June 29 (Bloomberg) -- For U.S. Solicitor General Donald Verrilli, the Supreme Court’s decision to uphold the Obama administration’s health-care overhaul meant vindication.
During oral arguments in March, Verrilli faced questions from four of the court’s Republican appointees, and afterward was mocked in campaign ads and by television talk-show hosts, raising expectations that President Barack Obama’s signature domestic-policy achievement would be thrown out.
Yesterday, after the court issued its 5-4 ruling affirming the core of the 2010 law, Verrilli was the first person Obama called. The health-care decision came three days after the high court largely sided with Verrilli and the administration by scaling back an Arizona law targeting illegal immigrants.
“Don is one of the great Supreme Court and appellate advocates of our generation and he knew that,” said David Ogden, a former deputy attorney general who is now a partner at WilmerHale in Washington. “He knew he did a job that was good enough to win the case.”
Verrilli, 55, endured some suspenseful moments in the courtroom yesterday. While the decision was distributed outside to media and other watchers, people inside -- including Verrilli -- listened as Chief Justice John Roberts announced the ruling. With Verrilli sitting several feet away, Roberts started by saying the requirement at the core of the law -- that individuals get insurance or pay a penalty -- couldn’t be upheld under Congress’ power to regulate interstate commerce.
For about 10 minutes, the measure’s future looked in doubt. Then, Roberts switched gears, saying that the majority had concluded Congress had the authority to impose the insurance requirement -- under its power to levy taxes, salvaging the health-care overhaul’s constitutionality.
Verrilli and his colleagues celebrated afterward with champagne back at his office. The moment was a far cry from late March when commentators highlighted the harsh questioning he endured from the justices, including Roberts, Antonin Scalia and Anthony Kennedy, as signs the law would be struck down.
Following the argument, Verrilli was mocked and criticized by people ranging from Comedy Central’s “The Daily Show” host Jon Stewart to CNN legal commentator Jeffrey Toobin. The Republican Party followed with an Internet advertisement that altered Verrilli’s presentation to show him struggling for words and twice stopping to drink water.
“It was sufficiently sustained and nasty that it would affect anybody,” said Paul Smith, Verrilli’s former partner at Jenner & Block LLP. “But Don is a grown-up and knows what a tough town it can be.”
Verrilli, a Columbia Law School graduate and former law clerk to Justice William Brennan, returned to work after the health-care arguments and focused on the immigration case which was still pending. Privately, he made light of the criticism, and he hinted at it publicly during a speech to Columbia law graduates last month.
“There will be times when things break badly for you,” he told them. “You don’t live up to the expectations you have for yourself and others have for you. It happens to all of us. And when it happens it can be tough, believe me.”
Nominated in January 2011 to replace Elena Kagan as Solicitor General, Verrilli had worked at Jenner & Block in Washington representing the music and movie industries, winning a 2005 Supreme Court ruling that lets them press copyright suits against Internet file-sharing networks.
The decision on tax power surprised Paul Clement, the former solicitor general who represented 26 states challenging Obama’s health-care law. Arguments before the court focused more on the Commerce Clause, with taxing “not the focus,” he said in an interview with Bloomberg Television.
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House Makes Holder First U.S. Cabinet Member Cited for Contempt
The U.S. House cited Attorney General Eric Holder in contempt of Congress for refusing to provide documents about a federal gun operation and authorized its lawyers to wage a court battle to get them.
Republicans said Holder didn’t comply with a subpoena for material from the Fast and Furious operation, which allowed illegally purchased firearms from the U.S. to wind up at crime scenes in Mexico. President Barack Obama has asserted executive privilege over the documents and declined to turn them over.
The 255-67 vote yesterday, which made Holder the first Cabinet member ever held in contempt by either chamber of Congress, follows steady Republican criticism of the nation’s top law enforcement officer. More than 100 Republican lawmakers have called for Holder’s resignation over his handling of Fast and Furious, terrorism and other matters. Many Democrats didn’t vote and walked off the House floor in protest.
The contempt citation, which doesn’t need Senate approval, now goes to the U.S. attorney in Washington to determine whether criminal prosecution is warranted. The Washington prosecutor, Ronald Machen, is an Obama nominee who probably won’t pursue the matter after Obama claimed executive privilege over the documents last week, said Josh Chafetz, a professor at Cornell Law School in Ithaca, New York.
Executive privilege is a principle that says the executive branch can’t be required by Congress to disclose confidential communications because their release would harm the operations of the White House.
In a statement after the vote, White House spokesman Dan Pfeiffer said House Republicans “pushed for political theater rather than legitimate congressional oversight.” Separately, Holder called the House’s contempt citation “the regrettable culmination of what became a misguided and politically motivated investigation during an election year.”
