Month: July 2015

SEC Awards Third Highest Whistleblower Award to Date

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On July 17, 2015, the SEC announced a whistleblower award of over $3 million to a company insider who provided information that “helped the SEC crack a complex fraud.”  This payout represents the third highest award under the SEC’s whistleblower program to date.  The SEC has made two of the three highest payments to clients of the same law firm – Phillips & Cohen LLP. (The SEC paid roughly $14 million to a whistleblower in October 2013, and nearly $30 million to a foreign whistleblower represented by Phillips & Cohen in September 2014.).  This latest multi-million dollar payout suggests that the SEC’s whistleblower program is in full swing, and that legal representation of whistleblowers may be on the rise.

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Don’t touch that remote (tippee)? Salman reflects Ninth Circuit’s view on Newman

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In United States v. Salman, the Ninth Circuit recently held that a remote tippee could be liable for insider trading in the absence of any “personal benefit” to the insider/tipper where the insider had a close personal relationship with the tippee. This opinion is significant in that it appears at first glance to conflict with the Second Circuit’s decision last year in United States v. Newman, in which the court overturned the conviction of two remote tippees on the grounds that the government failed to establish first, that the insider who disclosed confidential information in that case did so in exchange for a personal benefit, and second, that the remote tippees were aware that the information had come from insiders. READ MORE →

You Can’t Cover Up Fraud with TARP Funds: US Government Sues Bank President’s Estate

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On July 1, 2015, the United States for the District of Columbia sued the estate and trusts of the late Layton P. Stuart – the former owner of One Financial Corporation and its subsidiary One Bank & Trust– and the trust’s beneficiaries, for alleged fraud on the Treasury Department and its Troubled Asset Relief Program (“TARP”).  This civil suit is the latest in a growing list of cases brought by the government to recover TARP funds that it alleges were fraudulently procured.

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Chamber of Commerce Airs Grievances Related To Internal Controls Inspections

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In recent months, issues related to internal control systems and reporting have taken on an increased profile and significance.  For example, as previously noted by the authors here and here, the SEC has sought to prioritize compliance with internal controls by initiating a growing number of investigations into companies based on allegations of inadequate internal controls.

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Merger Price and Process Win the Day Yet Again In Delaware Appraisal Action

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On June 30, 2015, the Delaware Court of Chancery issued a post-trial opinion in which it yet again rejected a dissenting shareholder’s attempt to extract consideration for its shares above the merger price through appraisal rights.  See LongPath Capital, LLC v. Ramtron Int’l Corp., Slip. Op. June 30, 2015, C.A. No. 8094-VCP (Del. Ch. June 30, 2015).  LongPath is just the latest decision in which the Chancery Court has upheld merger price as the most reliable indicator of fair value where it was the result of a fair and adequate process.  Vice Chancellor Parsons’ opinion reaffirms the importance of merger price and process in Delaware appraisal actions, and offers helpful guidance to companies, directors and their counsel in defending against claims that the company was sold at too low a price.

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