Friday, March 29, 2013

Bankrupt countries are coming after investors

Story originally appeared on Market Watch.

LONDON (MarketWatch) — These are difficult times to be a tax manager at a major multinational. Everywhere you go you are assailed for not paying enough tax.

In the U.K., companies such as Ikea, Starbucks SBUX +0.07%  , Amazon AMZN +0.45%   and Apple AAPL -2.08%   have been under ferocious assault for not paying enough corporation tax. Starbucks faced boycotts of its stores, and actually volunteered to pay more tax. An online petition in the U.K. demanding that Amazon pay more to the government has collected almost 100,000 signatures.

Germany’s Angela Merkel has made tough speeches on tackling corporate tax avoidance. In the U.S., President Barack Obama has been attacking tax-avoidance strategies by corporations. British Prime Minister David Cameron is using his presidency of the G-8 to develop proposals to make companies pay more.

And now the European Parliament is planning to force companies to publish how much tax they pay in each state — it will start with banks but could quickly spread to every multinational doing business in Europe.

Companies everywhere are going to face more and more pressure to pay higher taxes than they do now. There is a problem here for investors. If companies are made to pay more tax, the money is going to come out of the pockets of shareholders — and that means share prices in the most bankrupt nations are under threat.

It is not hard to figure out why nations are going after the corporate sector for more tax revenues.

One reason, of course, is that companies pay less tax than they used to.

When most businesses were domestic and made things in factories, they were relatively easy to tax. The likes of Amazon and Apple are far harder to collect any money from. They can set their servers up anywhere that offers an easy tax break. And they can shuffle their costs and revenues from place to place at the flick of a switch. You can hardly blame them if the big profits end up being made in places where taxes are lowest — very few of us would pay anymore tax than we actually had to.

But the bigger reason is that most developed nations are fundamentally broke.

The degrees of broke-ness varies: from completely and utterly broke, like Greece or Italy; to wobbly, like the U.K., France, the U.S., or Japan; to getting poorer like Germany. But all of them are going to have to raise the percentage of gross domestic product they collect in tax — and many of them very significantly.

The U.S. deficit is more than 7% of GDP. The U.K.’s deficit is just as high. There is very little sign that spending cuts to close gaps of that magnitude are on the cards, nor is there any sign that growth will be sufficiently strong to make up the difference — certainly not in countries like the U.K. or Japan.

Huge sums of additional revenue will have to be raised.

Willie Sutton once famously remarked that he robbed banks because “that’s where the money is.”

In the same way, governments will look to raise more tax from companies because that’s where the money is. It certainly isn’t anywhere else. Ordinary workers are already suffering declining living standards: in most counties wages have not kept pace with rising prices. Sales taxes can’t be raised without tipping the economy into a fresh recession. Payroll taxes can hardly be raised without wiping out scarce jobs.

But right through this recession, company profits have been amazingly buoyant. Take the U.S., for example. Total corporate profits were more than $1.6 trillion in 2012, an all-time record. Likewise, as a percentage of GDP profits are at a record high. Profits for corporations in the S&P 500 index climbed to a record $100.75 a share in 2012, and will exceed $120 a share next year, double the $60.43 seen in 2008, according to data compiled by Bloomberg.

The same is true in most other developed economies. Even in the beleaguered euro zone, while economies contract corporate profits are still rising — one reason why stock markets have been hitting decade-highs.

If governments are to have any chance of closing those deficits they will have to go after corporate profits; there is nowhere else to get the money. There is a big issue here, however, for investors. If companies are made to pay more tax, their profits will fall significantly.

The maths are simple. If a company makes $100 million a year in profit and pays a 25% tax rate it is left with $75 million to re-invest and pay out to shareholders. Push that tax rate up to 35%, and only $65 million is left. It is unlikely the company can pass higher taxes onto consumers, or to suppliers. It is shareholders that will take the hit — and the money will come straight out of profits.

True, it may prove impossible to tax the corporate sector more. Corporations have become mobile. Digital files can be sold from anywhere. There will always be a tax haven somewhere that will slash rates to attract a wave of investment. And yet if the major economies work together, they may well succeed. Multinational companies have to sell things where their customers are, and as Starbucks has found in the U.K., if a country is determined to make you pay more tax there is probably little choice but to dig into your wallet.

There is a warning in that for investors.

In the medium term, companies operating in the countries with huge deficits will suffer. In practice that means the U.S., U.K. and Japan are the most vulnerable — their companies will end up paying more. So are most of the major euro-zone corporates.

But companies based in low-deficit nations such as Switzerland, Scandinavia, and of course the emerging markets, will do much better. There will not be anything like the same pressure on their companies to pay more tax — and those markets will outperform their bankrupt rivals.

Editorial: Judge's leadership moved Detroit Water and Sewerage Department out of federal control

Story originally appeared on Freep.

The problems at the Detroit Water and Sewerage Department were never a mystery.

In 1977, when the U.S. Environmental Protection Agency’s first alleged that the department’s Wastewater Treatment Plant was discharging unlawful amounts of “effluent,” no one disputed its claims; the department readily acknowledged the EPA’s finding that the plant had too few workers, trained those it did hire inadequately, and purchased critical equipment and supplies too slowly.

DWSD and the federal government settled the lawsuit with a consent decree designed to remedy the flaws in the system and bring the department into compliance with federal sewage treatment standards.

But that didn’t happen. The problems documented in the EPA lawsuit — and in six reports commissioned during the tenure of U.S. District Judge John Feikens, who oversaw the case from its inception until his 2010 retirement — weren’t fixable within the parameters of the Detroit City Charter and local ordinances.

This week U.S. District Judge Sean Cox, to whom the case was assigned after Feikens left the bench, declared the system largely in compliance with state and federal guidelines, and — more crucially — that it is expected to remain in compliance, because of changes to the way DWSD is run.

From the time Cox took up the consent decree, he made it clear that DWSD would not be his life’s work. (Feikens, in contrast, earned the nickname “sludge judge” for his lengthy oversight of the department.)

