A daily look at legal news and the business of law...
Faith-Based Integrity Bank's Executives Prosecuted for Fraud
One of the 228 banks that has failed since Jan. 1, 2008, is Integrity Bank, an institution apparently named by George Orwell. Two of the banks' executives and a hotel developer face conspiracy, bribery, bank fraud and securities fraud charges relating to $80 million in loans the executives gave the developer. Bloomberg reports that some $20 million of the loans financed the developer's lavish lifestyle, including a $1.5 million purchase of an island in the Bahamas.
The executives allegedly received both direct payments from the developer and inside information that allowed them to profit greatly from the sale of stock in the developer's company.
The New York Times' report on the charges includes the extra detail that the bank was founded on "Christian principles" in 2000 -- it gave out free bibles, staff prayed together at meetings, and it donated 10% of annual profits to churches and faith-based charities. The bank's slogan was "In God We Trust." Maybe the charged bank executives were trusting in God to deliver get-out-of-jail-free cards.
The SEC Gives Moody's a New Reason to Be Blue
Moody's and all the other ratings agencies who want to be a "nationally recognized statistical ratings organization", a status that has investment significance, have to apply to the Securities and Exchange Commission for such designation. Moody's has just announced that the SEC is investigating whether part of Moody's 2007 application "was false and misleading" -- and may bring an administrative action against the company.
As The Wall Street Journal explains, one set of Moody's policies and procedures relating to rating certain types of securities was violated, leading to inflated ratings/delayed downgrades. The securities ratings at issue are not related to mortgage-backed securities. However, given all the information that has come out about how mortgage securities were rated -- processes that have given rise to fraud charges -- I wonder if this is the only part of Moody's (or any other ratings agency's) application that gets close scrutiny.
And in the Business of Law...
The legal sector lost 1,100 jobs in April, the second straight month of four-digit losses, reports American Lawyer. Despite the grim news, lawyers should take heart: There's a lot of work, especially contracting work, coming down the pike, notes Above the Law. ATL flags as major legal employment drivers the United (UAUA)/Continental (CAL) airline merger; the Toyota (TM) lawsuits, the BP (BP) spill lawsuits; all things Goldman Sachs (GS) and Wall Street; Foreign Corrupt Practices Act defense; and then everything else that's normally happening.
Law firms' 2009 financial performance numbers look good until you notice that massive cost cutting, particularly large layoffs, accounts for increased profits. So it's refreshing to find a firm that had solid performance without such measures: Fox Rothschild. Am Law Daily reported Fox had an honestly good 2009 -- gross revenue was up 7%, and profits per equity partner were up 2.8%. Not big numbers, but Fox did it without laying off associates or cutting equity partners. In fact, the firm increased its number of equity partners. Nor does one massive contingency fee explain the rise. Fox apparently made its solid numbers the "old-fashioned way" -- earning them.
Legal Briefing: Execs at Faith-Based Integrity Bank Charged With Fraud