INSIDE THIS ISSUE

•   Proposed $8.5 Billion Bank Of America/Countrywide RMBS Settlement To Remain In Federal Court

•   Scott+Scott Proceeds In Case Against Canadian Oil Company

•   Shareholder Votes On Executive Compensation Tell Boards To Curb Excesses

•   AT&T’s Acquisition Of T-Mobile Delayed By Antitrust Challenges

•   Scott+Scott Attorney Races In Ironman World Championship, Kailua-Kona, Hawaii

•   Conferences And Educational Seminars

•   On The Record

(Flashlit version)

Proposed $8.5 Billion Bank Of America/Countrywide RMBS Settlement To Remain In Federal Court

Parties challenging the fairness of the proposed $8.5 billion Bank of America/Countrywide residential mortgage-backed securities settlement—including a group of pension funds being represented by Scott+Scott—recently received a favorable ruling that will make it far more likely investors will be given the opportunity to fully vet the fairness of this historic settlement.

In an opinion issued on October 19, 2011, the Honorable William H. Pauley III of the U.S. District Court for the Southern District of New York determined that Bank of America’s and Countrywide’s proposed $8.5 billion settlement should proceed in federal court.  The settling parties had originally filed the settlement in state court and hoped to obtain judicial approval of the settlement under the more lenient standards set forth in Article 77 of the New York Code.  One month after the settlement was filed in state court, however, a group of investors in Countrywide’s mortgage-backed securities removed the case to federal court.

            Bank of America and Countrywide sought to have the case remanded back to state court, but after fully briefing the issue, Judge Pauley determined that the case was governed by the Class Action Fairness Act of 2005 (“CAFA”) and, accordingly, should stay in federal court.  The court noted that the case involved:  (1) a claim for monetary relief, (2) involved 100 or more persons, and (3) presented common questions of law or fact.

The court concluded that:  The Settlement Agreement at issue here implicates core federal interests in the integrity of nationally chartered banks and the vitality of the national securities markets.  A controversy touching on these paramount federal interests should proceed in federal court.  And Congress enacted CAFA to provide a federal forum for such cases.”  Order at 21 (internal citations omitted).

            The court’s ruling is significant because Bank of America, Countrywide, and the other settling parties must now show that the settlement satisfies the requirements of Rule 23 of the Federal Rules of Civil Procedure, which requires the settlement to be fair and in the best interests of the entire class of investors who purchased Countrywide’s residential mortgage-backed securities.

Rule 23 will also require the court to examine the process leading up to the settlement, which was negotiated privately between Bank of America, Countrywide, Bank of New York Mellon, and a select group of institutional investors led by Goldman Sachs.  The court’s ruling is a positive development for pension funds and other institutional investors—including many of Scott+Scott’s pension fund clients—that were not included in the settlement negotiations and have not been given access to materials that purportedly support the settlement that the parties reached in the case.

The matter is captioned Bank of New York Mellon, et al. v. Walnut Place LLC, et al., No. 11-civ-5988.

Table of Contents

 

Scott+Scott Proceeds In Case Against Canadian Oil Company

On September 16, 2011, the Honorable Jed S. Rakoff of the U.S. District for the Southern District of New York has issued a decision in the case of St. Lucie County Fire District Firefighter’s Pension Trust Fund, et al. v. Oilsands Quest Inc., et al., No. 11-civ-1288, denying the motion to dismiss the case filed previously by the defendants.  With the decision, Scott+Scott has been given the green light to proceed aggressively in a case concerning incorrect announcements and inflation of false hopes surrounding the discovery and extractability of oil.

Scott+Scott initially filed a complaint on February 24, 2011, on behalf of a group of lead plaintiffs, investors in Oilsands Quest, a Canadian company engaged in the business of extracting bitumen from what are geologically termed “oilsands.”  On June 2, 2011, Scott+Scott filed an amended complaint in the action.  The complaint alleges that officers and directors of the company effectively created a “modern day goldrush” by touting the discovery of—and the company’s rights to—valuable bitumen in the Canadian oil sand regions of Saskatchewan in order to grossly inflate the value of Oilsands Quest Inc.  From the beginning, however, the defendants knew that the vast majority of the company’s acreage could, in fact, contain no oil at all; and that for those areas that did contain potential oil, it would not be possible to extract it absent some new technology.  As alleged in the complaint, the company was expending funds for unused equipment and performing meaningless “tests” such as sticking a large “curling iron” into the ground to make it appear to investors that it was making progress.  Once the truth about the lack of oil, lack of technology, and certain accounting irregularities was slowly unearthed and leaked, investors were left financially harmed.

