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Corporate Governance: Avoiding and Responding to Misconduct

Kevin T. Abikoff

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For anyone who has been dealing with both the intended and unintended consequences of Dodd-Frank, Sarbanes-Oxley and other new laws and regulations, Corporate Governance: Avoiding and Responding to Misconduct is an essential guide.

This timely book describes step by step the measures needed to prevent criminal actions within a corporation and minimize the impact of misconduct that may have already occurred. It discusses the process of establishing a corporate compliance program, how to recognize corporate misconduct, the duties corporate officers and directors are obligated to perform following misconduct, and the impact SEC and DOJ pronouncements may have on how the board of directors responds to allegations of misconduct.

You'll find detailed guidance on the role of counsel in investigating and advising on potential abuses, invaluable for both in house and outside counsel. Corporate Governance: Avoiding and Responding to Misconduct also includes coverage of executive compensation issues, the Foreign Corrupt Practices Act, and other important topics, placing all of them in the context of the broader legal landscape.

Filled with legal and practical insights on how to prevent corporate malfeasance or handle it after the fact, this new book will help guide you and your company or client through a minefield of potential difficulties.

Book #00687; looseleaf, one volume, 834 pages; published in 2007, updated as needed; no additional charge for updates during your subscription. Looseleaf print subscribers receive supplements. The online edition is updated automatically. ISBN: 978-1-58852-142-2.

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  • Availability: Available
  • Brand: Law Journal Press
  • Product Type: Books
  • Edition: 0
  • Page Count: 834
  • ISBN: 978-1-58852-142-2
  • Pub#/SKU#: 687
  • Volume(s): 1

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  • Kevin T. Abikoff
Kevin T. Abikoff is a partner, member of the Executive Committee and Co-Chairman of the Securities Litigation Practice Group of Hughes Hubbard & Reed LLP in Washington, D.C. He concentrates on securities class action litigation and enforcement, shareholder derivative litigation, internal investigations (including shareholder derivative investigations for board committees), Foreign Corrupt Practices Act counseling and enforcement, and corporate governance counseling and compliance. Mr. Abikoff is author of Corporate Governance: Avoiding and Responding to Misconduct and co-author of Shareholder Derivative Litigation: Besieging the Board, both published by Law Journal Press. He has written numerous articles on securities, anti-corruption and corporate governance issues and is a frequent lecturer on these and other topics. Prior to joining Hughes Hubbard & Reed LLP, Mr. Abikoff was Senior Vice President and General Counsel Corporate and Compliance of American General Corporation.

Also by Kevin T. Abikoff:
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CHAPTER 1
Financial Fraud in Context

§1.01 Introduction
§1.02 Bubbles
[1] Tulipmania
[2] The South Sea Bubble
§1.03 Swindles
[1] Crédit Mobilier
[2] The Savings and Loan Scandal
[3] William Duer and Wall Street’s First Crash
[4] Ponzi, “The Boston Swindler”
[5] De Angelis and the Salad Oil Swindle
[6]  Madoff, The New Ponzi Scheme
§1.04 Lessons Learned from Previous Bubbles and Scandals

CHAPTER 2
Structural Governance: Board of Directors’ Committee Mechanics and Mechanisms

§2.01 Background
§2.02 The Role of Board Committees
§2.03 Regulating Board Committees
[1] The Compensation Committee
[2] The Nominating/Governance Committee
[3] Non-Board Committees: The SEC Disclosure Committee Recommendation
[4] Comments
§2.04 Lead Director
[1] NYSE Rules Regarding Lead Directors
[2] Comments
§2.05 Director Self-Evaluation
[1] Background
[2] Comments
§2.06 Promoting Director Quality
[1] Term Limits and Mandatory Retirement
[2] Limitations on Board Memberships
[3] Board Entrenchment

