Corporate Governance

SLUSA and securities fraud class action litigation

Posted on March 20, 2009
In In re Lord Abbett Mutual Funds Fee Litigation, 2009 WL 117002 (3rd Cir. Jan. 20, 2009), the Third Circuit Court of Appeals considered whether the Securities Litigation Uniform Standards Act of 1998 (SLUSA) requires the court to dismiss an entire action when it includes claims SLUSA preempts and claims it does not preempt...

The Chamber of Commerce and Reforming the SEC (Structural Reforms)

Posted on March 19, 2009
The Center for Capital Markets of the Chamber of Commerce issued a report recently titled "Examining the Efficiency and Effectiveness of the US Securities and Exchange Commission."  Of the 23 recommendations, seven of them call for an assortment of structural reforms...

The Chamber of Commerce and Reforming the SEC (The No Action Process and a Reduction in Flexibility)

Posted on March 19, 2009
The Center for Capital Markets of the Chamber of Commerce issued a report recently titled "Examining the Efficiency and Effectiveness of the US Securities and Exchange Commission."  Among the proposed reforms were changes to the system of issuing no action letters...

Hybrid Securities and the Bifurcated Approach to Section 16(b) Liability

Posted on March 18, 2009
In Analytical Surveys, Inc. v. Tonga Partners, L.P., 2008 WL 4443828 (S.D.N.Y. 2008), Plaintiff, Analytical Surveys, Inc. ('Plaintiff' or 'ASI') brought a claim under Section 16(b) of the Exchange Act, seeking disgorgement of short-swing profits realized by Tonga Partners, L...

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ECA v. JP Morgan Chase Securities Fraud Complaint Dismissed

Posted on March 18, 2009
In ECA v. JP Morgan Chase Co., 553 F.3d 187 (2d Cir. 2009), the Second Circuit Court of Appeals dismissed a securities fraud claim because Plaintiffs failed to adequately plead materiality and scienter under the heightened pleading requirements of the Private Securities Litigation Reform Act...

Delaware Courts and Exonerating the Board from Supervising Risk: In re Citigroup Derivative Litigation (The Judicial Defense of a Mirage)

Posted on March 17, 2009
We are discussing In re Citigroup.  The case contains a fair amount of "speechifying", instances where the Chancellor chose to lecture both the parties and, presumably, the American public.  It is clear that he views derivative suits, including the ones against Citigroup, as little more than whining by investors who made bad business decisions...

Interview with Eric Cohen, Co-Founder of Investors Against Genocide

Posted on March 17, 2009
Interview with Eric Cohen, Co-Founder and Chairperson of Investors Against Genocide on 3/7/09.   CH -- While the Congressional Act is titled the Sudan Accountability and Divestment Act, your organization, Investors Against Genocide, has not emphasized divestment but rather genocide-free investment...

Delaware Courts and Exonerating the Board from Supervising Risk: In re Citigroup Derivative Litigation (The Refusal to Impose Meaningful Standards for Reporting Standards)

Posted on March 17, 2009
We are discussing In re Citigroup.  Today is our final post, for now.  The case didn't involve the traditional Caremark allegations. Caremark, as repeated in Stone v. Ritter, analyzed the possibility of liability for a breach of the duty to monitor under two prongs: (a) the directors utterly failed to implement any reporting or information system or controls; or (b) having implemented such a system or controls, consciously failed to monitor or oversee its operations thus disabling themselves from being informed of risks or problems requiring their attention...

Delaware Courts and Exonerating the Board from Supervising Risk: In re Citigroup Derivative Litigation (Compensation and the Effort to Avoid Further Preemption)

Posted on March 16, 2009
We are discussing In re Citigroup. Despite having dismissed the causes of action related to the board's oversight of the excessive risk taking by the financial institution, the decision managed to find a way to keep alive the one claim of waste related to the severence package paid to Citigroup's departing CEO...

Diane Sanger and the SEC

Posted on March 15, 2009
Back in the 1980s, I worked in the counseling side of the General Counsel's Office at the SEC.  My boss was Diane Sanger, then an Assistant General Counsel.  She was one of, if not the smartest person I knew at the Commission and tough as nails, not something that earned her kudos with everyone in the Agency...

Nacchio and Prison

Posted on March 15, 2009
Joe Nacchio lost his appeal, with the en banc court ruling against him by a 5-4 vote.  He is doing his best to stay out of prison pending appeal to the Supreme Court, so far to no avail.  He has been instructed by the federal district court to go to prison, with the arrival date scheduled for March 23...

The Hedge Fund Transparency Act

Posted on March 14, 2009
In prior posts, The Race to the Bottom has discussed the growth, influence, and lack of regulation of hedge funds. Similar discourse occurred on the Harvard Corporate Governance Blog and the Wall Street Journal. On January 29, 2009, Senators Carl Levin (D-MI) and Chuck Grassley (R-IA) introduced The Hedge Fund Transparency Act...

Delaware Courts and Exonerating the Board from Supervising Risk: In re Citigroup Derivative Litigation (The Weakness of the Caremark Standard)

Posted on March 13, 2009
We are discussing In re Citigroup Derivative Litigation. As we have noted, the Chancellor in this case took an almost derisive approach towards plaintiffs' allegations that the board potentially should have played a larger role in the oversight of the risk undertaken by Citigroup that ultimately resulted in "staggering" losses and near nationalization of the financial institution...

