Kramer Levin Launches Public Alternative Funds Blog
Electronic Discovery Update: Spring 2013
We are representing Rajat K. Gupta, McKinsey’s former Managing Director Worldwide, in both a criminal prosecution brought against him by the U.S. Attorney for the Southern District of New York and a civil enforcement action brought against him by the SEC in the Galleon insider trading matter. The SEC initially commenced an administrative proceeding against Mr. Gupta in March 2011, seeking to have the charges determined by an administrative law judge instead of by a federal district court judge in a proceeding that would have denied Mr. Gupta a jury as well as of the benefits of the federal rules of procedure and evidence. In response, Mr. Gupta sued the SEC in federal court, alleging that the SEC deprived Mr. Gupta of his constitutional right to equal protection under the law by singling him out for disparate and prejudicial treatment given that the SEC had sued all other Galleon-related defendants in federal court. On July 11, 2011, the U.S. District Court for the Southern District of New York denied the SEC’s motion to dismiss this action in a 22-page opinion, which rejected each of the SEC’s jurisdictional and immunity arguments, finding that a federal district court action provided Mr. Gupta with the only meaningful forum to pursue his constitutional claim. On August 4, 2011 the SEC announced that it had agreed to drop its administrative proceedings against Mr. Gupta. In October 2011, Mr. Gupta was indicted in the Southern District of New York, and the SEC refiled its allegations in that federal court. After a four-week trial in June 2012, Mr. Gupta was acquitted on two counts of the indictment, but convicted on certain other counts. In December 2012 Mr. Gupta was granted bail pending appeal. The appeal is likely to be argued in the spring of 2013.
In a unanimous opinion issued on April 5, 2013, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of the complaint in the case of Mercer v. Gupta. James Mercer, a shareholder of The Goldman Sachs Group, Inc., brought this action purportedly on behalf of Goldman Sachs against Mr. Gupta under Section 16(b) of the Securities Exchange Act of 1934. Section 16(b) is a strict liability provision that forces statutory insiders (that is, officers, directors and owners of more than 10% of the outstanding shares of a corporation) to disgorge all profits realized by him or her from any purchase and sale (or sale and purchase) made within a six-month period. Mercer alleged that Mr. Gupta was the “beneficial owner” of profits realized by Raj Rajaratnam through Rajaratnam’s trading in Goldman Sachs stock for the Galleon Group. In a decision issued on July 28, 2012, the district court granted Mr. Gupta’s motion to dismiss on the ground that the complaint failed adequately to plead that Mr. Gupta was a beneficial owner of these shares. The Second Circuit affirmed the district court’s dismissal, agreeing that the plaintiff had failed adequately to plead that Mr. Gupta was the beneficial owner of the Galleon Group’s shares of Goldman Sachs (and therefore Mr. Gupta had not “realized” any profits as required for liability under Section 16(b)). The Second Circuit also accepted the argument that “Section 16(b) does not apply perforce to tippers,” where the central allegation of the complaint was that Mr. Gupta tipped information about Goldman Sachs to Rajaratnam.
We represent the President and Chief Operating Officer of MF Global Holdings Ltd., in connection with numerous ongoing investigations into the company’s collapse and bankruptcy in October 2011.
We successfully represented a former investment representative at Deutsche Bank Alex Brown in a criminal prosecution in the Southern District of New York related to alleged tax-shelter fraud. He was charged with conspiring with three lawyers from Jenkens & Gilchrist, the former CEO of the accounting firm BDO Seidman, and others to deprive the IRS of billions of tax dollars through the use of allegedly abusive tax shelters. After a 10-week trial, our client was acquitted on all nine criminal charges, the only defendant to be found not guilty on all charges.
We represent Bear Stearns in the criminal investigation and related civil proceedings focused on the collapse of two Bear Stearns investment funds related to the sub-prime mortgage crisis.
We successfully represented the City of New York in the inquiry by the New York County District Attorney relating to the fire at the Deutsche Bank building. No charges were brought against the City, any of its agencies or its officials.
We won dismissal in favor of Kenneth Langone, former Chair of the New York Stock Exchange Compensation Committee, of all charges brought against him by then Attorney General Eliot Spitzer relating to the compensation of NYSE Chairman Richard Grasso.
We represented Aqueduct Entertainment Company, LLC, in connection with the high profile investigation by the New York State Office of the Inspector General and other regulators into the bidding process that led to the company’s selection, by Governor David Paterson and legislative leaders (including Assembly Speaker Sheldon Silver), to negotiate to operate the video lottery terminal facility at Aqueduct Racetrack in Queens, New York.
We are representing the former Chairman of the New York State Liberal Party, against charges arising out of the New York State Attorney General’s inquiry into the awarding of investments by the New York State Pension Funds.
We have been very active in investigations relating to the historical option granting practices of public companies, conducting independent inquiries for audit and special board committees, and representing issuers and their officers and directors in regulatory investigations and shareholder litigations. Our public matters include, for example, the representation of a special committee of the board of a public medical care company in reviewing the issuer’s historical option grants; the defense of various outside directors of Comverse Technology, Inc. in class and derivative litigation; and the representation of the former CFO of Affiliated Computer Services, Inc. in regulatory matters and shareholder litigation.
We represent an individual defendant in a criminal prosecution relating to online poker. The charges against our client include violations of federal gambling statutes, bank fraud and money laundering.
