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McDermott, Davis Polk, Kirkland, Weil: Business of Law

McDermott Will & Emery LLP announced today the 44th and 45th lateral partner hires of the year, as it expands its life sciences practice.

Judy Mohr, in Silicon Valley, and Richard B. Smith, in Boston, were hired along with one associate and a team of professionals. Yesterday, the firm announced it hired former U.S. Attorney Marcos D. Jiménez. The firm’s hiring spree is particularly notable compared to its 2011 numbers -- 18 lateral partners all year.

“I think there’s a flight to stability and excellence,” said Peter John Sacripanti, co-chair of the firm, in an interview. “The instability that was generated by the collapse of Dewey makes a platform like ours very, very attractive to lateral candidates.” He credited the appeal of the firm in part to the fact that, “We don’t carry any debt. We’re completely self-financed. We’re not the only firm that does that, I’m sure, but it’s a pretty attractive alternative to firms that laden themselves with a debt.”

McDermott’s growth hasn’t been in one practice area, geographic location or accomplished through mergers or poaching from another firm.

“We’ve been building on our strengths and expanding our geographic and substantive footprint,” Jeffrey E. Stone, McDermott’s other co-chair, said in an interview about the strategy behind the growth. “We’re not just looking to hire. We want players who will fit with existing strengths.”

Among the sources for the new partners, the firm hired six from bankrupt law firm Dewey & LeBouef LLP, four of whom opened a new Frankfurt office for the firm in May, its third in Germany. Five of the firm’s new hires came from Orrick, Herrington & Sutcliffe LLP, while four jumped from Greenberg Traurig LLP and four moved from Latham & Watkins LLP, the firm said. The others were spread out across 11 firms, government agencies or companies.

In terms of areas of practice, the firm had the greatest partner growth in corporate and tax lawyers. The Dewey Frankfurt hires included corporate finance and securities partners, led by Philipp von Ilberg.

One of today’s new hires, Smith, is a life science dealmaker who joins the corporate advisory practice group from Edwards Wildman Palmer LLP, the firm said.

In June, the firm hired Cym Lowell, Mark Martin, John T. Woodruff and five others to lead a seven-person tax transfer pricing team in Texas. The team focuses on designing and defending the allocation of income and expenses in cross-border transactions. Martin became the head of McDermott’s transfer pricing practice.

“That team fits very nicely with the tax portfolio,” Stone said, pointing to it as an example of the firm’s hiring strategy. “They add further capacity to an already strong group.”

IP has also been a growth area for McDermott. Mohr, the firm’s other new partner, and her team, who were previously with King & Spalding LLP, will focus on all aspects of domestic and international patent procurement, patent portfolio strategic counseling, and comprehensive portfolio management for emerging and mature life sciences companies.

In March, IP litigation partner Fabio Marino brought a team of three additional lawyers with him to the Silicon Valley office, capping a six-lawyer increase in the office during that month.

The firm has also added to its regulatory, private equity and white collar and securities defense teams, among others.

Of the firm’s offices, Washington, with eight partner hires, grew the most, while New York followed with six new hires. Boston and Paris have each had five partners join. Nine other offices saw additions, including Houston, Chicago and London.

Litigator Jiménez, who will be based in New York and Miami, was the U.S. Attorney for the Southern District of Florida from 2002 to 2005. He was previously at Kasowitz, Benson, Torres & Friedman LLP, the firm said. Among his recent, significant matters, Jiménez won a deceptive trade practices trial where the Florida Attorney General sought more than $20 million in damages plus statutory penalties from his client, Alltel Communications, a subsidiary of Verizon Communications Inc., the firm said.

Among the hires in the last few months, McDermott added some other prominent names, including restructuring lawyer Timothy W. Walsh, who was hired away from DLA Piper LLP, where he was vice chairman of that firm’s restructuring practice group. He’s now McDermott’s international head of the restructuring and insolvency practice.

McDermott also hired Allan Van Fleet, the immediate past chair of the ABA Section of Antitrust Law, who joined the firm’s Houston office in May from Greenberg.

