are taking place, and there is significant disruption in the fair and orderly functioning of the securities markets,” said Herlihy and Levine in their first memo on September 16. “The markets are in crisis.”

Generally, we like our political power brokers to be elected or at least appointed by somebody who was elected. However, with everybody else in government waiting for Mr. Paulson to come and save America, maybe it is not a bad thing to have professional lawyers suggesting a strong course of action.

We don’t know if the SEC was listening. But we do know that Wachtell told them to ban short-selling on September 16th, and the SEC banned short-selling on September 19th. Post hoc ergo propter hoc …

Wachtell’s next gambit after the jump.

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Should They Be? “

Nationwide Layoff Watch: McKee Nelson Says Further Cuts Are ‘Unlikely’

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McKee Nelson LLP AboveTheLaw Above the Law blog.jpgAn interesting article in today’s New York Times — by Lynnley Browning, author of the earlier Biglaw perks piece — focuses on the subprime mortgage mess and current investigations into the adequacy of disclosures to investors.
Investigators are focused on Wall Street, but lawyers involved in the securitization process may also face scrutiny. Government investigation is the last thing these struggling law firms need, as they try to retool in the face of a grim outlook for structured finance and real estate work.
The article focuses on McKee Nelson:

McKee Nelson burst onto the scene in 1999 and quickly grabbed lucrative Wall Street work from long-established rivals. William F. Nelson, one of its co-founders, said the firm, which is known for its sophisticated tax work, did not employ any special legal maneuvers to outflank its competitors. “There’s no secret, magic elixir that we sprinkled,” Mr. Nelson said.

In any case, the mortgage turmoil is now hitting the highly regarded McKee Nelson hard. The firm recently pared its structured finance department to 80 lawyers from about 115 through buyouts, sabbaticals and transfers to other departments. More cuts are unlikely, a spokeswoman said.

So that’s good news. And the firm is trying to take lemons and make the proverbial lemonade:

[A]fter profiting from the mortgage boom, McKee Nelson is now positioning itself to profit from the bust by riding the coming wave of lawsuits. In January, the firm flew its partners and their spouses to Charleston, S.C., aboard four Delta commuter jets, to map out its strategy.

“We’re heavily committed to doing more litigation,” Mr. Nelson said. The firm hopes to represent investment banks, hedge funds and other financial companies, as well as their executives, in a variety of litigation, he said.

And maybe law firms, too, as lawsuits and investigations proliferate? See, e.g., Cadwalader, facing a $70 million lawsuit arising out of a securitization deal gone bad.
Small Law Firm’s Big Role in Bundling Mortgages [New York Times]

Non-Sequiturs: 01.17.08

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Green Bay Packers football Above the Law blog.jpg* Does the Supreme Court’s Stoneridge decision give the “getaway drivers” of securities fraud a free pass? [OverHedged]
* Apparently Green Bay fans really like the Packers. [SI.com]
* Miss Loyola 2L? Meet Kirsten Wolf. [WSJ Law Blog]
* Did Barack Obama receive an illegal endorsement? [TaxProf Blog]
* Speaking of Obama, his minister had this to say about Bill Clinton: “He did the same thing to us that he did to Monica Lewinsky.” Can someone please remove the cigar from the national vajayjay? [Baltimore Sun]