A French labor court Tuesday awarded Jérôme Kerviel, the Société Générale SA rogue trader convicted in 2010 of bringing the bank to the brink of collapse, a total of €450,000 ($511,000) because he was fired without “real or serious cause,” reports The Wall Street Journal.

According to the report: “Société Générale ‘could not pretend it hadn’t long been aware of the unauthorized trades conducted by Mr. Kerviel,’ judges wrote in their ruling. The bank therefore can’t argue that Mr. Kerviel was at fault when it ‘previously tolerated similar practices,’ they added.”

In a previous trial, Kerviel was found guilty on charges of forgery, breach of trust and unauthorized computer use and sentenced to three years in prison. He was ordered to repay his former employer €4.9 billion.

Read the article.

A new filing in the re-trial of former Dewey & LeBoeuf chief financial officer Joel Sanders and former executive director Stephen DiCarmine alleges that two former Dewey partners put pressure upon the Manhattan District Attorney’s office to look into the financials of the failed firm, reports Kathryn Rubino in Above the Law.

Three former Dewey executives went on trial last year for their roles in the demise of the firm. After a mistrial, former Dewey chairman, Steven Davis, signed a deferred prosecution agreement, and Sanders and DiCarmine could be facing a new trial in 2017.

“It is in the context of this new trial that Sanders’s legal team filed documents suggesting two attorneys pressured the District Attorney’s office to investigate the firm’s finances,” Rubino reports.

Read the article.

The U.S. Supreme Court recently determined that the nondischargeability of debts under 11 U.S.C. § 523(a)(2)(A), which prohibits discharge of debts “obtained by . . .  false pretenses, a false representation, or actual fraud,” does not require a false representation, reports Brian Hockett of Thompson Coburn in an article posted on JDSupra.com.

His article says the “actual fraud” exception to a bankruptcy discharge includes other traditional forms of fraud, including fraudulent conveyances that do not necessarily include a representation by the debtor or reliance by the creditor.

“This important decision by the Supreme Court resolves a split among lower courts and opens up potential additional opportunities for creditors to pursue nondischargeability actions under 11 U.S.C. § 523(a)(2)(A),” Hockett writes.

Read the article.

Takata Corp. has confirmed it has hired investment bank Lazard Ltd. to lead a financial restructuring in an effort to resolve costs stemming from its recall of tens of millions of faulty air bags linked to at least 13 deaths and more than 100 injuries worldwide, Reuters is reporting.

“Takata’s board of directors in February named an outside steering committee to develop a comprehensive restructuring plan to address the financial and operational issues related to its recall of the defective inflators,” swrites David Shepardson. “Takata’s outside committee said it retained Lazard as it is ‘expeditiously seeking new investment for Takata,’ the committee said in a statement.”

Takata posted a net loss of $120 million for the year ended in March and could potentially could face billions of dollars in costs related to the recall.

Read the article.

Florida lawyer and lobbyist Alan Koslow was charged Thursday with a federal money-laundering conspiracy after prosecutors said he and a friend laundered what they believed was cash linked to illegal gambling and drug dealing, according to a report in the Sun Sentinel of Fort Lauderdale.

The report says the manner in which Koslow, 62, and Susan Mohr, 57, of Delray Beach, were charged suggests both have already reached plea agreements with prosecutors.

The criminal charges are linked to an undercover FBI sting that began more than three years ago, in which Koslow allegedly accepted $220,000 in cash that he agreed to launder for the undercover FBI agents between December 2012 and August 2013, according to court records. In exchange, he was paid $8,500, investigators wrote.

Read the article.

When Beck Redden partner and appellate specialist Connie Pfeiffer led the charge to overturn a Fifth Circuit decision, the path to victory was nearly certain to be long and arduous, the firm said in a release.

The Fifth Circuit had just decided a critical question interpreting the Texas Constitution, holding that homeowners with constitutionally defective liens on their homestead must file suit to set the lien aside within four years of originating a home equity loan.  (See Priester v. JP Morgan Chase Bank, N.A., 708 F.3d 667, 674 (5th Cir. 2013).  Yet overturning Priester would prove challenging, because out-of-state lenders could usually remove Texas homeowner suits to federal court, where Priester was binding.

The release continues:

Beck Redden was first hired to handle a homeowner’s Fifth Circuit appeal immediately following Priester and to seek the Fifth Circuit’s certification of the Texas constitutional questions, even though the Fifth Circuit rarely certifies a question it has already decided.  The Fifth Circuit adhered to that policy, holding that it could not revisit Priester or seek the Texas Supreme Court’s guidance.  In the wake of Priester, nearly all homeowner suits were removed to federal court and promptly dismissed.

