Business Judgment Rule Tentatively Prevails in Case against Dewey & LeBoeuf Executives

By Alex Williamson, J.D. Candidate 2018 | Posted on

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.

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Banks Leave it to Startups to Take the High Road in Providing Services to Dispensaries

By Sheila Salehpour, J.D. Candidate 2018 | Posted on

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.

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Reinforcements Arrive for Whistleblowers in Financial Services

By Kevin Chiu, J.D. Candidate 2018 | Posted on

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.

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The Politics of Dodd Frank

By Madisson Goorman, J.D. Candidate 2018 | Posted on

The debate around breaking up big banks has become a focal point of the 2016 Presidential Election. With Wall Street facing growing market pressures there is uncertainty over whether reforms that have been put in place will be able to help withstand these challenges. One of the major reforms at question is the Dodd-Frank Wall Street Reform and Consumer Protection Act. The act was created to address the causes of the 2008 financial crisis, one of which was high leverage. Dodd Frank has been successful in reducing the leverage of large banks as seen by Citigroup whose “leverage peaked at 33 to one, [but] today it stands at less than 10 to one.”

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Earning Stripping, Tax Inversions, and the Gaming of America’s Corporate Tax System

By Kristofer Hatch J.D. Candidate 2017 | Posted on

Earning stripping and tax inversions are allowing US-based corporations to shelter their tax burdens outside of the reach of the IRS. In an inversion, a US-based company relocates their corporate headquarters overseas, allowing them to lower their domestic tax bill. A key element of this scheme is earning stripping. Earning stripping works by having a company complete their inversion deal, moving their headquarters outside of the US for tax purposes, while retaining their operations within the US. The US subsidiary then borrows large amounts of money from the foreign parent. The US subsidiary can then use the interest payments they make for the foreign parent to offset the American earnings, thus lowering the amount they are taxed domestically.

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Judge Orders HSBC to Make Money-Laundering Report Public

By Kevin Jones, J.D. Candidate 2018 | Posted on

In December 2012, the Department of Justice filed to prosecute HSBC Bank for violating the Bank Secrecy Act, Emergency Economic Powers Act, and Trading with the Enemy Act. The Department of Justice’s investigation revealed significant evidence showing HSBC officers engaged in business protocol that allowed drug cartels in several different nations to launder money internationally. Before taking the case to trial, the Department of Justice agreed on a settlement with HSBC.

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Recap: “Venture Capital Speaker Series—Paul Vronsky, Kleiner Perkins Caufield & Byers”

By Joyce Li, J.D. Candidate 2018 | Posted on

On February 10, 2016, the Berkeley Center for Law, Business and the Economy (BCLBE) welcomed Paul Vronsky, general counsel of Kleiner Perkins Caufield & Byers, for a discussion of his role at Kleiner Perkins and the future of venture capital.

A graduate of Stanford Law, Vronsky made his start at Gunderson Dettmer Stough Villeneuve Franklin & Hacigian, LLP, where he first encountered venture fund formation and management. Venture funds are unique among corporate work in that they require long-term legal strategies to anticipate the unpredictable life cycles of companies. The exceptionally high tax rate on capital gains also necessitates skills in tax law in order to truly master venture fund work, which Vronsky honed in a post-graduation class at his alma mater. Subsequently, by the end of Vronsky’s four years at Gunderson, 70 to 80 percent of his time was being dedicated to Kleiner Perkins alone.

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Three, Two, One, Coke Zero: Coca-Cola’s Trademark Battle Nears its End

By Blake E. Guerrero, J.D. Candidate 2018 | Posted on

Since Coke Zero was first introduced in 2005, the Coca-Cola Company (Coke) has been involved in domestic and international efforts to acquire rights over the English word “zero.” The fight over the term “zero” may seem trivial at first glance, but Coke Zero currently makes up 3% of the $168 billion soda industry. Though Diet Coke remains the top-selling diet cola with 4.8% share of the soda market, global sales of Coke Zero rose 6% while Diet Coke fell 6% in 2015. This large success is essentially because men tend to avoid drinks labeled “diet” but not drinks labeled “zero.” Realizing that men could not “bridge the gender gap image-wise without a new brand and product just for them,” the black-canned cola was specially marketed to this demographic.

Though Coke Zero has been a market success, Coke’s trademark battle has been largely unsuccessful. Coke has argued that their creative marketing campaign has made the term “zero” distinctive. However, in Canada and the United Kingdom, regulators have rejected Coke’s trademark applications.

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US Foods Plans to Go Public Following Failed Merger

By Patrick Atchison, J.D. Candidate 2018 | Posted on

On February 9, 2016, US Foods filed a “Form S-1” registration statement with the US Securities and Exchange Commission (SEC) for an initial public offering (IPO). US Foods’s announcement marks only the third US IPO of 2016, a year marred by heightened volatility in global equity markets.

Founded in 1988, US Foods is the second largest food distributor in the United States, supplying over 250,000 customer locations nationwide. US Foods delivers national brand foods and its own food products to supermarkets, educational institutions, restaurants, and medical facilities throughout the nation. Two private equity firms, Clayton Dubilier & Rice (CD&R) and Kohlberg Kravis Roberts & Co. (KKR), own the food distributor.

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Supreme Court Presses Pause on Carbon Regulation

By David Gomez, J.D. Candidate 2018 | Posted on

The Obama Administration and the Environmental Protection Agency (“EPA”) suffered a setback on February 9, 2016 when the Supreme Court put a temporary halt on enforcement of the EPA’s Clean Power Plan. The Clean Power Plan is an attempt to reduce carbon pollution from its largest source, power plants, by returning the costs of negative externalities stemming from the worst carbon-producing power plants back to them. It punishes heavy carbon-producing power sources such as coal while simultaneously rewarding investment in cleaner energy-producing alternatives such as solar, wind, and natural gas.

New York Governor Andrew Cuomo has gone on record as stating, “[the Clean Power Plan is] crucial to ensuring a cleaner, greener, and safer future for all.” U.S. Solicitor General Donald Verrilli stated in his legal filings that “[a] stay that delays all of the rule’s deadlines would postpone reductions in greenhouse gas emissions and thus contribute to the problem of global climate change even if the rule is ultimately sustained.”

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