Month: December 2008

LegallyMinded – The ABA Tries To Get Social

The American Bar Association launched LegallyMinded, a social networking site targeted at lawyers, paralegals, law librarians, law students and anyone else in the legal market. Being a student of social networks for lawyers, I thought I would sign up.

I encountered my first problem when they asked me to have a username rather than my real name. The statement was to use your real name. But they do not allow spaces in the username.Someone else had already grabbed the “dougcornelius” username. I am stuck with dougcornelius1.

The next problem was the lengthy six step sign-up process. No other site makes you add so much information. I singed in with my ABA identification so I would expect they would carry over my ABA information. I was wrong.

The next challenge was trying to connect with people. They offer an interactive map showing people with similar interests closer to you. It seemed to make little sense to me. Right next to me was someone who runs a small rural practice. Not me.

The site shows people with their username instead of their real names so it is hard to figure out who is who. My first search was to find out who joined as dougcornelius. No luck in being able to search the site for people by name. Of course their real name is hidden anyhow.

I moved on to the group function. There were two dozen in place, none of which held much interest for me. Five were focused on law students or law schools and three were focused on geography. So I set up a group for compliance since I noted Bruce Carton from Securities Docket and Compliance Week was on the site. I could not find a way to invite him to the group.

They have a blog feature so I tried that out. I copied in some posts from my Compliance Space blog to try out that feature. The publishing and editing of the blog platform is really poor.

The ABA Journal published a piece in the December 2008 issue: The ABA Gets Social.

“We set out to do something different,” says Fred Faulkner, the ABA’s manager of interactive services in Chicago. “We looked at a lot of the professional and social networks, and the gap we found was that there truly wasn’t a good site that was a cross between professional and personal networking.”“We’re filling that gap by offering the best features of sites like LinkedIn and Facebook and adding a bunch of content from the ABA and other high-quality content sources.”

I think they missed the mark with LegallyMinded.

Bob Ambrogi is trying to test it out, but he can’t even log in: ABA Launches (Buggy) Networking Site.


Originally posted in KM Space, my old blog on knowledge management, enterprise 2.0, and social networking for lawyers.

Is CalPERS a Sovereign Wealth Fund?

Ashby H. B. Monk wrote Is CalPERS a Sovereign Wealth Fund? (He ends up saying no.)

Sovereign Wealth Funds have come under increased scrutiny with countries concerned that an investment by a SWF could be used as a political tool and not a mere investment. The underlying concern is that many of the SWFs come from countries that at times are hostile to the United States and often lack a substantive rule of law. Ashby notes that there is some confusion as to what constitutes a sovereign wealth fund.

While all seem to agree that the China Investment Corporation and the Abu Dhabi Investment Authority are SWFs, there is a lively debate as to whether public pension funds, such as the California Public Employees Retirement System (CalPERS), are also SWFs. While CalPERS itself is adamant that it is not, others disagree. The stakes are high for a fund like CalPERS, as the SWF label could come with a high cost.

Ashby starts with several of the SWF definitions and creates this definition:

SWFs are government-owned and controlled (directly or indirectly) investment funds that have no outside liabilities or beneficiaries (beyond the government or the citizenry in abstract) and that invest their assets, either in the short or long term, according to the interests and objectives of the sponsoring government.

Based on this definition, Ashby concludes that CalPERS is not a SWF.

Ashby H. B. Monk is a Research Fellow at the Center for Retirement Research at Boston College (CRR) and the University of Oxford.

Securities Litigation and the FCPA

last week the Ninth Circuit handed down a decision in a securities litigation case related to FCPA violations in Glazer Capital Management LP v. Magistri.

Glazer’s claims arose after InVision Technologies, Inc. (InVision) announced, in March 2004, that it had entered into a merger agreement with General Electric (GE). Several months later, in July 2004, InVision issued a press release, casting doubt on the merger because of the discovery of potential violations of the Foreign Corrupt Practices Act of 1997(FCPA), 15 U.S.C. § 17dd-1. Although the proposed merger ultimately was consummated, the July 2004 announcement resulted in an immediate drop in InVision’s share price. A class action complaint was filed by InVision shareholders and Glazer was appointed lead plaintiff.

The suit was largely based on three alleged misstatements in the merger agreement attached to the 10-K filed to announce the transaction. The merger agreement has representations that InVision was in compliance with all applicable law, in compliance with the books and record provisions of the FCPA and that the company had no knowledge of any FCPA violations. The merger agreement was signed by the President/CEO and the COO of the company.

One element of securities litigation is to show the element of scienter, that is the the required state of mind for the violation. In this case, that the defendant intended to commit the fraud. There is a concept of “collective scienter” where the intent of the company is imputed on the individual.  In this case, the court found that since the CEO and COO are the ones that signed the merger agreement the plaintiff needs to prove that one of those two new that the statements were not correct.

As Kevin M. LaCroix of the D & O Diary points out:

[I]n the InVision case, “the surreptitious nature of the transactions creates an equally strong inference that the payments would have deliberately kept secret – even within the company.” Obviously, payments of this kind invariably are of a surreptitious nature and of a kind that would be kept secret, even within the company. The implication is that in order for a securities claim alleging FCPA-related disclosures to survive the initial pleadings stage, the claimants may have to plead that the company officials who prepared the company’s public disclosures were aware of the improper activities.

