October 2012 Newsletter


•  Scott+Scott NY Moves Office To The Chrysler Building

•  Scott+Scott Secures $26 Million Settlement ForInvestors In Washington Mutual Mortgage-Backed Securities

•  03Q2012 Antitrust Developments

•  Facebook IPO Fallout Prompts SEC To Review QuietPeriod Rules

•  LIBOR Manipulation Harms Investors

•  Conferences and Educational Seminars

•  On The Record


Scott+Scott NY Moves Office To The Chrysler Building

Scott+Scott is pleased to announce the firm has moved its New York City office to the fortieth floor of the Chrysler Building at 405 Lexington Ave, New York, NY.  Phone, fax, email, and website contact information will remain the same.  The decision to move to the Chrysler Building satisfied a need for more space as Scott+Scott continues to expand.  The iconic Chrysler Building, with its elaborate art deco ornamentation, is a symbol of American labor.  Commissioned by Walter Chrysler of Chrysler Motors in 1929 and designed by architect Van Alen, the Chrysler building was the tallest building in the world upon its completion.  A bank tower at 40 Wall Street was being erected at the same time with plans of surpassing the Chrysler building in height.  Van Alen secretly built a 185-foot spire inside the building, which, at the last minute, was hoisted through the roof making the Chrysler Building 119 feet taller than the Wall Street building.  It is currently the third tallest building in New York City and continues to be a popular tourist attraction.

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Scott+Scott Secures $26 Million Settlement For Investors In Washington Mutual Mortgage-Backed Securities

            On September 14, 2012, the Honorable Judge Marsha J. Pechman of the Western District of Washington granted preliminary approval to a $26 million settlement between investors in Washington Mutual mortgage-backed securities and the Washington Mutual entities that issued the securities.  Scott+Scott secured the settlement for a certified class of plaintiffs that have been fighting the Washington Mutual affiliates in federal court over their sale of mortgage-backed securities for over three years.  Mortgage-backed securities are financial instruments that entitle the holder of the instrument to receive the principal and interest payments from a pool of mortgage loans.  The settling defendants are WaMu Capital Corp., the underwriter of the securities, and WaMu Asset Acceptance Corp., the issuer of the securities, as well as four individual Washington Mutual executives.  The securities at issues are WaMu Mortgage Pass-Through Certificates Series 2006-AR7, 2006-AR12, 2006-AR16, 2006-AR17, 2006-AR18, and 2007-HY1.  Every aspect of the litigation was vigorously contested.  Throughout the course of the litigation, over 27 million pages of documents were produced and 54 depositions taken.  The $26 million settlement represents a tremendous result.

            Washington Mutual grew from a regional bank based in Seattle, Washington, into one of the largest banks in the country.  After a long period of expansion, concerns about the company’s financial condition led to its seizure by federal regulators in September 2008 during the height of the financial crisis.  Since that time, it has been the subject of government inquiries, best-selling books, and numerous lawsuits.

Scott+Scott originally filed suit on behalf of investors in Washington Mutual mortgage-backed securities in 2009.  The suit alleged that documents and materials issued in connection with the securities contained misleading statements and omissions about the mortgage loans that formed the collateral of the securities.  Prior to the settlement, the case was scheduled for trial beginning September 17, 2012.  The defendants originally moved the court to dismiss the case under numerous theories on April 27, 2010.  On September 28, 2010, the court refused to dismiss the case, ruling that the challenged statements in the offering documents may have misled the plaintiff investors.  On October 21, 2011, the court granted the plaintiffs’ motion for class certification, allowing a class of investors to sue the Washington Mutual entities, rejecting claims by the defendants that the investors needed to sue the defendant Washington Mutual entities individually.  On April 13, 2012, the defendants again sought to dismiss the case on summary judgment, arguing again that the offering documents of the securities did not contain misleading information, and even if they did, the misleading statements did not cause the plaintiffs’ damages.  On July 23, 2012, the court again refused to dismiss the case, ruling that the plaintiffs presented sufficient facts to sustain claims against the defendants for federal securities law violations.

