The Struggle for Transparency in Political Advertising

By Camila Piedrahita Abello, J.D. Candidate 2019 | Posted on

On October 19, 2017, Senators Mark Warner, Amy Klobuchar, and John McCain introduced new campaign finance legislation. The “Honest Ads Act” seeks to compel greater disclosure surrounding online political advertising. More specifically, the bill would force large digital platforms (those with at least 50 million monthly views) to keep a public file of paid political advertising exceeding $500 per advertiser.

In response to reports of Russian interference in the 2016 election, the goal of the Honest Ads Act is to prevent foreign actors from buying ads on online platforms. It would require sites like Facebook and Twitter to “make ‘all reasonable efforts’ to ensure that foreign individuals and entities are not buying political advertisements to influence the U.S. electorate.”

Per the Federal Election Campaign Act of 1971, radio, television, and newspaper ads already carry restrictions when it comes to political advertisement disclosures. Online advertising, however, has remained untouched by these rules. Proponents of the exemption argued that as an “evolving mode of mass communication,” the Internet required fewer restrictions than other forms of media. This exemption allowed Russian companies to purchase $100,000 in political advertisements during the latest presidential election.

Despite the bipartisan nature of this bill, some social media companies have already mounted a campaign to influence or even resist the proposed changes. Facebook’s Chief Operating Officer argued that Facebook is not a media company, but rather “a tech company” that would take its own steps to achieve advertising transparency. Facebook’s Vice President of U.S. Public Policy, however, said the company would work with lawmakers to create a legislative solution to the political advertisement problem. A Twitter spokesperson noted that the company “look[s] forward to engaging with Congress and the FEC on these issues.”

Representatives Derek Kilmer and Mike Coffman have introduced a companion bill to the Honest Ads Act in the House. It is unclear when either version of the bill will come up for a vote.

The Struggle for Transparency in Political Advertising (PDF)

Uber Discrimination Lawsuits in Tech

By Angela Lyons, J.D. Candidate 2019 | Posted on

Three Latina female engineers have filed suit against Uber for gender and race discrimination. The suit, filed in San Francisco on October 24, 2017, alleges that Uber violated the Equal Pay Act by using a “stack ranking” system. The promotion vehicle is alleged to be an unreliable qualitative method that systematically undervalues female employees and employees of color. The three plaintiffs are represented by Outten & Golden, which has also represented employees in suits against Goldman Sachs and Microsoft.

The suit comes after Uber attempted to amend some of its culture issues. In August, the company instituted a new policy that bumped up the salaries of employees who were not paid the median amount for their jobs. The policy change also included a 2.5% salary increase for each year an employee had worked at Uber.

These changes come after Uber acknowledged its pervasive sexism following a viral blog post detailing an engineer’s experience with rampant sexism and sexual harassment. In response, Uber’s CEO Travis Kalanick ultimately resigned. Eric Holder was then hired to review the company’s policies, and Frances Frei of Harvard Business School was brought on board to improve company culture.

Uber is not the only company facing similar charges. Google, Tesla, and Microsoft have been the subject of discrimination lawsuits in recent months. Given the pervasiveness of these suits, it is possible that more employees will come forward in the future. With more employees beginning to speak out, these suits may mark a watershed moment in the technology industry.

Uber Discrimination Lawsuits in Tech (PDF)

Supreme Court to Decide Microsoft Data Privacy Case

By Patrick Blake, J.D. Candidate 2019 | Posted on

This month, the Supreme Court has decided to hear a case that will resolve whether a United States company, Microsoft, must provide data stored on servers outside the United States.  The decision will impact what data is available to the United States Government and will have reactions in countries where the data is stored.

In 2016, a Second Circuit decision overturned a district court ruling and held that the Government cannot compel an internet service provider to produce information overseas that would constitute an extra-territorial application of the statute not in accordance with congressional intent.  The court focused on user privacy and increased global freedom of expression.

This decision has been criticized for not addressing the complexities of data in the technological age. One of the difficulties in all of this is interpreting anachronistic legal terms and cases to a world that where technological progress and entrepreneurship is moving at an incredible pace.  Applying the Fourth Amendment in a digital world means a breakdown of traditional distinctions protecting privacy.

