Did Wall Street Bankers Commit CDO Fraud?

In 2009, the Securities and Exchange Commission (SEC) began a civil fraud investigation of over a dozen banking firms that traded and sold mortgage-backed collateralized debt obligations (CDOs). This investigation has engendered subsequent probes into the behavior of Wall Street firms. Did Wall Street bankers defraud investors by selling them CDOs in order to make [...]

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What Exactly Is Cellular Marketing?

I am sure you have noticed that a number of people, in reality almost all individuals have cell phones these days. It is this proliferation of mobiles marketing makes a large amount of use of. Allow us to take a look at exactly what mobile marketing is and how it all works. For those who [...]

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RESOURCE WELL INVESTMENT

We maintain a close relationship with prominent oil field operator in Texas o This oil field operator is offering fractional oil well ownership to our clients for a long term investment opportunity lasting 25yrs. ? This offer has 100% Success Rate with Proof of Performance ? 100% Transparent, Full Due Diligence package offered to Qualified [...]

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CandidateSpeak - Cases in Point

“My experience with Nancy Grimes and GLI has been pivotal to the future of my legal career. Nancy is a consummate professional who shoots it ?straight-from-the-hip?. I was impressed by her knowledge of the market. One of the things I most admired about Nancy is that she easily balanced the sometimes competing interests of providing [...]

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ClientSpeak - GLI Delivers!

I find the team at Grimes Legal, Inc. to be professional, responsive and sensitive to the needs of our law firm. Nancy Grimes has been extremely creative and diligent in helping our firm find the right matches each and every time we?ve called. We appreciate the opportunity to work with consummate professionals like those at [...]

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New Jersey Has a Busy Week

We’ve noted  before that New Jersey remains the hands-down leader in pay-to-play ordinance proliferation.  Until Governor Christie (or someone at the state level) succeeds in implementing a uniform statewide protocol for procurement efforts such as the one proposed here, New Jersey will extend its dubious distinction of having more varietie s of pay-to-play legislation than its Turnpike has exits. (Think I’m kidding?  Read on.  It’s not even close).

This week saw two such ordinances seek admission to New Jersey’s growing family. First, Montclair, New Jersey proposed an ordinance, which would, if passed, debar contractors and their companies, which have made local political contributions in excess of $300 (and in some instances $500) within the preceding year from contracting with the township. The provision further provides for two relatively punitive provisions for its violation. First, the proposed law makes clear that a violation “shall be a material breach of the terms of a Montclair agreement or contract for Professional Services or Extraordinary Unspecified Services”, which virtually ensures that discovery of inadvertent violations of the ordinance shall be the first order of business for any losing bi dder contemplating a bid protest. Second, making matters worse for the intentional or unintentional violator, contractors discovered to have transgressed (by a disgruntled bid protestor or others) would be barred from bidding on township contracts for four years. Ouch.

A second pay-to-play ordinance is being contemplated by the Bergen County, New Jersey Board of Chosen Freeholders. This  ordinance has drawn criticism not for the penalties it imposes but rather for the exemptions it contains (one payer’s “exemption” is another player’s “loophole”). At issue in the Bergen County ordinance is a provision that its penalties and restrictions do not apply to contracts procured via open, competitive bidding (the so-called “fair and open process” exception). While it might strike some (such as myself) that contracts awarded through a transparent and open bidding process do not require the same, strict level of safeguards in the form of complex, and often punitive, restrictions on campaign activity, the “fair and open process” e xception has   drawn  fire in the township. This clause has drawn the ire of Jersey residents  before and shows no sign of abating any time in the near future.

Until New Jersey finds a way to adopt a common regulatory standard throughout the state, it will remain safely ensconced as the clear national leader in multiple, contradictory political procurement regulatory schemes.

While you’re holding your breath for that development, I strongly recommend that any entities or individuals seeking to navigate New Jersey pay-to-play or doing business with the State’s numerous townships to bookmark this extremely handy reference to the State’s numerous (literally over 100) current pay-to-play provisions. I further recommend that anyone seeking to navigate the State’s famous turnpike be on the lookout for these signs.

 

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FINRA CEO Says Brokers Must ?Push and Pull? for Private Placement Information

Often, investment advisors, stockbrokers and brokerages who unsuitably push Reg. D Private Placements on investors claim that any financial losses investors subsequently experience occur despite their due diligence. However, these private investments pay high fees that can induce some financial professionals to look the other way, focusing on the fifteen percent fee rather than the [...]

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Is It Really Too Late? Fraud, Statutes of Limitations & Recovering Investment Losses

Although it?s been three years since financial misconduct on Wall Street rocked the nation, investors still have opportunity to recoup some or all of their financial loss. If you suffered financial loss during the recent crisis, your broker, brokerage or financial advisor may be legally responsible for that loss. A variety of legal actions can [...]

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ClientSpeak - GLI Delivers!

Nancy Grimes and the GLI team are wonderful to work with. My first experience with GLI was for one of our most difficult searches. Nancy took a significant amount of time working with both the partner in charge and the recruiting department to get a thorough understanding of what we were looking for and did [...]

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Atlanta Takes Another Shot at Procurement Restriction

Fulton County, Georgia – home county to the City of Atlanta - is poised once again to take up an ordinance designed to prohibit any corporation, officer, agent or individual who makes relevant campaign contributions or gifts from seeking county contracts. Just yesterday, the Fulton County Commission announced an agenda item for its August 17, 2011 recess meeting. Deep on page 12 of that agenda is a single line item styled:

Request approval of a Resolution amending the Fulton County Code of Laws regarding campaign contributions from entities doing business with, or seeking to do business with, Fulton County.

The resolution to be taken up, proposed by Commissioner Emma Darnell, closely mirrors a pay-to-play contract restriction proposed two years ago for the City of Atlanta by Common Cause Georgia.  In its current form, the proposed resolution provides that no corporation, entity, or individual will have the right to bid for, or hold, a county contract if it has either made a campaign contribution of $500 or more to a County Commissioner or has provided any direct or indirect gift or contribution to a County Commissioner or any Fulton County employee.

For the purposes of determining whether a person has reached the $500 threshold, Commissioner Darnell’s resolution proposes aggregating all contributions or gifts made by an individual, their parents, siblings, spouse, or children as well as by any company that the individual controls or holds a 10% stock interest in. With respect to company contributions and gifts, the proposed resolution would aggregate all contributions or benefits conferred by any “officers, directors, partners, members, or salaried employees of the entity, and of any affiliated or subsidiary entities.”