Judge Rakoff’s decision permits the case to proceed against the company, its named officers and directors, and an oil and gas consultant used by the company to estimate the amount of oil on its lands.  As such, Scott+Scott instantly filed discovery requests seeking documents and information from the defendants and will proceed to take depositions and prepare the case for trial.  As the case progresses, Scott+Scott will continue to update the potential class of investors and the general public.

Table of Contents

 

Shareholder Votes On Executive Compensation Tell Boards To Curb Excesses

            The global financial crisis of 2008-2009 galvanized a shareholder movement to limit executive compensation.  Congress recognized the need to curb excessive executive compensation packages when it enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”).

            Dodd-Frank was enacted to provide for financial regulatory reform in order to protect investors and consumers from dangerous Wall Street practices, including excessive executive compensation and related corporate governance practices.  Dodd-Frank addresses executive compensation and corporate governance through the legislation’s “say-on-pay” provisions.  The Senate Report accompanying the bill stated Dodd-Frank was enacted in response to the economic crisis during which “corporate executives received very high compensation despite the very poor performance by their firms.”  S. Rep. No. 111-176, at 133 (2010).

            The say-on-pay law requires publicly-traded companies to put executive compensation to an advisory vote of the shareholders every three years.  The legislation also imposes an advisory shareholder vote on golden parachutes, which are payments made to top executives when their employment is terminated.  In addition, the legislation mandates independence requirements for members of a board’s compensation committee.

            Shareholder votes on executive compensation and golden parachutes are advisory, meaning non-binding on the board.  However, such votes allow shareholders to be heard regarding executive compensation and, indeed, that was Congress’ intent.

            Prior to Dodd-Frank, shareholders could signal their discontent with executive compensation packages only through voting against re-election of board members who sat on the compensation committee.  The say-on-pay vote is a more targeted way for shareholders to express their views on compensation.

            When Congress enacted the say-on-pay provisions, it intended to give shareholders a greater voice in corporate governance.  The say-on-pay law gives shareholders a mechanism for expressing their views on whether the corporation’s executive compensation is in the best interests of shareholders.  Dodd-Frank contemplated that the result of a say-on-pay vote would be a direct referendum on whether the executive compensation paid by the board of directors to the top executives of the corporation actually serves the best interest of the shareholders.

            In January 2011, the say-on-pay provision became mandatory, and by the end of 2011, all publicly traded companies will be required to include advisory compensation votes on proxy statements.  So far, shareholders have voted down executive compensation packages in 1.6% of say-on-pay votes.  Shareholders have voted no when compensation was increased over the prior year despite the company’s declining performance.

            A boards’ failure to abide by shareholders’ negative vote recommendations is potentially a breach of the fiduciary duties directors owe to the company.  One of those duties is the duty of loyalty, which requires directors and officers to act in good faith and in the best interest of the corporation.  Board members may be acting disloyally, that is, not in the best interest of the company or its shareholders, when they award large pay increases in years when the company performs poorly.  Sometimes awarding executives with bonuses and pay increases also violates a company’s written compensation policy.  In these situations, a negative shareholder vote on compensation is direct evidence that the decision was against the best interests of the company and shareholders, in violation of the high standards boards are supposed to hold themselves to, in conducting the affairs of the corporation.

Table of Contents

 

AT&T’s Acquisition Of T-Mobile Delayed By Antitrust Challenges

            Back in March, AT&T Inc. announced that it had acquired T-Mobile USA Inc. from its German parent company, Deutsche Telekom AG.  If completed, the $39 billion merger likely would create the nation’s largest wireless carrier.  The deal, however, was met with resistance from antitrust and regulatory authorities in the United States.  On August 31, the Department of Justice (the “DOJ”) filed suit in the U.S. District Court for the District of Columbia to prevent the merger from taking place.

            The overarching goal of the federal antitrust laws is the promotion of competition.  In order to achieve the goal of competition, the federal government reviews potential mergers in order to prevent market concentration.  Companies are required to notify the Federal Trade Commission (the “FTC”) and the Assistant Attorney General of the DOJ of any contemplated mergers and acquisitions that meet a certain threshold of commerce.  To give companies guidance, the DOJ and FTC release Horizontal Merger Guidelines that sets forth the criteria that the agencies use when analyzing a potential merger or acquisition.

