Stingy Investor Search - Contact - Subscribe - Login
  Home | Articles | Links | SNW
Article Archive: Law

Private-equity firms feud
11/27/17   Law
"A former Ontario Superior Court judge was targeted in a sting designed to discredit him days before his decision in a controversial case with hundreds of millions of dollars at stake was scheduled to be heard at the Ontario Court of Appeal."

Tyranny of the noncompete clause
04/17/16   Law
"Subjects in simulated noncompete conditions showed significantly less motivation and got worse results on effort-based tasks. Why? We believe that limits on future employment not only dim workers' external prospects but also decrease their perceived ownership of their jobs, sapping their desire to exert themselves and develop their skills. The resulting drop in performance may be more damaging to companies than the actual loss of the employees would be."

Now with more democracy
02/23/14   Law
"Ottawa should reform its key corporate legislation - the Canada Business Corporations Act - to entrench majority voting as a legal requirement for all companies with public shareholders. The CBCA is under review for potential amendments, so the time is right to push for change. A fundamental reform of shareholder democracy is long overdue. Annual board elections should be more than an empty gesture."

Corruption Law
04/28/12   Law
"Increasingly, the FCPA has become a tool for American prosecutors to police the world's large multinationals. Corporations whose shares trade on American exchanges are considered fair targets. So are corrupt transactions that pass through American banks. Using that theory, the Justice Department brought a case against against Japan's JPC, a company that, as the Shearman and Sterling report put it, had 'no apparent commercial connection with the United States whatsoever.' Rather than test the government's arguments in court, and risk criminal convictions for their executives, most companies have chosen to settle using deferred prosecution agreements."

Keep it simple
01/21/12   Law
"Unlike many in the banking industry, Petrou is not ideologically opposed to regulation. For instance, she was a critic of the lack of regulation that allowed so many sleazy subprime mortgage originators to emerge from the precrisis ooze. Yet, now, she's worried about something different: that the hundreds of new mandates required by the Dodd-Frank law are creating a new kind of risk. She calls it "complexity risk." As she put it in a speech she delivered last week in New York: "If we don't understand the cross-cutting effects and inherent contradictions in all of the stringent standards now being written into final form, we risk doing real damage to the sound, stable and - yes - profitable financial industry regulators say they support and the economies sorely need.""

01/18/12   Law
"Many of the webs most important and integral websites are protesting seriously flawed legislation called SOPA. It would greatly damage the linking structure of the internet, allowing companies to close down websites on flimsiest of premises. It would criminalize even pointing to any site that itself points to a site where there is a Copyright violation. Over the years, the copyright cartel - this includes Disney and other major content companies - have bought themselves a Congress. They prevented works that were scheduled to enter the public domain, as envisioned in the US Constitution, from doing so. SOPA is the latest attempt to censor the public's access to independent information and manipulate copyright laws. The new law works to their own benefit and the public's detriment."

New generation of cross-border income trusts
09/17/11   Law
"In December 2010, Eagle Energy Trust closed its initial public offering (IPO) of trust units in Canada, resulting in the first of a new generation of cross-border income trusts to access the Canadian capital markets. Since then, Parallel Energy Trust completed its IPO in April 2011 and Argent Energy Trust has recently filed a preliminary prospectus for a proposed IPO. Each of these new trusts owns or will acquire an underlying energy business carried on in the U.S. However, and as discussed in further detail below, there is generally no restriction on other types of U.S. businesses being owned by these income trusts. The suitability of a particular business for these trusts will largely turn on the results of economic modelling based on anticipated deductions in computing U.S. income (i.e., deductions for interest, depreciation, depletion, etc.)"

A license to lie, backdated
06/20/11   Law
"if you are considering an investment in a mutual fund or ETF, you should understand that you will have little recourse if information provided in the prospectus turns out to be misleading or incomplete, even outright fraudulent"

In Prison for Taking a Liar Loan
03/26/11   Law
"It's not just that Mr. Engle is the smallest of small fry that is bothersome about his prosecution. It is also the way the government went about building its case. Although Mr. Engle took out the two stated-income loans, as liar loans are more formally called, in late 2005 and early 2006, it wasn't until three years later that his troubles began."

