November 2009
Pay-to-Play Laws Here To Stay? Part Deux — SEC Moves To Restrict Influence Peddling By Investment Advisers
Last week, the CC looked at the increasing number of state and local
laws aimed at ridding the political procurement process of apparent
quid pro quos for campaign and lobbying dollars. And lest you think
this is not a big issue, just look at what the SEC is doing in this
arena. Just as background, note that the SEC has been after pay-to-play
for years. If you search the SEC website, you'll find strong public
statements by former Chairman Arthur Levitt going back to the 1990s
denouncing pay-to-play's influence in municipal bond markets and even
commending the ABA for its stance in denouncing the practice by lawyers
and law firms. But for today, we're going to look at a specific rule
proposal that involves pay-to-play and the investment adviser industry.
J. T. Westermeier (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Of Counsel) explains "reverse engineering" and how it comes up in litigation
PLI: Can you explain "reverse engineering" and offer an example of how it comes up in litigation?
J. T. WESTERMEIER: "Reverse engineering" is generally referred to as
the process of starting with a known product and working backward to
find how it was designed or operates.1
Wikipedia refers to reverse engineering as "the process of discovering
the technological principles of a device, object or system through
analysis of its structure, function and operation."2
The Wikipedia definition goes on further to state that reverse
engineering "often involves taking something (e.g., a mechanical
device, electronic component or software program) apart and analyzing
its workings in detail to be used in maintenance, or to try to make a
new device or program that does the same thing without copying anything
from the original,"3 and notes that
reverse engineering techniques are currently being used in connection
with application and legacy software systems "to replace incorrect,
incomplete, or otherwise unavailable documentation."4
One common reason for reverse engineering is to determine whether a
competitor's product contains patent infringements, copyright
infringements or misappropriated trade secrets.5 Another reason for reverse engineering is to develop competing or interoperable products.
Andrew L. Oringer (Ropes & Gray LLP) assesses the impact employees' general release has on actions for damage to employee benefit plans
PLI: Many actions for damage to employee benefit plans, including class
actions, may be brought by former employees who have given general
releases. Will such a release bar the claim?
ANDREW L. ORINGER: The question can take several analytical turns.
There can be the question of whether the release is void as
against public policy. Assuming the release is not viewed as void
against public policy, there can then be the question of whether the
release by its terms reaches the claim being made. In answering this
question, it may be relevant whether the claim is technically a claim
of the former employee or a claim brought by the former employee but on
behalf of the plan. In LaRue v. DeWolf, Boberg & Associates,
128 S. Ct. 1020 (2008), for example, the claim was held to be a claim
on behalf of the plan — albeit one for which damages would flow to a
specific plan account.
Run Rate
Budgeting metric that entails extrapolating performance over a specified period of time.
This'll
be a quickie issue before we gear up for the end-of-the-year slog PMBA
intends to take you through. Anyway, a favorite activity of sports fans
early in a season is to look at the statistics of a player and say,
"Why, if he continues at this rate, he'll hit X home runs." So, if Alex
Rodriguez were to hit 7 home runs at the beginning of a season, like in
the first four games, you would project that at that rate, he would hit
284 home runs during the season. That is, 7 * (162 games/4 games) = 7 *
40.5 = 283.5. (You round up to make your favorite player look even
better.) But of course, this statistical method is useless in sports,
because nobody can keep that pace, even if they're on steroids. But as
an explanation of run rate (or more exactly home run rate), it really
is all you need to know.
And Never The Twain Shall Meet? Not So Fast: New, Balanced Approach To Discovery In Parallel Proceedings
If a civil securities case leaves Chicago at 7 PM travelling to
Washington, D.C. at three motions per month, and a criminal securities
action involving the same defendant leaves Washington at 5 PM traveling
at 0 motions per month, how long until they crash? Solve for X. Aren't
you glad law doesn't work that way? If it did, figuring out procedure
in parallel securities cases would be a painful mathematic exercise.
Instead, courts just try to figure out how to best accommodate
situations in which "prosecutors charge individuals or companies with
federal crimes while regulators, typically the SEC, file a civil
complaint against the same or related parties." And it used to be
standard that courts would grant discovery stays (there's your 0
motions per month train) in the civil enforcement action while the
criminal proceeding progressed (your faster train). But as explained in
New and Balanced Approach to Discovery in Parallel Proceedings: New
York Federal Courts Reject Government Requests for Broad Stays,
by Steven M. Witzel & David B. Hennes, both of Fried, Frank,
Harris, Shriver & Jacobson LLP, those days may be gone, and
parallel proceedings may start moving down the track at the same time.
