Ethics Follies

Facebook Founder Follows Financial Superheroes to Give Away Fortunes

2010-12-12T11:35:00.000-08:00

Billionaire Mark Zuckerberg, cocreator of Facebook,
gives away majority of his fortune

I went to a business lunch with an attorney a few months ago who was very wealthy. Not earned wealth, but epic family money. Unlike many of my friends, who would just pick up a fifteen dollar lunch check and say "you can get it next time," more for convenience than anything else, this particular attorney studied the bill intensely. She then hailed down the waiter abruptly and went over the bill in great detail. With the mistake that had been made in the bill was discovered (an extra iced tea!! Aaahhhh!), she used that as a rationalization to only tip ten percent on her soup. "That will show him to not be perfect," she must have thought. I marveled at the thrift of the attorney knowing she would never be able to spend all of the money in her many accounts and portfolios.

I've also found a different, more generous, approach to wealth by those who were suddenly wealthy. New money seems to be less of a burden. Despite earning their fortunes through tireless work or a moment of genius that resulted in a novel patent idea, I have had clients who were so generous it was inspiring. I know a professor at a major teaching hospital who is paid about one hundred million dollars a year for a medical device he invented and licenses to a major pharmaceutical company. He drives a 1985 pick up truck and worn blue jeans every day. And unlike lottery winners who are suddenly wealthy, but didn't earn the money, he gives a large portion of his earnings each year to nonprofits in San Antonio and Kerrville, Texas. He's happy with the life he had when he became remarkably wealthy and had the good sense to not change what already worked. Unlike the attorney who was not very generous to the waiter, money was not a burden to him because he had not been born with it. It is a luxury to have... and to let go of...

Bill Gates and Warren Buffett are self-made men who concluded recently they could substantially change civilizations by focusing their billions of dollars on certain humanitarian efforts. To increase the impact of "letting go of" some of their fortunes, they have invited other billionaires to dinner (it was probably pretty nice, don't you imagine? No cold cut platter I'm guessing) to discuss their goals. It conjures a vision of financial super heroes with special cash capes and cool gadgets that only gazillionaires could have made in underground "Iron Man" type labs.

From what the Wall Street Journal reported, it sounds as though the "new money" billionaires have decided that growing huge wealth into even larger wealth is not as exciting as helping millions of people live better lives. If that isn't an inspiration, I don't know what is. Here's a take on the story by Philiana Ng.

Mark Zuckerberg to Give Away FortuneFacebook founder Mark Zuckerberg has signed on to give away a portion of his fortune, the Wall Street Journal reports.

The 26-year-old is one of 16 billionaires who have agreed to join "Giving Pledge," which asks its participants to publicly commit to giving away a majority of their wealth.

Zuckerberg, who founded Facebook in his Harvard University dorm and is portrayed by Jesse Eisenberg in The Social Network, is one of the youngest billionaires in the world. According to Forbes, he is said to be worth $6.9 billion, though the Journal notes his value is theoretical.

Earlier this year, Zuckerberg donated $100 million to the Newark public school system, which was announced on The Oprah Winfrey Show.

Facebook co-founder Dustin Moskovitz, who is played by actor Joseph Mazzello in the film, has also agreed to participate.

New additions to the pledge include AOL co-founder Steve Case, Carl Icahn and Michael Milken, an ex-junk-bond king. Other billionaires who had previously signed on include Oracle founder Larry Ellison, George Lucas and New York Mayor Michael Bloomberg.

Bill Gates and Warren Buffett started Giving Pledge in order to persuade the rich to be more philanthropic. Last year, the two hosted several dinners for billionaires to discuss setting up the pledge, which then led to its official launch in June.

"I view this as a call to others who might in their 30s or 40s use some of their creativity to get involved in philanthropy earlier in life," Milken said of Giving Pledge.

Steve and wife Jean Case chose to participate because of they wanted to learn from each other. "It is less about what size of a check that you write and more about the outcome," Steve Case said. His wife noted that people who start web companies, like Zuckerberg and the founders of AOL, want "to change the world," so it was only appropriate that "they are giving back in big ways."

Former SEC Investigator (and former Ethics Follies speaker!) May Have Known of R. Allen Stanford's Ponzi Scheme

2010-05-05T09:19:00.000-07:00

Is Spencer Barasch the man who single-handedly let alleged Ponzi schemer R. Allen Stanford (pictured left) off the hook three times, costing investors more than $7 billion? Yikes!

Mr. Barasch gave a humous talk at Ethics Follies 2008 about business ethics right here in the River City. I guess Ethics Follies was even more in touch with current ethics issues than it even realized! Who would have guessed that a guest speaker at Ethics Follies could be responsible for a $7 Billion dollar Ponzi scheme?

Or is he an honest Dallas defense attorney unfairly blamed for the failings of a government regulator? Yeah...I have no idea. He seemed like a nice guy when he was at the Empire Theatre and he understood ethics issues which relate to SEC investigations.

The Securities and Exchange Commission's Inspector General has issued a 151-page report that says he was the former. It skewers Barasch, former head of the SEC's enforcement efforts at its Fort Worth office, as a poster child for an agency critics say missed one of the biggest investor scams of our generation. Mr. Barasch and his law firm deny his culpability.

Here's an interesting quote from the Executive Summary of the SEC Inspector General's Report of Investigation on the Allen Stanford debacle:

"Finally, the OIG investigation revealed that the former head of Enforcement in Fort Worth, who played a significant role in numerous decisions by the Fort Worth office to deny investigations of Stanford, sought to represent Stanford on three separate occasions after he left the SEC, and represented Stanford briefly in 2006 before he was informed by the SEC Ethics Office that it was improper to do so.

This former head of Enforcement in Fort Worth was responsible for: (1) in 1998, deciding to close a MUI opened regarding Stanford after the 1997 broker-dealer examination; (2) in 2002, deciding to forward the [redacted] complaint letter to the TSSB and deciding not respond to the [redacted] complaint or investigate the issues it raised; (3) in 2002, deciding not to act on the Examination staff's referral of Stanford for investigation after its investment adviser examination; (4) in 2003, participation in a decision not to investigate Stanford after receiving [Confidential Source]'s complaint letter comparing Stanford's operations to the [redacted] fraud; (5) in 2003, participating in a decision not to investigate Stanford after receiving the complaint letter from an anonymous insider alleging that Stanford was engaged in a "massive Ponzi scheme;" and (6) in 2005, informing senior Examination staff after a presentation was made on Stanford at a quarterly summit meeting that Stanford was not a matter they planned to investigate.

Yet, in June 2005, a mere two months after leaving the SEC, this former head of the Enforcement in Fort Worth e-mailed the SEC Ethics Office that he had been "approached about representing [Stanford] . . . in connection with (what appears to be) a preliminary inquiry by the Fort Worth office." He further stated, "I am not aware of any conflicts and I do not remember any matters pending on Stanford while I was at the commission."

After the SEC Ethics Office denied his request in June 2005, in September 2006, Stanford retained this former head of Enforcement in Fort Worth to assist with inquiries Stanford was receiving from regulatory authorities, including the SEC. He met with Stanford Financial Group's General Counsel in Stanford's Miami office and billed Stanford for his time. Following the meeting, he billed 6.5 hours to Stanford on October 4, 2006, for, inter alia, "review[ing] documentation received from company about SEC and NASD inquiries." On October 12, 2006, he billed Stanford 0.7 hours for a "[t]elephone conference with [Stanford Financial Group's General Counsel] regarding status of SEC and NASD matters." In late November 2006, he called his former subordinate, the Assistant Director who was working on the Stanford matter in Fort Worth, who asked him during the conversation, "[C]an you work on this?" and who in fact told him, "I'm not sure you're able to work on this." Near the time of this call, he belatedly sought permission from the SEC's Ethics Office to represent Stanford. The SEC Ethics office replied that he could not represent Stanford for the same reasons given a year earlier and he discontinued his representation.

In February 2009, immediately after the SEC sued Stanford, this same former head of Enforcement in Fort Worth contacted the SEC Ethics Office a third time about representing Stanford in connection with the SEC matter - this time to defend Stanford against the lawsuit filed by the SEC. An SEC Ethics official testified that he could not recall another occasion in which a former SEC employee contacted his office on three separate occasions trying to represent a client in the same matter. After the SEC Ethics Office informed him for a third time that he could not represent Stanford, the former head of Enforcement in Fort Worth became upset with the decision, arguing that the matter pending in 2009 "was new and was different and unrelated to the matter that had occurred before he left." When asked why he was so insistent on representing Stanford, he replied, "Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines."

The OIG investigation found that the former head of Enforcement in Fort Worth's representation of Stanford appeared to violate state bar rules that prohibit a former government employee from working on matters in which that individual participated as a government employee. Accordingly, we are referring this Report of Investigation to the Commission's Ethics Counsel for referral to the Office of Bar Counsel for the District of Columbia and the Chief Disciplinary Counsel for the State Bar of Texas, the states in which he is admitted to practice law."

Boy Scouts of America's Apology Could Have Saved Millions: The Ethics of Accountability

2010-04-23T19:07:00.000-07:00

Do you remember the lawsuit where McDonalds corporation was hit with a really large judgment when the woman spilled her hot McDonalds' coffee in her lap? It was a claim that could have been contained or handled without litigation, but arrogance and a lack of an ethical culture of accountability caused the jury to punish McDonalds and their attorneys (who were reportedly horribly arrogant in front of the jury with their cross exam of the plaintiff). Without having heard the testimony, I am speculating that a similar situaton happened with the man who sued the Boy Scouts of America (a huge organization with good lawyers). It was reported by the judge that no one with the Boy Scout's corporation had even attempted to apologize for the sexual abuse of seventeen boys by the same Boy Scouts assistant troup leader. The Boy Scouts of America was aware that the assistant troup leader had prior sexual abuse incidents in his past, but allowed him to accompany the plaintiff on the campout.

There's no doubt that there are wonderful Boy Scout troups all over the country. However, the corporation itself could probably take a lesson from some of them in taking accountability and respect. Imagine, if you will, for a second that your son was injured at a campout, and you told the company, and they came to your home to tell you how sorry they were, and even offered to pay for counseling or medical care, and perhaps some other cash for your troubles. It is highly likely the settlement would have been less than the $18M judgment. More importantly, headline news about the long history of sexual abuse in the Boy Scouts organization would have been avoided. The actual public relations cost and damage to the organization of this judgment is far in excess of the jury's punative number.

Like McDonalds, the jury is sending a message of accountability and respect. Smart corporations will anticipate the need for a program in their organization to take control of this sort of situation and find genuine remorse for individuals who are harmed or believe that they are. The full story of the historically large judgment follows.

PORTLAND, Ore. - A jury on Friday ordered the Boy Scouts of America to pay $18.5 million to a man sexually abused by a former assistant Scoutmaster in what is believed to be the largest such award against the organization.

Lawyers for Kerry Lewis had asked the jury to award at least $25 million to punish the Boy Scouts for what the jury had already agreed in the first phase of the trial was reckless and outrageous conduct.

They also noted the Boy Scouts had never apologized to Lewis, who said Friday at a news conference that the verdict shows that "big corporations can't be above the law."

Lewis added that an apology "would mean something to me, but I'm not expecting it."

The jury decided on April 13 that the Boy Scouts were negligent for allowing former assistant Scoutmaster Timur Dykes to associate with Scouts, including Lewis, after Dykes admitted to a Scouts official in 1983 that he had molested 17 boys.

The jury awarded Lewis $1.4 million in compensatory damages with that verdict and agreed the Boy Scouts of America were liable for punitive damages to be determined in the second phase of the trial that ended Thursday.

Boy Scouts officials declined to comment on details of the case because other cases are pending, but issued a statement saying it maintains a "rigorous" system to screen Scout leaders.

"The Boy Scouts of America has always stood against child abuse of any kind," it said.

The case was the first of six filed against the Boy Scouts in the same court in Oregon, with at least one other separate case pending. If mediation fails to settle the next cases, they also could go to trial.

Significant award
The amount of the damages surprised Patrick Boyle, editor of the Youth Today newspaper and author of a book about sex abuse within the Scouts.

"That's a lot of money. This is by far the biggest award against the Scouts for sex abuse, probably by several times," Boyle said.

The award is also significant, he said, because it is only against the national Boy Scouts organization and is not divided among any of its local councils or other defendants.

Kelly Clark and Paul Mones, the attorneys for Lewis, told the jury the Boy Scouts were nearly a $1 billion corporation that could well afford punitive damages intended to deter them from similar conduct in the future.

Clark and Mones said Friday after the verdict that publicity about the case also could act as a deterrent.

"They've always settled. And they're silent. No one hears because it does not see the light of day," Mones said. "What we saw here in Portland really pulled back the covers on the Boy Scouts of America, and what it did to cover up."

During the first phase of the trial, Clark and Mones introduced more than 1,000 files the Scouts kept on suspected child molesters from 1965-85 as evidence the organization should have put a sex abuse prevention program into place decades ago.

The Scouts executive now in charge of those files admitted they had never been evaluated or analyzed to help design or determine the effectiveness of a prevention program that is now in place.

A number of witnesses testified for the Scouts during the second phase of the trial that they participated in a training and prevention program since at least the late 1980s. None could say why the Scouts had not yet made the "youth protection training" program mandatory.

Punitive damages
Under Oregon law, 60 percent of the punitive damages awarded by the jury will go to the state crime victim compensation fund.

Because the Boy Scouts have settled some lawsuits out of court, it is difficult to say where the total awards imposed by the Portland jury rank with those of the past.

In a 1987 sex abuse case, an Oregon jury awarded more than $4 million to the victim, including $2 million in punitive damages against the Scouts that were thrown out when the case was appealed. A jury in San Bernardino, Calif., awarded $3.75 million to three sex abuse victims in 1991.

Boyle said from 1984 through 1992, the Scouts were sued at least 60 times for alleged sex abuse with settlements and judgments totaling more than $16 million.

"Cusenbary Takes Out Trash Without Being Asked by Wife"

2009-11-17T07:33:00.000-08:00

It always seems funny to me that the government has its own press releases. This was the most entertaining back when labs all over the country were investigated by the Office of Inspector General (OIG) billing for labs that weren't actually done. "Lab Scam" was in the news due to the many press releases by the OIG, which bragged with abandon about the millions of dollars recouped for the Medicare Trust. One laboratory paid the largest Medicare settlement in history, and it took on a permanent place in my slide deck that was part of my regulatory talk I did for hospitals, labs and doctor groups before working at Mission Pharmacal. Joking aside, the press releases raise awareness of what is illegal in the area of billing the federal government and raised awareness of why the correct billing codes must be used and audited internally to avoid liability.

It would be cool if we all did press releases when we thought we did a good job, like "Cusenbary Daughter Has Awesome Volleyball Game," or "Cusenbary Takes out Trash Without Being Asked by Wife." This time, it's the SEC who is tooting it's horn about the computer programmers who kept the fraud looking real for Bernie Madoff. I'm glad the SEC has found yet more criminals who were enticed by Bernie's scheme to defraud innocent investors. I just wish they had caught them years ago before people, companies and charities lost everything they had saved. The SEC's press release follows:

Washington, D.C., Nov. 13, 2009 -- The Securities and Exchange Commission today charged two computer programmers for their role in helping convicted Ponzi schemer Bernard L. Madoff cover up the fraud at Bernard L. Madoff Investment Securities LLC (BMIS) for more than 15 years.

The SEC alleges that Jerome O'Hara of Malverne, N.Y., and George Perez of East Brunswick, N.J., provided the technical support necessary to produce false documents and trading records, and took hush money to help keep the scheme going.

"Without the help of O'Hara and Perez, the Madoff fraud would not have been possible," said George S. Canellos, Director of the SEC's New York Regional Office. "They used their special computer skills to create sophisticated, credible and entirely phony trading records that were critical to the success of Madoff's scheme for so many years."

According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, Madoff and his lieutenant Frank DiPascali, Jr., routinely asked O'Hara and Perez for their help in creating records that, among other things, combined actual positions and activity from BMIS' market-making and proprietary trading businesses with the fictional balances maintained in investor accounts. O'Hara and Perez wrote programs that generated many thousands of pages of fake trade blotters, stock records, Depository Trust Corporation (DTC) reports and other phantom books and records to substantiate nonexistent trading. They assigned file names to many of these programs that began with "SPCL," which is short for "special."

