Securities and Exchange Commission leadership and staff members addressed the public on February 20-21 at the annual “SEC Speaks” conference in Washington, D.C. Common themes among the numerous presentations included the Commission’s increasing use of data analytics, the Commission’s focus on gatekeepers such as accountants and attorneys, and the Commission’s still incomplete rulemakings mandated by both the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Jumpstart Our Business Startups Act.
Justin Bagdady, a managing associate in Orrick’s Washington, D.C., office, is a member of the Securities Litigation, Investigations and Enforcement Group.
Mr. Bagdady focuses his practice on the representation of entities and individuals in regulatory investigations and enforcement actions, private actions under federal and state securities laws, and commercial litigation matters.
Recent engagements include:
- SEC v. Mercury Interactive, Inc. Represented the General Counsel of Mercury in an SEC enforcement action alleging backdating of stock options and improper accounting practices.
- Bundy v. IronPlanet. Obtained judgment in favor of client on all counts, including an award of attorneys’ fees and costs, in an action alleging breach of a repurchase contract over shares of stock allegedly worth more than US$20 million.
- Molina Information Systems v. Unisys Corp. Represented Molina in contractual dispute alleging breaches of representations and warranties related to purchase of information management business.
- SEC v. Mozilo, et al. Represented the former President and Chief Operating Officer of the nation’s largest mortgage lender in litigation with the SEC involving allegations of disclosure fraud. Also represented the same client in private securities actions.
- SEC v. Espuelas, et al. Represented the former Vice President of Global Sales of StarMedia Network, Inc. in an SEC enforcement action in federal court alleging improper revenue recognition.
- Represented corporations and individuals in investigations and in administrative proceedings brought by the SEC and FINRA.
Prior to joining Orrick, Mr. Bagdady interned at the United States Office of Government Ethics.
In an amicus brief filed earlier this month in Berman v. Neo@Ogilvy LCC, the SEC asked the Second Circuit to defer to the Commission and hold that individuals who report misconduct internally are covered by the anti-retaliation protections of the Dodd-Frank Act of 2002, regardless of whether they report the information to the SEC.
Today, the Securities and Exchange Commission (“SEC” or “Commission”) announced the terms of a settlement with four of the Respondents in In the Matter of BDO China Dhaua CPA Co., Ltd. The four Respondents are the China affiliates of the “Big Four” international accounting firms —Deloitte Touche Tohmatsu Certified Public Accountants Ltd., Ernst & Young Hua Ming LLP, KPMG Huazhen (Special General Partnership), and PricewaterhouseCoopers Zhong Tian CPAs Limited. The settlement resolves an administrative proceeding brought by the Commission against Respondents pursuant to Rule 102(e) of the SEC’s Rules of Practice over requests made by the SEC for the production of audit work papers located in China.
The need to detect and investigate reported allegations of wrongdoing within a corporation has long been a fact of corporate life. In the last 15 years, however, a combination of circumstances has contributed to an explosion of activity in this area. Among the contributing factors was Congress’ passage of laws and related agency regulations encouraging and, in some cases, mandating that employees report suspected corporate misconduct; creating financial incentives for employees to do so; and prohibiting retaliation against those who report. For companies, understanding their obligations pursuant to this statutory regime and the unsettled issues still surrounding it is crucial both for purposes of complying with applicable law and responding appropriately to alleged wrongdoing. Recently Orrick attorneys drafted an article for the Review of Securities & Commodities Regulation that discusses certain significant whistleblowing provisions of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), as well as best practices for responding to tips where these statutes apply.
To view the full article, please click here.
On November 3, 2014, the U.S. Supreme Court held oral argument in Omnicare v. Laborers District Council Construction Industry Pension Fund. As discussed in earlier posts, from March 18, 2014 and July 22, 2014, the Supreme Court in Omnicare has been asked to resolve a circuit split regarding the scope of liability under Section 11 of the Securities Act: does an issuer violate Section 11 if it makes a statement of opinion that is objectively false, or must the issuer also have known that the statement was false when made?