Feikens tried to make the system work more efficiently with “non-intrusive” measures, Cox wrote, including appointing successive mayors of Detroit “special administrators” of the water system, but he was ultimately unsuccessful.

(It’s worth noting that during Feikens’ oversight of the department, consultants were paid $4.4 million between 2002 and 2010, according to Oakland County court filings, and that one firm paid to vet DWSD contracts apparently was unable to identify the wide-ranging bid-rigging scheme of which former Detroit Mayor Kwame Kilpatrick and crony Bobby Ferguson were recently convicted.)

After the case landed on Cox’s docket, the judge ordered the city and the Board of Water Commissioners to develop recommendations to address the “root causes” of the system’s inability to operate within federal and state guidelines; in developing this report, Cox ordered, the city and the water commissioners need not be constrained by the Detroit City Charter, ordinances or any existing contracts.

And this, it seems, was the tipping point.

Three years later, DWSD has its own human resources department, and its purchasing is controlled by the Michigan Department of Environmental Quality. The system has had a permanent director since 2012, a post that had been vacant since 2008, and has a COO/Chief Compliance Officer.

While Cox freed the committee from the confines of the charter, ordinances and contracts, he also cautioned that changes that would override state or local laws should be “narrowly tailored,” and implemented only when local solutions don’t work.

As of Wednesday, Cox, at least, was satisfied that working outside the system had been the key to creating the ability for the system to reach, and sustain, compliance with federal requirements.

It’s an instructive model for the city of Detroit.

Much like DWSD, Detroit’s problems aren’t mysterious, documented in report after report: Too much debt, too much bureaucracy, outdated systems, a charter that makes streamlining all but impossible. Working within that system makes it difficult to effect permanent change. But like DWSD, the city now has an appointed official, in Emergency Manager Kevyn Orr, who is empowered to go outside local law to make necessary changes.

As evidenced by Cox’s ruling, the application of non-traditional solutions, when used judiciously, can bring about positive change.

Unionized workers reject UAW-GM bargaining proposal

Story originally appeared on Freep.

In an unusual case where the United Auto Workers union is bargaining as an employer, about 74 workers at the UAW-General Motors Center for Human Resources rejected the union’s latest contract proposal.

The staff workers include clerical, custodians, maintenance workers and professional staff, that provide safety training and legal services to UAW workers at dozens of GM factories and offices. Some of the center’s employees are represented by the Office and Professional Employees International Union. The UAW and GM jointly manage the center at the foot of Walker Street on the Detroit riverfront.

The employees have been working under the terms of their previous deal, which expired March 31, 2012, after rejecting the latest proposal Tuesday by a vote of 58 to 4.

Kevin Nix, lead negotiator for OPEIU Local 459, said his members have not authorized a strike. UAW-GM negotiators have not threatened to impose new working conditions.

But OPEIU has filed three Unfair Labor Practice complaints with the Federal Labor Relations Board during the bargaining process, Nix said. Specifically, the union alleged that the UAW-GM leaders failed to pay the OPEIU bargaining team, proposed to change workers’ health care plan and stopped bargaining at one point.

“Obviously in a world where GM is making billions of profit, we feel this contract should have been done by now,” Nix said.

A UAW spokeswoman did not respond to phone and email messages.

“The UAW-GM Center for Human Resources continues to have open and constructive dialogue with our OPEIU partners,” GM said in a statement. “We consider all information about the issues and topics discussed to be private matters between the negotiating parties.”

Nix said workers want guaranteed health care and retirement packages beyond 2016.

“What management has on the table right now is to guarantee health care and retirement just through the end of their proposed contract, which would be the end of 2016,” he said.

Wednesday, March 27, 2013

Anonymous strikes back after feds shut down piracy hub Megaupload

Story originally appeared on CNN.

NEW YORK (CNNMoney) -- In one of the U.S. government's largest anti-piracy crackdowns ever, federal agents on Thursday arrested the leaders of and shut down, a popular hub for illegal media downloads.

Hours later, Megaupload's fans turned the table on the feds. "Hacktivist" collective Anonymous said it set its sights on the U.S. Department of Justice and apparently knocked the agency's website offline.

"We are having website problems, but we're not sure what it's from," a DOJ spokeswoman told CNNMoney.

The DOJ website glitches came soon after various Twitter accounts associated with Anonymous took aim at the agency.

Anonymous's favorite weapon for these attacks is what's called a "distributed denial of service" (DDoS) attack, which directs a flood of traffic to a website and temporarily crashes it by overwhelming its servers. It doesn't actually involve any hacking or security breaches.

"One thing is certain: EXPECT US! #Megaupload" read one tweet from AnonOps that went out mid-afternoon.

One hour later, the same account tweeted a victory message: "Tango down! & #Megaupload"

It was the largest attack ever by Anonymous, according to an Anonymous representative, with 5,635 people using a networking tool called a "low orbit ion cannon." A LOIC is software tool that aims a massive flood of traffic at a targeted site.

Universal Music's website also went down Thursday afternoon. The music company had been locked in a legal battle with Megaupload over a YouTube video that featured many of Universal Music's signed artists promoting Megaupload's site.

The websites of the Recording Industry Association of America and Motion Picture Association of America went down Thursday afternoon as well. On Twitter, AnonOps -- one of the main communications channels for the leaderless Anonymous collective -- took credit for the crashes.

An RIAA spokesman confirmed that the organization's website was intermittently offline. But he cast the attack as a minor hiccup.

"The fact that a couple of sites might have been taken down is really ancillary to the significant news today that the Justice Department brought down one of the world's most notorious file sharing hubs," he said.

By Friday morning, all but one of the subjects of Anonymous' attack were back online -- including the FBI's website, Warner Music Group and the U.S. Copyright Office. Only Universal Music remained unavailable, as the company took the site down for "maintenance."

A piracy crackdown: The Anonymous attack came soon after the DOJ announced the indictment of seven individuals connected to Megaupload for allegedly operating an "international organized criminal enterprise responsible for massive worldwide online piracy of copyrighted works."

Authorities said the operation had generated more than $175 million in illegal profits through advertising revenue and the sale of premium memberships.