Delaware Courts and Exonerating the Board from Supervising Risk: In re Citigroup Derivative Litigation (The Facts)

Posted on March 13, 2009
We are discussing In re Citigroup Derivative Litigation. In late 2007, Citigroup began to announce large losses relating to subprime related assets, particularly those associated with structured investment vehicles.  Without repeating the details, the court conceded that the losses were "staggering...

Misunderstanding the Role of a Relationship of Trust and Confidence in O'Hagan

Posted on March 12, 2009
The recent action brought by the SEC against Larry Cuban for allegedly violating SEA Rule 10b-5 by selling stock in Mamma.com on the basis of information he allegedly expressly promised to keep confidential has drawn an amicus brief from five distinguished securities law professors urging dismissal of the complaint...

Delaware Courts and Exonerating the Board from Supervising Risk: In re Citigroup Derivative Litigation (Introduction)

Posted on March 12, 2009
Anyone other than the comatose knows that Citigroup is in deep trouble. The financial institution has suffered massive losses and has seen its share prices fall to below $3. Citigroup has probably survived this long only because of the government bailout...

SEC v. Mark Cuban: Insider Trading Claims

Posted on March 11, 2009
This post discusses insider trading law and the specific claims contained in the complaint against Mark Cuban. The SEC alleged that Cuban violated 10b of the Exchange Act and Rule 10b-5 by selling his entire holding of stock in Mamma.com while he possessed material, non-public information...

SEC v. Mark Cuban: Amicus Argues that the SEC Has Overstepped Its Regulatory Authority

Posted on March 11, 2009
The Securities and Exchange Commission ('SEC') has filed suit against Mark Cuban for insider trading. In brief, the SEC complaint alleged that Cuban, a large shareholder in Mamma.com, learned of an upcoming PIPE offering in Mamma.com. He agreed to keep that information confidential and to not sell his shares until after the company made the information public...

The Race to the Bottom and Covering Cases: SEC v. Cuban

Posted on March 10, 2009
The Race to the Bottom still has the rare distinction of combining the work of faculty and students.  For students, working on the Blog provides an opportunity to write in a pithy fashion about important developments in the corporate governance area...

SEC v. Mark Cuban: Introduction

Posted on March 10, 2009
The Race to the Bottom will be covering the SEC charges against Mark Cuban, the billionaire entrepreneur. Cuban is famous for being the charismatic owner of the Dallas Mavericks, the NBA team he has owned since 2000, and his recent attempt at purchasing the Chicago Cubs...

Churchill v. University of Colorado: The Times They Are A Changing (Part 2)

Posted on March 10, 2009
Want further evidence that things have changed since 2005 when, as David Lane put it, it was "All Churchill, All the Time?"  The Denver Post (now the only daily newspaper in Denver) had a very brief article (maybe 120 words and written by Joe Aguilar at the Daily Camera) on page 2B indicating that opening arguments would begin today...

SEC v. Mark Cuban ? The Complaint

Posted on March 10, 2009
In a complaint filed on November 7, 2008 (the 'Complaint'), the SEC charged Mark Cuban with committing securities fraud by engaging in unlawful insider trading. According to the Complaint, Cuban violated §17(a) of the Securities Act, §10(b) of the Exchange Act and Rule 10b-5 thereunder because he used material, nonpublic information to avoid losses in excess of $750,000 when he sold shares of Mamma...

Sudan and a Shari'a Compliant Stock Exchange

Posted on March 09, 2009
We enjoy, on this Blog, occasionally writing about governance issues that arise in other countries.  We have posted on the Saudi system of governance that includes the mandatory payment of zakat (alms) by corporations.  Today we are pleased to have a post from Fayha Suleman, a student at the University of Denver Sturm College of Law about the Islamic influences on the Khartoum Stock Exchange in Sudan.

The Sudan Accountability and Divestment Act (SADA); Part 2

Posted on March 09, 2009
On the last day of 2007, President Bush signed the Sudan Accountability and Divestment Act (SADA), 50 U.S.C. § 1701, which has several provisions. First, it 'supports the decision' of state and local governments to divest from companies with 'direct' business operations in oil, mineral extraction, power production or production of military equipment in Sudan when information about those companies is from 'credible information available to the public...

Churchill v. University of Colorado: The First Morning

Posted on March 09, 2009
The doors of the Denver Courthouse opened as usual at 8:00 am.  In courtroom 6 (on the second floor), the law suit brought by Ward Churchill against the University of Colorado got off to a quiet start. The morning was spent with examinations of prospective jurors apparently in chambers (none of the interviews took place in open court)...

Sudan Accountability and Divestment Act of 2007 (SADA); Part 1

Posted on March 09, 2009
The International Court of Justice issued an arrest warrant for Sudanese President Omar Hassan al-Bashir on charges of crimes against humanity. This development warrants an examination of U.S. government response to various crisis in Sudan, leading up to and including the Sudan Accountability and Divestment Act of 2007...

The SEC and the Costs of SOX: A Section 404 Survey

Posted on March 06, 2009

Covering Churchill v. University of Colorado

Posted on March 06, 2009
This Blog has undertaken a number of innovative tasks.  One is that it continues to serve as a rare example of student-faculty collaboration.  As part of that approach, the Blog looks for unique content that has pedagogical value.  One way to do this is to have students cover important trials and blog about them...

Proposed Amendments to the Delaware General Corporation Law and the Resulting Reduction in Shareholder Rights

Posted on March 05, 2009

Proposed Amendments to the Delaware General Corporation Law and the Resulting Reduction in Shareholder Rights

Posted on March 05, 2009

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