Yes, you read that right. Under the proposed resolution, a company such as Delta Air Lines would theoretically be debarred from contracting with Fulton County (they have an airport in Atlanta, don’t they?) if even one of its salaried employees pays for a birthday cake for a next door neighbor who just happens to be a Fulton County employee. (Transparency Note: Delta Air Lines is a client of our firm, but this example could just as easily apply to any corporation having any employee who inadvertently makes a $500 campaign contribution or any gift to a County Commissioner or county employee).

As this blog has noted before, well-meaning and good-intentioned efforts to restrict back room dealing almost always get hoisted upon the petard of the broad language necessary to prevent circumvention but predictably results in negative, unintended consequences. The Law of Good Intentions almost always loses out to the  Law of Unintended Consequences.  Under this proposal, compliance costs will skyrocket, as will the likelihood of unnecessary and inefficient bid protest litigation due to inadvertent violations. In light of these potential effects, simple disclosure of all campaign and gift activity in the contracting process strikes me as the much more sensible approach.

I also have concerns that such restrictions will needlessly limit campaign activity and chill political speech inside of Fulton County. The words I wrote two years ago here still ring true to my ear:

While few would argue that the procurement process in Atlanta doesn't need more sunshine, the Common Cause proposal appears to go a few steps to far. Most troublesome is the proposal to prohibit persons who make contributions of over [$500] from bidding on any … contracts for the next year, as the prohibition applies even if the contract in question was not in existence at the time of the contribution. Restricting contribution amounts in this manner would undoubtedly chill the making of political contributions for City of Atlanta elections altogether, as any person or entity with any potential interest in any City contract in the future could not make contributions without the fear of being locked out of all future business. This is the sort of broad restriction that has proven to be problematic in jurisdictions such as Colorado. Similarly problematic is the apparent willingness to consider contributions by spouses and children of contributors in making prohibition determinations. Again, Colorado should serve as a cautionary tale here.

Needless to say, Common Cause Georgia, and many others, do not share my concerns. Whether Fulton County’s proposed resolution passes tomorrow or not, however, the waves of “restriction as reform” continue to hit the beach.

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Aviation Recruitment: What Companies Must Know Before They Hire

A few years back, the aviation industry looked like it was in turmoil. Profits were dropping and it seemed impossible that all but the largest carriers would survive the phase. But, the upswing for the aviation industry has begun recently and as you may know most aviation companies are in the process of recruiting large [...]

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SEC Pay-to-Play Rule Factor in Republican GOP Presidential Primary Fundraising Battle

Much has been written and said about the SEC’s new pay-to-play rules, which will go into effect on March 14.

Recent commentary has generally focused on the lack of certainty to the business community on how these rules will be applied, as well as the administrative difficulties that will likely arise as the rule first goes into effect. RealClearPolitics has an interesting new take on the regulations, which focuses on how this could impact the 2012 Republican Presidential Primary.

More on that later. As a reminder, the SEC’s new rule has three key elements:

1) It prohibits investment advisors from providing advisory services for compensation—either directly or through a pooled investment vehicle—for two years, if the advisor or certain of its executives or employees have made prohibited political contributions to an elected official in a position to influence the selection of the advisor;

2) It prohibits advisory firms and certain executives and employees from soliciting or coordinating campaign contributions from others (a practice referred to as “bundling”) for any elected official in a position to influence the selection of the adviser. It also prohibits solicitation and coordination of payments to political parties in the state or locality where the adviser is seeking business; and

3) It prohibits investment advisors from paying third parties, such as placement agents, from soliciting a government client on behalf of the investment adviser, unless that third party is an SEC-registered investment advisor or broker/dealer subject to similar pay to play restriction.
Importantly, for the purposes of campaign fundraising, it doesn't matter whether a state official directly oversees a fund or can appoint someone who does. In either situation, investment advisers interested in obtaining contracts for those funds cannot donate more than $150 to their campaigns in a cycle. The limit goes up to $350 if the investment adviser lives in the state of the elected official.

National political reporter for RealClearPolitics, Erin McPike, writes in "SEC 'Pay to Play' Rule Could Inhibit Barbour, Daniels" that:

Daniels has a direct role on a board that oversees some public funds in the Hoosier State, and Barbour appointed his chief of staff to sit on a board that oversees the public retirement fund in Mississippi, meaning both potential presidential contenders’ campaign accounts could take a hit from the new rules.

In the presidential race, they appear to be the only two politicians in the still-forming field who could be affected by the rule. President Obama is not affected, and the rest of the GOP field is populated by former officials and a senator, none of whom have to worry about the rules.

It remains to be seen how deeply the rules will shape the money chase in the impending GOP presidential primary. A number of sources say that while the giving trends of investment advisers have tended to favor Democrats, there's a growing interest in the industry for two potential Republican candidates: [Mitt] Romney, who isn't affected by the rules, and Daniels, who is.

Interestingly, the SEC’s rules are also impacting other races nationwide. McPike further explains:

Of course, the rules affect candidates down the ballot and across the country, so Barbour and Daniels are not alone. Take Indiana, for example. Indiana Treasurer Richard Mourdock plans to challenge Republican Sen. Dick Lugar in a primary, so Mourdock's role on the same board on which Daniels sits that oversees a state fund impairs the treasurer's ability to raise money from this part of the financial services industry. If Republican Rep. Mike Pence runs for governor, he'll face the same complication given the governor's role on the board and the fact that candidates for affected offices are included.

In neighboring Ohio, Treasurer Josh Mandel has the authority to appoint an investment designee to the Ohio Public Employees Retirement System Board of Trustees. Mandel, a Republican, is a potential opponent for Democratic Sen. Sherrod Brown, and investment advisers would be subject to penalty if they donated substantial contributions to him for the Senate race.

Chalk this up as another unintended consequence of pay-to-play regulations. While it is still unclear just how much these restrictions will limit an impacted candidate’s fundraising prowess, what is clear is the need for comprehensive compliance programs in order to proactively address these challenges prior to March 14.

