William Alderman

Senior Counsel

San Francisco

walderman@orrick.com

Read full biography at www.orrick.com
Bill Alderman, a Senior Counsel in the San Francisco office, concentrates his practice on business litigation and dispute resolution. He has broad experience in matters involving federal and state securities, corporate governance, technology, trade secrets, business torts and international disputes.

Bill is additionally recognized for the results he has obtained in insurance coverage, employee benefits, and federal and state antitrust disputes. He commits a substantial part of his time to pro bono representation and to representation of the firm.

Representing clients in class and derivative actions, Bill's approach is to minimize his clients’ overall cost through careful strategic planning, dispositive motions and aggressive negotiation. Only three of the many securities class actions he has defended have resulted in any settlement payment by his client or its carrier. Of his nearly 100 motions to dismiss securities class, mass or derivative actions since 1996, more than 90 percent were granted in their entirety (most with prejudice), while others were granted in part or led to a successful motion for summary judgment.

Posts by: William Alderman

Do Trades Made Pursuant to 10b5-1 Plans Still Offer A Defense to Insider Trading?

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Chairs Around a Table

Rule 10b5-1, enacted in August 2000, codified the SEC’s position that trading while in possession of material non-public information is sufficient to establish liability for insider trading. The rule also provided an affirmative defense for individuals who could prove that the purchase or sale of stock was made pursuant to a pre-existing written plan executed before the individual became aware of the material non-public information. These so-called 10b5-1 plans have long been considered to be an efficient way to trade company stock without raising suspicion of insider trading or another improper motive.

However, recent news stories have reignited concerns that corporate insiders may be abusing 10b5-1 trading plans to trade on material non-public information. An April Wall Street Journal article reported that not only has the use of 10b5-1 plans by non-executive directors nearly doubled between 2006 and 2011, but a significant percentage of the plans were being used to unload all or a large percentage of the directors’ holdings in a short period of time. An earlier November 2012 Wall Street Journal article analyzing thousands of trades made by corporate executives found evidence that company insiders did statistically much better than expected in realizing trading profits. Together, these articles suggest that the lack of transparency and regulation of 10b5-1 trading plans has allowed them to be misused as vehicles to effectuate opportunistic trades.

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Recent Study Finds Cybersecurity Disclosures May Fail to Meet SEC Guidelines

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Hackers aren’t the only ones after company information. Earlier this week, Wills Fortune 500, a unit of Wills Group Holdings, a global insurance broker providing insurance and risk management services, made available its own report  tracking the response by Fortune 500 companies to the SEC’s October 2011 guidelines for cybersecurity disclosures. The report’s key findings include that, as of April 2013, 85% of Fortune 500 companies were following the SEC guidelines and providing some level of disclosure of cyber exposures. However, close to 40% of the companies failed to provide details on the size of their exposure, stating only that the risk would have an impact on the company without further discussing the extent of the impact. As such, the report concluded that the question whether company disclosures rise to the level mandated by the SEC is debatable, given the paucity of information regarding the probability of incidents and their quantitative and qualitative magnitude.

In light of the findings of the Willis Fortune 500 report, it’s not surprising that SEC Chairman Mary Jo White had previously asked the Commission to evaluate compliance with current guidelines for cybersecurity disclosures, assemble a report on the general practice and compliance with the existing guidelines, and make recommendations for further guidance.

Say Hello to My Imaginary Friend! Judge Posner, Seventh Circuit Issue Stern Warning to Plaintiffs’ Firms For Again Citing Bogus Confidential Witnesses

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Plaintiffs’ counsel beware: to avoid Rule 11 sanctions you might actually have to talk to “confidential witnesses” yourself and corroborate their statements before citing them in a securities fraud complaint.

That is one major takeaway from the Seventh Circuit’s March 26, 2013 opinion in City of Livonia Employees’ Retirement System v. The Boeing Company, et al. In that case, Judge Posner singled out plaintiffs’ counsel for making “confident assurances in their complaints about a confidential source . . . even though none of the lawyers had spoken to the source and their investigator had acknowledged that she couldn’t verify what (according to her) he had told her.” Slip op. at 16. Citing multiple cases in which the same firm, Robbins Geller Rudman & Dowd LLP, had “engaged in similar misconduct” and noting that “recidivism is relevant in assessing sanctions,” Judge Posner remanded to the district court for further proceedings on Rule 11 sanctions.

The appeal came from the district court’s grant of a renewed motion to dismiss in Boeing’s favor after discovery into the CW’s statement revealed significant inconsistencies with the complaint’s allegations. The allegations, briefly, were that Boeing made false statements about the progress of Boeing’s flagship aircraft, the Dreamliner. In April and May 2009, with the Dreamliner’s maiden test flight (or “First Flight”) scheduled for June 30, 2009, the Dreamliner failed several “stress tests” that raised doubts about the First Flight’s timing. Boeing remained optimistic about the scheduled First Flight, though, and made disclosures to that effect in May and June. But one week before the anticipated First Flight, the Company disclosed that it had failed the tests and that the First Flight had been canceled, delaying final delivery of the plane to customers. Following the disclosure, Boeing’s stock price fell 10% over two days of trading.