The settlement is being administered by The Garden City Group (www.gcginc.com), which may be contacted at (800) 757-9279 or by mail addressed to WAMU MBS Litigation c/o The Garden City Group, P.O. 9875, Dublin, OH 43017-5775.

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03Q2012 Antitrust Developments

Supreme Court Grants Certiorari in Antitrust and Consumer Cases

            Next term, the Supreme Court will address two antitrust cases and one consumer case.  First, the Supreme Court will address the standards for class certification in Comcast Corp. v. Behrend, a case bringing market allocation claims under Section 1 of the Sherman Act and monopolization claims under Section 2 of the Sherman Act.  The question presented is “[w]hether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.”  In the second antitrust case that will be heard next term, the Court granted review in the U.S. Federal Trade Commission’s (“FTC”) challenge of a hospital merger case in FTC v. Phoebe Putney Health System, Inc., No. 11-1160.  The Eleventh Circuit had held that even though a merger of the two hospitals would create a monopoly, the merger was immune from the antitrust laws under the state action doctrine because Georgia law gives a state hospital the authority to regulate hospitals in the state.  The decision will address the state action doctrine, which gives antitrust immunity when allegedly anticompetitive conduct is mandated by a state’s regulation and is subject to the state’s active supervision.  In the consumer case, Standard Fire Insurance Co. v. Knowles, No. 11-1450, the Supreme Court will address the scope of the Class Action Fairness Act of 2005 (“CAFA”).  This will be the first time the Court has addressed this landmark piece of legislation.  The Court will address a split among the circuits on whether a plaintiff can avoid federal jurisdiction under CAFA by stipulating to seek damages less than $5 million, the jurisdictional minimum that would allow the case to be removed from state court to federal court.

Second Circuit Refines Antitrust Summary Judgment Standard

            The Second Circuit issued a ruling in In re Publication Paper Antitrust Litigation, No. 11-101-CV, 2012 WL 3156156, at *7 (2d Cir. Aug. 6, 2012), interpreting the Supreme Court’s decision in Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986), which sets forth the plaintiff’s burden on summary judgment.  Matsushita holds that evidence of “conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy.”  Publication Paper puts three important glosses on the Matsushita standard.  First, the Second Circuit joined the Third and Seventh Circuits in holding that the standard is more easily satisfied and broader inferences are permitted when the plaintiffs’ theory is economically plausible.  Second, the plaintiff is not required to rely solely on uncontradicted evidence of collusion: “The [Matsushita] Court surely did not mean that the plaintiff must disprove all nonconspiratorial explanations for the defendants’ conduct.”  Third, joining the Third, Seventh, and Eleventh Circuits, Publication Paper held that Matsushita’s restrictions as to what inferences are permissible do not apply where the plaintiff provides direct or unambiguous evidence of an unlawful agreement.  Under this standard, the Second Circuit held that the plaintiffs, purchasers of high quality paper used for magazines, had put forward evidence that tended to exclude the possibility that the defendants were engaged in unilateral conduct.  The court vacated the lower court’s grant of summary judgment as to all but one defendant.

Seventh Circuit Addresses the Reach of U.S. Antitrust Law to Extraterritorial Conduct

            The Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”) limits the reach of the U.S. antitrust laws to extraterritorial conduct.  Under the FTAIA, U.S. antitrust laws apply to domestic and import commerce, as well as foreign trade that has a “direct, substantial, and reasonably foreseeable effect” on U.S. domestic or import commerce.  15 U.S.C. §6a(1).  In Minn-Chem Inc. v. Agrium Inc., No.10-1712, the Seventh Circuit held that the FTAIA was not a jurisdictional statute, but rather states the elements of a Sherman Act claim involving foreign conduct.  This holding provides advantages to antitrust plaintiffs because on a motion to dismiss for lack of jurisdiction under Federal Rules of Civil Procedure Rule 12(b)(1), the defendants may put forward evidence outside the complaint, whereas on a motion to dismiss under Rule 12(b)(6), aimed at the sufficiency of pleading the elements of a claim, the court generally will limit its review to the four corners of the complaint and all well-pleaded allegations are presumed true.  The Seventh Circuit also addressed how “direct” an effect must be in order to fit within the FTAIA’s exception.  The Seventh Circuit interpreted “direct” to mean a “reasonably proximate causal nexus,” an interpretation that broadens the scope of liability for companies operating in foreign jurisdictions.