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Halliburton Class Action for Securities Fraud, Case Reinstated ? a Victory for Claimants

According to a June 6, 2011 article by James Vicini for Reuters (?Halliburton securities fraud lawsuit reinstated?) the U.S. Supreme Court has reinstated a securities fraud class-action lawsuit filed against Halliburton in 2001 by pension and mutual fund investors on behalf of all buyers of Halliburton stock between June 1999 and December 2001. Claimants in [...]

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Friday News (06.24.2011)

Austin City Council voted 6-1 in favor of postponing the “Formula One decision” — i.e., the the decision on whether the City will sponsor the event, thereby allowing it to receive $25 million per year in state taxpayer funds from the Texas Comptroller — until next Wednesday.  With the exception of Mayor Leffingwell, councilmembers agreed that more time was needed to review the agreement documents proposed to the City by Formula One proponents.  On a sidenote, newly elected councilmember Kathie Tovo — who has clearly

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Is It Really Too Late? Fraud, Statutes of Limitations & Recovering Investment Losses

Although it?s been three years since financial misconduct on Wall Street rocked the nation, investors still have opportunity to recoup some or all of their financial loss. If you suffered financial loss during the recent crisis, your broker, brokerage or financial advisor may be legally responsible for that loss. A variety of legal actions can [...]

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SEC Pay-to-Play Rule Factor in Republican GOP Presidential Primary Fundraising Battle

Much has been written and said about the SEC’s new pay-to-play rules, which will go into effect on March 14.

Recent commentary has generally focused on the lack of certainty to the business community on how these rules will be applied, as well as the administrative difficulties that will likely arise as the rule first goes into effect. RealClearPolitics has an interesting new take on the regulations, which focuses on how this could impact the 2012 Republican Presidential Primary.

More on that later. As a reminder, the SEC’s new rule has three key elements:

1) It prohibits investment advisors from providing advisory services for compensation—either directly or through a pooled investment vehicle—for two years, if the advisor or certain of its executives or employees have made prohibited political contributions to an elected official in a position to influence the selection of the advisor;

2) It prohibits advisory firms and certain executives and employees from soliciting or coordinating campaign contributions from others (a practice referred to as “bundling”) for any elected official in a position to influence the selection of the adviser. It also prohibits solicitation and coordination of payments to political parties in the state or locality where the adviser is seeking business; and

3) It prohibits investment advisors from paying third parties, such as placement agents, from soliciting a government client on behalf of the investment adviser, unless that third party is an SEC-registered investment advisor or broker/dealer subject to similar pay to play restriction.
Importantly, for the purposes of campaign fundraising, it doesn't matter whether a state official directly oversees a fund or can appoint someone who does. In either situation, investment advisers interested in obtaining contracts for those funds cannot donate more than $150 to their campaigns in a cycle. The limit goes up to $350 if the investment adviser lives in the state of the elected official.

National political reporter for RealClearPolitics, Erin McPike, writes in "SEC 'Pay to Play' Rule Could Inhibit Barbour, Daniels" that:

Daniels has a direct role on a board that oversees some public funds in the Hoosier State, and Barbour appointed his chief of staff to sit on a board that oversees the public retirement fund in Mississippi, meaning both potential presidential contenders’ campaign accounts could take a hit from the new rules.

In the presidential race, they appear to be the only two politicians in the still-forming field who could be affected by the rule. President Obama is not affected, and the rest of the GOP field is populated by former officials and a senator, none of whom have to worry about the rules.

It remains to be seen how deeply the rules will shape the money chase in the impending GOP presidential primary. A number of sources say that while the giving trends of investment advisers have tended to favor Democrats, there's a growing interest in the industry for two potential Republican candidates: [Mitt] Romney, who isn't affected by the rules, and Daniels, who is.

Interestingly, the SEC’s rules are also impacting other races nationwide. McPike further explains:

Of course, the rules affect candidates down the ballot and across the country, so Barbour and Daniels are not alone. Take Indiana, for example. Indiana Treasurer Richard Mourdock plans to challenge Republican Sen. Dick Lugar in a primary, so Mourdock's role on the same board on which Daniels sits that oversees a state fund impairs the treasurer's ability to raise money from this part of the financial services industry. If Republican Rep. Mike Pence runs for governor, he'll face the same complication given the governor's role on the board and the fact that candidates for affected offices are included.

In neighboring Ohio, Treasurer Josh Mandel has the authority to appoint an investment designee to the Ohio Public Employees Retirement System Board of Trustees. Mandel, a Republican, is a potential opponent for Democratic Sen. Sherrod Brown, and investment advisers would be subject to penalty if they donated substantial contributions to him for the Senate race.

Chalk this up as another unintended consequence of pay-to-play regulations. While it is still unclear just how much these restrictions will limit an impacted candidate’s fundraising prowess, what is clear is the need for comprehensive compliance programs in order to proactively address these challenges prior to March 14.

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FRAUD CHARGES BROUGHT BY SEC IN SILICON VALLEY REAL ESTATE INVESTMENT SCHEME

On the U. S. Securities and Exchange Commission’s website, it was announced that the Securities and Exchange Commission (SEC) charged Mountain View, Calif.-based JSW Financial Inc. and five officers for defrauding investors in two real estate funds, alleging that the firm used investor funds to prop up the officers? own failing real estate development projects [...]

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A 2009 BigLaw Retrospective

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Is It Really Too Late? Fraud, Statutes of Limitations & Recovering Investment Losses

Although it?s been three years since financial misconduct on Wall Street rocked the nation, investors still have opportunity to recoup some or all of their financial loss. If you suffered financial loss during the recent crisis, your broker, brokerage or financial advisor may be legally responsible for that loss. A variety of legal actions can [...]

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Aviation Recruitment: What Companies Must Know Before They Hire

A few years back, the aviation industry looked like it was in turmoil. Profits were dropping and it seemed impossible that all but the largest carriers would survive the phase. But, the upswing for the aviation industry has begun recently and as you may know most aviation companies are in the process of recruiting large [...]

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So, Does Fulton County KNOW the Resolution it is Considering is Invalid?

We just posted about a pay-to-play resolution being considered by the Fulton County, Georgia, Board of Commissioners. That post considers whether the campaign regulation proposed by the county is good policy and further warns about the legal pitfalls encountered in other states adopting similar proposals.

What I didn’t address is the possibility that someone at Fulton County already knows the resolution is legally invalid as an attempt to regulate campaign activity statutorily reserved to the State. The evidence would appear to indicate that they do.

