Tuesday, May 31, 2011

MEO conference faculty

From: RDShatt@aol.com
To: KDarcy@theecoa.org, bolson@theecoa.org, jkaplan@kaplanwalker.com, gwinter@illinois.edu, cbeinfo@bentley.edu, mhoffman@bentley.edu, twhite@ethicsandbusiness.org, TMazur@theecoa.org, harry.britt@elpaso.com, LTrevino@psu.edu, Jeff_Oak@bshsi.org, Dmdprudenc@AOL.com, johnsherman3@mac.com, carrie@ethicalleadershipgroup.com, dgebler@skoutgroup.com
Sent: 5/31/2011 4:33:26 A.M. Central Daylight Time

Subj: MEO: Entity versus individual liability under Obama

To Managing Ethics in Organizations faculty:

Is something significant going on in the Obama administration relative to entity versus individual liability for purposes of achieving deterrence?

Three Wall Street Journal articles in the past month have been suggestive to me that this is the case. See this, this, and this.

What do you think?

Rob Shattuck

Monday, May 30, 2011

WSJ: Mortgage fraud civil charges against individuals

  • The Wall Street Journal

SEC Eyes Charges For Bond Players

Settlement agreements being hammered out by U.S. securities regulators and securities firms accused of fraud in mortgage-bond deals are likely to include civil charges against at least one person connected to each deal, according to people familiar with the situation.
Securities and Exchange Commission officials are pushing hard as part of their ongoing probe of collateralized debt obligations and other mortgage-related products developed by Wall Street to bring charges against individuals, such as executives involved in selling the deals or outsiders who managed the assets, these people said.
While the situation remains fluid, the agency also could file civil charges against hedge-fund managers who helped structure certain mortgage-bond deals but then bet against them.
The move by the SEC to pin at least some of the blame for alleged wrongdoing on specific individuals follows criticism of the agency for previous fraud settlements in which no enforcement action was taken against executives or other employees.
In 2009, U.S. District Court Judge Jed Rakoff in New York denounced the SEC's proposed $33 million settlement with Bank of America Corp. of civil charges related to its takeover of Merrill Lynch as a "contrivance designed to provide the SEC with the facade of enforcement."
No executives at the Charlotte, N.C., bank were accused of wrongdoing as part of the case. Judge Rakoff eventually agreed "reluctantly" to a $150 million settlement in which Bank of America neither admitted nor denied wrongdoing.
Robert Khuzami, the SEC's director of enforcement, declined to comment on the settlement talks. "Our starting point in any investigation is to see if there are grounds for enforcement action against one or more individuals," he said in an interview.
Financial firms being probed by the SEC include J.P. Morgan Chase & Co., Citigroup Inc., Morgan Stanley, Bank of America's Merrill unit and UBS AG, according to people familiar with the matter. The companies declined to comment.
Talks aimed at reaching settlements with at least some of the firms have accelerated in recent weeks. In its quarterly report last week, J.P. Morgan said it was in "advanced discussions" to resolve the matter, though the New York company said it couldn't assure that a deal would be reached.
In January, the SEC notified J.P. Morgan's former head of CDOs, Michael Llodra, and Edward Steffelin, a former executive at an outside firm that managed the assets in a CDO created by the giant bank, that they could face civil charges related to the bond deal called Squared, according to their records at the Financial Industry Regulatory Authority.
Lawyers for Messrs. Llodra and Steffelin declined to comment.
CDOs are complex pools of mortgages and other loans, made up in part of risky subprime mortgages. Banks and securities firms cranked out more than $1 trillion of CDOs, often at the request of investors who made bets against the same deals. The collapse of the CDO market deepened the financial crisis and triggered investigations of Wall Street's mortgage machine.
In the most significant example, Goldman Sachs Group Inc. agreed to pay $550 million last year to settle an SEC investigation into whether it duped investors in a CDO deal called Abacus 2007-AC1.
Goldman admitted making mistakes but denied cheating clients. No Goldman executives were accused of wrongdoing by the SEC, and the agency is heading to trial against Fabrice Tourre, the Goldman bond trader who helped assemble the Abacus deal. He is fighting the civil fraud charges.
A lawyer for Mr. Tourre declined to comment. A Goldman spokesman declined to comment.
Mr. Steffelin, who worked at investment-management firm GSC Group, was influential in that company's rejection of a request by Goldman to manage the Abacus deal, according to lawmakers who scrutinized the transaction.
A Senate report released last month included an email from February 2007 in which Mr. Steffelin wrote to a Goldman executive: "I do not have to say how bad it is that you guys are pushing this thing." Asked later about the email, sent after GSC had declined to act as a manager for Abacus, Mr. Steffelin said he believed the CDO created "reputational" risk for the market.
As part of a growing push to counter criticism that it hasn't punished enough executives for wrongdoing related to the financial crisis, the SEC launched a new section on its website about the agency's track record.
The SEC has filed charges against 32 senior executives as part of enforcement actions related to the crisis that have resulted in $1.34 billion in penalties and restitution to investors.
"Most of the concern seems to stem from the fact that there have been few senior executives going off to jail as a result of the crisis, though that's not for lack of hard work and dedication on the part of the criminal authorities," Mr. Khuzami said.
"It's a pretty strong track record, and we're still hard at work," he added.