Is Law School a Losing Game?
01/14/11   Law
"Based on the seething and regret you hear from some law school grads, more than a few wish that someone had been patronizing enough to say, "Oh no you don't." But it's often hard to convince students about the potential downside of law school, says Kimber A. Russell, a 37-year-old graduate of DePaul, who writes the Shilling Me Softly blog. "This idea of exceptionalism - I don't know if it's a thing with millennials, or what," she says, referring to the generation now in its 20s. "Even if you tell them the bottom has fallen out of the legal market, they're all convinced that none of the bad stuff will happen to them. It's a serious, life-altering decision, going to law school, and you're dealing with a lot of na ve students who have never had jobs, never paid real bills.""

Securities Class Actions Punish Shareholders
12/02/10   Law
"It's a belief many law-school graduates cling to fiercely, in the face of all contrary evidence: That the tort system is a mechanism for discovering the truth, disciplining wrongdoers, and compensating victims for their losses. A new study in the Financial Analysts Journal casts serious doubt on the premise, at least when it comes to shareholder class actions. In most cases, the authors found, the litigation mainly serves to punish shareholders who have already suffered from a downturn in their stock. Only suits targeting illegal insider trading, and to a lesser extent, accounting fraud were associated with subsequent higher long-term returns."

Suing yourself
06/23/10   Law
"Lawsuit arbitrage! Fantastic! So, see, the problem is that the shareholders ALREADY own the company. So when they sue the company, they are suing themselves. And the lawyers get rich in the process. Sweet."

Great moments in financial regulation
05/01/10   Law
"We should be skeptical about expecting a regulator to make accurate, one-size-fits-all judgments about the merit of specific financial products. For example, before 1996, certain initial public offerings of stocks were subject to merit review in certain states, where the state decided if a security is a "bad" investment and thus not appropriate to be offered to its citizens. In fact, this is exactly what happened to Apple Computer when it first went public in 1980. Massachusetts prohibited the offering of Apple shares because they were "too risky," and Apple did not even bother to offer its shares in Illinois due to strict state laws on new issues. What if federal bureaucrats had had the power to impose their judgment on a "risky" financial product (such as an IPO) on a nationwide scale, or every state followed Massachusetts' lead? Would Apple have become the successful company that it is today?"

4 ways to fix a broken system
02/23/10   Law
"The land of the free has become a legal minefield, says Philip K. Howard -- especially for teachers and doctors, whose work has been paralyzed by fear of suits. What's the answer? A lawyer himself, Howard has four propositions for simplifying US law."

Learning to love insider trading
10/25/09   Law
From the what could possibly go wrong file, "Want to keep companies honest, make the markets work more efficiently and encourage investors to diversify? Let insiders buy and sell"

The mortgage machine backfires
09/27/09   Law
"As cases filed by MERS grew, lawyers representing troubled borrowers began questioning how an electronic registry with no ownership claims had the right to evict people. April Charney, a consumer lawyer at Jacksonville Area Legal Aid in Florida, was among the first to argue that MERS, which didn't own the note or the mortgage, could not move against a borrower. Initially, judges rejected those arguments and allowed MERS foreclosures to proceed. Recently, however, MERS has begun losing some cases, and the Kansas ruling is a pivotal loss, experts say."

Crops, ponds destroyed in quest for food safety
07/17/09   Law
"For many giant food retailers, the choice between a dead pond and a dead child is no choice at all. Industry has paid more than $100 million in court settlements and verdicts in spinach and lettuce lawsuits, a fraction of the lost sales involved. Galvanized by the spinach disaster, large growers instituted a quasi-governmental program of new protocols for growing greens safely, called the "leafy greens marketing agreement." A proposal was submitted last month in Washington to take these rules nationwide."

How modern law makes us powerless
01/26/09   Law
"Americans don't feel free to reach inside themselves and make a difference. The growth of litigation and regulation has injected a paralyzing uncertainty into everyday choices. All around us are warnings and legal risks. The modern credo is not "Yes We Can" but "No You Can't." Our sense of powerlessness is pervasive. Those who deal with the public are the most discouraged. Most doctors say they wouldn't advise their children to go into medicine. Government service is seen as a bureaucratic morass, not a noble calling. Make a difference? You can't even show basic human kindness for fear of legal action. Teachers across America are instructed never to put an arm around a crying child."

