March 2015

This Sunday, the NCAA will announce the 68 basketball teams that are scheduled to participate in this year’s men’s basketball tournament.  Then, the true “madness” begins.  

At many schools, one or more professors will likely organize an NCAA Tournament pool.  The pool will likely include entry fees and prize money. The pool’s rules and standings will often appear on a public website.

All of this may sound like innocuous fun — especially during the anxiety-ridden days of waiting for ExpressO and Scholastica acceptances to arrive.  However, law professors playing in online, pay-to-enter NCAA Tournament pools technically are acting in violation of several federal laws — albeit, laws that are rarely enforced,

One federal law that seems to prohibit online, pay-to-enter NCAA Tournament pools is the Interstate Wire Act of 1961.  This act disallows individuals from “engaging in the business of betting or wagering [through the knowing use of] a wire communication for the transmission in interstate or foreign commerce.”  According to various recent court decisions, the Wire Act applies to contests hosted via the Internet, as well as those hosted over the phone.  And even though the act was originally passed to crack down on organized crime, even “upstanding” individuals…

As someone who likes to write from time to time on women on corporate boards, I sometimes feel like I am writing about last year’s “news.”  In other words, not much seems to sound new.  So, I am always in search of a novel problem to explore or a different vantage point through which fresh insights can be obtained.

My most recent contribution in this regard is a symposium piece that looks at women on boards through the lens of the literature on crowds–whether they be mad or wise.  Boards can be crowds (albeit small ones), based on prevailing definitions.  Moreover, crowd behaviors can be gendered.  So, it seemed like a reasonable idea.

The fruit of this labor is my most recent article, Women in the Crowd of Corporate Directors: Following, Walking Alone, and Meaningfully Contributing.  The substantive portion of the abstract is as follows:

With the thought that new perspectives often can be helpful in addressing long-standing unresolved questions, this article approaches an analysis of women’s roles on corporate boards of directors from the standpoint of crowd theory. Crowd theory — in reality, a group of theories — explains the behavior of people in crowds. Specifically, this article…

Today in my Energy Law Seminar, I sprung an exercise on my class.  I gave each member of the class a confidentiality and non-disclosure agreement (NDA).  Half the class works for a venture fund and the other half works for a technology inventor who was seeking investment. (I give them some more details about the proposed deal the NDA would help facilitate. (The exercise is based on an issue I worked on some years ago.)

I instruct them to read the  NDA, then they can meet with others assigned the same side. They can come up with their negotiating points, then I turn them loose with the other side.  

I always enjoy watching students work like this.  They are forced to react, and it lets them be a little creative.  I also like this exercise, because it has multiple layers. They get to ask me me what they need to know for the business points, and I later get to talk to them about the options they may not have considered.  

I have done this a few times, and the students always negotiate what they see as the key issues. Their issue spotting is usually good, but they…

WCU

Western Carolina University has posted an opening for an assistant professor of legal studies.  More information is available here. The position is fixed-term and non-tenure-track, though it comes with the title “assistant professor.” 

Last year, I greatly enjoyed my time presenting at Western Carolina University. WCU is in a beautiful part of the country, about an hour from Ashville, NC. WCU has a strong group of legal studies professors and has one of the nation’s few Business Administration and Law degrees at the undergraduate level.

I’ve updated my list of legal studies professor positions in business schools. Many of the positions have now been filled, but I placed the newer postings in bold font. 

Sergei Magnitsky. Remember that name any time you’re considering doing business in Russia or any other country in which the “rule of law” is a meaningless masquerade for the uncontrolled whims of the powerful.

Magnitsky was a young Russian accountant working for the Hermitage Capital Management firm created by Bill Browder to invest in Russia. When Browder stepped on the toes of some of the Russian business oligarchs, Magnitsky was thrown into prison, beaten, refused essential medical care, and basically murdered.

I learned Magnitsky’s story in a new book by Bill Browder, Red Notice: A True Story of High Finance, Murder, and One Man’s Fight for Justice. Browder created Hermitage Capital shortly after the breakup of the Soviet Union. The book details Hermitage’s dramatic rise and, when Browder publicly fought the attempts by the Russian oligarchs to dilute his minority investments, Hermitage’s eventual fall. Browder and almost everyone else associated with Hermitage managed to flee Russia, some after being detained, but Magnitsky, the firm’s young accountant, refused to leave. When he was imprisoned and questioned, he refused to tell his captors the lies they wanted to hear, and his refusal eventually resulted in his death.

