According to a front-page story in today's Wall Street Journal, William Lerach is hoping that newspaper subscriptions will put him in a good bargaining position in prison.
Yesterday, Lerach, formerly a prominent class-action plaintiffs' attorney, who has pleaded guilty to rent-a-plaintiff accusations, received his sentence. He'll do two years in federal prison, pay $8 million, and accept disbarment.
Fortunately, he has been in the habit of reading up to six newspapers a day. He figures that'll help him get along. "A sports section is supposed to win you a lot of favors." Good luck with that.
It is amusing to me that the government stumbled into the case against Lerach and his former colleagues at Milberg Weiss in the course of pursuing a bit of insurance fraud involving two extremely valuable paintings -- a Monet and a Picasso, no less.
The works were: Monet's "The Customs Officer's Cabin at Pourville," from 1882, and Picasso's "Nude Before a Mirror," painted in 1932. They were both purchased by a fellow named Stephen Cooperman, then insured in 1991 for a total of $12.5 million. The following year he reported them stolen and made his insurance claim. This was suspicious from the get-go. The Cooperman home had a burglar alarm, which had not been set off by the alleged thief. There was no sign of break-in at all, other than the reportedly missing paintings. But the insurance company, after contesting the matter initially, settled in time. (I don't know off hand whether the amount of the settlement has ever been made public.)
Anyway, the paintings were found undamaged in a storage locker in a Cleveland suburb on Feb. 2, 1997. For the story of how that recovery came about, go here. The short version ... a Clevelander apparently had stored the paintings in the locker as a favor to his buddy, Cooperman. The insurance company took title to the paintings when they were found, and Cooperman now faced fraud charges.
Cooperman cut a deal for a lighter sentence by telling authorities that he had some (unrelated) dirt on Milberg Weiss. He had been a lead plaintiff of theirs in class-actions against corporations. They'd have him buy stock in a company that might be vulnerable to such a lawsuit. This is where the business sections of six daily newspapers might be helpful. Then, if the the stock price fell dramatically, Cooperman would serve as the lead plaintiff, allowing Milberg Weiss to win a "race to the courthouse" against other attorneys and their clients, and allowing it to be first in line for as lead counsel for the class. Cooperman would receive payment for his part in this, and that payment would in turn be very hush-hush, because the courts are rather vigilant about intra-class conflicts of interest.
So that's the want-of-a-horseshoe-nail type story that led to the fall of King Lerach.
Seek edification elsewhere.
Showing posts with label securities litigation. Show all posts
Showing posts with label securities litigation. Show all posts
Tuesday, February 12, 2008
Sunday, January 13, 2008
What is CNET?
CNET Networks (Nasdaq: CNET) announced on Friday that its board has adopted a poison pill plan in order to try to thwart any unfriendly takeover.
Well, of course, they didn't announce it using the phrase "poison pill." Its a sharehlders rights plan, naturally! But if it scares off bidders who might otherwise have offered shareholders a control premium for their shares, this assertion of their rights might seem empty to some of them.
CNET's corporate website (not to be confused with their consumer website) is:
here.
They provide internet content and games under a variety of brand names. They've had a good deal of success at this, but 2007 was a very choppy year for them in terms of stock price.
At any rate, the new poison pill is a move to protect a flank, but it doesn't represent the front line in CNET management's efforts to preserve corporate autonomy. The front line is a proxy contest along with related litigation.
CNET's bylaws are confusingly written, so it isn't clear whether the activists who want to take control through proxy votes can do so in a single election or not. The board is staggered, so that one would usually answer, "not." Yet there maybe a loophole in the staggering. And there may be a loophole in the loophole.
I'll see if I can make it all clear over the next couple of days.
Well, of course, they didn't announce it using the phrase "poison pill." Its a sharehlders rights plan, naturally! But if it scares off bidders who might otherwise have offered shareholders a control premium for their shares, this assertion of their rights might seem empty to some of them.
CNET's corporate website (not to be confused with their consumer website) is:
here.
They provide internet content and games under a variety of brand names. They've had a good deal of success at this, but 2007 was a very choppy year for them in terms of stock price.
At any rate, the new poison pill is a move to protect a flank, but it doesn't represent the front line in CNET management's efforts to preserve corporate autonomy. The front line is a proxy contest along with related litigation.
CNET's bylaws are confusingly written, so it isn't clear whether the activists who want to take control through proxy votes can do so in a single election or not. The board is staggered, so that one would usually answer, "not." Yet there maybe a loophole in the staggering. And there may be a loophole in the loophole.
I'll see if I can make it all clear over the next couple of days.
Monday, December 17, 2007
Controlling Group
I over-promised yesterday, when I said I'd discuss the legal issue today of whether Greenberg is running a "controlling group" in the meaning of New York's law governing who does or doesn't get to control an insurance company.
Researching the matter turns out to be more trouble than I thought, and would expect that words like "control" and "group" have the same meaning in New York state law, in particular in its insurance law, that they have in the federal securities regulatory system.
