On February 9, 2016, the Monsanto Company (NYSE: MON), a multinational agricultural chemical manufacturer based in St. Louis, Missouri, and the Securities and Exchange Commission (SEC) announced their agreement to settle charges that Monsanto’s public disclosures in fiscal years 2009, 2010, and 2011 had materially misstated the firm’s financial results. The provisions of the settlement require Monsanto to pay the SEC an $80 million fine and retain independent compliance monitors.
On February 29, 2016, a nonprofit ethics watchdog, National Legal and Policy Center (NLPC), launched a call to the U.S. Attorney for District of Columbia and the Inspector General of the Department of Housing and Urban Development for an in-depth investigation of David H. Stevens, President and CEO of the Mortgage Bankers Association (MBA). The NLPC argues that Stevens might have violated ethics laws when he was acting as commissioner of the Federal Housing Administration (FHA) for the U.S. Department of Housing & Urban Development (HUD). In December 2015, Campaign for Accountability made a similar request to the Justice Department. These groups want government officials to investigate whether Stevens lobbied on some of the same issues he worked on when he was a FHA commissioner.
On February 25, 2016, the Energy and Environmental Markets Advisory Committee (EEMAC) of the Commodity Futures Trading Commission (CFTC) released a report, advising the CFTC to abandon its plan for position limits on the number of futures contracts a trader can hold on certain commodities such as oil and natural gas. The EEMAC was created under the 2010 Dodd Frank Act and functions “to advise the Commission on important new developments in energy and environmental derivatives markets that may raise new regulatory issues, and the appropriate regulatory response to ensure market integrity and competition, and protect consumers.”
In 2013, Colorado made pioneering strides by becoming the first state to legalize the recreational use of marijuana. Fast-forward to 2016, and marijuana can now be used in three more states recreationally and in a total of 23 states medically. In tandem with the exponential boom of marijuana legalization is the sharp growth of the legal marijuana market. The legal cannabis market achieved $4.6 billion in sales in 2014 and was met with even more success in 2015 when it pulled in an estimated $5.4 billion, according to ArcView Market Research, the leading provider of market data on the cannabis industry. Not surprisingly, “edibles and other infused products” comprise at least half of legal marijuana sales in the United States. This number will likely continue to grow as more states legalize the recreational use of marijuana in coming years.
America’s heavyweight financial institutions, including banks and payments networks, have started aggressively applying for patents at an unprecedented rate. In the past three years, they have snagged 1,192 patents, representing a 36 percent increase over the previous three years. Those patents include an incredible range of technology that runs the gamut from blockchain ledgers to mobile wallets and beyond, and this shift can be attributed to a revolution in the market for financial services. Digital financial service companies, now known as Financial Technology or “FinTech” startups, threaten to push banks out of the market if they can’t keep pace in the realm of innovation.
On February 25, 2016, Apple moved to vacate Magistrate Judge Sheri Pym’s order forcing the company to write computer code that would allow the FBI to break into the iPhone of Syed Farook, one the San Bernardino shooters that killed fourteen people last year. The FBI has been unable to access the information on Farook’s iPhone through its own efforts.
According to Apple CEO Tim Cook, “The government suggests this tool could only be used once, on one phone. But that’s simply not true. Once created, the technique could be used over and over again, on any number of devices. In the physical world, it would be the equivalent of a master key, capable of opening hundreds of millions of locks—from restaurants and banks to stores and homes.”
We are all familiar with legendary hedge fund investors like Bill Ackman and many others making history with shareholder activism in Wall Street, but this trend is also starting to appear on a smaller scale in other places…notably venture capital in Silicon Valley.
Picture the following scenario: A venture-backed startup valued at $4.5 Billion in its latest investment round, a hotshot CEO, and venture capital investors with a history of acquiescence with its portfolio companies—contributing to growth without major interferences in management. It seems like the perfect Silicon Valley tale, until the California Department of Insurance starts to investigate the company and its CEO for allegedly circumventing California State regulations in connection with employee’s insurance training. Zenefits exemplifies this scenario as it was subject to an investigation of such practices.
In 2012, the New York based law firm Dewey & LeBoeuf made headlines by filing for Chapter 11 bankruptcy. The firm, which was among Vault.com’s Top 50 Law Firm Rankings from 2009 to 2012, employed more than 1,400 attorneys across fifteen countries before announcing its collapse. Since the announcement, Dewey’s top managers have been at the center of both a criminal and civil lawsuit after allegations surfaced that they had made fraudulent accounting representations to obtain funding.
Dewey & LeBoeuf’s problems began shortly after its inception in 2007, when Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae combined in the largest law firm merger to date. The new firm quickly became a powerhouse in the legal industry, representing high-profile transactions for clients such as A.I.G., BP, JPMorgan Chase, Disney, Dell and eBay. The firm built this enviable list of clientele largely by making “lateral hires,” the practice of drawing high profile lawyers from other firms by extending highly profitable contracts. One such hire was Ralph Ferrara, a successful securities litigator that Dewey was able to lure with an annual salary of $1.6 million and signing bonus of $16 million.
After legalization victories in Alaska, Oregon, Washington, Colorado, and the District of Columbia, the war on drugs (and marijuana in particular) may finally be losing its thunder in the Court of Public Opinion. Still, a pro-marijuana victory lap is premature with twenty-five states continuing to ban both recreational and medical marijuana use.
Even in states that have fully legalized marijuana, a new battle is underway: federally regulated banks, major credit card companies such as Visa and MasterCard, and electronic payment services such as PayPal have refused to process pot-related transactions. Possession or distribution of marijuana still violates federal law, so banks and financial services providers that support those activities are at risk of being prosecuted or sanctioned. As a result, startup companies such as Tokken, Hypur, and Kind Financial have stepped in to provide much-needed financial services to authorized dispensaries that have been forced into cash-only transactions.
Whistleblowing is the ultimate form of burning your bridges. So it comes as no surprise that while whistleblowers are lauded for their courage and willingness to call out their companies for material financial wrongdoing, the celebration pales in comparison to the common risks they face from their current and future employers. Whistleblowers are often mishandled, ignored, and their allegations lead to job terminations and being blacklisted from other prospective companies in the industry. In response, a new group seeks to change this recurring story.