...with the addition of a few more minor names, like JPMorgan Chase, Morgan Stanley and Wachovia.

-- MDT

Labels: auction rate securities, JPMorgan, Morgan Stanley, New York AG, Wachovia

This was forecast back in January by NY AG Andrew Cuomo. A recently filed 1oK reveals the substance of Cuomo's requests - "documents and information to assist with its probe of whether there have been any agreements or arrangements establishing or maintaining a monopoly in the sale of microprocessors in violation of federal or New York antitrust laws." More at Forbes.

Labels: antitrust, Dell, New York AG

Subpoena is latin for love, right?

In any case, Amgen was on the receiving end of a compelling request from the New York Attorney General's office.

According to a recent SEC filing the May 10th letter sought wide ranging documentation from the pharmaceutical company, including: data on the company's sales and marketing, medical education, clinical studies, pricing, contracting, licensing and distribution agreements as well as corporate communications.

Amgen is already facing class action litigation filed in the U.S. District Court for the Central District of California. , alleging securities fraud.

-- MDT

Labels: Amgen, class action, New York AG, securities, subpoena

Assistant New York Attorney General, Whitman G.S. Knapp, has joined the James Mintz Group as a senior investigator. Here's a collection of docs from the NY AG's website that give a sense of how Mr. Knapp was spending his days prior to the move to private practice. Looks like a great, high profile hire for Daily Caveat investigative alma mater, JMG...

-- MDT

Labels: Mintz Group, New York AG, Whitman Knapp

After more than 2 years the SEC has called an end to their investigation of accounting issues at General Motors/Delphi. Whether or not the regulatory agency will file civil charges remains to be seen, but we should know something by the end of the summer. The New York Attorney General's Office also has a dog in this fight, having been looking into GM's supplier relationships since 2006.

For further details on where things stand on GM check out the full article from the Detroit News. Also note the quote-love for friend of The Daily Caveat, Peter Henning.

-- MDT

Labels: accounting fraud, Delphi, GM, New York AG, SEC

In a story that broke over the weekend, the SEC and New York Attorney General are both taking a close look at some suspicious activity on the big board.

In particular Dow Jones director, David K. P. Li, is being scrutinized in connection with a Hong Kong couple, Kan King Wong and Charlotte Ka On Wong Leung, who made millions of dollars on some well-timed trading just before the announcement of Rupert Murdoch's take-over bid of Down Jones.

Is all this just part of a general rise in questionable trades? Some think so...

-- MDT

Labels: David K. P. Li, Dow Jones, New York AG

The Department of Justice is preparing to revamp guidelines for the criminal prosecution of corporations in order to make it harder for local and state level law enforcement to bring actions without DOJ input (call it the Spitzer-neuter).

This move comes based on broad, national, grassroots support amongst average Americans who hate to see corporations having such a hard time. Nah. Just jokin'. It's the corporate lobbyists who've been pushing for it. And civil libertarians, to be fair.

Details from the Washington Post:

The changes, which could require local U.S. attorneys to obtain input from high-level Justice Department officials before seeking corporate indictments, could be unveiled by Deputy Attorney General Paul J. McNulty next month, according to sources briefed on the issue who spoke on condition of anonymity because the deliberations are not yet complete. The administrative revisions also may forbid government lawyers from forcing companies to stop paying attorney fees to employees ensnared in investigations, a move that was declared unconstitutional in June by a federal judge in New York.

Separately, Senate Judiciary Chairman Arlen Specter (R-Pa.) is drafting legislation that would bar prosecutors from forcing companies to waive their attorney-client privilege over internal documents in order to avoid criminal charges, a key part of the current guidelines. Specter, who has received support from Sen. Patrick J. Leahy (D-Vt.), could release the bill as early as Monday.

Debate about the appropriate use of prosecutorial power over business has simmered for years, reigniting in 2002 when the Justice Department charged Arthur Andersen LLP with obstruction of justice, a move that prompted partners and clients to flee and hastened the death of the audit firm...