A separate computer internally known as "House 17" was used to process BMIS investment advisory account data at the direction of Madoff, DiPascali and others. The SEC alleges that O'Hara and Perez knew that the House 17 computer was missing a host of functioning programs necessary for actual securities trading and reporting. According to the SEC's complaint, they recognized that the trades being entered into House 17 and the account statements and trade confirmations being sent to investors did not reflect actual trades.

The SEC alleges that O'Hara and Perez had a crisis of conscience in 2006 and tried to cover their tracks by attempting to delete approximately 218 of the 225 special programs from the House 17 computer. But they did not delete the monthly backup tapes. O'Hara and Perez then cashed out hundreds of thousands of dollars each from their personal BMIS accounts before confronting Madoff and refusing to generate any more fabricated books and records.

According to O'Hara's handwritten notes from the encounter, one of them told Madoff, "I won't lie any longer. Next time, I say 'ask Frank,'" meaning that Madoff should rely on DiPascali alone to create the false data and reports.

The SEC's complaint alleges that Madoff responded by telling DiPascali to offer O'Hara and Perez as much money as necessary to keep quiet and not expose the misrepresentations. O'Hara and Perez considered the offer and demanded a salary increase of nearly 25 percent along with one-time bonuses in late 2006 of more than $60,000 each. They stated to DiPascali at the time that they did not ask for more because a greater amount might appear too suspicious. DiPascali then managed to convince O'Hara and Perez to modify computer programs so that he and other 17th floor employees could create the necessary reports themselves.

This is the SEC's latest enforcement action concerning the Madoff fraud since the scheme collapsed last December. The Commission previously charged Madoff and BMIS, DiPascali, and auditors David G. Friehling and Friehling & Horowitz CPAs, P.C.. The SEC also charged certain feeders with committing securities fraud through a Ponzi scheme perpetrated on advisory and brokerage customers of BMIS. Madoff, DiPascali and Friehling have all pleaded guilty to criminal charges related to their conduct.

The SEC's complaint specifically alleges that O'Hara and Perez aided and abetted violations of Sections 10(b), 15(c) and 17(a) of the Exchange Act and Rules 10b-3, 10b-5 and 17a-3 thereunder, and Sections 204, 206(1) and 206(2) of the Advisers Act and Rule 204-2 thereunder. Among other things, the SEC's complaint seeks financial penalties and a court order requiring O'Hara and Perez to disgorge their ill-gotten gains.

The Commission acknowledges the assistance of the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation, with which the Commission has coordinated its investigation. The Commission's investigation is continuing.

Ethics Follies 2009: A Seriously Fun Ethics Conference

2009-10-18T11:08:00.000-07:00

More than sixty San Antonio judges, attorneys, doctors, managers, actors and other professionals rehearsed for months to prepare for Ethics Follies 2009. The "Follies" is a city-wide musical ethics conference held at the Charline McCombs Empire Theatre last week on Oct. 14th at 2 p.m. and Oct. 15th at 7 p.m. The conference is in it's twelfth year, and is organized by the award-winning local chapter of the Association of Corporate Counsel. The goal is to raise ethics awareness of San Antonians in hopes of preserving the trusting and honest nature of business and legal transactions in our city. It is also a major funding source for The Community Justice Program, which provides free legal services to those who can't afford them. Formerly attended by only in-house attorneys, the original musical parodies are now enjoyed by judges, corporate management, lawyers in private practice and the general public. What makes the show fun from a theatrical perspective is the "cream of the crop" cast and crew. Talented performers like Rick Cavender, Heloise, Anna Gangai, Sherry Houston, Steven Bull, Valarie Miller and Jillian Cox make the show fun to see even if you have never heard of theTexas Ethics Rules or Sarbanes Oxley.

Mayor Julian Castro awarded USAA The Ethical Life Award for it's commitment to ethical business and legal practices. San Antonio Bar Association President, Robin Teague and Bar Foundation Chair, Jenny Durbin, presented The Ethical Life Award to attorney George Kampmann.

Attorneys, accountants, and HR professionals received three hours of continuing education credit for attending.

San Antonio is a great place to live and work. The cast and crew of the Follies believe that keeping the courtrooms and boardrooms honest and accountable is a worthy investing of time and talents. USAA, Valero, and Cox Smith are the Community Leader sponsors of the event this year, providing $10,000 each towards the production. Many companies use the Follies to help train their executives since awareness of risk is key to avoiding corporate fraud or theft. Attorneys can also attend the annual event with their clients to get on the same page regarding ethics issues in business and why a code of ethics for an organization can actually be good for profitability due to the reduced risk of litigation and regulatory enforcement actions.
If you'd like to attend and be part of this city-wide ethics conference in 2010, you can register online at www.ethicsfollies.com. Everyone is welcome to attend.

Watching the Watchman & Media Accountability

2009-09-07T21:05:00.000-07:00

Agenda For Hope By Agustin Martin G. Rodriguez

By now, after the Watchmen film has made its theatrical and DVD rounds, Juvenal’s haunting question, "Who watches the Watchmen," should be back in currency. It is a question that can be posed to the institutions of Philippine journalism as much as it can be posed to costumed vigilantes.
Those of us who lived through the last days of martial law know how guerrilla journalism was an essential element in the corrosion of Marcos’s grip over Philippine society. Because journalists were able to leak the truth regarding the war in Mindanao, the terrible violations of the basic rights of the people, the (under)mining of the Philippine economy by his family and cronies, the upsurge of anger and the growing resistance awakened by the assassination of Ninoy and the subversion of the snap elections, the general populace was able to cultivate its indignation, gather its courage, and take part in the events the led to EDSA. These same but freer institutions of journalism investigated the unaccounted riches, the jueteng connections, the midnight cabinet decisions, and the unabashed cronyism of another corrupt president, and led to his downfall. It continues to expose the follies and misdemeanors of this present administration and its allies.
I doubt if anyone who values our beleaguered democracy does not value the role of the press as one of the primary watchdogs of our democracy. Without it, the predatory elite who rule our country will go their merry way with full impunity. At least with the press hounding them, they have to give a thought to trying to cover their tracks. Even the present set of politicians, with all their sense of impunity, must show a semblance of accountability for their acts of corruption and abuses of power. This is the reason why so many journalists have been killed in the last 10 years.
However, despite their vital role in our democracy, we are also aware that they too need to be held accountable for their practices. One only need look at the yellow journalism that adorns our sidewalks to realize how journalists could destroy reputations and violate people’s privacy with the kind of reporting that aims to cheaply titillate the public’s imagination. Or one can tune in to a random AM station and hear commentators ranting freely against some government agency regarding some issue on which they have not done their full investigation. Television too is replete with such careless journalism. There are TV investigation shows where, without any apology for the violation of people’s rights to a fair hearing, they barge into alleged abusive officials’ offices or criminals’ homes to present a hasty conclusion about their guilt. People’s lives could be destroyed in an hour’s showing based on less than a week’s worth of sloppy snooping.
When the media behave badly, who reports on them? In a recent paper written for the Loyola Schools’ Agenda for Hope project entitled "Exacting Accountability from the Media: Positive Signs," academic and journalist Chay Florentino Hofileña noted that there is a growing awareness among the news outlets that their credibility is dropping. She notes a Pulse Asia Survey of 2004 where television had a 67%, radio 20%, and newspapers 5% credibility rating. She attributes the higher TV rating to the perception that TV interviewees are "aired as they speak, with little or no editing or misinterpretation," unlike in newspapers where they are misquoted and misinterpreted. Radio suffers from its low ratings because of its sensationalist reporting and because its reporters are perceived to be corruptible. Becoming aware of these issues regarding their credibility, media have made some steps toward self-regulation.
One major step is the formulation of a code of ethics by some major media organizations like GMA-7, ABS-CBN, and thePhilippine Daily Inquirer (PDI). These codes of ethics, notes Hofileña, "reflect a desire to uphold journalistic standards even in tough situations." They are still considered works in progress, and have not been made public, but they have already been used to sanction media personnel who have violated the most basic principles of these codes. For instance, Ces Drilon was suspended for her Abu Sayaf fiasco.
Hofileña also notes that PDI has set up a reader’s advocate position "to provide readers a venue for voicing complaints and dissatisfaction with the paper’s stories or coverage." The advocate is like the reader’s voice in the newsroom to be the "counter-weight to the otherwise exclusive powers of editors and reporters to define the news agenda." Lorna Kalaw Tirol, the first and so far only reader’s advocate, was able to bring cases against writers who used their columns to make money or as platforms to air their homophobia. Unfortunately, she has resigned from her position and it remains unfilled to this day.
Perhaps, an even more significant sign of hope for increasing media accountability is the engagement of citizen journalists in reporting the news and the practice of civic journalism by local newspapers. With citizen journalists, media outlets open avenues for the input of ordinary citizens in important events such as the elections when ABS-CBN opened its newsrooms to citizen reports. The local press also practices a different kind of journalism in which they dialogue with communities to surface their concerns and help them define solutions to their issues. For instance, journalists in Palawan and Mindanao act as facilitators for public reflections and write as advocates for these communities’ concerns. Hofileña says, "Because citizens are involved in the coverage of events that matter in public life through citizen journalism, they feel a stronger connection with the media. And because journalists, through their practice of public or civic journalism, become more involved in issues and problems that concern communities and ordinary citizens, their stories resonate more with their readers."
Finally, there are the examples of the Philippine Center for Investigative Journalism and Newsbreak, which are news groups put up by journalists who wish to practice journalism according to its highest standards. These groups have been able to raise funding independently, which allows them to genuinely pursue stories without having to prioritize sales or the concerns of their patrons. In these days of 24-hour news TV and Internet journalism, where journalists are pressured to keep feeding their news outlets with breaking stories and newspapers have to compete with the Internet to break interesting and sensational news, we are seeing less of the carefully thought-out story and more of the quick flow of images and sound bites that are not framed by deep background research or rounded out by a fuller reflection on the unfolding of events. These independent groups are able to serve the public by offering well-researched and well thought-out pieces because they are not beholden to commercial or vested interests.
These are only tentative beginnings at self-regulation and greater accountability of the media. These attempts must be further pursued because only if the media govern themselves well will they have the integrity to credibly advocate for good governance and expose the ills of those who govern us. Our Watchmen must strengthen these structures that keep them true to their watch. But just as importantly, we the people must find effective ways to remind them constantly of this vocation they have embraced.

Dr. Agustin Martin G. Rodriguez is associate professor and chair of the Philosophy Department at the Ateneo de Manila University

Pfizer to pay record $2.3B penalty over promotions

2009-09-02T14:16:00.000-07:00

Why does big pharma think it can get away with bribing doctors to prescribe their drugs? Equally amazing is the doctors who put their hands out to accept the goodies. The American Medical Association and the PhRMA Code of Sale Reps Ethics prohibit such behavior and it's thriving according to the article below by Devlin Barrett.

Repeat offender Pfizer paying record $2.3B settlement for illegal drug promotions
By Devlin Barrett, Associated Press Writer
On Wednesday September 2, 2009,

WASHINGTON (AP) -- Federal prosecutors hit Pfizer Inc. with a record-breaking $2.3 billion in fines Wednesday and called the world's largest drug maker a repeating corporate cheat for illegal drug promotions that plied doctors with free golf, massages, and resort junkets.

Announcing the penalty as a warning to all drug manufacturers, Justice Department officials said the overall settlement is the largest ever paid by a drug company for alleged violations of federal drug rules, and the $1.2 billion criminal fine is the largest ever in any U.S. criminal case. The total includes $1 billion in civil penalties and a $100 million criminal forfeiture.
Authorities called Pfizer a repeat offender, noting it is the company's fourth such settlement of government charges in the last decade. The allegations surround the marketing of 13 different drugs, including big sellers such as Viagra, Zoloft, and Lipitor.
As part of its illegal marketing, Pfizer invited doctors to consultant meetings at resort locations, paying their expenses and providing perks, prosecutors said.
"They were entertained with golf, massages, and other activities," said Mike Loucks, the U.S. attorney in Massachusetts.

Loucks said that even as Pfizer was negotiating deals on past misconduct, they were continuing to violate the very same laws with other drugs.
To prevent backsliding this time, Pfizer's conduct will be specially monitored by the Health and Human Service Department inspector general for five years.
In an unusual twist, the head of the Justice Department, Attorney General Eric Holder, did not participate in the record settlement, because he had represented Pfizer on these issues while in private practice.

Associate Attorney General Thomas Perrelli said the settlement illustrates ways the Justice Department "can help the American public at a time when budgets are tight and health care costs are rising."

Perrelli announced the settlement terms at a news conference with federal prosecutors and FBI, and Health and Human Services Department officials.
The settlement ends an investigation that also resulted in guilty pleas from two former Pfizer sales managers.

Officials said the U.S. industry has paid out more than $11 billion in such settlements over the past decade, but one consumer advocate voiced hope that Wednesday's penalty was so big it would curb the abuses.

"There's so much money in selling pills, that there's a tremendous temptation to cheat," said Bill Vaughan, an analyst at Consumers Union, the nonprofit publisher of Consumer Reports.
"There's a kind of mentality in this sector that (settlements) are the cost of doing business and we can cheat. This penalty is so huge I think consumers can have some hope that maybe these guys will tighten up and run a better ship."

The government said the company promoted four prescription drugs, including the pain killer Bextra, as treatments for medical conditions different from those the drugs had been approved for by federal regulators. Authorities said Pfizer's salesmen and women created phony doctor requests for medical information in order to send unsolicited information to doctors about unapproved uses and dosages.

Use of drugs for so-called "off-label" medical conditions is not uncommon, but drug manufacturers are prohibited from marketing drugs for uses that have not been approved by the Food and Drug Administration. They said the junkets and other company-paid perks were designed to promote Bextra and other drugs, to doctors for unapproved uses and dosages, backed by false and misleading claims about safety and effectiveness.
Bextra, for instance, was approved for arthritis, but Pfizer promoted it for acute pain and surgical pain, and in dosages above the approved maximum. In 2005, Bextra, one of a class of painkillers known as Cox-2 inhibitors, was pulled from the U.S. market amid mounting evidence it raised the risk of heart attack, stroke and death. A Pfizer subsidiary, Pharmacia and Upjohn Inc., which was acquired in 2003, has entered an agreement to plead guilty to one count of felony misbranding. The criminal case applied only to Bextra. The $1 billion in civil penalties was related to Bextra and a number of other medicines. A portion of the civil penalty will be distributed to 49 states and the District of Columbia, according to agreements with each state's Medicaid program. Pfizer's top lawyer, Amy Schulman, said the settlements "bring final closure to significant legal matters and help to enhance our focus on what we do best -- discovering, developing and delivering innovative medicines." In her statement, Schulman said: "We regret certain actions taken in the past, but are proud of the action we've taken to strengthen our internal controls and pioneer new procedures." In financial filings in January, the company had indicated that it would pay $2.3 billion over the allegations. The civil settlement announced Wednesday covered Pfizer's promotions of Bextra, blockbuster nerve pain and epilepsy treatment Lyrica, schizophrenia medicine Geodon, antibiotic Zyvox and nine other medicines. The agreement with the Justice Department resolves the investigation into promotion of all those drugs, Pfizer said.

The government said Pfizer also paid kickbacks to market a host of big-name drugs: Aricept, Celebrex, Lipitor, Norvasc, Relpax, Viagra, Zithromax, Zoloft, and Zyrtec.
The allegations came to light thanks largely to five Pfizer employees and one Pennsylvania doctor, who will now share $102 million of the settlement money.
FBI Assistant Director Kevin Perkins praised the whistleblowers who decided to "speak out against a corporate giant that was blatantly violating the law and misleading the public through false marketing claims."

To rein in the abuses, the government's five-year monitoring will force Pfizer to notify doctors about Wednesday's agreement, encourage them to report any similar behavior, and publicly post any payments or perks it gives to doctors.
Under terms of the settlement, Pfizer must pay $1 billion to compensate Medicaid, Medicare, and other federal health care programs. Some of that money will be shared among the states: New York, for example, will receive $66 million, according to the state's attorney general, Andrew Cuomo.