 A careful read of Commissioner Emma Darnell’s website announcing the resolution shows that someone appears to have inadvertently attached a privileged legal analysis from the Indiana Attorney General to the Indiana Senate to the end of her proposal concluding that a virtually identical resolution, “if enacted by the City of Fort Wayne, would be invalid as an attempt to regulate, without specific statutory authority, conduct which is regulated by a state agency.” (emphasis added)

One can only speculate as to the reason why such a legal opinion would be attached to the proposed Fulton County resolution. One potential possibility would be that the Commission is already concerned that the resolution as proposed is legally invalid. On the off-chance that Commissioner Darnell’s website changes subsequent to this post, here is a screen-grab of the resolution along with the apparently inadvertently attached legal opinion as it was originally circulated.

Without offering any legal advice upon which anyone should rely, it would appear that Georgia’s constitutional and statutory structure mirrors that which concerned the Indiana Attorney General when he analyzed the Fort Wayne pay-to-play proposal. As is the case in Indiana, the Fulton County proposal clearly seeks to regulate conduct related to campaign financing and contributions. As is the case in Indiana, Georgia’s “Home Rule” provisions limit the power of municipalities to matters not preempted by the General Assembly through general law and not specifically enumerated as matters of state authority under O.C.G.A § 36-35-6. Included among those powers reserved to the state are authority over election procedures and campaign finance rules, which are specifically administered by the St ate Board of Elections and Georgia Government Transparency and Campaign Finance Commission in accordance with the requirements of general law and the state constitution.

In fairness, there are some in Indiana who disagree with the analysis and conclusion reached by Indiana Attorney General Zoeller; including Fort Wayne’s former city attorney. Nonetheless, this would appear to be a good opportunity for Fulton County to slow down, exhale, and reconsider.

 

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ClientSpeak - GLI Delivers!

Nancy Grimes and the GLI team are wonderful to work with. My first experience with GLI was for one of our most difficult searches. Nancy took a significant amount of time working with both the partner in charge and the recruiting department to get a thorough understanding of what we were looking for and did [...]

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A 2009 BigLaw Retrospective

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Can Investment Advisors, Private Fund Managers, and their Employees Contribute to Governor Perry?

Last February, we posted an entry flagging potential concerns arising from the SEC’s new pay-to-play rules for investment advisors as applied to presidential candidates. Admittedly, at the time we were talking about Governors Haley Barbour and Mitch Daniels, but the same holds true now for Texas Governor Rick Perry.

The Compliance Building blog (Presidential Campaign Season and the SEC’s Pay-to-Play Rule) has just posted an excellent analysis of the issue. I highly recommend you check it out. As the blog notes:

 

“Registered Investment Advisors, private fund managers getting ready to register with Securities and Exchange Commission, and their employees need to be very cautious about making contributions to Governor Perry if they have a Texas state sponsored fund as a client or investor, or hope to have one as a client or investor in the next two years.”     

 

Transparency Alert: the author is campaign counsel to several federal candidates including former Speaker Newt Gingrich.

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Did Wall Street Bankers Commit CDO Fraud?

In 2009, the Securities and Exchange Commission (SEC) began a civil fraud investigation of over a dozen banking firms that traded and sold mortgage-backed collateralized debt obligations (CDOs). This investigation has engendered subsequent probes into the behavior of Wall Street firms. Did Wall Street bankers defraud investors by selling them CDOs in order to make [...]

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Will the SEC File Investment Fraud Charges Against Credit-Rating Companies?

Image via Wikipedia According to the Wall Street Journal, in May 2011 the Securities and Exchange Commission (SEC) acknowledged that credit-rating agencies, desirous of pleasing the companies they rate, are sometimes less than objective in their evaluations. To mitigate this problem, the SEC has proposed that credit-rating firms operate under stricter guidelines. This month, the [...]

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Labor Day Greetings and Kudos

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Developers

The purpose of the The Affiliate Venture Bond with PRPTM is to provide funds for Developers while simultaneously providing sufficient collateral and security for Qualified Institutional Buyers Qualified Institutional Buyers (QIBs) require more collateral than Developers can manage under the current global financial conditions. What is necessary for development projects to move forward in today?s [...]

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FINRA CEO Says Brokers Must ?Push and Pull? for Private Placement Information

Often, investment advisors, stockbrokers and brokerages who unsuitably push Reg. D Private Placements on investors claim that any financial losses investors subsequently experience occur despite their due diligence. However, these private investments pay high fees that can induce some financial professionals to look the other way, focusing on the fifteen percent fee rather than the [...]

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Did Wall Street Bankers Commit CDO Fraud?

In 2009, the Securities and Exchange Commission (SEC) began a civil fraud investigation of over a dozen banking firms that traded and sold mortgage-backed collateralized debt obligations (CDOs). This investigation has engendered subsequent probes into the behavior of Wall Street firms. Did Wall Street bankers defraud investors by selling them CDOs in order to make [...]

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GLI SPOTLIGHTS CARLOS RIAZ

Carlos Riaz is the Project Coordinator for the New York, NY market. After graduating college with a degree in Human Resource Management, Carlos spent 4 years working in the HR department of a large law firm in New York. During his tenure in human resources, Carlos discovered his favorite aspect of the job was his [...]

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Costs Associated with Investing in Mutual Funds

If you?ve invested in mutual funds, you should know that taxes can affect your investment, sometimes significantly reducing your net returns. To completely avoid federal taxes, consider investments such as tax free municipal bonds. Also be aware that some mutual fund investments are more tax efficient than others. Below is some basic information regarding mutual [...]

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Developers

The purpose of the The Affiliate Venture Bond with PRPTM is to provide funds for Developers while simultaneously providing sufficient collateral and security for Qualified Institutional Buyers Qualified Institutional Buyers (QIBs) require more collateral than Developers can manage under the current global financial conditions. What is necessary for development projects to move forward in today?s [...]

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Inexpensive Good quality Laptop Bags Now Readily available On-line

Laptops are fairly well-known today. A lot of people pick these devices above desktop computer systems due to the fact it brings much more advantage to its owner. These are transportable devices and may be pretty versatile. Compared with the traditional desktop pcs, the gadget is often carried everywhere you want. It truly is fundamentally [...]

