Compliance Lesson from the Chiquita Case
June 28, 2007
In March of this year, Chiquita Brands agreed to pay a $25 million criminal fine for payments it made to a paramilitary group in Colombia. The payments were made by the Colombian subsidiary of Chiquita in order to protect the company's employees from threatened violence. Unfavorable press coverage emphasized payments by Chiquita to a 'terrorist group' and downplayed the threats made to Chiquita, which prompted it to make the payments in the first place.
Corporate Exposure Under the Alien Tort Claims Act
May 29, 2007
Despite the U.S. Supreme Court's effort to restrict and clarify the Alien Tort Claims Act ('ATCA'), the divergence between judicial interpretations of the law, and the number of ATCA lawsuits continues to grow. Some courts have construed the ATCA narrowly, as the Supreme Court urged, limiting the cases that can be brought. Others have interpreted the Act broadly, recognizing novel claims and theories of liability. Emblematic of that schism are two cases decided last year, one filed in New York involving an energy company's role in oil development in Sudan, and one in California involving Papua New Guinea mining operations. These ATCA cases and others like them are part of a rising wave of high-stakes litigation against corporations and their executive officers, and necessitate especially careful attention by in-house counsel regarding overseas operations.
The Employee Freedom of Choice Act
May 29, 2007
After years of lobbying, the Employee Free Choice Act was introduced in 2003, but did not advance. Similar legislation was proposed again in 2005, co-sponsored by Sen. Edward Kennedy (D-MA) and Rep. George Miller (D-CA). While it did not pass either the House or Senate, it attracted widespread notice by gaining the support of 44 Senators and 215 Representatives (only three short of the 218 House votes required for passage). Predictably, in early February 2007, with the new Democratic Congress now in power, Rep. Miller, in his role as Chairman of the House Education and Labor Committee, reintroduced this proposed legislation (H.R. 800) containing all three items on the labor movement's wish list.
Whistleblowing with a French Twist
May 29, 2007
Last month, we discussed the fact that whistleblowing in France is a rather unwelcome legal obligation. France's total opposition to whistleblowing has softened over time and has been accompanied by a greater understanding and appreciation of its implications. Nevertheless, strong pervasive principles of French law continue to govern this domain. We referred our readers to a recent report on Whistleblowing and Ethical Charters, which was commissioned by the French Minister of State for Employment and Professional Insertion. The Antonmatt'i-Vivien report was aimed at encouraging the analysis and clarification of this grey area of French law. We continue this month with a look at how whistleblowing is implemented in France.
The 2007 Proxy Season
May 29, 2007
On July 26, 2006, the Securities and Exchange Commission ('SEC') formally adopted new executive compensation disclosure requirements under Item 402 of Regulations S-K ('Item 402'). With the ink barely dry, the SEC on Dec. 22, 2006, modified the reporting requirements related to stock options and stock awards on the Summary Compensation Table, the Director Compensation Table and the Grants of Plan Based Award Table (the 'Item 402 Amendment'). The new rules significantly increase the required disclosure for the 2007 proxy season and ensure that there will be plenty of interesting reading for shareholders, executives and regulators.
Procurement Fraud Enforcement
May 29, 2007
Each year, the federal government spends several hundred billion dollars to obtain goods and services from corporations and other nongovernmental entities. Under the critical eye of the nation's taxpayers, the federal government has amplified its own scrutiny of the ethics and integrity of its procurement officers and those companies with which it contracts. Via new national legislation and investigative initiatives, the attention of Capitol Hill and federal law enforcement offices across the nation is keenly focused on the prevention, detection and punishment of procurement fraud. It is a brand new day ' and a potentially dark one for the unwary governmental contractor.
Whistleblowing with a French Twist
April 30, 2007
A long accepted and familiar concept in Anglo-Saxon countries, whistleblowing, for cultural and historical reasons, has proven to be a rather unwelcome legal obligation. France's total opposition to whistleblowing has softened over time and has been accompanied by a greater understanding and appreciation of its implications. Nevertheless, strong pervasive principles of French law continue to govern this domain.
A Blow to Private Whistleblowers
April 30, 2007
In a substantial win for businesses, the U.S. Supreme Court recently issued a decision imposing strict requirements for lawsuits by private whistleblowers. Under the federal False Claims Act, once allegations of fraud are publicly disclosed, a relator (as citizen-plaintiffs are called) may bring suit on the government's behalf only if the relator is an 'original source.' In <i>Rockwell International Corp. v. United States</i>, the Court rejected the notion that a relator need only have knowledge of background facts about alleged fraud, even if those facts preceded the fraud. Instead, the Court held that a relator must have direct and independent knowledge of <i>the specific misconduct for which liability is actually imposed.</i>
Backdating Investigations
April 30, 2007
As federal investigators examine the stock option programs of more than 160 companies, innumerable other companies launch internal investigations. As top executives resign, shareholders file dizzying numbers of derivative class action suits. Finally, as the Securities Exchange Commission and Department of Justice bring enforcement actions and criminal charges, the media is vilifying the so-called stock option backdating scandal as the biggest example of corporate abuse since Enron. The option backdating media frenzy focuses upon investigations by federal prosecutors and other regulatory agencies into public companies that have employed stock option compensation plans for corporate executives and employees.
Backdated Options
April 30, 2007
On Feb. 8, 2007, the Internal Revenue Service ('IRS') made an usual offer to employers: on very short notice ' by Feb. 28, 2007, employers could inform the IRS of their intent to pay the back taxes and penalties owed by (non-insider) employees who exercised stock options with 'an exercise price of less than fair market value of the underlying stock on the date of grant in 2006.' Under this Program, companies with backdated options programs were 'allowed' to calculate and pay, by June 30, 2007, on behalf of their employees who exercised such options, a 20% penalty tax, and an additional 1% interest on underpayments, owed by such employees under ' 409A of the Internal Revenue Code ('IRC').