When Pfizer originally disclosed the settlement figure, it also announced plans to acquire rival Wyeth for $68 billion. That deal, which would bolster Pfizer's position as the world's top drug maker by revenue, is expected to close before year's end. Shares of Pfizer dropped 14 cents to $16.24 in midday trading.

AP Business Writer Linda A. Johnson in Trenton, N.J. contributed to this report.

Broadcom Settles Backdating Case For $118 Million; Lawyers' Fees Exceed Amount

2009-09-01T04:32:00.000-07:00

Susan Beck writes an insightful piece on the Broadcome settlement and how the attorneys for both sides are likely to end up the only winners in this derivative suit alleging backdating which settled for $118M:

We're still scratching our heads over this one. Last week, Broadcom announced in an 8K filing https://webmail.missionpharmacal.net/owa/redir.aspx?C=c80dfef620334df18482a43003766fc6&URL=http%3a%2f%2feditorial.incisivemedia.com%2fc%2f12eTn3MHrjolUOU5Y4 that it had settled a stock option backdating derivative suit for $118 million. If approved by Los Angeles federal district court judge Manuel Real, it would be the second-largest backdating settlement for a derivative suit (behind UnitedHealthcare), and one of the biggest derivative settlements ever, according to Kevin LaCroix of The D & O Diaryhttps://webmail.missionpharmacal.net/owa/redir.aspx?C=c80dfef620334df18482a43003766fc6&URL=http%3a%2f%2feditorial.incisivemedia.com%2fc%2f12eTnt12n7cJbZEoKR.Depending on how you look at it, it could appear that all the money will be used to pay lawyers, on the plaintiffs and defense side. You see, Broadcom is liable for a whopping $130 million in attorneys' fees racked up by the 19 officers and directors caught up in backdating charges, including two who face criminal counts. The $118 million that Broadcom will receive--which is coming from its D&O insurers under a settlement--will be eaten up by the $11.5 million fee for the plaintiffs' lawyers and this $130 million-plus defense tab. Broadcom is obligated to pay these defense fees under the indemnification agreements it signed with these officers and directors.You can find the derivative settlement herehttps://webmail.missionpharmacal.net/owa/redir.aspx?C=c80dfef620334df18482a43003766fc6&URL=http%3a%2f%2feditorial.incisivemedia.com%2fc%2f12eTnSfniV16taoHxE. A copy of Broadcom's settlement with its insurers (which mentions the $130 million legal tab) can be found herehttps://webmail.missionpharmacal.net/owa/redir.aspx?C=c80dfef620334df18482a43003766fc6&URL=http%3a%2f%2feditorial.incisivemedia.com%2fc%2f12eTohtIeIPtKl90kr.David Siegel of Irell & Manella, who represents Broadcom, offers a different take on this settlement. "The $118 million represents a payment to Broadcom for its benefit, and the attorneys' fees incurred and yet to be incurred are just one part of the alleged damages the plaintiffs were seeking in this case." He adds that the insurers had disputed their obligation to cover these fees, so it wasn't certain that, absent this settlement, Broadcom could have recovered from its insurers anything close to the full amount it has paid to these defendants' lawyers. "[The insurers] disputed whether they owed anything," he said. Before the settlement, the insurers had paid just $43.3 million of the more than $130 million sought by Broadcom. (This $43.3 million is included in the $118 million settlement amount.)The plaintiffs lawyers who brought the derivative suit--led by Lieff, Cabraser, Heimann & Bernstein--have dropped or released claims against 16 individuals as part of their settlement. The settling defendants deny any wrongdoing. The plaintiffs still have claims against three defendants, including Broadcom cofounders Henry Nicholas III and William Ruehle, who both face criminal charges.Broadcom used David Steuber of Howrey to negotiate with its insurers. Broadcom's special litigation committee was represented by Kaye Scholer.We briefly reached Richard Heimann at Lieff Cabraser as he was about to board a flight, but his cell phone connection ended before we could discuss the settlement in any detail. We left messages for other lawyers at his firm but have not heard back.--Susan Beck

Bank of America Settles SEC Charge for $33 Million

2009-08-04T14:40:00.000-07:00

I have a few bank accounts with Bank of America (BofA), so it's disturbing to see wasteful regulatory penalites paid to the government by BofA while I worry that my money is less than safe and secure in a bank that lost it's shirt last year in the mortgage loan crisis. Here's the rest of the story by my favorite emailed newsletter, Am Law Litigation daily:

Bank of America Pays $33 Million to Settle SEC Charges That It Failed to Disclose Merrill Bonuses to Investors

On Monday, August 3, 2009, Bank of America agreed to pay $33 million to settle SEC allegations that it lied to investors by failing to disclose the $5.8 billion it had agreed to pay to Merrill Lynch & Co. executives before it bought Merrill in September 2008. The settlement came within moments of the SEC's filing of its complaint against BofA http://editorial.incisivemedia.com/c/11XpVJEt09sT5m4pLI in Manhattan federal district court. The SEC's press release on the settlement is here http://editorial.incisivemedia.com/c/11XpW8SNVXhgmwOIyv.
SEC enforcement division director Robert Khuzami called the settlement "significant." So let's take a look at how "significant" $33 million is to Bank of America, which lost $26.8 billion in 2008. For instance, what percentage of the $5.8 billion that BofA secretly agreed to pay to Merrill execs does $33 million represent? Here's the "significant" answer: .57 percent. Or perhaps you'd like to know what percentage of Bank of America's 2008 bonus pool $33 million was. According to the July 30 report on executive bonuses http://editorial.incisivemedia.com/c/11XpWy78RL5DDHz1li issued by New York State attorney general Andrew Cuomo, BofA paid out $3.3 billion in bonuses last year. The bank, in other words, coughed up exactly 1 percent of its bonus pool to the SEC. Ouch--that must really hurt the 172 Bank of America employees who received bonuses of more than $1 million last year, not to mention the 696 Merrill Lynch execs who got more than $1 million.
As part of the settlement, Bank of America did not admit guilt but consented to a judgment enjoining it from violating proxy solicitation rules. The bank was represented in SEC negotiations by Lewis Liman of Cleary Gottlieb Steen & Hamilton, whose office referred our call for comment to Bank of America.
In its complaint, the SEC alleged that Bank of America had already authorized Merrill Lynch to pay up to $5.8 billion in discretionary bonuses for 2008 when it announced its acquisition of Merrill Lynch in 2008, even though proxy materials soliciting shareholder votes on the merger stated that Merrill Lynch had agreed not to pay year-end bonuses or other discretionary compensation to executives without Bank of America's consent. The complaint asserted that the proxy statements were materially false and misleading.

Wachtell, Lipton, Rosen & Katz represented Bank of America in preparing the proxy statement, while Cravath, Swain & Moore served as Merrill Lynch's counsel for the deal. The firms did not return calls seeking comment.

In a statement announcing the complaint and settlement, the SEC's Khuzami said, "Failing to disclose that a struggling company will pay out billions of dollars in performance bonuses obviously violates that duty and warrants significant financial penalty."
The bank released a statement describing the settlement as "an important step forward for Bank of America [that] allows us to focus our energies on enhancing stockholder value." Additionally, the statement says, "Bank of America believes that the settlement...represents a constructive conclusion of this issue."

But not everyone is willing to let go so quickly of the bonus issue that fueled populist rage this spring. Andrew Cuomo put out his own statement http://editorial.incisivemedia.com/c/11XpWXltNyU0USjk85, saying he was "pleased" that the SEC had taken action, but warning that "we want to be clear that our investigation...will continue." (You remember: That's the investigation in which Cuomo forced BofA to cough up the names of Merrill Lynch's bonus recipients http://editorial.incisivemedia.com/c/11XpXmzOJmIoc33CUS, despite BofA's strenuous objections.) We're also guessing that the plaintiffs lawyers who fought to be named lead counsel http://editorial.incisivemedia.com/c/11XpXLO9FawLtdNVHF in the shareholder class action against Bank of America aren't going to go away anytime soon. We called Frederic Fox of Kaplan, Kilsheimer & Fox and Max Berger of Bernstein Litowitz Berger & Grossmann to ask, but we didn't hear back. Peter Hein of Wachtell, who's defending BofA in the class action, told us he "wasn't in a position to comment at this point" on the SEC settlement.

--Drew Combs and Alison Frankel (both rock!)

2009-07-20T14:41:00.000-07:00

Mavericks owner Mark Cuban is to sports team ownership what Paris Hilton is to the entertainment industry. Oddly, we all know their names, but no one knows why! Cuban continues his ego driven rants while in legal trouble for insider trading. The wonderful Am Law Litigation Daily reports below.

The Am Law Litigation Daily
Edited by Susan Beck and Ben Hallman
July 20, 2009
SECURITIES / WHITE-COLLAR

Dewey Dunks SEC in Mark Cuban Insider Trading Case

We're not sure how Dallas Mavericks owner Mark Cuban achieved celebrity status (quick, name another NBA owner), but we do find ourselves curiously drawn to his antics, especially his public fight with the SEC. (We particularly enjoyed the e-mail exchange http://editorial.incisivemedia.com/c/11MZPRPIBmUT2ODKxO between Cuban and an SEC lawyer, reported by The Wall Street Journal's Law Blog.) As you may recall, in November the agency charged Cuban with insider trading of the stock for Mamma.com. On Friday, Dallas federal district court judge Sidney Fitzwater awarded the feisty owner and his lawyers at Dewey & LeBoeuf a big "W." In tossing the suit, Judge Fitzwater agreed with the defense argument that Cuban violated no law when he traded 600,000 shares of his stock. "Trading on the basis of material, nonpublic information cannot be deceptive unless the trader is under a legal duty to refrain from trading on or otherwise using it for personal benefit," Judge Fitzwater wrote. Read the decision here http://editorial.incisivemedia.com/c/11MZV9Q6IOtLE4lGM5.
According to the SEC’s complaint, in 2004 Cuban bought a 6.3 percent stake in Mamma.com, a Canadian company that operated an Internet search engine. In the spring of 2004, Mamma.com decided to raise capital through an offering that would dilute the value of its stock, and it invited Cuban, then its largest known shareholder, to participate in the offering. The CEO of Mamma.com, Guy Faure, claims Cuban promised to keep this information confidential. Soon after learning this news, Cuban sold all of his Mamma.com shares, thus avoiding losses in excess of $750,000. After the sale, Cuban filed the required SEC disclosure statement.
The SEC accused Cuban of insider trading, based on his promise to keep the information confidential. But Cuban's lawyers argued that a confidentiality agreement alone is insufficient to establish misappropriation theory liability. Instead, the government must show that the agreement arises in the context of a preexisting fiduciary relationship, or creates a relationship that bears all the hallmarks of a fiduciary relationship. "There is no general prohibition on the trading of securities based on material, nonpublic information," they wrote in their motion to dismiss http://editorial.incisivemedia.com/c/11MZVz4rECi8Vf5ZyS. "Although the SEC has often argued that any recipient of material, nonpublic information has potential insider trading liability, the U.S. Supreme Court has repeatedly rejected the SEC's view. Instead, the Court has insisted that insider trading liability requires a showing of fraud."
Judge Fitzwater agreed. But the ruling wasn't a total loss for the SEC: The agency can amend its complaint and file again.
Cuban's defense team includes Dewey & LeBoeuf lawyers Lyle Roberts (who writes the 10b-5 Daily blog), Ralph Ferrara, Stephen Best, Henry Asbill, and Christopher Clark. "In the end, the court held that any attempt by the SEC, by rule or enforcement action, to impose insider trading liability on someone who does not agree to both preserve confidences and not use the confidential information for his own benefit must fail," the firm said in a statement.
--Ben Hallman

Cyber Security Settlement: $9.75 million Settlement for Alleged Data Breach

2009-07-16T07:03:00.000-07:00

Speechly Bircham LLP reports on The Association of Corporate Counsel's webpage that TJX, the parent company of TK Maxx, has paid settlement monies of $9.75m to 41 US states following a data breach disclosed in January 2007 which reportedly exposed at least 45.7 million credit and debit cardholders to possible fraud in the computer systems. The breach began in July 2005.
TJX stress, however, that they did not breach any consumer or data security laws and that this pay-out is not an admission of liability. Instead, TJX have stated that "the decision to enter into this settlement reflects TJX's desire to concentrate on its core business without distraction and to promote cyber security measures that will benefit all consumers".
The settlement monies will create a data security fund for states and cover expenses incurred in relation to the states' investigations. TJX agreed to increase their security measures to prevent anything like this happening again...

Not that anything happened... LOL

Lessons Learned from Michael Jackson

2009-06-29T12:08:00.000-07:00

After the saddness over Michael Jackson's passing fades a bit, and Bernie Madoff was sentenced for the biggest ever ponzi scheme, I can more clearly see a lesson for corporate America in the life and demise of Michael Jackson. Like Elvis Presley and other famous people, Mr. Jackson appears to have surrounded himself with "yes men" and "yes women," including health care providers, who didn't use their influence to break him from his prescription drug addictions, if any. Although we'll all know more when the toxicology studies come back from the lab in a few weeks, it appeared that Mr. Jackson was barely over 100 pounds at 5' 10" tall. His children's nanny has made public statements that she had to assist in pumping Mr. Jackson's stomach on many occasions because he had taken too many narcotics and was ill. He appears to have sedated himself into permanent unconsiousness with prescription medications obtained from his own doctor, who reportedly received $150,000 a month. Being an unethical doctor isn't a crime in and of itself. He has a duty, however, to take note of addictive behavior and change medications or therapies if it is in the best interest of the patient. Again, awaiting the lab results, it should be noted that the only thing that keeps a doctor from being a drug dealer is a medical license and a fiduciary duty to "do no harm." As an attorney who used to successfully defend doctors in front of their hospital peer review committees and their state licensing boards, I am very confident telling you that doctors are slow to pull someone's medical license. Self-policing doesn't work in the US. Period. Unless a doctor has a long history of severely injuring patients, he or she will get a "second chance." Sometimes a third chance. It's a shame Mr. Jackson didn't get a "second opinion" about his daily use of painkillers. Anna Nicole Smith appeared to have prescribed drugs in her possession that killed her due to addictive abuse. To claim this was "news" is sort of ridiculous when Ms. Smith appeared on many talk and award shows higher than a kite. Did anyone ever hear what happened to the doctors who kept her in supply? I didn't read a word about it in the media after the dust cleared.

Mr. Jackson is not that different from some powerful corporate CEOs or Presidents in the fact that he could fire people who tried to redirect him and was driven by a strong sense of self confidence. He also experienced some fantastic results with the choices he made. The irony is that this strong drive and lack of the ability to listen to other people's ideas and warnings can be dangerous, or in Mr. Jackson's case, deadly. In a company, confronting the CEO with what an executive believes is illegal or unethical could result in an ugly confrontation that takes weeks to recover from or result in a termination. When this behavior by a leader is evident, it "chills" communication and the leader starts to work in a vacuum, lacking support and direction from those who surround him or her.

Whether you are discussing the bad decisions by Kenneth Lay at Enron or Mr. Jackson's possible decision to surround himself with a physician who would prescribe drugs that he has a history of not being able to use in moderation, the result is the same. Everyone around them sees a disaster coming, but no one wants to walk into the line of fire and do what might be considered "right" because the risk is too high. The result is also disturbing. Whether its the demise of 14,000 people's jobs and 401ks at Enron despite many people in the company knowing about the fraud before it was discovered by the SEC or the death of a cultural icon when friends and family fail to intervene, it shouldn't have to happen. It wouldn't have happened if people who knew said something.

We should also take a lesson from the loss of Michael Jackson and say what we need to say, now, before it's too late.