For business groups, the biggest concern is waiver of the attorney-client privilege to avoid prosecution, a move that puts sensitive documents and e-mail messages -- often involving communication with company lawyers -- into the hands of prosecutors, securities regulators and, ultimately, plaintiff lawyers who can use the waivers to obtain potentially damaging information in costly class-action lawsuits.

The Daily Caveat is not exactly surprised, as this shift in the wind, given all the recent talk about Sarbox rollback and concerns about competitiveness relative to European markets.

Still, you have to wonder when a country becomes more interested in legal protections for its corporations even as due process for its citizens is increasingly eroded. The continuing legacy of Santa Clara County v. The Southern Pacific Railroad, I guess.

Read the rest of the Post article, here.

-- MDT

Labels: Department of Justice, New York AG, pre-trial agreements

New York Attorney General, Eliot Spitzer certainly has his supporters and, no doubt about it, his detractors as well. Tom Kirkendall over at Houston's Clear Thinkers falls more in the detractor column and, as Spitzer prepares to become New York's next governor, Kirkendall offers details on the dark side of Spitzer. And if by some chance you've been sleeping through that last few years of Spitzerized business regulation, here's some background.

-- MDT

Labels: Eliot Spitzer, Houston's Clear Thinkers, New York AG

Interesting indeed. Brooke Masters of The Washington Post has taken a stab at writing a bio of New York Attorney General, Eliot Spitzer. Read the handicap, courtesy of Prof. Bainbridge.

-- MDT

Labels: Eliot Spitzer, New York AG

The Rock is set to pay $600 million to settle charges arising out of New York Attorney General. Eliot Spitzer's investigation into mutual fund practices that began back in 2003. The settlement allows Prudential to avoid criminal prosecution and they represent the first company to settle in the wide-ranging market timing-related investigation.

A little background, via Bloomberg:

...Five former Prudential brokers and two branch managers in Boston were sued by the SEC and Massachusetts regulators for securities fraud in November 2003. Brokers used aliases to conduct short-term trades on behalf of seven hedge fund clients, driving up costs for the mutual funds' other shareholders, according to the complaints.

Using 183 accounts under phony names and identification numbers, the brokers made more than $3.2 million in net commissions from the trades between January 2001 and September 2003, according to the SEC. The group's ``success relied significantly on a lack of supervision by Prudential,'' the Massachusetts complaint said.

Martin Druffner, whom the government called the leader of one group, pleaded guilty in federal court last year to four counts each of wire fraud and securities fraud. Ex-broker Skifter Ajro also pleaded guilty last year to two counts each of wire and securities fraud. They haven't been sentenced.

Branch manager Robert Shannon pleaded guilty in May to a criminal charge of aiding and abetting securities fraud and was sentenced to three years of probation and a $5,000 fine...

With the settlement, Prudential has admitted that criminal acts were undertaken under the company's auspicies between 1999 and 2003. Prudential's $600 joins a host of other large scale settlements arising from the Spitzer (and related) investigations. Get more details on those past settlements and the structure of the Prudential fine, here.

-- MDT

Labels: Eliot Spitzer, New York AG

From the press release:

Senior Criminal Justice Official for NYC Mayor's Office Joins Kroll

Press Release
August 1, 2006

Richard Plansky, formerly the Deputy Criminal Justice Coordinator for the Office of the Mayor of the City of New York, has joined Kroll, the global risk consulting company, as a managing director in its Business Intelligence & Investigations division.

Based in Kroll's head office in New York, Plansky is responsible for corporate investigations, fraud prevention and detection, and integrity due diligence.

Plansky, a 14-year veteran of the criminal justice system, has led complex investigations involving sex crimes, homicides, police shootings, larcenies, and other serious crimes. Most recently, as Deputy Criminal Justice Coordinator, he oversaw the development of multi-agency criminal justice initiatives, including a comprehensive program targeting the distribution and use of illegal guns. He also developed the John Doe Indictment project, a citywide effort to preserve unsolved sex crimes for later prosecution through the use of DNA technology.

Plansky began his career as an assistant district attorney in New York County where, from 1992 through 2001, he prosecuted 30 Supreme Court trials and conducted more than 150 grand jury presentations and investigations. He subsequently served as assistant general counsel at the City University of New York, where he led extensive investigations involving allegations of organized cheating and identity theft, as well as student and faculty misconduct.