President Obama Nominates Law Professor Joshua Wright as FTC Commissioner

            On September 10, 2012, President Obama announced his intention to fill departing Commissioner J. Thomas Rosch’s seat by nominating antitrust scholar and law professor Joshua Wright as a Commissioner.  The FTC is headed by five commissioners who are nominated by the U.S. President and confirmed by the Senate to serve seven-year terms.  Wright is a professor at George Mason University School of Law and previously served at the FTC from 2007 to 2008.

DOJ Continues to Collect Fines for Price Fixing in Auto Parts Industry

            The U.S. Department of Justice (“DOJ”), Antitrust Division announced another guilty plea in connection with the global cartel investigation in the automotive parts industry.  Japanese auto parts manufacturer Nippon Seiki Co., Ltd. will plead guilty and agreed to pay a $1 million fine in connection with its role in the price-fixing cartel.  To date, the ongoing investigation has led eight companies and 11 individuals to plead guilty to criminal antitrust charges.  The DOJ has obtained more than $786 million in fines.

Barclays to Pay $450 million to Settle LIBOR and EURIBOR Manipulation Charges

On June 27, 2012, the DOJ’s Commodity Futures Trading Commission (“CFTC”), and U.K. Financial Services Authority (“FSA”) announced separate agreements with Barclays to settle charges that Barclays manipulated the Euro Interbank Offered Rate (“EURIBOR”) and the London Interbank Offered Rate (“LIBOR”).  EURIBOR and LIBOR are benchmark interest rates used in financial markets around the world.  Barclays paid $160 million to the DOJ in exchange for non-prosecution under U.S. criminal laws.  The CFTC agreement settled charges of attempted manipulation and false reporting and imposed a $200 million penalty.  The FSA also imposed a penalty of £59.5 ($92 million USD) against Barclays.

            The agencies’ investigations revealed that between 2005 and 2008, Barclays’ EURIBOR and LIBOR submissions were at times based on Barclays’ and other leading banks’ financial positions on interest rate derivative contracts and a desire to conceal the banks’ poor financial conditions during the depths of the financial crisis. 

            Barclays is the second bank to settle charges of LIBOR rate manipulation.  UBS disclosed in March 2011 that it had received subpoenas from U.S. and Japanese regulators over its LIBOR reporting, and in July 2011, UBS reported that it received immunity from U.S. regulators and was cooperating with the investigation. 

Anti-retaliation Legislation Proposed for Antitrust Whistleblowers

            Senators Patrick Leahy (D-VT), Herb Kohl (D-WI), and Chuck Grassley (R-IA) introduced legislation (S. 3462) that would protect whistleblowers from being fired after reporting anticompetitive conduct to the DOJ.  An identical bill has been introduced in the House of Representatives (H.R. 6409).  If whistleblowers believe they are a victim of retaliation, under the bill, they would have the ability to file a complaint with the Department of Labor.  The legislation comes after recommendations from the U.S. Government Accountability Office (GAO) to add whistleblower protections to the Antitrust Criminal Penalty Enhancement and Reform Act of 2004, which provides leniency to parties that report cartel behavior to the authorities.  The GAO report also discussed adding financial incentives for antitrust whistleblowers, but the bill does not include such a provision.  The proposed legislation has been referred to various committees for recommendations.