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Will the SEC File Investment Fraud Charges Against Credit-Rating Companies?

Image via Wikipedia According to the Wall Street Journal, in May 2011 the Securities and Exchange Commission (SEC) acknowledged that credit-rating agencies, desirous of pleasing the companies they rate, are sometimes less than objective in their evaluations. To mitigate this problem, the SEC has proposed that credit-rating firms operate under stricter guidelines. This month, the [...]

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Costs Associated with Investing in Mutual Funds

If you?ve invested in mutual funds, you should know that taxes can affect your investment, sometimes significantly reducing your net returns. To completely avoid federal taxes, consider investments such as tax free municipal bonds. Also be aware that some mutual fund investments are more tax efficient than others. Below is some basic information regarding mutual [...]

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Costs Associated with Investing in Mutual Funds

If you?ve invested in mutual funds, you should know that taxes can affect your investment, sometimes significantly reducing your net returns. To completely avoid federal taxes, consider investments such as tax free municipal bonds. Also be aware that some mutual fund investments are more tax efficient than others. Below is some basic information regarding mutual [...]

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Did Wall Street Bankers Commit CDO Fraud?

In 2009, the Securities and Exchange Commission (SEC) began a civil fraud investigation of over a dozen banking firms that traded and sold mortgage-backed collateralized debt obligations (CDOs). This investigation has engendered subsequent probes into the behavior of Wall Street firms. Did Wall Street bankers defraud investors by selling them CDOs in order to make [...]

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Performance Fee Thresholds for Investors to be Raised by the SEC

High net-worth investors will enjoy lower fees?that is, if the Securities and Exchange Commission?s (SEC?s) proposed changes to performance based fees proceed as planned. The SEC intends to increase the dollar thresholds investors must meet before financial professional can charge them performance based fees. Currently, the thresholds are determined under two provisos of Rule 205-3 of the Investment Advisers [...]

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Pricing Gap Revealed in Apple REIT Eight

David Kelly of InvestmentNews.com, June 15, 2011, writes that the price of one in a series of 10 nontraded REITs sold exclusively through David Lerner Associates Inc. took a hit yesterday when management from Apple REIT Eight Inc. said that its book value was $7.57 per share at the end of March, according to a [...]

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Performance Fee Thresholds for Investors to be Raised by the SEC

High net-worth investors will enjoy lower fees?that is, if the Securities and Exchange Commission?s (SEC?s) proposed changes to performance based fees proceed as planned. The SEC intends to increase the dollar thresholds investors must meet before financial professional can charge them performance based fees. Currently, the thresholds are determined under two provisos of Rule 205-3 of the Investment Advisers [...]

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Will the SEC File Investment Fraud Charges Against Credit-Rating Companies?

Image via Wikipedia According to the Wall Street Journal, in May 2011 the Securities and Exchange Commission (SEC) acknowledged that credit-rating agencies, desirous of pleasing the companies they rate, are sometimes less than objective in their evaluations. To mitigate this problem, the SEC has proposed that credit-rating firms operate under stricter guidelines. This month, the [...]

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WHY GLI?

Consider Our Track Record?
? During the one of the gravest legal markets in recorded history, GLI increased its performance.
? We have been party to thousands of legal placements ? associates, counsel, partners, group acquisitions AND firm mergers.
? During our tenure, GLI has had the awesome responsibility of opening many branch offices for some of the [...]

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Life Insurance Sold to Church Members Alleged Scam by Agents

In a June 17, 2011, article written by Darla Mercado for InvestmentNews.com, she writes that six life insurance agents claim that Aviva Life and Annuity Co. had consented to the offer of insurance coverage to some 119 churchgoers in Los Angeles. It was reported that insurance agents, Kazimir Patelski, Glenda Smith-Lee, Napoleon B. Kinney, Cheralynne Bridgewater, Candice [...]

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There is DEFINITELY a New Sheriff in Albany - Governor Cuomo Proposes Sweeping Ethics and Pay-to-Play Reform

Having apparently abandoned all hope of reforming New York’s Congressional delegation (and with a bipartisan ethics All-Star team including Congressmen Anthony Weiner (D-NY), Christopher Lee (R-NY), Eric Massa (D-NY), Charlie Rangel (D-NY) and Vito Fosella (R-NY)), Governor Cuomo has concluded that it's time to focus on New York State ethics and disclosure.

This week, Governor Cuomo announced that he, Senate Majority Leader Dean Skelos and Assembly Speaker Sheldon Silver had reached a three-way agreement on a substantial ethics reform package. Initially, and possibly more appropriately, named the “Clean Up Albany Act” in early press releases, the “Public Integrity Reform Act of 2011” proposes sweeping changes across a number of ethical disciplines. The proposed changes include the following:

Financial Disclosures: Financial disclosure statements filed with the new Joint Commission on Public Ethics from elected officials will now be posted on the internet and the prac tice of redacting the monetary values and amounts reported by the filer will be ended. The Act also includes greater and more precise disclosure of financial information by expanding the categories of value used by reporting individuals to disclose the dollar amounts in their financial disclosure statements. The Act requires disclosure of the reporting individual’s and his or her firm’s outside clients and customers doing business with, receiving grants or contracts from, seeking legislation or resolutions from, or involved in cases or proceedings before the State as well as such clients brought to the firm by the public official.

In Albany, this is a controversial measure as a number of legislators – who will now be required – effective July 1, 2012 and upon potential penalty of $40,000 for failing to do so – to disclose the names of “outside clients and customers” – are attorneys who do not wish to disclose the identities of their clients. As one would expect, backlash from legal members of the Assembly was immediate and vociferous.

Increased Access to Who is Appearing Before the State and Why: The Act establishes a new database of any individual or firm that appears in a representative capacity before any state governmental entity.

Additional Disclosures for Registered Lobbyists: The bill expands lobbying disclosure requirements, including the disclosure by lobbyists of any "reportable business relationships" of more than $1,000 with public officials. It also expands the definition of lobbying to include advocacy to affect the "introduction" of legislation or resolutions, a change that will help to ensure that all relevant lobbying activities are regulated by the new Joint Commission.