The firm is not done growing either, according to its leaders. The firm will add its second new office of the year when it opens in Seoul, probably in October. And it will continue to hire laterals. “We have very targeted goals, different goals for each of our markets,” Stone said.

In addition to its lateral partner hires, the firm has hired 44 additional counsel and associates. With more than 1,000 lawyers at 17 offices world-wide, firm leaders say they have no fear that the rapid growth will be a problem like it was at Dewey.

“Our partnership is very transparent,” Sacripanti said. For example, he noted, the firm’s leadership team, “Their incomes are known to the entire equity partnership.”

Litigation

Samsung’s Lawyer Begs to Undo Ruling; Opening Arguments Made

Samsung Electronics Co. (005930) again lost its bid to use evidence a lawyer for the company described as “critical” to rebutting Apple Inc.’s central allegations in a patent-infringement trial in California.

Samsung was barred by U.S. District Judge Lucy Koh in San Jose from presenting images of a smartphone that it claims to have been developing in 2006, the year before Apple introduced the iPhone. Samsung said in a filing that the images show evidence that it was developing the next generation of mobile phones with a “simple, rounded rectangular body” before Apple’s January 2007 announcement of the iPhone.

Before jurors heard opening arguments in the trial yesterday, John B. Quinn, a Samsung lawyer from Quinn Emanuel Urquhart & Sullivan LLP, asked Koh to reconsider her July 30 decision barring the evidence.

Quinn, who said he had never begged in court in more than 30 years of practicing law, told Koh that he was “begging now.”

Koh rejected the request for what she said was at least the third time.

“We’ve done three reconsiderations on this and we have a jury waiting,” Koh told Quinn. “You’ve made your record.”

“Don’t make me sanction you, please,” Koh said when Quinn persisted with his argument. “I want you to sit down please.”

Samsung said in an e-mailed statement that Koh’s ruling means “Samsung was not allowed to tell the jury the full story and show the pre-iPhone design for that and other phones that were in development at Samsung in 2006, before the iPhone.”

“The excluded evidence would have established beyond doubt that Samsung did not copy the iPhone design,” the Suwon, South Korea-based company said in the statement.

Samsung’s statement included attachments of the evidence that Koh had excluded, prompting a demand from Koh for an explanation of who drafted and issued the release. Koh told lawyers representing Samsung that she wanted a statement from Quinn explaining his role in issuing the statement.

Harold McElhinny, a lawyer for Apple at Morrison & Foerster LLP, told Koh the release was “on perception an intentional attempt to pollute this jury” rising to “contempt of court.”

In Quinn’s response to a demand from Koh for an explanation, the lawyer defended his role in issuing the statement in a filing today with the court.

“Samsung’s brief statement and transmission of public materials in response to press inquiries was not motivated by or designed to influence jurors,” Quinn said in his declaration.

Apple and Samsung made initial pitches to a U.S. jury yesterday in their global battle over smartphone patents, with the iPhone maker alleging its designs were copied and the South Korean company countering that Apple can’t claim a “monopoly on a rectangle.”

Apple’s lawyer alleged in opening arguments that Samsung infringed the touch-screen characteristics of the iPhone after it was released in 2007. Samsung’s attorney downplayed the significance of Apple’s iPhone innovations by saying other companies had received patents for similarly minimalist designs.

“As we all know, it’s easier to copy than to innovate,” McElhinny, Apple’s lawyer, told the jury.

The jury trial is the first in the U.S. in a battle being waged on four continents for dominance in a smartphone market valued by Bloomberg Industries at $219.1 billion. Apple and Samsung are the world’s largest makers of the high-end handheld devices that blend the functionality of a phone and a computer.

Each company is trying to convince jurors that its rival infringed patents covering designs and technology for mobile devices, with potential damages awards reaching billions of dollars.

A Samsung attorney, Charles K. Verhoeven, said that while the company was “inspired” by the iPhone, he said that’s a natural part of business competition, just as each company performs a detailed analysis whenever a rival product is released.

“Being inspired by a good product and seeking to make even better products is called competition,” Verhoeven said. “It’s not copying and it’s not infringing. Everybody does it in the commercial marketplace.”