Beck Redden was then hired in one of the few cases remaining in state court.  It stepped in mid-way in an appeal before Houston’s Fourteenth Court of Appeals, but the court fell in step with the growing line of cases following Priester and dismissing homeowner claims as time-barred.

At last in the Texas Supreme Court, Beck Redden handled every aspect of the briefing, argument, and strategy.  Connie Pfeiffer authored the briefs and presented oral argument, working with her appellate partner Russell S. Post and trial lawyers Chip Lane and Anh Thu Dinh of The Lane Law Firm.

The Texas Supreme Court voted 6 to 3 to overturn the Fifth Circuit’s decision in Priester and five Texas appellate decisions reaching the same holdings (See Wood v. HSBC Bank USA, N.A. ___ S.W.3d ___ (Tex. May 20, 2016).   The Majority followed the Constitution’s plain text to hold “that liens securing constitutionally noncompliant home-equity loans are invalid until cured and thus not subject to any statute of limitations.”  The practical effect of the Supreme Court’s decision is that homeowners will not face foreclosure unless their lender has complied with the Texas Constitution to create a valid lien.  The decision upholds the Constitution’s careful protections for homeowners by ensuring that invalid liens do not become valid and enforceable merely with the passage of time.

Foley & Lardner LLP announced that Dana Lach has returned to the firm’s Health Care Finance, Public Finance and Finance & Financial Institutions Practices in the Milwaukee office.

In a release, the firm said Lach has extensive experience counseling health care and other nonprofit organizations, including colleges and universities, in tax-exempt and taxable bond transactions, commercial loans, non-traditional financing products such as commercial paper programs and securitizations, and derivative transactions. Lach regularly serves as counsel to investment banks, purchasers and commercial banks in connection with tax-exempt and taxable financing transactions. Lach’s participation as borrower’s or underwriter’s counsel on more than 150 securities transactions has totaled in excess of $20 billion.

“Dana’s deep experience structuring complex securities transactions across many public sectors, particularly the health care industry, will play a key role as we work to sustain and grow our established public finance bench,” said Laura Bilas, chair of Foley’s Public Finance Practice.

Lach has worked on post-issuance compliance, including ongoing tax, covenant and disclosure compliance. She has helped develop policies and procedures for both tax and primary and secondary market disclosure requirements and has provided guidance on remedial actions for changes in use of bond financed facilities and information reporting for the U.S. Internal Revenue Service Form 990, Schedule K.

“We are thrilled to welcome Dana back to Foley. Her immense knowledge in the health care, nonprofit and municipal financing arenas will contribute vastly to our existing and expanding client base,” said Linda Benfield, managing partner of Foley’s Milwaukee office.

Banks’ interest in smart contracts could lead them to beef up their legal departments in the near term, as the financial industry and regulators alike continue to wrestle with the implications of blockchain technology, writes Brian Patrick Eha of American Banker.

In his article Eha explains that “a smart contract is a piece of software that executes its terms automatically and encodes rules agreed upon by all parties. Smart contracts are decentralized — living on a blockchain — and transparent, viewable by all parties. They can be used to transfer value, and that transfer is triggered in response to certain events.”

“What if smart contracts were to catch on? Ideally, the code would be reusable in the form of templates, cutting down on legal busywork. Just not all legal work,” according to the article.

Read the article.

Global finance firm Burford Capital focused on law announced it has expanded its New York team.

Among those joining Burford in its New York office are:

Justin Brass, Managing Director. Brass formerly was a Managing Director at Stone Lion Capital, a credit-focused hedge fund, and with a professional background spanning law and finance at firms including Paul, Weiss and Jefferies.

Christopher Catalano, Director. Catalano was Assistant General Counsel at JPMorgan Chase following a litigation career at Kirkland & Ellis, Wilson Sonsini and O’Melveny & Myers.

Sarah Lieber, Vice President. Lieber was Deputy General Counsel for CIFG Services following a career as a litigator at Jones Day.

“We are delighted to welcome Justin, Chris and Sarah to Burford, where they join our terrific team of more than 60 other people meeting client needs around the world. Burford has grown its team every year since we started this business in 2009, and this year is no exception, as we continue to field the industry’s largest group of highly experienced litigators and financial professionals to serve our clients,” saide Burford’s Chief Executive Officer, Christopher Bogart.

The law firm Greensfelder, Hemker & Gale, P.C. announced that John L. Senica has joined the firm’s Chicago office as an attorney in the Business Services Practice Group.

The also announced expanding its Chicago office space on the 33rd floor of its current building at 200 West Madison St.