The story is…

There’s been a lot of controversy recently over the SEC’s use – or perhaps I should say, non-use – of the automatic “bad actor” disqualifications for firms that commit securities violations.  The disqualification provisions place certain limits on the activities of firms that are found to have committed securities violations.  Dodd Frank added a big stick to the list of penalties:  It added an automatic disqualification from participating in private placements under Rule 506 of Regulation D.  It’s a severe penalty; private placements are extremely lucrative.

But the SEC can waive the automatic disqualification – and frequently does, even for “recidivist” firms that repeatedly rack up securities violations.  It imposes fines, perhaps outside monitoring, but it waives disqualifications – especially the Rule 506 disqualification.

The issue has recently hit the public eye because Democratic Commissioners Luis Aguilar and Kara Stein have been objecting to the grant of waivers to recidivist firms.  In their view, waivers are an important tool for deterring securities violations, and the SEC has improperly adopted a policy of granting them “reflexively.”

In light of all of this, the SEC has promised to issue guidelines as to how Rule 506 waiver decisions are made; Commissioner Daniel Gallagher thinks the matter may ultimately have to be resolved by Congress.

Until recently, hasn’t been clear just how often these waivers have been granted, and who has received them.  But Urska Velikonja just posted a new paper that gathered data on 201 waivers issued between 2003 and 2014.  These waivers involved Regulation D disqualification, Regulation A disqualification, and also disqualification from the use of automatic shelf registration statements to raise capital.  Velikonja finds that: (1) large financial firms received over 80% of the waivers; smaller firms and nonfinancial firms rarely receive them even though they are much more likely to be the target of an enforcement action; (2) the SEC typically does not offer any real justifications for its decision to grant or withhold a waiver, but the pattern appears to be that the Commission does not grant waivers for firms accused of offering fraud or issuer disclosure violations; usually, they’re granted for firms accused of unrelated misconduct, such as violations of the broker-dealer and investment adviser rules – presumably because the Commission views the latter firms as presenting a lower recidivism risk; and (3) the number of waivers has declined over time, and the SEC has recently begun utilizing partial waivers.

(More under the jump)

Social enterprise has made two relatively recent appearances in the mainstream media:

(1) David Brooks on “How to Leave a Mark” in the NYT.

(2) George Roberts on “Bringing a Business Approach to Doing Good” in the WSJ.

In addition, a few law schools have started focusing more on social enterprise, including through the Georgetown Social Enterprise and Nonprofit Clinic and the Social Enterprise Law Association at Harvard Law School. 

Interest in social enterprise is and has been increasing, but the legal frameworks could still use significant work as my co-blogger Joan Heminway noted last month.

Ten days from now will mark the start of the 2015 NCAA men’s basketball tournament — one of the most watched sporting events of the year.   Recently, the NCAA sold 14 years worth of television broadcast rights to the NCAA Tournament for $10.8 Billion.  On an annual basis, that comes to an annual sum of  $770 Million per year.  

The athletes who play in these games, by contrast, do not receive any share of the derived revenues, nor are they allowed to endorse products or sign autographs for money.  In addition, the most successful teams in this tournament will have athletes that are required to miss upwards of nine class days based on a tournament schedule that is created to accommodate television broadcasts.

As a guest blogger for the month of March, I will be discussing the legal issues related to NCAA amateurism and the economic realities of the NCAA men’s basketball tournament.  Some of the topics I will discuss include why the NCAA is indeed an economic cartel, why the U.S. district court’s decision in O’Bannon v. NCAA does not go far enough to protect college athletes, why perhaps the National…

It’s always nice to be validated. Day two into torturing my business associations students with basic accounting and corporate finance, I was able to post the results of a recent study about what they were learning and why. “Torture” is a strong word– I try to break up the lessons by showing up to the minute video clips about companies that they know to illustrate how their concepts apply to real life settings. But for some students it remains a foreign language no matter how many background YouTube videos I suggest, or how interesting the debate is about McDonalds and Shake Shack on CNBC.

My alma mater Harvard Law School surveyed a number of BigLaw graduates about the essential skills and coursework for both transactional and litigation practitioners. As I explained in an earlier post, most of my students will likely practice solo or in small firms. But I have always believed that the skills sets are inherently the same regardless of the size of the practice or resources of the client. My future litigators need to know what documents to ask for in discovery and what questions to ask during the deposition of a financial expert. My family…