The case is Apple Inc. (AAPL) v. Samsung Electronics Co. Ltd., 11- cv-01846, U.S. District Court, Northern District of California (San Jose).

For more, click here.

SEC Loses Lawsuit Against Ex-Citigroup Official Brian Stoker

The Securities and Exchange Commission lost a jury verdict in its lawsuit against former Citigroup Inc. (C) official Brian Stoker over a deal at the center of the bank’s proposed $285 million settlement with regulators over subprime residential mortgage securities.

The jury reached its verdict yesterday in Manhattan federal court. The SEC had accused Stoker, the former director of Citigroup’s collateralized debt obligation structuring group, of violating securities law in putting together the assets underlying a $1 billion CDO.

Stoker’s lawyer John Keker, founding partner of Keker & Van Nest LLP, made the closing arguments July 30 on his behalf.

The SEC claimed New York-based Citigroup structured and sold the CDO without telling investors that it helped pick about half the underlying assets and was betting they would decline in value by taking a short position.

“This verdict should not deter the SEC from continuing to investigate the financial industry, to review current regulations, and modify existing regulations as necessary,” the jury said in rendering its decision that Stoker wasn’t liable.

The case is U.S. Securities and Exchange Commission v. Stoker, 11-cv-7388, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

News

U.S. Consumer Financial Agency Targets Lawyer in First Lawsuit

The year-old U.S. Consumer Financial Protection Bureau brought its first lawsuit this month, accusing a California lawyer of operating an illegal mortgage relief scheme.

The lawsuit, filed in federal court in Los Angeles, alleges that Chance Gordon used his law firm and affiliated companies to falsely promise loan modifications in exchange for advance fees, ranging from $2,500 to $4,000, according to a complaint unsealed on July 23.

“Rather than helping homeowners modify their mortgage loans or avoid foreclosure, defendants dupe distressed homeowners into paying thousands of dollars based on false promises and misrepresentations,” Kent Markus, the bureau’s enforcement director, said in the filing.

The lawsuit alleges that since early 2010 Gordon, who is based in Los Angeles, would entice potential clients with advertisements and phone calls that claimed an affiliation with government entities or programs.

After securing payments, he did “little or nothing” to assist his clients and advised them to avoid interaction with their lenders and to stop making mortgage payments, causing them to enter foreclosure or lose their property, according to the complaint.

U.S. District Judge Ronald Lew granted the agency’s request that the assets of Gordon and other defendants remain temporarily frozen.

On July 30, Gordon asked the judge to allow him access to $25,000 to pay a lawyer to defend him in the case and another $10,000 a month for living expenses. Lew hasn’t ruled on that request.

Gary Kurtz, a lawyer for Gordon, didn’t immediately respond to a telephone message seeking comment on the allegations.

The case is Consumer Financial Protection Bureau v. Gordon, 12-cv-06147, U.S. District Court, Central District of California (Los Angeles).

How Wall Street Lawyer Turned Insider Trader Eluded FBI 17 Years

Every dawn in the early spring of 2011, Matthew Kluger peered out his window, wondering when federal agents would knock at his door. Kluger, a mergers-and-acquisitions lawyer, says he worried that authorities were closing in on him as the source of illegal tips in a three-man insider-trading ring that had eluded detection for 17 years, Bloomberg News David Voreacos reports.

The knock came on April 6. U.S. agents handcuffed Kluger, hustled him into a Dodge Intrepid, drove to the Federal Bureau of Investigation office in Manassas, Virginia, and laid out the case against him. The evidence included tape recordings of Kluger telling the man he tipped to get rid of a cellular phone that could lead back to him -- and to do it carefully because the authorities had dogs that can sniff out mobiles.

“I really would like to see this phone go bye-bye ASAP,” Kluger said, adding: “Do you want this to be our undoing?”

Kluger’s account offers a unique view of insider trading by a mid-level lawyer who moved from one powerful firm to another, exploiting his access to partners and confidential documents. It shows how difficult it is to police such activity when conspirators take care to conceal their crimes and trade with discipline. The trio’s downfall came only when one of them changed the routine after almost two decades.