AU Optronics Corp Fined $500 Million for Price-Fixing Following Guilty Jury Verdict

Following guilty jury verdicts last spring, District Judge Susan Illston for the Northern District of California sentenced Taiwanese company AU Optronics to pay a fine of $500 million, and two of its executives received three-year prison terms and $200,000 fines for their roles in a price-fixing conspiracy involving thin film transistor liquid crystal display (TFT-LCD) screens, commonly used in televisions and computer screens.  AU Optronics was the only defendant in the TFT-LCD price-fixing cartel to take its case to trial.  Seven other companies and 22 executives were indicted in the scheme.  To date, the DOJ has netted over $900 million in fines resulting from plea agreements.  Prosecutors had sought $1 billion fines and 10-year prison sentences against AU Optronics and its executives.  Still, the $500 million penalty imposed on AU Optronics ties the single largest fine in an antitrust case.  In 1999, Swiss pharmaceutical company F. Hoffmann-LaRoche Ltd. received a $500 million fine for its role in the worldwide vitamins cartel.  Judge Illston said $1 billion was excessive and would likely put the company out of business.  Further, AU Optronics faces liability in a great number of civil actions filed by TFT-LCD purchasers.

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Facebook IPO Fallout Prompts SEC To Review Quiet Period Rules

            On August 23, 2012, in response to complaints that smaller investors were not privy to as much information as larger investors in the wake of the Facebook Initial Public Offering (“IPO”), the U.S. Securities and Exchange Commission (“SEC”) announced a review of its “quiet period” rules.  Presently, the SEC’s quiet period rules limit the communications that an issuer can have with investors during an IPO.  Under the Securities Act of 1933, as modified in 2005, a quiet period extends from the time a company files a registration statement with the SEC until SEC staff declare the registration statement “effective.”  During this period, the federal securities laws and SEC regulations restrict what information a company and related parties can release to the public.

            On August 23, 2012, Mary L. Schapiro, the Chairman of the SEC, wrote a letter to Congressman Darrell E. Issa (R-CA), the Chairman of the House Committee on Oversight and Government Reform.  Previously, Mr. Issa had written to Ms. Schapiro and expressed concern over “[t]he informational disadvantage to the less informed public,” which he said “proved harmful” in the Facebook IPO.  In her letter, Ms. Schapiro addressed issues related to the regulatory structure of IPOs.  Specifically, Ms. Schapiro stated that the SEC is considering whether it should relax rules governing what companies can say to investors ahead of IPOs.  Ms. Schapiro wrote, “We should review our communications rules and the application of the quiet period in light of the changes in . . . communications technology that have occurred since our last major reform in 2005.”  Ms. Schapiro declined to offer any specifics related to the Facebook IPO.

            Ms. Schapiro further detailed her belief that the SEC’s “rules must keep pace with innovations in technology and methods of communication in order to properly balance [the SEC’s] mission to protect investors, facilitate capital formation, and maintain fair and orderly markets.”  She added that “[a]s communications technology changes, and, importantly, the manner in which companies and investors communicate changes, we need to continue to assess the effectiveness of our rules.”  Nevertheless, Ms. Schapiro affirmed her belief “that the quiet period rules continue to provide substantive benefits to the marketplace . . . .”

            Transparency and uniformity are essential to the IPO process.  As Ms. Schapiro discussed in her letter, the quiet period rules are designed to ensure that the prospectuses and documents related thereto serve as a comprehensive guide for potential investors.  By limiting disclosures in the time period immediately preceding an IPO, the quiet period rules should keep a fair playing field for all potential investors.

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LIBOR Manipulation Harms Investors

Over the last several months, the U.S. government, along with its counterparts in Europe and Asia, has unearthed information indicating that several of the largest banks in the world manipulated the London Interbank Offered Rate (“LIBOR”).  LIBOR is an interest rate used in countless financial instruments, from asset-backed securities to interest rate swaps.  Almost every investor holds some instrument incorporating LIBOR, and has potentially suffered losses as a result of the manipulation.