AT&T touted the merger as being pro-competitive and also released public statements arguing that the acquisition would improve cell service and would create as many as 96,000 new jobs.  Antitrust authorities have disagreed, however.  In an August 31 press release, Deputy Attorney General James M. Cole stated:  “The combination of AT&T and T-Mobile would result in tens of millions of consumers all across the United States facing higher prices, fewer choices and lower quality products for mobile wireless devices.”  Currently four wireless providers, AT&T, Verizon, T-Mobile, and Sprint account for more than 90% of mobile wireless connections in the United States.  In addition, the DOJ complaint asserts that AT&T and T-Mobile directly compete nationwide in 97 of the country’s 100 largest markets.

Not only have government authorities sought to block the merger, but also competitors such as Sprint Nextel Corp. and Cellular South Inc. have filed briefs with the court arguing that the merger should be prevented.  There are some organizations wanting to see the merger completed.  According to the Center for Public Integrity, a nonprofit news agency, at least two dozen charities have written in support of the merger.  These charities were recipients of large AT&T donations, however, raising questions about their true motives.

The DOJ is also seeking to block a much smaller acquisition by H&R Block Inc. of 2SS Holdings Inc., the maker of TaxACT software products.  This case is looked at as a potential template of how the AT&T suit will proceed.  “It doesn’t matter whether it’s a relatively small transaction or a transaction involving billions of dollars, the law should be applied the same way,” stated Joseph Wayland, the deputy head of the DOJ antitrust division in the trial’s closing arguments.

Table of Contents

 

Scott+Scott Attorney Races In Ironman World Championship, Kailua-Kona, Hawaii

Scott+Scott attorney Amanda Lawrence recently competed in the 2011 Ford Ironman World Championship in Kailua-Kona, Hawai’i.  The world famous race is a grueling triathlon made up of a 2.4 mile swim, a 112 mile bike ride, and a 26.2 mile run.  Set on the “Big Island” of Hawai’i, the annual championship race is considered the toughest—and therefore the most prestigious—Ironman course in the world.  Competitors swim through rough open waters, whose high temperatures prevent the use of buoyant wetsuits, cycle amidst strong winds through the Hawaiian “lava desert,” and battle extreme heat and high humidity throughout the marathon.

In order to participate in the World Championship, athletes must compete and place highly in one of the other Ironman races held throughout the world, which draw full fields of often close to 3,000 athletes.  Ms. Lawrence qualified to compete in the championship by racing in the 2011 Memorial Hermann Ironman in Woodlands, Texas, where she won her age group division by 30 minutes.  Ms. Lawrence then embarked on a months-long intensive training schedule to prepare for the Ironman Hawai’i.

On October 8, 2011, Ms. Lawrence completed the World Championship race in Hawai’i in 10:51:28, beating her qualifying time.  Her swimming leg was completed in 01:11:25, and her cycling leg was completed in 05:51:20.  The real victory, however, came in the marathon run that Ms. Lawrence finished in a personal best time of 03:42:53, beating her total goal time by 25 minutes.  This rare event (a record time on such a difficult course) was the fitting end to a “smooth race” for Ms. Lawrence in which she carefully monitored her pace, as well as her food and water intake in the difficult conditions.  “It was a long, but fun day” according to the Connecticut-native.  “A lot of people were suffering in the heat and high winds and had to walk the marathon.  It was nice to not join them and give it all I had.”

Table of Contents

 

Conferences And Educational Seminars

+ October 30November 2, 2011

International Foundation of Employee Benefits Plans (IFEBP) 57th U.S. Annual Employee Benefits Conference

New Orleans Morial Convention Center

New Orleans, LA

The Annual Employee Benefits Conference provides four days of education, roundtable discussions, and networking events.  Taft-Hartley and Public Sector fund trustees, administrators, business managers, and association leaders, as well as service providers to the funds will be in attendance to learn the latest cost-saving ideas, legislative and legal developments in the pension fund and financial areas.  Participants may earn continuing education credit and certification.

 

+ November 1 – 3, 2011

Governance, Risk Management and Compliance Summit

Hilton Back Bay

Boston, MA

Various panels of experts will address the best methods of compliance, and offer suggestions as to how to effectively respond to ambiguous mandates.  Case studies will also outline key components of the Sarbanes-Oxley Act and offer audit strategies for testing and forensic investigations.

 

+ November 14 – 15, 2011

American Society of Pension Professionals & Actuaries (ASPPA) Cincinnati Pension Conference

Northern Kentucky Convention Center

Covington, KY

The ASPPA Cincinnati Pension Conference is celebrating its fourth successful year.  The conference provides continuing education to members and to the industry as a whole.  ASPPA currently conducts a wide variety of conferences focusing on the most current retirement plan topics each year. National and regional conferences offer unique opportunities for participants to exchange views and meet with the top players and decision makers of the pension industry.

