When home mortgage giant Freddie Mac announced last month that the Justice Department’s three-year probe into its accounting practices would not result in criminal charges, company spokespersons had to tread carefully while delivering the good news. “It is Freddie Mac’s understanding that it is the practice of the U.S. attorney’s office for the Eastern District […]
Regulatory Enforcement
Posted inRegulatory Enforcement
Sorting Out E-Discovery’s New Ambiguity
The new electronic discovery rules set to take effect Dec. 1 in federal court are meant to clarify the obligations of parties to turn over emails and other electronically stored records—but ambiguity in some of the terminology assures that disputes will continue over when old information will have to be retrieved and what kind of […]
Posted inInternal Controls
Document Creation, Retention, And Destruction Policies
As a practicing lawyer, my clients were all well aware of the infamous “Pitt’s Postulate”: Whenever you think you’ve destroyed the last copy of any document, there’s always one more that exists, and it will surface at exactly the most inopportune time. The only exception, of course, is if you really need the document, at […]
Posted inRegulatory Enforcement
Backdating Study Gives Lawsuits New Ammo
As regulators, prosecutors, and lawmakers continue their scrutiny of stock option backdating, a new study may offer investors more ammunition as they ramp up legal complaints against companies implicated in the much-maligned practice. A study by researchers at the University of Michigan concludes that backdating is costing shareholders big bucks for what amounts to relatively […]
Posted inEthics & Culture
Courts Raise Specter Of ‘Collective’ Scienter
In a potentially ominous development for corporations, a handful of decisions by federal judges in New York have strayed from the traditional rule that a company can’t be found to have had fraudulent intent—known in the law as scienter—unless the individual making a false or misleading material statement actually had such an intent. Under a […]
Posted inRegulatory Enforcement
Penalty Declined: SEC Often Takes Nothing
The Securities and Exchange Commission seemed to bring closure the largest corporate fraud scandal in history in July, when it announced final civil settlements with former WorldCom Chief Financial Officer Scott Sullivan and five other executives at the former telecommunications company. At the time, Sullivan had agreed to be liable for $10 million in disgorgement […]
Posted inRegulatory Enforcement
The Brave New World Of e-Discovery Rules
Electronic data has no natural lifecycle and can exist on an IT system forever—which sounds ideal, right until a subpoena lands on your desk. As email and other computer information accumulate across the world at alarming rates, organizations are making the rationalization of records and information management (“RIM”) a top priority. According to a 2006 […]
Posted inRegulatory Enforcement
Pain In The Class: CAFA Boosts Legal Costs
More than a year after its enactment, the Class Action Fairness Act has largely succeeded in forcing potentially costly class actions out of state courts and into federal courts—but procedural battles over keeping litigation in the federal system have made defending such cases more expensive, at least for the time being. “CAFA has raised the […]
Posted inInternal Controls
Sifting Through New e-Discovery Technology
New federal rules governing electronic discovery take effect Dec. 1, leaving corporations scant time to evaluate and implement any technology or procedures to help handle looming new standards of producing electronic records in litigation. The biggest change: Companies must be prepared to address e-discovery issues immediately after a suit is filed. Under the new rules, […]
Posted inRegulatory Enforcement
New IT Risk: Not Monitoring Computer Use
Most savvy corporations already have strict policies about what employees can and cannot do at their workplace computers, but the stakes for not enforcing those policies and properly investigating misuse are rising. In one recent case from New Jersey, a company was sued by the victim of child pornography that a worker had on his […]