            LIBOR is set by a panel of banks that report the daily interest rate they are charged by other banks to borrow money in specific currencies for specific periods of time.  So, there are actually multiple LIBOR rates, and corresponding LIBOR panels—for example, there are LIBOR rates to borrow U.S. dollars for one month, three months, and other time periods, as well as LIBOR rates to borrow Euros for various time periods.  Each panel consists of about 12 to 16 banks, and the rate is set by discarding the top and bottom quartiles of rates and then averaging the remaining rates.

            Although the process of discarding the highest and lowest rate submissions is supposed to insulate LIBOR from manipulation, the government investigations have found that the banks were able to do just that.  Prior to, and after, the financial crisis, banks would communicate with each other and discuss what rates to submit.  The banks did this in order to make sure that any instruments involving LIBOR they were trading were on the right side of the LIBOR rate, thereby maximizing their trading profits.  This conduct was improper because even within any given bank, the bank’s trading operations are not supposed to contact the department responsible for LIBOR submissions.  The investigations found instances where Barclays and other banks engaged in such misconduct for their own benefit.

            In addition, the investigations also found that during the height of the financial crisis, panel banks made artificially low LIBOR submissions.  It appears the motivation for doing so was to present a better financial condition than was actually the case.  In other words, if a bank reported that it had to pay a high interest rate to borrow money, this would signal that the bank had poor credit and might cause investors and lenders to stop doing business with the bank.  The investigations indicate that Barclays and other banks engaged in this conduct.  Some of the other banks known to be subject to investigation include Royal Bank of Scotland, Citibank, JPMorgan, and UBS.

            As a result of the investigations, there have been calls for regulators to oversee the way LIBOR is set in order to ensure that the rate is accurate going forward.  Certain banks may also pay penalties to the regulators or face charges.

            But penalties may not compensate investors harmed by the banks’ wrongful conduct.  For instance, if an investor held a financial instrument and was entitled to interest payments pegged to LIBOR, at least during the height of the financial crisis, if not during a longer period, the investor would have received lower interest payments than it should have.  Such investors may be able to bring antitrust, breach of contract, and other claims to address their losses.

            Scott+Scott has been a leader in investigating the LIBOR scandal, and seeking remedies for its victims.  Investors interested in understanding their options should contact David R. Scott at (800) 404-7770 or by email at drscott@scott-scott.com.

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Conferences and Educational Seminars


+October 2-5, 2012

Illinois Public Pension Fund Association (IPPFA) Midwest Pension Conference

Grand Geneva Resort & Spa

Lake Geneva, WI

The IPPFA educational programs are certified trustee programs and are offered throughout the year.  Other IPPFA-sponsored programs include regional seminars, referral programs, online training, legislative support, an annual conference, as well as financial support to all member families who have lost a police officer or firefighter in the line of duty.


+October 3-5, 2012

Council of Institutional Investors (CII) Fall Conference

The Westin Seattle

Seattle, WA

The Council of Institutional Investors is known as “The Voice of Corporate Governance” and this year’s theme is “Engaging in the Future.”  More than 200 members will attend this annual conference.


+October 7-10, 2012

The Public Safety Employees Pension & Benefits Conference (PSEP&BC) sponsored by NCPERS

Omni Royal Orleans Hotel

New Orleans, LA

As an affiliate of NCPERS, this conference is the ideal venue to exchange information, learn examples of best practices, and the latest strategies in investment and management.


+October 7-10, 2012

National Council on Teacher Retirement (NCTR) 90th Annual Conference

Loew’s Ventana Canyon

Tucson, AZ

Meredith Williams, formerly of the Colorado Public Employees Retirement System, will be introduced as the new executive director. The National Teacher of the Year Award Dinner and address will be celebrated mid-conference.


+October 7-10, 2012

Florida Public Pension Trustees Association (FPPTA) Fall Trustees School

Hyatt Coconut Point

Bonita Springs, FL

The FPPTA Certification Program has become the model for funds and state organizations across the nation.  The program provides an educational setting with courses ranging from basic to advanced and are open to all.