The clock will strike on the first self-report deadline under the SEC’s Municipalities Continuing Disclosure Cooperation Initiative (the “MCDC Initiative”) at 12:00 a.m. EST on September 10, 2014. Under the MCDC Initiative, underwriters and issuers of municipal securities may choose to self-report any potential, materially inaccurate statements relating to prior compliance with continuing disclosure obligations in exchange for a recommendation of “favorable settlement terms.” Under the terms of the original SEC announcement, the deadline for both underwriters and issuers was September 10. But the SEC announced a set of modifications to the MCDC Initiative on July 31, 2014, including a shift to a piecemeal approach whereby the deadline for underwriters went unchanged but the deadline for issuers was moved to December 1, 2014. This decision was admonished in an August 28, 2014 letter from U.S. Representatives Steve Stivers and Krysten Sinema to SEC Chair Mary Jo White, in which they “urge[d] the SEC to extend the self-reporting deadline for dealers to match the deadline for issuers” because there “simply is no justification for separate reporting deadlines.” Read More
Judge John L. Kane of the United States District Court for the District of Colorado is uninterested in oxymoronic gimmicks, that much is clear. In a fiery April 24, 2014 opinion, Judge Kane rejected settlements between the SEC and two individual defendants in an insider trading case. Judge Kane evoked—both in style and via explicit citation—Judge Jed Rakoff’s well-known rejection of the proposed settlement in SEC v. Citigroup Global Markets and similarly rejected the proposed settlements because they included numerous “provisions and recitations that [he would] not endorse.”
Judge Kane’s ire was focused on the SEC’s proposed settlement with Michael Van Gilder, the individual who allegedly traded based on inside information in advance of a high-stakes acquisition and tipped friends and family in an email titled “Xmas present.” The SEC’s proposed settlement with Van Gilder included a permanent injunction prohibiting future violations of Section 10(b) or Rule 10b-5, a $109,265 disgorgement payment (credited in part by a payment already made in a parallel criminal proceeding), and another $109,265 in civil penalties. The proposal included a number of standard provisions for SEC settlements, including a waiver of the entry of findings of fact and conclusions of law, a waiver of the right to appeal from the entry of final judgment, “a statement that Van Gilder neither admits nor denies the allegations of the Complaint,” and enjoining Van Gilder from future violations of existing statutory law. Judge Kane decisively rejected each of these in turn. Read More
The leaders of the Securities and Exchange Commission addressed the public on February 21-22 at the annual SEC Speaks conference in Washington, D.C. The presentations covered an array of topics, but common themes included the Commission’s ongoing effort to carry out the rulemaking agenda set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act, its role as an enforcement body post-financial crisis, its increasing utilization of technology, and its renewed focus on the conduct of gatekeepers. In a surprise appearance, Dallas Mavericks owner and former insider trading defendant Mark Cuban attended the first day of the conference. During his time at the conference, Mr. Cuban shared his thoughts on a number of the presentations via his Twitter account.
From a litigation and enforcement perspective, key takeaways from the conference include the following: Read More
A pair of investment firms recently filed suit against Twitter in the Southern District of New York, alleging that Twitter had fraudulently refused to allow them to sell its private stock in advance of its much-anticipated IPO. If that sentence looks somewhat bizarre, it is because the allegations themselves are bizarre, at best.
In short, the plaintiff investment firms allege that a managing partner of GSV Asset Management, who was a Twitter shareholder, engaged them to market a fund that would purchase and hold nearly $300 million in private Twitter shares from the Company’s early-stage shareholders. Plaintiffs then embarked on an “international roadshow” to line up investors in the fund. Plaintiffs allege that, on the roadshow, “there was substantial interest in purchasing [the private] Twitter shares at $19 per share.” Read More
High profile schemes perpetrated by Bernie Madoff, Allen Stanford, Nevin Shapiro, and others have brought, or at least reinforced, a general understanding of the term “Ponzi scheme” into the public lexicon. But what, legally, is a Ponzi scheme? In SEC v. Management Solutions, Inc., 2013 WL 4501088 (D. Utah Aug. 22, 2013), Judge Bruce Jenkins endeavored to answer that question and, in the process, authored an encyclopedic account of the term and key court opinions, from seven federal circuits, that have construed it.
Management Solutions was an SEC enforcement action against a father-and-son team that had allegedly raised over $200 million through a “classic Ponzi scheme.” According to the SEC’s complaint, investors in the scheme were sold “membership interests” in an apartment-flipping business and were guaranteed a return of five to eight percent. In reality, the funds were allegedly deposited into a general account and were used to pay a variety of expenses, including returns to other investors. Each of the defendants in the SEC case settled without admitting or denying the allegations.
A hearing was held in 2013 to determine whether, as argued by the court-appointed receiver, the scheme was properly classified as a “Ponzi scheme” and, if so, at what point that designation became applicable. The receiver sought such a finding in order to obtain the so-called “Ponzi presumption,” which is sufficient to establish actual intent to defraud. Read More