Employee free choice act is unconstitutional
12/19/08   Law
"The government-chosen panel could well impose terms that might cripple the firm competitively. Consider that the takings clause surely prevents the government from forcing any person to buy real estate for twice its market value from a seller. That same principle applies to this labor law: No government should be able to force a firm to hire labor at $50 per hour when the company is not willing to pay half that much."

Discounters face battle on minimum pricing
12/07/08   Law
"Manufacturers have been racing to enforce minimum-pricing policies since last year, when the Supreme Court ruled them to be legal, and not a violation of antitrust law. EBay and a group of other retailers and antitrust advocates are meeting Thursday in Washington to craft a strategy to overturn that ruling."

Your dog's bite could bankrupt you
09/04/08   Law
"But all dog owners need to understand their potential liability should their animal bite, maul or, heaven forbid, kill someone. A single bite could cost you tens of thousands of dollars -- a lawsuit hundreds of thousands -- and your insurance coverage might not apply. If the attack is especially serious, you could even go to jail."

Bankrupt retailers: pushed to the brink
08/11/08   Law
"All filers are covered by the new bankruptcy law, but the changes were particularly harsh on retailers. For companies that already are short of cash - and, in the current environment, unlikely to find new financing - these new provisions in the law can amount to a death sentence. "Liquidity is sucked out of the debtor in a way that it becomes hard to survive," says Lawrence Gottlieb, chair of the bankruptcy and restructuring practice at New York law firm Cooley Godward Kronish, who has represented creditors' committees in the bankruptcies of Sharper Image and Linens 'n Things."

Lawyer finds gaping hole in securities law
07/26/08   Law
""Allowing a member to resign and therefore escape sanction for improper acts committed while a member of a [self-regulatory organization] can hardly be said to protect investors. ... Certainly, the public would have less confidence in capital markets where sanctions for misconduct could be avoided by a simple letter of resignation," Judge Carnwath wrote."

Hedge funds can vote at CSX meeting
06/12/08   Law
"CSX argued that the brokerage firms, which nominally own the shares although they have no economic stake in the company, had good business reasons to vote as the hedge funds wish. If they did not do so, such firms would risk losing business from the hedge funds. Judge Kaplan said there were 'persuasive reasons' for concluding that the funds 'beneficially owned at least some and quite possibly all' of the shares bought by the brokerage firms to hedge their swap positions."

The siege of State Farm
05/05/08   Law
"For State Farm Insurance - the nation's leading auto and home insurer - coping with once-in-a-lifetime disasters is everyday business. Risk analysis is what it does, and its actuarial staffs are prepared for every eventuality. Almost. When Hurricane Katrina struck the Gulf Coast in 2005, it infamously brought a storm surge the likes of which the nation had never seen, causing more flood damage in one event than all the storms combined for as far back as there was data (37 years). Even that risk State Farm had anticipated. What it hadn't foreseen was that the storm surge would gut the home of a plaintiffs lawyer named Richard F. "Dickie" Scruggs, as well as those of his family, friends, and neighbors in Pascagoula, Miss. Scruggs was someone who could render all of State Farm's actuarial calculations irrelevant, because he had the power and know-how to force it to rewrite its contracts retroactively. He had been the scourge of Fortune 500 companies for two decades, precisely because he tended to change the rules of any game he chose to play."

My big fat IRS case
03/24/08   Law
"The young couple hauled in $40,000 in cash at their Greek wedding. They knew if they deposited $10,000 or more at once, the bank would have to file a "currency transaction report" and they'd have to wait in line to provide information. So they deposited their loot in smaller lumps. Soon, they were being investigated by Internal Revenue Service criminal agents and paying Chicago attorney Robert E. McKenzie $500-plus an hour to help them avoid seizure of their cash or worse. Carving up deposits to avoid a currency report is "structuring." Structuring is a felony. "It's scary. If you know of the $10,000 requirement and attempt to avoid it, you've committed a crime," says McKenzie, who convinced the irs to let the newlyweds go. You don't have to be dealing drugs, cheating on your taxes or paying prostitutes to run afoul of the structuring law. Even if the money is from a legal source and used legally, the government can charge you with a crime and/or demand you forfeit cash. By contrast, with money laundering, the cash has to be related to an underlying crime."

