May 8, 2008

Colorado's other revenge-initiative war, and the NYT

As Carter reported yesterday, trial lawyers in Colorado have apparently reached a truce with some of their critics: a former state treasurer won't try to qualify a ballot measure limiting contingency fees, and CTLA won't try to qualify nine (9!) separate counter-measures which sought to inflict pain on realtors, doctors and other nonlawyer groups. That skirmish having calmed down, however, there remains a ballot war very much in progress between organized labor and some of _its_ critics. Amendment 47 would add Colorado to the ranks of states with a "right to work" law preventing unions from negotiating contracts that require the dismissal of nonmembers. A Better Colorado, the group promoting that initiative, has thus far been backed mostly by CoorsTek, which is related to the large brewing interest. As revenge, a group called Protect Colorado's Future, whose biggest support has come from the politically active Service Employees International Union (SEIU), is pushing two business-bashing ballot measures, one to allow lawsuits over firings without "good cause", and the other to menace company executives with lawsuits if they so much as know about legal infractions at their firms, even if they do not themselves participate.

The New York Times showcased the executive-criminal-liability measure in a lengthy and overall quite flattering April 1 report, but omitted any discussion of the revenge initiative aspects or of the union backing, describing Protect Colorado's Future merely as "a coalition of advocacy groups that supports the initiative".

May 6, 2008

New SEC nominee

Troy Paredes has the important Ribstein and Bainbridge endorsements.

April 16, 2008

DC Circuit argument over constitutionality of Public Company Accounting Oversight Board

Yesterday, the DC Circuit heard arguments appealing the dismissal of a challenge to the constitutionality of the Public Company Accounting Oversight Board (Feb. 2006), an institution whose members are appointed by the SEC, which would seem to violate the Appointments Clause. (The lawsuit also alleges nondelegation doctrine problems.) A panel of Judges Brett Kavanaugh, Judith Rogers, and Janice Rogers Brown expressed substantial skepticism to the PCAOB's position, as Michael Carvin argued that the board was a permanent government-like agency with extraordinarily broad and unchecked prosecutorial powers, but outside the power of the president to appoint or remove officials. (Judith Burns, "Accounting Oversight Board Case Heard By Appellate Court", Dow Jones Newswires, Apr. 15; Jurist summary; CEI press release). Because of a nonseverability provision in Sarbanes-Oxley, a finding that PCAOB is unconstitutional would strike down the law entirely, but the argument was not reported on by any newspaper—not even the Wall Street Journal.

April 14, 2008

Shorting Stein

Speaking of weak opinion pieces in the pages of the Times, Felix Salmon once again enjoys a field day at Ben Stein's expense:

Stein also can't conceive of a world in which some people suffer losses without other people (invariably investment bankers) finding themselves with enormous gains. "The false god of deregulation allows unscrupulous people to loot the system," he says, convinced that a cabal of cackling capitalists is somewhere cheering the present crisis, making billions of dollars every time another bank implodes.

The really funny bit is where Stein contrasts the winners and the losers. On the winning side you have "Wall Street", while on the losing side you have "the people who were wiped out in Bear Stearns stock", as though such people were widows in Omaha rather than the very investment bankers who Stein thinks are gaming the system so that they always win.

Legal Aid, to subprime borrowers' rescue?

Scott Greenfield ventilates (in the Warner Bros. sense of "blasts holes in") an op-ed in today's NYT proposing the unleashing of legal services lawyers to go after mortgage lenders:

Sant's view is that the LAS should be at the forefront of a political campaign to win cash and prizes for the subprimers. ...

But [Legal Aid] lawyers are hamstrung by federal regulations that limit homeowners' access to speedy, low-cost legal relief.

No, No, No. There are no regulations that limit homeowners' access to anything. There are regulation that limit the LAS, which receives governmental funding, from engaging in political activities. Homeowners are free to go hire a lawyer, whether by fee or contingency, any time they want. A good time might have been before they signed their names 37 times on the mortgage papers. ...

Finally, federal law forbids legal aid lawyers to undertake class action litigation, preventing them from attacking systemic abuses in the real estate industry. Class actions offer the best chance for taking on foreclosure fraud, identifying illegal fees, recovering stolen equity and sending powerful signals to would-be predators. Instead, legal aid lawyers must prosecute cases one at a time.

While I seem to recall Michele Maxian, formerly of the New York Legal Aid Society, doing some "special projects" involving class actions, let's assume that Sant's correct. When it comes to his poor homeowners, what class actions is Sant talking about? Downtrodden Homeowners who agree to take mortgages they can't afford versus Evil Subprime Lenders who give mortgages to people with no assets and no income? Don't they teach students at Georgetown that when claims are dependent on the individual facts of each case, they really aren't class action material? And if he wants speedy justice, class actions certainly aren't the way to go.

Whole thing here.

April 6, 2008

Profs. Lerner and Yahya on Sarbanes-Oxley

New from Washington Legal Foundation: former AG Dick Thornburgh interviews lawprofs Craig Lerner (George Mason) and Moin Yahya (University of Alberta) on the costs, benefits and lingering malincentives of the 2002 Sarbanes-Oxley law (PDF), just in case you needed a reminder that the fundamental problems with Sarbox are in no way a thing of the past.

April 2, 2008

"Premised largely on a repudiation of Occam's razor"

Felix Salmon traces the connections between Ben Stein's apparent view that conspiracies by nefarious hedge-funders brought down Bear Stearns, and Stein's cinematic efforts as a promoter of creationism "intelligent design".

March 28, 2008

Scott: U.S. capital markets continue slipping

Reuters: "U.S. capital markets again lost ground against global competitors last year, highlighting the need to streamline regulation and crack down on excessive securities litigation, industry experts said on Wednesday. The United States received only 6.9 percent of the funds raised in global initial public offerings in 2007 and did not participate in any of the top 20 global IPOs, Harvard Law School Professor Hal Scott said at the U.S. Chamber of Commerce's second annual capital markets conference. ...In comparison, in 2000, about half of the value of global IPOs was raised in the United States, according to Scott's committee."

March 19, 2008

Enron prosecution

Did it withhold exculpatory evidence from the defense?

March 18, 2008

Bear Stearns thoughts

• With the share price of Bear Stearns dropping in Enronesque fashion from $170 to $2, less than the value of its skyscraper headquarters, John Carney and others ask: how could the net value of Bear Stearns's business be negative? One of the reasons shareholders are getting so little is because of the billions of dollars of litigation reserves JP Morgan has built into the valuation. (Josh Gerstein, "Amid Bear Stearns Rubble, Lawyers Swoop In", NY Sun, May 18) Ironically, the shareholder litigation, which will generate hundreds of millions of dollars of litigation expense even aside from any settlements in a suit that may well allege billions of dollars in damages, almost certainly has hurt the shareholder recovery. JP Morgan is paying $2 now, and will pay shareholders more later, but the lawyers will take a large commission for the transaction.
• Larry Ribstein sensibly asks: "Is there potential [Sarbanes-Oxley] internal controls liability for Bear executives? If not, and melt-downs like this can happen after SOX (worth $80+/share one day, $2 the next), then what was it, exactly, that SOX did for us? Could it be that SOX didn't eliminate risk after all? ... So two possible lessons from Bear: We didn't need SOX, and it didn't do any good." More on Sarbanes-Oxley from Ribstein (and AEI).