Tears, Sex and Opportunism

2009-06-25T13:09:00.000-07:00

If South Carolina Governor Mark Sanford wants to sleep with a woman in Argentina, it is none of our business as US citizens. However, if Mark Sanford lies, and drag his staff into it, he forces the issue. From what I've read, Governor Sanford's staffers first said Governor Sanford is "off being alone, which is just sort of how he is..." Then they say, "oops, no, actually he decided to do something exotic, so he flew to Argentina. Yeah, that's the ticket, but he went there because he loves their political history!" Wow. At least the staffers are creative. Then, to make this really memorable, the Governor gives a tearful speech about how he is cheating on his wife in Argentina. And, wait for it... has been doing this for years! The new ethical twist I'd like to add to the already obvious lies that were told is the comments made by readers following the online news stories . Many of them lunge onto the opportunity to attack the Republican Party, as if Governor Sanford is the only member. Have we already forgotten John Edwards and Bill Clinton's affair with a cigar?! Intellectual honesty must be as tough to come by as a politician who has the decency to divorce his wife before sleeping with another woman. It's not about political parties, its about lack of accountability, lack of commitment and lack of ethics. It makes America look weak. Dana Milbank says it best in his article below.

Sanford's Tearful Stream of Consciousness
By Dana Millbanks

South Carolina Gov. Mark Sanford cried in Argentina -- and back at home during a news conference. (Davis Turner - Getty Images) Yesterday, Sanford finally returned from his mysterious absence hiking the Appalachian Trail -- no, wait, visiting his girlfriend in Argentina! -- to the well-charted location of the statehouse. But as he stood in front of the cameras for 20 minutes, it became obvious that even Mark Sanford doesn't know where in the world Mark Sanford is.
"Oddly enough, I spent the last five days of my life crying in Argentina so I could repeat it when I got here," the tearful Republican governor said with the pathos of Eva Perón.
As he rambled his way through his confession of adultery, he stumbled upon incoherence: "The biggest self of self is indeed self." He meandered into the trivial: "We called it Jurassic Park because of the kids' dinosaur sheets." And, just off the plane from his last tango in Buenos Aires, he confessed the dark details: "I have seen her three times since then, during that whole sparking thing, and it was discovered."
By the standards of the PR textbook, it was a disaster: Sanford had no focus as he stuttered his way through apologies before finally saying what he was apologizing for. One moment he was talking about getting the "soccer coach or football coach to act as chaperone" for hiking trips during high school; the next moment he was philosophizing about God's law: "It's not a moral, rigid list of do's and don'ts just for the heck of do's and don'ts."
But what became clear is that he was working these issues out in front of the microphones before he had worked them out in his head. A reporter asked if he was separating from his wife. He didn't have an answer. "I -- I don't know how you want to define that," he said. "I mean, I'm here, and she's there."
In that sense, however rotten Sanford's behavior was, there was something compelling in the raw and messy nature of his confession. Politicians' acknowledgments of infidelity have become set pieces of late, the most recent coming just a week ago when Republican Sen. John Ensign of Nevada made a terse statement that he takes "full responsibility for my actions" -- then refused to take questions. Others, such as former Democratic New York governor Eliot Spitzer and Republican Sen. David Vitter of Louisiana, hauled in their wives to share the shame. Still others, such as Bill Clinton and former GOP senator Larry Craig, substituted accusations for confessions.

But this was something entirely different. At a time when every last bit of political life is scripted, here was a powerful man wiping tears from his cheeks and talking about the intimate details of his shameful behavior. His wife wasn't at his side -- she'd kicked him out and told him not to call. "The bottom line is this: I -- I've been unfaithful to my wife," the governor said. "I developed a relationship which started out as a dear, dear friend from Argentina. It began very innocently, as I suspect many of these things do, in just a casual e-mail. . . . But here recently over this last year it developed into something much more than that."

The disgraced politician unwisely admitted that "from a heart level, there was something real" with his mistress, and that when their affair was discovered five months ago, "we went into serious overdrive in trying to say: Where do you go from here?"

When the cameras started rolling, Sanford looked down at his notes. "Umm," he said. He scratched his head. "I won't begin in any particular spot," he said, accurately as it turns out. He began with his high school hiking trips, when he'd "get folks to give me 60 bucks each, or whatever it was, to take the trip."

The nationally televised stream of consciousness went from travel adventures to state budget politics, until Sanford finally said this was "not the whole story," and offered to "lay it out." But before laying it out, he first went on an extensive round of apologies. He apologized to his wife. He apologized to his sons. He apologized to his staff for making them believe, and tell the world, the fiction that he was hiking the Appalachian Trail.

"I want to apologize to anybody who lives in South Carolina," he continued, and "I want to apologize to good friends." He particularly wanted to apologize to a friend named Tom Davis, whose name Sanford invoked five times. The governor moved on to a moral discussion of God's law, before stopping to "throw one more apology out there" -- to his fellow religious faithful who are disappointed in him. "So one more apology in there," he offered. Check.

After much wandering, the itinerant Sanford arrived at his destination: He was an adulterer. He detailed the "innocent" beginnings ("we swapped e-mails, whatever") up to the time it "sparked into something more than that," and even the "surreal" conversation with his father-in-law.
"When you live in the zone of politics, you can't ever let your guard down," he explained, because "it could be a front-page story." But with his Argentine lover, "there was this zone of protectiveness," because "she lives thousands of miles away and I was up here."

Within hours, the little that Sanford had left to the imagination had been filled in by e-mails from the relationship that were obtained by the State newspaper in Columbia, S.C.: "You have the ability to give magnificent gentle kisses. . . . I love the curve of your hips, the erotic beauty of you holding yourself."

Sounds like a good time on the Appalachian Trail.

Ethics are Part of Future Business Leaders' Goals

2009-06-02T20:56:00.000-07:00

It takes some very smart young people to appreciate the need for ethics in business at an early age. Some established leaders in corporate America are realizing the financial stability caused by a firm commitment to ethics in law and business. The following interesting story is from the New York Times. Enjoy.

When a new crop of future business leaders graduates from the Harvard Business School next week, many of them will be taking a new oath that says, in effect, greed is not good.

Nearly 20 percent of the graduating class have signed “The M.B.A. Oath,” a voluntary student-led pledge that the goal of a business manager is to “serve the greater good.” It promises that Harvard M.B.A.’s will act responsibly, ethically and refrain from advancing their “own narrow ambitions” at the expense of others.
What happened to making money?
That, of course, is still at the heart of the Harvard curriculum. But at Harvard and other top business schools, there has been an explosion of interest in ethics courses and in student activities — clubs, lectures, conferences — about personal and corporate responsibility and on how to view business as more than a money-making enterprise, but part of a large social community.
“We want to stand up and recite something out loud with our class,” said Teal Carlock, who is graduating from Harvard and has accepted a job at Genentech. “Fingers are now pointed at M.B.A.’s and we, as a class, have a real opportunity to come together and set a standard as business leaders.”
At Columbia Business School, all students must pledge to an honor code: “As a lifelong member of the Columbia Business School community, I adhere to the principles of truth, integrity, and respect. I will not lie, cheat, steal, or tolerate those who do.” The code has been in place for about three years and came about after discussions between students and faculty.
In the post-Enron and post-Madoff era, the issue of ethics and corporate social responsibility has taken on greater urgency among students about to graduate. While this might easily be dismissed as a passing fancy — or simply a defensive reaction to the current business environment — business school professors say that is not the case. Rather, they say, they are seeing a generational shift away from viewing an M.B.A. as simply an on-ramp to the road to riches.
Those graduating today, they say, are far more concerned about how corporations affect the community, the lives of its workers and the environment. And business schools are responding with more courses, new centers specializing in business ethics and, in the case of Harvard, student-lead efforts to bring about a professional code of conduct for M.B.A.’s, not unlike oaths that are taken by lawyers and doctors.
“I don’t see this as something that will fade away,” said Diana C. Robertson, a professor of business ethics at the Wharton School of the University of Pennsylvania. “It’s coming from the students. I don’t know that we’ve seen such a surge in this activism since the 1960s. This activism is different, but, like that time, it is student-driven.”
A decade ago, Wharton had one or two professors who taught a required ethics class. Today there are seven teaching an array of ethics classes that Ms. Robertson said were among the most popular at the school. Since 1997, it has had the Zicklin Center for Business Ethics Research. In addition, over the last five years, students have formed clubs around the issues of ethics that sponsor conferences, work on microfinance projects in Philadelphia or engage in social impact consulting.
“It’s been a dramatic change,” Ms. Robertson added. “This generation was raised learning about the environment and raised with the idea of a social conscience. That does not apply to every student. But this year’s financial crisis and the downturn have brought about a greater emphasis on social ethics and responsibility.”
At Harvard, about 160 from a graduating class of about 800 have signed “The M.B.A. Oath,” which its student advocates contend is the first step in trying to develop a professional code not unlike the Hippocratic Oath for physicians or the pledge taken by lawyers to uphold the law and Constitution.
Part of this has emerged by the beating that Wall Street and financiers have taken in the current economic crisis, which can set the stage for reform, Harvard students say.
“There is the feeling that we want our lives to mean something more and to run organizations for the greater good,” said Max Anderson, one of the pledge’s organizers who is about to leave Harvard and take a job at Bridgewater Associates, a money management firm.
“No one wants to have their future criticized as a place filled with unethical behaviors,” he added. “We want to learn from those mistakes, do things differently and accept our duty to lead responsibly. Realistically, we have tremendous potential to affect society for better or worse. Let’s humbly step up. We are looking out for our own interest, but also for the interest of our employees and the broader public.”
Bruce Kogut, director of the Sanford C. Bernstein & Company Center for Leadership and Ethics at Columbia, said that this emphasis did not mean that students were necessarily going to shun jobs that paid well. Rather, they will think about how they earn their income, not just how much.
At Columbia, an ethics course is required, but students have also formed a popular “Leadership and Ethics Board,” that sponsors lectures with topics like “The Marie Antoinettes of Corporate America.”
“The courses make people aware that the financial crisis is not a technical blip,” Mr. Kogut said. “We’re seeing a generational change that understands that poverty is not just about Africa and India. They see inequities and the role of business to address them.”
Dalia Rahman, who is about to leave Harvard for a job with Goldman Sachs in London, said she signed the pledge because “it takes what we learned in class and makes it more concrete. When you have to make a public vow, it’s a way to commit to uphold principles.”

Woody Allen sues American Apparel for using his likeness in advertising

2009-05-19T07:49:00.000-07:00

Last year in Ethics Follies, our good friend Heloise acted in a scene where an air freshner ad misappropriated her likeness to increase sales. American Apparel takes a page right out of last year's Follies script and uses another famous face without permission.

March 31st, 2008 by Scott Marks

"Woody Allen was in federal court today looking to put a dent in American Apparel’s profit margin to the tune of $10 million claiming the clothing manufacturer illegally used his image in an internet and billboard advertising campaign.
According to Variety, the lawsuit contended Allen was not contacted by the company and did not give permission for them to the use his likeness and accuses American Apparel of “blatant misappropriation and commercial use of Allen’s image.” It goes on to say the billboard falsely implied that Allen sponsored, endorsed or was associated with American Apparel, said the lawsuit, which seeks at least $10 million in compensatory damages and unspecified punitive damages.
The picture of Rebbe Woody is a frame blow up from Annie Hall. In the film Woody fantasizes how he must look in the eyes of his girlfriend’s Jew-hating Grammy. The Yiddish text on the billboard translates into “the Holy Rebbe.”
The lawsuit describes Woody as among the most influential figures in the history of American film and a man who has maintained strict control over the projects with which he is associated. Woody appeared in a lot of American advertising campaigns in the 60s, most notably a series of Smirnoff vodka ads, but hasn’t been a pitchman for products or services in the United States in decades."

Did Merck Make Phony Peer-Review Journal for Marketing?

2009-05-02T15:21:00.000-07:00

Summer Johnson, PhD reports on blog.bioethics.net about questionable peer reviewed journal that seems to be an automatic "stamp of approval" for Merck products. The journal doesn't mention that the stamp is held by Merck itself. If Dr. Johnson is correct, this is probably the clearest example of unethical drug marketing you will come across. Read her story below and let me know what you think:

It's a safe guess that somewhere at Merck today someone is going through the meeting minutes of the day that the hair-brained scheme for the Australasian Journal of Bone and Joint Medicine was launched, and that everyone who was in the room is now going to be fired.
The Scientist has reported that, yes, it's true, Merck cooked up a phony, but
real sounding, peer reviewed journal and published favorably looking data for
its products in them. Merck paid Elsevier to publish such a tome, which neither
appears in MEDLINE or has a website, according to The Scientist.
What's wrong with this is so obvious it doesn't have to be argued for. What's sad is that I'm sure many a primary care physician was given literature from Merck that said, "As published in Australasian Journal of Bone and Joint Medicine, Fosamax outperforms all other medications...." Said doctor, or even the average researcher wouldn't know that the journal is bogus. In fact, knowing that the journal is published by Elsevier gives it credibility!
These kinds of endeavors are not possible without help. One of The Scientist's most notable finds is a Australian rheumatologist named Peter Brooks who served on the "honorary advisory board" of this "journal". His take: "I don't think it's fair to say it was totally a marketing journal", apparently on the grounds that it had excerpts from peer-reviewed papers. However, in his entire time on the board he never received a single paper for peer-review, but because he apparently knew the journal did not receive original submissions of research. This didn't seem to bother him one bit. Such "throwaways" of non-peer reviewed publications and semi-marketing materials are commonplace in medicine.
But wouldn't that seem odd for an academic journal? Apparently not. Moreover,
Peter Brooks had a pretty lax sense of academic ethics any way: he admitted to
having his name put on a "advertorial" for pharma within the last ten years,
says The Scientist. An "advertorial"? Again, language unfamiliar to us in the
academic publishing world, but apparently quite familiar to the pharmaceutical
publishing scene.
It is this attitude within companies like Merck and among doctors that allows scandals precisely like this to happen. While the scandals with Merck and Vioxx are particularly egregious, we know they are not isolated incidents. This one is just particularly so. If physicians would not lend their names or pens to these efforts, and publishers would not offer their presses, these publications could not exist. What doctors would have as available data would be peer-reviewed research and what pharmaceutical companies produce from their marketing departments--actual advertisements.

Summer Johnson, PhD

Bernie Madoff Would be Proud- More Fraudsters Afoot

2009-04-28T06:27:00.000-07:00

Lawyers Line Up for New Investor Fraud Cases in Fla., Pa.
by Brian Baxter, AmLaw Daily

Bernie Madoff and Allen Stanford aren't the only accused fraudsters giving Am Law 200 lawyers business these days. This week the SEC charged two investment advisers with orchestrating multimillion-dollar frauds. Dechert, Mayer Brown, Carlton Fields, and Pepper Hamilton are among the firms queuing up to represent the defendants and aggrieved investors. The week began with the SEC unveiling a 22-page complaint against Donald Anthony Walker Young, accusing him of running a Ponzi scheme and misappropriating more than $23 million from investors. On Tuesday the SEC froze the assets of Acorn Capital Management, based in Kennett Square, Pennsylvania (Young was principal at the firm). The SEC has stated that most of those who invested with Young are from the Philadelphia area. The charges have shocked the residents of idyllic Chester County, Pa., where the 38-year-old Young lived and enjoyed horseback riding and foxhunting. (Ironically, Young also lived part-time in Palm Beach, Fla., where he was a close neighbor of Madoff's, the Palm Beach Daily News reports.) Dechert partner Paul Huey-Burns in Washington, D.C., a former attorney with the SEC's Division of Enforcement, reportedly was representing Young. But when reached on his cell phone on Friday, Huey-Burns told us that while he's represented Young in the past, he's no longer involved in this case as it pertains to the SEC charges.

Pepper Hamilton partner Cuyler Walker in Berwyn, Pa., is representing several investors claiming to be victims of Young's alleged Ponzi scheme. He declined to disclose the names of those investors but said they were cooperating with investigators. "There is a process the SEC is following, and we are seeing how that could play out," Walker told The Delaware County Daily Times. Prosecutors have yet to file criminal charges against Young. Nearly 1,200 miles to the south, the SEC charged Naples, Fla., investment adviser William Gunlicks and his firm, Founding Partners Capital Management, with defrauding investors by misrepresenting the nature of their $550 million in investments. The agency requested and received an emergency asset freeze from U.S. district court judge John Steele in Fort Myers, Fla., who appointed Gray Robinson partner Leyza Blanco in Miami to be receiver for Founding Capital and several subsidiary funds.
Founding Capital has retained Mayer Brown's Sean Casey, former deputy chief of the business and securities fraud unit at the U.S. attorney's office in Brooklyn, for the SEC case. Casey, who joined the firm in February, also previously served as senior counsel in the SEC's enforcement division. (Casey declined to comment.)