When OSC goes green, lawyers see red
03/19/08   Law
"The regulator says financial estimates must be provided to investors where quantitative information is "reasonably available," and the company should explain that the estimate is highly uncertain. It should also consider providing the upper and lower ranges of financial exposure, as well as an analysis of the likelihood the event will actually occur. Almost overnight, environmental liability has been escalated to a major governance issue. Public companies are being asked to come clean or risk a big legal mess. But at least one of the country's senior environmental lawyers says the OSC is asking for trouble."

Wage wars
09/21/07   Law
"In overtime cases, Depression-era laws aimed at factories and textile mills are being applied in a 21st century economy, raising fundamental questions about the rules of the modern workplace. As the country has shifted from manufacturing to services, for example, which employees deserve the protections these laws offer? Generally, workers with jobs that require independent judgment have not been entitled to overtime pay. But with businesses embracing efficiency and quality-control initiatives, more and more tasks, even in offices, are becoming standardized, tightly choreographed routines. That's just one of several factors blurring the traditional blue-collar/white-collar divide. Then there's technology: In an always-on, telecommuting world, when does the workday begin and end? The ambiguity now surrounding these questions is tripping up companies and enriching lawyers like Thierman."

Viscusi interview
08/15/07   Law
"So, for instance, in the case of Superfund cleanups of hazardous wastes, the people who benefit from the cleanups are not paying the costs directly and thus demand the most stringent standards possible. The result is that the median cost per cancer case averted is about $7 billion. It's off the charts because you are using the responsible parties' money to clean up the site. In contrast, if you look at the amount of money people are willing to pay for houses that are not exposed to hazardous waste risks, you don't observe that kind of large trade-off at all."

Justices end 96-year-old ban on price floors
07/01/07   Law
"Striking down an antitrust rule nearly a century old, the Supreme Court ruled today that it is no longer automatically unlawful for manufacturers and distributors to agree on setting minimum retail prices. The decision will give producers significantly more leeway, though not unlimited power, to dictate retail prices and to restrict the flexibility of discounters."

Efficient markets can land you in jail
09/07/06   Law
"Because market prices reflect all available information, argued the court, misleading statements by a company will affect its share price. Investors rely on the integrity of the price as a guide to fundamental value. Thus, misleading statements defraud purchasers of the firm's shares even if they do not rely directly on those statements, or are not even aware of them. That ruling has proved a goldmine for America's trial lawyers, who have won fortunes by suing firms for damages when news (often, in practice, a restatement of their accounts) is followed by a sharp fall in their share prices. The fall is treated as proof of overvaluation due to the initial, wrong statement. Increasingly, a similar logic has been used in criminal cases"

No defense for this insanity
05/01/06   Law
"Open societies flourish because they are driven by intelligence and information; the U.S. tort system creates an enclave of idiotic whimsy in the heart of the most open society in the world. But the Vioxx litigation does not merely celebrate dumb prejudice. It's extraordinarily expensive. For this year alone, Merck has set aside a legal war chest of $685 million. The Vioxx lawsuits could eventually cost it between $10 billion and $50 billion. Did those numbers sink in properly? The midpoint of those estimates -- $30 billion -- is six times more than the federal government spends annually on cancer research. Or, to put it another way, $30 billion is about five times Merck's annual earnings, meaning that one of the world's top pharmaceutical research establishments is fighting for survival. At a time when Americans fret over relative decline in science and business, it's insane to sink a flagship scientific company in order to line the pockets of unscrupulous lawyers."

So sue me
04/10/06   Law
"Rather, I'm interested in the issue of litigation as part of an investment decision. Too few investors look at pending litigation when deciding what stocks to back. That's too bad, because lawsuits can have a big impact on stock prices over the longer term, positive and negative."