WSJ: Company President charged with homicide

  • The Wall Street Journal

Owning Up to a Boy's Death

Rare but Grisly Swimming Pool Accident Spurs Unusual Prosecution of Executive

Associated Press
Shoreline Pools President David Lionetti, left, and his attorney Richard Meehan in 2008.

David Lionetti's swimming pool company failed to install a required safety device in a Connecticut family's backyard pool. That triggered the drowning of a six-year-old boy, state prosecutors argued, and led to an unusual homicide case against Mr. Lionetti, the company's president.
The prosecution spotlighted a rare but gruesome accident called entrapment, in which powerful suction from a pool's drain traps a swimmer underwater. The case also could pave the way for similar prosecutions.
After the six-year-old, Zachary Cohn, was fatally trapped underwater in 2007 with his arm caught in the pool's drain, Connecticut prosecutors charged Mr. Lionetti, president of Shoreline Pools, of Stamford, with manslaughter.
The prosecutors claimed that the company had failed to install a device that would have shut off the pump when an object got in the way.
Pool-industry experts say the criminal charges against Mr. Lionetti were the first ever lodged against an industry executive for an entrapment injury.
"It was clear that both Lionetti and Shoreline's behavior was to pay lip service to safety regulations," said Ernie Teitell, the Cohns' lawyer in separate civil litigation. "The plea indicates that safety has to be a number one priority."
Mr. Lionetti's lawyer, Richard Meehan, didn't return calls seeking comment. A representative for Shoreline Pools declined to comment. The prosecutors who handled the case didn't return calls requesting comment.
A federal bill was signed into law in 2007, after Zachary drowned, to prevent entrapment in public pools and spas. The Virginia Graeme Baker Act was named after the seven-year-old granddaughter of former Secretary of State James Baker who died in 2002 when suction from a drain trapped her at the bottom of a spa.
In entrapment, swimmers can be pinned to the floor of the pool or otherwise trapped until they drown or suffer serious injuries, including disembowelment. According to statistics gathered by the Consumer Product Safety Commission, from 1999 to 2008 there were reports of 83 entrapments nationwide, 11 of which involved fatalities. Small children are especially vulnerable.
Pool makers have made significant improvements in recent years, but safety advocates want them to move faster, and there are gaps in the patchwork of federal and state regulations that govern the pool industry.
The industry, with its main political arm, the Association of Pool & Spa Professionals, has lobbied against tougher rules, safety advocates say.
"They've fought safety efforts every step of the way," said Nancy Baker, the mother of the girl killed in the 2002 accident. "It's always been more about saving money than safety with them."
Carvin DiGiovanni, a senior director with the APSP, said his organization had worked closely with federal lawmakers leading up to the Virginia Graeme Baker Act.
The law requires all public pools and spas to employ special upgraded drain covers to prevent entrapment and, in some instances, to install devices that reduce the water force should an object get stuck in the drain. Violations can bring civil or criminal penalties.
"Safety has always been a core value of the association and remains a core value," said Mr. DiGiovanni.
Write to Ashby Jones at ashby.jones@wsj.com