The SEC claims that Gunlicks and Founding Partners maintained that their funds had audited financial statements for 2007 when they did not. Gunlicks, whom the SEC accuses of using investor funds to pay personal expenses, has tapped Carlton Fields partner Michael Pasano in Miami for counsel.

Blagojevich Charged With 16 Corruption Felonies

2009-04-03T06:43:00.000-07:00

The New York Times has an update on the Blago the Clown story:

By MONICA DAVEY and SUSAN SAULNY. Published: April 2, 2009
CHICAGO — Rod R. Blagojevich, the ousted governor of Illinois, used his chance to fill the Senate seat vacated by Barack Obama as one more money-making plan in a vast racketeering scheme, federal prosecutors said Thursday, an operation they portrayed as the “Blagojevich Enterprise.” In a 19-count indictment, prosecutors said the “primary purpose of the Blagojevich Enterprise was to exercise and preserve power over the government of the State of Illinois for the financial and political benefit of” Mr. Blagojevich, his family and his friends.
Running 75 pages, the indictment had been expected for nearly four months, since Mr. Blagojevich was arrested. The former governor, a second-term Democrat whose political career has come apart, was charged with 16 felonies, including racketeering conspiracy, wire fraud, extortion conspiracy, attempted extortion and making false statements to federal agents. Five of his closest advisers — his brother, one of his top fund-raisers, two of his former chiefs of staff and a Springfield businessman — were also charged with crimes.
Mr. Blagojevich, who was believed to be vacationing with his family near Walt Disney World in Florida when the indictment was announced here late Thursday, issued a statement through his publicist. “I’m saddened and hurt, but I am not surprised by the indictment,” he said. “I am innocent. I now will fight in the courts to clear my name.”
The indictment lays out a broad pattern of corruption spanning from before Mr. Blagojevich was elected governor in 2002 to the day of his arrest, Dec. 9. He used his official position, the indictment suggested, to seek financial gain in nearly every element of government work, from picking members of state commissions to signing legislation.
Mr. Blagojevich sought a return on deals to give money to a hospital, to approve legislation helpful to racetrack owners, to pick a particular candidate to fill the Senate seat and, according to the indictment, from a United States representative who was pressing for a $2 million grant for a publicly supported school.
The indictment describes the member of Congress as United States Congressman A, one of a series of unidentified public officials listed throughout the document only by letters of the alphabet. White House officials confirmed that Rahm Emanuel, a former House member who is President Obama’s chief of staff, was Congressman A.
In 2006, when Congressman A was making inquiries about the status of state grant money intended for the school, Mr. Blagojevich sent a message that a brother of the representative (apparently, officials said, Ari Emanuel, an agent in Hollywood) needed to have a fund-raiser for Mr. Blagojevich, the indictment says. Mr. Blagojevich told an employee not to release the grant money, already in the state’s budget, until the governor gave further notice. According to the indictment, the fund-raiser never occurred.
Then last year, the indictment says, Mr. Blagojevich seemed to envision multiple, varying plans for how he might secure money or win a high-paying job through his choice of who would fill Mr. Obama’s seat. Among them, the documents say, Mr. Blagojevich believed he might get $1.5 million in campaign contributions from an associate of one person, identified only as Senate Candidate A, who hoped to receive the appointment.
In December, at the time of Mr. Blagojevich’s arrest at his home on the North Side of Chicago, Patrick J. Fitzgerald, the United States attorney for the Northern District of Illinois, said he had gone forward with a criminal complaint — not a formal indictment after a review of the case by a grand jury — because telephone calls intercepted by agents had forced the authorities to move quickly to stop what Mr. Fitzgerald described as a crime spree in progress. At that point, the Senate seat, now held by Roland W. Burris, was still vacant.
Some legal experts had suggested that Mr. Fitzgerald’s choice might signal that he did not yet have a prosecutable case in hand; some raised broader questions about the strength of his case and the difficult legal distinction between illegal acts and simply unseemly political talk.
But legal experts said that the scope of the indictment on Thursday showed no signs that prosecutors were backing away from their case.
“It weaves together all the series of acts we’ve all been hearing about,” said Leonard L. Cavise, a professor at the DePaul University College of Law who has expertise in criminal defense. “It’s broad ranging. It will be a very complex trial.”
Some of the most serious counts against Mr. Blagojevich carry prison sentences of as long as 20 years.

Ethical Attorney Comes out on Top in Ted Stevens Case

2009-04-03T05:26:00.000-07:00

The American Law Litigation Daily reported on April 3, 2009 that Brendan Sullivan, Jr. of Williams & Connolly is their Litigator of the Week. Alison Frankel reports:
"Every two years, when The American Lawyer conducts its Best Litigation Department contest, we talk to lots of opposing counsel--the lawyers who've appeared on the other side of cases our finalists tell us they've won. You might be surprised at what we hear. Opposing counsel occasionally have pretty nasty things to say, accusing the other side of exaggeration, misstatement, overaggression, and, sometimes, outright misconduct.

Except when Williams & Connolly is the firm on the other side. We have never heard a lawyer on the other side of a case from Williams & Connolly criticize the firm that's led by our Litigator of the Week, Brendan Sullivan, Jr. W&C has adopted Sullivan's rigorous standard of behavior, which demands that lawyers fight hard but always within the bounds of the rules of procedure. Sullivan and the other firm leaders train their lawyers to litigate honorably.

That's why Sullivan's outrage at the prosecution's missteps in the political corruption case against former Alaska senator Ted Stevens was so genuine. As we noted the last time we named him Litigator of the Week
http://editorial.incisivemedia.com/c/1LzOi4H5vKcHyEnAN , Sullivan was deeply aggrieved by the government's lapses, and after the trial, he sent a 16-page letter to then-Attorney General Michael Mukasey, calling for the Justice Department to investigate its own team. "His zealous advocacy," we predicted, "may yet get Stevens off the hook."

On Wednesday, it did: Attorney General Eric Holder announced his decision to drop charges against Stevens
http://editorial.incisivemedia.com/c/1LzOHj21jyzYJoGnA , citing additional evidence that prosecutors hid exculpatory material from Stevens and Williams & Connolly.

Sullivan, who is notoriously reluctant to talk to reporters, didn't respond to our request for an interview. But he did send us his press release on Holder's announcement
http://editorial.incisivemedia.com/c/1LzP6xmX7mXfU8Zan . It's unlike any other press release we've received, and it's well worth reading. Not only does Sullivan mince no words in criticizing the government, which he accuses of "stunning" misconduct, he also identifies "heroes in this story": the trial judge, Emmet Sullivan, the Justice Department lawyers who investigated the conduct of the Stevens prosecution team, and Eric Holder, whom Sullivan calls "a pillar of integrity in the legal community."

But he doesn't stop there: "[Holder] has demonstrated the kind of leadership that we defense lawyers seek and that the Department of Justice desperately needs. Ineffective leadership permits this type of prosecutorial misconduct to flourish."

The same can be said of leadership on the private side. And through his conduct in the Stevens case, Sullivan leads by example.

Ballad of Timothy Geithner

2009-04-01T12:51:00.000-07:00

Attorney Anne McKinney sings a funny parody about Mr. Geithner's tax woes and poor ethical decisions. Over half a million youtube.com viewers have had a chuckle at this creative parody. Follies fan's are sure to enjoy it as well.

It Takes a Team to Commit Billion Dollar Fraud

2009-03-22T07:17:00.000-07:00

Prosecutors Charge Madoff's Accountant With Fraud
NEW YORK (AP) ―

David Friehling, accountant to Bernard Madoff, leaves Federal Court in New York after arrest on fraud charges. (File) AP

Bernard Madoff's longtime accountant was arrested on fraud charges Wednesday as authorities blamed him for failing to make the most basic auditing checks that would have exposed an epic fraud that cost investors billions of dollars.David Friehling is the first person to be arrested in the scandal since Madoff turned himself in, and his prosecution signals that the government is intent on bringing Madoff's associates to justice as they try to figure out who helped him carry out the fraud.Prosecutors say the 49-year-old Friehling essentially rubber-stamped Madoff's books for 17 years, serving as Madoff's auditor from 1991 through 2008 while operating from a discreet building in suburban New York. Authorities said that if Friehling had done his job, Madoff's financial statements would have shown his company owed tens of billions of dollars to his customers and was insolvent."Mr. Friehling's deception helped foster the illusion that Mr. Madoff legitimately invested his clients' money," said acting U.S. Attorney Lev L. Dassin. The relationship between the accountant and Madoff was so cozy that Friehling and his family pulled $5.5 million from accounts with Madoff since 2000 and had a balance of more than $14 million as recently as November. Prosecutors said:

"...it's a conflict for accountants to have such large sums invested with clients."

Friehling did not comment as he left the courthouse after being released on bail, and his lawyer, Andrew Lankler, also declined comment.Madoff, 70, confessed to his sons in early December that his investment empire was actually a giant Ponzi scheme in which he paid off old investors with money from new ones. Though he reported to 4,800 investors that they had $65 billion in November, investigators have found only about $1 billion.He pleaded guilty last week and could spend the rest of his life in prison after he is sentenced in June.Prosecutors now believe that Madoff received help from Friehling as he carried out his fraud, although Friehling is not charged with knowing about his Ponzi scheme.The government says Friehling did not meaningfully audit Madoff's business or confirm that securities purportedly held by Madoff's company on behalf of its customers even existed.The Securities and Exchange Commission said Friehling instead...

"pretended to conduct minimal audit procedures"

...of certain accounts to make it seem he was conducting an audit and then failed to document his purported findings and conclusions as he was required to do.Prosecutors said he even failed to examine a bank account through which billions of dollars flowed."He did little or no testing, no verification of the `facts' he certified," said Joseph M. Demarest, head of New York's FBI office. "His job was not merely to rubber-stamp statements he didn't verify. "The SEC said Friehling took steps to hide his personal investment with Madoff, including replacing his own name on his Madoff account with his wife's name and later naming the account the "Friehling Investment Fund" to conceal the conflict of interest.The SEC also accused Friehling of lying to the American Institute of Certified Public Accountants for years, denying he conducted any audit work, because he was afraid that his work for Madoff would be subject to peer review.He was paid a tidy sum by Madoff: Prosecutors said he made between $12,000 and $14,500 a month from 2004 to 2007, amounting to $144,000 to $174,000 annually. If convicted, Friehling faces up to 105 years in prison.

He is charged with securities fraud, aiding and abetting investment adviser fraud and four counts of filing false audit reports with the SEC.The fraud charges against Friehling come just days after the founder of his auditing firm, Jerome Horowitz, died of cancer last week at the age of 80, a family friend said. Horowitz handled Madoff's books for many years before turning the business over to Friehling, who is his son-in-law. The single glass door in Friehling's Rockland County office bears the name "Friehling & Horowitz."Horowitz's lawyer, Latour "L.T." Lafferty, declined to immediately comment on his death or Friehling's arrest Wednesday, but had previously described the two accountants as victims of the scam who were unaware that fraud was taking place.The strain of the Madoff scandal on Friehling began to show in recent months as he put his luxury home in Rockland County on the market.A listing posted on the Web site of Prudential Rand Real Estate said the family is seeking $995,000 for the five-bedroom Colonial. The home was built in 1990 and has a swimming pool and 4,437 square feet of space.It's unclear how the sale will fare because he had to put up his home to make bail.Madoff pleaded guilty to securities fraud, perjury and other charges on Thursday. During his plea, Madoff said he began a Ponzi scheme in the 1990s in response to the pain of a recession — around the time that Friehling took over his accounting. He said he never recovered, though, and knew prison awaited him.Investigators have said they believe investors may have originally put $17 billion or less into accounts with Madoff but that Madoff falsely told them in their financial statements that it had grown to as much as $65 billion.

(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

Related Stories:
S. Fla. Madoff Victims Auctioning Off Belongings (3/18/2009)
Madoff Victims Get Relief From IRS (3/18/2009)
Madoff Probe Turns Focus To Wife, Family (3/16/2009)
Documents: Madoff Had Net Worth Of $823 Million (3/14/2009)
Madoff's Lawyers Appeal Ruling On Bail (3/13/2009)

What You Can't See Can Still Hurt You

2009-03-22T06:28:00.000-07:00

Trial attorney's have an obligation to protect confidential and proprietary information of our clients from inadvertent publication. With the communication age in full swing, there is a bit of a learning curve, however, which caused at least one law firm to accidentially give up redacted information. It sounds as though a Sharpie would have been a better idea than digitial black boxes. Reporter Doug Malan's tells the instructive metadata tale...

A Major Redaction Gaffe
GE's sensitive information easy to access behind black veil
By DOUGLAS S. MALAN as published in the Connecticut Law Tribune

Lawyers involved in the class-action sex discrimination case against Fairfield-based General Electric in 2007 would rather you not read passages from various filings. After all, the plaintiffs' firm, Sanford, Wittels & Heisler in Washington, D.C., took the time and effort to black out reams of pages in numerous briefs to make them inaccessible to the public — or so they thought.

But as of late last week, you could download several documents through PACER's federal court filing system, copy the black bars that cover the text on the screen and paste them into a Word document. Voilà. Information about the inner-workings of GE's white, male-dominated management and their alleged discriminatory practices against women, which is supposed to be sealed by court order, appears with little technical savvy required.
"I didn't know that," plaintiffs' lead counsel David W. Sanford said from his office early last week.

Neither did Patrick W. Shea of Paul, Hastings, Janofsky & Walker in New York, which serves as GE's outside counsel in the case. Shea said the two sides are in mediation after Judge Peter C. Dorsey in New Haven denied GE's motion to dismiss on May 8. Now, the game may have changed with revelations that there's a large leak of information in the case, though Shea never said as much. He referred all questions to GE, whose spokesman, Gary Sheffer, wouldn't comment on how the course of the case might be altered. "All parties agreed that the documents would be filed under seal," Sheffer said. "We acted under belief that they were filed under seal, and we're concerned." When asked what GE's legal reaction might be, Sheffer said: "We're considering our options." Shea contacted Sanford to discuss the matter. Sanford, the plaintiff's lawyer, then called the Law Tribune to shed more light on the matter. "I wasn't aware of the severity of this problem," he said. "Certain documents have been filed improperly by us. If this redacted material is in the public domain, it becomes a problem for GE and for us.

"We're going to try to take steps to correct that error. We're doing everything we can today (last Thursday)" to make emergency, corrected filings with federal court clerks who are aware of the problem, Sanford said.
PACER account representative Shawn Robledo, who works in PACER's service center in San Antonio, also was unaware of the problem until she was guided through the process of downloading, copying and pasting.
"We need to report this to the court," she said. "We've never had this problem come up. I've been here for years and have never seen [a redaction] done like this." The PACER service center is operated by the Administrative Office of the U.S. Courts in Washington, D.C. Spokesman Richard Carelli said PACER employees do not check filings to make certain that redacted information actually is inaccessible. "The total responsibility rests with the lawyers" to redact properly, he said. Lorene F. Schaefer, a lawyer in the company's Erie, Pa.-based GE Transportation, accused company officials in her lawsuit of giving unfair preference to men in promotions to top-paying legal jobs.

The class-action lawsuit potentially seeks damages of $500 million. It also seeks an injunction to halt GE's pay and promotion policies and practices, and names Chairman and Chief Executive Officer Jeffrey R. Immelt, General Counsel Brackett B. Denniston III and numerous other executives as defendants. Schaefer filed the lawsuit last April after learning that she was to be demoted from her job as GE Transportation's top legal officer. She was placed on paid administrative leave last May after complaining about her demotion. Schaefer had been an entry-level executive since 1997, and a GE employee since 1994. In 2007, she was paid $380,000, including bonuses.

