February 5, 2011
FantasySCOTUS and Other Stuff
I'm sure many of you are already familiar with this site, but I was recently reminded about "the Internet’s Premier Supreme Court Fantasy League": FantasySCOTUS. What I found most interesting is that the site's "Prediction Tracker" identifies the Third Circuit's opinion in FCC v. AT&T as one that will be affirmed. As I've noted elsewhere, I was prepared to see my similar prediction go down in flames following reports of the oral argument--but now, who knows?
Other tidbits I've been meaning to post:
Mike Koehler has posted some of his FCPA year-in-review here.
The fight for legalized online poker continues.
I was privileged to be asked to sign on to the law professors' brief discussed here (which I promptly did).
February 4, 2011
Coal Powered: Massey and Alpha Natural Resources Inc. to Merge
Alpha Natural Resources Inc. is taking over Massey Energy Corp., the latter of which is valued at $8.5 billion for takeover purposes. The deal will be the biggest coal-related purchase in history. Alpha Natural Resources agreed to pay a 55% premium to make the deal happen, making clear that, at least in the world of finance and big business, coal is not going anywhere soon.
Power generation from coal makes up about 50% of the U.S. energy mix, about 90% here in North Dakota, but a number of utilities are shifting generation to natural gas. However, overall, coal demand continues to increase, especially in China and India, for both steel production and power generation. The Energy Information Administration also predicts that coal consumption will stay relatively stable between now and 2035 (see pdf here).
This is one of many places where I'm confident markets don't lie. Coal is not going anywhere, and if we're going to make any productive changes to our energy policy, and our energy mix, we need to recognize that. That doesn't mean functioning with the status quo. It simply means that, to plot a better course, we need to understand the map. This acquisition of Massey just provided that map an update.
How to Improve Your Business Law Blog's Readership
The M&A Law Prof Blog is another member of the Law Professor's Network. Yesterday, they blogged about a Delaware company, BJ's, that is considering a merger or another strategic combination. Nothing unusual about that, but note the title of the blog entry here.
My guess is some of the traffic Google sends their way is going to expect something a little different.
Failure of Public Companies to File Exchange Act Reports
A few months ago, I subscribed to the SEC News Digest, a daily report on the SEC’s actions. One recurring item in those reports has amazed me: the number of delistings and trading suspensions resulting from the failure of reporting companies to file required Exchange Act reports. Here are latest two examples.
I didn’t realize how many public companies fail to file reports. I haven’t been counting, but the SEC seems to report at least a couple of suspensions each week. I don’t know if it’s because of recent economic events, or if this has always been the case, but the number is surprising.
And a company can apparently get away with not filing reports for some time before the SEC takes formal action. The two companies noted in the report above “have not filed periodic reports with the Commission in over two years.”
February 3, 2011
Three Related Links?
1. "In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion . . . ." (More here.)
2. "More than 14% of the population drew food stamps in November . . . ." (More here.)
3. "REVOLUTIONS arise from inequalities . . . ." (More here.)
February 2, 2011
The Role of Taxes on Entrepreneurship
Inc. Magazine has an interesting article this month, In Norway, Start-ups Say Ja to Socialism. It's good food for thought, regardless your angle on the article or the issue generally. Here's my take away:
This isn't to say that entrepreneurs don't have a right to get angry about taxes—or to fight tax increases in the same way they might fight any price increase by a supplier. It is to say only that, despite what you hear from Washington politicians and activist groups, the tax rate is probably far from the most important issue facing your business. Entrepreneurs can thrive under almost any regime, even the scourge of European socialism.
[UPDATE: The article link has been fixed.]
February 1, 2011
Webcast: The Changing World of Securities Regulation
In my last post, I referred to a speech by John Coffee in a symposium at Case Western Reserve College of Law, The Changing World of Securities Regulation. The symposium was in October, but I only recently got a chance to watch it. If you haven’t seen it, it’s available as a webcast and it's worth watching.
I think the most interesting part of the symposium is a dispute between Renee Jones, who was on the symposium’s first panel, and David Becker, who was on the second panel. Jones, an Associate Professor at Boston College Law School, argues that the revolving door between the SEC and private industry/law firms is at least partially responsible for the SEC’s enforcement difficulties—in essence, that SEC lawyers are pulling their punches. Becker, General Counsel and Senior Policy Director at the SEC, discards his prepared remarks and spends his entire time in a lengthy, impromptu defense of the SEC and its personnel.