According to the indictment, Megaupload, which launched in 2005, was once the 13th most visited website on the Internet, serving as a hub for distribution of copyrighted television shows, images, computer software and video games.

The site's popular MegaVideo subsidiary was widely known in tech circles for its copious selection of pirated content, including recent movies and episodes of hit TV shows.

Four of those indicted were arrested Thursday in Auckland, New Zealand, at the request of the U.S. Three others remain at large.

The individuals indicted are citizens of New Zealand, Germany, Slovakia and the Netherlands. No U.S. citizens were named. However, Megaupload has servers in Ashburn, Va., and Washington D.C., which prompted the Virginia-based investigation.

To shut down Megaupload, federal authorities executed 20 search warrants in eight countries, seizing 18 domain names and $50 million worth of assets, including servers located in Virginia, Washington, the Netherlands and Canada.

The news comes as lawmakers have turned their attention to anti-piracy legislation. Protests erupted both online and offline this week against two bills currently under consideration in Congress: the House's Stop Online Piracy Act (SOPA) and the Senate's Protect IP Act (PIPA).

The bills are aimed at cracking down on copyright infringement by restricting access to sites that host or facilitate the trading of pirated content. But the legislation has created a divide between tech giants, who say the language is too broad, and large media companies, who say they are losing millions each year to rampant online piracy.

Tuesday, March 26, 2013

The Other Lawyer in Gay-Wed Case

Story originally appeared on the Wall Street Journal.

The face of the argument against gay marriage in the Supreme Court on Tuesday will be a lawyer with a genteel Southern tone and a record of championing conservative causes, including preserving gun rights and limiting affirmative action and gay rights.

Charles J. Cooper will defend Proposition 8, the gay-marriage ban California voters passed in 2008. He is less well known than his opponent, Ted Olson, a fellow conservative who shocked both sides when he challenged Proposition 8 in 2009 on behalf of two same-sex couples, saying it violated the Constitution.

Mr. Cooper's low profile is partly by design, say people who have worked with the 61-year-old Alabama native, known as Chuck. He has avoided discussing this case in the media, and his argument is rooted in deeply conservative views of both the justice system and the historical definition of marriage, they say. Keeping with his practice since the case began, Mr. Cooper declined an interview with The Wall Street Journal.

His Proposition 8 strategy has been notable in part because he has avoided putting homosexuality—or even the policy of same-sex marriage—on trial. Instead, he argues that the high court should allow citizens to deliberate the issues through democratic processes and should let states make their own rules about marriage.

"Chuck is a traditionalist," said Kenneth Starr, who was independent counsel during the administration of Bill Clinton and is now president of Baylor University. Mr. Starr has been a friend of Mr. Cooper's since they worked together in the Ronald Reagan administration. (Mr. Olson is another veteran of the Reagan White House.)

In 2010, the Republican National Lawyers Association named Mr. Cooper "Republican Lawyer of the Year."

Mr. Cooper has appeared before the Supreme Court before, including in the 1996 U.S. v. Winstar case, in which he successfully argued that the federal government violated contracts with certain banks by changing accounting rules during the savings and loan crisis., the group that put Proposition 8 on the ballot, chose Mr. Cooper's Washington-based firm, Cooper & Kirk, to lead its defense in part because he has "a strong and impressive background in civil rights and constitutional litigation," said Andy Pugno, the group's general counsel.

Early in his career, Mr. Cooper clerked for Justice William Rehnquist. During the Reagan administration, Mr. Cooper joined the Justice Department's Civil Rights Division and the Office of Legal Counsel, where he built a reputation as a legal "originalist," who staunchly defends the letter of the law. His thinking was that "you had to obey the law, and not what you wanted the law to be," said Nelson Lund, a George Mason University law professor who worked with Mr. Cooper at the time.

Even during their time together in the Reagan administration, Messrs. Cooper and Olson embodied different flavors of conservatism. "I remember that Ted wore very flamboyant ties and Chuck wore suspenders," said Roger Clegg—president of the Center for Equal Opportunity, a conservative think tank—who worked with both.

The Supreme Court is set to hear two cases this week that could be decisive for same-sex marriage: California's Proposition 8 and the Defense of Marriage Act. WSJ's Neil Hickey spoke to some same-sex marriage supporters who will be attending the cases.

In 1986, Mr. Cooper wrote a policy memo for the Reagan administration that argued a law prohibiting discrimination based on handicap didn't apply to employers who wanted to fire employees with AIDS, if the basis for the decision was fear of catching the disease. He later wrote a brief to the Supreme Court on behalf of several states, defending a Colorado constitutional amendment that denied gay men and lesbians equal protection. In 1997, Mr. Cooper defended Hawaii in the state's Supreme Court for not performing same-sex marriages, in one of the first major cases tied to the issue.

In the Proposition 8 case, Mr. Cooper may be best known for a 2009 moment in a San Francisco courtroom when U.S. District Court Judge Vaughn R. Walker asked him what harm would come from permitting same-sex marriage. "My answer is, I don't know," said Mr. Cooper, who is married. In a recent Supreme Court brief, he said the reason he didn't know was because same-sex marriage is "a very recent innovation" whose impact "can't possibly be known now."

Kate Kendell, the executive director of the National Center for Lesbian Rights, said she has appreciated that Mr. Cooper has "refused to make ad hominem attacks" against gay and lesbian people in his arguments, but adds that, "When the hard questions get asked about why we don't let same-sex couples get married, there is no longer an answer that is persuasive to most Americans."

UBS Asks Singapore Court to Seal Cases of Two Fired Traders

Story originally appeared on the New York Times.

SINGAPORE (Reuters) - UBS AG has filed an application to the Singapore High Court asking that two cases be sealed involving traders fired as part of the bank's investigation into reference rate manipulation.

The request for seals underscores the highly sensitive information within the cases, which stem from a global crackdown on banks involved with submitting false reference rates for various markets to benefit trading books.

Mukesh Chhaganlal and Prashant Mirpuri are suing the Swiss bank in separate cases for wrongful dismissal, saying they were sacked in order to lessen UBS's role in the alleged manipulation of currency reference rates in Singapore.

