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Texas Supreme Court Justice Sues over Ruling
Areas of Focus |
2009/01/29 18:30
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Texas Supreme Court Justice Nathan Hecht sued the Texas Ethics Commission over its ruling that reduced legal fees constitute a political donation. Hecht says the Jackson Walker law firm represented him in a 2006 proceeding "that affected the free speech rights of all Texas judges" - Hecht's public endorsement of Harriet Miers' nomination to the U.S. Supreme Court. He says Jackson Walker charged reduced fees because of its dedication to public interest work, which is ethical and permissible.
Judge Hecht, the longest-serving justice on the Texas Supreme Court, says the Preamble to the Texas Rules of Professional Conduct states that lawyers should do public interest work. Rule 1.04 spells out appropriate procedures on which to base legal fees.
Hecht says Jackson Walker charged him "a reasonable fee" that was less than it could have billed for its hourly rate, but that the reduced rate is ethical under the Rules.
A complaint was filed against Hecht in July 2007, claiming that the reduced rate was a de facto political contribution. The Commission ruled on Dec. 11, 2008 that that was the case. Hecht claims that the Commission's ruling actually would require attorneys "to ignore their Rules of Professional Conduct and charge judges differently than any other client."
The Texas Ethics Commission fined Hecht $29,000 in the case, the Dallas Morning News reported. "The commission ruled that it was a contribution to his campaign, that it exceeded legal limits on what judges can accept and that he failed to disclose the donation on his state reports," the Morning News reported on Dec. 5, 2008.
(The Morning News quoted Hecht after he emerged from what it called a 4-hour hearing. The discrepancy between the date of the Morning News report and the Commission's "final ruling" on Dec. 11 apparently results from the time needed to prepare the ruling for publication.)
The original case stemmed from Hecht's public endorsement of Harriet Miers' nomination to the U.S. Supreme Court, the Morning News reported.
The newspaper reported that the Texas Commission on Judicial Conduct admonished Hecht for endorsing Miers in May 2006, and that Hecht's "one-year legal fight resulted in a $476,000 legal fee, of which he paid $308,000. Justice Hecht said that he negotiated a lower price, a common practice with lawyer fees, and paid the discounted amount with campaign contributions."
Texas Watch filed the complaint against Hecht, saying he failed to disclose the discount. Texas law limits judicial campaign contributions to $5,000 for individuals and $30,000 for a law firm.
Hecht is represented in Travis County Court by Steve McConnico with Scott, Douglas & McConnico. |
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Wyeth Shareholders Reluctant to Pfizer Sale
Legal Topics |
2009/01/28 17:22
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Wyeth shareholders say the company is selling itself too cheaply to Pfizer - for $68 billion, or $33 for each Wyeth share, plus 0.985 of a Pfizer share. The federal class action claims that in the deal, announced Monday, Pfizer is taking advantage of a weak stock market to buy Wyeth on the cheap.
Wyeth shareholders claim the deal is "grossly inadequate," though it offers about a 15% premium over Wyeth's market price. They estimate that the deal works out to about $50.19 per Wyeth share, based on the $33 cash and Pfizer's closing price of $17.19 on Friday, Jan. 23.
Wyeth reported $22.4 billion income in 2007, up from $20.6 billion in 2006, and the company continued to do well since then, reporting $11.7 billion in revenue for the first half of 2008, according to the complaint.
Plaintiffs claim: "On September 25, 2008, Credit Suisse's Equity Research department published a research note noting that Wyeth shares represented an opportunity for the Value Investor, as its shares were trading at just above their 4-year low at $37.76. According to the note: 'Our sum of the Parts Analysis implies a price of $52, roughly 38% upside to Wyeth's $37.76 closing price today. In fact, assuming the biologics business alone (led by Enbrel and Prevnar) is worth $44, the value of just the biologics business is 117% of the current share price.'"
Shareholders cite a Sunday story in The New York Times: "On January 25, 2009, The New York Times reported that 'Pfizer appears to be taking advantage of the bad market for credit to buy Wyeth at a lower price than it might fetch if competing bids emerged, which analysts do not expect.' The article, citing Barbara Ryan, an analyst at Deutsche Bank stated: 'They have a unique opportunity now because not everybody can get that capital. They're probably one of the few companies in the world that can get that capital. These are going to be among the best companies in the U.S. to extend credit to.'
