infoUSA in the News Again

The SEC has recently concluded stock option backdating investigations with a number of companies, notably technology companies such as Zoran and NVIDIA, leading to speculation that enforcement momentum in the stock option backdating scandal may be waning.

Not to worry. As the SEC Investigation Disclosure section of SM Litigator reports, there are still misdeeds aplenty (or allegations thereof) for the SEC to investigate. Consider direct mailing mega mogul, infoUSA, which reported yesterday that the SEC had launched a preliminary investigation concerning related party transactions, the reimbursement of expenses, other corporate expenditures and specific trading in the Company’s securities.

infoUSA is a company that cannot stay out of the limelight. In the past six months, reports of abusive sales practices involving elderly Americans culled from its mailing lists, jobs outsourced to India, and campaign finance ties of CEO Vinod Gupta to the Clintons, have led the company to reserve a significant slice of its home page for defenses of its practices, including praise from Bill Clinton in his new book, Giving.

SM Litigator Wells Notices Search now Includes a Full Range of SEC Investigation Disclosures

We have culled Wells Notice disclosures from 8-K filings since the inception of SM Litigator. On Friday, we added an exciting, and significantly larger, new set of Investigations disclosures, including both Preliminary and Formal Investigation disclosures appearing in 8-K filings.

Our SEC Investigation Disclosure database now includes 789 company disclosures, broken out by recipient name and position (for Wells Notices), and allowing text search and search by CIK and Exchange. For example, using this database, you can learn about 19 CEOs who received Wells Notices, including CEOs at Berkshire Hathaway's General Reinsurance Corporation and Richard McGinn, CEO of Lucent Technologies.

Using the Exchange field, you can also learn view 132 notices of Preliminary Investigation from NYSE companies, including a recent (10/12/2007) disclosure from Zimmer Holdings regarding an SEC investigation into potential violations of the Foreign Corrupt Practices Act and an 8-K from Caremark RX reporting the completion of an SEC investigation into stock option grants, and a decision by the Commission not to recommend any enforcement action.

As we harvest these notices, we will also publish the most recent ones in our SM Litigator Daily News email.

CFTC Enforcement on SM Litigator

We released a great new tool on SM Litigator yesterday, that allows you to search a trove of enforcement actions data from the CFTC. This new search page resembles similar work we have done with SEC enforcement actions and PCAOB inspection reports and disciplinary proceedings.

The CFTC tool is unique because it lets you access hand-tagged data that is otherwise unavailable. For example, you can search enforcement actions by Defendant Name, Defendant Place of Employment, Position, Violation, Penalty type, Penalty Amount, and Other Sanctions. The data currently goes back to 2004, with plans to extend it back to 2000 in the next few months.

Access to this data lets you quickly analyze, evaluate, and understand details and trends in commodities and futures enforcement. With CFTC Enforcement Action Search, you can perform enforcement action trend analysis and quickly model and profile the range of any possible actions and penalties against a client or employee.

For example, using the CFTC enforcement tool, you can learn instantly that the CFTC has brought actions against 21 CEOs since 2004, for alleged violations ranging from Disclosure Violation and False Reporting to Missappropriation to Misrepresentation to Commodity Pool Fraud, and Commingling. By contrast, the CFTC has brought actions against only two Chief Financial Officers and one General Counsel.

The vast preponderance of the actions brought by the CFTC concern various kinds of fraud. However, the CFTC also brings significant numbers of actions against individuals and companies for false reporting, misrepresentation, and misappropriation. Recent actions include a very large settlement with BP Products for manipulation in the propane market and action against a variety of individuals involved in a multi-million dollar foreign currency options scam.

It's good stuff.

We welcome the LawProf Blogs to the KM Blogwatch

When it rains, it pours. We are delighted to announce a twofer, with the addition of two LawProf blogs to the Knowledge Mosaic Blogwatch. We welcome Professor Barbara Black, who brings us the Securities Law Prof Blog, and Professor Steven Davidoff, who brings us the M&A Law Prof Blog.

If you are not familiar with the Law Professors Blogs Network, it is definitely worth checking out. Published by University of Cincinnati College of Law Professor (and Associate Dean of Faculty) Paul Caron and managed by Cincinnati College of Law Associate Library Director Joseph Hodnicki, the Law Professors Blogs Network now includes more than 50 blogs covering every conceivable legal practice interest, ranging from Antitrust Law and Aviation Law to White Collar Crime and Wills, Trusts, and Estates.

Barbara Black is the Charles Hartsock Professor of Law and Director of the Corporate Law Center at the University of Cincinnati College of School. A prolific scholar, Professor's Black most recent SSRN publication is Stoneridge Investment Partners v. Scientific-Atlanta (8th Cir. 2006) What Makes it the Most Important Securities Case in a Decade? In the Securities Law Prof Blog, Professor Black offers immediate and comprehensive coverage of the leading events and scholarship in the securities law community.

Steven Davidoff is Assistant Professor at the Wayne State University School of Law. His most recent SSRN paper is Black Market Capital, which explores the fascinating phenomenon of "shadow" hedge fund and private equity fund instruments, which are the result of the lack of direct access of public investors to hedge fund and private equity funds because of regulatory prohibitions.

Dangerous Times for General Counsel? Maybe Not.

The Harvard Law School Corporate Governance Blog publishes a post addressing new concerns about stepped-up Justice Department enforcement against General Counsel and other legal officers at public companies.

Data from SM Litigator's SEC Enforcement Actions database suggests the trend may not be that dire for GCs. Our data indicates that the SEC has brought actions against 11 GCs in 2007, compared to 7 in 2006, and 13 in 2005. So there is not much of a discernible trend.

The only difference we can spot is that the nature of the violations has changed. In 2005 and 2006, there were a number of violations for Sale of Securities and Late Trading/Market Timing. In 2007, the violations have tended more toward Accounting/Auditing, along with options backdating.

So what is the source of the fuss? Probably that options backdating scandals have pulled more prominent public companies into the spotlight and put their GCs more at risk.

Insider Trading Enforcement

In today's SM Litigator Blogwatch, Tom Gorman discusses the SEC's renewed campaign against inside trading. On SM Litigator's SEC Enforcement Actions data analysis page, you can actually review the trends. In the past 12 months, the SEC has instituted proceedings against 106 defendants. In the 12 months previous, the Commission launched actions against 72 defendants. In the 12 months previous to that period (October 2004 through October 2005), the SEC brought actions against 96 defendants. So there is clearly an upward enforcement trend, although perhaps not dramatically in excess of previous years. Institutions associated with individual defendants include Dell, Goldman Sachs, Banc of America Securities, Morgan Stanley, Credit Suisse, Bear Stearns, UBS Securities, the law firm Katten Muchin Rosenman, and Fredericks of Hollywood!