Additionally, there may be impacts in foreign relations.  The European Union (EU) has updated their policies in what they call the General Data Protection Regulation.   It is worth considering whether this policy, which has yet to go into effect, would have implications for EU companies with data stored in the United States.  One of the key changes in their law is the extra-territorial application.

What will the Supreme Court have to say?  Will they draw clear lines?  Will they acknowledge the complexities of this space?  Will they issue a ruling that impacts entrepreneurship or your individual data privacy?  Or will they send a message the Fourth Amendment needs to be squared immediately with our individual constitutional rights?

Supreme Court to Decide Microsoft Data Privacy Case (PDF)

Nursing Home Giant Owes Landlord Over $300 Million In Rent

By Michael Soon Fah, J.D. Candidate 2019 | Posted on

Significant changes could be coming for thousands of elderly residents living at HCR ManorCare’s 292 nursing home and assisted care facilities. On August 17, 2017, HCR’s landlord and real estate company, Quality Care Properties, Inc., filed a complaint seeking to recover over $300 million in rent owed. The complaint asks the Court to appoint a receiver to facilitate transfer of the homes to a new operator. On October 19, QCP announced it had agreed to extend the deadline for HCR to respond to the receivership complaint. HCR now has until November 1 to respond.

A receivership is an alternative remedy to traditional bankruptcy and eviction. In a receivership proceeding, the court orders transfer of the insolvent’s assets to an appointed receiver. The receiver will facilitate transition of ownership to a new entity who will hopefully be able to run the operation profitably and meet its obligations. During the interim, the court empowers the receiver with the power to manage the business and protect its assets. Receiverships enable continuity and stability, but are only granted in certain circumstances that vary depending on jurisdiction.

Receiverships have been used to transfer ownership of smaller nursing home companies in the past. Recently in July 2017, a court approved the transfer of Fortis Management Group’s 65 nursing homes and assisted living facilities to a receiver. However, a court has yet to apply receivership to a nursing home giant like HCR ManorCare.

QCP’s lawsuit hits HCR amidst Department of Justice accusations of Medicare fraud. On April 21, 2015, the DOJ announced it had intervened in a consolidated False Claims Act lawsuit against HCR. The government alleged that HCR pressured staff to push unnecessary services on residents and kept discharge-worthy patients in its facilities to increase Medicare billables. The case is still pending in District Court. If the Court finds HCR engaged in intentional fraud, liability under the False Claims Act may not be dischargeable in bankruptcy.

HCR and QCP expect to use the deadline extension to discuss the possibility of selling and releasing properties, governance and protocol changes, and asset stewardship. It is unclear whether these talks are aimed at completely avoiding the receivership or preliminarily restructuring HCR’s assets in advance of the proceeding. Either way, for thousands of HCR ManorCare residents, home could be completely different in the not so distant future.

Nursing Home Giant Owes Landlord Over $300 Million In Rent (PDF)

$150 Billion Spark Bipartisanship and Changes the Definition of “Worthy”

By Cremeithius Riggins, J.D. Candidate 2020 | Posted on

Congress and White House personnel are attempting to raise the financial threshold for a banking institution to be considered a “Systematically Important Financial Institution” (SIFI). On its face, this may seem to bring about banking reform; however, this would lead to a dramatic decrease in federal oversight and transparency. Considering the 2008 financial crisis, it is difficult to understand why any banking institution would not be considered systematically important. Nevertheless, the arguably arbitrary $50 billion threshold is taking center stage for what has already been a controversial Trump agenda.

At a time when there has been very little to celebrate about our government’s ability to work in a bipartisan manner, it appears that economics has forced the hand of some, including top White House economic advisor, Gary Cohen. Cohen was considered the “most important person” in Washington and on Wall Street. Cohen has been working with Democrats and Republicans to create significant changes in U.S. banking. On October 16, 2017, Cohen told the American Banking Association that the SIFI threshold needs to be raised from $50 billion to $200 billion. Is the U.S. banking system ready for a $150 million-dollar threshold increase only seven years after the $50 billion threshold was implemented?

Let’s put this into perspective. The 2008 financial crisis was the most stifling financial dilemma since the Great Depression. Several economic markets were crashing. The financial sector, credit industry, real estate market, and auto industry required federal funding to prevent economic turmoil. Many companies failed and many people lost their assets in the aftermath. It is also important to consider that the United States was not the only country that experienced the shock. The economic shock was so profound that it traveled across the Atlantic Ocean and devastated many European markets.

