Martoma, Gibson, Sullivan & Cromwell: Business of Law
Richard Strassberg, the Goodwin Procter LLP lawyer who represented Martha Stewart’s broker Peter Bacanovic in his 2004 criminal trial, will head a legal team defending former SAC Capital Advisors LP portfolio manager Mathew Martoma against insider-trading charges.
Martoma, 38, is charged in what prosecutors have called the biggest insider-trading scheme in history. Strassberg, chairman of Goodwin Procter’s white-collar crime and government investigations practice, will take over Martoma’s case from Charles Stillman and his New York firm, Stillman & Friedman, both firms said yesterday.
“We wish Mathew Martoma all the best,” Stillman said in a statement.
Martoma is charged with conspiracy and securities fraud for allegedly using inside information about a clinical drug trial to make $276 million for SAC.
Prosecutors claim Martoma traded on tips from a physician who was in charge of monitoring tests of bapineuzumab, or bapi, a drug to treat Alzheimer’s disease. Martoma used the tips to trade in Elan Corp. and Wyeth LLC, the government said.
When Martoma learned the companies would report negative data on the drug, he had a 20-minute phone call with SAC’s founder, Steven A. Cohen, according to the government.
SAC, based in Stamford, Connecticut, began liquidating its $700 million position in Elan and Wyeth the day after the call, the government said. SAC then profited by taking short positions in the stock, prosecutors said.
Cohen’s fate may hinge on whether Martoma chooses to plead guilty and cooperate with investigators or go to trial and seek an acquittal.
Strassberg will lead a team of four Goodwin Procter partners that also includes Roberto Braceras, John Farley and Dan Roeser, according to Lee Feldman, a firm spokesman. The firm will represent Martoma in the criminal case and in related civil litigation brought by the U.S. Securities and Exchange Commission, Feldman said.
Strassberg recently represented Swiss bank Wegelin & Co., which pleaded guilty to helping American taxpayers hide more than $1.2 billion from the Internal Revenue Service.
Strassberg and Braceras represented Bristol-Myers Squibb Co. (BMY) executive Richard Lane, charged in 2005 with fraud and conspiracy. Prosecutors dropped the case in 2010. The two also represented Jon Paul Rorech, a Deutsche Bank AG trader, in the first insider-trading case involving credit default swaps. After a 2010 trial, the court dismissed the charges against Rorech.
The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).
Corzine Knew MF Global Systems ‘Fatally Flawed,’ Freeh Says
Former MF Global Holdings Ltd. Chairman and Chief Executive Officer Jon S. Corzine’s risky business strategies and mismanagement helped accelerate the futures brokerage’s demise, according to a report by bankruptcy trustee Louis Freeh, the chairman of Pepper Hamilton LLP law firm and president of the Freeh Group Intl LLC, a risk management firm that is part of Pepper Hamilton.
The 124-page report blames Corzine and his management team for bungling an expansion of the company’s traditional business model while ignoring deficiencies in its risk controls. Corzine’s “aggressive trading strategy” that invested heavily in European sovereign debt produced no significant revenue, and he and Chief Financial Officer Henri Steenkamp knew that the company’s controls were flawed as early as May 2010, according to the filing yesterday in U.S. Bankruptcy Court in Manhattan.
Capital and liquidity assumption “were fatally flawed, even though Corzine and other members of his management team knew about their deficiencies many months before they were stretched to their limits” in October 2011, lawyers for Freeh said in the report.
The parent company of brokerage MF Global Inc. filed for bankruptcy on Oct. 31, 2011, after a wrong-way $6.3 billion trade on its own behalf on bonds of some of Europe’s most- indebted nations. The company listed assets of $41 billion and debts of $39.7 billion.
Freeh estimated losses to MF Global and its finance subsidiary of $1.5 billion to $2.1 billion. The trustee for the company’s operating brokerage estimated a shortfall of $1.6 billion in customer funds, and has been distributing payments to former customers in a wind-down proceeding that is separate from the Chapter 11 liquidation of the parent company.