"On January 26, 2008, Forbes reported that the Proposed Transaction 'will give Pfizer a much larger presence in areas where it has been viewed as weaker than the competition, namely biotech drugs and vaccines. Wyeth, which makes the top-selling vaccine for children, Prevnar, would help fill this void. Wyeth also co-markets Amgen's Enbrel biotech drug for rheumatoid arthritis. That is exactly what Pfizer needs as it looks to fill the void that will be left by Lipitor when it loses patent protection in 2010.'"
The complaint adds: "The terms of the Proposed Transaction also present Wyeth shareholders with considerable risk. The onerous terms insisted upon by Pfizer's lenders reflect how disastrous the current market is for sellers and calls into question the Individual Defendants' judgment in deciding to sell the Company at this time. The lenders can abandon their financing commitment if Pfizer's credit rating drops below certain thresholds. ...
"By agreeing to the Proposed Transaction on these terms and placing the fate of all its shareholders in the unreliable hands of the rating agencies the Board has created a huge risk for Wyeth shareholders that cannot possibly be compensated for by a larger than usual reverse termination fee.
"In their pursuit of the Proposed Transaction the Defendants have breached their duty of loyalty to Wyeth's stockholders by using their control of Wyeth to deprive the Company's public shareholders of maximum value to which they are entitled. The
Defendants have also breached the duties of loyalty, good faith and due care by not taking adequate measures to ensure that the interests of Wyeth's public shareholders are properly considered in rejecting the Proposed Acquisition.
"The Individual Defendants are in a position of control and power over Wyeth's public stockholders, and have access to internal financial information about Wyeth to which plaintiff and the Class members are not privy. Defendants are using their positions of power and control to undervalue Wyeth, to the detriment of Wyeth's shareholders."
Plaintiffs want the deal rescinded and enjoined until they get a better offer. Their lead counsel is Joseph DePalma with Lite DePalma Greenberg. |
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Missing Fla. hedge fund manager turns himself in
Legal Topics |
2009/01/27 22:35
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| A Florida hedge fund manager who disappeared this month just as he was due to pay investors $50 million turned himself in to authorities Tuesday to face federal securities and wire fraud charges. Arthur Nadel, accompanied by two attorneys, surrendered in Tampa, about an hour north of his home in Sarasota, the FBI said. He was chained at the waist and wrists when he appeared in court later Tuesday. Attorney Barry Cohen said Nadel is not violent and asked that he be released on his own recognizance. He said Nadel has emotional problems and does not pose a flight risk, but a federal judge ordered him held at least until Friday. Asked outside court where his client had been for two weeks, Cohen said, "He went away for a while just to be alone." He declined to say where exactly Nadel was, and the FBI did not provide details. Federal regulators last week sued Nadel for fraud, saying he misled investors and overstated the value of investments in six funds by about $300 million. The Securities and Exchange Commission also won a court order freezing his assets. A criminal complaint unsealed Tuesday in federal court in Manhattan alleges Nadel has been defrauding investors since 2004. Nadel, 76, disappeared Jan. 14 after telling his wife in a note that he felt guilty. He also threatened to kill himself, according to the Sarasota County Sheriff's Office. Police found his green Subaru the next day in an airport parking lot. In a lawsuit filed in federal court in Tampa, the SEC said Nadel recently transferred at least $1.25 million from two funds to secret bank accounts that he controlled. |
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Wrongfully convicted, man can't sue prosecutor
Headline Legal News |
2009/01/27 22:32
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| The Supreme Court says a man who was wrongly convicted and spent 24 years in prison may not sue the former Los Angeles district attorney and his chief deputy for violating his civil rights. The justices, ruling unanimously Monday, say decisions of supervising prosecutors, like the actions of prosecutors at trial, are shielded from civil lawsuits. In this case, Thomas Goldstein was convicted of a 1979 murder on the strength of a jailhouse informant's testimony that Goldstein had confessed to the crime. The informant testified he received no benefit in return, but evidence that came to light later suggested he had struck a deal to get a lighter sentence. Goldstein sued former District Attorney John K. Van de Kamp and his former chief deputy, Curt Livesay, claiming that as managers they had a policy of relying on jailhouse informants even though it sometimes led to false evidence. In this case, the federal appeals court in San Francisco said Van de Kamp and Livesay did not enjoy the absolute immunity from lawsuits that is given to prosecutors because they were acting as administrators, not prosecutors, in failing to put in place a system that would allow information about informants to be shared in their office. The case is Van de Kamp v. Goldstein, 07-854. |