As a result of the financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). The Dodd-Frank Act was the culmination of studies conducted by the Commodity Futures Trading Commission (CFTC) and implemented an increase in regulation of swap market dealers. The current listing of swap dealers features more than 100 banking institutions considered SIFIs because they possess more than $50 billion dollars in assets. These banking institutions face greater federal oversight to increase transparency and lower risk to Americans. The $50 billion threshold was implemented to protect Americans; however, some economists attribute a negative impact to the threshold because it limits banks from lending to “worthy” customers. Does a $150 billion increase in the threshold change the definition of a worthy customer?

The worthy customer is as ambiguous and arbitrary as the slogan, “let banks be banks again,” used by President Trump to support the proposed $150 billion threshold increase. It is unclear exactly how many of the approximately one-hundred SIFIs would be free from governmental oversight. However, if letting banks be banks again means allowing institutions to engage in risky transactions to the detriment of Americans, it is as undesirable as waking up to the loss of all your fantasy stock.

$150 Billion Spark Bipartisanship and Changes the Definition of Worthy (PDF)

Recap: “Leadership Lunch Talk: Ricardo Cortes-Monroy, Nestlé – Sustenance and Sustainability”

By Hayley Dardick, J.D. Candidate 2019 | Posted on

On October 24th, 2017, the Berkeley Center for Law, Business and the Economy (BCLBE) hosted Ricardo Cortes-Monroy, Chief Legal Officer and General Counsel of Nestlé.

Nestlé is the world’s largest food company, manufacturing more than 10,000 different products, employing around 330,000 people, and maintaining a presence in over 150 countries. Mr. Cortes-Monroy not only manages the company’s giant legal department, but is recognized as a leader in the legal community for advancing corporate citizenship.

He explained that sustainability and corporate responsibility should be understood as legal issues, and urged this needs to be embraced by other inside counsel. In the past, these concepts were only acknowledged as public relations concerns—indeed many lawyers today view corporate responsibility as nothing more than a marketing fad. Mr. Cortes-Monroy, however, explains these concepts are relevant business considerations. In the food industry, you must maintain trust and a positive reputation to be successful with consumers. But for Mr. Cortes-Monroy, the bottom line is, “It’s not about what is legal, but what is right.”

The paramount example of Mr. Cortes-Monroy’s commitment to this ideal is the Thai fisheries case. In 2014, media outlets and NGOs began reporting on ties between horrific labor conditions on fishing boats in Thailand and Purina cat food, a brand owned by Nestlé. In response to these reports, Nestlé’s legal department commissioned global NGO Verité  to investigate its production sites in Thailand. Using supply chain mapping, Verité confirmed a link. In an incredibly dangerous move and despite significant legal risks, Nestlé published the report online, basically admitting wrongdoing. Mr. Cortes-Monroy recognizes, “from a defense lawyer perspective, what we did was crazy.”

Yet, the company was publically praised for disclosing the report and announcing an action plan to combat slave labor in its supply chain. Measures outlined in the plan include commissioning an emergency response team, launching an awareness campaign, training boat owners and captains, and utilizing a traceability system and audits. Nestlé’s disclosure ultimately shielded the company from liability under the safe harbor doctrine in one California class action.

Nestlé’s commitment to corporate responsibility may be having an influence on other companies, as well. Pulling straight from the Nestlé playbook, Patagonia engaged Verité to investigate forced labor in their clothing supply chain and to assist the company with a strategy moving forward.

Nestlé continues to strive for improvement in sustainability. For example, the company has committed to purchase only cage-free eggs by 2020. As Mr. Cortes-Monroy concluded, “Challenges are still there, but there has been remarkable progress in the last few years.”

The presentation also discussed Nestlé’s Summer Internship Program for 1L students. Second year Berkeley Law student Lauren Kelly-Jones was on-hand to share her experience interning in Nestlé’s Legal Sustainability & Creating Shared Value group this past summer in Vevey, Switzerland. Interested first year students may apply for next summer’s program when the application becomes available on December 1st.

