A daily look at legal news and the business of law:
AIG Agrees to Settle Shareholder Suit for $725 Million, Sort Of
Ohio Attorney General Richard Cordray and three Ohio pension funds led a class-action lawsuit on behalf of AIG (AIG) shareholders that predated the financial meltdown -- a suit that has now been settled. The lawsuit, first filed in 2004, alleged that between 1999 and 2005, AIG engaged in "anti-competitive market division, accounting violations and stock price manipulation." Cordray noted that this settlement follows others with AIG's ex-CEO Hank Greenberg, PriceWaterhouse Coopers, and General Reinsurance Corporation, bringing the total recovered to over $1 billion. Recovered eventually, that is.
As AmLaw Litigation Daily notes, the $725 million settlement involves an upfront payment of $175 million, with a promise to pay $550 million after funds are raised in the securities markets or by some other means. If AIG doesn't come up with the $550 million fast enough, shareholders can get additional shares worth that much. However, given that the price of shares fluctuates and that shareholders are suing because they're unhappy with how the shares they already own have decreased in value (the decrease being caused by the alleged frauds), I'm not sure getting new shares of AIG will be quite the same as getting $550 million in cash in a timely way.
Hard-Core Porn Not Criminally Obscene
Events in the recent Washington D.C. obscenity trial reveal why the cases are so rare: The judge threw out the case after the prosecution rested, finding insufficient evidence to convict anybody, reported the Blog of the Legal Times.
SEC to Scrutinize Disclosure More Effectively
The Securities and Exchange Commission announced that it was creating three specialized divisions within the branch that reviews public company filings for disclosure accuracy: financial institutions, structured financial products, and securities offering trends. This move is one more reason -- the SEC's targeting of Goldman Sachs's (GS) Abacus deal is another -- that investors should expect disclosures to become more complete.
And in the Business of Law...
• All associates are no longer compensated equal: Some firms are instituting a two-tier system. Traditionally within firms, all associates within the same year of hiring have received the same base salary, with merit affecting their bonuses. That "lock step" compensation is often the same throughout a legal market, such as New York, and while efforts to change the structure have been tried, they've generally failed, and the firms that made the attempts have reverted to the old model.
Now, reports The Recorder, firms are trying a new approach: sorting associates into partnership track and nonpartnership track tiers, paying the latter up to 50% less and billing them out to clients more cheaply, but requiring fewer hours of work from them as well.
So long as the second-tier associates get paid enough to manage their student loans and have a reasonable standard of living, I can only imagine that many associates would be willing to make that trade. Lots of new associates start off their careers with no intention of trying to make partner, and would be grateful to have the higher quality of life that goes with reduced hours. Of course, if firms turn these positions into sweatshop jobs with no respect -- essentially bringing in-house a team of what would otherwise be contract attorneys -- this approach will create more problems than the contract attorney alternative, as tier one associates worry about losing billable work and tier two associates resent their status.
• I miss business formal. Perhaps business casual is fine for men, for whom khakis and a button-down shirt can be as uniform-esque as suits are, but without the discomfort. Women, though, have a much harder time finding clothes that are work appropriate when dress codes are looser. I also think that business formal attire inspires more professional behavior. But we live in an informal era, and I doubt lawyers will be wearing suits outside of court or client meetings much anymore. At least, once the attorneys who started in a business formal world retire.
• Speaking of less-than-professional behavior, Scott McInnis, Republican candidate for governor of Colorado and partner at Hogan Lovells, plagarized material he "created" while working for a nonprofit. Horrified, the nonprofit demanded McInnis return the $300,000 he "earned" while working for them, which he agreed to do, reports the ABA Journal.
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