Monday, May 16, 2011

Email to consumer protection professionals

From: RDShatt@aol.com
To: _______________
Sent: 5/__/2011 _______.M. Central Daylight Time

Subj: Expand role of consumer protection agencies; reduce role of plaintiffs' lawyers

Dear ______________,

I am a citizen advocate. I have been on a wending path that has led me to serial encounters with, among others, law professors, lawmakers, business ethics professionals, judges, and state attorneys general. This path is laid out in my blog How To Combat Plaintiffs' Lawyers.

I have progressed to contacting consumer protection organizations and professionals.

More particularly, I am, in the consumer protection arena, advocating in favor of the expansion of the roles of state attorneys general and other governmental consumer protection agencies, and a reduction in the role of plaintiffs' lawyers. My reasons for this advocacy are indicated at length in my article Does the Civil Liability System Undermine Business Ethics?

I have identified you as prominent in the consumer protection arena and am contacting you to solicit dialogue with you concerning my advocacy and the analysis and argumentation I advance in support of my position.

If you think my advocacy raises interesting questions for your consideration, and you would be willing to indulge me in discussion about the same, I would love to hear from you.

Thank you.

Rob Shattuck

Sunday, May 15, 2011

WSJ 5/11/11 -U.S. Rebuffed in Glaxo Misconduct Case

  • The Wall Street Journal

U.S. Rebuffed in Glaxo Misconduct Case

A federal trial judge on Tuesday acquitted a former GlaxoSmithKline PLC lawyer in a high-profile corporate misconduct case, dealing a blow to the government's effort to target individuals in probes of the pharmaceutical industry.
U.S. District Court Judge Roger Titus in Maryland took the rare move of acquitting former Glaxo lawyer Lauren Stevens without sending the case to the jury.
Judge Titus called his summary move to acquit Ms. Stevens a first in his seven-and-a-half years on the federal bench. "The defendant in this case should never have been prosecuted and she should be permitted to resume her career," he said.
Prosecutors had alleged Ms. Stevens obstructed a Food and Drug Administration investigation into whether Glaxo had improperly promoted the antidepressant Wellbutrin for weight loss, a use not approved by the FDA.
The government's defeat points to the difficulty of prosecuting individuals over alleged wrongdoing at large corporations, where teams of people may be involved in a matter and it is hard to show that executives intended to break the law.
Despite calls for prosecution of top Wall Street figures in the wake of the 2008 financial crisis, the Justice Department has brought only a handful of cases against individuals, and lost some prominent cases.
Ms. Stevens's sudden acquittal could hurt other government efforts, including the long-running investigation of Glaxo for marketing issues related to several drugs, said defense attorneys. They said the Justice Department and the Department of Health and Human Services may have to review their larger strategy of targeting executives and lawyers at pharmaceutical companies.
The Justice Department cannot appeal Tuesday's acquittal. "We believe these charges were well-founded and that the jury should have been allowed to deliberate and decide this case," a department spokesman said.
Pharmaceutical companies have paid billions of dollars to settle various marketing-related charges with the government, but only a few executives have pleaded guilty to any crimes.Government officials have said they decided to go after more individuals to create a stronger deterrent and prevent companies from viewing fines as merely "a cost of doing business."
Prosecutors alleged Ms. Stevens falsely denied that the company had promoted Wellbutrin for unapproved or "off-label" uses, despite knowing that the company had sponsored programs with doctors' groups involving Wellbutrin. Companies are barred from off-label marketing but doctors can generally prescribe an FDA-approved drug for any condition.
Defense lawyers for Ms. Stevens said she provided legitimate and zealous representation of Glaxo and relied in good faith on the advice she received from an outside law firm.
The judge agreed, saying it would be a "miscarriage of justice" to let the case get to the jury.
"We did not have a bad five minutes in that courtroom; if it had been a prize fight, they would have stopped it," said Ms. Stevens's lawyer, Reid Weingarten, who has represented Cabinet secretaries and corporate chiefs.
It is rare for the government to charge a lawyer over advice given to a client, because such conversations are generally protected unless the lawyer is helping the client commit a crime.
Judge Titus's ruling is likely to make such prosecutions rarer still. "There is an enormous potential for abuse in allowing prosecution of an attorney for the giving of legal advice," the judge said.
The government has long been investigating Glaxo over various allegations related to sales of antidepressants Paxil and Wellbutrin, as well as its former popular diabetes drug Avandia. Glaxo hasn't been charged with wrongdoing in these cases, but the investigation is continuing, according to people familiar with the matter.
Its outside counsel, King & Spalding LLP, didn't return calls requesting comment.
The government hasn't said whether the prosecution of Ms. Stevens was part of an effort to push Glaxo into a plea deal. It said in court documents in December that the Stevens case was part of an "ongoing underlying health-care fraud investigation" looking at her and "potential criminal activity by others."
The company has declined to comment on the cases, and it hasn't said under what terms Ms. Stevens left the company last year.
It said Tuesday that it was "pleased" with her vindication.
"The acquittal certainly strengthens Glaxo's hand in negotiations with the government about a corporate resolution of their case," said John Fleder, a defense attorney with Hyman, Phelps & McNamara PC who wasn't involved in the case.
FDA officials and the inspector general of the Department of Health and Human Services have said that the government wants to make more use of an administrative option to punish executives by excluding pharmaceutical company leaders from the industry. That option may look more attractive after the failure of the criminal case against Ms. Stevens.
Companies that employ an "excluded" executive can be prevented from selling products to the U.S. government—which almost all pharmaceutical firms do. In essence, the step can force a company to dump its chief in order to do business with Medicare or the Veterans Administration.
In April, the HHS inspector general created a firestorm in the drug industry when the agency said it intends to exclude the longtime chief executive of Forest Laboratories Inc, Howard Solomon. The company has protested the move and said Mr. Solomon had nothing to do with marketing violations for which the company agreed to pay more than $300 million in civil and criminal fines.
Write to Alicia Mundy at alicia.mundy@wsj.com and Brent Kendall at brent.kendall@dowjones.com