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Sludge company's ex-representative pleads guilty
Legal Topics |
2009/01/27 22:32
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| A former representative of a Texas company pleaded guilty Monday to federal bribery conspiracy, admitting a multiyear scheme to win a sludge recycling contract through cash and trips for Detroit officials. Jim Rosendall's cooperation with the FBI led prosecutors to recommend a sentence of no more than 11 months in prison, well below the five-year maximum. The company used cash and plane trips to Las Vegas to curry favor with Detroit officials and win the $47 million contract to recycle sludge, according to a criminal charge unsealed earlier in the day. The city officials were not identified. The influence-peddling game reached a climax in fall 2007 when a city council member accepted payments to vote in favor of a deal with Synagro Technologies, the government alleges. The contract was approved, 5-4, in November 2007. "People expected me to give things to get their support," Rosendall, former president of Synagro of Michigan, said in court. Earlier Monday, Mayor Ken Cockrel Jr. addressed speculation about a federal investigation into the conduct of city government members. "I think we'll have to see how it plays out," he said. Rosendall's guilty plea comes more than four months after Kwame Kilpatrick resigned as mayor and went to jail in a sex-and-text scandal after admitting he lied during a civil trial to cover up a torrid affair with his chief of staff. |
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ACLU Challenges Gov't Secrecy in the False Claims Act
Headline Legal News |
2009/01/20 17:11
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The federal government has been defrauded of billions of dollars in hundreds of cases it has sealed under the False Claims Act, the ACLU claims in Federal Court. "The result of the secrecy provisions is that the federal court system is home to an entire secret docket of cases that is inaccessible to the public and the press," including more than 60 such cases in Iraq, according to the complaint.
The ACLU claims Congress inserted unconstitutional secrecy amendments into the Act in 1986.
Joining the ACLU as plaintiffs are OMB Watch and the Government Accountability Project.
The plaintiffs "challenge the constitutionality of the secrecy provisions in the FCA, specifically §§ 3730(b)(2) and (b)(3) (together, the 'FCA secrecy provisions'). The FCA secrecy provisions are unconstitutional on their face. Plaintiffs seek a declaration that they violate the public's First Amendment rights."
The plaintiffs sued Attorney General Michael Mukasey and Fernando Galindo, "the Clerk of the Court in the United States District Court, Eastern District of Virginia. The Clerk of the Court is the officer of the court that seals the complaints as required by the statute challenged in this case."
According to the complaint, Congress enacted the False Claims Act in 1863 to "combat rampant fraud in Civil War contracts." It was substantially amended only twice. The 1943 amendments were to prohibit "so-called parasitic actions," in which individuals filed qui tam actions "based entirely on public allegations found in criminal indictments against World War II contractors. ... The Act was amended such that jurisdiction over FCA claims was barred if the claims were based on information in the government's possession.
"In 1986, as a result of a decline in FCA suits, Congress amended the FCA to encourage private individuals to bring more FCA suits. The legislation increased incentives, financial and otherwise, for private individuals to bring suits on behalf of the government. Congress also set out to right a number of overly restrictive court interpretations of the FCA that were making it difficult for whistleblowers to succeed in FCA suits. Finally, to encourage more whistleblowers to file FCA suits, Congress enacted an anti-retaliation provision to protect whistleblowers from reprisal for initiating or aiding an FCA disclosure and lawsuit.
"As part of the amendments in 1986, Congress enacted the secrecy provisions at issue. Thus, for the first 123 years of the existence of the FCA, qui tarn complaints were not filed under seal and were accessible to the public. Only in the last 22 years have all FCA qui tarn complaints filed by relators been automatically placed under seal and inaccessible to the public.
"When the secrecy provisions were being debated before the Senate Judiciary Committee, DOJ argued that the secrecy provisions were needed to prevent the potential defendant from being tipped off that there might be a parallel criminal investigation. 1986 U.S.C.C.A.N. at 5288-89. DOJ stated that the FCA civil suit 'might overlap with allegations already under criminal investigation.' Id. at 5289 (emphasis added). Thus, neither DOJ nor any other entity expected that every FCA case would be accompanied by a parallel criminal investigation. Even if an ongoing criminal investigation alone was a sufficient governmental interest, not every case should be subjected to secrecy. ...