The security breach in her case underscores a hot issue in the legal profession involving uncovered trails of electronic data, known as metadata. Where once a black marker strike on a piece of paper was sufficient, redaction in the digital world requires special software and the know-how to delete the words behind the shield.

Sloppy information management "has been a huge problem" for lawyers ...

said Connecticut Chief Disciplinary Counsel Mark Dubois. "Metadata is a fascinating area of developing law. It is much discussed in the fields of risk aversion and risk management." Dubois said a lawyer or law firm who has insufficiently redacted information in a case could be in violation of a host of ethical rules and an easy target for a malpractice lawsuit. Redaction problems often arise when people use old versions of Adobe software, which turns paper documents into an easy-to-read electronic Portable Document Format (PDF), the format of choice for PACER and many other web sites with multiple documents.
There are ways to hide the text in older versions of Adobe, but the process is "cumbersome" and requires multiple programming steps, said Glastonbury attorney N. Kane Bennett, a member of the Connecticut Bar Association's Legal Technology Committee. "With the newest version of Adobe, it is pretty simple to hide the text with a black box and then scrub the hidden text behind it," said Bennett, who was unfamiliar with problems in the Schaefer case. “This prevents people from copying and pasting into a Word document.” There’s also a popular software program called Redax, manufactured by Appligent Inc., which is a plug-in application for Adobe Acrobat Standard or Professional 6, 7 and 8, according to its web site. It promises to “permanently” remove sensitive information from PDF documents at a starting price of $249. In 2005, the Department of Defense suffered through a similar dispersion of classified information. Redacted segments of an investigative report on the shooting death of an Italian journalist by U.S. soldiers in Iraq could be copied and pasted from a PDF into a Word document. Plaintiff’s attorney Sanford couldn’t say what process or software his law firm used to redact the information in the Schaefer case. “Quite frankly, I’m not involved in the mechanics,” he said.
Paralegals were responsible for redacting the information properly before filing the briefs electronically, but they were out of the office and unavailable for comment last Thursday, Sanford said. He said the firm is not considering any disciplinary action against them. “Anything that happened here was an innocent mistake,” he noted. In terms of electronic filing, “people are learning as they go.”

Alleged $8 Billion Dollar Fraud by Texas Financier Stanford

2009-02-17T13:55:00.000-08:00

(AP Writer Monica Rhor in Houston)
On Feb. 17th, AP reported that federal regulators charged Texas financier R. Allen Stanford and three of his firms with a "massive" fraud that centered around high-interest-rate certificates of deposit, and raided some of the companies' offices. Probably most shocking is that the guy's a Baylor grad! Fraud just doesn't seem very...you know... Baptist.

Watch CNBC video report by clicking here

In a complaint filed in federal court in Dallas, the Securities and Exchange Commission alleged Stanford orchestrated a fraudulent investment scheme centered on an $8 billion CD program that promised "improbable and unsubstantiated high interest rates."

Stanford's assets, along with those of the three companies, were frozen. Stanford's firms include Antigua-based Stanford International Bank, broker-dealer Stanford Group Co. and investment adviser Stanford Capital Management, which are both based in Houston.

The bank's chief financial officer, James Davis, and Stanford Financial Group's chief investment officer, Laura Pendergest-Holt, were also charged in the complaint.

Alfredo Perez, a spokesman for the U.S. Marshal's Service in Houston, confirmed that agents raided Stanford's office in Houston Tuesday morning, but he did not have any other immediate comment.

The SEC alleged Stanford and his businesses misrepresented the safety of the deposits, claiming the bank reinvested client funds in liquid financial instruments to help return profits on investments sharply higher than average rates of similar products.
"Stanford and the close circle of family and friends with whom he runs his businesses perpetrated a massive fraud based on false promises, and fabricated historical return data to prey on investors," Linda Chatman Thomsen, director of the SEC's division of enforcement, said in a statement.

The SEC also accuses Stanford of running a second scheme tied to sales of a mutual fund product, which allegedly used false historical performance data to grow the program from less than $10 million in 2004 to more than $1 billion. The alleged fraud helped generate $25 million in fees for Stanford Group in 2007 and 2008, according to the SEC.
Stanford, 58, is one of the most prominent businessmen in the Caribbean, with investment advisers around the world helping him grow a personal fortune estimated at $2.2 billion by Forbes magazine.

His Stanford International Bank Ltd. said deposits surged from $624 million in 1999 to $8.4 billion in December. The bank is based in the twin-island Caribbean nation of Antigua and Barbuda, which has carved out a niche as a tax haven and offshore base for Internet gambling.
Stanford has deep roots in Texas, where he graduated from Baylor University, and still speaks with a slight twang. But he travels in different circles now — knighted in 2006 by the islands' government, Stanford is known there as "Sir Allen." And last year he shook up the staid world of professional cricket by bankrolling the purse in a $20 million winner-take-all match in Antigua between England and a West Indies select team.

Law Firms Lay Off Record Number of Attorneys

2009-02-17T09:23:00.000-08:00

The National Law Journal and Law.com have recently reported record attorney layoffs. Washington took the brunt of the layoffs with 149 D.C. staff at Hogan & Hartson offered buyouts and dozens more attorneys and staff at Holland & Knight, Dechert, Bryan Cave, and DLA Piper let go. Almost 250 lawyers and staff in Washington were affected. The poor economy has required downsizing of firms all over the U.S. to keep them in the black. Here's a list of firms that have reported layoffs as of February 17, 2009:

Akin Gump
Ballard Spahr Andrews & Ingersoll
Bell Boyd & Lloyd
Bingham Mccutchen
Blank Rome
Brown Rudnick Berlack Israels
Bryan Cave
Buchanan Ingersoll & Rooney
Cadwalader, Wickersham & Taft
Cahill Gordon
Clifford Chance
Cooley Godward
Dechert
Dewey & Leboeuf
Dickstein Shapiro
DLA Piper
Drinker Biddle & Reath
Duane Morris
Epstein Becker
Faegre & Benson
Fenwick & West
Fish & Richardson
Foley Hoag
Fragomen, Del Rey, Bernsen & Loewy
Freshfields Bruckhaus Deringer
Fried, Frank, Harris, Shriver & Jacobson
Goodwin Procter
Heller Ehrman
Hogan & Hartson
Holland & Knight
Howrey
Hunton & Williams
Jenner & Block
Katten Muchin Rosenman
Kaye Scholer
Kirkland & Ellis
Linklaters
Loeb & Loeb
Lovells
Luce Forward
Mayer Brown
McDermott Will
McKee Nelson
Milbank Tweed Hadley & McCloy
Moore & Van Allen
Morgan & Finnegan
Morrison & Foerster
Nixon Peabody
O'Melveny & Myers
Orrick, Herrington & Sutcliffe
Patton Boggs
Paul, Hastings, Janofsky & Walker
Pillsbury Winthrop Shaw Pittman
Powell Goldstein
Proskauer Rose
Reed Smith
Ropes & Gray
Seyfarth Shaw
Shutts & Bowen
Simpson Thacher & Bartlett
Sonnenschein Nath & Rosenthal
Squire, Sanders & Dempsey
Sutherland Asbill & Brennan
Synnestvedt & Lechner
Taylor Wessing
Thelen Reid Brown Raysman & Steiner
White & Case
Wilson Sonsini
Winstead
Wolf Block

Unfortunately, there will probably be more. The question is whether there is anything to be learned from the huge salaries to first year associates and the billable hour pressures to keep the doors open. Perhaps a new model for law firms will arise out of the rubble when the economy recovers that better aligns outside attorneys with their clients.

Email is Smoking Gun in Salmonella Cover Up

2009-02-11T19:50:00.000-08:00

Okay, so that headline is dramatic. But when there is written evidence of testing of peanuts with salmonella way back in 2006 and the owners and managers decide to ship the tainted products anyway to keep the cash coming in, there's an ethics problem that quickly became deadly. Nine people have died from that business decision. The business decision was based on greed.

The owner of a U.S. peanut company refused to testify to Congress on Wednesday amid reports that he urged his workers to ship bacteria-tainted products and pleaded with health officials to be allowed to "turn the raw peanuts on the floor into money."
Stewart Parnell, owner of Peanut Corp. of America, repeatedly invoked his right not to incriminate himself before the House of Representatives subcommittee holding a hearing on a salmonella outbreak blamed on his company.

The outbreak has sickened some 600 people in the U.S. and may be linked to nine deaths — the latest reported in Ohio on Wednesday — and has resulted in one of the largest product recalls ever, involving more than 1,800 items.

KV Implodes

2009-02-06T07:57:00.000-08:00

As we suspected last month, KV's poor ethical choices led to it's investigation by several federal authorities, including the FDA and SEC. News today is that KV has layed off about 1000 employees . See prior blogs to see the story unfold from product recalls, to misbranded products, to family feuds, to potential board of directors liability for selling products which they may have known were not made to the drug specifications approved by the FDA.

Lawyers Billable Hour is Tough to Defend

2009-02-02T07:12:00.000-08:00

Jonathan Glater of the New York Times wrote an article that examined lawyers are having trouble defending the the billable hour. "Clients have complained for years that the practice of billing for each hour worked can encourage law firms to prolong a client’s problem rather than solve it. But the rough economic climate is making clients more demanding, leading many law firms to rethink their business model. "

“This is the time to get rid of the billable hour,” said Evan R. Chesler, presiding partner at Cravath, Swaine & Moore in New York, one of a number of large firms whose most senior lawyers bill more than $800 an hour. “Clients are concerned about the budgets, more so than perhaps a year or two ago,” he added, with a lawyer’s gift for understatement.

This blogger notes that the difficulty lies in the fact that lawyers trained in the law, not in business. They don't know any other business models besides the billable hour "eat what you kill" approach to lawyer compensation. Law firms are worried about changing business models in difficult economic times. "Two top U.S. firms, Heller Ehrman and Thelen, have collapsed in recent months. Others have laid off lawyers and staff," reports Mr. Glater in his article.

However, some of the more creative firms are utilizing flat fees for handling transactions and success fees for positive outcomes to market their firms, using the down economy as the inspiration for new solutions for clients. The change is welcomed by many corporations since the attorneys' billable hour has been used regularly since the 1960s. Most in-house attorneys have law firm experience and fully appreciate the pressure of attorneys to bill a large number of hours to advance in the firm or hold onto large partner compensation packages.

Mr. Glater's article continues-- “Does this make any sense?” said David B. Wilkins, professor of legal ethics and director of the program on the legal profession at Harvard. “It makes as much sense as any other kind of effort to measure your value by some kind of objective, extrinsic measure. Which is not much.” In this blogger's observation, the fact is lawyers and their clients are not aligned with regard to fees for service since the longer the work takes, the more the attorney bills. Clients want the fastest result possible, but that isn't in the attorneys' best interest. I liken it to taking a car into the mechanic and he says you need a new gazinkazoink. You have no reference to know that this is in fact what you need, but you pay the fee for the part and installation because you have no alternative. The response to such a comparison by many attorneys is to take offense, responding that ethics keeps them from overbilling or worrying too much about the number of hourse they must bill. While a majority of attorneys are ethical in their billing, the temptation is too great for some and there is billing recorded when the time either didn't need to be spent or was marked up to reflect a "value" billing situation that wasn't agreed to in advance. To deny the potential for wrongdoing under the billable hour arrangement is to place your head in the sand.

Mr. Glater notes that greed may also encourage lawyers to change their payment plans... Law firms are running out of hours that they can bill in a year, said Scott F. Turow, best-selling author of legal thrillers and a partner at Sonnenschein Nath & Rosenthal in Chicago. “Firms are approaching the limit of how hard they can ask lawyers to work,” he wrote, in an e-mail response to a reporter’s query. “Without alternative billing schemes, lawyers will not be able to maintain the rapid escalation in incomes that big firms have seen.” A recent study released last year by the Association of Corporate Counsel showed a rise in the number of companies paying by the hour — but that covered the spring and summer, before the worst of the downturn.
Many smaller firms and solo practitioners have long offered to perform services, like mortgage closings, for flat fees. Plaintiff lawyers also often work on a contingency basis, receiving a percentage of any awards. “What we do in our business litigation is charge clients some kind of monthly retainer, which gets credited against an eventual recovery,” said John G. Balestriere, a partner at Balestriere Lanza, a Manhattan firm with five lawyers. “It’s a lot easier for us to tell a client, ‘We want to do this, we want to push for summary judgment,’ ” he said, and so avoid a lengthy, costly trial. When not paid by the hour, lawyers’ approach to their work changes, said Carl A. Leonard, a former chairman of Morrison & Foerster who is now a senior consultant at Hildebrandt International, which advises professional services firms. In one case, he said, Morrison & Foerster negotiated a fixed fee for defending a company in court, covering work up to the point of a motion for summary judgment. On top of the fee, if the case settled for less than what the company feared having to pay if it lost in court, the law firm got a percentage of the amount saved. The arrangement made sense when the goal was to resolve the dispute quickly, Mr. Leonard said. Lawyers on the case negotiated a settlement for much less than the client’s worst-case number, Mr. Leonard said. “The effective hourly rate was something like 150 percent of our hourly rates,” he added. “We made money, the client was happy.”
In litigation, firms that charge by the hour can suffer if they are too successful and end a lawsuit — and the stream of payments from continuing work — too quickly. One law firm that recently collapsed, Heller Ehrman, was hurt in part because a number of cases had settled.

That collapse highlights the risk to law firms experimenting with other payment arrangements: If lawyers set too low a price, they lose money. Many lawyers may not be good enough businessmen to pick the right price, said Mr. Krebs, of the Association of Corporate Counsel.
“The difficulty is, we don’t really know what it costs us to do something,” he said. But the biggest stumbling block to alternative fee structures may be the managing partners at law firms, who will have to overhaul compensation structures to reward partners and associates for something other than taking a long time to do something.

“I don’t think law firms have completely come to grips with that issue,” said J. Stephen Poor, managing partner at Seyfarth Shaw in Chicago. “But they need to start coming to grips with it very quickly.”

Blago the Clown Just Doesn't Get It

2009-01-29T18:16:00.000-08:00

Governor Rod Blagojevich just doesn't get it. I think he really believes that he is above the law and ethics. However, he was thrown out of office Thursday without a single lawmaker rising in his defense, ending a nearly two-month crisis that erupted with his arrest on charges he tried to sell Barack Obama's vacant Senate seat.
Blago the Clown is the first U.S. governor in more than 20 years to be removed by impeachment.
After a four-day trial, the Illinois Senate voted 59-0 to convict him of abuse of power, automatically ousting the second-term Democrat. In a second, identical vote, lawmakers further barred Blagojevich from ever holding public office in the state again. The man is the outer limit of ridiculous and has no idea what a public servant does for a living. He had the gross lack of insight to state that he was framed, set up, and that he did nothing wrong. Wow.

Former General Counsel of Peregrine Systems Pleads Guilty to Fraud

2009-01-27T12:19:00.000-08:00

Ethisphere Magazine reports that the former General Counsel of Peregrine Systems faces as many as 30 years in prison and up to a $1 million fine after pleading guilty to one count of bank fraud in January. The fraud dates back to 2002 when the company disclosed accounting irregularities that reportedly totaled $500 million in overstated revenue and $3 billion in understated net loss. Richard T. Nelson, the former GC, faces sentencing in April. He will be one of over a dozen former executives and outside consultants that have already pleaded guilty in this case. This group includes former CEO Stephen Gardner who was sentenced to just over eight years in prison. It is samazing that an educated man like Mr. Nelson could rise to the level of being the General Counsel of this large entity and then rationalize, along with a reported 18 others, overstating revenues and understating net loss. The duty to shareholders by executives needs to be reinforced, or perhaps tatooed, on some of these executives heads.