Monday, May 9, 2011

Consumer Watchdog

From: RDShatt@aol.com
To: admin@consumerwatchdog.org
Sent: 5/9/2011 6:34:23 A.M. Central Daylight Time
Subj: Would Consumer Watchdog care to comment?

Dear Sir,

I am, in the consumer protection arena, an advocate of the expansion of the roles of state attorneys general and governmental agencies and prosecutors, and a reduction in the role of plaintiffs' lawyers. My reasons for this advocacy are set out in my blog How To Combat Plaintiffs' Lawyers and particularly in my article Does the Civil Liability System Undermine Business Ethics? Most recently I have been making my advocacy to the National Association of Attorneys General and to attorneys general directly. See this blog entry.

Would Consumer Watchdog care to comment on my above advocacy and the argumentation I make in support of that advocacy?

Thank you.

Rob Shattuck

Thursday, May 5, 2011

National Association of Attorneys General correspondence

From: RDShatt@aol.com
To: rdshatt@aol.com
Sent: 4/17/2011 10:14:47 A.M. Central Daylight Time
Subj: Thanks for contacting http://www.naag.org/. Someone will get back to you soon.

Re: Attorney general offices should expand
[above is online confirm of sending below online to NAAG]
Re: Attorney general offices should expand

Dear Mr. McPherson,
While I have no credentials, I am making public advocacy that attorney general offices should expand. You may find a brief statement of the reasons I am making this advocacy at this link (http://robertshattuck.blogspot.com/2011/04/attorney-general-offices-should-expand.html) in my blog How To Combat Plainitiffs' Lawyers.
The reason I am contacting you as the Executive Director of the National Association of Attorneys General is that I wish to identify one or more attorneys general who are receptive to my advocacy and its reasons and rationale and would like to be a public spokesperson on behalf of the advocacy in question.
Are you in a position to refer me to some attorneys general who you think would be interested in the advocacy in question or to someone on the staff of the NAAG who might help me out?