But maybe not. The point, after all, is different. In federal securities law, the question often arises, "is so-and-so seeking to acquire control of a company without paying a control premium for it?" That is, after all, how the temptation to buy shares through surrogates, acting informally as a 'group,' would arise. An acquirer given its druthers wouldn't announce on the news "I'm going to start buying up AIG shares until I control the company"! That would be akin to saying, "Please demand ever-higher prices from me for that stock -- I'll pay them," and this of course gets to be expensive. Hence the phrase "control premium."
But the acquirers don't get their druthers. If you act surreptitiously, as a 'group,' to acquire the stock without paying such a premium you're in violation of the securities laws and regulations which require candor on such matters, on the theory that its only fair to pay the stockholders that sort of control premium, and you've cheated them out of something if you avoid paying it.
There's more to it than that, but my point is just that the significance of words "control" and "group" in the typical securities litigators' setting is different from the concern of the insurance regulators of a state to keep track of just who it is they are regulating. The meaning of the words may not be the same.
And of course you must suppress any impulse that arises in your throat to say, "maybe group just means plain-old-English 'group'." Tautologies don't enlighten.
Researching the matter turns out to be more trouble than I thought, and would expect that words like "control" and "group" have the same meaning in New York state law, in particular in its insurance law, that they have in the federal securities regulatory system.
But maybe not. The point, after all, is different. In federal securities law, the question often arises, "is so-and-so seeking to acquire control of a company without paying a control premium for it?" That is, after all, how the temptation to buy shares through surrogates, acting informally as a 'group,' would arise. An acquirer given its druthers wouldn't announce on the news "I'm going to start buying up AIG shares until I control the company"! That would be akin to saying, "Please demand ever-higher prices from me for that stock -- I'll pay them," and this of course gets to be expensive. Hence the phrase "control premium."
But the acquirers don't get their druthers. If you act surreptitiously, as a 'group,' to acquire the stock without paying such a premium you're in violation of the securities laws and regulations which require candor on such matters, on the theory that its only fair to pay the stockholders that sort of control premium, and you've cheated them out of something if you avoid paying it.
There's more to it than that, but my point is just that the significance of words "control" and "group" in the typical securities litigators' setting is different from the concern of the insurance regulators of a state to keep track of just who it is they are regulating. The meaning of the words may not be the same.
And of course you must suppress any impulse that arises in your throat to say, "maybe group just means plain-old-English 'group'." Tautologies don't enlighten.
Sunday, November 11, 2007
Miscellaneous News
Three things today:
1) Icahn has reached a confidentiality agreement with BEA Systems Inc. I wrote about BEA and its rebuff of Oracle in the waningdays of October. Management apparently hopes to persuade him that they are in the right in insisting that they won't sell control for anything less than $21 a share, and they'll share confidential material with him in order to pull off this feat of persuasion.
2) AIG reported its third-quarter operating profit Wednesday: and the news was bad. The third-quarter operating profit fell by 13% percent, or 27 cents a share below analysts' estimates.
In a conference call the following day, AIG honchos warned that revenue in some parts of the company probably wouldn't improve in 2008.
It warned in a conference call on Thursday that revenue in some parts of the company, such as the mortgage insurance unit, probably would not improve in 2008.
This has had the predictable effect upon AIG's stock price and may well lead stockholders to look kindly upon whatever Greenberg is cooking up.
3) By the way, I'd like to say a big "hello" to anyone who is reading this from Labaton Sucharow LLP, a prominent securities-litigation law firm. Labaton reprsents the Ohio Public Employees Retirement System, which is lead plaintiff in a lawsuit against AIG and Greenberg for their use of sham reinsurance agreements that made the books look unrealistically favorable and allegedly induced pension fund executives to buy and/or hold the stock when they wouldn't have otherwise.
I infer that somebody at Labaton has the job of periodically googling the name "Hank Greenberg" and writing a report on what he finds. In that case, he's reading this, too. Welcome.
1) Icahn has reached a confidentiality agreement with BEA Systems Inc. I wrote about BEA and its rebuff of Oracle in the waningdays of October. Management apparently hopes to persuade him that they are in the right in insisting that they won't sell control for anything less than $21 a share, and they'll share confidential material with him in order to pull off this feat of persuasion.
2) AIG reported its third-quarter operating profit Wednesday: and the news was bad. The third-quarter operating profit fell by 13% percent, or 27 cents a share below analysts' estimates.
In a conference call the following day, AIG honchos warned that revenue in some parts of the company probably wouldn't improve in 2008.
It warned in a conference call on Thursday that revenue in some parts of the company, such as the mortgage insurance unit, probably would not improve in 2008.
This has had the predictable effect upon AIG's stock price and may well lead stockholders to look kindly upon whatever Greenberg is cooking up.
3) By the way, I'd like to say a big "hello" to anyone who is reading this from Labaton Sucharow LLP, a prominent securities-litigation law firm. Labaton reprsents the Ohio Public Employees Retirement System, which is lead plaintiff in a lawsuit against AIG and Greenberg for their use of sham reinsurance agreements that made the books look unrealistically favorable and allegedly induced pension fund executives to buy and/or hold the stock when they wouldn't have otherwise.
I infer that somebody at Labaton has the job of periodically googling the name "Hank Greenberg" and writing a report on what he finds. In that case, he's reading this, too. Welcome.
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