Brilliant Houston trial lawyer John O’Quinn strikes again.
Update: Dylan over at Slithery D observes that Mr. O’Quinn’s formidable talents are often misdirected.

Houston-based Service Corporation International, the world’s largest funeral and cemetery company, announced late last week that it had entered into a memorandum of understanding to settle the securities class action lawsuit that has been pending in U.S. District Court in Houston against SCI and certain of its current and former officers since January 1999. The suit alleges that SCI made misrepresentations concerning its prearranged funeral business and other financial matters. The settlement is for $65 million, with SCI’s insurers ponying up $30 million of the settlement payment.

Professor Ribstein over at IdeaBlog has assembled a bright and provocative program for his conference on “Uncorporations” at the University of Illinois College of Law this weekend. The ubiquitous Professor Bainbridge has a working paper and is giving a talk on whether courts should scrap veil-piercing theories, and there are nine other working papers on various topics relating to personal liability in the context of corporate and limited liability partnership law. All of the working papers that are being discussed at the conference are online and can be reviewed here. If you are involved in business law, I highly recommend that you take some time and review these creative and insightful papers.

Three former executives involved in Duke Energy‘s energy trading operation have been indicted in what the local U.S. Attorney’s Office contends was a fraudulent scheme to attain bonus compensation through making part of Duke Energy’s trading operations look profitable when they really were not.
Timothy Kramer, 40, former vice president of Duke Energy North America. Todd Reid, 41, former vice president, and Brian Lavielle, 33, a former trader were charged with racketeering, wire and mail fraud, and falsification of corporate books and records. All of them pled not guilty today and were released on $100,000 bond. If convicted on all counts, the defendants face prison sentences of anywhere from five years to life, in addition to forfeiture of $7 million in “false gains” plus penalties of up to $9 million.
The gist of the indictment is that the defendants allegedly ginned up phony electricity and natural-gas trades to boost trading volumes and inflate profits in a trading book that was the basis of their annual bonuses. The indictment alleges that there were 400 rigged trades that produced a $50 million profit in the trade book used for bonus calculations between March 2001 and May 2002. The schemes are alleged to have inflated bonuses for the defendants by a total of at least $7 million.
Moreover, this is the first federal case that I know of in which senior-level executives have been accused of devising schemes to generate trading profits in a “mark-to-market” book that determined bonuses, on one hand, and to enter losses in an “accrual” book that had no bearing on bonuses, on the other. Duke and many other energy trades used mark-to-market accounting to record profit and loss for energy contracts that might not settle for many years. However, the mark to market accounting method has come under intense scrutiny since the demise of Enron Corp. in late 2001 because of the latitude that the method allows in recording results.
Interestingly, the amount of money involved in the alleged fraud is relatively small when compared with Duke Energy’s pretax profits in 2001 from energy trading. Wholesale energy trading that year generated a pretax profit of $1.34 billion, and Duke’s wholesale-trading profits more than tripled from 2000 to 2001.

This NY Times article reports on an unusual brief that the Securities and Exchange Commission has filed in Citigroup‘s appeal of the class certification order in the WorldCom class action securities fraud case.
This particular appeal involves the “fraud on the market” theory, which is explained in this prior post. In their unusual brief, SEC lawyers argue that analysts such as Citigroup’s Jack B. Grubman do affect the price of a company’s stock and bonds and may be held accountable for misrepresentations they may make. On the other hand, Citigroup is contending that its analysts’ enthusiasm for WorldCom securities is irrelevant, that institutional investors ignore analysts’ reports, and that analysts’ opinions – including those of Mr. Grubman – are simply part of a conglomeration of information and do not have a distinct effect on securities prices. Accordingly, Citigroup lawyers are contending that each individual investor should have to prove that he was harmed by the analysts’ opinions in individual cases, which, if adopted by the appellate court, would effectively scuttle the class action. Oral argument in the appellate court is scheduled for May 10, so stay tuned.

Washington-based law firm Wilmer Cutler Pickering and Boston-based Hale & Dorr have announced their merger, which will create one of nation’s largest law firms. Both of these firms were mid-sized major firms that compete with larger multinational firms, so the merger makes some sense in that the combined firm will be on a similar footing to those larger firms.
In that connection, Professor Ribstein over at Ideablog has interesting post that on the merger that points out that it could be a good thing for some big firms to grow even bigger:

[L]egal ethical rules constrain law firms from getting as big as they need to get. In particular, restrictions on non-competition agreements prevent firms from binding lawyers to the firm. These restrictions also constrain firms from compensating lawyers in ways that get them to focus on the long-term interests of the firm.
In other words, without ethical rules, big law firms would get even bigger, and more independent from clients. The result might be that lawyers would be more, rather than less, loyal to the long-term interests of clients and society. Ethics can be viewed as yet another product of free markets.

This NY Times article reports on corporate attorney Martin Lipton‘s work with the board of Walt Disney Company in connection with the sputtering Comcast takeover bid.
Mr. Lipton is famous in corporate legal circles as being one of the lawyers who devised the poison pill strategy, which is an anti-takeover strategy that Professor Bainbridge explains much better than I can.
However, Disney was never really in a position to adopt a poison pill strategy in regard to the Comcast bid. Inasmuch as the Board has already been heavily criticized for its unwavering support of CEO Michael Eisner despite Disney’s lackluster performance over the past several years, a poison pill strategy would be widely viewed as the Disney Board again supporting a strategy mainly benefitting Mr. Eisner and an unproductive management team at the expense of Disney’s shareholders.
Nevertheless, as the Times article reports, Mr. Lipton has made a strong impression on the Disney board members, and his close friend Mr. Eisner has to date weathered the corporate storms relating to the Comcast bid and Disney’s lagging stock price:

Indeed, if there was any dissension on Disney’s board about the fate of Mr. Eisner before Mr. Lipton arrived on the scene, there is none now.
With Mr. Lipton in, out went Cravath, Swaine & Moore, the white-shoe law firm that had been working with the Disney board to help swat away Roy E. Disney’s mob of irate shareholders. Cravath could hardly be counted on to rescue the company and protect Mr. Eisner’s job. (Technically, Cravath resigned the account, but what else could it do?)
After Mr. Lipton’s arrival, several independent Disney directors raised the issue of whether they should be seeking out their own lawyers and bankers to help evaluate the situation separately from Mr. Eisner and management. Naturally, the idea was summarily rejected, according to executives close to the board. The board’s other advisers were hardly independent, either: Alan D. Schwartz, president and co-chief executive of Bear Stearns, is a close friend and longtime adviser to Mr. Eisner. Gene T. Sykes, a managing director of Goldman Sachs, has similarly had a long relationship with Mr. Eisner, as has Morton A. Pierce, a partner in Dewey Ballantine, the company’s regular outside counsel.
Of course, new independent advisers would interfere with Mr. Lipton’s game plan. In a telling memorandum Mr. Lipton sent to all his clients last year, he wrote, “There is no need for the board to create a special committee to deal with a major transaction, even a hostile takeover, and experience shows that a major transaction is best addressed by the full board.”
That advice may be right under some circumstances, but between Comcast’s bid for Disney and Roy Disney’s effort to oust Mr. Eisner, it is hard to believe that any adviser hired to be a sage and savior on both issues could be anything but conflicted. Mr. Lipton declined to comment. A spokesman for Disney called him “a world-renowned lawyer and expert” whose “reputation and integrity are beyond reproach.”