Their stealth masked Kluger’s ability to steal secrets from some of the most prominent U.S. law firms, including Wilson Sonsini Goodrich & Rosati PC and Skadden, Arps, Slate, Meagher & Flom LLP. The three men made $37 million in profit on deals involving some of the largest technology companies, including Oracle Corp., Adobe Systems Inc., Hewlett-Packard Co. and Intel Corp.

Kluger began confessing his crimes to federal authorities the day of his arrest. He first detailed them to Bloomberg News nine days later, after posting bail in Newark, New Jersey, when he needed a ride back to a jail to pick up his heart medicine. He offered additional details in interviews over the next year.

For more, click here.

Vale May Settle Brazil Royalties Dispute This Month, Torres Says

Vale SA (VALE5), the world’s largest iron-ore producer, may settle a dispute with Brazil this month over unpaid royalties, the company’s top lawyer said.

Vale probably will decide at an Aug. 23 board meeting in Mozambique whether to pay or continue the dispute in court, Clovis Torres, the company’s general counsel, said in an interview yesterday. The company, which as recently as April 17 said that it estimated the claims at about 5.64 billion reais ($2.75 billion), is likely to pay less than 4 billion reais in a settlement, he said, declining to elaborate.

“The decisions to be taken are to pay all, to pay something or not to pay anything and continue the discussion in court,” Torres said by telephone from Rio de Janeiro. “That will be decided by the end of August.”

Brazil’s largest exporting company has been fighting government tax claims as authorities from Australia to Chile seek to boost revenue from growing China-led demand for metals and minerals. Vale and Brazil’s Mineral Production Department, or DNPM, set up in August a group to discuss the disputed royalties, failing to meet an October deadline for an agreement. In April, it was given another 60 days to reach a deal.

The Rio-based company said April 17 that it estimated the royalty dispute at about 5.64 billion reais as of Dec. 31, including possible fines and interest payments. The company may end up paying 1.2 billion reais, Credit Suisse Group AG analysts led by Ivano Westin said in a note to customers dated July 13.

Vale, which dedicated about 40 staff members to provide new information to authorities and reduce the value of the claim, is getting opinions from external lawyers for its board to weigh the chances of success in court, Torres said.

Deals

Roper Agrees to Buy Software Maker Sunquest for $1.42 Billion

Roper Industries Inc. (ROP) agreed to buy Sunquest Information Systems Inc. for about $1.42 billion in cash to add software used in health-care diagnostics.

Davis Polk & Wardwell LLP is advising Roper Industries Inc. while Kirkland & Ellis LLP represents Vista Equity Partners and Sunquest Information Systems Inc.

The Davis Polk New York team includes partners Joseph Rinaldi, corporate; Kenneth J. Steinberg, credit; Kathleen L. Ferrell, tax; and Jean McLoughlin; benefits advice.

The Kirkland team includes San Francisco corporate partners David Breach and Stuart Casillas.

The transaction includes $25 million in cash tax benefits, and the acquisition of the Tucson, Arizona-based company will be “immediately” cash accretive and add $140 million in earnings before interest, tax, depreciation and amortization next year, Roper Industries said July 30 in a statement.

Roper Industries, based in Sarasota, Florida, makes engineering products for the water, energy, transportation and medical industries.

For more, click here.

Fees

Lehman’s Bankruptcy Adviser Fees Pass $1.7 Billion Through June

Lehman Brothers Holdings Inc. paid advisers $16.4 million in June, bringing total fees to more than $1.7 billion since the former investment bank’s bankruptcy.

Its chief bankruptcy law firm, Weil Gotshal & Manges LLP, made $6 million in June, bringing total fees from Lehman work to $419 million.

As of June 30, Lehman had $8.2 billion in cash available for use, according to a filing in U.S. bankruptcy court in Manhattan.

Lehman failed because of too much debt and risky real estate investments, according to a bankruptcy examiner’s report.

The bankruptcy case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Elizabeth Amon in New York at eamon2@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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