Recap Leadership Lunch Talk Ricardo Cortes-Monroy, Nestlé – Sustenance and Sustainability (PDF)

Chinese Business Law: Who’s Pulling the Strings?

By Michael Homer, J.D. Candidate 2020 | Posted on

The Communist Party of the People’s Republic of China held its 19th Party Congress last week. The twice-a-decade party determines China’s political and economic development of at least the next five years, and is when the new leadership of the Communist Party is chosen. Chinese President Xi Jinping is expected to use this opportunity to further consolidate political power, and set forth his vision for the country’s future.

Under Xi, the trend of utilizing law to centralize authority and strengthen control has been accelerating, as evidenced by the recent codifying of informal restrictions, such as the anti-graft campaign. In an effort to embolden the campaign, Xi plans to invest legal authority in the nascent National Supervision Commission to crack down on corruption. It has been speculated that Wang Qishan, a current member of the Standing Committee of the Politburo and a.k.a. “China’s second most powerful man,” will head the organization.

Wang Qishan, the so-called anti-graft tsar, was recently accused by Chinese dissident Guo Wengui of corruption himself. Guo alleged that Wang has an illicit financial connection with the HNA Group, a multibillion-dollar Chinese conglomerate. Guo Wengui, a real estate billionaire turned exiled democratic-reform advocate has built quite an online following for himself in the last year utilizing social media to expose what he claims is his first-hand knowledge of the corruption of “Chinese kleptocrats.” Interestingly enough, Guo’s YouTube account was recently suspended for 90 days for alleged harassment. The identity of the person or organization who alleged harassment has not been released, although Guo believes that the Chinese government was behind the complaint.

The Communist Party’s growing influence on foreign companies has increased in recent years. The law in China requires foreign companies to set up Communist Party cells in their firms. According to Qi Yu, a deputy head of the Communist Party’s Organization Department, these party cells “help [foreign firms] to understand in a timely manner Chinese policies, to resolve salary disputes, and provide positive energy for the company’s development.” While Communist officials claim that foreign companies welcome the benefit of having a party cell within their organization, some foreign executives have privately expressed their concern about increasing political pressure from the Party to allow greater control over business and investment decisions.

Chinese Business Law Who’s Pulling the Strings (PDF)

The FTC Sends Student Debt Relief Scammers Their Regards

By Bonifacio Sison, J.D. Candidate 2020 | Posted on

It was indeed an unlucky Friday the 13th for student debt relief scammers following an announcement of a task force by the Federal Trade Commission along with 12 state attorney generals. Cases have been filed against companies, such as Student Debt Doctor and American Student Loan Consolidators, under an operation named Game of Loans. The accused companies have been charged with misleading debtors about their fees and student-loan payments. Seven FTC actions are involved in the operation: five new cases, a single new judgment in favor of the FTC, and a preliminary injunction for a case filed this past year.

Over 42 million Americans have student loan debts with an outstanding balance of more than $1.4 trillion. After mortgages, student loans are the largest segment of U.S. debt. Student loan servicers assist student debtors with their payments, answer questions, and help them avoid defaulting on their loans. For this service, the federal government pays them millions of dollars.

The issue of fraud arises when these companies provide inconsistent or incomplete information, leaving student debtors vulnerable to scammers. It is estimated by the federal government that scammers have taken more than $95 million in illegal fees over the years. One example involved companies charging an upfront fee of several hundred to over a thousand dollars for merely mailing out paperwork that student debtors can obtain and do themselves for free. In another instance, a Florida-based company promised its student debtors loan forgiveness in five years or less. However, the company falsified the student debtor’s paperwork, such as income and employment status, in order to lower their monthly payments.

A precipitous rise in complaints by student debtors of fraud resulted from the federal government’s broadening of repayment options and debt forgiveness plans. To avoid being scammed, an advisory by the Department of Education stated that student debtors looking for debt consultation should avoid companies that charge fees upfront, ask for bank account information or access to their federal student aid PIN. A company having access to this PIN number would allow them to act on behalf of the student debtor.

In the wake of Operation Game of Loans, state officials ranging from Colorado, Texas, the District of Columbia, among many others, are working together to protect student debtors and educate the general population about how to spot these scams and if they are scammed, where to seek help. “Winter is coming for debt relief scams that prey on hardworking Americans struggling to pay back their student loans,” announced Maureen K. Ohlhausen, FTC Acting Chairman.