A New Joint Commission on Public Ethics: This is potentially the most significant development of the newly proposed legislation. The new Joint Commission on Public Ethics will replace the existing Commission on Public Integrity with jurisdiction over all elected state officials and their employees, both executive and legislative, as well as lobbyists. Among other restrictions, no individual will be eligible to serve on the Joint Commission who has within the last three years been a registered lobbyist, a statewide office holder, a legislator, a state commissioner or a political party chairman. Commissioners will be prohibited from making campaign contributions to candidates for elected executive or legislative offices during their tenure.

The Joint Commission will have jurisdiction to investigate potential violations of law by legislators and legislative employees and, if violations are found, issue findings to the Legislative Ethics Commission, which will have jurisdiction to impose penalties. Significantly, if the joint commission reports such a violation to the Legislative Ethics Commission (with full findings of fact and conclusions of law), that report must be made public along with the Legislative Ethics Commission’s disposition of the matter within strict timeframes. The Joint Commission will have jurisdiction to impose penalties on executive employees and lobbyists. Any potential violations of federal or state criminal laws will be referred to the appropriate prosecutor for further action.

This provision has proven controversial almost immediately. In order to initiate an investigation, the new Joint Commission will require that two appointees of the same party in a given branch assent. This means, as many have already pointed out, that in theory the commission could vote 11-3 to take action without anything being done. Similarly, the New York Times noted that “commissioners appointed by the Assembly speaker, Sheldon Silver, a Democrat, could effectively block investigations of any Democrat in the Legislature, while commissioners appointed by the Senate majority leader, Dean G. Skelos, a Republican, would have similar power over investigations of any Republican.”

Overall, however, it appears that most public interest groups believe that the newly proposed Joint Commission will strike the right balance between unbiased investigation and the prevention of politically motivated “witch hunts” against the party out of power.

Forfeiture of Pensions for Public Officials Convicted of a Felony: Certain public officials who commit crimes related to their public offices may have their pensions reduced or forfeited in a new civil forfeiture proceeding brought by the Attorney General or the prosecutor who handled the conviction of the official.

Clarifying Independent Expenditures For Elections: The Act requires the state board of elections to issue new regulations clarifying disclosure of Independent Expenditures.

Increased Penalties for Violations: The Act substantially increases penalties for violations of the filing requirements and contribution limits in the Election Law, and provides for a special enforcement proceeding in the Supreme Court. The bill also increases penalties for violations of certain provisions of the state’s code of Ethics that prohibits conflicts of interest.

Without a doubt, this legislation represents sweeping change that must be carefully studied, and compliance prepared for, by all doing business in New York.

Now, if only we could get the Governor to introduce a “Clean Up Washington Act”.

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Aviation Recruitment: What Companies Must Know Before They Hire

A few years back, the aviation industry looked like it was in turmoil. Profits were dropping and it seemed impossible that all but the largest carriers would survive the phase. But, the upswing for the aviation industry has begun recently and as you may know most aviation companies are in the process of recruiting large [...]

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President Obama (Again) Looks to Impose a Form of Federal Pay-to-Play Disclosure on Federal Contractors

Last year, we reported here and here that certain elements of the Executive Branch have been looking into ways to impose federal pay-to-play restrictions and disclosure requirements on those doing business with the federal government. Today, the White House confirmed that President Obama is strongly contemplating issuing an executive order designed to impose pay-to-play disclosures on federal contractors in a big way.

As announced by the White House, the President is http://www.washingtonpost.com/politics/obama-weighs-disclosure-order-for-cont...">examining an order that would mandate that all federal contractors disclose any and all contributions to groups that engage in political activities. This is contemplated, the White House says, in direct response to the Supreme Court’s opinion in Citizens United v. FEC (discussed here) and Congress’ failure to enact the DISCLOSE Act (discussed here).

To learn more about what, exactly, the President has in mind, one needed to be on board Air Force One (headed to California on a Presidential and DNC fundraising swing, ironically enough) to hear White House Press Secretary Jay Carney say the following:

Q Jay, there was -- there were reports this morning that the administration is considering an executive order requiring companies seeking government contracts to disclose their contributions to groups that under current law would be secret. Is that correct?

MR. CARNEY: Well, what I can tell you is there is a draft -- there’s a process, and it’s in the -- it’s part of a process. There’s a draft, and the particular specifics of that executive order could change over time, so I can’t talk about the specifics. What I can tell you is the President is committed to improving our federal contracting system, making it more transparent and more accountable. He believes that American taxpayers deserve that, and that's what he intends to pursue through this executive order.

Q Is there any political goals behind this?

MR. CARNEY: Quite the contrary. He believes very strongly that taxpayers deserve to know whether or not the contractors that their money is going to is being used -- how they're spending their money, and how -- whether they're -- how they're spending in terms of political campaigns. And his goal is transparency and accountability. That's the responsible thing to do when you’re handling taxpayer dollars.

Q Is he likely to go ahead with the executive order? Or is there another way to accomplish it?

MR. CARNEY: I can’t -- there’s an executive order in the draft process. I can’t give you any specifics on it because the specifics could change. That's the nature of the process.

Q Jay, on a trip like this that combines presidential events with campaign events, can you talk about how it’s funded? For example, there are no presidential events in Los Angeles. Is that entire part of the trip funded through the campaign?

MR. CARNEY: Ari, you know the -- when there is travel like this that involves official travel and also political travel, this administration very diligently follows all the same rules that the Bush administration did. And as far as the specifics on how that breaks down, I’ll have to get back to you. I don't have that. But we’re very careful about making sure that all those rules are followed.

“Diligently [following] all the same rules that the Bush administration did” and breaking substantial new ground all at the same time. That’s a pretty impressive two-step.

One immediate challenge comes to mind: if all federal contractors and bidders are required to disclose their contributions to groups of any kind that engage in political or issue advocacy, how does one prevent federal contract officers from demonstrating bias against bidders supporting unpopular views or the party out of power? This is a decent enough effort at transparency that strikes me as having the potential to trod all over our constitutional rights to free expression and freedom of association. To quote David Wenhold, immediate past president of the American League of Lobbyists, “Sunlight is good, but sometimes too much sunshine can cause cancer.”

This is definitely one to stay tuned to.

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Deficit "Super Committee" Transparency - Will We Get to See the Budgetary Sausage in Production?

