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Wednesday
Mar282007

Lawyers Not Immune for Standing on The Sidelines and Watching a Fraud Go Down

After years of investigation the SEC is now putting lawyers on notice that they have responsibility to shareholders.

Link: Print Story: SEC charges 2 ex-Enron lawyers with fraud on Yahoo! News.

SEC charges 2 ex-Enron lawyers with fraud 55 minutes ago The U.S. Securities and Exchange Commission has charged two former in-house lawyers at Enron Corp. with securities fraud. Jordan Mintz, former general counsel of Enron's global finance group, and Rex Rogers, former associate general counsel, were charged in connection with a fraudulent scheme to make material misrepresentations or omissions in Enron's public filings, the SEC said on Wednesday. Attorneys for Mintz and Rogers could not immediately be reached for comment. Frederic Firestone, an associate director in the SEC's enforcement division, said the case was another example of the pervasiveness of fraud at Enron, which collapsed in 2001, but was also important for showing the SEC will hold all relevant parties accountable. "The commission will pursue gatekeepers such as these who engage in misconduct," he said. The case involves Enron's 1999 sale of an interest in a troubled power project in Cuiaba, Brazil to LJM1, a partnership controlled by former Enron Chief Financial Officer Andrew Fastow, the SEC said. The SEC alleges the transaction was done to take the asset off Enron's balance sheet and to recognize related earnings.

It included an oral agreement on the side that LJM1 would not lose money, which was neither in the deal documents nor disclosed to Enron's auditor.



Enron then bought back LJM1's Cuiaba interest in 2001 according to the oral agreement, paying LJM1 a profit even though the investment had decreased in value.



The SEC charges that Mintz knew, or was reckless in not knowing, of the oral agreement and directed the documenting and closing of the buyback.



The investor protection agency also charged Mintz and Rogers with knowingly or recklessly failing to accurately disclose the buyback and related details in Enron's regulatory filings.



The SEC is seeking permanent injunctions, disgorgement and civil monetary penalties from both defendants as well as orders barring them from serving as an officer or director of a public company.





Tuesday
Mar272007

Announcement Reed R. Kathrein Joins HBSS.

Link: Hagens Berman Sobol Shapiro LLP - Attorneys at Law: Press Room.

March 26, 2007. Nationally Recognized Class-Action Attorney Joins Hagens Berman Sobol Shapiro. Reed R. Kathrein to expand on HBSS's national presence Seattle and San Francisco CA -

Reed R. Kathrein, a nationally recognized complex litigation attorney announced today he has joined the class action and large-scale litigation firm Hagens Berman Sobol Shapiro (HBSS), and will head up HBSS's new San Francisco office. According to managing partner Steve W. Berman, Kathrein's deep experience in securities fraud, consumer and antitrust class actions will be a strong addition to HBSS. "We are all very excited to welcome Reed to HBSS," said Berman. "Reed's experience matches perfectly with our work, and we are very fortunate to have him lead our new San Francisco office." Kathrein's 30 year practice has been dedicated to protect the rights of individuals and institutions through consumer and antitrust class actions. He has been the lead or co-counsel on many significant rulings over the years including a recent win involving a $1 billion settlement with Tenet Healthcare, a case he shared with HBSS.

"Practicing law is always more rewarding when you work alongside like-minded, talented people, and I have found that in HBSS," Kathrein said. "I am excited about helping the firm expand its practice, and to expand the firm's presence by leading its new San Francisco office."

HBSS is headquartered in Seattle, with offices in Cambridge Massachusetts, Chicago, Phoenix, Los Angeles and now San Francisco.

"We are doing more and more work representing consumers and others in California, and it made sense to strengthen our presence there," Berman added. "Reed's familiarity with the courts in California make him even more of a potent ally for the firm, and for our clients."

Among Kathrein's other notable successes include a $259 million settlement for shareholders against 3Com Corporation involving accusations the company defrauded investors by hiding a $160 million loss, a case that was then one of the nation's largest securities class-action settlements. Kathrein was also instrumental in the 2003 settlement in the largest investment manager fraud case in U.S. history against Capital Consultants, which resulted in a $300 million settlement on behalf of labor pension funds.

Kathrein served as co-chair of the Securities Working Group in California, tasked by Chief Justices Marilyn Hall Patel and Vaughn Walker to propose and assist in revising the Court's local securities fraud class actions rules. He also served on the executive committee of the National Association of Securities and Consumer Law Attorneys, the Private International Law Committee of the American Bar Assocation and acted as an advisor to the U.S. State Department's Advisory Committee on Private International Law.

About Hagens Berman Sobol Shapiro
The law firm of Hagens Berman Sobol Shapiro is based in Seattle with offices in Chicago, Cambridge, Los Angeles, Phoenix and San Francisco. Since the firm's founding in 1993, it has developed a nationally recognized practice in class-action and complex litigation. Among recent successes, HBSS has negotiated a pending $300 million settlement as lead counsel in the DRAM memory antitrust litigation; a $340 million recovery on behalf of Enron employees which is awaiting distribution; a $150 million settlement involving charges of illegally inflated charges for the drug Lupron, and served as co-counsel on the Visa/Mastercard litigation which resulted in a $3 billion settlement, the largest anti-trust settlement to date. HBSS also served as counsel in a $850 million settlement in the Washington Public Power Supply litigation and represented Washington and 12 other states in lawsuits against the tobacco industry that resulted in the largest settlement in the history of litigation. For a complete listing of HBSS cases, visit www.hbsslaw.com.

