There’s a very good chance that former Securities and Exchange Commission general counsel David Becker owes absolutely nothing to the folks who lost money in Bernard Madoff’s Ponzi scheme. Nevertheless, on Monday, Becker and his two brothers agreed to turn over every penny of the proceeds they received from their mother’s long-ago Madoff investment account, a total of $556,017. Becker, a partner at Cleary Gottlieb Steen & Hamilton, didn’t return my call seeking comment. But he is doubtless hoping that the $556,017 settlement with Madoff bankruptcy trustee Irving Picard of Baker & Hostetler puts an end to the ugliest chapter in his career.
For the Justice Department’s Foreign Corrupt Practices prosecutors, last week was the best of times and the worst of times. A federal judge in Houston sentenced the former CEO of the Halliburton spin-off KBR Inc. to 30 months in prison for his role in a 10-year scheme to pay $182 million in bribes to Nigerian officials in order to secure $6 billion in military oil and gas contracts. Albert Stanley’s sentencing marked the end of one of the DOJ’s most successful FCPA prosecutions, in which KBR agreed to pay $579 million in criminal fines and disgorged profits — the second-highest fine in an FCPA case at the time the guilty plea and Securities and Exchange Commission settlement was announced in 2009. The KBR case is an FCPA paradigm, a classic demonstration of the law’s power to expose and punish corruption that would otherwise have stayed in the shadows.
Remember a couple years back when Air Products, in its takeover assault on Airgas, attempted to force Airgas to move up its annual shareholder meeting? Air Products wanted to rush a vote on a slate of board nominees it supported en route to gaining control of Airgas’s staggered board. The hurried-up meeting seemed at first like a clever maneuver by the company and its lawyers at Cravath, Swaine & Moore: After some tediously hair-splitting testimony about whether “annual” means once in a calendar year or once every 12 months, then-Chancellor William Chandler of Delaware Chancery Court blessed the moved-up shareholder meeting date. But Chandler was subsequently overturned by the Delaware Supreme Court, which said the Airgas board members whose seats were at stake were entitled to serve out their full three-year terms.
Over the last six months, U.S. Senior District Judge Jed Rakoff has made Irving Picard of Baker & Hostetler look more like Don Quixote than a white knight riding to the rescue of investors who lost billions in Bernard Madoff’s Ponzi scheme.
There’s a really important lesson in IBM’s summary judgment victory in a trade secrets case that could have exposed the company to more than $100 million in claims. IBM’s lawyers at Paul Hastings amassed all kinds of evidence to undermine the allegations of Bruce Bierman, who said the company stole his technology to create the Rapid Resume feature embedded in millions of IBM personal computers. But the case ended up turning on a weird little technicality about — of all things — what Bierman’s mother knew about IBM’s software before she died in 1998. The lesson? Even when you’ve got what you think are great facts, the quickest route to victory may be in relatively obscure law. It’s less psychically satisfying, but it gets the job done.
U.S. District Judge Frederic Block of Brooklyn federal court will probably, in the end, approve a $1 million settlement between the Securities and Exchange Commission and former Bear Stearns fund managers Ralph Cioffi and Matthew Tannin. He said as much in open court Monday, presiding over a settlement hearing rather than the civil trial scheduled to begin that day. But for everyone except Cioffi, Tannin, and their lawyers, the real story at Monday’s hearing was Block’s stream-of-consciousness musings on the appropriate role of a judge overseeing an SEC case. If there was any doubt that U.S. Senior District Judge Jed Rakoff has inspired soul-searching in the nation’s federal judiciary, the utterly compelling transcript of the hearing before Block should put it to rest. (My Reuters colleague Jessica Dye attended the hearing and sent me the transcript.)
The state and federal regulators who announced the $25 billion foreclosure settlement with five major banks last week aren’t the only folks complaining about robosigning. The exposure of that practice — in which bank representatives, in order to speed up foreclosures, signed thousands of mortgage-related affidavits without actually reading them — sparked the nationwide foreclosure investigations that led to the $25 billion settlement. The robosigning scandal also spawned shareholder derivative suits. Board members at Bank of America, Citigroup, Wells Fargo, and JPMorgan Chase have all been accused of breaching their duty to shareholders by permitting robosigning and other flawed foreclosure practices to take place.
Asking investors in mortgage-backed securities to trust the banks that issued them is like asking Charlie Brown to trust Lucy van Pelt. MBS noteholders are so convinced they’ve been duped by the folks that packaged and sold shoddy mortgage loans that it’s little wonder the banks’ $25 billion settlement with federal and state regulators has been greeted with a tsunami of skepticism. Sure, MBS investors understand that the settlement doesn’t preclude them or regulators from suing over deficient securitizations. But their fear, in the absence of the actual settlement documents, is that the loan modifications the deal calls for will reduce the revenue stream to MBS trusts.
The Solicitor General’s office of the Department of Justice is home to some of the smartest lawyers in the country. These are the people who represent the views of the United States in the most important public policy cases at the U.S. Supreme Court. They go on to head appellate practices at prestigious law firms — or to their own seats in the federal judiciary. Lawyers in the SG’s office are accustomed to deference.