By Stefan C. Passantino and Benjamin P. Keane

 

Whether you agree with Justice Brandeis that sunlight is the “best of disinfectants” or with former American League of Lobbyists president Dave Wenhold that “too much sunlight causes cancer”, it should be readily apparent to the readers of this blog that public officials of all stripes have increasingly begun to listen to the chorus of voices calling out for more transparency in all levels of government. At PaytoPlayLawBlog, we often write about how the push for greater transparency at the federal, state and local levels is affecting the operation of government, as well as the interaction of the public with government officials. As strictly objective, rational observers (ahem), it seems to us that disclosure alone generally trumps both inaction and punitive regulation in the pay-to-play space. Over the past month or so, we have come to see new evidence of this welcome push for openness at the federal level, particularly with regard to the activities of the newly-formed Joint Select Committee on Deficit Reduction (or the so-called Deficit “Super Committee”).      

For those who have spent all of their time recently tracking satellite orbits and running calcu lations on their chance of having to make a potentially uncovered hom eowners claim, the Super Committee is a balanced delegation of six Democrats and six Republicans (split evenly between members of the U.S. House of Representatives and U.S. Senate) formed in August of this year as a means of permitting Congress and the White House the opportunity to avoid responsibility for identifying an additional $1.5 trillion in federal budgetary cuts over the next decade. Whether one agrees with the premise of granting 12 Members of Congress such extraordinary authority over federal, fiscal decision making, it is readily apparent that the ongoing work of the Super Committee has drawn a great deal of attention from political organizations and commentators across the ideological spectrum. Given the nature of the current (entirely justified) cynicism with the political process, and the enormity of the task before the Super Committee, it should not surprise readers of this blog to learn that much of this attention across the political continuum has been focused on increasing the political transparency of the Committee’s activities. 

One of the more prominent efforts to accomplish this goal has been organized by the Sunlight Foundation, a non-profit organization dedicated to using the “power of the Internet to catalyze greater government openness and transparency.” On August 3, 2011, the Foundation issued a letter to congressional leadership urging them to adopt a series of recommendations that the Foundation believes will ensure the Super Committee operates in a fully open and transparent manner. Those recommendations included: (1) holding live webcasts of all official Committee meetings and hear ings; (2) posting the Committee’s draft recommendations for at least 72 hours prior to a final committee vote; (3) promoting disclosure of every meeting held by Committee members with lobbyists and other “powerful interests”; (4) ensuring the immediate disclosure of all campaign contributions received by Committee members during their service on the Committee; and (5) demanding additional financial disclosure standards for Committee members and their staffers. In addition, the Foundation has teamed up with various transparency activists and supporters to launch a grassroots campaign designed to encourage greater accountability and openness from the Super Committee. The movement’s allies in this endeavor include such left-leaning organizations as The Bre nnan Center for Justice, the Project on Government Oversight, and Public Citizen.

Although not necessarily backing each of the Sunlight Foundation’s specific recommendations, many organizations and individuals on the conservative and libertarian end of the political spectrum have also echoed the Foundation’s calls for transparency in Super Committee activities. For example, Jim Harper of the CATO Institute and Rob Bluey of The Heritage Fou ndation’s Center for Media and Public Policy have both recently demanded that the Super Committee permit open public access to Committee meetings and legislative proposals as a means of ensuring that all citizens are kept abreast of the activities of this uniquely powerful legislative panel. Along those same lines, Harper and Bluey have also called for Committee transparency as a safeguard against the passage of expansive legislation that is subject to little or no debate or public input. 

All of this makes perfect sense. As we have previously observed here, efforts to govern matters such as this from behind closed doors can lead to embarrassing exchanges.

Bi-partisan support for greater Super Committee transparency has even begun to emerge within Congress itself. In fact, in early September, Representatives Mike Quigley (D-IL), Dave Loebsack (D-IA), and Jim Renacci (R-OH) introduced H.R. 2860, the Deficit Committee Transparency Act, which would implement six transparency reforms along the lines of those recommended by the Sunlight Foundation. Similarly, Senators David Vitter (R-LA) and Dean Heller (R-NV) have also introduced two separate bills, S. 1501 (the Budget Control Joint Committee Transparency Act) and S. 1498  (the Super Committee Sunshine Act), that are designed to ensure the openness of Super Committee meetings and greater transparency in the political fundraising of Committee members.

At present, none of the aforementioned bills have been acted upon in Congress, but there does appear to be growing support on both sides of the political aisle for a more open and forthright framework for Super Committee action. Recognizing the growing momentum in support of such transparency, the Committee has taken the initial step of keeping its three preliminary meetings open to the public (and also available for video review over the Internet). It remains to be seen, however, whether this policy will continue as the Committee gets deeper into the task of formulating its deficit-reduction proposals. Likewise, it remains to be seen whether any of the other aforementioned transparency proposals will gain any traction with the Committee itself. Stay tuned in the coming months to find out.

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Regulation D: Some Important Points

Takeaway: Some of the SEC’s more commonly used registration exemptions for private offerings are found in “Regulation D.”  Two of the overarching themes of “Reg D” are (1) a prohibition against “general solicitation” and (2) the distinction drawn between “accredited” and “unaccredited” investors.  Understanding these two concepts is crucial when offering securities for sale under these exemptions. Back in February, I discussed the importance of ensuring compliance with SEC and state regulations surrounding the private offering of securities.  As an old industry adage goes, there

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Did Wall Street Bankers Commit CDO Fraud?

In 2009, the Securities and Exchange Commission (SEC) began a civil fraud investigation of over a dozen banking firms that traded and sold mortgage-backed collateralized debt obligations (CDOs). This investigation has engendered subsequent probes into the behavior of Wall Street firms. Did Wall Street bankers defraud investors by selling them CDOs in order to make [...]

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Where Were the Lawyers?

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Entertainment Recruiters ? Secrets to Hiring the Best

In the fast paced environment of media and entertainment, you need the most qualified employees on your team. This is where entertainment recruiters can help; recruiting agencies that specialize solely within this industry. Whether you are a public relations firm, an advertising agency, a production company, or the like, you know that having the [...]

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Did Goldman Sachs Play an Unwholesome Role in the Recent Financial Crisis?

According to an article published by Reuters on June 2, 2011, Goldman Sachs has been subpoenaed by the Manhattan District Attorney?s Office for information regarding its role in events which precipitated the recent worldwide financial crisis. Earlier this year, the Wall Street Journal reported that the U.S. Department of Justice also plans to subpoena Goldman [...]