In 2002, Plansky was appointed special counsel to the Mayor's Criminal Justice Coordinator, and was promoted the following year to general counsel and director of the Mayor's Office of Midtown Enforcement. In this role, he oversaw all legal affairs, formulated quality of life enforcement strategies, and developed and coordinated a wide spectrum of criminal justice programs, including an initiative to combat large-scale trademark counterfeiting establishments.

Plansky received his Juris Doctor, magna cum laude, from Harvard University.

More on Kroll, here.

-- MDT

Labels: identity theft, Kroll, New York AG

Great article in the Washington Post, which shows how valuable key sources can be in the course of an investigation. Whether the investigator is involved in regulation or litigation, the identification, location and effective interviewing of knowledgable sources can produce greater returns than almost any other investigative process. In this case, the source was Noreen Harrington, who went out of her way to inform the office of New York Attorney General Eliot Spitzer that they should take a closer look at mutual funds...Fascinating.

-- MDT

Labels: Eliot Spitzer, New York AG

In July of last year the J-Lo really hit the fan, when New York Attorney General and all-around self-promoting regulatory pit-bull, Eliot Spitzer announced the findings resulting from the application of his unique charms to an investigation of recording industy radio promotion tactics (Spitzer launched the investigation in 2004). Back in July Spitzer dropped the hammer on Sony Music with internal documents detailing alll manner of illegal payola activities. This week Universal Music announced that it was settling similar charges for a cool $12 million.

-- MDT

Labels: Eliot Spitzer, New York AG

Hartford had been under investigation by New York Attorney General Eliot Spitzer and Connecticut Attorney General Richard Blumenthal whos' offices were exploring allegations that Hartford washad been making "secret payments" to insurance brokers in exchange for their recommeding Hartford group annuities to pension plans to customers. Spitzer has confirmed publicly that such payments were made, but indicated that pension plan managers themselves were likely ignorant of the kickbacks that were taking place. While Hartford is off the hook with a $20 million payment and probation, it is not yet known what, if any, action will be taken against the implicated brokers: Dietrich & Associates; Brentwood Asset Advisors; BCG Terminal Funding; and USI Consulting Group.

More here, via BusinessWeek.

-- MDT

Labels: Eliot Spitzer, New York AG

Bear Stearns has agreed to pay $250 million to settle SEC charges that the investment firm assisted its hedge fund clients in illegally trading mutual fund shares. Bear Stearns has been facing accusations of illegal activities on this front since 2003 when New York Attorney General Eliot Spitzer first brought forth accusations that the company swindled investors on behalf of its hedge fun clients.

More here.

-- MDT

Labels: Eliot Spitzer, New York AG

Famed plaintiff attorney and class-action king, Bill Lerach has filed suit on behalf of eleven plantiffs who are claiming to have paid artificially high prices for music purchased online. The Department of Justice has also been pursing an investigation into online music pricing, as has New York Attorney General Elliot Spitzer.

More here.

-- MDT

Labels: Department of Justice, New York AG

Otto von Bismark is thought to have once said, "Laws are like sausage. It is better not to see them made." Then again, sometimes the gruesome details behind either are important to understanding exactly how things turn out the way they do.

Case in point - the federal government's recent surreptitious efforts to shield auto-makers from future liability while upgrading badly out-dates vehicle safety standards. In a government where the already heavily compromised National Highway Transporation Safety Administration has been stocked with industry friendly types we need to pay more attention that ever to what manufacturers are putting on our roads.

But read the full article posted here from the L.A. Times and you'll quickly discover that the strategy of pre-empting liability by statue is not confined to the world of automobile safety regulation. This doctrine, long the pet of think-tanks such as the American Enterprise Institute, is being floated on many issues, from financial fraud to environmental damage:

Industries Get Quiet Protection From Lawsuits

By Myron Levin and Alan C. Miller
L.A. Times Staff Writers

WASHINGTON — Near sunrise on a summer morning in 2001, Patrick Parker of Childress, Texas, swerved to avoid a deer and rolled his pickup truck. The roof of the Ford F-250 crumpled, and Parker didn't stand a chance. His neck broke and, at 37, he was paralyzed from the chest down. He sued, and Ford Motor Co. settled for an undisclosed amount. "You can imagine what happens when you're belted in and the roof comes down even with the door," Parker said. "Your options are death or quadriplegia."