CHAPTER 3
Structural Governance: Director Independence and Related Issues

§3.01 Background
§3.02 Overview of Common Law Standards
[1] Disinterestedness
[2] Independence
§3.03 Sarbanes-Oxley: The Role of the Audit Committee; Audit Committee Independence and Related Issues
[1] Sarbanes-Oxley Independence Requirement
[2] Sarbanes-Oxley Audit Committee Oversight of Independent Auditors
[3] Audit Committee Complaint Handling Responsibilities
[4] Retention of Experts
§3.04 New York Stock Exchange Independence Standards
[1] Listing Standards Prior to the Blue Ribbon Committee’s Recommendations
[2] Recommendations of the Blue Ribbon Committee
[3] NYSE Standards
§3.05 NASD and American Stock Exchange Independence Standards
§3.06 Securities and Exchange Commission Standards Regarding Independence
[1] 1999 Amendments to SEC Rules
[2] 2003 Amendments to SEC Rules
[3] Regulation S-K, Item 407
[4] Related Persons Transactions
§3.07 Private Litigation: Raising the Bar

CHAPTER 4
Enhanced Controls

§4.01 Introduction
§4.02 Internal Controls
[1] Background
[2] Modern “Internal Control” Initiatives
§4.03 Officer Certifications
[1] Past Initiatives
[2] Current Requirements
[3] Comments
§4.04 Practical Considerations
[1] Disclosure Committees
[2] Sub-Certification

CHAPTER 5
Framework for Corporate Compliance

§5.01 Introduction
§5.02 Defining an Effective Compliance Program
[1] The Federal Sentencing Guidelines Standards
[2] Overview of Select Federal Agency Standards
[3] The Department of Justice
[4] The Securities and Exchange Commission Standards
[5] New York Stock Exchange Standards
§5.03 Developing an Effective Compliance Program
[1] Benchmark the Compliance Programs of Similarly Situated Companies
[2] Ensure Involvement of Senior Management and the Board in the Design
[3] Set the Right Tone at the Top
[4] Require Regular Reporting to Senior Management and the Board
[5] Monitor Compliance
[6] Use Available Benchmarking Tools
[7] Be Extremely Cautious When Granting Any Exceptions
[8] Take Prompt and Appropriate Corrective Action
[9] Communicate Regularly and Through Multiple Media
[10] Adapt Policies to Different Locations and Units
[11] Conduct Periodic Assessments of the Compliance Program
[12] Make Ethics Part of the Hiring and Evaluation Processes
§5.04 Codes of Business Conduct
[1] Federal Laws and Regulations Encouraging the Introduction of Codes of Conduct
[2] Listing Rules Requiring the Introduction of Codes of Conduct
[3] Legal Risks of Codes of Conduct
§5.05 SEC Whistleblower Protections

CHAPTER 6
Common Law Directorial Duties in Light of Allegations or Evidence of Misconduct

§6.01 Background
§6.02 The Business Judgment Rule
§6.03 Directorial Duties
[1] The Duty of Care
[2] The Duty of Loyalty
§6.04 Comments

CHAPTER 7
The SEC’s Influence on Board Responses to Allegations or Evidence of Misconduct

§7.01 Background
§7.02 Historic SEC Views Regarding Directorial Duties
§7.03 The Seaboard Report and the Penalties Guidance
[1] The Seaboard Report
[2] The Penalties Guidance
§7.04 Comments

CHAPTER 8
The Department of Justice Influence on Board Responses to Allegations or Evidence of Misconduct

§8.01 Overview
§8.02 The Federal Sentencing Guidelines Impact on Investigatory Behavior
[1] Involvement In or Tolerance of Criminal Conduct
[2] Effective Compliance and Ethics Program
§8.03 The Department of Justice Guidelines for Prosecution of Corporations Impact on Investigatory Behavior
[1] Cooperation and Voluntary Disclosure
[2] Disclosure of Results of Investigation and Privilege Waiver

CHAPTER 9 The Role of Counsel in the Investigative Process
§9.01 Background
§9.02 Historical Background and Past Approaches to the Role of Counsel
[1] The Alabama Code
[2] ABA Approaches
§9.03 Modern Developments in the Role of Counsel
[1] Sarbanes-Oxley Section 307 and SEC Part 205
[2] ABA Developments
[3] DOJ Enforcement Initiative
§9.04 Comments
[1] Current State Provisions

CHAPTER 10
Whistleblowers

§10.01 Introduction
[1] Historical Background
[2] Existing Whistleblower Legislation
§10.02 Sarbanes-Oxley Whistleblower Initiatives
[1] Section 301 of the Sarbanes-Oxley Act
[2] Section 307 of the Sarbanes-Oxley Act
[3] Sections 806 and 1107 of the Sarbanes-Oxley Act
§10.03 Practical Implications