Senica has more than 30 years of experience in corporate law, working in finance, secured lending, private equity and venture capital. He represents clients in business, commercial lending and commercial real estate transactions. He works with closely held companies and commercial lenders and handles matters related to business planning, commercial finance and mergers and acquisitions, the firm said in a release.

Prior to joining Greensfelder, Senica was the founding member and Resident Director of the Chicago Office of Miller Canfield, where he also served as a Senior Principal. Previously, he practiced in business transactional law for more than a decade as an equity partner at an Am Law 50 national law firm.

“John is a great addition to our firm as he brings decades of experience in corporate law and helps to further broaden Greensfelder’s transactional practice in Chicago,” said David B. Goodman, Managing Officer of Greensfelder’s Chicago office. “John’s insights and experience from opening and growing Miller Canfield’s office in Chicago also will be invaluable as we continue to expand and build Greensfelder’s presence in the Chicago market.”

Senica said, “As a Chicago native, I have a strong affinity for Midwest people, values and culture, and I was particularly drawn to Greensfelder’s culture and rate structures that I believe are highly appealing to middle market businesses and banks in Chicago and across the nation. I also am impressed by the firm’s deep commitment to Illinois expansion, as well as the depth of talent at the firm across a wide range of practice areas including real estate, franchising, health care and energy.”

Senica joins Greensfelder as the firm moves its Chicago office to expanded space with about 52 percent more square footage than the space it previously occupied since the office first opened in November 2008.

Senica is a Fellow of the American Bar Foundation and formerly served on the Board of Directors of the LaSalle Street Council. He earned his J.D. from Northwestern University School of Law and holds a B.A. from the University of Notre Dame.

Financial regulators have proposed new rules limiting the incentive pay of employees and other service providers at financial institutions, report Mark Jones and Robert L. Tian of Pillsbury Winthrop Shaw Pittman LLP.

“The new rules seek to establish general requirements applicable to the incentive-based compensation arrangements of covered persons working in covered institutions. Covered persons are any executive officers, employees, directors or principal shareholders who receive incentive-based compensation at a covered institution. Additional restrictions apply to senior executive officers and significant risk-takers,” they write.

Their article discusses the prohibition of excessive compensation, appropriate performance measures, effective controls, approval by the board of directors, and disclosure and record-keeping.

Read the article.

A former Skadden Arps lawyer who cheated friends and relatives of life savings in a Ponzi scheme and then tried to kill himself was sentenced in New York to five years in prison Thursday, reports the Associated Press and the New York Post.

His crime was revealed when he wrote a long suicide note and jumped into the Hudson River in a 2014 suicide attempt that ended with his rescue by police divers.

A U.S. District Court judge gave Bennett a sentence at the high end of federal sentencing guidelines. She announced it after hearing several of the 58-year-old’s friends describe giving hundreds of thousands of dollars for a supposedly safe investment. Some of them told the judge he is a “pathological liar.”

Read the AP story and the Post story.

Image created by Meredith Atwater for opensource.com

It is possible to be mistaken about the existence or terms of an agreement and for that mistake to thereby prove that no contract exists, writes Glenn West in Weil, Gotshal & Manges LLP’s Global Private Equity Watch.

As a general rule, being mistaken about whether you contracted, or what you contracted for, does not mean that a contract does not exist based upon the terms of the written agreement you signed. A party’s protestations that he or she did not understand the agreement, or believed it said something other than what it said, or that the words used in the agreement meant something other than what they are determined by a court to mean, will generally not be entertained by a court,” he wrote.

He discusses the case of Patterson v. CitiMortgage, Inc., which illustrates that “a unilateral mistake made by a party that is not made manifest to the other party will not be a basis for reformation because, absent knowledge of the mistaken belief, the other party is entitled to rely on the written agreement as manifesting the intentions of the otherwise mistaken party.”

Read the article.

Thomson Reuters is offering a complimentary copy of the 2016 edition of Practical Law’s study, Reverse Break-Up Fees and Specific Performance: A Survey of Remedies for Financing and Antitrust Failure.

This year’s edition analyzed all 85 merger agreements entered into in 2015 for debt-financed acquisitions of U.S. reporting companies in deals valued at $100 million or more. The study provides a detailed guide to the negotiation of remedies for buyer breach by:

• Examining how deal characteristics such as the size of the transaction and the profile of the buyer affect the negotiation of enforcement and monetary remedies.
• Reviewing the sizes of reverse break-up fees in leveraged deals as percentages of deal value and as multiples of the target company’s break-up fee, and compares reverse break-up fees that cap the damages payable by the buyer against those that do not.
• Analyzing other techniques for allocating risk in debt-financed transactions, including the buyer’s financing covenants, the definition of the lenders’ marketing period, and the agreement’s “Xerox” provisions.