Parker's case and hundreds like it are behind a beefed-up roof safety standard proposed in August by the National Highway Traffic Safety Administration. But safety regulators tucked into the proposed rule something vehicle makers have long desired: protection from future roof-crush lawsuits like the one Parker filed.

The surprise move seeking legal protection for automakers is one in a series of recent steps by federal agencies to shield leading industries from state regulation and civil lawsuits on the grounds that they conflict with federal authority.

Some of these efforts are already facing court challenges. However, through arcane regulatory actions and legal opinions, the Bush administration is providing industries with an unprecedented degree of protection at the expense of an individual's right to sue and a state's right to regulate.

In other moves by the administration:

• The highway safety agency, a branch of the Department of Transportation, is backing auto industry efforts to stop California and other states from regulating tailpipe emissions they link to global warming. The agency said last summer that any such rule would be a backdoor attempt by states to encroach on federal authority to set mileage standards, and should be preempted.

• The Justice Department helped industry groups overturn a pollution-control rule in Southern California that would have required cleaner-running buses, garbage trucks and other fleet vehicles.

• The U.S. Office of the Comptroller of the Currency has repeatedly sided with national banks to fend off enforcement of consumer protection laws passed by California, New York and other states. The agency argued that it had sole authority to regulate national banks, preempting state restrictions.

• The Food and Drug Administration issued a legal opinion last month asserting that FDA-approved labels should give pharmaceutical firms broad immunity from most types of lawsuits. The agency previously had filed briefs seeking dismissal of various cases against drug companies and medical-device manufacturers.

In a letter to President Bush on Thursday, Rep. Jan Schakowsky (D-Ill.) said, "It appears that there may have been an administration-wide directive for agencies … to limit corporate liability through the rule-making process and without the consent of Congress." Administration officials said the initiatives had not been centrally coordinated.

"Under the constitution, federal laws take priority over inconsistent state laws," said Scott Milburn, spokesman for the White House Office of Management and Budget. "Decisions about … whether particular rules should preempt state laws are made agency by agency and rule by rule."

Preemption initiatives by regulatory agencies have drawn less public attention than controversial legislative moves supported by the White House. With administration support, Congress has restricted class-action suits and banned certain claims against gun makers and vaccine producers.

By embedding similar protections for businesses in regulatory changes, the administration has advanced Bush's repeated pledge to rein in what he calls junk lawsuits. On Thursday, for example, when the Consumer Product Safety Commission adopted a rule to curb mattress fires, it recommended for the first time that courts bar suits against manufacturers that comply with the new standard. Schakowsky called the move "part of an unfortunate and troublesome pattern … to undermine consumer rights."

In addition to trying to bar suits over vehicle roof failures, the highway safety agency in recent months has sought broad legal protection for manufacturers in two other rules on the grounds that lawsuits could undermine its safety goals. One rule related to rear seat belts and the other to visibility requirements for trucks. No similar exemption clauses have been attached to any other highway safety agency rule changes for 35 years.

Industry executives, lobbyists and lawyers have shuttled through jobs in the highway safety agency and other departments over the years, but in the Bush administration, auto industry ties have grown more conspicuous. Before becoming White House chief of staff, Andrew H. Card Jr. served as a General Motors Corp. vice president and as chief executive of the top auto industry trade group. The acting head of the highway safety agency, Jacqueline Glassman, was a senior attorney for DaimlerChrysler Corp. before she became the agency's chief counsel in 2002.

Jeffrey A. Rosen, who became general counsel at the Transportation Department in 2003, was a senior partner at Kirkland & Ellis, a powerhouse law firm that has defended GM in numerous product-liability suits and represents the Alliance of Automobile Manufacturers. Rosen denied using his position to benefit automakers. "We have issued a number of major rules in the two years that I have been here," he said. "Some of them are supported by industry, some are opposed."