In affidavits filed on March 22, UBS lawyer Sannie Sng said the traders were terminated as a "result of serious misconduct" and that it intends to defend itself against the lawsuit. The traders have said UBS never provided them with reasons for their dismissal.

The bank asked that the cases be sealed from public view, arguing that premature disclosure of the bank's investigation into the fired traders would hamper its ongoing probe into the matter, as well as the review carried out globally by regulators looking into the manipulation of rate fixings.

"I ... verily believe that a sealing order would protect the integrity of the various investigations by regulators," Sng said in the affidavit.

Daniel Chia, a director at Stamford Law who is acting for both the traders, declined to comment on the application.

The Monetary Authority of Singapore (MAS) ordered banks that help to set local interbank lending rates and currency reference rates to review the fixing process last year as U.S. and British regulators cracked down on manipulation of Libor, a benchmark used to set interest rates for around $600 trillion worth of securities.

UBS said Chhanganlal and Mirpuri were fired as a result of those reviews.

It added that information involved in the case is likely to be of interest not just to the MAS's investigation but also to other reviews into rate manipulation taking place in other countries.

UBS was fined $1.5 billion in December last year for its role in a multi-year scheme to manipulate the London interbank offered rate (Libor) and other benchmark interest rates.

The two traders filed suits at the end of February, seeking damages including salary in lieu of notice and shares they said would have been due to them under the bank's equity ownership program had they not been fired.

UBS's application follows a similar move by Royal Bank of Scotland, which successfully applied last year for a case in Singapore to be sealed. RBS was defending itself against a wrongful dismissal suit from a former trader, Tan Chi Min, who the British lender says was fired for trying to improperly influence the bank's reference rate setters.

Tan sued the bank in December 2011, saying the practice of making requests to the bank's rate setters was known by RBS management, but the status of the case is now unclear as it has been sealed since September of last year.

Suit Offers a Peek at the Practice of Inflating a Legal Bill

Story originally appeared on the New York Times.

They were lawyers at the world’s largest law firm, trading casual e-mails about a client’s case. One made a sarcastic joke about how the bill was running way over budget. Another described a colleague’s approach to the assignment as “churn that bill, baby!”

The e-mails, which emerged in a court filing late last week, provide a window into the thorny issue of law firm billing. The documents are likely to reinforce a perception held by many corporate clients — and the public — that law firms inflate bills by performing superfluous tasks and overstaffing assignments.

The internal correspondence of the law firm, DLA Piper, was disclosed in a fee dispute between the law firm and Adam H. Victor, an energy industry executive. After DLA Piper sued Mr. Victor for $675,000 in unpaid legal bills, Mr. Victor filed a counterclaim, accusing the law firm of a “sweeping practice of overbilling.”

 Document: E-Mails on Law Firm Billing
Mr. Victor’s feud with DLA Piper began after he retained the firm in April 2010 to prepare a bankruptcy filing for one of his companies. A month after the filing, a lawyer at the firm warned colleagues that the businessman’s bill was mounting.

“I hear we are already 200k over our estimate — that’s Team DLA Piper!” wrote Erich P. Eisenegger, a lawyer at the firm.

Another DLA Piper lawyer, Christopher Thomson, replied, noting that a third colleague, Vincent J. Roldan, had been enlisted to work on the matter.

“Now Vince has random people working full time on random research projects in standard ‘churn that bill, baby!’ mode,” Mr. Thomson wrote. “That bill shall know no limits.”

A DLA Piper spokesman said the firm did not comment on pending litigation.

Legal ethics scholars said that it was highly unusual to find documentary evidence of possible churning — the creation of unnecessary work to drive up a client’s bill.

Stephen Gillers, who teaches professional responsibility at New York University Law School, called the e-mails a troubling example of lawyers’ flip attitudes toward a client’s escalating fees. And he noted that they had come to light at a time when corporations are increasingly rejecting the billable hour standard and becoming vigilant about controlling skyrocketing legal expenses.

William G. Ross, a law professor at Samford University’s Cumberland School of Law who specializes in billing ethics, said that the DLA Piper e-mails appeared to support what several of his studies had shown: that churning, while not endemic, is an insidious problem in the legal profession.

In a survey of about 250 lawyers that Professor Ross conducted in 2007, more than half acknowledged that the prospect of billing extra time influenced their decision to perform pointless assignments, such as doing excessive legal research or extraneous document review. There is also the issue of “featherbedding,” he said, or throwing armies of bodies at every problem.

“Lawyers sometimes conflate their own financial interests with the interests of the client who pays the bills,” Professor Ross said. “Of course, most lawyers are ethical, but the billable hour creates perverse incentives.”

The three DLA Piper lawyers who wrote the e-mails have since left the firm. Mr. Eisenegger and Mr. Roldan, who now work for other law firms, did not respond to requests for comment. Mr. Thomson, now a government lawyer, declined to comment. Their departures had nothing to do with the Victor case, according to people briefed on the matter.

The fee dispute centers on DLA Piper’s representation of Mr. Victor in a Chapter 11 filing for one of his holdings, Project Orange Associates, the operator of a power plant in Syracuse that provided steam to Syracuse University. Mr. Victor, the chief executive of TransGas Development Systems, which is based in New York, said that his fight over the Project Orange bill was the culmination of a relationship that had deteriorated over the last decade as DLA Piper undertook a breathtaking expansion.

He said that when he first started working with DLA Piper in the late 1990s, the firm was a modest size and went by the name Piper Rudnick. Mr. Victor had a point person at the firm, Nicolai J. Sarad, a partner in the energy industry practice.

But as DLA Piper grew, Mr. Sarad began spending less time on his assignments, Mr. Victor said. Mr. Sarad did not respond to a request for comment.

Through acquisitions, joint ventures and the aggressive hiring of partners from other firms, DLA Piper has grown into a global monolith of 4,200 lawyers in more than 30 countries, making it the world’s largest firm by lawyer count. Last year, it posted revenue of $2.25 billion, according to The American Lawyer magazine.