Rob Shattuck

From: RDShatt@aol.com
To: jmcpherson@NAAG.ORG
Sent: 4/19/2011 8:24:56 A.M. Central Daylight Time

Thank you for replying, Mr. McPherson.
I have initiated contact with Attorney General Strange's office per this link. I hope Attorney General Strange will take up the advocacy I am advocating. I still wish to contact attorneys general in states other than my home state of Alabama in order to find someone who wishes to be a public spokesperson. If you think this is not something to be run through NAAG, I can proceed in a more direct fashion.
Rob Shattuck

From: RDShatt@aol.com
To: jmcpherson@NAAG.ORG
Sent: 4/19/2011 8:31:31 A.M. Central Daylight Time

Yep, thanks, Mr. McPherson.
Rob Shattuck

From: RDShatt@aol.com
To: jmcpherson@naag.org
Sent: 4/22/2011 8:29:06 A.M. Central Daylight Time
Subj: Attorney general offices should expand- update

Dear Mr. McPherson,
I have emailed most of the attorneys general. We'll see whether I get any takers.
OBAMA AND THE TRANSITION TEAM that one of the biggest concerns of attorneys general is about Federal preemption.
As a citizen, ideally I hope the motivation for the resistance of attorneys general to Federal preemption is principled and for the benefit of the citizens the Federal and state governments are supposed to serve, and that there are not turf tussles going on that are not helpful for the citizens.
I think I have enunciated a very principled advocacy for the expansion of attorney general offices and a corresponding encroachment on the domain of plaintiffs' attorneys.
I appreciate that attorneys general are probably more inclined to do battle against the Feds headquartered in Washington DC, than against local plaintiffs' lawyers who are in their respective home states.
Nonetheless I wish to try to encourage attorneys general and NAAG to give fair consideration of the advocacy I have enunciated in favor of the expansion of the domain of attorneys general at the expense of plaintiffs' lawyers.
If this is something NAAG would like to explore, I would be thrilled to help out.
I will understand if NAAG decides against input from me on this.
Rob Shattuck

From: RDShatt@aol.com
To: jmcpherson@NAAG.ORG
Sent: 4/26/2011 7:15:39 A.M. Central Daylight Time
Subj: Re: Attorney general offices should expand- update

Thank you, Mr. McPherson. I don't suppose you would care to identify to any extent which AG's think what. Any clues you could give me would be most appreciated, but I understand if you cannot do that.
Rob Shattuck

From: RDShatt@aol.com
To: jmcpherson@NAAG.ORG
Sent: 4/27/2011 5:41:56 A.M. Central Daylight Time
Subj: Re: Attorney general offices should expand- update

Thank you, Mr. McPherson.
I have a tendency to push and to try to box people/organizations in.
I sometimes do this by rephrasing.
My pushing also sometimes terminates communication, and I will understand if that happens here.
Let me push NAAG (try to box NAAG in) with this rephrasing:
Can NAAG and all the attorneys general agree that the citizens of the respective states are entitled to be informed and should be informed about the issue in question, and can you on behalf of NAAG say that publicly?
Rob Shattuck

From: RDShatt@aol.com
To: jmcpherson@NAAG.ORG
Sent: 4/28/2011 5:11:16 A.M. Central Daylight Time
Subj: Re: Attorney general offices should expand- update

And a good morning to you, Jim. I always appreciate replies.
I have taken the liberty of copying and pasting below, and bold facing certain language, from the "about NAAG" webpage. The bold faced language seems inconsistent with what you say in your email, but, not to worry, that is neither here nor there, and I understand.
I would say that my interest and concern as a citizen are legitimately national in scope. I have not limited and will not limit myself to Alabama in communicating to or with attorneys general, legislators, and fellow citizens, albeit that attorneys general and legislators in other states may recognize only citizens in their respective states. If you are interested, you will be able to keep up with my activities in my blog.
Best wishes,
Rob Shattuck
[below from "about NAAG" webpage, with certain language boldfaced]

