Alison Frankel

Corporate criminals beware: Morgan Stanley wants to make you pay

November 13, 2012

In April 2011, Morgan Stanley paid $32 million to resolve a Securities and Exchange Commission case against Joseph “Chip” Skowron, the Morgan Stanley hedge fund manager who pled guilty to insider trading charges in August 2011. Skowron, who trained as a physician, ran a healthcare hedge fund called FrontPoint, which Morgan Stanley acquired in 2006. Over the next four years, until he was fired in December 2010, Skowron earned more than $32 million from Morgan Stanley, which also fronted almost $5 million in legal fees to defend its erstwhile trading star before he finally admitted his guilt.

New cert petition: End bar on direct corporate campaign giving

November 13, 2012

In the age of extravagant spending by Super PACs and politically active non-profits like the U.S. Chamber of Commerce, why do our election laws still distinguish between independent political expenditures by business interests — which are permissible under the U.S. Supreme Court’s 2010 ruling in Citizens United v. Federal Election Commission — and direct corporate donations to candidates, which remain illegal?

Banks should fear ominous new rulings in Fannie/Freddie MBS cases

November 9, 2012

JPMorgan Chase filed quite a remarkable quarterly report with the Securities and Exchange Commission on Thursday, crammed with far more details about its exposure to litigation and mortgage repurchase demands than the earnings report the bank issued in mid-October. Among the revelations: JPMorgan has reached an agreement in principle to settle two SEC investigations, one involving a single unidentified JPMorgan securitization, the other involving Bear Stearns’s crafty (alleged) trick of keeping put-back recoveries from mortgage originators for itself instead of passing them on to investors in mortgage-backed securities trusts. The SEC deal has been long rumored, and though we still don’t know any of its terms, the bank’s filing confirms it.

Can customers sue power companies for outages? Yes, but it’s hard to win

November 9, 2012

Scott Kreppein of Hagney, Quatela, Hargraves & Mari lives and works on Long Island, where about 90 percent of the customers of the Long Island Power Authority lost power in last week’s storm. Kreppein still doesn’t have electricity or heat at his house in Smithtown. Last week he got by on flashlights and a small gas-powered generator. Over the weekend, he and his wife fled to a hotel in Pennsylvania, and since they came back home, they’ve been living with relatives who have heat and light. Kreppein, in other words, has a personal interest in holding LIPA accountable for any failures in its restoration of power across Long Island.

Election results raise questions about impact of Citizens United

November 8, 2012

Fewer than one million people live in the great state of Montana, where per capita income in 2010 was less than $25,000. Now try to guess how much money Super PACs and politically involved non-profits spent on the race for a U.S. Senate seat in Montana in the 2012 election cycle. Would you believe $25 million? According to the most recent data assembled by The Center for Public Integrity, Republican challenger Denny Rheberg attracted $11.9 million in outside spending on his campaign, slightly less than the $12.8 million in outside money that went to the Democratic incumbent, Jon Tester. Do the math: That’s more than $25 per voter, in an outlay that significantly added to Montana’s bottom line. In neighboring North Dakota, population 684,000, candidates Heidi Heitkamp (Democrat) and Rick Berg (Republican) attracted $16 million in outside spending in their race to fill an open Senate seat.

How Apple botched its fair rate case against Motorola

November 6, 2012

I know Apple is a brilliantly managed company represented by brilliant outside counsel. But I cannot for the life of me figure out Apple’s endgame strategy in its breach-of-contract case against Motorola in federal court in Madison, Wisconsin.

In ruling against Barclays, NY judge rejects 2nd Circuit holding

November 5, 2012

Last March, U.S. District Judge Louis Stanton of Manhattan refused to dismiss a case against Barclays by a Florida credit union that claimed it had been defrauded by the bank’s misrepresentations about the collateral underlying a CDO called Markov. According to the credit union’s all-too-familiar allegations, Barclays stuffed the CDO with doomed-to-fail mortgage-backed securities, then shorted the vehicle even as it flogged the CDO to investors. Stanton said that the credit union had shown enough evidence in its complaint to proceed with discovery on its claims.

FDIC files first lawsuit against auditor of failed bank, targets PwC

November 2, 2012

Way back in February 2011, the crackerjack blogger Francine McKenna of re: The Auditors asked an interesting question in a column for Forbes: Given the widespread failures of small and regional banks in the financial crisis, why hadn’t the Federal Deposit Insurance Corporation brought any lawsuits against the audit firms that signed off on reports that turned out to be materially misleading? McKenna noted that two private lawyers had predicted such suits were coming in a column for the Legal Intelligencer, but said so far none had been filed. By then the FDIC was actively pursuing directors and officers of failed banks, but auditors seemed to be off the hook.

Can governors bar insurers from charging hurricane deductibles?

November 1, 2012

On Wednesday night, New York Governor Andrew Cuomo made a startling announcement: Homeowners “will not have to pay” so-called hurricane deductibles when they file insurance claims for damages caused by Sandy. In a follow-up press release Thursday morning, after other governors joined Cuomo in outlawing hurricane deductibles related to Sandy, Cuomo’s Department of Financial Services, which regulates insurance companies, said that it had “informed the insurance industry that hurricane deductibles should not be triggered for this storm.”

SCOTUS amicus brief could radically alter class action landscape

November 1, 2012

On my way to work today at Reuters’ satellite office in Suffolk County, New York, I had a chance to witness the devastation Hurricane Sandy wreaked on Long Island, where I live and where 90 percent of us lost power in the storm. Wending around downed trees and power lines turned what should have been a half-hour drive on major roads into an hour-long trek through police-directed detours and past huge piles of branches already cleared by road crews. In some neighborhoods there’s not a power line still attached to utility poles — unless the pole itself has been toppled.