Freeh’s findings come five months after U.S. House Republicans faulted Corzine’s leadership in a report released in November. That report, reached by majority Republicans on a Financial Services subcommittee, described a lack of coordination between the Commodity Futures Trading Commission and Securities and Exchange Commission, primary regulators for MF Global’s U.S. operations.
Corzine, a Democrat, was previously governor of New Jersey and Goldman Sachs Group Inc.’s co-chairman.
The holding company’s Chapter 11 case is In re MF Global Holdings Ltd. (MFGLQ), 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The liquidation of the broker is In re MF Global Inc., 11-bk-02790, in the same court.
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Exide Technologies Tumbles 48% as Debtwire Reports Akin Hiring
Exide Technologies (XIDE) dropped the most in almost nine years yesterday after Debtwire reported that the maker of lead-acid batteries hired Lazard and Akin Gump Strauss Hauer & Feld LLP to advise on a restructuring.
The company hired banker Lazard and law firm Akin Gump after initially engaging Deutsche Bank AG last year to lead a global refinancing, Debtwire said. Management is considering restructuring alternatives amid capital issues and a looming September maturity on its convertible notes, Debtwire reported, citing sources it didn’t identify.
Exide sank 48 percent to $1.37 yesterday in Nasdaq Stock Market trading, the biggest one-day decline since April 21, 2004. The Milton, Georgia-based company has tumbled 60 percent this year.
The company had cash and cash equivalents of $80 million as of Dec. 31, according to its most recent earnings report.
Susan Jaramillo, a company spokeswoman, didn’t respond to a voice-mail message requesting comment on the Debtwire report.
U.S. Law Firm Mergers Hit Four-Year High in First Quarter
Twenty-one U.S. law firms combined in the first three months of 2013, the highest number announced in a single quarter since 2009, with two large Detroit firms moving into new markets, according to Altman Weil MergerLine.
“U.S. law firms continue to grow, primarily through targeted acquisitions,” Altman Weil principal Ward Bower said in a statement yesterday. “Firms are picking up specialty practices, expanding in strong markets and adding offices in new cities.”
IN the biggest combination, Clark Hill PLC, a 231-lawyer firm based in Detroit, merged with Pittsburgh’s 82-laywer Thorp Reed & Armstrong LLP, according to the report. Detroit-based Dickinson Wright PPLC, with 282 lawyers, announced the acquisition of 60-lawyer, Phoenix-based Mariscal Weeks McIntyre & Friedlander.
The rest of the deals announced in the first quarter were acquisitions with fewer than 25 lawyers, according to the report. They included five firm combinations in the South and seven multiregional combinations.
For more information, see www.altmanweil.com/MergerLine.
SEC Regional Director Marc Fagel to Join Gibson Dunn
Marc Fagel, most recently the director of the San Francisco regional office of the U.S. Securities and Exchange Commission, will join Gibson, Dunn & Crutcher LLP’s San Francisco office as a partner. Fagel joins the firm’s securities enforcement practice.
“Securities enforcement investigations and actions, as well as related white collar and private securities class actions and derivative litigation, are on the rise,” Ken Doran, chairman and managing partner of Gibson Dunn, said in a statement. “Given his experience, visibility and reputation in this area, Marc will be a tremendous resource for our clients.”
Fagel had been regional director of the SEC’s San Francisco office since 2008, managing a staff of 100 lawyers and professionals and overseeing the SEC’s enforcement and examination programs for Northern California, Washington, Oregon, Alaska, Montana and Idaho. He was the associate regional director from 2005 to 2008.
“After more than 15 years at the SEC, I am looking forward to returning to private practice,” Fagel said in a statement. “With its national reputation in securities litigation and enforcement and established client base, Gibson Dunn is a perfect fit for me.”
Gibson Dunn has more than 1,100 lawyers at 18 offices in the Americas, Europe and Asia.