"We Have Met the Enemy and He is Us"
As Stefan pointed out on this blog last week, the Financial Crisis Inquiry Commission has issued its report on the financial crisis. The Commission concludes that “a combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis.”
Three (relatively) recent sources raise the possibility that, in Shakespeare’s words, “the fault, dear Brutus, is not in our stars, but in ourselves.”
1. In a recent article in the Business Lawyer, Delaware Chancellor Leo Strine argues that the focus of corporate executives and directors on short-term returns is often in response to pressure from their corporations’ shareholders. [Leo E. Strine, Jr., One Fundamental Corporate Governance Question We Face: Can Corporations Be Managed for the Long Term Unless Their Powerful Electorates Also Act and Think Long Term?, 66 BUS. LAW. 1 (2010).]
2. In a presentation at Case Western Reserve College of Law in October, John Coffee points out that Dodd-Frank’s attempt to make public companies, including banks, more responsive to shareholders is problematic given the pre-crisis pressure shareholders put on corporations to increase risk and leverage to produce higher returns.
3. Jay Kesten, who will be joining the legal academy next year, has a provocative paper in which he finds that companies with management entrenchment devices actually performed better in the recent economic downturn than companies without such protections. In other words, managers who were somewhat insulated from shareholder pressure to perform did better than manager who weren’t.
It may be, to quote Walt Kelly, that “we have met the enemy and he is us.”
January 31, 2011
Captain Obvious: What Not to Do As A Securities Lawyer
The SEC has filed an administrative action against an attorney alleging that he falsified documents during an SEC examination. (The full order is available here.) Here is a summary of the allegations (and keep in mind that, at this point, they are just unproven allegations):
"The SEC’s Office of the General Counsel alleges that David M. Tamman — in the course of an SEC examination of his client NewPoint Securities LLC in April and May 2009 — altered private placement memoranda (PPMs) purportedly used in the offer and sale of securities issued by NewPoint Financial Services. The original PPMs purportedly provided to investors stated that the funds raised in the offerings would be used primarily for real estate related investments. In fact, the vast majority of money raised in the offerings was misappropriated by NewPoint’s principal John Farahi.
"The SEC’s Office of the General Counsel alleges that Tamman — a member of the California Bar and a partner at a large international law firm — added language to the PPMs to make it appear that it was disclosed to investors that much of the money raised by NewPoint would be loaned to Farahi. The PPMs were then produced to the SEC’s examination and enforcement staff. According to the Office of the General Counsel, Tamman knew that the language he added to the documents was not included in the PPMs actually provided to investors."
Kids, don’t try this at home.
USDA and CFTC Begin Carbon Market Design Discussion
Today and tomorrow the CFTC and the USDA will host a workshop to discuss issues and opportunities related to creation of a carbon market. According to the press release:
The workshop will bring together policymakers, industry participants, nongovernmental organizations and academics to discuss issues facing the establishment of efficient carbon markets in the United States. The workshop will serve as a forum to consider the lessons learned from existing carbon/environmental markets to inform policymakers about potential hurdles to the design of domestic carbon markets.
This looks like an interesting conversation, and there are some great speakers on the agenda. One thing I noticed, though, is that there does not appear to be anyone on the panel with a legal background, in academics or practice. I also didn't see anyone representing the people who would actually handle the nuts and bolts of operating in such a market. And there isn't clearly anyone representing the political perspectives.
Don't get me wrong. I'm not questioning the background of the people at the conference or the value of the conference. I just can't help but notice that the scope of the speakers seems to underrepresent some key segments of creating and implementing such a market.
January 30, 2011
Vermont Legislature Considers Constitutional Amendment Eliminating Corporate Personhood
In Vermont, state Sen. Virginia Lyons on Friday presented an anti-corporate personhood resolution for passage in the Vermont Legislature. The resolution, the first of its kind, proposes “an amendment to the United States Constitution that provides that corporations are not persons under the laws of the United States.” Sources in the statehouse say it has a good chance of passing.