February 21 2006, 00:16
On January 23, 2006, the U.S. Supreme Court handed down its decision in Central Virginia Community College v. Katz , holding that a state cannot assert its sovereign immunity as grounds to block the avoidance of a preferential transfer to a state agency under § 547(b) of the Bankruptcy Code . At the heart of the matter was whether Congress overstepped its constitutional power when it enacted § 106(a) of the Code, which waives state sovereign immunity in bankruptcy.
However fair the outcome may be, the rationale of the Court cannot be reconciled with its prior decisions addressing Congress's ability to waive state sovereign immunity under its Article I powers. Indeed the Court's theory of implied waiver does little to justify why there should be a "bankruptcy exception" at all. On its face, Katz may be expected to open the door to broader Congressional abrogation of state sovereign immunity in the future, but the addition of Justice Alito to the bench almost certainly promises that Katz will receive a very narrow reading when the issue next reaches the Court. [More]
February 13 2006, 23:57
The beginning of 2006 usually gives pause to look back on the past year and reflect. When CEOs look back on the past year their vision may be obscured by the stacks of cash that were bestowed upon them. It was reported last week that despite small stock gains and slowing growth executive pay continued to swell in 2005.  Always a hot topic, and often over 400 time the amount earned by rank-and-file employees at large companies, executive pay is on the top of many people’s watch lists for 2006. This article will take a look at how some justify executive pay, what recourse shareholders have to stop executives being paid too much and the proposal the SEC has made regarding disclosure of executive compensation. [More]
November 14 2005, 23:58
As the year comes to a close, 2005 will be marked as a leading year of Chief Executive Officer (CEO) turnover. With 1,100 CEOs having already left this year, departures have already exceeded the previous high set in 2000 when the dot-com bubble burst. The trend is a bit surprising as the economy and corporate profits have both been on an up swing this year. While it might be easy to attribute the exodus rate to the impact to the pressures of compliance with Sarbanes-Oxley, there are other factors that seem to provide a better rationale for this year’s trend. [More]
November 3 2005, 23:59
Corporate scandals over the past few years have been numerous and high-profile. As a result, the conduct of directors and officers of corporations have become subject to a high level of scrutiny. In addition to the public keeping a keener eye on the activities of corporations, the Sarbanes-Oxley Act of 2002 has increased the potential liability of directors and officers.  The Act, having established new fines and penalties for the corporate board, has had the incidental effects of causing the price of director and officers (D&O) liability insurance to rise dramatically and of creating a need for more sophisticated D&O insurance. While D&O coverage does exist, albeit it with higher deductible and limited coverage, a recent case demonstrates how directors may still bear the costs of litigation even with a policy.  [More]
November 1 2005, 00:18
"I don't think you can make a lawyer honest by an act of legislature. You've got to work on his conscience. And his lack of conscience is what makes him a lawyer." 
While the lawyer joke is an art form dating back centuries, it is not actually the case that firms throughout the country are staffed with snakes, shysters, and snollygosters. Nor is there much evidence that attorneys who counsel clients through bankruptcy proceedings are a particularly shady lot. So it has come as a surprise to many attorneys that Congress has enacted strict requirements, backed by monetary and criminal sanctions, for attorneys practicing in consumer bankruptcy. The burden of personal liability raises fundamental questions about the role of the attorney and the sanctity of the attorney-client relationship under the new bankruptcy law. [More]
October 30 2005, 15:58
Hurricane Katrina struck the Gulf Coast on August 28, 2005 and was one of the worst natural disasters in American history. Heavy rain and strong winds destroyed much of New Orleans and surrounding areas, leaving the Gulf Coast under water for weeks. For houses not completely blown to the ground by the 145 mph winds, the amount of damage sustained generally depends on the length of time the home was submerged in floodwaters, allowing mold and rot to thrive in the structure of the home. Because much of New Orleans was submerged for 2 weeks or more, the secretary of the Louisiana Department of Environmental Quality currently estimates that between 140,000 and 160,000 homes need to be leveled and completely rebuilt.  [More]
October 14 2005, 00:00
September 21, 2005 marked the first open meeting of the Securities & Exchange Commission (SEC) under its new Chairman Christopher Cox. More importantly, at that meeting the SEC approved a one year extension for compliance with Sarbanes Oxley (SOX) section 404 for non-accelerated filers.  The Commission also proposed creating new categories for large accelerated filers, who would be the only category subject to the initial phase-in period and would make it easier for some companies to move from accelerated to non-accelerated filer status.  [More]
October 11 2005, 00:19
On Saturday October 8th, Delphi Corporation ended the intense speculation of media and industry watchers by filing for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. Sources inside Delphi had indicated as late as Friday that such a move was likely unless Delphi could negotiate a last-minute reprieve in the form of a bailout package from its largest creditors, General Motors and the United Autoworkers Union.
