SOX Lowers the Bar for Barring Directors and Officers
November 29, 2004
Banishment from the public company world -- through the enforcement of a D&O bar - used to be an extreme remedy for management misconduct. Now, the trend has turned, with Sarbanes-Oxley (SOX) and the current enforcement climate leading to a flood of requests for bars. In 2000, the SEC asked federal courts to impose 38 D&O bars, 7.5% of the cases initiated that year. In 2001, the SEC asked for 51 D&O bars, or 10.5%. In 2002, in the wake of corporate scandals that gave rise to Sarbanes-Oxley, the SEC requested 126 D&O bars, in 21% of initiated actions. In 2003, that number shot up to 170, in 25% of cases. As Stephen Cutler, the head of the SEC's Enforcement Division, recently explained, the SEC is "aggressively" seeking D&O bars "in expanded ways." Practitioners are now finding D&O bars to be a routine component of settling an SEC action.
Should You Tell Employees How Their Company Can Get Immunity From Prosecution?
November 29, 2004
The landscape has changed for many senior executives and other employees of corporations subject to government investigation. Two recent cases show how prosecutors virtually forced companies to "turn in" suspect executives and other employees to avoid prosecution. Amendments to the Sentencing Guidelines, effective Nov. 1, 2004, incorporate this change in the way courts will assess a corporation's compliance program.
In The Courts
November 29, 2004
Recent rulings of importance to you and your practice.
Online
November 29, 2004
A visit to <i>www.nlm.nih.gov</i> (National Library of Medicine) provides a wealth of information on health-related topics. This column will review various sections of the Web site over the next few issues. If you click on Health Information, you can access MedlinePlus, which contains more than 600 health topics searchable in alphabetical order, a medical encyclopedia with images, drug information, including names of hospitals and doctors and the latest health news. There are links to ClinicalTrials.gov, which was reviewed in last month's Online column, as well as NIHSeniorHealth, Tox Town, Household Products Database, Genetics Home Reference, Medline/PubMed (Biomedical Journal Literature), Aidsinfo and Office of the Surgeon General.
Ten Steps to an Effective Document Retention Program
November 29, 2004
In the past, the implementation of a comprehensive document retention policy may have seemed a secondary concern at best; however, the primary importance to all companies of implementing such a policy was dramatically illustrated in 2002. That year brought the federal obstruction of justice conviction and ultimate demise of accounting firm Arthur Andersen for destruction of documents it knew were important to the SEC's investigation of the Enron scandal. It also brought the Sarbanes-Oxley Act of 2002, which significantly expanded the reach of federal obstruction statutes, increased the penalties for document destruction that hinders a federal investigation, and promulgated new record-keeping obligations. <i>See, e.g.</i> 18 U.S.C. 1519, 1520. Coupled with these developments are the ever-expanding obligations in connection with discovery of electronic information.
Case Notes
November 29, 2004
Highlights of the latest product liability cases from around the country.
Recent Decision Provides Guidance on Admissibility of Expert Testimony
November 29, 2004
Improper use of experts in product liability cases is all too familiar. The proper use of an expert's specialized knowledge or expertise is to assist the trier of fact to determine a fact at issue. Some lawyers, however, use experts merely as sounding boards to highlight key facts and argue conclusory inferences in support of a party's case. These "experts" are typically offered as "historians" and arbiters of "ethical" conduct.
The Trouble with Constructive Trusts
November 29, 2004
The equitable remedy of constructive trust is employed when "property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest," and therefore equity converts him into a trustee. <i>In re Koreag, Controle et Revision S.A.</i>, 961 F.2d 341, 353 (2d Cir. 1992). This legal theory arises in bankruptcy cases when a non-debtor party with a pre-petition contract, which ostensibly grants such party an ownership interest in funds or which establishes an agency relationship with a debtor, seeks, in the bankruptcy case, to assert its ownership rights to the funds held by the debtor.
