Category Archives: Legal – General

More on the NYSE’s failed corporate governance

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NYSE.gifIn what cannot be construed as an endorsment of the oversight abilities of some of the most prominent business executives in the country, this Wall Street Journal ($) article reports that nine of the 12 New York Stock Exchange directors who served on the board’s compensation committee in 2001-2002 admit in Eliot Spitzer’s lawsuit against former NYSE Chairman and Chief Executive Officer Dick Grasso that they did not understand until later the extent to which the big pay raises awarded to Mr. Grasso would cause his retirement benefits to increase to the extent that they did.
Which begs the question: Why is Mr. Grasso the one being sued here rather than the admittedly negligent NYSE board members?
This free Newsweek article addresses essentially the same subject matter, and here are the previous posts on Mr. Spitzer’s lawsuit against Mr. Grasso.
At any rate, Mr. Spitzer’s lawsuit against Mr. Grasso is really just a publicity vehicle for his gubernatorial campaign and not likely to lead to a solution for the real problem, which is the NYSE’s failed corporate governance. For competing views on what it will take to address that problem, see these earlier posts from Professor Bainbridge and Professor Ribstein.

President nominates a Clear Thinkers favorite for the Supreme Court

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supreme court building4.jpgPresident Bush’s selection of D.C. appellate judge John G. Roberts Jr. to replace Sandra Day O’Connor on the U.S. Supreme Court is a solid one and should not lead to much of a confirmation fight. As noted in this post from earlier this year, Judge Roberts was my favorite candidate for one of the Supreme Court openings, a superb thinker and writer while on the D.C. Court of Appeals.
Stuart Buck passes along notes that, before Judge Roberts took the bench, Justice Scalia told one of Stuart’s friends that he and several other Supreme Court Justices thought that Roberts was the best Supreme Court litigator in the country. The reason? Because he never became flustered during questioning and was always able to answer any question calmly while skillfully weaving in the substantive points that he wanted to make in the first place. As usual, the SCOTUS Blog has a fine compendium of resources on the Roberts nomination, including this post that reviews some of his decisions while on the D.C. Court of Appeals.
My sense is that the nomination of Judge Roberts means that there is a good chance that President Bush intends to nominate a woman to replace Chief Justice Rehnquist when he retires as expected in the near future. Hopefully, Houstonian and Fifth Circuit Judge Edith H. Jones will be in the running for that nomination.

That’s one helluva hangover

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hangover.jpgWith Enron and other business scandals, it’s been a bit difficult to keep up with the ongoing grand jury investigation in Boston into whether mutual fund employees improperly accepted gifts or entertainment from brokers. Fidelity Investments has already disciplined 16 traders over matters relating to the investigation and five employees have left the company.
But even a grand jury investigation is merely a prelude for this Wall Street Journal ($) article that reports on the grand jury’s investigation into the details of the bachelor party of former Fidelity star trader Thomas Bruderman, who happened to be marrying the daughter of former Tyco International CEO Dennis Kozlowski. Small world, eh?

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More on the criminal investigation of Milberg Weiss

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Milberg Weiss2.jpgThis New York Sunday Times article provides the most detailed report to date on the three-year investigation into whether prominent class action securities plaintiffs lawyers — William Lerach and Melvin I. Weiss — and their former New York law firm — Milberg Weiss Bershad & Schulman — paid illegal kickbacks to class representatives in connection with various class action cases over the years. Earlier posts on the matter are here and here.

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Noose tightening for Bonds?

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bbonds.jpgVictor Conte, the founder of Bay Area Laboratory Co-Operative, which is at the center of a steroid scandal involving Major Leage Baseball star Barry Bonds and other top athletes, has agreed to plead guilty today to steroid distribution and money laundering under a plea bargain with federal prosecutors. Here is a previous post on the legal problems that Mr. Bonds is facing in connection with that investigation.
Mr. Conte is one of four men — including Mr. Bonds weight trainer, Greg Anderson — who were charged last year with dozens of counts in connection with providing distributing illegal drugs to more than 30 professional baseball, football and track and field athletes. Some of the biggest names in professional sports — including Mr. Bonds, New York Yankees slugger Jason Giambi and track star Marion Jones — have been under suspicion based on Balco grand-jury transcripts that were leaked to the San Francisco Chronicle.

Roll Tide!

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Mike Price.JPGTongues are wagging today throughout college football circles as the Wall Street Journal ($) runs with this front page story on former University of Alabama football coach Mike Price‘s libel lawsuit against Time Inc. The lawsuit involves an allegedly false story that Time’s Sports Illustrated magazine ran in May, 2003 involving a wild night that Coach Price had in Pensacola, Florida while attending an Alabama football-related golf tournament. That night of festive activity led to Coach Price’s termination as the Alabama football coach before he had ever coached a game for the Crimson Tide.
After sitting out a season, Coach Price endured the football coaching equivalent of an exile to El Paso, where he now coaches the University of Texas at El Paso football team. For those of you not familiar with the culture of college football, suffice it to say that there is little similarity between being the head coach of the University of Alabama and the head coach at UTEP. Thus, so long as Coach Price can get over the considerable liability issues in his libel suit against Time, establishing damages — despite the fact that Alabama fired Coach Price three days before the SI article appeared — will likely not be much of a problem.
As with any defamation lawsuit by a public figure such as Coach Price, establishing liability is a tough obstacle to overcome. To win his suit, Coach Price has to prove that the news organization acted with “actual malice,” which means that it published information known to be false or recklessly disregarded whether the information was false.