New this year, the study contains a supplement analyzing antitrust-triggered reverse break-up fees and other mechanisms for allocating the risk of antitrust failure. For this inquiry, the study surveyed all 49 agreements in the Practical Law What’s Market M&A database for 2015 that contained a reverse break-up fee payable for antitrust failure. These included 27 agreements for the acquisition of a US reporting company in deals valued at $100 million or more and 22 publicly filed agreements for private M&A deals involving the acquisition of a US company or business valued at $25 million or more.

Download the study and receive free temporary access to Practical Law online resources.

A federal bankruptcy judge in Dallas ruled late Tuesday that Dallas entrepreneurs Sam and Charles Wyly committed tax fraud when they created a series of offshore trusts in the Isle of Man in the 1990s to shield more than $1 billion for the family tax-free, according to a report in The Dallas Morning News.

There is “clear and convincing evidence” that the “heart of the Wyly offshore system had been established through deceptive and fraudulent actions,” wrote U.S. Bankruptcy Judge Barbara Houser.

“The IRS claims that the Wylys, who made billions of dollars growing and then selling Michaels Stores and Bonanza steakhouses, set up the series of offshore trusts in the Isle of Man in order to hide income from being taxed, while still using the money in the trusts to fund a lavish lifestyle,” the report says.

Under the ruling, Sam Wyly, the surviving brother, could be required to pay the IRS as much as $1.4 billion in back taxes and penalties.

Read the article.

Blockchain technology is gaining attention for its promise to enable value and asset transfer across a wide range of industries and use cases — and its potential to disintermediate financial institutions, remittance companies and lots of other transactional middleman businesses, according to a report written by Sue Troy, an editorial director at TechTarget. Smart contracts, meanwhile, work hand-in-hand with blockchain technology and have the potential to automate — and also disrupt — processes in many industries.

“Whereas a traditional legal contract defines the rules around an agreement between multiple people or parties, smart contracts go a step further and actually enforce those rules by controlling the transfer of currency or assets under specific conditions,” she explains.

She discusses sample use cases for the insurance industry, real estate, and supply chain.

Read the article.

A federal judge sentenced the leader of digital currency company Liberty Reserve to 20 years in prison for running a global money-laundering scheme that prosecutors said was unprecedented in size and scope, reports Reuters.

Arthur Budovsky, 42, had earlier pleaded guilty to one count of conspiracy to launder money related to his role in Liberty Reserve, which allowed cybercriminals to conceal and move their illegal proceeds anonymously through a digital currency. Authorities shut down the company in 2013.

“Liberty Reserve operated a widely used digital currency, processing more than $8 billion in financial transactions and earning Budovsky over $25 million, prosecutors said,” according to the report. “Much of its business came from criminals seeking to launder proceeds from Ponzi schemes, credit card trafficking, identity thefts and computer hacking, prosecutors said.”

Read the article.

The Consumer Financial Protection Bureau proposed a rule Thursday that would ban arbitration clauses, which would affect the entire financial industry and the hundreds of millions of bank accounts, credit cards and other financial services Americans use, reports the Associated Press.

“The CFPB’s proposal does have a significant limitation,” the report explains. “The ban would only apply when consumers want to create or join a class-action lawsuit. Financial companies will still be able to force individuals to settle disputes through arbitration; however cases where a lone customer wants to sue his or her bank are far less common.”

The financial industry claims that arbitration is a more efficient way for customers to resolve disputes, and a study commissioned by the CFPB in lends that claim some credence. “However, when large numbers of customers were negatively impacted by the same issue, the same study showed arbitration clauses hinder the ability for customers to seek relief,” the AP report says.

Read the article.

Financial services lawyers are predicting that efforts by the Consumer Financial Protection Bureau to prevent companies from keeping consumer complaints out of a courtroom will wind up being challenged in court, reports The Wall Street Journal.

A rule proposed by the agency Thursday would prohibit financial companies from using mandatory-arbitration clauses as a way to block class-action lawsuits, according to the report. “While companies would still be able to require consumers to enter arbitration to resolve individual disputes, the elimination of the no-class arbitration provisions would strip away incentives for companies to include arbitration clauses in their contracts. And many are predicting that as a result, companies would discontinue using them.”

But the CFPB counters that class actions are a “more effective means for consumers to challenge problematic practices by … companies” than arbitration, which it says gives financial service providers an unfair advantage over customers.

Read the report.