“As the firm got bigger, there were all of these lawyers who I didn’t know suddenly showing up on my bills,” Mr. Victor said.

He said he was particularly irked by the routine practice of DLA Piper partners farming out assignments to the firm’s junior lawyers. He complained that this resulted in higher bills and often subpar work.

Internal DLA Piper e-mails from the Project Orange bankruptcy appear to corroborate that criticism. Lawyers on the case openly discussed the inefficient use of junior lawyers, who are known as associates. Mr. Thomson, a DLA Piper lawyer, wrote that although the firm had reduced the amount of a bill for Mr. Victor, he expected his fees to escalate.

“DLA seems to love to lowball the bills and with the number of bodies being thrown at this thing it’s going to stay stupidly high and with the absurd litigation P.O.A. has been in for years it does have lots of wrinkles,” Mr. Thomson wrote.

Later, Mr. Thomson complained that DLA Piper associates were taking too long to complete assignments. “It took all of them four days to write those motions while I did cash collateral and talked to the client and learned the facts,” Mr. Thomson wrote. “Perhaps if we paid more money we’d have skilled associates.”

The e-mails were included in the 250,000 pages of documents that were turned over to Mr. Victor by DLA Piper as part of pretrial discovery in the case. Mr. Victor said that the e-mails confirmed his worst suspicions.

His lawyer, Larry Hutcher at Davidoff Hutcher & Citron, amended the countersuit last week to include a fraud claim and a request for $22.5 million in punitive damages, a number representing 1 percent of DLA Piper’s reported revenue last year.

“For the past decade, I have fought with DLA to reduce their legal bills,” Mr. Victor said. “And now I’m going to keep on fighting.”

Anthony Lewis, Supreme Court Reporter Who Brought Law to Life, Dies at 85

Story originally appeared on the New York Times.

Anthony Lewis, a former New York Times reporter and columnist whose work won two Pulitzer Prizes and transformed American legal journalism, died on Monday at his home in Cambridge, Mass. He was 85.
The cause was complications of renal and heart failure, said his wife, Margaret H. Marshall, a retired chief justice of the Massachusetts Supreme Judicial Court.
Mr. Lewis brought passionate engagement to his two great themes: justice and the role of the press in a democracy. His column, called “At Home Abroad” or “Abroad at Home” depending on where he was writing from, appeared on the Op-Ed page of The Times for more than 30 years, until 2001. His voice was liberal, learned, conversational and direct.
As a reporter, Mr. Lewis brought an entirely new approach to coverage of the Supreme Court, for which he won his second Pulitzer, in 1963.
“He brought context to the law,” said Ronald K. L. Collins, a scholar at the University of Washington who compiled a bibliography of Mr. Lewis’s work. “He had an incredible talent in making the law not only intelligible but also in making it compelling.”
Before Mr. Lewis started covering the Supreme Court, press reports on its decisions were apt to be pedestrian recitations by journalists without legal training, rarely examining the court’s reasoning or grappling with the context and consequences of particular rulings. Mr. Lewis’s thorough knowledge of the court’s work changed that. His articles were virtual tutorials about currents in legal thinking, written with ease and sweep and an ability to render complex matters accessible.
“There’s a kind of lucidity and directness to his prose,” said Joseph Lelyveld, a former executive editor of The Times. “You learned an awful lot of law just from reading Tony Lewis’s accounts of opinions.”
Mr. Lewis wrote several books, two of them classic accounts of landmark decisions of the Warren court, which he revered. Chief Justice Earl Warren led the Supreme Court from 1953 to 1969, corresponding almost precisely with Mr. Lewis’s years in Washington.
One of those books, “Gideon’s Trumpet,” concerned Gideon v. Wainwright, the 1963 decision that guaranteed lawyers to poor defendants charged with serious crimes. It has never been out of print since it was published in 1964.
“There must have been tens of thousands of college students who got it as a graduation gift before going off to law school,” said Yale Kamisar, an authority on criminal procedure who has taught at the University of Michigan and the University of San Diego.
In 1991, Mr. Lewis published “Make No Law,” an account of New York Times v. Sullivan, the 1964 Supreme Court decision that revolutionized American libel law. The Sullivan case, applying First Amendment principles to state libel law for the first time, ruled that public officials suing critics of their official conduct had to prove that the contested statements were made with “actual malice,” meaning with knowledge of their falsity or with serious subjective doubts about their truth.
Robert D. Sack, now a federal appeals court judge, said in a Times review that the book offered “a tour de force primer on the history of the First Amendment.”
Yet for all Mr. Lewis’s engagement with that Constitutional pillar, he parted company with many journalists on how far it should be used to protect them. He did not believe, for instance, that the First Amendment allows journalists to resist subpoenas for their confidential sources. Nor did he think that the amendment’s free-press clause entitles the institutional press to a special legal status.
Mr. Lewis’s coverage of the Warren court helped expand as well as explain its impact, Mr. Collins said.
“You cannot talk about the legacy of the Warren court and not talk about Tony Lewis,” he said. “He was just part and parcel of it. He was part of ushering in that constitutional revolution in civil rights and civil liberties from Brown v. Board of Education to Miranda v. Arizona.”

Monday, March 25, 2013

Weather groundhog Phil 'indicted,' accused of lying as winter continues

That's what a prosecutor in Ohio says. He has filed a criminal "indictment" against the famed groundhog, who, year for year on February 2, emerges from his burrow at Gobbler's Knob to predict whether spring will come early or winter will linger.

If he sees his shadow, it means six more weeks of chill. If not, short sleeves are days away.
This year, Phil got it wrong, and it's not the first time.

On the first day of spring this past Wednesday, the Northeast got pelted with more than a foot of snow.

It's still cold two days later, and more chilly weather is in the forecast.

Snow on the first day of spring
Gmoser talks to CNN
Michael T. Gmoser is sick of it, and he wants someone to pay.

"I woke up this morning and the wind was blowing, the snow was flying, the temperatures were falling, and I said 'Punxsutawney, you let us down,' " the prosecutor toldCNN affiliate WXIX.

The homepage of the Butler County, Ohio, prosecutor's office, which Gmoser heads, prominently features alerts against scammers.