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Inside Out: NASDAQ Proposes Rule to Require Internal Auditing

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Stock Ticker

The NASDAQ Stock Market recently submitted a proposed rule change that would require all companies listed on the NASDAQ to maintain an internal audit function. The function would “provide management and the audit committee with ongoing assessments of the Company’s risk management processes and system of internal control.” In addition, the company’s audit committee would be required to meet periodically with the internal auditors and oversee the internal audit function. If implemented, the rule would require companies listed prior to June 30, 2013 to establish the internal audit function by December 31, 2013. Companies listed after June 30, 2013 would have to establish the function prior to listing.

The purpose of the proposed rule is to ensure that listed companies have a mechanism to regularly review and assess their internal controls and ensure management and audit committees receive information about risk management. The NASDAQ also believes the internal audit function will assist companies in complying with Rules 13a-15 and 15d-15, which require management to evaluate a company’s internal controls on a quarterly basis.

Despite the rule’s requirement of an internal audit function, the proposed language permits companies “to outsource this function to a third party service provider other than its independent auditor.” So, while the rule permits the internal audit work to be done by an outside third party, the company cannot engage the same auditing firm as both its internal and external auditor. In other words, the company needs both an independent outside auditor that cannot act as the inside auditor and an inside auditor that can be an outside auditor as long as it’s not the independent outside auditor.

Although most companies listed on the NASDAQ already have an internal audit function, the proposed rule would bring the NASDAQ into alignment with the New York Stock Exchange, which already requires its listed companies to have an internal audit function. See NYSE Listed Company Manual Section 303A.07(c).

The deadline for comments on the proposed rule is March 29, 2013.

Consenting Adults: D.C. Circuit Tells Press to Stay Out of SEC-AIG Relationship

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Ringed Book

What happens between a mature multinational insurance corporation and its regulator is nobody’s business, or so says the United States Court of Appeals for the D.C. Circuit, which issued an opinion in SEC v. AIG on February 1, telling the press that it couldn’t have reports prepared by an AIG consultant under a consent decree with the SEC.

In 2004—years before AIG would rise to infamy in the financial collapse—the SEC charged AIG with securities violations, and the result was a consent decree requiring, among other things, that AIG hire a consultant to review AIG’s transaction policies and procedures and to prepare reports. The court supervising the decree later allowed disclosure of the consultant’s reports twice: to the Office of Thrift Supervision and the House of Representatives. Sue Reisinger, a reporter for Corporate Counsel and American Lawyer, wanted to know what the consultant found at the government bailout recipient. Not being a regulator or constitutionally-created legislative body, Ms. Reisinger turned to the courts for access. The district court found that the consultant’s reports were “judicial records” to which Reisinger had a common law right of access. The court of appeals disagreed.

Whether something is a judicial record depends on the role it plays in the adjudicatory process. The court of appeals noted that the consultant’s reports were not relied upon by the district court in any way, and thus never found their way into the fabric of the court’s record or decision-making process. Though merely filing the reports with the court would not have been sufficient to transform them into the type of judicial records Reisinger sought, the court of appeals held that filing was “very much a prerequisite.” Thus, while the terms of the decree requiring a consultant were surely important to the district court, the court was agnostic as to the eventual content of the reports. In other words, Reisinger had the substantive cart before the procedural horse, and whatever those reports eventually contained, their import did not work to make them judicial records. READ MORE →

Tim Pawlenty To Champion Deregulation at Financial Services Roundtable

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On September 20, 2012, the Financial Services Roundtable (FSR), a trade organization representing the 100 largest financial services companies in the country, announced that former Minnesota Governor Tim Pawlenty will become its new President and Chief Executive Officer on November 1. Pawlenty will succeed Steve Bartlett, who announced his retirement plans in March. Pawlenty spent 15 years as a labor lawyer before serving as a state representative and later Governor of Minnesota.

FSR actively lobbies for changes to the Dodd-Frank Act and its supporting regulations. Its goals include defeating Dodd-Frank’s price controls on debit card fees, the Volcker Rule, and whistleblower provisions. Dodd-Frank requires the drafting of over 300 new regulations that will apply to banks and other financial firms. FSR took the lead on past deregulation efforts, including some of the efforts to repeal the Glass-Steagall restrictions on affiliations between banks and insurance companies. FSR has also filed amici briefs in several important financial cases at both the appellate and Supreme Court level. READ MORE →