On Wednesday night, Grais & Ellsworth filed a 29-page brief laying out its arguments for why Bank of America’s proposed $8.5 billion settlement with Countrywide mortgage-backed securities investors belongs in federal court, not in New York state court, where Bank of New York Mellon, as Countrywide MBS trustee, filed it. I’ll talk about Grais’s assertions in a moment, but first I want to explain why the jurisdictional question is so crucial to the ultimate fate of BofA’s proposed deal. Two transcripts tell that tale.
The shadowy market of distressed debt investing — trading in the bonds of troubled companies as they enter and exit Chapter 11 — has rarely, if ever, received the kind of public scrutiny it has been subjected to in the bankruptcy of Washington Mutual Inc., the parent of WaMu Bank.
The Justice Department’s announcement Monday of a $63.7 million settlement with Accenture for allegedly taking kickbacks in connection with U.S. government IT contracts is the latest triumph for Norman Rille and Neal Roberts, a pair of former accounting executives whose False Claims Act cases against information technology contractors have so far netted the United States more than $250 million. Rille and Roberts (who is also a lawyer) have, in turn, been handsomely rewarded for blowing the whistle. Despite a fight with the feds over their bounty in Hewlett-Packard’s $55 million FCA settlement, the whistleblowers have reaped more than $10 million in fee awards through the government’s settlements with Cisco, EMC, and other contractors. The Accenture settlement should add several million to their pot; whistleblowers typically collect between 15 and 25 percent of the government’s take.
Note to disgruntled employees: you can’t be fired for complaining about your job on Facebook. That’s the upshot of the first ruling to address employees’ use of social media by a National Labor Relations Board judge. Last week, in a case called Hispanics United of Buffalo, administrative law judge Arthur Amchan said HUB violated the National Labor Relations Act when it fired five employees who commiserated about their jobs on Facebook. Judge Amchan’s ruling endorsed the NLRB’s stance that employees are protected from retribution for job-related postings. “Discussions about the workplace are protected whether they occur at the watercooler or the virtual watercooler,” said Laura Lawless Robertson of Greenberg Traurig, who sent out an alert about the NLRB administrative law judge’s ruling Friday.
Imagine, for a moment, that some errant instinct prompted you to want to watch an independent film called Danielle Staub Raw, which features the erstwhile Real Housewife of New Jersey engaged in certain X-rated acts. You probably wouldn’t want anyone to know that you were spending your free time watching Danielle Staub Raw. And you might prefer not paying for the movie. So it’s not too tough to discern the motivations of the more than 5,000 people who illegally downloaded the film anonymously through file-sharing services like BitTorrent.
It’s been decades since Baron Mor Lipot Herzog’s children hid his renowned art collection in the basement of one of the family’s factories in the Hungarian countryside, hoping to protect their dead father’s beloved paintings and sculptures from the Nazi regime. No such luck. The cache was discovered and appropriated, with choice pieces from the Herzog Collection going to Adolph Eichmann himself. Eichmann’s leavings, according to a ruling last week by Washington, D.C., federal judge Ellen Huvelle, ended up in, among other places, the Budapest Museum of Fine Arts, the Hungarian National Gallery, and the Budapest University of Technology and Economics.
Last Friday evening, after the Federal Housing Finance Agency filed 17 blockbuster suits against just about every major issuer of mortgage-backed securities, the buzz was about the staggering size of Fannie Mae and Freddie Mac’s investments in mortgage-backed notes and certificates. The suits, 13 filed by Quinn Emanuel Urquhart & Sullivan and four by Kasowitz Benson Torres & Friedman, cite about $196 billion in MBS holdings by Fannie and Freddie. Under both state and federal damages theories, the suits demand rescission, or a buyback of the notes by their issuers. Does that mean we should we assume that FHFA has $196 billion in claims?
The Federal Housing Finance Agency’s reported mortgage-backed securities suits against a slew of major banks haven’t yet been filed. But if you want to know what they’re likely to look like, check out Mass Mutual’s 168-page MBS complaint against Bank of America, Merrill Lynch, Bear Stearns, and J.P. Morgan, filed Thursday. (It’s so big the Massachusetts federal court docket split it into four parts: here, here, here and here.) Or you could look at AIG’s $10 billion megasuit against BofA, Countrywide, and Merrill, filed on Aug. 8, or Allstate’s 114-page complaint against Goldman Sachs on Aug. 15, or U.S. Bank’s MBS breach of contract suit against BofA, which came at the beginning of this week.
When the Justice Department stomps in to block a $39 billion deal that would have brought 5,000 jobs to the U.S., you have to believe that regulators are serious about wielding their antitrust enforcement power. DOJ’s 25-page complaint seeking to bar AT&T’s acquisition of T-Mobile is an emphatic document that asserts competition in the wireless industry is “essential to ensuring continued innovation and maintaining low prices.” So if that’s the case, what about the other enormous wireless deal under Justice Department antitrust scrutiny, Google’s proposed $12.5 billion merger with Motorola Mobility?
Monitoring the docket Tuesday afternoon, as motions to intervene in Bank of America’s proposed $8.5 billion settlement with Countrywide mortgage-backed securities noteholders piled up, was sort of like watching guests arrive a cocktail party. Oh, here come the hedge funds. Look, there’s a bunch of insurance companies. The public pension funds always head straight for the shrimp. Homeowners? Did anyone invite them? And, of course, Goldman Sachs had to show up fashionably late.