HD: Why he couldn't do it today
02/16/06   Law
"Going public and entrepreneurship were the keys to our success. If you're a public company today, you have to be surrounded with lawyers and you can't make a decision without a lawyer on one side of you and an accountant on the other side. Today, you just can't use your business judgment to take the risks that must be taken for a new company to succeed. And, one share value-killer lawsuit can kill a startup company. Back in 1978, those lawsuits were rare. Today, all you have to do is pick up a newspaper and read about one after another."

The Valentine's Effect?
02/13/06   Law
"Ah, Valentine's Day. Some say it's the most romantic day of the year. Others dismiss it as merely a commercial boondoggle. Still others find themselves dateless and depressed. For those of you in the last category, it could always be worse. You could be retaining a divorce lawyer."

New law lets shareholders play hardball
01/02/06   Law
"There appears to be a wide expectation that shareholders will more easily be able to launch successful class-action lawsuits under the new rules. Under the old common law system, class actions rarely succeeded in Canada. But lawyers have very different opinions about how much shareholders should be celebrating the advent of the new system. Mr. Voorheis said he doesn't support the principle motivation behind Bill 198, which is structured to ensure that liability is capped, allowing lawsuits to send a message to companies to deter misrepresentations without necessarily ensuring investors recoup all their losses."

Sticker shock
12/18/05   Law
"caught between lawsuits claiming they failed to protect consumers from "hidden" hazards--is there really any mystery about what can happen when you stand on the top of a ladder?--and the impossibility of making their products idiot-proof, manufacturers slap warning labels on everything but the kitchen sink in order to ward off liability."

Huge lawsuits threaten businesses
07/15/05   Law
"Denver defense lawyers say their clients are increasingly the target of lawsuits where the claims are so big, the future of their business is at stake. They're called "bet the business" cases, and they can involve many different areas, from mergers and acquisitions to intellectual property to securities."

The slavery shakedown
06/10/05   Law
"In other words, Thompson's apology was for something Wachovia didn't do, in an era when it didn't exist, under laws it didn't break. And as an act of contrition for this wrong it never committed, it can now expect to pay millions of dollars to activists for a wrong they never suffered. What is going on here?"

Tobacco settlement faces increasing challenges
06/03/05   Law
"But Philip Morris USA is pleased. In the first quarter of 2005, the nation's largest cigarette maker saw operating profit rise and its domestic market share grow to 50 percent, up from 48.3 percent two years earlier."

King Nothing
02/23/05   Law
"Judges appoint Mark Dottore to stabilize troubled companies. Critics say he's cleaning them out."

Outsourcing the lawyers
10/14/04   Law
"Contrary to popular perception, Shakespeare didn't really suggest that killing all the lawyers might be a good thing. But that hasn't stopped some people from wishing they would just go away."

A smoke ring? That'll cost you $280 billion
09/16/04   Law
"Has Philip Morris caught masochism of the throat? No, say its rivals: it is just trying to lock in its half-share of the American market. Tight marketing rules would hurt lesser brands more than they would Marlboro."

Injustice at the Justice Department
07/15/04   Law
"Republicans are criticizing John Kerry's choice for vice president because of John Edwards' trial lawyer background and connections. I'm hoping that maybe someone in the Bush administration will take this criticism to heart and do something about the most egregious trial lawyer operation of all time - the Bush administration's Department of Justice."

The 7 myths of highly effective plaintiffs' lawyers
07/14/04   Law
"Frederich Hayek in his opus, The Constitution of Liberty, wrote that "[t]here is probably no single factor which has contributed more to the prosperity of the West than the relative certainty of the law..." In the year 2003, American civil justice promises only the certainty of expense and a strange, relative sense of justice."

Case expands type of lies prosecutors will pursue
05/18/04   Law
"Until last month, lying to your own company's lawyers was not a crime. Now it is."

The case against the prosecution
03/17/04   Law
"The danger is that, by throwing a few bosses to the lions, the government will satisfy the public's thirst for blood and thus ease pressure for deeper, system-wide reform. Indeed, some critics argue that this was the government's intention all along, orif that seems a bit too conspiratorialat least explains its instinct to come down so hard on corporate crooks."