While Delphi is surely struggling, it is not currently strapped for cash. So why file now? The answer lies in both the legal climate and in business strategy. [More]
September 24 2005, 00:01
Five years after the Securities & Exchange Commission (SEC) passed Regulation FD (“Fair Disclosure”) a court finally had a chance to interpret its application. On September 1, 2005 the United Stated District Court for the Southern District of New York dismissed the SEC’s claims against Siebel Systems, Inc.  Regulation FD prohibits a company from disclosing information to analysts and investors that is non-public.  Adopted
in 2000, the regulation has often been criticized for being overly
broad. However until Siebel no company challenged the regulation in
FD is based on the idea that no group should have advance access to
information about a public company that may impact stock prices or that
may influence trading. Unsurprisingly, one of the regulation’s main purposes is to prevent insider trading. In
an effort to help companies comply Regulation FD considers information
to become public by posting information on a company website, making earnings calls open to anyone, or the filings of an 8-K.  However,
many companies have been wary of sharing information and some have even
stopped giving earnings guidance as a result of the potential liability. Some
companies have even gone as far as to adopt Regulation FD disclosure
policies which outline a procedure, with certain controls in place, for
dissemination of company information.
This was not the first time Siebel has come under SEC scrutiny. In 2002 the Siebel paid $250,000 to settle a alleged violation of regulation FD. In that case the SEC claimed that selective disclosures were made at a Goldman, Sachs technology conference. 
Other companies that have dealt with the SEC enforcement actions under
regulation FD and settled include Motorola, Raytheon and Secure
the present case the SEC alleges that Siebel violated Regulation FD by
comments made by its CFO Goldman at private events in 2003 attended by
investors. Goldman made comments that the
activity level of the company was “good” or “better” and noted that a
few deals were in the works.  These statements are said to contrast
the public statements made by CEO and Chairman Thomas Siebel earlier in
the month.  Furthermore, the complain states that the required 8-K filing disclosing the non-public information was not submitted.  The court dismissed the case for failure to state a claim. In
its opinion the court noted that “the SEC has scrutinized, at an
extremely heightened level, every particular word used … .” 
Additionally, the court found that application of the Regulation in
such an aggressive manner would not encourage the full disclosure of
While this is the first court decision, it may not be the last. The SEC has 60 days to decide if it will appeal to the Second Circuit located in New York.  Especially
since two questions raised by Siebel, if the SEC had authority to issue
the regulation at all and if the regulation is overly broad, remain to
In the meantime, what does this decision mean for companies? First, it means that the SEC will likely be a little less aggressive in looking for violations. But more importantly it gives a little guidance on hot to draft disclosures. If the case is followed, the informational content, not the form will be the focus of Regulation FD violations. Consequently those speaking on behalf of the company may have a bit more leeway then was originally thought. Although Regulation FD still survives, hopefully after this case clearer guidance will be provided for the future.
 SEC v. Siebel Systems, Inc., ___F. Supp. 2d ___, 2005 Westlaw 2100269 (S.D.N.Y. Sept. 1, 2005).
 17 C.F.R. § 243.100 (2000).
 Floyd Norris, Market Place; S.E.C. Puts Data Disclosure in the Spotlight, N.Y. Times, Nov. 26, 2002 at C1.
 SEC v. Siebel Systems, Inc., ___F. Supp. 2d ___, 2005 Westlaw 2100269 at *1.
 Id. at *2.
 Id. at *3.
 Id. at *8.
 Id. at *11.
 Stephen Labaton, Judge Dismisses Disclosure Suit Brought by S.E.C. Against Siebel, N.Y. Times, Sept. 2, 2005, at C9.
September 20 2005, 00:19
The aftermath of Hurricane Katrina has sparked renewed debate over stricter provisions in the new bankruptcy law that takes effect on October 17th. Higher filing fees, more stringent document requirements, and mandatory credit counseling are all cited as especially burdensome for victims of natural disasters. Democrats are concerned that the controversial financial means test will deny Katrina victims the ability to declare a fresh start, and have proposed an exemption in a bill referred to the Senate Committee on the Judiciary on September 8th.  [More]