Tuesday
Oct102006

Spin and Apple's Backdating Scandal

You have to admit, when it comes to PR, Apple is the spin master, along with it's Mac groupies. How else can you explain the quick rush to judgement of the "legal experts" being cited in the newspapers praising Steve Jobs:

View this article at: http://www.macnn.com/articles/06/10/09/legal.experts.on.probe/
Monday, October 9,2006 @ 5:00pm

Is Jobs clear of Apple options scandal?

Legal experts are commending Apple for taking charge to remedy its stock option grant scandal, despite the implication of two former executives which raised "serious concern" during Apple's internal investigation. The investigation of irregularities -- which has plagued investors with worries of company chief Steve Jobs possibly losing his position -- made significant progress last week to clear the air around Jobs' apparent lack of involvement with the shady accounting practices. "The company has taken every single appropriate step that can be expected to be taken to identify and remedy the past problems," said Mike Koenig, a criminal defense attorney. [Isn't that what defense attorneys always say?]"We think Apple will get past this unscathed - as long as it doesn't impact [Steve] Jobs," said analyst Shannon Cross of Cross Research. [Who is Cross selling research to?] Jobs assertion that he did not understand the accounting implications of the illegal backdating may also help his case, according to Reuters. [It's always better to be dumb and rich, than smart and rich...proven jury research.]

"He didn't know there was rejiggering of the financial results," said James Cox, a Duke University Law School professor. [Ahhhhh, who says....ohh Apple's Special Committee]"There's a difference between knowing that the options were backdated and knowing that the numbers that were being produced were misleading," Cox said. [ Hmmmmm...missed me on that one]Another attorney said Apple's mistakes seem much less serious than activities allegedly performed by executives of Brocade and Comverse -- which were also involved in stock options backdating -- and that disciplinary action will likely prove more lenient for the Cupertino-based company. "There have been some egregious cases," said George Stamboulidis, an attorney with Baker Hostetler. "But this doesn't sound to have been one of them," Stamboulidis of Apple. [Somehow I can't hear the violins.]

Monday
Apr102006

AT&T Cooperates with NSA to Wiretap

AT&T Faces Scrutiny for NSA Wiretaps


The Recorder
04-11-2006

Sure, it's exciting to hear Congress and the attorney general bloviate over the Bush administration's legally questionable eavesdropping program.

But a more interesting fight over the National Security Agency's warrantless wiretapping seems to be shaping up in San Francisco federal court, where a longtime Republican foe -- the class action plaintiff firm Lerach Coughlin Stoia Geller Rudman & Robbins -- is suing phone carrier AT&T for allegedly granting the government access to customers' phone and electronic communications.

The case, Hepting v. AT&T, 06-cv-00672, was filed in January, but made its first real waves on Thursday, when a retired AT&T technician alleged that the phone company lets the NSA review all its online and phone traffic, not just the relatively small number of calls the administration has admitted to monitoring.

The explosive and politically charged allegations come before Judge Vaughn Walker, a libertarian-leaning skeptic of law enforcement who has publicly feuded with Lerach firm lawyers.

As the case moves forward, the next few months should provide insight into the extent of the government's wiretaps, as well as difficult legal issues that will determine whether wiretapping may continue.

Lawyers involved in the case are now arguing over whether a trove of documents filed under seal by plaintiffs lawyers from the Lerach firm, the Electronic Frontier Foundation and a handful of other firms may be opened.

The documents have been provided over the last few weeks, and include testimony from the retired phone technician, Mark Klein, as well as an expert witness who agrees with Klein's claims.

The extent of his testimony is not clear, but in his statement on Thursday, Klein wrote of a secret room set up by the NSA to which all communications were diverted.

"Based on my understanding of the connections and equipment at issue, it appears the NSA is capable of conducting what amounts to vacuum-cleaner surveillance of all the data crossing the Internet -- whether that be peoples' e-mail, Web surfing or any other data," Klein wrote. His attorneys, Miles Ehrlich and Ismail Ramsey of Ramsey & Ehrlich in Berkeley, said Friday that they were no longer commenting on the case. They wouldn't say why.

Lerach partner Reed Kathrein and Cindy Cohn, a lawyer with the Electronic Frontier Foundation, said they haven't calculated potential monetary damages in the case.

"I haven't figured out how we're going to prove the monetary damages," Kathrein said. "It's having the ongoing irreparable harm of being eavesdropped on."

Cohn said that federal law provides statutory damages ranging from $100 to $10,000 per violation of wiretap statutes, but that she's not sure how the claim will shake out. "We haven't really done the math, because every time we do the math, the number's very, very big," she said.