CHAPTER 11
Document Retention and Production with Emphasis on Rules Relating to Electronic Discovery

§11.01 Overview and Context
§11.02 Enhanced Obligations of Accountants and Accounting Firms to Preserve Documents
§11.03 2006 Amendments to the Federal Rules of Civil Procedure Relating to Electronically Stored Information
[1] Rule 26(b)(2) of the Federal Rules of Civil Procedure
[2] Rule 26(f) of the Federal Rules of Civil Procedure
[3] Rule 37(e) of the Federal Rules of Civil Procedure

CHAPTER 12
Pitfalls of Failed Document Production Efforts

§12.01 Criminal Penalties for Document Destruction
[1] The Andersen Prosecution
[2] The Legislative Aftermath: The Sarbanes-Oxley Amendments
§12.02 The Hazards of Spoliation: Zubulake and Morgan Stanley
[1] Spoliation Overview
[2] Case Study: Zubulake
[3] Case Study: Morgan Stanley
[4] Case Study: QualComm
[5] Case Study: New Century
[6] Case Study: Rosenthal Collins Group, LLC v. Trading Technologies International
§12.03 SEC Requirements and Link to Cooperation
[1] Case Study: Lucent Technologies Inc.
[2] Case Study: Banc of America Securities LLC
[3] Case Study: American International Group
[4] Case Study: Symbol Technologies, Inc.
§12.04 Commentary

CHAPTER 13
Treatment of Electronic Materials at Issue in Securities and Exchange Commission Investigations

§13.01 Introduction
§13.02 Plan for Litigation
[1] Know the Systems
[2] Develop Questions for IT
[3] Know the Contacts
[4] Designate a Technical Resource
[5] Develop the Matrix—Plan for Electronic Material and Treatment Classification
[6] Consistent Treatment and Execution
[7] Know What Work Product Results
[8] Protocols and Standards
[9] Know How the Work Product Will Be Produced
§13.03 Act Quickly
[1] Preservation Notice
[2] Call IT
[3] Assembling the Litigation Team
[4] Setting Up and Managing an Archive
[5] Controlling Electronic Materials and Chain of Custody
§13.04 Do It Right
[1] Create an Ongoing Resource List
[2] Sweeps
[3] Create Electronic Material Maps
§13.05 Conclusion

CHAPTER 14
Select Issues in SEC Enforcement

§14.01 Commencement
[1] Introduction
[2] Sources of Information
[3] The Informal Investigation
[4] The Formal Investigation
[5] Parallel Investigations
§14.02 Conduct of Investigation
[1] Documents, Information and Testimony
[2] Attorney-Client Privilege
[3] Work Product Protection
[4] Confidentiality Agreements
[5] The Wells Process
[6] Inadvertent Disclosure
§14.03 Enforcement Actions
§14.03A Cooperation Tools
[1] Cooperation Agreements
[2] Deferred Prosecution Agreements
[3] Non-Prosecution Agreements
§14.04 Remedies
[1] Cease and Desist Order
[2] Suspensions and Revocations
[3] Injunctive Relief
[4] Monetary Relief
[5] Fair Funds Distribution
[6] Emergency Relief
§14.05 Sarbanes-Oxley Enforcement Reforms
§14.06 Collateral Consequences

CHAPTER 15
Select Issues in White Collar Criminal Enforcement

§15.01 Vicarious Liability
§15.02 Corporate Prosecutions
[1]  Principles of Federal Prosecution of Business Organizations
[2]  Negotiated Agreements
[3]  Criminal Prosecutions
§15.03 The Cooperation Decision
[1] Generally
[2] Negative Consequences of Cooperation
§15.04 Corporate Sentencing
[1] Corporate Sentencing Considerations
[2] Statutory Sentencing Considerations