 

+ November 15 – 17, 2011

International Brotherhood of Electrical Workers (IBEW) 2011 Annual Membership Development Conference

Paris Hotel & Conference Center

Las Vegas, NV

More than 1,300 IBEW delegates representing 700,000 IBEW members attended last year’s conference.  The Annual Membership Conference is produced using dynamic and innovative agenda topics.  Speakers’ presentations follow an educational approach while updating all on current legislation affecting unions.

 

+ November 15 – 18, 2011

State Association of County Retirement Systems (SACRS) Annual Fall Conference

The Westin South Coast Plaza

Costa Mesa, CA

In these turbulent economic times, the members, beneficiaries, and stakeholders of member systems want to be assured,  more than ever, that their interests are appropriately served by the fiduciaries they elected or appointed to the governing boards, and that the management of the retirement systems is as professional as ever.  The SACRS conference provides the trustees a venue for education and problem solving.

 

+ November 16 – 17, 2011

The Taxpayers Against Fraud Education Fund SEC Whistleblower Boot Camp

Embassy Row Hotel

Washington, D.C.

The Taxpayers Against Fraud Education Fund (TAF) is a nonprofit public interest organization dedicated to combating fraud against the federal government through the promotion and use of the federal False Claims Act and its qui tam provisions.  The False Claims Act is the single most important tool U.S. taxpayers have to recover the billions of dollars stolen through fraud by U.S. government contractors every year.  The False Claims Act contains qui tam, or whistleblower, provisions.  Qui tam is a unique mechanism in the law that allows citizens with evidence of fraud against government contracts and programs to sue, on behalf of the government, in order to recover the stolen funds.  In compensation for the risk and effort of filing a qui tam case, the citizen whistleblower may be awarded a portion of the funds recovered.

 

November Union Events

 

+ November 2 – 3, 2011

AFL-CIO Convention, Metal Trades Department 69th Convention

Bally’s Hotel & Conference Center

Las Vegas, NV

 

+ November 17 – 18, 2011

International Federation of Professional & Trade Engineers

The Signature MGM Grand Hotel

Las Vegas, NV

 

Government Finance Officers’ Association Conferences

 

+ November 7 - 9, 2011

Alaska GFOA

Westmark Fairbanks Hotel and Conference Center

Fairbanks, AK

 

+ November 15 – 18, 2011

Colorado GFOA

Copper Mountain Conference Center

Copper Mountain, CO

 

+ November 15, 2011

Connecticut GFOA

Aqua Turf Club

Plantsville, CT

 

+ November 16 – 18, 2011

Texas GFOA

La Torretta Lake Resort & Spa - Conroe

Montgomery, TX

Table of Contents

On The Record

“Litigation is the pursuit of practical ends, not a game of chess.”

--Felix Frankfurter, New York Court of Appeals Justice, born November 15, 1982

Indianapolis v. Chase Nat’l Bank of City of New York, 314 U.S. 63 (1941)

Table of Contents

Scott + Scott LLP is a nationally recognized law firm headquartered in Connecticut with offices in New York City, Ohio and California. The firm represents individual as well as institutional investors who have suffered from corporate stock fraud. Scott+Scott has participated in recovering billions of dollars and achieved precedent-setting reforms in corporate governance on behalf of its clients. In addition to being involved in complex shareholder securities and corporate governance actions, Scott+Scott also has a significant national practice in antitrust, ERISA, consumer, civil rights and human rights litigation. Through its efforts, Scott+Scott promotes corporate social responsibility.

Scott+Scott’s PT+SM System is the firm’s proprietary investment portfolio tracking service. Carefully combining the firm’s proprietary computer-based portfolio monitoring software with Scott+Scott’s hands-on approach to client  relations is a proven method for institutional investors and their trustees to successfully

  • Monitor their investment portfolios  
  • Identify losses arising from corporate fraud    
  • Consider what level of participation any given situation requires   
  • Recover funds obtained on their behalf through investor litigation action  

To obtain more information about Scott+Scott’s PT+SM services or to schedulea presentation to fund trustees, fund advisors or asset managers, please contact:    David R. Scott + Toll Free: 800.404.7770     email: drscott@scott-scott.com + UK Tel: 0808.234.1396     

  • Privacy Statement

    Legal

    Scott + Scott LLP, Attorneys at Law Copyright © 201

    Attorney Advertising: Results depend on a number of factors unique to each matter. Prior results do not guarantee a similar outcome.