Shadows aren't just for groundhogs

Gmoser is convinced that Phil is one and that he intentionally misled the nation. Now, trouble with the law is a brewing for the famous rodent from Punxsutawney, Pennsylvania.

Not really.

It's all in good fun, of course, and Phil's handlers are getting in on the joke.

But they are not "ratting" him out.

"If you remember two weeks ago on a Sunday, it was probably 60, 65 degrees," handler John Griffiths told WXIX in Phil's defense. "So, I mean, that basically counts as an early spring."

After snow storms and blizzards for weeks from Arizona to the Dakotas and into the Midwest and New England, not many Americans may buy it.

But Phil may not be at fault.

Some may have thought in the past that his predictions were a vast conspiracy. After all, he is sponsored by two clubs, a handful of corporations and two banks.

On Phil's website,, his handlers dispute the theory.

"No, Punxsutawney Phil's forecasts are not made in advance by the Inner Circle," they write.
The off prediction could have been a mistranslation.

Phil "speaks to the Groundhog Club President in Groundhogese," according to the website. "His proclamation is then translated for the world." What if the president can't hear correctly over the crowd? Is it then still really Phil's fault?

Gmoser is sticking by his guns. "Punxsutawney Phil did purposely, and with prior calculation and design, cause people to believe that Spring would come early," the indictment reads.

He recommends the death penalty.

"He's already serving a life sentence behind bars, as you know," Gmoser told WXIX.
Phil has been making his predictions since 1887 and will probably continue.

Extraditing him from Pennsylvania to Ohio to stand trial is unlikely, since transporting wild animals across state lines can be illegal.

People may be angry with Phil about his prediction as winter's chill dawdles.
But lighten up. He's just a groundhog.

Tuesday, March 19, 2013

Judge ignores leniency plea, hands AT&T hacker a 41-month-sentence

Story originally appeared on ComputerWorld

It's the maximum sentence prosecutors had sought for Andrew Auernheimer

Computerworld - A federal judge today ignored convicted hacker Andrew Auernheimer's leniency plea in sentencing him to 41 months in prison for illegally accessing email addresses and other data belonging to more than 120,000 iPad subscribers from AT&T's networks.
U.S. District Judge Susan Wigenton of the District Court in New Jersey also sentenced Auernheimer to an additional three years of supervised release and ordered him to pay AT&T more than $73,000 in restitution for damages stemming from his actions.
The sentence is the maximum that federal prosecutors had sought against Auernheimer.
In a pre-sentencing memo filed with the court last week. Auernheimer's attorneys had argued their client only deserved months of non-custodial probation, at most, for his offenses. They had argued for leniency on the grounds that Auernheimer's actions were not motivated by fraud and did not cause any direct harm to AT&T's systems.
Monday's sentence shows that neither the jury nor the court bought that story, the U.S attorney's office said in a statement.
"Andrew Auernheimer knew he was breaking the law when he and his partner hacked into AT&T's servers and stole personal information from unsuspecting iPad users," U.S. Attorney Paul Fishman noted. "When it became clear that he was in trouble, he concocted the fiction that he was trying to make the Internet more secure, and that all he did was walk in through an unlocked door. The jury didn't buy it, and neither did the Court in imposing sentence upon him today."
Auernheimer made headlines in June 2010 when he and his partner, Daniel Spitler, used an automated script they called iPad 3G Account Slurper to extract email addresses and SIM card ID numbers of more than 100,000 iPad owners from AT&T's servers.
The data included email addresses belonging to New York Mayor Michael Bloomberg, New York Times CEO Janet Robinson, ABC's Diane Sawyer, movie producer Harvey Weinstein, former White House chief of staff Rahm Emmanuel and numerous others.
Auernheimer and Spitler handed the data to Gawker, which posted the information public. The duo claimed they carried out the exercise only to demonstrate how AT&T was leaking the data via its Web site.
But prosecutors claimed that the whole caper was a self-serving stunt by Auernheimer to promote himself and Goatse Security, a security group to which he belonged. AT&T said it had to spend more than $73,000 for breach notifications.
In court filings, prosecutors described Aurenheimer as someone who not only took credit for the breach but also openly boasted about it to the media and others. They noted that Goatse Security often portrayed itself as a group of self-described Internet trolls bent on disrupting services and content on the Internet.

Kraft fights back over Cracker Barrel's grocery line

Story originally appeared on USA today

Companies' brand battle rights escalates after restaurant chain sells hams in groceries.

The "food fight" between Cracker Barrel Old Country Stores and Kraft Foods is getting messier.

Kraft is crying foul after the Lebanon, Tenn.-based restaurant chain earlier this month began selling Cracker Barrel-branded hams in grocery stores in several states despite Kraft's pending lawsuit challenging it, court records show.
Kraft wants a judge to stop the restaurant chain from further entering the grocery market, saying it would irreparably harm Kraft's Cracker Barrel brand of cheese. The restaurant chain is fighting back, however, with a countersuit that accuses Kraft of infringing on its trademarks. It's unclear when a decision could be expected in the case.
Late last year, Cracker Barrel announced a licensing agreement to expand the sale of its branded food items from its retail stores to supermarkets and other mass merchandisers. The company said at the time that it planned to launch the grocery line in the latter half of 2013.
Kraft objected, saying those plans infringed on its cheese brand's trademark, would cause confusion among consumers and amounted to unfair and deceptive trade practices. Kraft, based in Northfield, Ill., then filed a federal trademark-infringement lawsuit in Chicago on Jan. 31.
In court filings, Kraft said it did not immediately seek an injunction or restraining order and even gave Cracker Barrel more time to respond to the suit because it believed Cracker Barrel would not launch its grocery line until much later in the year.
But on March 2, a Cracker Barrel attorney notified Kraft that her client had launched the line. John Morrell Food Group, Cracker Barrel's licensing partner, shipped 40,000 pounds of spiral-cut hams to 325 grocery stores in six states as the "first wave," the attorney wrote in an email.
That, according to court records, prompted Kraft to file an amended lawsuit within a week that seeks a permanent injunction against the restaurant chain.
The suit claims Kraft's Cracker Barrel mark "will die a thousand deaths" as a result of the influx of Cracker Barrel-branded product.
It adds, "Absent immediate injunctive relief, by the time the case is disposed of, Kraft's ... brand may not be able to be resuscitated, regardless of any monetary award."
According to the suit, Kraft launched its line of cheese in 1954 and has sold more than $100 million of it since 2000.
In response, the restaurant chain, which was launched in 1969, contends its logo and the cheese brand logo are different enough that consumers won't confuse them. It also contends that Kraft never objected during the decades that Cracker Barrel-branded meats, syrups and other food products were sold through its stores, website and catalogs.
Kraft's legal efforts also are a threat to the restaurant chain's rights to use its trademarks as it sees fit, Cracker Barrel also said in the response.