We represented J. Pedro Reinhard, a former CFO and member of the board of directors of Dow Chemical in a highly publicized dispute between Mr. Reinhard and Dow. In allegations published on the front page of The Wall Street Journal, Dow accused Mr. Reinhard, along with another Dow executive, of planning a takeover of the company while concealing that plan from Dow’s Board and CEO. We filed a defamation and breach of contract action on behalf of Mr. Reinhard and defended him against breach of fiduciary claims brought by Dow. Following a year of hotly contested litigation in Dow’s home State of Michigan, the parties agreed to settle the matter on mutually satisfactory terms.
We represent senior officers of a number of financial services firms including Citigroup, AIG Structured Products, Lehman Brothers and Neuberger Berman in inquiries relating to those firms’ investments in structured products.
We are actively involved in representing significant figures and entities in government inquiries and related civil litigation concerning alleged accounting irregularities. Our representations include a major equipment rental company in SEC and related inquiries, the former chairman and founder of Global Crossing, the former chairman of ImClone, the former CEO’s of WorldCom and Arthur Andersen, the former CFO’s of Cendant, Bristol-Myers Squibb and Oxford Health Systems and the former General Counsel of Rite-Aid.
We defended the former Chief Executive Officer of Refco, Inc., against securities fraud and other criminal charges brought by the United States Attorney for the Southern District of New York relating to the falsification of Refco’s financial statements.
We conducted an internal investigation on behalf of Moody’s Corporation regarding complaints about its securities rating methodology, the results of which were widely reported and cited in congressional hearings.
We represented the head of a multi-billion dollar investment fund, who was recently cleared of all charges in an indictment in the Southern District of New York that alleged he conspired to bribe the President of Azerbaijan in connection with the privatization of the state-owned oil company in violation of the Foreign Corrupt Practices Act.
We successfully represented Assemblyman Clarence Norman, Jr., the Deputy Speaker of the New York State Assembly, in a criminal prosecution in Brooklyn, New York, who was cleared of grand larceny charges.
We have successfully represented numerous securities industry clients, including Canary Capital Partners in the New York State Attorney General’s mutual fund industry investigation, Salomon Brothers in the federal criminal and SEC investigations of U.S. Treasury auction bidding practices, and Kidder Peabody in connection with the Wall Street insider trading scandal. In each instance, we persuaded the government not to bring criminal charges.
We successfully represented a high-ranking investment banker from a major broker dealer firm in the SEC’s Orange County investigation, whom the Commission determined not to charge with any wrongdoing.
We persuaded the government not to charge an investment banker at a major broker dealer firm in connection with the federal criminal investigation of “yield burning” in the municipal bond industry.
We represented institutions and individuals in the investigations of Drexel Burnham, including Drexel customers and a high-ranking former Drexel executive, none of whom was ultimately charged by the government.
We successfully defended the General Counsel and Chief Financial Officer of The Southland Corporation against criminal proxy fraud charges, and a First Jersey Securities broker in a case alleging perjury and obstruction of justice.
We persuaded the government not to charge an investment advisor in connection with the Connecticut Treasurer’s Office corruption investigation.
We represented the chief trader of D.H. Blair in the New York County District Attorney’s investigation into its practices.
We represent the chief trader of an international metal dealer in CFTC proceedings alleging manipulation of the world copper markets with Sumitomo Corporation.
We represented the owner of a 1933 Double Eagle gold coin, believed to be the rarest and most valuable coin in the world, that the United States government claimed was stolen governmental property and successfully persuaded the government to dismiss criminal charges.We then achieved a landmark settlement in the civil forfeiture proceeding under which the coin was auctioned and the proceeds divided between our client and the government.
We successfully defended a prominent Saudi Arabian banker in connection with state criminal charges and in proceedings before the Federal Reserve Board, relating to the disposition of his interest in the Bank of Commerce and Credit International, as well as in complex RICO litigation brought by liquidators of BCCI seeking $10 billion in damages. All U.S. civil, criminal and regulatory charges were dismissed.
We represented E. Robert Wallach, a San Francisco attorney and counsel to former Attorney General Edwin Meese, in a lengthy federal criminal trial arising out of the Wedtech government contracting scandal. The charges against Mr. Wallach were subsequently dropped.
We have been engaged in the representation of attorneys, accountants and other professionals in criminal and regulatory investigations, securities litigation and related matters; licensed professionals before the New York State Office of Professional Discipline; labor union officials, employers and others in grand jury and administrative labor proceedings; and companies, individuals and government officials in government contract matters; as well as the trial and appellate defense of government officials in the New York City Parking Violations Bureau and Ill Wind scandals.
We successfully represented a doctor who operated a large medical center in a significant health care fraud case that received wide-spread media attention. The doctor avoided criminal prosecution, regained his medical license, and resumed the practice of medicine.
We represented the general counsel of a company charged with violating federal immigration and labor laws. Following successful motions to sever and limit the charges, all charges were dismissed on the eve of trial and the client has resumed the private practice of law.
We represented a former officer of a leading investment bank alleged to have participated in a fraud involving hundreds of millions of dollars, and successfully persuaded the United States Attorney’s Office for the Southern District of New York to not pursue criminal charges against him.
We obtained a significant ruling from the Second Circuit Court of Appeals, establishing that there is no civil conspiracy liability under Rule 10b-5, while successfully defending a law firm charged with securities fraud.