Two Republicans, Steve LaTourette of Ohio and Scott Rigell of Virginia, joined 65 Democrats in opposing the contempt citation while 17 Democrats supported it. Before the roll call most of the 108 Democrats who didn’t vote, including Minority Leader Nancy Pelosi of California, walked out of the chamber to protest the resolution.
Lawmakers then voted 258-95 to authorize a civil lawsuit to force Holder to turn over the documents. Both LaTourette and Rigell supported the civil enforcement resolution. Democrat on the oversight panel, called the probe “one of the most reckless and politically motivated congressional investigations in decades.”
Cummings argued that the investigation is aimed not at getting to the truth about Fast and Furious because Issa has refused to allow questioning of the head of the Bureau of Alcohol, Tobacco, Firearms and Explosives, which ran the operation.
“No member has been able to pose a single question to the head of ATF,” Cummings said.
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News Corp. to Split Into Two After Board Approves Separation
News Corp., the media company controlled by Rupert Murdoch, said it plans to split into two after its board approved the move separating publishing assets from entertainment businesses.
Skadden, Arps, Slate, Meagher & Flom LLP is representing News Corp. in the matter. New York mergers and acquisitions partners Howard Ellin, Brandon Van Dyke and Lou Kling are involved, as is New York tax partner Steven Matays.
The publishing business consists of newspapers in the U.S., U.K. and Australia, as well as book, education and marketing assets, according to a statement from the company. The media and entertainment company includes film and TV assets. Murdoch will be chairman of both companies and chief executive officer of the media business when the deal is completed in about 12 months.
“Everyone is enormously excited for what we’ll be able to achieve with this split,” Murdoch, 81, said in a telephone interview after the announcement.
With the action, Murdoch is bowing to shareholder demands after a costly yearlong scandal at his treasured newspaper operation, which is seen as a drag on the larger and growing film, broadcast and pay-television units. The phone-hacking probe at the U.K. newspapers has led to arrests and parliamentary hearings, costing News Corp. millions.
Centerview Partners, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are advising News Corp. on the breakup, according to people with knowledge of the situation. JPMorgan is working with the company on the capital structure, credit ratings and financing for the publishing company, one person said.
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Cravath Elects Parker Presiding Partner, Chesler as Chairman
C. Allen Parker, a corporate partner, will take the helm at Cravath, Swaine & Moore LLP at the beginning of the year. He was elected to succeed Evan R. Chesler as presiding partner, as of Jan. 1. Chesler will become chairman of the firm, also in January.
“I have known Allen Parker my entire career. He is one of the classiest guys on Wall Street and helped me build our investment bank,” James B. Lee, vice chairman of JPMorgan Chase & Co., said in an e-mail. “The partners at Cravath are in good hands.”
Parker, who has been the deputy presiding partner of the firm since Jan. 1, 2007, joined the firm in 1984 and made partner in 1990. He served as head of the corporate department from January 2009 to September 2010 and as managing partner of the corporate department from January 2001 to December 2004.
Parker has experience in a range of finance and banking matters, including syndicated loan transactions, acquisition financings and leveraged recapitalizations, the firm said. His clients, in addition to JPMorgan Chase, have included Citigroup Inc., Covenant House, DreamWorks Animation SKG and DreamWorks Studios. Parker declined to be interviewed about his new role.
As chairman, Chesler, a litigator, will continue trying cases and maintaining the firm’s important client relationships, according to the firm’s statement.
Chesler served as Cravath’s presiding partner since 2007 and deputy presiding partner before that. Chesler also was head of the litigation department from September 1996 until November 2005. He joined Cravath in 1976 and became a partner in 1982.
Chesler is known for handling a variety of litigation, including securities, shareholder derivative, intellectual property, general commercial, contract and antitrust matters, the firm said. His clients have included Alcoa Inc., American Express Co., DuPont Co., International Business Machines Corp., JPMorgan Chase and Merck & Co.
Cravath has more than 490 lawyers in New York City and London.
Herbert Smith to Merge With Australia’s Freehills, Open in U.S.
Herbert Smith LLP of London and Freehills, Australia’s third-largest law firm, will merge to create a 2,800-lawyer firm, with plans to open offices in New York, Seoul and Africa.
The full equity merger will take effect Oct. 1, the two firms said in a joint statement yesterday. David Willis and Gavin Bell, the managing partners of Herbert Smith and Freehills, will be joint chief executive officers of the new firm.