Michael S. Greve, a resident scholar at the conservative American Enterprise Institute, has written that preemption is crucial to protect the economy from "trial lawyers, ambitious state attorneys general and parochial state legislatures."

But critics say the preemption push contradicts the conservative ideals of a limited federal government and states' rights — principles espoused by Bush. "This is the most aggressive federal government in the history of the United States," said California Atty. Gen. Bill Lockyer, a Democrat. Some say the election calendar is spurring the moves.

"The message has been clear in the last couple of years that if industries are going to get protection, they need to get it now," because no one knows what will happen in the next election, said Jonathan Turley, a George Washington University law professor.

Rollover accidents kill more than 10,000 people in the U.S. each year, and seriously injure an additional 16,000. Consumer groups say better roofs would have saved thousands of victims over time. Automakers counter with the "roof dive" theory — that rollover victims fall head-first to the roof as it strikes the ground, injuring themselves whether the roof holds or buckles. Thus, they say, the value of stronger roofs is practically nil.

Brian O'Neill, president of the Insurance Institute for Highway Safety, called this argument "patently nonsense." If it were true, he said, people would be "just as well-off in a rollover in a convertible as a hardtop." The highway safety agency always has agreed that roof failures can cause death and injury. Its roof-crush proposal estimates that 596 deaths and 807 serious injuries a year are linked to roof collapse.

Its proposed rule would increase the force a roof must withstand in a rollover from its current 1.5 times a vehicle's weight to 2.5 times — at a cost per vehicle of about $12. It would cover large trucks and SUVs of more than 6,000 pounds for the first time. The agency also is considering requiring stability control systems to reduce rollover risk. The revised roof rule would create "the strongest ever uniform set of minimum … standards" for automakers in the U.S., Transportation Department spokesman Brian Turmail said.

However, the safety agency is projecting relatively modest benefits from the upgrade: 13 to 44 deaths and 500 to 800 injuries prevented a year. One reason: Nearly 70% of existing vehicles already meet the proposed standard.

Critics call this a token improvement. The stiffest criticism, however, has been reserved for the effort to grant immunity from lawsuits. The safety agency says its push to preempt personal injury litigation is based on a concern that automakers, fearful of lawsuits, might beef up roofs to such an extent that the vehicles become top-heavy and more prone to roll over.

John G. Womack Jr., a former acting chief counsel at the safety agency, said that equating roof strength with weight was a "very debatable proposition." Other options are to use high-strength steel or widen the stance of vehicles to compensate for heavier roofs, he said.

Diverse groups — including Public Citizen, a consumer watchdog, and the National Conference of State Legislatures — have condemned the provision and questioned the highway safety agency's authority to protect automakers. Some have complained that if companies could not be held liable for damages, it would remove incentives for automakers to exceed minimum safety standards.

A bipartisan group of 26 state attorneys general said in a December letter to the highway safety agency that the lawsuit ban, if accepted by the courts, would shift significant costs of caring for seriously injured victims from the industry to taxpayer-funded programs such as Medicaid. It would also conflict with consumer rights, they said. "Such an extreme step is unwarranted in the absence of express congressional intent," they wrote.

Roof-crush suits have resulted in costly settlements and verdicts against automakers at a time of widespread financial trouble for the U.S. industry. In 2004, Ford paid $41 million in a case in which a California appeals court compared the company's use of a fiberglass and metal roof in the 1978 Bronco to "involuntary manslaughter."

The same year, a San Diego jury awarded damages against Ford of $367 million, later reduced by the judge to $150 million. In 2003, GM was hit with a $19.6-million verdict, described as the largest product liability award in Nebraska history. The San Diego and Nebraska cases are being appealed.

For victims like Parker, the prospect of manufacturer immunity is an especially bitter pill. The paralyzed Texas man, who had worked as a technician for a local utility, said he at least gained some financial security through litigation by extracting a settlement from Ford. Otherwise, he said, he and his wife "would have been living from hand to mouth."

He criticized the preemption clause, saying it was as if the industry had "this red phone and they just pick it up and it automatically dials NHTSA." The immunity clause was unexpected, even to some in the industry. "Whether this was some conspiracy or whether it was a pleasant surprise, I really don't know," said Barry Felrice, director of regulatory affairs with DaimlerChrysler in Washington. Spokesmen for GM and Ford said that their companies had not lobbied for the lawsuit ban but that they supported it.

