BU LAW TO BECOME FIRST U.S. LAW SCHOOL TO OFFER A MOOC IN COMPLIANCE

Course series will focus on legal risk management for companies doing businesses overseas

(APRIL 23, 2015) -­‐ Boston University School of Law will launch a massive open online course, Legal Risk Management Strategies for Multinational Enterprises, in October, becoming the first U.S. law school to offer a MOOC in the fast-­‐growing field of compliance.  In a partnership with BU’s Digital Learning Initiative, the School of Law will deliver the four-­‐part series on the edX online platform. 

“BU Law is committed to using new technologies to open up our classrooms not only to our students, but to all qualified practitioners with an interest in studying legal topics,” says BU Law Dean Maureen O’Rourke. “I am pleased that our very first MOOC will focus on compliance, and will provide all students, both with and without law degrees, with marketable skills for which there is significant demand in the US and abroad.”

The course will examine the issues that multinational companies face in adhering to the numerous laws and regulations that govern their operations. Students will be introduced to new tools for managing risk in the global marketplace and learn how to identify, analyze and control compliance risks in various commercial and financial contexts.

“I am excited to develop this course and to make it available to a global audience,” says course instructor Babak Boghraty, who teaches Compliance Risks in International Business in BU Law’s Executive LL.M. Program. “The subject matter really lends itself to online learning tools.”

With the introduction of the MOOC, BU Law continues to expand its online learning programs. In 2011, the School launched a first-­‐of-­‐its-­‐kind Executive LL.M. Program in International Business Law, where students learn in a blended format of residential and online courses. In 2012, BU Law began offering an online LL.M. degree in Taxation.

“At BU Law, we are committed to making our superior LL.M. instruction available to experienced practitioners who are unable to attend our traditional, nine-­‐month residential programs,” says BU Law Assistant Dean John Riccardi. “Our launch of this MOOC further demonstrates our commitment to becoming a leader in the field of global compliance and a pioneer in digital learning.”

The course will be offered as part of edX’s exclusive professional development course roster for a fee of $950.

Contact:

Ann Comer-­Woods

Communications & Marketing

Phone: 617.353.3097

Email: anncomer@bu.edu

An ongoing issue in many securities cases concerns the precise state of mind necessary to satisfy the element of scienter in a Section 10(b) violation.  The basic dispute is about whether the defendant must have intended to harm investors, or whether it is sufficient if the defendant simply intended to mislead them.

One would have thought this issue was settled by the Supreme Court’s decision in Basic Inc. v. Levinson, 485 U.S. 224 (1988).  There, the defendants lied to investors by falsely claiming that they were not engaged in merger negotiations.  The lie was not intended to harm anyone; if anything, the defendants intended to benefit investors by concealing the talks so as not to prejudice a beneficial deal.  The Supreme Court did not weigh in on the definition of scienter per se, but it did emphasize that the defendants’ benign motives would not immunize them from liability.  As the Court put it, “[W]e think that creating an exception to a regulatory scheme founded on a prodisclosure legislative philosophy, because complying with the regulation might be ‘bad for business,’ is a role for Congress, not this Court.”

Similarly, in Nakkhumpun v. Taylor, 2015 U.S. App. LEXIS 5547 (10th Cir. Apr. 7, 2015), the Tenth Circuit rejected a defendant’s argument that his false statements – in that case, false characterizations as to why a corporate asset sale had fallen through – were intended to benefit investors by attracting new deal partners.  The Tenth Circuit held that whatever the defendant’s ultimate motive, Section 10(b) liability would be imposed if he intentionally or recklessly misled investors.

Nonetheless, courts continue to sporadically define Section 10(b) scienter in a more limited manner.

[More under the jump]

Continue Reading What counts as scienter?

Marco Ventoruzzo (Penn State Law) alerts us to the upcoming international conference for the sixtieth anniversary of the Rivista delle società, which will be held in Venice, on San Giorgio Maggiore, on 13-14 November 2015. The title of the conference is “Rules for the Market and Market for Rules. Corporate Law and the Role of the Legislature.” The program and information on how to register (and other logistics) can be found here.  It looks like only an Italian version of the program is available on the website as of the time this is being posted, but I have an English version.  So, please just contact me if you want one.