"The mandatory secrecy provision requires the Clerk of the Court to seal the complaint upon its filing. Neither the relator nor the government is required to show that there is a compelling need to deny the public access to this information. The mandatory secrecy provision prohibits a court from making an individualized, case-by-case determination as to whether the sealing of the complaint serves a compelling interest and is narrowly tailored.
"During this time, the public has no knowledge that a civil action has been filed in federal court alleging that the U.S. government has been defrauded. Nor does the public have any other means of acquiring this knowledge or accessing information relating to these cases because the relator is gagged from speaking about the case. ...
"The secrecy extension provision does not define "good cause," nor is the term defined elsewhere in the FCA statute. 31 U.S.C. § 373O(b)(3). The secrecy extension provision does not require that the relator or the government demonstrate a compelling need for the action to remain inaccessible to the public, or that keeping the complaint under seal is narrowly tailored to that need. The secrecy extension provision therefore permits the complaint to remain under seal for an indefinite period of time."
As a result, the FCA secrecy provisions hide allegations of fraud from the public, including more than 60 allegations of fraud in the Iraq war, the complaint states. Many of these allegations are against politically connected giants such as Halliburton and Kellogg, Brown & Root.
"According to DOJ, as of July 2007, there were approximately 1,000 qui tarn cases that were under seal pending the government's decision on whether to intervene. The average length of time between when an FCA case is filed and when the government notifies the court of its election to intervene is approximately 13 months. FCA cases, however, are usually sealed for much longer period of time than 13 months. Cases typically remain sealed for 2 to 3 years, and have been sealed for as long as 9 years.
"The FCA secrecy scheme has hidden from public purview allegations of military contractor fraud in the Iraq War. (See, e.g., David Rose, The People vs. the Profiteers, Vanity Fair November 2007, asserting that military contractor fraud is rampant but unknown to the public at large because the allegations remain under seal).
"Although the exact number of Iraq contractor fraud cases under seal remains unknown, there is evidence that more than a handful of these cases exist. Stuart Bowen, the Special Inspector General for Iraqi reconstruction, reports on Iraq reconstruction issues to the Pentagon and State Department. In 2006, Mr. Bowen reported that he knew of 79 sealed FCA Iraq contractor fraud cases, some of which have multiple plaintiffs. Id. As of August 2007, allegedly 66 remained under seal." |
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Hollywood Firm Dreier Trying to Sever Ties
Headline Legal News |
2009/01/07 17:07
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A top Hollywood law firm is quietly but doggedly trying to sever ties with its New York owner in the wake of his arrest on financial fraud charges.
Santa Monica-based Dreier Stein, the 40-attorney outpost of Dreier Llp. and home to well-known entertainment litigator Stanton "Larry" Stein, spent the holidays in expedited meetings with potential new merger partners on both coasts.
The goal, Stein said, is to split from firm principal and accused swindler Marc Dreier before the end of January.
"We're listening to offers," said Stein, who reps such industry clients as Lionsgate, Jennifer Love Hewitt and David Duchovny. "We've done nothing wrong, and we need to get out from under the burden of Dreier."
Dreier, who opened the West Coast outpost of his 250-lawyer firm in January 2007 via a pricey deal with Stein's entertainment litigation and corporate boutique, has been held in a Manhattan jail since early December on charges of bilking some of New York's top investors to the tune of $380 million.
Among other colorful and bizarre tactics, Dreier is accused of impersonating lawyers and hawking fake promissory notes to hedge funds.
The arrest has plunged the once high-flying Dreier firm into bankruptcy and put some of Hollywood's most prolific lawyers in play.
Stein's group of 20 talent-side litigators, which includes Michael Plonsker, Yakub Hazzard and Mark Passin, has handled recent cases for Marvel Entertainment and Eva Longoria and repped Rob Lowe in his battle against a former nanny.
In December, the firm, whose full name is Dreier Stein Kahan Browne Woods George, went to trial against AMPAS on behalf of the estate of Mary Pickford over the effort by Pickford's heirs to auction off her Oscar for 1929's "Coquette."
Stein said he and his partners are cooperating with the court-ordered receiver that is collecting the firm's income and approving its expenses while he scrambles to find another home. He would not confirm the names of suitors, but top contenders include Los Angeles' Liner Yankelevitz Sunshine & Regenstreif, which itself boasts a strong entertainment practice, as well as New York-based Mintz Levin Cohn Ferris Glovsky & Popeo, Washington-based Buchanan Ingersoll & Rooney and international firms Troutman Sanders and Kramer Levin Naftalis & Frankel. |
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