Mr. Herzinger, a partner in Orrick's San Francisco office, is a member of the Securities Litigation and Regulatory Enforcement Group. Mr. Herzinger’s practice focuses on securities class actions, derivative suits, M&A litigation, SEC and related criminal investigations and enforcement actions, internal investigations and compliance counseling. Mr. Herzinger's clients include: Chesapeake Energy Corporation, Intel Corporation, Morgan Stanley Smith Barney, Oracle Corporation, PricewaterhouseCoopers LLP, and Tesoro Corporation.
Securities Class Actions, Auditor Representation and M&A Litigation
Mr. Herzinger has represented numerous corporations, directors and officers, auditors, and financial institutions in federal securities class actions, M&A litigation and derivative suits. Notable engagements include the following:
- In re Chesapeake Energy Corp Securities Litigation
- Metropolitan v. PricewaterhouseCoopers LLP
- In re Metropolitan Securities Litigation
- In re Retek Securities Litigation
- In re Mutual Fund Trading Securities Litigation
- Oracle/Sun Microsystems M&A Litigation
- Furman v. Wal-Mart Derivative Litigation
- McAfee/Secure Computing M&A Litigation
- Oracle/Siebel Systems M&A Litigation
- Oracle/Portal Systems M&A Litigation
- In re Enron Corporation Securities Litigation
- In re Initial Public Offering Securities Litigation
Mr. Herzinger was also a member of the trial team which obtained a defense verdict in Howard v. Everex Systems, Inc., (N.D. Cal. 2002), one of only several securities class action jury trials in the country to be tried to verdict.
SEC and Regulatory Experience
Mr. Herzinger began his legal career as a staff attorney in the Enforcement Division of the U.S. Securities and Exchange Commission in New York, where he was responsible for conducting investigations of accounting and financial statement fraud, insider trading, and market manipulation. Since entering private practice, he has represented numerous corporations, directors and officers, financial institutions, auditors, hedge funds, mutual funds and broker-dealers involved in investigations by the U.S. Attorney's Office, SEC, self-regulatory organizations such as FINRA and the New York Attorney General’s Office. He has also conducted numerous internal and audit committee investigations.
Kenneth Herzinger
A Texas federal judge denied defendants ArthoCare CEO Michael A. Baker and CFO Michael T. Gluk’s motion to dismiss the SEC’s claim against them under Sarbanes-Oxley (“SOX”) Section 304’s clawback provision. Section 304 requires CEOs and CFOs to reimburse their company for any bonus or similar compensations, or any profits realized from the sale of company stock, for the 12-month period following a financial report, if the company is required to prepare an accounting restatement due to material noncompliance committed as a result of misconduct.
Baker and Gluk, who were not alleged to have participated in the misconduct that led to ArthoCare’s restatement, challenged Section 304 as unconstitutional, arguing that the SEC could not require them to repay bonus compensation and profits from stock sales for merely holding CEO and CFO positions during the time of the alleged misconduct. In particular, they argued that Section 304 is vague and is unconstitutional because it does not require a reasonable relationship between the triggering conduct and the penalty as is required by the Due Process Clause.
Judge Sam Sparks of the Western District of Texas rejected the Officer-Defendants’ constitutional arguments. Judge Sparks first held that Section 304 was not vague because it clearly referred to misconduct on behalf of the issuer of the allegedly false financial statement. Judge Sparks noted that Defendants “should have been monitoring the various internal controls to guard against such misconduct; they signed the SEC filings in question, and represented they in fact were actively guarding against noncompliance. As such, they shouldered the risk of Section 304 reimbursement when noncompliance nevertheless occurred.” Read More
NERA Economic Consulting Group’s June 27, 2012 report shows a 20% increase in SEC settlements with individual defendants for the first half of fiscal 2012. This spike is consistent with the SEC’s stated intent to hold more individuals accountable for violations of federal securities laws.
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