U.S. Attorney O’Neill Joins Freeh Group International Solutions
“We are honored to be joined by a sitting United States attorney,” James R. Bucknam, chief executive officer of FGIS, said in a statement, “but especially honored to be joined by Bobby O’Neill, an outstanding prosecutor of the highest caliber. He represents a significant addition to our senior ranks.”
O’Neill has spent about 20 years prosecuting crimes in federal courtrooms in Tampa and Miami, the company said. Before serving in the Middle District starting in 1993, O’Neill was assistant U.S. attorney in the Southern District of Florida in Miami from 1986 to 1990.
The new Miami office will provide a base for FGIS’s growing Latin American practice, Bucknam said in the statement. The global risk management firm is a part of law firm Pepper Hamilton LLP.
“I am thrilled to team up with a group of outstanding professionals who are doing great work for great clients,” O’Neill said in a statement. “To work with the likes of Louie Freeh, Jim Bucknam, and their colleagues, some of whom I have known for over 25 years, is a bonus.”
Schiff Hardin LLP Adds Ann Arbor State and Local Taxation Team
Schiff Hardin LLP announced the addition of a team of state and local taxation attorneys to the firm’s Ann Arbor, Michigan, office. Partner Joanne B. Faycurry, along with three other lawyers, join Schiff Hardin from Miller Canfield PLC in Detroit.
“We are enthused about the addition of these highly talented attorneys to our growing Ann Arbor office,” Gregory L. Curtner, coordinating partner of Schiff Hardin’s Ann Arbor office, said in a statement. “This group brings extensive knowledge and wide-ranging experience in state and local tax matters.”
Schiff Hardin has almost 400 attorneys in nine U.S. offices.
New Hires in California, Florida and in the Middle East
In California, two firms announced partner hires. The Palo Alto office of K&L Gates LLP hired Linda Zhou as a partner in the emerging growth and venture capital practice. Zhou joins K&L Gates from Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP, the firm said.
Pepper Hamilton LLP announced that Alan J. Kessel has joined the firm’s Orange County, California, office as a partner in the commercial litigation practice group. Prior to joining Pepper, Kessel was a partner at Baker & Hostetler LLP, according to a statement from the firm.
In Florida, Squire Sanders LLP added Gregory E. Young to the firm’s real estate practice group as a partner in its West Palm Beach office. He joins from Edwards Wildman Palmer LLP where he was chairman of the public policy and governmental relations department, and has been a member of the firm-wide management team.
Cozen O’Connor announced that Martin Schrier has joined its Miami office as a member. Formerly with K&L Gates, Schrier focuses his practice on business transactions, including domestic and international mergers and acquisitions, leveraged buyouts, restructurings, and venture and growth capital investments, the firm said.
Outside the U.S., Holland & Knight LLP announced that Oliver Agha has joined the firm as a partner and will head its Islamic finance and Middle East and North Africa practices. He founded Dubai-based Agha & Co. in 2010 as a boutique Islamic finance firm. The four associate attorneys at his firm will also join Holland & Knight, working out of both Dubai and Abu Dhabi.
Gowlings hired Canadian corporate finance, mergers-and- acquisitions and private-equity lawyer Ian Palm as a partner in its Toronto office. Palm was previously a partner at McCarthy Tetrault LLP, where he led the private equity group, the firm said.
Sullivan & Cromwell’s M&A Hotline is Ringing
Despite the number of global mergers-and-acquisition deals being down year over year for the first quarter, Sullivan & Cromwell LLP expects deal work to increase in 2013 because the phone is ringing more often at its New York office, partner Frank Aquila told Bloomberg Law’s Lee Pacchia.
“A year ago, very few clients were considering making larger or even smaller acquisitions,” he said. And most deals clients consider fall through the cracks. “You have to get 50 phone calls to get 20 deals done.”
Japan’s moves to push down the value of the yen and the end of the leadership change in the Chinese government point toward growth in Asian M&A over the next nine months, he said. Aquila also said domestic deal work is likely to rebound, while Europe is expected to remain uncertain.
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