We Have a Winner! Biggest Settlement in US by Eli Lilly for $1.415 Billion

2009-01-16T19:06:00.000-08:00

Yes, with a "B." I promise I do read things besides pharma news (last three blog entries about pharma or related). It's just the pharma industry is out of control this month! $1.415 Billion...that's some serious dinero, folks. Eli Lilly and Co. agreed Jan. 15 to plead guilty and pay $1.415 billion to resolve allegations related to the promotion of its antipsychotic drug Zyprexa for off-label uses.
The resolution includes a criminal fine of $515 million, which the DOJ said was "the largest ever in a health care case, and the largest criminal fine for an individual corporation ever imposed in a United States criminal prosecution of any kind." The company also agreed to forfeit an additional $100 million in assets. The company signed a plea agreement admitting its guilt to a misdemeanor criminal charge of misbranding. In a criminal information filed against Lilly in connection with the agreement, the company was charged with promoting the medication as a treatment for dementia, including Alzheimer's dementia, among other off-label uses.
The company also agreed to pay up to $800 million in a civil settlement with the federal government and the states. The settlement resolves allegations that by marketing Zyprexa for unapproved uses, the company caused false claims for payment to be submitted to Medicaid and other federal health care programs. The civil allegations originally were brought in four qui tam lawsuits brought under the federal False Claims Act. The federal share of the civil settlement will be $438 million, with $361 million going to states that choose to participate in the agreement. The qui tam relators (employees of Lilly most probably) will receive more than $78.8 million from the federal share of the civil settlement amount. The Lilly press release says there has been "a resolution" and they are concerned about the "misdemeanor charge." Denial is a powerful thing, ya'll. You have to admit you have a problem with your corporate culture before you can change it.

Like watching a barn burn...

2009-01-15T17:27:00.000-08:00

KV Pharmaceuticals may have lost its ethical direction, presumably from the management down, in a spiral of events that continued today with a class action lawsuit against the company by its shareholders. Look at how the company has one problem after another. I only noticed this because I work in the pharma industry so the name caught my eye...repeatedly.

April 20, 2007: Victor Hermelin, the 93-year-old founder of KV Pharmaceutical Co. and loving father, has gone to court to try to have his son Marc Hermelin, president of KV, removed as a trustee of one of four trusts set up to benefit Victor Hermelin's five children and his ex-wife.
In his lawsuit filed March 1st in St. Louis County Probate Court, the elder Hermelin charges that Marc Hermelin, 64, has managed a $35 million trust to favor himself and selected relatives and has a conflict of interest in his dual roles as company president and trustee. Marc does okay despite his not-so-supportive dad, until he's fired down the page a bit.

July 29, 2008: Maybe Marc's dad thought his son lacked a moral compass... Agents from the FDA and the US Marshal’s Service grabbed $24.2 million worth of unapproved drugs from KV. The majority of the products seized were made after the FDA required an end to their production, according to US Attorney Catherine Hanaway (see statement). The seizure followed an FDA inspection of several of KV’s plants earlier this year, when investigators found the drugmaker was not complying with an FDA enforcement notice warning that drugs in time-release format containing guaifenesin, an expectorant, must be approved by the FDA to ensure the safe and effective release of the active ingredients.

December 11, 2008: KV Pharma Fires CEO. KV terminated the employment of Chief Executive Marc Hermelin with cause, but would not specify a reason. Hermelin, however, claims that he effectively retired from his employment with the company prior to the board’s action. Hermelin led the company for over three decades. (Editorial note: It was an odd management choice to state publicly that he was terminated "for cause." There's no benefit to the company and exposes them to potential fraud allegations if cause can't be successfully established.)

December 24, 2008: DOH! KV Pharma shares dive after painkiller recall. Shares of KV Pharmaceutical Co. dropped to all-time lows after the company issued its second product recall in two months, and said it is suspending all sales of tablet drugs because of the risk some tablets were oversized. The tablets were made by KV's Ethex subsidiary, and sold in bottles of 100. An overdose of the drug can cause breathing problems, low blood pressure and unconsciousness.

January 14, 2009: The law firm of Milberg LLP is investigating conduct of KV's officers and directors. The lawsuits charge KV and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Some of the investigations have to do with the recall mentioned above, presumably that the officers and directors knew the drugs were not within specification of the FDA-approved label, but chose to do nothing (to avoid an expensive recall). It might have gone like this: "Let's take a vote, Board...potential death to patients due to accidental overdose from KV's too strong pills ...or an expensive recall?" Wow.

FDA Warns Weight-Loss Products' Manufacturers

2009-01-06T13:16:00.000-08:00

The FDA's enforcement action against 28 manufacturer's of over-the-counter weight loss products revealed that many of the products contain drugs not approved for use in the United States, some of which may have dangerous side effects. The manufacturer's responses to the FDA's concerns have reportedly been slow and some of the infractions against FDA regulations severe. As such, the FDA is considering seizing some of these products and shutting down the websites which market these products. However, one manufacturer, found at Somotrim.com, posted an FDA notice on their website, regarding the "undeclared" active ingredient in their weight loss product. Perhaps not enough to provide customers full disclosure of the dangers of the active ingredients, but at least they acknowledge there is an issue. The FDA's investigation was a major victory for GlaxoSmithKline, the marketer of "Alli," the only FDA-approved weight loss product on the market.

Body Solutions Founder Gets Jail Time

2008-12-24T12:47:00.000-08:00

Body Solutions' founder, Harry Siskind, "waves" to reporters after being sentenced to 37 months in prison for lying to federal authorities. Like ethics icon Martha Stewart, he isn't going to jail for the crime of which he was first accused. He is going to jail for lying about facts related to the investigation. I still remember the huge San Antonio Spurs flag waiving in multiple spotlights above the Body Solutions building on Hwy 281 and Bitters Road. Local radio and tv were covered with the amateurish explosion logo. The sales of the aloe vera potion were astronomical, with Siskind's ads making dramatic weight loss claims. They couldn't make the stuff fast enough. The ironic thing about the product is that if you take it as directed, you actually do lose weight because you have to take it at night and can't eat anything before going to bed. Nighttime is when most overweight people consume a majority of their calories. Some people lost weight, but not from consuming the ingredients in the bottle. Regardless, the claims were too far reaching and they sparked a federal investigation. Siskind was charged by the FTC for fraud. His company, Mark Nutritionals, Inc., was fined $155 million dollars. U.S. District Judge Orlando Garcia gives him the maximum sentence set out in sentencing guidelines... and a $10,000 fine to go with the $155 million he still owes.

SEC Charges Siemens AG for Engaging in Worldwide Bribery

2008-12-15T12:26:00.000-08:00

There have been more Foreign Corrupt Practices Acts (FCPA) enforcement cases in the US in the last three years than in the history of the Act itself. The government's all over bribes to foreign government officials in exchange for business. Today, the SEC announced huge settlement with Siemens AG. Siemen's AG has agreed to settle claims with the SEC and The Department of Justice, among others, for violations of the FCPA that total over $1 billion dollars. Yes, with a "b." The SEC press release link is at the bottom of this post.

Washington, D.C., Dec. 15, 2008 - The Securities and Exchange Commission today announced an unprecedented settlement with Siemens AG to resolve SEC charges that the Munich, Germany-based manufacturer of industrial and consumer products violated the Foreign Corrupt Practices Act (FCPA) by engaging in a systematic practice of paying bribes to foreign government officials to obtain business.The SEC alleges that Siemens paid bribes on such widespread transactions as the design and construction of metro transit lines in Venezuela, power plants in Israel, and refineries in Mexico. Siemens also used bribes to obtain such business as developing mobile telephone networks in Bangladesh, national identity cards in Argentina, and medical devices in Vietnam, China, and Russia. According to the SEC's complaint, Siemens also paid kickbacks to Iraqi ministries in connection with sales of power stations and equipment to Iraq under the United Nations Oil for Food Program. Siemens earned more than $1.1 billion in profits on these and several other transactions.Siemens has agreed to pay $350 million in disgorgement to settle the SEC's charges, and a $450 million fine to the U.S. Department of Justice to settle criminal charges. Siemens also will pay a fine of approximately $569 million to the Office of the Prosecutor General in Munich, to whom the company previously paid an approximately $285 million fine in October 2007. View Press Release 2008-294

Something Positive During the Crime Spree

2008-12-12T06:53:00.000-08:00

The last few days have been surreal, with a large number of indictments and arrests of wealthy business and political leaders who have allegedly committed fraud with wreckless abandon. It is truly a white collar crime spree in the U.S. However, a ray of light peeks through as some large corporations take the lead in trying to get corruption under control. One of Ethics Follies favorite ethics resources, Ethisphere Magazine, reported on its Business Ethics Leadership Alliance (BELA), which is seventeen companies which have committed to a code of conduct to rebuild trust in corporate behavior. The principles that these well-known companies, like GE, Wal-Mart, PepsiCo, Dell, and Accenture, have agreed to include legal compliance, transparency, avoiding conflict of interests and accountability. The voluntary initiative is to reinforce the standards of ethics and fortify confidence in business worldwide. As part of the agreement, the companies have to submit to regular independent audits. Ethisphere’s own reputation has grown rapidly in recent years and getting on their list of the most ethical companies is impressive.

Former Nasdaq chairman Arrested for 50 Billion Dollar Fraud

2008-12-11T20:16:00.000-08:00

I started the Ethics Follies blog to keep track of the year's corporate ethics and compliance issues to use in writing a script six months from now. Since my first post, the stories just keep coming! And not just minor glitches. These are doozies. A governor trying to sell Obama's Senate seat, two hedge fund schemes, and a partridge in a pear tree. The following is from Rueters on Dec. 11, 2008:

NEW YORK - Bernard Madoff, a longtime fixture on Wall Street, was arrested and charged on Thursday with allegedly running a $50 billion Ponzi scheme, U.S. authorities said.
The former chairman of the Nasdaq Stock Market who remains a member of Nasdaq OMX Group Inc’s nominating committee, is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he founded in 1960.
But the alleged fraud involved a hedge fund he ran from a separate floor of the building where his brokerage is based. Madoff told senior employees of his firm on Wednesday that “it’s all just one big lie” and that it was “basically, a giant Ponzi scheme,” with estimated investor losses of about $50 billion, according to a criminal complaint against him.
A Ponzi scheme is a pyramid-type swindle in which very high returns are promised to early investors, who are paid off with money put up by later investors.

Prosecutors charged Madoff, 70, with a single count of securities fraud. They said he faces up to 5 years in prison and a fine of up to $5 million.
“Madoff stated that the business was insolvent, and that it had been for years,” Lev Dassin, acting United States Attorney for the Southern District of New York, said in a statement.

Authorities said that, according to a document filed by Madoff with the U.S. Securities and Exchange Commission on January 7, 2008, Madoff’s investment advisory business served between 11 and 25 clients and had a total of about $17.1 billion in assets under management.
“Bernard Madoff is a longstanding leader in the financial services industry,” his lawyer Dan Horwitz told reporters outside a downtown Manhattan courtroom where he was arraigned. “We will fight to get through this unfortunate set of events.”
A shaken Madoff stared at the ground as reporters peppered him with questions. He was released after posting a $10 million bond secured by his Manhattan apartment.
The SEC filed separate civil charges.
“Our complaint alleges a stunning fraud -- both in terms of scope and duration,” said Scott Friestad, the SEC’s deputy enforcer. “We are moving quickly and decisively to stop the scheme and protect the remaining assets for investors.”
The SEC said it appeared that virtually all of the assets of his hedge fund business were missing.
Madoff had long kept the financial statements for his hedge fund business under “lock and key,” according to prosecutors, and was “cryptic” about the firm.
Bernard L. Madoff Investment Securities has more than $700 million in capital, according to its website. It is a market maker for about 350 Nasdaq stocks, including Apple, EBay and Dell, according to the website.
The website also states that Madoff himself has “a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm’s hallmark.”

Ilinois Governor Arrested in Obama Successor Probe

2008-12-09T09:22:00.000-08:00

Where are America's leaders' ethics? Did we learn nothing from Monica Lewinsky and Bill Clinton?! The following (like a low budget Lifetime movie, but half as believable) story is from AP Wire. At least the actor playing the Governor in the movie will have an easy time looking like the character by just sporting a large toupe:

CHICAGO – Illinois Gov. Rod Blagojevich was arrested on Tuesday on charges that he brazenly conspired to sell or trade the U.S. Senate seat left vacant by President-elect Barack Obama to the highest bidder. Blagojevich also was charged with illegally threatening to withhold state assistance to Tribune Co., the owner of the Chicago Tribune, in the sale of Wrigley Field, according to a federal criminal complaint. In return for state assistance, Blagojevich allegedly wanted members of the paper's editorial board who had been critical of him fired.

A 76-page FBI affidavit said the 51-year-old Democratic governor was intercepted on court-authorized wiretaps over the last month conspiring to sell or trade the vacant Senate seat for personal benefits for himself and his wife, Patti. Otherwise, Blagojevich considered appointing himself. The affidavit said that as late as Nov. 3, he told his deputy governor that if "they're not going to offer me anything of value I might as well take it."

"I'm going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain," Blagojevich allegedly said later that day, according to the affidavit, which also quoted him as saying in a remark punctuated by profanity that the seat was "a valuable thing — you just don't give it away for nothing."

The affidavit said Blagojevich also discussed getting a substantial salary for himself at a nonprofit foundation or an organization affiliated with labor unions. It said Blagojevich also talked about getting his wife placed on corporate boards where she might get $150,000 a year in director's fees. He also allegedly discussed getting campaign funds for himself or possibly a post in the president's cabinet or an ambassadorship once he left the governor's office. He noted becoming a U.S. senator might remake his image for a possible presidential run in 2016, according to the affidavit. And he allegedly said a Senate seat would also provide him with corporate contacts if he needed a job and present an opportunity for his wife to work as a lobbyist. "I want to make money," the affidavit quotes him as saying in one conversation. The affidavit said Blagojevich expressed frustration at being "stuck" as governor and that he would have access to greater resources if he were indicted while in the U.S. Senate than while sitting as governor.
U.S. Attorney Patrick J. Fitzgerald said in a statement that "the breadth of corruption laid out in these charges is staggering."

"They allege that Blagojevich put a for sale sign on the naming of a United States senator," Fitzgerald said." Messages left for Blagojevich spokesman Lucio Guerrero and at the governor's press office were not immediately returned Tuesday morning. Among those being considered for the Senate post include U.S. Reps. Danny Davis and Jesse Jackson Jr. The affidavit outlined a Nov. 10 call between Blagojevich, his wife, his chief of staff — John Harris, who also was arrested Tuesday — and a group of advisers in which Harris allegedly suggested working out an agreement with the Service Employees International Union. Under the plan, Blagojevich would appoint a new senator who would be helpful to the president-elect and in turn get a job as head of Change to Win, a group formed by the union. The union would get an unspecified favor from Obama later. Nothing in the court papers suggested Obama had any part in the discussion. In fact, Blagojevich allegedly said in the same conversation that Obama most likely would not appoint him as secretary of health and human services or to an ambassadorship because of the negative publicity that has surrounded the governor for three years. One day later, according to the affidavit, Blagojevich allegedly told an associate he knew Obama wanted a specific Senate candidate but "they're not going to give me anything except appreciation." He finished the remark with an expletive.

Blagojevich also was charged with using his authority as governor in an attempt to squeeze out campaign contributions. Corruption in the Blagojevich administration has been the focus of a federal investigation involving an alleged $7 million scheme aimed at squeezing kickbacks out of companies seeking business from the state. Federal prosecutors have acknowledged they're also investigating "serious allegations of endemic hiring fraud" under Blagojevich, who has a $177,412 salary, though it's unclear whether he accepts the total. Political fundraiser Antoin "Tony" Rezko who raised money for the campaigns of both Blagojevich and Obama is awaiting sentencing after being convicted of fraud and other charges. Blagojevich's chief fundraiser, Christopher G. Kelly, is due to stand trial early next year on charges of obstructing the Internal Revenue Service.
According to Tuesday's complaint, Blagojevich schemed with Rezko, millionaire-fundraiser turned federal witness Stuart Levine and others to get financial benefits for himself and his campaign committee.

Federal prosecutors said Blagojevich and the chairman of his campaign committee have been speeding up corrupt fundraising activities in the last month to get as much money as possible before the end of the year when a new law would curtail his ability to raise contributions from companies with state contracts worth more than $50,000.