Herbert Smith Freehills, as the firm will be known around the world, is the fourth combination of an Australian and an international firm this year and the first to have a single profit pool for its global partners. Allens Linklaters, King & Wood Mallesons and Ashurst have maintained separate finances while chasing a bigger share of energy, natural resources and acquisition work with Chinese and other Asian clients.
“As the world’s business and deal activity moves eastwards, this new firm is exceptionally well-placed to serve both Asian and multinational clients in the Asia Pacific, the fastest growing legal market in the world,” said Mark Johnson, Asia head of Herbert Smith.
The new firm will have 20 offices in Asia, Australia, Europe and the Middle East, and plans to open in New York, Seoul and North Africa this year, Johnson said in an interview. Herbert Smith, which has ended a decade-long alliance with German firm Gleiss Lutz, also plans to open an office in Germany next year, he said.
Law firms have been merging to better serve clients as the global economy has slowed and competition increased. The May bankruptcy of New York-based Dewey & LeBoeuf LLP, created in a 2007 merger, illustrates the industry’s challenges.
The world’s largest law firms, DLA Piper and Baker & McKenzie, don’t have a single pool from which all their partners share the profit or loss. Recent combinations involving U.S. firms including Hogan Lovells and SNR Denton have also kept their finances separate.
While some firms like Norton Rose Group, which combines U.K., Australian, Canadian and South African partnerships, say they are no different from a fully integrated firm, Bell of Freehills said that a full merger creates an incentive for all partners to work together and ensures seamless client service.
“Over the next few years the market for premium legal services will become increasingly dominated by a small number of truly global firms,” Willis said.
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Kerviel Lawyer Continues Aggressive Strategy in Final Appeal
Jerome Kerviel apologized to Societe Generale SA employees and said he “never lied” during the investigation into the bank’s 4.9 billion-euro ($6.1 billion) trading loss, as his lawyers asked a Paris court to clear him of any wrongdoing on the final day of his hearing.
Kerviel, 35, is fighting a 2010 guilty verdict, for which he was sentenced to three years in prison and ordered to repay the bank for its losses. Yesterday, the prosecutor asked for the maximum five years, a tougher recommendation than the lower court prosecution requested.
The court is to issue its decision Oct. 24. Kerviel and his lawyers didn’t back down yesterday from the aggressive strategy they’ve pursued in their appeal. Defense attorneys conceded their client admitted to exceeding trading limits, falsifying documents and lying to people who questioned him about his bets and faked hedges he created to mask the losses. They argued that none of the actions rose to the level of a crime in France.
Kerviel said throughout the proceeding that his superiors knew what he was doing and advanced a theory that the bank allowed him to take such risks in order to use him as a scapegoat and distract from its losses on the U.S. subprime mortgage market.
“Jerome Kerviel must get the benefit of the doubt, he must be cleared,” said Julien Dami Le Coz, one of his lawyers. He focused on the technicalities of the law, arguing that since there weren’t individual limits on traders, there was no abuse of trust. The lawyer also argued that the falsified documents couldn’t count as crimes under French law because the amounts Kerviel was claiming -- his bets had risen to 50 billion euros by the time the bank discovered them -- “couldn’t fool” anyone.
If Kerviel should be condemned again, his lead lawyer, David Koubbi, called for a sentence “he could survive.”
Koubbi frequently clashed with Mireille Filippini, who led the panel of three judges overseeing the appeal. Yesterday, he continued to criticize the court, saying “nothing has been respected in this case,” and calling the lower court’s ruling “absurd.”
Kerviel has changed legal teams at least four times since the bank loss was announced Jan. 24, 2008. The current team, which took over about three months before the hearings began June 4, “decided to take on the defense fully, to let nothing slip by, to respond blow for blow,” co-counsel Benoit Pruvost said yesterday.
World Bank’s Zoellick to Join Harvard, Peterson Institute
World Bank President Robert Zoellick said he will join Harvard University’s Kennedy School of Government and the Peterson Institute for International Economics when his term ends this week.
Zoellick, who served in three Republican administrations before taking the World Bank’s helm in 2007, will become a senior fellow at the Kennedy School’s Belfer Center for Science and International Affairs, he said in an e-mailed statement. He will also be the Washington-based Peterson Institute’s first Distinguished Fellow, according to the release.
Zoellick graduated from Swarthmore College in 1975 and earned a J.D. from Harvard Law School and a Master of Public Policy from the Kennedy School of Government in 1981.
“I hope to work on the intersection of economics and security, applying history to policy questions of today,” Zoellick said in the statement.
Zoellick, who was nominated for the World Bank job by Republican President George W. Bush in 2007, has held positions including U.S. trade representative and deputy secretary of state. He will be replaced at the bank by Dartmouth College President Jim Yong Kim.
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