CHAPTER 16
Select Aspects of Executive Compensation

§16.01 Introduction
§16.02 Section 16—Reporting of Insider Securities Transactions
[1] Accelerated Reporting
[2] Electronic Filing and Web Site Posting
§16.03 Pension Plan Blackouts—Notices and Trading Restrictions
[1] Introduction
[2] SEC Regulations
[3] DOL Regulations
§16.04 Prohibition on Loans
[1] Background
[2] The Statutory Prohibition
[3] Law Firm Position Paper
§16.05 Form 8-K Reporting of Executive Compensation
[1] Introduction
[2] The 2004 Amendments
[3] SEC Interpretations
[4] The 2006 Amendments
[5] The Emergency Economic Stabilization Act of 2008
§16.05A  Dodd-Frank Act
[1] Say on Pay
[2] Say on Golden Parachutes
[3] Pay Versus Performance Disclosures
[4] SEC Implementation
§16.06 Restrictions on Deferred Compensation
[1] Background
[2] Restrictions on Deferred Compensation Plans-The Statutory Provision
[3] Restrictions on Deferred Compensation Plans—Final Regulations
[4] Restrictions on Funding of Deferred Compensation
§16.07 Conclusion

CHAPTER 17
Select Issues in Securities Class Action Litigation

§17.01 Introduction
[1]  Enactment of the Securities Laws
[2]  Private Enforcement of the Securities Laws
§17.02 Selection of Lead Plaintiff
[1] Introduction
[2] Procedure for Determining Lead Plaintiff
[3] Standards for Lead Plaintiff Selection
[4] Limitations on Professional Lead Plaintiffs
[5] Rebuttal of the Presumption of Lead Plaintiff
[6] Grouping of Lead Plaintiffs
§17.03 Pleading Standards
[1] Introduction
[2] Pleading Standards Under Rule 9(b)
[3] Pleading Standards Under the PSLRA
[4] Pleading Scienter
[5] Use of Anonymous Sources
[6] Pleading Damages
[7] The Securities Act
[8] Section 18
§17.04 PSLRA Stay Of Discovery Provisions
[1] Lifting the Stay (In General)
[2] Particularized Discovery as Necessary to Prevent Undue Prejudice
[3] Fighting for Corporate Life
[4] The Need to Preserve Evidence
[5] Shifting the Burden: Previous Production
[6] Circumventing the Stay
§17.05 Class Certification
[1] Certification Deadlines
[2] Requirements for Class Certification
[3] Challenges to Class Certification
§17.06 Statute of Limitations
[1] The Exchange Act
[2] The Securities Act

CHAPTER 18
Select Issues in the Foreign Corrupt Practices Act

§18.01 Introduction
§18.02 Overview of the FCPA
[1] Anti-Bribery Provisions
[2] Accounting Provisions
[3] Sanctions
§18.03 “Promises” and “Anything of Value”
§18.04 The “In Furtherance” Requirement
§18.05 Who Is a “Foreign Official”
§18.06 The Intent Requirement
[1] Corruptly
[2] Knowing
[3] Willfully
§18.07 The “Obtain or Retain Business” Element
§18.08 Use of Advisory Opinions
[1] History of the FCPA Advisory Opinion Process
[2] FCPA’s Current Advisory Opinion Process
§18.09Enforcement Trends
[1] Industry-Wide Investigations
[2] Nonclassical Violations
[3] Private Litigation
[4]  International Anti-Corruption Enforcement
§18.10Due Diligence
[1] In General
[2] Need for Appropriate Due Diligence—Baker Hughes as a Case Study

CHAPTER 19
Select Issues in Governance of Not-for-Profit Organizations

§19.01 Introduction
[1] Cautionary Tales
[2] Self-Regulation
§19.02 Policies and Procedures
[1] Code of Ethics
[2] Disclosure
[3] Conflicts of Interest
[4] Whistleblowing
[5] Business Records
[6] Reimbursing Expenses
[7] Loans to Directors and Officers
§19.03 Board Structure and Composition
[1] Governing Body
[2] Diversity and Financial Literacy
[3] Independence
[4] Compensation
§19.04 Board Responsibilities
[1] Meet Regularly
[2] Review Size and Structure
[3] Train Board Members
[4] Review Governing Instruments
[5] Review Goals for Implementing Mission
[6] Supervise and Evaluate CEO
[7] Perform Self-Evaluation
[8] Limit Terms for Board Members
[9] Review Risk Management
§19.05 Timetables

Appendices
INDEX