Know Your Customer Podcasts

You can find a seried of FINRA Compliance Podcasts on their Compliance Podcast webpage and from iTunes.  Last summer they have a few on Customer Identification Programs and Anti-Money Laundering programs:

Kozeny Decision Limits Defense to FCPA

Melissa Klein Aguilar wrote a peice on Compliance Week about the decision in U.S. v. Kozeny decision that limits the local law defense under the Foreign Corrupt Practices Act: FCPA Decision Narrows Local-Law Defense.

The Kozeny decision makes clear that if the payment itself is illegal, the local-law defense can’t be used even if the common practice in that country is to forgive the offense; the transaction must be permitted under local law.

In the facts of the Kozeny case were unusual. Local Azerbaijani law the voluntary declaration of having committed bribery absolves the bribe-giver and his accomplices from criminal responsibility. The Kozeny court did not seem to think this was the same as the bribe being legal.

The judge also finds that mere economic coercion is not a defense. The Kozeny judge equates true extortion with a “payment made to an official to keep an oil rig from being dynamited.”

The article also points us to two law firm legal alerts:

Code of Business Ethics for Jones Lang LaSalle

Jones Lang LaSalle Incorporated was named to The Ethisphere Institute’s 2008 World’s Most Ethical Companies list.

The World’s Most Ethical Companies are the ones that go above and beyond legal minimums, bring about innovative new ideas to expand the public well being, work on reducing their carbon footprint rather than contributing to green washing and won’t be found next to the words “Billion Dollar Fine” in newspaper headlines any time in the near future. These are the companies that stand out among the competition in their industry.

The Jones Lang LaSalle Code of Ethics (.pdf) is published on the “investor relations” section of their website.

Making Smarter Risk Decisions

PriceWaterhouseCoopers published Making Smarter Risk Decisions.

The paper looks at how the most successful organisations define their risk appetite and integrate this appetite into business strategy and culture so that all facets of the business consistently apply the desired risk thresholds, top down, to decision making, an organisation can achieve optimal performance and compliance and avoid investing in redundant or ineffective functions, processes and technology.

One section of the paper addresses risk appetite:

Developing this culture requires leadership to not only define risk appetite and ethical
business standards, but to encourage employees to do the right thing through clear communication of objectives and risk appetite; incentive and reward systems that are aligned to employees “doing the right thing”; and role specific ethics, compliance and risk training programmes. It also requires that management be prepared to take a hard line with employees who don’t “do the right thing”, but not with those employees who truly “do the right thing” and achieve sub-optimal results.

No business deal should ever justify putting your company’s reputation at risk.

What You Need to Know About U.S. Sanctions Against Drug Traffickers

As part of OFAC‘s Specially Designated National List, OFAC includes narcotics kingpins. OFAC has published What You Need to Know About U.S. Sanctions Against Drug Traffickers (.pdf).

On December 3, 1999, the President signed into law the Foreign Narcotics Kingpin Designation Act (the “Kingpin Act”), 21 U.S.C. § 1901-1908, 8 U.S.C § 1182. The related regulations are styled the “Foreign Narcotics Kingpin Sanctions Regulations” (31 C.F.R. Part 598).

The Kingpin Act blocks all property and interests in property, subject to U.S. jurisdiction, owned or controlled by significant foreign narcotics traffickers as identified by the President. In addition, the Kingpin Act blocks the property and interests in property, subject to U.S. jurisdiction, of foreign persons designated by the Secretary of Treasury, in consultation with the Attorney General, the Director of Central Intelligence, the Director of the Federal Bureau of Investigation, the Administrator of the Drug Enforcement Administration, the Secretary of Defense, and the Secretary of State, who are found to be: (1) materially assisting in, or providing financial or technological support for or to, or providing goods or services in support of, the international narcotics trafficking activities of a person designated pursuant to the Kingpin Act; (2) owned, controlled, or directed by, or acting for or on behalf of, a person designated pursuant to the Kingpin Act; or (3) playing a significant role in international narcotics trafficking.

Significant foreign narcotics traffickers and foreign persons designated by the Secretary of the Treasury are referred to collectively as Specially Designated Narcotics Traffickers. Foreign persons designated under the Kingpin Act are referred to as “[SDNTK]s” on OFAC’s listing of “Specially Designated Nationals and Blocked Persons” to differentiate them from the Specially Designated Narcotics Traffickers named under Executive Order 12978.

U.S. persons are prohibited from engaging in any transaction or dealing in property or interests in property of [SDNTK]s and from engaging in any transaction that evades or avoids the prohibitions of the Kingpin Act. These prohibitions affect trade transactions as well as accounts, securities, and other assets.

Bribery and Corruption Have Become Endemic in Russia

The Economist ran a special report on Russia. The article that caught my eye was Grease My Palm. In looking at the scope of the problem in Russia, the articel cites the corruption market being estimated at $300 billion, which is about 20% of Russia’s GDP. INDEM (a Russian NGO) says 80% of all Russian businesses pay bribes.

It makes you wonder how any U.S. business can being doing business in Russia without violating the FCPA.

Iraq Is Quietly Firing Fraud Monitors

From James Glanz and Riyadh Mohammed of the New York Times: Premier of Iraq Is Quietly Firing Fraud Monitors.

The dismissals, which were confirmed by senior Iraqi and American government officials on Sunday and Monday, have come as estimates of official Iraqi corruption have soared. One Iraqi former chief investigator recently testified before Congress that $13 billion in reconstruction funds from the United States had been lost to fraud, embezzlement, theft and waste by Iraqi government officials.

Iraq, in its earliest days of existence, looks like it headed toward being a kleptocracy and will be another example of the resource course.