Tired, Poor, Huddled Masses Yearning To Breathe Free From Rough Economy, As Well: H-1B And PERM In A Down Economy
Toolbox's all-time, favorite scene in a movie (for sheer, unintended comic genius) remains the one in
The Day After Tomorrow
where Americans race across the Rio Grande into Mexico to avoid the
coming ice age. Toolbox watched that movie with an immigrant, who after
guffawing, said (and Toolbox paraphrases a much more colorful utterance
here), "Well, sometimes it's necessary to walk in someone else's
shoes." As news reports filter in about declining illegal immigration,
it's important to note that times are tough all around. During a
recession, legal immigrants and employers seeking to hire them are kind
of in a co-dependent Catch-22. The more the unemployment rate rises
(10.2% at last official report), the more calls come for restricting
immigration. But restricting immigration can hinder economic recovery
in industries like technology and health care. See Business Week, "Immigration Amid a Recession."
And what happens when a company lays off immigrant workers? For
employers with H1-B workers and PERM obligations, a rough economy
simply adds burdens.
Pay-to-Play Laws Here To Stay? Increasingly, State And Local Campaign Finance Laws Restrict Influence Peddling
The CC hears the term "pay to play" all the time without knowing
precisely to what it refers — in the "sketchy behavior" sense. That's
because in this life, you pretty much always have to pay to play
whatever it is your playing. That's a given. It's only when we decide
that certain manifestations of pay to play create playing fields so
unlevel (as in only certain individuals and entities can afford to pay)
that we like to undermine it. Such is the case in government, where we
like to think that our representatives are not for sale to the highest
bidder; that there aren't quid pro quos for obtaining contracts from
government; or that judgment is not being clouded by campaign
contributions. And because what we think is not always what happens in
reality, so it is that increasingly, at the state and local levels
especially, pay-to-play laws are cropping up to eliminate conflicts of
interest and the like.
In essence, pay-to-play laws "prohibit a corporation from entering into
business arrangements or contracts with certain governmental entities
if the corporation, its PAC and in many cases certain covered
directors, employees, and their family members (such as spouses or
children) make or solicit political contributions in that
jurisdiction." See Kenneth A. Gross and Ki P. Hong, "State Pay-to-Play Laws" at 1 in Corporate Political Activities
(PLI 2009). And currently 37 states, municipalities and other local and
statewide governmental entities have such laws: California; California
counties; CALPERS; CALSTRS; Chicago; Colorado; Connecticut; Culver
City, CA; Denver; Florida; Hawaii; Houston; Illinois; Jefferson Parish,
LA; Kentucky; L.A. City; L.A. County; MTA Louisiana; Maryland;
Missouri; New Jersey; New Mexico; New York City; Oakland; Ohio;
Pasadena, CA; Pennsylvania; Philadelphia; Rhode Island; Salt Lake
County, UT; San Antonio; San Francisco; South Carolina; Suffolk County,
NY; TX Teacher Retirement System; Vermont; and West Virginia. Running
afoul of these laws can leave your clients in a position where they
will be paying dearly, indeed. So how do you make sure you play without
paying or pay without playing without sitting out the entire game?
David J. Murphy (Morrison & Foerster LLP) assesses the renaissance of labor unions
PLI: Unions are ascendant in many policy respects. What are some of the primary issues renewing labor unions?
DAVID J. MURPHY: Organized labor is on the brink of benefiting from a
number of significant political and legislative developments that may
greatly enhance its ability to organize previously union-free
workplaces and industries. Given these developments, it simply no
longer is the case that companies can rely on the dormancy of U.S.
labor unions as their best and only protection for avoiding union
issues being raised at their workplace. Instead, both the possibility
of union organizing taking place and the risk that it would be
successful have substantially changed.
Edward M. Stroz (Stroz Friedberg, LLC) examines how investigators look for intent in white collar cases
PLI: What makes for an effective white collar crime investigation into intent?
EDWARD M. STROZ: The challenge in conducting a fair white collar
investigation almost always is to gather evidence of the true intent
behind the actions of the people involved. White collar offenses are
usually about actions that are not violent or inherently illegal.
Examples include writing a check, transferring funds, or making a
representation about an investment or contract. Therefore, the bank
accounts, checks, and correspondence documents typically found in white
collar investigations are often no different, on their face, from those
used in legitimate commerce. What makes those documents interesting, or
not, will be based on evidence about how they were used, for what
purpose, and to further what intentions.
Capacity Utilization Rate (CUR)
Percentage of output capability in use at a given time or for a given period at a company, within an industry or in the economy as a whole.
Last
week, we looked at the underemployment of human resources in the
economy. If, after a weekend of lying around watching television when
you had planned to put a new roof on your house, you've thought to
yourself, "I accomplished nothing this weekend and I had so much to
do," you have experience with the concept on a personal level. The CUR
does that for industry by measuring underemployment of manufacturing
and industrial resources. The CUR is measured on a monthly basis and
the results are released by the Federal Reserve. As we will see, we
have just emerged from a remarkable period of declining CUR that
illustrates just how severe the currently ending recession was.
Continue reading "Capacity Utilization Rate (CUR) "
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