Frank M. Scaduto

Senior Associate
Securities Litigation & Regulatory Enforcement
(415) 773-5457
fscaduto@orrick.com
Read full biography at www.orrick.com

Frank Scaduto is an associate in the San Francisco office and a member of the litigation practice group.  Mr. Scaduto represents financial institutions, accounting firms, corporate boards, audit committees, and officers and directors in complex litigation, investigations and regulatory proceedings across the country and internationally.  His recent representative experience includes the following.

Financial Crisis Litigation

  • Representing the former President and COO of Countrywide Financial Corp. in connection with state and federal court litigation across the country arising out of Countrywide’s mortgage-backed securities business.
  • Represented Goldman, Sachs & Co., JPMorgan and other underwriters of $12 billion offering in a New York federal securities class action arising out of the financial crisis.
  • Represented the former CFO of Merrill Lynch & Co., Inc. in connection with multijurisdictional securities, derivative and ERISA litigation relating to Merrill’s CDO losses and merger with Bank of America.

Complex Commercial Litigation

  • Obtained trial verdict in Virginia state court compelling Vornado to sell Pentagon Row, a major mixed-use development in Arlington, Virginia, to clients Federal Realty Investment Trust and Post Properties Inc.  We proved that Vornado had acquired the property in violation of rights of first offer belonging to our clients, who had long-term leases on the property.  We also defeated Vornado’s petition to appeal.
  • Obtained judgment in New York state court compelling turnover of $62 million collateral account to hedge fund client Black Diamond Commercial Finance LLC.  We demonstrated that defendant had failed to turn over the account in accordance with the applicable credit agreement.

Internal Investigations & Regulatory Proceedings

  • Part of the team that conducted one of the largest international accounting investigations ever on behalf of the audit committee of Dell, Inc.  Mr. Scaduto focused his efforts on Dell’s Asia-Pacific and Japan region.
  • Represented prominent hedge fund in internal investigation of potential market manipulation and related regulatory inquiries and civil appeals in Europe.
  • Represented Big Four accounting firm in connection with SEC investigation relating to a manufacturing client’s restatement.

Other Notable Representations

  • Co-authored amicus brief on behalf of the U.S. Chamber of Commerce in precedent-setting appeal, SEC v. Tambone (1st Cir.), which rejected primary 10(b) liability against underwriters.

Mr. Scaduto is also actively involved in pro bono work as a member of OneJustice's Associate Advisory Board and through referrals from VLSP's Eviction Defense Project and federal Criminal Justice Act panels.

Prior to joining Orrick, Mr. Scaduto was an associate with Willkie Farr & Gallagher LLP in New York.

Frank Scaduto

Posts by Frank M. Scaduto

RMBS

Where There’s Smoke, There’s FIRREA

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Few can ignite a legal firestorm like U.S. District Judge Jed Rakoff of the Southern District of New York. Last week, in a mortgage fraud suit against Bank of America and Countrywide, Judge Rakoff refused to dismiss a novel claim for civil penalties under the obscure Financial Institutions Reform Recovery Enforcement Act (“FIRREA”). The ruling will surely encourage civil prosecutors to make wider use of FIRREA, which provides a generous ten-year statute of limitations and low burden of proof, in pursuing financial fraud cases.

FIRREA was enacted in response to the Savings and Loan debacle of the 1980s, as well as the fraud scandals that emerged during that era. The statute includes a clause imposing a civil penalty for mail and wire fraud and other violations “affecting a federally insured financial institution.” Until recently the civil penalty provision has been ignored by prosecutors, leaving courts without occasion to decide what exactly the statute means by “affecting” a financial institution. Read More

SEC

Stop! In the Name of … 28 U.S.C. §2462

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Last week we heard from RUSH. This week we’re tuning in to The Supremes.

On January 8, 2013, the U.S. Supreme Court heard arguments in Gabelli v. Securities and Exchange Commission, No. 11-1274, concerning when the clock begins to run on the five-year statute of limitations for civil penalty claims by the SEC and other federal agencies. The 200-year-old statute at the heart of the dispute (28 U.S.C. §2462) provides: “Except as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued . . . .” Taking their cue from the Supremes that, “No, you just have to wait,” the SEC argues that “accrued” means when the government discovered, or reasonably could have discovered, the alleged wrongdoing (in this case, market timing by two executives of investment adviser Gabelli Funds, LLC ). On the other hand, the two executives want to know, “How long must I wait, How much more can I take?” arguing that “accrued” means when the government can first bring the action (typically when the alleged wrongdoing occurs), regardless of whether the government knows about it.

What can be divined from the oral argument? The justices appeared skeptical of the government’s position. It was pointed out that this was not a position that had ever been taken by any other government agency, and not by the SEC until 2004, even though the statute had been on the books for almost 200 years. Justice Breyer went so far as to press, “All I’m asking you for is one case [prior to 2004],” but the government’s attorney could not provide one.

Some of justices also commented that it would almost be impossible for a defendant to prove that the government “should have known” about something. There would be no bright-line rules to such an approach. Whether an agency “should have known” could potentially depend on any number of circumstances, for example whether the agency had 100 or 1,000 people reviewing things to shed light on a violation or even whether the agency was overworked or underfunded at the time of the violation. In other words, SEC, “Think it over.” Read More