SAC’s Insiders: Indicting Financial Institutions

Vesna Harasic

On November 8th, 2013, billionaire Steven A. Cohen’s Connecticut-based hedge fund, SAC Capital Advisors (“SAC”), pled guilty to criminal fraud charges, after allowing—if not facilitating—insider trading for over a decade.[1]  SAC cut a deal with the government in the U.S. District Court in New York, in which it has agreed to pay $900 million in penalties to resolve this criminal case.[2]  SAC’s general counsel entered the guilty plea on four counts of securities fraud and one count of wire fraud.[3]  In addition, six former SAC employees have faced similar criminal charges based on their individual involvement in the case.[4]  Despite SAC’s acceptance of the plea, however, District Judge Laura Swain has already stated that she will not accept the plea until she reads the government’s pre-sentencing report.[5] Continue reading

SEC Approves Crowdfunding for Internet Stock Sales

Danielle Hartl

Crowdfunding is “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.”[1]  Companies in need of financial assistance launch a fundraising campaign online where a mission statement is presented, a goal amount is set, investments from the general public can be monitored, and once the goal amount is reached the securities are issued.[2]  On April 5th, 2012, President Obama signed the Jumpstart Our Business Startups Acts (“JOBS”) giving the Security and Exchange Committee (“SEC”) authority to issue rules “on capital formation, disclosure and registration requirements.”[3]  The SEC used their authority to create a proposed “Crowdfunding Exemption [that] is intended to facilitate capital formation by startups and small businesses by allowing certain companies to raise up to $1 million in any 12-month period through online crowdfunding ‘portals’ in exchange for securities.”[4]  Since the SEC’s regulations have been released for public comment, the crowdfunding exemption has created excitement in the business world.[5] Continue reading

TVI Corporation, et al. v. Gallagher, et al.

Chris O’Mahoney

The Delaware Court of Chancery has shown a renewed interest in holding corporate founders also serving as directors subject to shareholder derivative actions when the founders engaged in self-dealing to leverage control over the board. On October 28, 2013, the Delaware Court of Chancery handed down in the case TVI Corporation et al. v. Gallagher, et al., [1] a memorandum opinion that serves as a nonprecedential warning to founder directors who, as the controlling group of stockholders, abused their power through self-dealing.[2] In TVI, a group of shareholders of the closely-held corporation, iCueTV, brought a derivative action against three of the founder-directors and a group of non-founder directors alleging that the founder-directors took actions that wrongfully benefitted them while injuring the corporation and its shareholders.[3]  To get into court, the shareholders pled demand futility to board actions and inactions by alleging that every member of the board was either self-interested or lacked independence at the time of the challenged transaction, and could not objectively respond to the shareholders’ demands. The Chancery court declined to grant the directors’ motion to dismiss the shareholders’ claim after finding that the shareholders adequately plead demand futility. This case is unique in that the shareholders successfully made demand futility claims regarding both action and inaction of the board. Continue reading

The Government Settlement Transparency & Reform Act: Clarity and Nothing More

Addison Pierce

In December of 2009, Attorney General Eric Holder announced a precedent-setting $335 million settlement with Bank of America.[1]  The deal settled claims that Countywide Financial, acquired by Bank of America, charged black and Hispanic borrowers higher mortgage fees and steered them into risker loans.[2]  The Obama administration, among others, applauded the efforts by the Department of Justice (DOJ) in reaching the largest-ever settlement in a fair-lending claim.[3]  While the settlement and press conference sent a clear message to the lending community, it also produced an interesting byproduct; a $117 million tax savings for the wrongdoer.[4]  While the disconnect went unremedied back then, as JPMorgan Chase & Company (“JPMorgan”) and the DOJ continue to negotiate the details of a $13 billion settlement,[5] there has been a renewed call to address the provision in the tax code that allows corporation to write off portions of government settlements.[6] Continue reading