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A prediction on the outcome of the corporate case of the decade

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disney.JPGLarry Ribstein of the University of Illinois Law School pens the smart Ideoblog that examines an eclectic combination of issues and subjects relating to corporate and securities law, regulation, business crime, economics, and film, among others. In particular, the blog contributions of Professor Ribstein and UCLA Law Professor Stephen Bainbridge of ProfessorBainbridge.com over the past couple of years have done more for the understanding of corporate and securities law issues for professionals and the general public than any other resource of which I am aware.
In this remarkably creative and insightful post, Professor Ribstein predicts the Delaware Chancellory Court’s decision in the corporate case of the decade — i.e., the civil lawsuit over The Walt Disney Co. board’s decision to pay Michael Ovitz a rather generous severance package for essentially doing nothing during his short stay at Disney (earlier posts on the case are here and here). Regardless of whether Professor Ribstein correctly predicts the outcome, his analysis of the case is masterful and should be required reading for anyone who ever deals with corporate governance issues.
Before the blogosphere, this is the type of analysis that would be found only in a thinly-read professional journal or, at best, perhaps buried deep in the op-ed page of the Wall Street Journal or Financial Times. But now, this type of insight is readily available at all times for a much larger number of people than would read any of the more limited mediums. Just another example of how the blogosphere is redefining the way in which specialized information and wisdom is being delivered to our society and the world.

The first Vioxx trial

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vioxxB.jpgJury selection begins today in Angleton, Texas in the first personal injury/wrongful death trial against Merck & Co. for alleged non-disclosure of the risks of taking the pain relieving drug Vioxx. Angleton is a small town in a plaintiff-friendly county about an hour south of downtown Houston. Talented Houston-based personal injury trial lawyer Mark Lanier has been receiving quite a bit of free publicity about the upcoming trial (here is the NY Times article and an earlier WSJ ($) article is here), and here are several previous posts on Merck and Vioxx.
Mr. Lanier’s effectiveness as a trial lawyer is in no small part attributable to the fact that he is a devout Christian who regularly teaches a Bible Study class at his church in Houston. Such familiarity with the Bible typically resonates with jurors in small Texas towns, who often rationalize tenuous liability and damage issues through Biblical associations.
Curiously, as Professor Ribstein has pointed out, Mr. Lanier’s case against Merck is based largely on the very un-Biblical concept of resentment and not the truth. Merck pulled Vioxx from the market in October, 2004 after a study showed that it increased the risk of heart attack or stoke, but not necessarily the risk of death. That move prompted Cleveland Clinic cardiologist Eric Topol to go postal over Merck’s handling of the drug, contending that Vioxx resulted in 15 cases of heart attack or stroke per 1,000 patients.

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Benny Hinn and the I.R.S.

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benny2.jpgLast week, televangelist Benny Hinn was not particularly pleased with, might we say, the responsiveness of his Nigerian hosts to his latest African crusade.
Well, this latest news report probably explains why Benny is a tad jumpy these days:

The IRS is questioning televangelist Benny Hinn’s organization about its operations and finances issues that underlie its tax-exempt status as a church.
The inquiry into the flamboyant faith healer’s ministry began a year ago, and the IRS has asked for dozens of detailed answers, according to documents provided to The Dallas Morning News by a watchdog group. . .

Separately, The News found that another watchdog group’s complaint to the IRS that the ministry lacks financial oversight and independent governance may have led the agency to question the operation through what’s called a church tax-inquiry letter.
While detractors argue that Mr. Hinn improperly profits from a ministry that hasn’t met the IRS definition of a church for years, his public-relations contractor dismissed the possibility that the tax exemptions — worth millions a year — could be at risk. [Hinn’s public relations contractor] repeatedly warned The News should “be very careful about what it reports.”

Geez, Hinn’s public relations contractor sounds a bit like Tom Hagen, Don Corleone’s lawyer, don’t you think?
By the way, did you know that Benny asserted at one time that the Trinity was comprised not of three persons, but nine?!

Mistrial declared in Cleveland corruption trial related to Houston criminal investigation

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MayorBrown3.jpgNot only are a couple of former officials in the administration of former Houston Mayor Lee P. Brown admitted crooks (earlier posts here, here and here), they are apparently not very persuasive witnesses, either.
The Chronicle’s Dan Feldstein has been doing a good job of connecting the dots in this developing story, the latest chapter of which has been playing out in a public corruption trial in Cleveland, Ohio. In his latest article, Mr. Feldstein reports that a federal judge in Cleveland declared a mistrial Tuesday after a jury deadlocked on most bribery charges against Cleveland area entreprenuer Nate Gray, who is the person from whom two former Houston officials — former Brown administration chief of staff Oliver Spellman and building services director Monique McGilbra — testified that they took cash and gifts. The retrial of the case will begin on August 8.
During the trial, an F.B.I. agent testified that Justice Department officials in Houston are continuing to pursue an investigation that is related to the Cleveland prosecution. It is not known at this time whether any other former Brown administation officials have been named as targets of that investigation.