Friday, March 15, 2013

Senators aim to reach bipartisan immigration deal next week

Story originally appeared on Reuters
(Reuters) - Eight senators aim to cap months of talks next week with a comprehensive deal to overhaul the U.S. immigration system, a member of the bipartisan group said on Thursday.
Democratic Senator Robert Menendez of New Jersey, a longtime reform advocate, said once the agreement is done, aides will draw up legislation that could be considered by the Senate Judiciary Committee in April.
"That's our goal," Menendez told Reuters. "We hope to agree on all of the major issues, hopefully, by the end of next week. But it could slip a bit," he said, perhaps by a couple of days or so.
"I'm not rigid about anything other than getting it right," Menendez said.
The timetable Menendez spelled out mirrored one that the group suggested earlier this year. It said it aimed to have a bill in March and a vote by the full Democratic-led Senate in June or July.
The eight senators - four Democrats and four Republicans - announced a "framework for comprehensive immigration reform" in January and have been working to flesh it out.
There are an estimated 11 million undocumented immigrants in the United States, many of them living in the shadows while seeking work and trying to avoid detection.
The eight senators have tried to draft a plan that would include a pathway toward U.S. citizenship for undocumented immigrants while strengthening border security.
They also want to create a more effective system to guard against U.S. employers hiring undocumented immigrants, and develop a program to better forecast and meet future U.S. workforce needs in a bid to curb illegal immigration.
The eight senators came together shortly after the November 2012 election results reflected the growing power of Hispanic voters and their pleas for immigration reform.
"There have been hard and tough negotiations, but it has been done all in the spirit of achieving the goal, in which compromise has been made on both sides," Menendez said.
The senators have worked with the encouragement of the White House and reached out to members of the Republican-led House of Representatives.
This week Obama met separately with Republican and Democratic lawmakers, mainly to talk about budget deficit concerns. But immigration reform also was discussed.
On Wednesday, Obama told a closed-door meeting of Senate Democrats that immigration was "'something that we can get done,'" Democratic Senator Benjamin Cardin of Maryland said.
On Thursday, Republican Senator Jeff Flake of Arizona, a member of the group of eight, said he thanked Obama for "playing a role that's behind the scenes."
Flake said the issue of future immigration to the United States is a sticking point for Democrats, and that Obama could build support for that part of the pending immigration bill.
(Reporting By Thomas Ferraro; Additional reporting by Richard Cowan; Editing by Fred Barbash and Stacey Joyce)

Florida legislature moves to ban internet cafes following arrests

Story originally appeared on Reuters
(Reuters) - The resignation of Florida's lieutenant governor, Jennifer Carroll, and the arrests of 57 people charged with money laundering and racketeering has sparked a stampede in the state legislature to shut down hundreds of "internet cafes," whose online gambling operations have been allowed to skirt the law for several years.
While they try to distance themselves from the storefront sweepstakes, political leaders are also trying to scrub their campaign-finance reports of any contributions from companies associated with Allied Veterans of the World, the non-profit operation at the center of a massive fraud investigation.
Carroll's public relations company worked with Allied Veterans when she was a House member in 2009-10. She resigned Tuesday after being questioned by the Florida Department of Law Enforcement, though she has not been charged.
Internet cafes sell phone cards or internet access that customers can use on-premises, often to gamble online, playing electronic slot machines or poker, among other games. Winnings and losses are recorded on an access card, which can be cashed out when a player leaves an establishment.
Many city and county governments, including sheriffs, have called them "storefront casinos," but pleas for statewide regulation have gone unheeded.
That changed on Wednesday when Republican leaders, including Senate President Don Gaetz and House Speaker Will Weatherford, rushed to add internet cafe bills to the top of committee agendas.
Law enforcement officials alleged that Allied Veterans earned about $300 million over a four-year period while it served as a front for illegal gambling. The Oklahoma-based organization spent around $2 million on political donations over the same period.
Police shuttered 49 cafes in the sweep of arrests on Tuesday.
Republican Senator John Thrasher has already proposed a bill that would have stopped licensing of any more internet cafes. It is set for a hearing on Monday in the Senate Gaming Committee and is expected to be amended before then to outlaw the cafes.
"Even the internet cafes that are operating with the best of intentions are operating within a gray area of the law," said Adam Putnam, commissioner of agriculture and consumer services. "That should be resolved and, given the widespread nature of the corruption, I think it's best for the state of Florida to err on the side of a total elimination."
After announcing Carroll's resignation Wednesday, Governor Rick Scott ordered a thorough inspection of his own campaign-finance records to see if he has received any contributions from companies associated with Allied Veterans. Such funds will be donated to charity, he said.
On Thursday, Republican Party of Florida Chairman Lenny Curry of Jacksonville took the same action.
"In light of recent developments, RPOF is examining financial contributions that may be connected to any entities affiliated with the investigation and we are reviewing the most appropriate options," he said.
At least nine lobbyists and legislative advisers withdrew from representing International Internet Technologies, an internet cafe company investigators said provided technology to Allied Veterans to run the online games.
Tallahassee public relations woman Sarah Bascom said IIT was part of the Coalition of Florida's Internet Cafes, which her firm represented. She said the internet cafe lobbying "team" felt misled by the company.
"We had no knowledge of any of this until Tuesday, when the media reports started coming out (about arrests), and we terminated our representation of them immediately," she said.