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Will the SEC File Investment Fraud Charges Against Credit-Rating Companies?

Image via Wikipedia According to the Wall Street Journal, in May 2011 the Securities and Exchange Commission (SEC) acknowledged that credit-rating agencies, desirous of pleasing the companies they rate, are sometimes less than objective in their evaluations. To mitigate this problem, the SEC has proposed that credit-rating firms operate under stricter guidelines. This month, the [...]

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The SEC's Newly Proposed Rules on Derivative "Swaps"

This Wednesday, the Securities and Exchange Committee (SEC) voted to propose rules that would impose certain business conduct standards on banks and other firms that deal in complex financial instruments known as “swaps.”  For the uninitiated, swaps are derivatives in which parties exchange the benefits of one financial instrument for another in order to trade the cash flow streams of the particular assets.  Swaps are typically used either to insure against market risks such as interest rate fluctuations or to make speculative investments based upon expected changes in the prices of the financial benchmarks underlying the instruments. 

This effort to regulate conduct in the derivative swap market by the SEC emerges out of the Dodd-Frank Act's comprehensive framework for monitoring over-the-counter swaps and the activities of “security-based swap dealers” and “major security-based swap participants” that engage in security-based swap transactions with counterparties (including “special entities” such as federal agencies, states and political subdivisions, employee benefit plans, governmental plans, and endowments).  The rules the SEC advanced this week would require swap dealers to disclose to their buyers the risks associated with transactions, the potential conflicts of interests involved, and the day-to-day values of their swaps, which would aid purchasers in assessing the overall worth of specific deals.&nbs p; The rules would also mandate that swap dealers doing business with special entities ensure that their counterparts use independent financial advisers to assist with transactions.  Additionally, dealers would be prohibited from participating in a wide range of “pay to play” practices.

Under these new pay to play rules, securities-based swap dealers and their “covered associates” would specifically be barred from engaging in swap transactions with a “municipal entity” for a two-year period if they choose to make certain types of political contributions to officials of that municipal entity. This Proposed Rule 15Fh-6 is modeled on, and intended to complement, existing restrictions on pay to play practices under Advisers Act Rule 206(4)-5, which imposes restrictions on political contributions by investment advisers providin g or seeking to provide investment advisory services to public pensio n plans and other government investors, and MSRB Rules G-37 and G-38, which impose such restrictions on municipal securities dealers and broker-dealers engaging or seeking to engage in the municipal securities business. The pay to play restrictions are also similar to rules the Commodity Futures Trading Commission (CFTC) recently proposed for non-securities-based swaps.

 

According to SEC Chairwoman Mary L. Schapiro, these new pay to play provisions and the other business conduct standards in the proposed rules will work to “level the playing field in the securities-based swap market by bringing needed transparency to this market and by seeking to ensure that customers in these transactions are treated fairly.” That is yet to be seen, but all five SEC commissioners nevertheless voted unanimously to propose the rules and introduce them through formal public notice. The proposed rules will remain open for public comment until August 29, at which point the SEC will take any submitted remarks under advisement and make a final vote as to their implementation.

It will be interesting to see how business leaders and public officials alike react to the SEC’s proposal during the upcoming notice and comment period. Businesses, and in particular investment firms, have had to adjust to a litany of newly proposed regulations and pay to pay rules in the wake of the passage of the Dodd-Frank Act. As such, it has left companies universally unsure as to what types of activities are permitted and prohibited in their day-to-day business. Public officials, however, have been quick to applaud any and all efforts by the federal government and its numerous business regulatory bodies to restrain “unsavory” corporate practices – practices that the SEC, MSRB, CFTC, and other entities assert have contributed to the current economic downturn and led to the misappropriation of billions upon billions of dollars in taxpayer money. Over the next few months, we shall see if both trends continue and if the movement toward increas ed federal regulation of business conduct and political speech persists.

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Los Angeles Passes its Pay-To-Play Ordinance

As we anticipated for you here last November, Angelenos have indeed passed into law an ordinance establishing pay-to-play restrictions in the City of Angels. If ever one needed a sense of the public sentiment towards pay-to play regulation, one need only look at the 75% -25% margin by which the measure passed. As anticipated, the Measure targeted a single class of campaign donors (City contractors) who are perceived to make their living procuring contracts greased by campaign contributions. The full Resolution - which you can count on approximately 5 people having actually read - can be found here.

As proposed, the ballot measure put before the public read:

Shall the Charter be amended to (1) restrict campaign contributions and fundraising by bidders on certain City contracts; require increased disclosure for bidders; and provide for bans on future contracts for violators; and (2) build upon the city's voter-approved campaign trust fund, which provides limited public matching funds for qualified city candidates who agree to spending limits, by lifting the maximum balance in the fund while allowing the LA City Council by a two-thirds vote to not make the annual appropriation and temporarily transfer funds to meet City budgetary obligations in certain emergency conditions?

Language like that is difficult to vote against. The Devil, as they say, is in the details. Specifically, as passed, the measure restricts contractors holding or seeking City contracts in excess of $100,000 from making campaign contributions to, or fundraising for, City officials (including the Mayor, the City Attorney, the Controller or a member of the City Council) or candidates to those offices. Second, the ordinance lifts the maximum balance on the City’s public finance vehicle - the Campaign Trust Fund.

This contribution ban extends not just to those authorized by the company to represent it in seeking or negotiating the contract, but also to the contractor’s Board Chairman, President, Chief Executive Officer, Chief Operating Officer, and anyone who holds more than a 20% ownership stake in the contractor.

As if these compliance challenges are not imposing enough for the well meaning corporation that might not have absolute control over the campaign contributions of its 21% minority owners, the new ordinance extends the ban to subcontractors and their officers if the subcontractor has a $100,000 interest in the City contract. While it is easy to perceive the logic that leads to such a prohibition, one can anticipate that the unintentional violations of this ordinance - and dramatic negative consequences - will be legion.

On the other hand, many argued against the measure on the ground that it does not go far enough in banning contributions and will simply drive unscrupulous contractors to measures that will evade disclosure altogether. A good example of such an argument can be found here.

Interestingly, the City taketh away just as it giveth. A third element of the ordinance provides that the City may, during “financial emergencies” (when do you anticipate LA won’t be laboring under a “financial emergency”?), borrow money from that trust fund without appropriating funds back in. Now that’s playing without paying!

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