Futile courtroom dramas
03/02/04   Law
"The solution is not to write off capitalism as a hopeless casino where crooks get rich and the suckers get fleeced, it is to recognize that regulation cannot in reality protect investors if they deal with financial institutions driven by their trading desks to exploit every angle for a fast buck. Before the regulatory wave of the 1930s in the United States and the 1980s in Britain, for those investors who made sure to deal with top quality institutions: J.P. Morgan, the First National Bank, Kidder Peabody and the Boston money managers (or Schroders, Rothschilds, Hill Samuel, Warburgs, Hambros), their money was both safe and earned a decent return. Only investors dealing with "bucket shops" entered the world of Damon Runyon and Arnold Rothstein and lost their money. As Morgan would have told you, regulation is absolutely no substitute for character."

Martha Stewart's surreal ordeal
02/23/04   Law
"So the Martha Stewart trial has come to this. Judge Miriam Goldman Cedarbaum ruled that the government cannot introduce testimony about how Stewart's statements to the press asserting her innocence of violating insider trading law affected investors of her firm, Martha Stewart Living."

Punishing critical analysts
01/15/04   Law
"The judges in the LVMH case cited the analyst settlement reached in the United States as evidence of Morgan Stanley's perfidy. But that case included ample evidence that analysts issued reports they did not believe and caved in to pressure from investment bankers. Such evidence was not required in France."

Patenting air or protecting property?
12/11/03   Law
"Universities, corporations and tens of thousands of Web site providers across the country probably never imagined they would be rooting for the pornography industry."

Triumph of the pygmy state
10/23/03   Law
"Despite the many business scandals in America, Delaware's amazing grip on corporate law is set to endure"

Enemy of the states
09/05/03   Law
"Companies are increasingly worried by the growing power, and desire, of America's state attorneys-general to regulate and punish them"

Patent bending
07/08/03   Law
"As Benjamin Day, Henry Ford, and Sam Walton might attest, American corporations have thrived on innovative ideas and new business methods, without owning them, for two centuries. In the past decade, the balance has been upset. The scope of patents has been expanded, copyrights have been extended, trademarks have been subjected to bizarre interpretations."

Director finds no road map on route to disclosure
04/19/03   Law
"Ms. Urquhart had every intention of being an active director. Her unsuccessful efforts to get fellow directors to address what she considered a hornet's nest of problems at the Aldergrove, B.C., company took her on an odyssey well beyond the boardroom. She has spent the past two years writing innumerable letters, making phone calls and travelling back and forth from her home in Mississauga to British Columbia, navigating her way through the courts and Canada's patchwork securities regulatory system. It seems that just about everyone wanted her to go away."

Companies act to avert asbestos claims crisis
09/09/02   Law
"Two-hundred and fifty of the world's largest companies will on Monday petition the US Supreme Court in an attempt to halt a new asbestos compensation crisis that will claim a record number of bankruptcies this year."

The firms that can't stop falling
09/08/02   Law
"Mr LoPucki looked at the fortunes of firms that emerged from bankruptcy between 1991 and 1996. Within five years, 29% had gone out of business, with two-thirds of these liquidated or merged in distress. In each of those five years, on average, the typical firm in Mr LoPucki's sample racked up losses equivalent to 2% of its total assets."

  Articles by
  Norman Rothery

  Growth Investing
  Real Estate
  Stingy Investing
  Value Investing

  Warren Buffett
  Benjamin Graham
  Charlie Munger
  David Dreman
  Martin Whitman
  Tweedy Browne
  James Montier
  John Dorfman
  Prem Watsa
  Francis Chou
  Walter Schloss
  Seth Klarman
  Nassim Taleb
  Robert Shiller
  James Grant
  John Bogle
  John Neff
  Bill Gross
  Dan Hallett
  Tim Cestnick
  Jason Zweig
  Norm Rothery

Article Archive

About Us | Legal | Contact Us
Disclaimers: Consult with a qualified investment adviser before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, financial advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More...