+October 7-10, 2012

Public Pension Financial Forum (P2F2) 9th Annual Educational Conference

New Orleans Marriott

New Orleans, LA

P2F2 is the only professional organization specifically organized for and by public pension finance professionals.  Members may earn up to 27 continuing professional education (CPE) units.  P2F2 is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of CPE.


+October 8-10, 2012

National Coordinating Committee for Multiemployer Plans (NCCMP) Annual Conference

The Diplomat Hotel

Hollywood, FL

For more than 30 years, NCCMP has been representing the interests of multiemployer plan participants in the halls of congress, in regulatory arenas, and in the courts.  NCCMP has saved multiemployer plans hundreds of millions of dollars in regulatory and administrative costs.


+October 13-17, 2012

National Pension Education Association (NPEA) Annual Conference

Omni Parker House Hotel

Boston, MA

This year’s conference includes topics on ethics, reporting, and communicating under the “New Rules.”  Pension legal issues and legislative changes, as well as how to best portray benefits to the media will be highlighted.


+October 14-17, 2012

Massachusetts Association of Contributory Retirement Systems (MACRS) Fall Conference

Sheraton Springfield

Springfield, MA

MACRS conducts two statewide meetings each year.  Each meeting features speakers, small group presentations, and roundtable discussions.  In addition, each meeting is an important opportunity for the informal exchange of ideas and information about our retirement benefits.


+October 17-19, 2012

National Association of Securities Professionals (NASP) 16th Annual Trustee Education Conference

The Westchester Marriott Hotel

Tarrytown, NY

Since 1986, NASP has been the premier non-profit organization advocating for women and people of color in the financial services industry.  NASP’s annual pension and financial services conference has evolved into one of the industry’s most respected and influential educational forums.


+October 21-23, 2012

Fiduciary Investors Symposium (FIS)

Casa Del Mar

Santa Monica, CA

Delegates will be asked to consider how their fiduciary duty extends to influence sustainability issues, including environmental risks, growing unemployment, infrastructure inadequacies, and corporate behavior.  The event will also tackle how the fiduciary duty of meeting the pension promise could be improved by engaging cutting edge investment thinking and innovative portfolio construction tools and techniques.



Government Finance Officers Association Conferences


+October 2-5, 2012

South Dakota Municipal League

Ramkota Hotel and Conference Center

Pierre, SD


+October 3-5, 2012

Louisiana GFOA

Baton Rouge Crowne Plaza

Baton Rouge, LA


+October 3-5, 2012

Montana League of Cities and Towns

Hilton Garden Inn

Kalispell, MT


+October 4-5, 2012

Great Plains GFOA

Univ. of Nebraska at Omaha

School of Public Administration

Omaha, NE


+October 10-12, 2012

Kansas GFOA

Sheraton Overland Park Hotel

Overland Park, KS


+October 17-19, 2012

Virginia GFOA

Omni Charlottesville

Charlottesville, VA


+October 17-19, 2012


Holiday Inn Airport

Des Moines, IA


+October 18-19, 2012

Tennessee GFOA

Embassy Suites Murfreesboro

Murfreesboro, TN


+October 24-26, 2012

Texas Municipal League

Embassy Suites Hotel

San Marcos, TX




+October 3-5, 2012

Western Canadian GFOA

Fairmont Hotel Vancouver

Vancouver, BC

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On The Record

“Distinctions between citizens solely because of their ancestry are by their very nature odious to a free people whose institutions are founded upon the doctrine of equality.”

Harlan F. Stone, U.S. Supreme Court Justice, born October 11, 1872

Hirabayashi v. U.S., 320 U.S. 81, 100 (1943)

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Scott + Scott LLP is a nationally recognized law firm headquartered inConnecticut with offices in New York City, Ohio and California. The firmrepresents 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