The FTC Sends Student Debt Relief Scammers Their Regards (PDF)

U.S. and European Tax Authorities Look at U.S. Corporate Profits Overseas

By Nathan Shi, J.D. Candidate 2019 | Posted on

Republicans in Congress have released an outline of their plan to rewrite the tax code. A recent episode of NPR’s Planet Money explains that a centerpiece of the Republican plan is to drastically reduce corporate taxation, lowering the rate to twenty percent. Currently, the corporate tax rate in the U.S. is thirty-five percent, one of the highest in the world. But, there are various exceptions in the tax code that allow many Corporations to be taxed at about a little over twenty percent; a comparable rate to the rest of the world.

One of the most prominent exceptions allows companies to avoid taxation on profit earned outside of the U.S. so long as it remains outside of the U.S. Many U.S. companies take advantage of this through foreign subsidiaries that manage their international profits. In fact, seventy-three percent of Fortune 500 companies operate one or more subsidiaries in tax haven countries such as Luxembourg or the Cayman Islands, where corporate income tax rates are much lower. This amounts to trillions in U.S. corporations’ profits sitting untaxed overseas.

A recent case brought a glimmer of hope for those in Congress wanting to see money from overseas flow back into the U.S. economy. The IRS sued Amazon for roughly $1.5 billion, but ultimately, Amazon prevailed. In hopes of seeing money move to the U.S., President Trump called for tax reform including a one-time tax cut. Trump’s plan would slash the corporate tax rate to twenty percent and eliminate many existing exceptions. He believes that money saved could be used to hire more American workers. But, the President may face competition for subsidiaries’ money from where it is already piling up: Europe.

European countries themselves have been cracking down on this issue as well. This has resulted in a race to the bottom, with governments lowering taxes to try to lure corporations to their countries. Although European rulings may result in the U.S. missing out on huge sources of revenue, it could potentially aid the President’s efforts. The more difficult it becomes for companies to keep profits abroad, the more likely they may be to return that money to the U.S. Ultimately, Congress and the President’s ambitions have many challenges ahead of them. But, if their plan works, the U.S. may see trillions of dollars return to its shores.

U.S. and European Tax Authorities Look at U.S. Corporate Profits Overseas (PDF)

The Weinstein Company in Talks to Sell to Colony Capital

By Hilarie Bellis, J.D. Candidate 2019 | Posted on

On Monday, October 16, The Weinstein Company (“Company”) announced that the studio has entered into an agreement with private equity firm Colony Capital. The struggling studio was left in a financial flux after multiple Hollywood actresses came forward with sexual harassment, sexual assault, and rape allegations against co-founder Harvey Weinstein. It was also revealed that Weinstein had reached at least eight settlements with women accusing him of sexual harassment and unwanted physical contact.

The Company has been struggling financially over the recent years due to the studio’s films’ poor performances at the box office. The New York based studio, known for Oscar winning films including The King’s Speech and The Artist, was founded by brothers Bob and Harvey Weinstein; the two brothers currently own 42% of the production company. Weinstein was fired by the board of the Company earlier in October due to the rising allegations of sexual misconduct.

In addition to the Company’s financial difficulties, internal investigations into Weinstein’s conduct may cost the studio between $20 and $40 million dollars. Additionally, the association with Weinstein is likely to hurt the studio’s upcoming slate of pictures. The Company has pushed back its Oscar hopeful, The Current War, from its original November 24, 2017 release date to later in 2018. Amazon Studios has also decided not to move forward with a David O. Russell television project that was to be a co-production with the Company.

Colony Capital was founded by Thomas J. Barrack Jr., a former business partner and close friend of President Trump. The private equity firm has experience with the movie business: in 2010, Colony Capital purchased Miramax, a production company that was also founded by the Weinstein brothers. Tarak Ben Ammar, a board member of the Company, said that Colony Capital had entered into an agreement with the studio to buy most of the Company’s television and movie properties. While the deal with Colony Capital will provide the Company a much-needed financial boost, many of the studio’s partners have cut ties amid the allegations against Weinstein. Goldman Sachs recently announced it is looking at options for its small stake in the production company.

The Weinstein Company in Talks to Sell to Colony Capital (PDF)