Cohn and Kathrein both emphasized that the real point of the suit is to stop the eavesdropping.

Class action specialists said that given the large purported class -- it would encompass all AT&T customers -- the separation of powers issues and the fact that the eavesdropping was apparently done with government authority, it could be a hard case for plaintiffs.

"I think that there will be significant roadblocks under national security interests, as well as the Patriot Act," said Bruce Simon, a partner at the plaintiff firm Cotchett, Pitre, Simon & McCarthy.

"I think there is a separation of powers issue, and I think it's also tough to substitute the opinion of a federal judge for the debate that just occurred in Congress, extending the Patriot Act," Simon added. "It seems like a judge might not be willing to substitute his or her judgment for Congress."

But if there is a judge willing to take a risk, said other class action specialists, Walker is a prime candidate. He's known for a robust skepticism of law enforcement and standing behind controversial decisions, such as sentencing a mail thief to wear a sign proclaiming "I stole mail."

Attorneys who have appeared before Walker -- who won't talk about him on the record -- said they expect his libertarian tendencies to outweigh feelings stemming from his public feud with two partners from the Lerach firm, which was formerly known as Milberg Weiss Bershad Hynes & Lerach.

"He's libertarian first and foremost," said a securities defense lawyer. "I think the animosity is more from Milberg toward him."

AT&T's defense in the case is not entirely clear, given that lawyers for AT&T at Pillsbury Winthrop Shaw Pittman and Sidley Austin Brown & Wood referred requests for comment to a company spokesman, who did not return phone calls.

The EFF's Cohn said she's received notification that AT&T will file a motion for dismissal later this month. Kathrein said he expects the phone company to rely on the government as it argues to get the suit thrown out.

"They're going to try to bury us with state secrets so that it never gets heard before the court," he said.

Whether such an effort succeeds should become clear in coming weeks, when Walker is expected to rule on opening the sealed documents to the public.

Until then, the plaintiffs lawyers are saying that, despite the complex issues the case raises, their underlying arguments rely on the basic principle of a right to privacy.

Searches without probable cause, said San Francisco solo Richard Wiebe, who is representing plaintiffs in the suit, have long been barred.

"It's been absolutely prohibited under English and American law for the last 150 years," he said.

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For more information start exploring:

Daily Kos
Friday
Sep232005

Feds investigating Frist's HCA stock sale

Should Senator Frist be involved in legislation involving securities fraud? The following incident suggests maybe not.

The Associated Press

Updated: 12:44 p.m. ET Sept. 23, 2005

NASHVILLE, Tenn. - Hospital operator HCA Inc. said Friday that federal prosecutors have issued a subpoena for documents the company believes may be related to the sale of its stock by Senate Majority Leader Bill Frist.

A release from the Nashville-based company said the subpoena came from the U.S. attorney for the Southern District of New York.

Frist’s office confirmed the SEC is looking into the sale.

“Not surprisingly, the Securities and Exchange Commission contacted Senator Frist’s office after the story appeared in the press about the sale of his Hospital Corporation of America stock,” Frist spokesman Bob Stevenson said in an e-mail. “The majority leader will provide the SEC any information that it needs with respect to this matter.”

Frist traded using only public information, and only to eliminate the appearance of a conflict of interest, Stevenson said.

The SEC had not contacted HCA as of Friday morning, said HCA spokesman Jeff Prescott. He declined further comment.

Company founded by Frist's father
HCA, the nation’s largest for-profit hospital company, was founded by Frist’s father and his brother was formerly its CEO and chairman and remains on the board of directors.

Frist asked a trustee to sell all his HCA stock in June, near a 52-week stock price peak of $58.40 and at the same time HCA insiders were selling off shares. Reports to the Securities and Exchange Commission showed insiders sold about 2.3 million shares, worth about $112 million, from January through June, said Mark LoPresti of Thomson Financial.

The sale came about two weeks before the company issued a disappointing earnings forecast that drove its stock price down almost 16 percent by mid-July. They still have not recovered, closing Thursday at $45.90.

The value of Frist’s stock at the time of the sale was not disclosed. Earlier this year, he reported holding blind trusts valued at $7 million to $35 million.

Insider knowledge?
For years, Frist was criticized for holding HCA stock while directing legislation on Medicare reform and patient issues. His office has consistently deflected criticism by noting that his assets were in a blind trust and not under his active control.

Frist, a Tennessee Republican, is widely considered a potential presidential candidate in 2008.

HCA said the subpoena seeks the “production of documents,” and said it plans to fully cooperate with the district attorney’s investigation.

The Wall Street Journal reported Friday that the SEC is looking into whether Frist had any inside knowledge that prompted his sales.

On Thursday, SEC spokesman John Nester would neither confirm nor deny that Frist or any officer or director of HCA is the subject of an investigation, citing the agency’s policy.

Shares of HCA fell 20 cents to $45.70 in premarket trading on the New York Stock Exchange.

© 2005 The Associated Press. All rights reserved. This material may not be published,

broadcast, rewritten or redistributed.

© 2005 MSNBC.com

URL: http://www.msnbc.msn.com/id/9450770/

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