According to the affidavit, agents learned Blagojevich was seeking $2.5 million in campaign contributions by the end of the year, with a large part allegedly to come from companies and individuals who have gotten state contracts or appointments.
The affidavit also outlines Blagojevich conversations related to Tribune Co., which has been hoping to sell Wrigley Field, the home of the Chicago Cubs which the publishing giant also owns.
Blagojevich was quoted in court papers as telling Harris in a profanity laced Nov. 4 conversation that his recommendation to Tribune executives was to fire the editorial writers "and get us some editorial support."

Harris is quoted as telling the governor Nov. 11 that an unnamed Tribune Owner, presumably CEO Sam Zell, "got the message and is very sensitive to the issue." The affidavit said Harris quoted a Tribune financial adviser as saying cuts were coming at the newspaper and "reading between the lines he's going after that section," apparently meaning editorial writers. Blagojevich is quoted as saying: "Oh, that's fantastic." "Wow," Blagojevich allegedly replied. "Keep our fingers crossed. You're the man. Good job, John."

Harris allegedly told Blagojevich in his conversation with the financial adviser he had singled out deputy editorial page editor John McCormick as "somebody who was the most biased and unfair." After hearing that, Blagojevich allegedly stressed to the head of a Chicago sports consulting firm that it was important to provide state aid for a Wrigley Field sale.
Blagojevich took the chief executive's office in 2003 as a reformer promising to clean up former Gov. George Ryan's mess.

Ryan, a Republican, is serving a 6-year prison sentence after being convicted on racketeering and fraud charges. A decade-long investigation began with the sale of driver's licenses for bribes and led to the conviction of dozens of people who worked for Ryan when he was secretary of state and governor. FBI spokesman Frank Bochte said federal agents arrested the governor and Harris simultaneously at their homes at 6:15 a.m. and took them to the Chicago FBI headquarters.

He did not have any details about Blagojevich's arrest, only that he was cooperative with federal agents. "It was a very calm setting," he said. The governor was to appear later Tuesday before U.S. Magistrate Judge Nan Nolan to answer the charges. The time was not immediately set.
___
Associated Press Writer Don Babwin contributed to this report.

Slideshow: Illinois Gov. Rod Blagojevich
Play Video Video: LIVE - News conference on Blagojevich’s arrest ABC News
Play Video Video: Illinois governor arrested on federal charges AP

When Do Hourly Rates Become Ridiculous?

2008-12-09T08:59:00.000-08:00

I'm going to venture out there on an editorial limb and suggest that now...December 2008....billable hourly rates are officially unreasonable in the US at large firms. The National Law Journal reports that "[t]he average of this year's average firmwide billing rates, which include partner and associate rates, climbed by 4.3%. The level of increase for average firmwide billing rates was lower than the increase last year of 7.7%, compared with 2006. The continued uptick in legal expenses means that law firms should expect clients, especially in a worsening economy, to hire more attorneys in-house and to rely more heavily on "flexible staffing," said Pamela Woldow, general counsel and principal of Altman Weil Inc., a law firm consultancy. In addition, clients, such as pharmaceutical companies, that in the past did not demand alternative or varied fees will be "negotiating harder" for better deals on legal services, Woldow said. The average of the average firmwide billing rate for 2008 was $363 per hour, compared with $348 in 2007. The average of the median firmwide rate this year was $350 per hour, compared with $347 per hour last year.

The most expensive hourly rate came from White & Case, which reported that the high end of its partner rate was $1,260 per hour. (I choked a little just now) The firm's average partner billing rate was $747 per hour. With 2,205 attorneys, White & Case is ranked No. 6 on the NLJ 250. In a written statement, White & Case said that the high end of its billing rates was "representative of only two potential billing scenarios for clients" and "[did] not take into account a number of key factors, including blended rates and rates negotiated with specific clients."Coming in second was Dorsey & Whitney, where the high end of the partner rate was $1,180. Dorsey's average partner rate was $505. The top rates at Dorsey & Whitney were charged by two international tax partners practicing in London, said firm spokesman Bob Kleiber. The firm declined to identify the partners charging that rate.The two law firms also reported the highest associate rates, with White & Case charging $920 per hour at the high end of the range and Dorsey & Whitney charging up to $820 per hour for associate work. The average associate rate at White & Case was $456 per hour. The average associate rate at Dorsey & Whitney was $301 per hour. The $820 fee charged at Dorsey & Whitney applied to one associate practicing in the firm's London office, Kleiber said. Regarding average partner billing rates, 86.2% of the firms charged more this year than last year. The average of the average partner rate this year was $451 per hour, while the average of the median partner rate was $435 per hour.Regarding associate rates, 80.7% of the law firms responding to the billing survey both in 2007 and 2008 raised the high end of associate rates. The average of the average associate rate for these firms was $282 per hour. The average of the median associate rate was $274. Two law firms besides Dorsey & Whitney and White & Case reported partners who charged four-figure rates. They were Pittsburgh-based Buchanan Ingersoll & Rooney, at $1,020, and Chicago-based Jenner & Block, at $1,000. Several law firms came close to the $1,000 mark on the high end of the partner rate range. They were New York-based McKee Nelson, at $995; Washington-based Patton Boggs, at $990; Cooley Godward Kronish of Palo Alto, Calif., at $980; Locke Lord Bissell & Liddell, at $975; Chicago-based Winston & Strawn, at $975; Venable of Washington, at $950; Loeb & Loeb, at $925; Washington-based Hogan & Hartson, at $900; and Reed Smith, at $900. Alternative and variant billing systems were popular among many law firms. Of the 127 firms that responded to billing questions, 66 reported that they received at least a portion of their revenue from alternatives and variations. "Variations" to the billable hour mean discounted fees or blended hourly rates, while "alternatives" include fixed or flat fees.Many law firms derived most of their revenue via variations. "

The ethics issues implicated by these astronomical rates is that there is a duty to zealously represent clients regardless of the hourly fee, so there is per se no additional value added for the $1,260 an hour representation. If it is skill that people buying, there may be value added for peace of mind of the client who thinks they have hired a magician who can make things happen that other attorneys can't. Is it ethical to charge whatever the market will bear? One could argue the sophisticated client could go elsewhere and get similar representation. I'm not sure there is even an ethics issue here, it's just interesting to explore why the in house legal community is in such a rage over it and a discussion of right or wrong. I would suggest that in house attorneys are to blame if they don't tell outside attorneys what they are willing to spend on a project or per billable hour. Man up! (you too women!).

The flip side of the ubber expensive attorneys are the talented attorneys at the same firms who don't want the rates to constantly increase for various reasons (guilt, client concerns, limits on marketing when fees are too high), but are billed at those rates due to the firm's policies. The options are to leave the firm they fought so hard to become a partner in or to just not be concerned with the fairness of the rates. Neither is a particularly good solution to the problem.

SURVEY RESULTS:Nationwide Sampling of Law Firm Billing Rates Billing Rates by Associate Class Alternative Billing Variants Order the 2008 NLJ Billing Survey from ALM Research.
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Wealthy NYC Lawyer Admits $150 Million Securities Fraud

2008-12-09T07:16:00.000-08:00

DOH! From the "hard to believe" news department, prominent New York city lawyer Marc Dreier (formerly represented Jon Bon Jovi and Jay Leno) recently admitted to selling fake securities worth millions to unwitting investors. According to a release issued by the U.S. attorney’s office in New York and an accompanying criminal complaint, Dreier was arrested late Sunday night, presumably upon his arrival back in New York, on charges stemming from a $100 million fraud against various hedge funds. The SEC also filed suit against Dreier on Monday, Dec. 8th, alleging that he has been marketing and selling fake promissory notes to investors. Click here for the SEC’s complaint. In a related announcement on Monday, the U.S. Securities & Exchange Commission charged Dreier with attempting to raise more than $113 million as part of a "stunning, brazen fraud that targeted some very sophisticated investors." Wachovia Bank also sued Dreier LLP and Marc Dreier (in addition to a handful of others) today, alleging that a credit revolver and term loan extended to the firm are in default, as of November 1, upon which the bank is owed some $12.7 million. Click here for a copy of the complaint.

What's odd is that Dreier is a wealthy individual, who did not appear to be in financial trouble. Because of the sophisticated parties he was defrauding, he would most certainly be caught. So why commit fraud? Greed? Ego? Insanity? From a distance it looks like a lemming jumping off a cliff.

Read more: Marc Dreier

Acts of God? No ...just "The Donald"

2008-12-03T06:54:00.000-08:00

Donald Trump's lawyers have taken the position that they don't have to repay Deutche Bank $330 million of the $640 million he borrowed for a high-rise hotel condominium project in Chicago. Trumps lawyers are claiming the economic recession is a "Force Majeure" as defined in Trump's loan agreements with the Bank, releasing him from the obligations due to acts of God out of his control. This French phrase for "greater force," (Trump?) clearly doesn't mean "I don't have the cash so I'll turn around and just sue you to avoid paying right now." But that's what Trumps lawyers did. Trump refused to repay the loan and then sued Deutsche Bank for tortious interference, negligent misrepresentation, and breach of fiduciary duty. Deutche Bank countered with a request for sanctions against Trump for $40 Million for what appears to be a frivolous lawsuit. The judge is obviously aware of Trump's attorneys behaving badly since he scheduled the hearing on the motion for summary judgement on the sanctions on New Year's Eve. Judges can be a hoot.

"This isn't Candy?"

2008-11-26T13:26:00.000-08:00

Drug manufacturer Cephalon recently settled a claim of a misdemeanor violation of the U.S. Food, Drug and Cosmetic Act. The company must pay $425 million to settle criminal and civil charges filed against the company for the way it marketed three of its drugs - Actiq (a painkiller), Gabitril (an epilepsy drug) and Provigil (a sleeping drug). "These are potentially harmful drugs that were being marketed as if they were, in the case of Actiq, actual lollipops instead of a potent pain medication intended for a specific class of patients,” said acting United States Attorney Laurie Magid in a statement.
The first part of the settlement is for $50 million (criminal charges) and the second part is for $375 million (civil charges). Implementing a company code of ethics and following the PhRMA Code looks pretty cheap by comparison.
The civil complaint was brought by a former sales rep who, on the government’s request, agreed to wear a wire to a company sales conference. Three other individuals (two of them also former Cephalon sales reps), later filed suit as well. The four whistle-blowers will share $46.5 million from the settlement. Pretty "sweet" for the honest sales reps. What's disturbing from an ethics perspective is that you can't be in the pharma industry and not be aware of FDA's regulations of how drugs may be marketed. The tone was set at the top of Cephalon and it was waaay off pitch.

What You Don't See Can Hurt Your Client

2008-11-24T09:45:00.001-08:00

Revisions made with word processing software to legal documents can be revealing if inadvertently given to opposing counsel. The revisions/deletions are still visible as code in the document after they are deleted, even though you can't see them. This invisible data about data, or "metadata," is sometimes sent to an opposing side of a negotiation or lawsuit by accident. There is software that can be used to "scrub" this data out of a document, but it not yet used uniformly in the legal profession. (You can't scrub discovery responses if the metadata is responsive. That metadata must remain untouched). So what happens when opposing counsel gets this document with the other guy's confidential information? The key here is that the confidentiality is owned by the attorney's client, not the attorney. The failure to remove the metadata is a breach of a duty by the attorney to her client. However, the ABA concludes that if an attorney sends you a document, and you should reasonably believe that some information was sent by mistake, the only real duty to the recipient is notify the other attorney of the screw up. But you can do whatever you like with the information after giving such notice. (ABA Formal Opinion 06-442) Hmmm. That sounds like punishment to the client, even though the attorney made the mistake.

2008-11-21T09:21:00.000-08:00

Ethical Tacos

Andrew Longstreth of American Lawyer edits a really great free newsletter called the Am Law Litigation Daily. I wanted to share one of his entries (I hope he's flattered) because it is clever, and made me think of an Ethics Follies parody. The take away is that you may avoid breaking the law, but when you violate the spirit of the law and damage who it is meant to protect, your ethical compass may be off kilter. In this case, it's possible both Parties are frontin'. Enjoy:

"When Taco Bell used 50 Cent's name in a promotion to sell tacos over the summer, the gangsta rapper talked tough and threatened legal action. "When my legal team is finished with them," he said, "Taco Bell is going to have a new corporate slogan: 'We messed with the bull and got the horns.'" Oh, snap! Fifty, whose real name is Curtis Jackson, wasn't just fronting. He hired an IP lawyer, Peter Raymond of Reed Smith, who filed a $4 million suit in the Southern District of New York against Taco Bell, claiming the restaurant chain infringed 50 Cent's trademark.At issue is a letter sent by Taco Bell's president to 50's agent (but also distributed to the media). In the letter, available here, Taco Bell offered to donate $10,000 to a charity of 50 Cent's choice if he would temporarily change his name to 79 Cent, 89 Cent, or 99 Cent and rap at a Taco Bell drive thru. In 50 Cent's complaint, his lawyers claim the letter was in reality an advertisement and that Taco Bell did not have permission to use the artist's name.Taco Bell's lawyers at Patterson Belknap Webb & Tyler have been talking smack, too. In the restaurant chain's response, filed in September, they begin by declaring that "Jackson is a self-described former drug dealer and hustler." Oh, no they didn't! "Jackson has used his colorful past to cultivate a public image of belligerence and arrogance and has a well-publicized track record of making threats, starting feuds, and filings lawsuits," they continue. "This lawsuit is another of Jackson's attempts to burnish his gangsta rapper persona by distorting beyond all recognition a bona fide, good faith offer that Taco Bell made to Jackson."Fifty's lawyer, Reed Smith's Raymond, told us that he "disagrees with all the false allegations" of Taco Bell's lawyers. He also said he found it "curious" that Taco Bell describes 50 Cent as such a disreputable character, given that the restaurant was once so eager to be associated with him. "

Decent's Descent- "Put it on Vibrate Buddy!"

2008-11-19T18:54:00.000-08:00

"I Can Hear Your Cell" is a parody of a song from the Broadway show and film "Hairspray." It is a social commentary on the thoughtless use of cell phones in the US. Most business people and attorneys speak openly in public on their cell phones about confidential deals and subject matter without thinking about who may be hearing what is said. We decided to make this song the "Production" number in the show, complete with inflatable cell phones.

Cuban Faces Insider Trading Allegations

2008-11-17T18:35:00.000-08:00

When Mark Cuban said that the San Antonio River was an "ugly-ass, muddy-watered thing," most folks in San Antonio knew that he was an arrogant jerk. Like many folks who have lost insight as to how they impact others, his overconfidence may have gotten him in trouble with the law. While they are just allegations at this point, the Associated Press reports that federal regulators on Monday charged Dallas Mavericks owner Mark Cuban with insider trading for allegedly using confidential information on a stock sale to avoid more than $750,000 in losses. Cuban disputed the Securities and Exchange Commission’s allegations and said he would contest them. In a civil lawsuit filed in federal court in Dallas, the SEC alleged that in June 2004, Cuban was invited to get in on the coming stock offering by Mamma.com Inc. after he agreed to keep the information private. Maybe he has been chatting with Martha Stewart...and not about her chocolate biscotti recipe.

Ethics Follies 2008--Decent's Descent

2008-11-15T13:49:00.000-08:00

For the last few months, about 40 people have invested hundreds of rehearsal hours to rehearse a semi-original musical comedy called "Decent's Descent." The musical fulfills the ethics conference mission of the local chapter of The Association of Corporate Counsel. The premiere of the show was on November 6, 2008 at the Empire Theatre. We were pleased that the show was a success on many levels. We got the ethics messages across without being preachy. We raised a substantial amount of money for The Community Justice Program, which provides free legal services to those who can't affford them. As the cherry on top, every single person in the show did their personal best the day of the show.

The Empire Theatre in San Antonio was full of lawyers, accountants, managers, compliance officers and a couple of doctors (in the cast), who were excited to see the alternative to three hours of ethics speeches given at a podium. Ethics awareness helps keep San Antonio ethical in the court room and the board room.

For the next year, I will blog the progress of the Ethics Follies 2009 as we move towards our November 5, 2009 show date. For now, while I'm resting up from the last six months of work, I'll post some photos of the show as they come in and some video, which I hope to receive soon from Fawn Mountain Productions in Austin, Texas.

The Follies cast and crew are coming to my house November 15th for a cast party broohaha. Should be fun.