There is a very unusual paragraph at the beginning of the plea agreement former RBS trader Matthew Katke entered Wednesday with federal prosecutors in Connecticut. Katke admitted to conspiring to commit securities fraud when he worked at RBS. But he and prosecutors agreed that his conduct may turn out not to be a crime at all, depending on what the 2nd U.S. Circuit Court of Appeals eventually rules in an appeal by ex-Jefferies broker Jesse Litvak.
Larry Stryker first told the Securities and Exchange Commission about supposedly shady business practices at a firm called Advanced Technologies Group in 2004. At the time, there was no bounty program for tips to the SEC. But Stryker was in the midst of his own fight with ATG’s leaders, whom he accused of cheating him out of an ownership stake in a previous enterprise. Over the next six years, as Stryker pursued his own ultimately unsuccessful litigation against his former business partners, he continued to badger the SEC to bring a case against them and ATG. After a meeting with Stryker in 2009, the commission finally sued the company and its principals for illegally offering unregistered securities in 2010. The case ended in 2011 with judgments of more than $20 million against the defendants.
The big frustration in the debate over the relative merits of arbitration and consumer class actions has always been the scarcity of hard data. Sure, the U.S. Chamber of Commerce and the class action bar could talk all day about why the other side’s ideology is dead wrong, but neither side had convincing empirical information. So the Consumer Financial Protection Bureau set out in 2012 to collect it.
The 4th U.S. Circuit Court of Appeals wasted no time in deciding that U.S. District Judge Irene Berger of Beckley, West Virginia, went too far when she issued a sweeping seal-and-gag order in the government’s criminal case against former Massey Energy CEO and chairman Don Blankenship. A three-judge panel heard oral arguments in a challenge to Berger’s order last Monday, less than two weeks after four media companies and a nonprofit petitioned the 4th Circuit to undo Berger’s restrictions. On Thursday, 4th Circuit Judges Roger Gregory, James Wynn and Andre Davis did just that in a short per curiam opinion.
As the Securities and Exchange Commission follows through with its promise – or threat, depending on how you look at these things – to bring more of its enforcement actions as administrative proceedings before judges employed by the commission, at least a half-dozen defendants have brought constitutional challenges to the SEC’s right to pursue charges outside of federal district court. They’ve asserted two different theories: First, administrative proceedings violate their Seventh Amendment and due process rights because there’s no jury and the evidentiary rules favor the SEC; and second, the entire administrative law judge system violates separation-of-powers doctrine under the U.S. Supreme Court’s 2010 decision in Free Enterprise Fund v. Public Company Accounting Oversight Board.
One of the hottest and ugliest judicial campaign battles of last fall was over Justice Lloyd Karmeier‘s reelection to the Illinois Supreme Court. Karmeier, who was first elected to the state high court in 2004 and subsequently voted to overturn billion-dollar judgments against Philip Morris and State Farm, faced a deluge of ads from plaintiffs’ lawyers who claimed he was beholden to corporate defendants that had supposedly bankrolled his 2004 campaign.
Most of the nation’s attention on Wednesday will be fixed on the U.S. Supreme Court, where the justices will hear arguments in King v. Burwell, a case that could bring down President Obama’s healthcare law. Securities lawyers, though, should keep an eye on Delaware Chancery Court as well. Vice Chancellor Travis Laster is scheduled to hear arguments about whether to approve a proposed $275 million settlement of derivative claims against Activision board members who allegedly breached their duties when they agreed to a $6 billion buyback of shares held by Vivendi in 2013.
There’s been a lot of discussion lately of the Securities and Exchange Commission’s authority to define insider trading, thanks to the 2nd U.S. Circuit Court of Appeal’s landmark December 2014 decision in U.S. v. Newman and a statement last November by U.S. Supreme Court Justices Antonin Scalia and Clarence Thomas that questioned whether the SEC has the power to determine what constitutes criminal conduct. The commission’s redefinition of the scope of liability for civil securities fraud – in a split opinion last December in an enforcement action against two former employees of the investment manager State Street – has received much less attention. But as an appeal of the SEC opinion by the former State Street executives, John Flannery and James Hopkins, moves forward at the 1st Circuit, it could test the SEC’s authority to interpret securities law through a specific enforcement action.
The most interesting amicus brief in the government’s landmark appeal of a December 2014 ruling by the 2nd U.S. Circuit Court of Appeals that overturned the convictions of accused insider traders Todd Newman and Anthony Chiasson was not from the Securities and Exchange Commission. It wasn’t much of a surprise that the SEC agreed with U.S. Attorney Preet Bharara that a three-judge 2nd Circuit panel made a grievous mistake when it held that the government can’t bring an insider trading case if a tipster’s only gain is helping a casual friend. Nor was it a shock that the National Association of Criminal Defense Lawyers backed Newman and Chiasson, who oppose the government’s request for reconsideration of the panel’s hearing.
In July 2013, a federal appeals court overseeing thousands of individual smokers’ suits against Philip Morris USA, R.J. Reynolds and Lorillard threw up its hands in defeat.