Amy M. Ross is the former Partner-in-Charge of the San Francisco office and a member of the Securities Litigation, Investigations and Enforcement Group.
Her practice focuses on the representation of public companies, directors and officers in securities class actions, SEC and DOJ investigations and enforcement actions, shareholder derivative actions and actions brought under federal and state securities laws.
Ms. Ross has extensive experience in litigation involving compliance breaches of fiduciary duty and securities law violations and conducting various types of corporate investigations.
Ms. Ross has represented the following companies and/or individuals associated with the following companies: Brocade Communications Systems, Inc.; Intel Corporation; Siebel Systems, Inc.; FormFactor, Inc.; SiRF Technology Holdings, Inc.; Qwest Communications; EFI; Atmel Corporation; and Autodesk, Inc.
The Ninth Circuit recently reversed a ruling by the U.S. District Court of Nevada granting summary judgment in favor of the SEC in a case alleging violations of Section 5 of the Securities Act of 1933 in connection with the sale of unregistered securities. The SEC’s complaint alleged that 1st Global Stock Transfer LLC (“Global”), a transfer agent, and Global’s owner, Helen Bagley (collectively “Defendants”), assisted in the sale of unregistered securities for CMKM Diamonds, Inc. (“CMKM”), a purported diamond and gold mining company. The SEC’s complaint further alleged that CMKM had no legitimate business operations but instead the Company concocted false press releases and distributed fake maps and videos of mineral operations to its investors. While CMKM was one of several defendants in the action, the SEC only moved for summary judgment against Global, Bagley, and CMKM’s attorney. The District Court granted the SEC’s motion for summary judgment against the three defendants, but only Global and Bagley appealed that ruling.
In perpetrating the scheme, CMKM’s attorney was alleged to have provided hundreds of false opinion letters supporting the issuance of unregistered stock without restrictive legends to indicate that the stock was unregistered. Relying on these opinion letters, Global and Bagley issued additional CMKM stock without restrictive legends, believing that the issuance was legal. After a year and a half of this practice, Bagley became suspicious and asked a second law firm to confirm the opinion letters. The second law firm, however, relied on the first attorney’s opinion letters and also issued an opinion letter stating that the issuance of additional CMKM stock was valid. Based on the additional opinion letter, Global and Bagley continued to issue CMKM shares without restrictive legends. READ MORE
The Sixth Circuit recently made it easier for plaintiffs to bring securities suits brought under Section 11 of the Securities Act of 1933. In a recent ruling in Indiana State Dist. Council v. Omnicare, Inc., No. 12-5287 (6th Cir. May 23, 2013), the court of appeals revived a purported class action lawsuit against Omnicare. The suit, which had been dismissed by the District Court for the Eastern District of Kentucky, alleged that Omnicare artificially inflated its stock price by failing to disclose a kickback scheme in its registration statement.
The Sixth Circuit (which covers Kentucky, Ohio, Tennessee, and Michigan), held that the shareholders did not have to allege that the defendant executives knew that statements were false at the time they were made. In a unanimous opinion, Judges Cole, Griffin, and Gwin reasoned that Section 11 imposes strict liability for misstatements made in offering documents – whether or not the executive “making” the statement knew them to be false at the time they were made. The panel expressly refused to extend the U.S. Supreme Court’s ruling in Virginia Bankshares v. Sandberg, 501 U.S. 1083 (1991) (which requires plaintiffs to allege both objective and subjective falsity to pursue a Section 14(a) claim) to Section 11 claims. This ruling will likely embolden plaintiffs to bring Section 11 claims in the Sixth Circuit. READ MORE
On August 17, 2012, a shareholder filed a derivative suit in Delaware federal court against Viacom Inc.’s board of directors, alleging they wasted corporate assets by awarding lavish corporate bonuses. In a novel approach that hardly mentions the “say-on-pay” provisions of Dodd-Frank, the plaintiff argued that the company violated §162(m) of the Internal Revenue Code. Section 162(m) limits corporate tax deductions that can be taken by a company for any senior executive compensation over $1 million to that which is determined by objective, performance-based criteria such that a “third party having knowledge of the relevant facts could determine whether the goal is met.” 26 CFR § 1.162-27(e)(2)(ii).
The complaint alleges that Viacom’s tax deductions for the compensation in excess of $1 million paid to executive chairman Sumner Redstone and two other senior executives were based on subjective criteria like “leadership and vision” and therefore violated Section 162(m). The complaint seeks to force repayment to Viacom of $36 million in past compensation. The complaint also seeks broader voting rights on executive compensation issues. Specifically, the plaintiff wants Class B shareholders to have voting rights on executive compensation (currently, only Class A shareholders have them).
The complaint further alleges that Viacom’s Compensation Committee awarded these annual bonuses to its senior executives in a manner that violated its own shareholder-approved 2007 compensation plan, which required the Committee meet the requirements of §162(m). READ MORE
The SEC came under scrutiny, including from U.S. Senator Charles Grassley, following an April 25, 2012 front page article in the Wall Street Journal which reported that the Agency had inadvertently revealed the identity of a whistleblower during an inquiry into his former employer.
The investigation involved Pipeline Trading Systems LLC, which runs stock trading platforms under its new name, Aritas Securities LLC. According to the article, an SEC Staff Attorney showed a notebook belonging to the whistleblower to a Pipeline executive during an interview. The executive recognized the handwriting regarding trades, meetings, and phone calls. Pipeline settled with the SEC on October 24, 2011. READ MORE