Bill Walsh, a former highway safety agency senior executive who worked on the rule before retiring in 2004, said the immunity language "was dropped in from out of the blue." Preempting lawsuits, he said, was "different from how we normally operated … in issuing regulations." Rosen, the Transportation Department's general counsel, said this was not the first time the highway safety agency had tried to override state liability laws.

During the 1990s, the agency joined automakers in arguing that they shouldn't be sued for not installing air bags at a time when the agency allowed either air bags or automatic seat belts. In 2000, the Supreme Court agreed that such suits were preempted but said that compliance with a standard ordinarily "does not immunize a manufacturer."

Card, the White House chief of staff, and Glassman, the agency's chief counsel, declined to discuss how the roof-crush lawsuit preemption originated. Rosen said he did not want "to get into the specifics of who said what to whom…. As a legal matter, I'm obliged to protect the deliberative process."

The Rev. Lawrence Harris of Pittsgrove, N.J., sees the issue from the vantage point of his wheelchair. Had his claim been preempted after a devastating accident with his family in North Carolina, he might not be preaching on Sundays. Harris, then 46, was wearing a seat belt but suffered a fractured spine in 1997 when his Ford Econoline van rolled over. Except for minimal movement in his hands, he was paralyzed from the chest down.

With the damage award he won from Ford, Harris installed a roll-in shower and wheelchair lift in his house, hired a caretaker to help him dress each morning, and modified a van so he could continue as pastor of Olivet United Methodist Church. Without the lawsuit, he said, "I would not be able to do the things I'm able to do." If automakers are immune, Harris said, "where is the check and balance going to be for them?"

Within days of its roof-crush proposal, the highway safety agency again backed the auto industry in challenging California's efforts to cut emissions. The Alliance of Automobile Manufacturers had gone to court to stop the state Air Resources Board from regulating tailpipe emissions of carbon dioxide and other greenhouse gases, contending the rule was preempted.

Because carbon dioxide emissions drop when less fuel is burned, the industry attacked the rule as a backdoor attempt to regulate fuel economy — under federal law, the exclusive domain of the highway safety agency. The agency agreed. On Aug. 23, it issued new mileage standards for light trucks, saying that its authority over fuel economy meant that "a state law that seeks to reduce motor vehicle carbon dioxide emissions is … preempted."

Industry lawyers filed papers the next day in U.S. District Court in Fresno informing the judge of the agency's position. California's global warming rule, which would first apply to 2009 models, is not all that's at stake in the Fresno case. Ten states have copied California's emission rule, and all those rules could be wiped out if the industry wins.

Rosen's former law firm, Kirkland & Ellis, represents the Alliance of Automobile Manufacturers in the suit to block California's global warming rule. The suit was filed in late 2004, a year after Rosen left the firm to join the Transportation Department. Transportation spokesman Turmail said Rosen did not discuss the matter with the law firm. In considering the safety agency's position on the matter, Rosen acted in the government's interest, Turmail said.

Eleven U.S. senators from both parties and 29 House Democrats from California have urged Transportation Secretary Norman Y. Mineta to reverse the agency's opposition to the emissions standard. "Rather than attempting to thwart such state efforts, the federal government should encourage states to develop innovative solutions to serious public health and environmental problems," the senators wrote to Mineta in December.

Kirkland & Ellis also represented automakers in another case against California regulators. In 2002, the industry — backed by the Justice Department — challenged a state rule that required production of a certain number of non-polluting vehicles.

Rosen said he did not participate in that case while he was with the law firm. The case was settled when the state agreed to remove language that the industry said amounted to regulating fuel economy. The Bush administration also helped two industry groups overturn a regulation requiring the purchase of cleaner-running fleet vehicles such as buses and garbage trucks in Southern California.

The Engine Manufacturers Assn. and Western States Petroleum Assn. claimed the rule by the South Coast Air Quality Management District was preempted by federal law. Their challenge was rejected in federal district court and by a federal appeals court. When the case went to the U.S. Supreme Court, the Justice Department filed a brief siding with the industry. The high court agreed that the local rules were preempted.