About NAAG

About the Association

The National Association of Attorneys General (NAAG) was founded in 1907 to help Attorneys General fulfill the responsibilities of their office and to assist in the delivery of high quality legal services to the states and territorial jurisdictions. NAAG’s mission is: "To facilitate interaction among Attorneys General as peers and to facilitate the enhanced performance of Attorneys General and their staffs." NAAG fosters an environment of "cooperative leadership," helping Attorneys General respond effectively - individually and collectively - to emerging state and federal issues.
The Association fosters interstate cooperation on legal and law enforcement issues, conducts policy research and analysis of issues, conducts training, and facilitates communication between the states’ chief legal officers and all levels of government. The Association’s members are the Attorneys General of the 50 states and the District of Columbia and the chief legal officers of the Commonwealths of Puerto Rico (Secretary of Justice) and the Northern Mariana Islands, and the territories of American Samoa, Guam, and the Virgin Islands.

The Attorneys General

The Attorney General is popularly elected in 43 states, as well as in Guam, and is appointed by the governor in five states (Alaska, Hawaii, New Hampshire, New Jersey, and Wyoming) and in the four jurisdictions of American Samoa, the Northern Mariana Islands, Puerto Rico, and the Virgin Islands. In Maine, the Attorney General is selected by secret ballot of the legislature and in Tennessee, by the state Supreme Court. In the District of Columbia, the Mayor appoints the Attorney General whose powers and duties are similar to those of the Attorneys General of the states and jurisdictions.
As chief legal officers of the states, commonwealths, and territories of the United States, the Attorneys General serve as counselors to state government agencies and legislatures, and as representatives of the public interest. It is often said that Attorneys General occupy the intersection of law and public policy, dealing in areas as diverse as child support enforcement, drug policy, and environmental protection.

In many areas traditionally considered the exclusive responsibility of the federal government, the Attorneys General now share enforcement authority. Indeed, a major trend of the last several years has been the increasingly cooperative working relationships the Attorneys General have forged with their federal counterparts, particularly in the areas of trade regulation, environmental enforcement, and criminal justice.
Typical powers of the Attorneys General, while varying from one jurisdiction to the next due to statutory and constitutional mandates, now include the authority to: institute civil suits; represent state agencies; defend and/or challenge the constitutionality of legislative or administrative actions; enforce open meetings and records laws; revoke corporate charters; enforce antitrust prohibitions against monopolistic enterprises; and enforce air, water pollution, and hazardous waste laws. In a majority of states, handle criminal appeals and serious state-wide criminal prosecutions; intervene in public utility rate cases; and enforce the provisions of charitable trusts.

Goals of the Association

NAAG’s goals are to:
  • Identify, produce, and disseminate key information related to the independence, scope, and management of the office of the Attorney General;
  • Create and maintain a collegial network among the chief legal officers of the states and jurisdictions by providing a meeting ground for cooperation and learning;
  • Promote cooperation and coordination on interstate legal matters to foster an even more responsive and efficient legal system for state citizens;
  • Advise the federal government on issues of concern to state Attorneys General through the National Attorneys General Training and Research Institute, provide training to staff involving the enhancement of legal skills and the exploration of significant legal developments and emerging trends. ;
  • Increase citizen understanding of the law and law enforcement's role to ensure both protection of individual rights and compliance with the law;
  • Influence the development of national and state legal policy through such means as Supreme Court advocacy training and dialogue with other national, state, and local policy makers and pursue policy objectives as determined by the membership

From: RDShatt@aol.com
To: jmcpherson@NAAG.ORG
Sent: 5/2/2011 5:32:30 A.M. Central Daylight Time
Subj: Re: Attorney general offices should expand- update

Thanks again, Jim.
Did you see the 4/26/11 Wall Street Journal front page article U.S. Effort to Remove Drug CEO?
The article says: "The campaign against drug-company CEOs is part of a larger Obama administration effort to pursue individual executives blamed for wrongdoing rather than simply punishing companies."
Yes, I believe this is an extremely important issue for lawmakers, judges, regulators, governmental prosecutors, state attorneys general, ethics and corporate governance professionals, chambers of commerce, and citizens. I think it is an issue worthy of NAAG policy research and analysis for the benefit of NAAG's member attorneys general, who, as you say, can "take that work and craft their own positions".
Needless to say, I would love for NAAG to take up the issue, and I would love to lend a helping hand.