Monday, March 4, 2013

Miller determined innocent, yet still in prison

Story first appeared on USA Today -

Even the federal prosecutors who put Gordon Lee Miller in prison couldn't get him out

U.S. Justice Department lawyers took the unusual step in December of asking a federal judge to throw out Miller's conviction and free him because, they said, he had not actually broken the law.

The judge's answer was still more unusual: No.

The judge's ruling against Miller is among the latest in a handful of court decisions blocking, at least temporarily, efforts by defense lawyers and prosecutors to overturn convictions in hundreds of cases in which the Justice Department agrees that people were sent to prison improperly because of a misunderstanding of federal law. The decisions raise for the first time the prospect that scores of prisoners still waiting for courts to decide their cases might remain locked up.

"It's very frustrating," said Chris Brook, legal director of the ACLU of North Carolina. "These are cases where everybody is on the same page. The government and the defense agree. The only one standing in the way is the judge."

Miller finished his prison sentence while the case was pending; he faces three years of supervised release.

The legal dispute stems from a misunderstanding about which North Carolina state convictions were serious enough to make having a gun a federal crime. A USA TODAY investigation last year identified 60 people who had been sent to prison on gun charges even though an appeals court later determined that it was not illegal for them to have a gun. The Justice Department had initially asked courts to keep the prisoners locked up anyway, but dropped that position last year "in the interests of justice," and is now asking courts to let them out.

In response, judges have freed 34 people and taken at least 16 others off supervised release, court records show. A Justice Department review last year identified 175 others in the smallest of the state's three judicial districts who should be freed or have their prison sentences reduced.

But this month, U.S. District Judge Robert Conrad in Charlotte turned down petitions by Miller and another man seeking to have their convictions overturned, even though prosecutors said in court filings that they were "convicted for conduct that we now understand is not criminal." Another judge, Martin Reidinger, has expressed skepticism that he can free five other men and has asked for additional filings from lawyers on both sides before he makes a decision.

Justice Department spokeswoman Allison Price declined to comment on the specifics of those cases, saying, "We respect the court's decision." The department has until next week to respond to Reidinger.

Conrad, the former chief federal prosecutor in Charlotte, said in a Feb. 15 order that he could not upend Miller's conviction. Miller, he wrote, was "lawfully sentenced under then-existing law," and an appeals court's 2011 decision that changed that understanding of the law did not apply to cases that were already concluded.

Miller's lawyers, who declined to comment, have appealed Conrad's order. If the 4th Circuit Court of Appeals upholds the decision, it could effectively block other judges from overturning convictions in similar cases that are still pending in federal courts throughout North Carolina.

$450M Cut from Samsung's Debt to Apple for Patent Infringement

Story first appeared on ABC News -

The two biggest — and bitterest — rivals in the smartphone market will have to endure another bruising trial after a federal judge ruled that jurors miscalculated nearly half the $1 billion in damages it found Samsung Electronics owed Apple Inc. for patent infringement.

U.S. District Judge Lucy Koh wiped out $450 million from the verdict and ordered a new trial to reconsider damages related to 14 Samsung products including some products in its hot-selling Galaxy lineup jurors in August found were using Apple's technology without permission. Koh said jurors in the three-week trial had not properly followed her instruction in calculating some of the damages.

She also concluded that mistakes had been made in determining when Apple had first notified Samsung about the alleged violations of patents for its trend-setting iPhone and IPad.

"We are pleased that the court decided to strike $450,514,650 from the jury's award," Samsung spokeswoman Lauren Restuccia said.

Koh didn't toss out the jurors underlying finding that two dozen Samsung products infringed patents Apple used to develop its iPad and iPhone products. The new jury will be tasked with only determining what Samsung owes Apple.

Apple declined to comment on the Koh's ruling, which still did leave Samsung with a bill to just under $599 million. The judge said the tab will probably increase after the appeals of both companies are resolved.

Apple is seeking more damages and Samsung a complete dismissal of the case in the U.S. Court of Appeals for the Federal Circuit, the Washington, D.C.-based court that handles all patent appeals. The new trial to recalculate the damages could also increase the award.

Still, the ruling was the second significant setback in Koh's courtroom since the headline grabbing verdict was announced.

In December, Koh refused to order a sales ban on the products the jury found infringed Apple's patents. She said Apple failed to prove the purloined technology is what drove consumers to buy a Samsung product instead of an Apple iPhone or iPad. Samsung says that it is continues to sell only three of the two dozen products found to have infringed Apple's patents.

After a three-week trial closely followed in Silicon Valley, the jury decided that Samsung ripped off the trailblazing technology and sleek designs used by Apple to create its revolutionary iPhone and iPad. Jurors ordered Samsung to pay Apple $1.05 billion.

Apple filed another lawsuit last year accusing Samsung's newer line of products of continuing to use technology controlled by Apple. Koh has scheduled trial in that case for early next year. She has implored both companies on several occasions to settle their difference with little success.

Apple filed its patent infringement lawsuit in April 2011 and engaged legions of the country's highest-paid patent lawyers to demand $2.5 billion from its top smartphone competitor. Samsung Electronics Co. fired back with its own lawsuit seeking $399 million.

The jury found that several Samsung products illegally used such Apple creations as the "bounce-back" feature when a user scrolls to an end image, and the ability to zoom text with a tap of a finger.

Samsung has mounted an aggressive post-trial attack on the verdict, raising a number of legal issues that allege the South Korean company was treated unfairly in a federal courtroom a dozen miles from Apple's Cupertino headquarters. Samsung alleges that some of Apple's patents shouldn't have been awarded in the first place and that the jury made mistakes in calculating the damage award.

Samsung has emerged as one of Apple's biggest rivals and has overtaken it as the leading smartphone maker. Samsung's Galaxy line of phones run on Android, a mobile operating system that Google Inc. has given out for free to Samsung and other phone makers.

Apple and Samsung have filed similar lawsuits in eight other countries, including South Korea, Germany, Japan, Italy, the Netherlands, Britain, France and Australia.