In the past, said California's Atty. Gen. Lockyer, when industries challenged state regulations, "the federal government abstained from those lawsuits." Now, he said, there's "a policy of rubber-stamping whatever business wants, and that's too bad." The idea behind another California law was simple: Tell credit cardholders on monthly bills how long it would take to retire their debt if they paid the minimum amount. But major banks issuing most of the nation's credit cards didn't like it. In a 2002 court challenge, they attacked the state's credit disclosure law with help from a powerful ally.

The U.S. Office of the Comptroller of the Currency joined forces with the American Banking Assn., Citibank and other plaintiffs, arguing in a friend-of-the-court brief that the law interfered with federal authority to regulate national banks, and with powers granted to the banks by their federal charters. A federal judge blocked the law from going into effect, and the state lost a subsequent appeal. Intervention by the comptroller's office "definitely tipped the balance," said Gail Hillebrand, a lawyer for Consumers Union, which had backed the state's position.

In recent years, the comptroller's office on many occasions has helped national banks and their subsidiaries fend off investigations or enforcement actions by state officials on preemption grounds. In 2004, for example, the agency helped to shoot down a California law that would have required customer permission before banks shared their personal information with business affiliates. Although a U.S. District Court judge upheld the privacy law, an appeals court ruled last year that its major provisions were preempted by federal law.

Last year, the agency went to court on the side of a banking association to block an investigation by New York Atty. Gen. Eliot Spitzer into possible racial bias in the lending practices of several banks. A federal judge agreed that Spitzer's investigation "impermissibly infringes" on the authority of the comptroller's office. The state is appealing.

Turf battles over banking regulation have occurred in the past, but the Office of the Comptroller of the Currency has become more aggressive in pushing preemption under Bush. Agency officials say they have zero tolerance for abusive practices and bristle at complaints that they might be chasing off state watchdogs to the detriment of consumers.

The banks "have an enormous body of consumer compliance laws and regulations that we apply to them at the federal level," said Julie L. Williams, the agency's senior deputy comptroller and chief counsel. But Arthur E. Wilmarth Jr., a George Washington University professor specializing in banking law, said, "The OCC hasn't been, shall we say, a very zealous enforcer on the consumer side…. States have been far more vigorous."

Greve, the American Enterprise Institute scholar who has been a mainstay of the conservative brain trust promoting preemption, said well-connected industry law firms were part of a policy network providing legal and political rationale for the effort. He called them "a merry band of Washington lawyers … who know how to push the buttons" and get things done.

Levin reported from Los Angeles and Miller from Washington. Times researcher Janet Lundblad in Los Angeles also contributed to this report.

The original article appears here.

-- MDT

Labels: DaimlerChrysler, Department of Justice, Eliot Spitzer, New York AG

Exactly how they plan to do accomplish this is not exactly clear at this point...but no doubt we'll here more in the near future about the SEC's plans:

Via The Ely Times:

New SEC Guidelines Shield Shareholders

By ELLEN SIMON
AP Business Writer
28 January, 2006

NEW YORK - How can the Securities and Exchange Commission punish corporate crime without punishing shareholders? But even hundreds of millions of dollars in fines at the corporate level did little to compensate shareholders. At the beginning of January, the SEC issued a statement on financial penalties for corporations, saying it will look at "whether the issuer‘s violation has provided an improper benefit to shareholders, or conversely whether the violation has resulted in harm to shareholders. The guidelines are meant to bring "clarity, consistency and predictability" to the SEC‘s enforcement efforts, agency Chairman Christopher Cox said at a news conference.

Atkins called the SEC‘s statement "a more rational and systematic approach to deciding whether to impose penalties on shareholders." "The statement is so general, it really doesn‘t tell you much," said Peter J. Henning, a former senior attorney for the division of enforcement at the SEC who is now a law professor at Wayne State University in Detroit. "It‘s kind of what everyone knew already: If you cooperate, it‘s going to help you. If senior management were involved, it‘s going to be a problem. How extensive the wrongdoing was and what timeframe it covered will be considered." For investors, there is no punishment for corporate crooks that will make them whole.

