Law

Gone Gallagher

Speaking of the overall dickishness at the SEC, you should Google “Gallagher Grundfest Harvard” and read about how Dan Gallagher (that flaming asshole) abused his office by accusing the Harvard Shareholder Rights Project of securities fraud – not as part of an SEC proceeding, but in an academic paper he co-authored with Prof. Grundfest – securities fraud supposedly perpetrated when the Harvard SRP made filings in support of Rule 14a-8 shareholder proposals to de-stagger boards of directors at a number of publicly traded corporations and, Gallagher alleges, mischaracterized the academic literature as overwhelmingly in support of de-staggering, when in fact there is a “substantial” body of research that favors leaving staggered boards as they are.

Leaving aside the merits of Gallagher’s views and his unctuously pro-management, anti-activist tone (at least we now know what he’s planning to do when he leaves the SEC), how can it possibly be appropriate for an SEC Commissioner to accuse private individuals or organizations of Rule 14a-9 violations or other securities fraud in the absence of any SEC proceeding or investigation?  Even where (maybe especially where) current SEC Staff policy makes it very unlikely that the underlying conduct would ever be the subject of an enforcement action?  Since when is an SEC Commissioner permitted to pronounce violations of the Federal securities laws, using his own preferred interpretation, on a freelance basis?

Over the line!  Gallagher must go!  I’m sure there’s a lobbying job for him at Americans For Entrenched Management or The Impunity Society or someplace like that.

DiFi tortures the CIA

Here’s an email I just sent to everyone in my firm:

The report of the Senate Select Committee on Intelligence was released a few minutes ago.  It can be downloaded here.  Everyone should read as much of it as they can bear.
Barest summary of the report:  In the years after 9/11, the CIA systematically tortured terror suspects and other detainees pursuant to orders from the Executive branch.  Senior members of the Bush Administration (presumably including Vice President Cheney) committed war crimes, in knowing violation of both international and US law, under cover of deliberately shoddy and misleading legal advice from, among others, a sitting Federal judge.  No one will be prosecuted.
 The report’s most important conclusion:  The torture yielded no actionable intelligence, a fact that should finally put an end to the specious arguments about ends and means.  That torture doesn’t “work” is not a surprise.  Torture isn’t, and wasn’t, about extracting information.  It is, and was, about power, revenge, rage and cruelty.  Certainly, torture isn’t a sign of strength, or moral clarity in the face of existential danger.  It’s a sign of fear and, ultimately, weakness.
 Justification for this email:  If a meaningful distinction can be made between “law” and “politics” – and, by extension, between what is and what is not appropriate for workplace discussion – my considered judgment is that the attached Senate report is concerned with issues of law.  At the very least, the report (in its discussions of the Yoo and Bybee memos) highlights the ethical lapses lawyers can commit when pressured by important clients to reach a favorable conclusion.
 Jeff

See more…

Unscrupulous tipsters and touts

From the legislative history of the U.S. Investment Advisers Act of 1940:

Not only must the public be protected from the frauds and misrepresentations of unscrupulous tipsters and touts, but the bona fide investment counsel must be safeguarded against the stigma of the activities of these individuals. Virtually no limitations or restrictions exist with respect to the honesty and integrity of individuals who may solicit funds to be controlled, managed, and supervised. Persons who may have been convicted or enjoined by courts because of perpetration of securities fraud are able to assume the role of investment advisers. Individuals assuming to act as investment advisers at present can enter profit-sharing contracts which are nothing more than “heads I win, tails you lose” arrangements. Contracts with investment advisers which are of a personal nature may be assigned and the control of funds of investors may be transferred to others without the knowledge or consent of the client.

S. Rep. No. 1775, Investment Company Act of 1940 and Investment Advisers Act of 1940, 76th Cong., 3d Sess., 21-22 (1940).

“UnSCRUpulous TIPsters and TOUTS.”  An alliterative, rhythmic and evocative phrase.

Cash-register management

Recommended reading – Steven Harper’s article in this month’s American Lawyer about the results of the midlevel associates survey.  Money quote:

The prevailing business model has distorted some concepts of value and jettisoned others. At most big firms, productivity equals billed time, without regard to the efficiency of the worker or quality of the end product. Meanwhile, anything that can’t be measured—mentoring, creating a sense of community, delegating important client relationships to young attorneys, and encouraging balanced lives that make better lawyers—gets discounted or lost altogether.

That’s the real theme permeating midlevel associate dissatisfaction. Running big firms according to metrics aimed at increasing short-term profits is deceptively objective and relatively simple. But it risks ignoring important things that can’t be quantified. […]

As a result, behavior that would enhance institutional stability and intergenerational transition yields to the self-interested development of portable books of business. Add enough laterals, and any partnership can quickly lose itself. Client-filled partner silos don’t promote the shared identity that provides a sense of community. Relying on current profits to be the glue that holds everything together can quickly make a strong firm fragile. Just ask lawyers who once worked at Heller Ehrman, Howrey, or, for history buffs, Finley Kumble.

Among large-firm equity partners, a revolution of rising expectations has continued for two decades. Recessions come and go, but somehow average equity partner earnings have trended skyward as associate satisfaction has tanked. With new attorneys flooding the market, where’s the incentive for those who reap staggering rewards to reconsider the human impact of their business models, especially on the youngest and most vulnerable?

[…]  The question for large firms is whether they can continue to attract the best and the brightest even when top recruits truly understand the work they’ll do, the culture of short-term thinking they’ll endure, and the failure most will encounter in their bids for equity partnership.

The tragedy, as I see it, is that the people most responsible for creating the winner-take-all law firm culture, and most capable of correcting it, will read this and either (i) not care (“I’ve got mine, Jack”), because worrying about the institutional legacy is for chumps, or (ii) not recognize themselves, because they believe their own recruiting hype and would vehemently deny pursuing short-term profits über alles or asset-stripping the firm before they retire.

EXEMPTION

On November 19, 2010, the Securities and Exchange Commission (SEC) issued proposed rules relating to provisions of the Dodd-Frank Act that expand the SEC’s regulatory authority over investment advisers to include many more investment advisers to private equity and hedge funds, subject to certain exemptions.

Later, a non-U.S. investment adviser went to the SEC’s Division of Investment Management to get a Foreign Private Adviser Exemption, as described in the Dodd-Frank Act.

This is the story of that investment adviser.

Pitching the counterinsurgency

From today’s paper, the U.S. counterinsurgency strategy in Afghanistan reduced to meaningless chartjunk:

afghanpowerpoint

As if Edward Tufte’s diagnosis of the state of our verbal and statistical reasoning in the era of PowerPoint — “Power corrupts; PowerPoint corrupts absolutely” — needed any confirmation.

Make sentences, not bullet points.

nobullets