The SEC imposed fines and restitutions totaling $715 million from Adelphia, but it didn‘t come close to pulling investors out of the red. The company‘s peak market cap, before the scandals and subsequent bankruptcy, was $8.4 billion. "I wish I knew," Henning said. "To this point, no one has come up with one. ... It‘s so much easier if someone steals your purse."

The original article appears here.

-- MDT

Labels: New York AG, Peter Henning

Note the quote-love for friend of The Daily Caveat, Peter Henning of Wayne State University:

Via the Ashville Citizen Times:

...Ingles announced in December 2004 that the SEC was investigating it, and last year the company restated results for its 2002 and 2003 fiscal years and part of FY 2004. The problems, the company said last year, involved the timing of reporting of certain payments from vendors. Vendors sometimes give retailers money or credits for advertising, certain displays of their products or other considerations.

The legal purpose of a Wells Notice is to allow a company to offer information or arguments in its favor before the SEC acts, but it also often triggers negotiations for a settlement, two experts in securities law said.

“As a general rule, when a Wells Notice comes, the staff has decided,” said Mark Astarita, who practices securities law in New York and New Jersey.

Astarita and Peter Henning, a law professor at Wayne State University in Detroit and former attorney at the SEC, said it is rare for information that arises once a Wells Notice is filed to change the SEC staff recommendation...

Check out the full article here...and navigate on over here to find Mr. Henning's fine blog devoted to daily happenings in the world of white collar crime.

Labels: New York AG, Peter Henning

Via NorthJersey.com:

Hedge fund to settle case with N.J. for $10M

Wednesday, January 18, 2006
Associated Press

Defunct hedge fund Canary Capital Partners LLC has agreed to pay the state $10 million to settle allegations it stacked the deck against ordinary investors, the New Jersey Attorney General's office said Tuesday.

Secaucus-based Canary, two of its units and managing principal Edward J. Stern were accused of trading after hours, when mutual fund prices are frozen, to reap profits from after-hours events that affect a stock's price the next day.

In addition, Canary and Stern were accused of engaging in market timing, or making trades into and out of funds to take advantage of short-term market fluctuations at the expense of long-term shareholders.

"The whole idea of our marketplace is that they're supposed to be fair and open and that everyone gets a fair shot," said Franklin Widmann, chief of the state Bureau of Securities.

"They weren't playing that way. They set up a situation where they concealed and disguised the nature of their trading."

Ron Simoncini, a spokesman for Canary Capital, said the company was not commenting Tuesday.

Stern - the youngest scion of the family that owns developer Hartz Mountain Industries - sparked a sweeping probe of the mutual fund industry when he struck a deal with New York Attorney General Eliot Spitzer in September 2003.

Stern paid $40 million to Spitzer's office to escape prosecution for illegal trading, and agreed to cooperate with the attorney general's investigation.

The probe shook the industry and resulted in scores of people fired and dozens of firms under scrutiny.

They paid out more than $1.5 billion in settlements.

Stern testified for the prosecution last year in the trial of Bank of America broker Ted Sihpol, who was accused of larceny, securities fraud and other charges related to mutual fund trading with Canary. Stern told a Manhattan court that his trading gave him an "unfair" edge over other investors.

A jury cleared Sihpol of 29 counts and the remainder were dropped.

Canary's payment to New Jersey is tied for the third-largest ever paid to the state to settle securities violations, said Peter Aseltine, a spokesman for the Attorney General's office.

As part of the settlement, Stern and Canary have agreed to be barred from acting as brokers or investment advisers for 13 years.

Last week, UBS Financial Services Inc. agreed to pay New Jersey nearly $25 million - the largest sum ever collected in a state securities matter - to settle allegations that it failed to properly supervise brokers who engaged in deceptive market-timing activities.

The UBS payment to New Jersey included a civil penalty of $12.75 million and an additional $12 million for investigative costs, investor education and other enforcement initiatives.

Staff Writer Hugh Morley contributed to this article.

The original appears here.

-- MDT

Labels: Eliot Spitzer, New York AG