Marco notes that the conference, organized every ten years by the Rivista, is one of the major events for corporate law scholars and practitioners in Italy (and probably in Europe as a whole). He anticipates well over 300 participants from several European countries, the U.S., and elsewhere. He notes that, as an additional incentive to participate, the venue is probably one of the most spectacular that can be imagined.  San Giorgio is a tiny island in the Venice lagoon, just in front of Saint Mark’s Square, that overlooks the entire Venetian waterfront. On the island, inhabited since Roman times, the conference will be hosted in a monastery partially designed by Andrea Palladio in the XVI century.

Hat tip to Marco for this announcement.

There’s good news and no news from me on the 3L job search front.

First, the good news.  One of the talented 3L business law students whom I have been mentoring in the Quest for Employment (Q4E) recently secured a position that is perfect for him.  He is a great fit for the firm and the position, and the firm is lucky to get him.  Yay for our team!

The rest of the news on the Q4E front is same-old, same-old.  Two other terrific 3L business law students who have had career/life changes that have led them to seek employment in new markets better suited to their professional or personal objectives are still on the market.  Of course, this is nothing new in Knoxville and much of the rest of the State of Tennessee, where many law firms cannot really assess their needs until much closer to the bar exam/hiring start date.  And these two promising lawyers-to-be are getting bites at the line.

Haskell earlier wrote a great post here on resumes and interviews, and I earlier wrote a companion post on cover letters.  But what happens after you’ve sent the cover letter and resume and have not been granted an interview?  Give up on the Q4E with those folks?  No way!  At least, that’s not my advice . . . .

Continue Reading The Continuing Job Search for 3Ls

UL_Lafayette_Logo

Some business schools are still hiring for this coming August. Here is a recent legal studies professor posting by University of Louisiana-Lafayette. University of Louisiana-Lafayette is a special school to me because they made my first tenure track offer, which was quickly followed by an offer from another school that was in a better geographic location for my family. While my decision was definitely the right one for our family, I have only good things to say about University of Louisiana-Lafayette. They ran a professional search process and have a collegial, bright faculty. Also, Lafayette seemed to have a wonderful, unique culture and excellent food.

I have updated my legal studies professor openings list here.

Last week the New York Times hosted a debate about the Public Corporation’s Duty to Shareholders.  Contributors include corporate law professors Stephen Bainbridge, Tamara Belinfante, Lynn Stout, David Yosifan and Jean Rogers, CEO of Sustainability Accounting Standards Board.

This collection of essays is not only more interesting than anything that I could write, but it is also the type of short, assessable debate that would be a great starting point for discussion in a seminar or corporations class.  

-Anne Tucker

In North Dakota, the state has seen drastically falling revenues due to low oil prices.  Lower revenues makes it more challenging for the communities in that state that are still trying to provide the necessary infrastructure and services that remain a challenge due to the enormous growth over the last several years.  The response from some in the North Dakota legislature? Cut taxes. 

Oil companies always seek lower taxes because they are rational actors.  Lower taxes means higher revenues. This was true with sky high oil prices and is even more true with lower prices. From a company perspective, the position makes sense.  From a legislative perspective, the position should be more nuanced. 

(Please click below to read more.)

Continue Reading Triggering Compromise in North Dakota: Oil, Taxes, and Planning Ahead

As most of you know, this year’s U.S. News rankings of law schools are now available. I’m not a big fan of those rankings. I don’t think they’re a particularly meaningful way of comparing law schools. They sometimes provide a laugh or two, as when a dean disparages the rankings while pointing to his or her school’s rise in the rankings as a sign of successful decanal leadership. But no student should be choosing a law school based on those rankings.

However, the rankings are fun to play with from time to time, and here’s one example for your amusement.

Most of the top 100 law schools in the rankings are affiliated with universities that are ranked in the U.S. News rankings of national universities. Everything else being equal, one would expect a law school’s ranking to be comparable to that of its university, and many are. Yale is the top-ranked law school (an obvious mistake in this Harvard grad’s opinion); its university ranking is number 3. But that’s not always the case; many of the law school rankings are significantly different from the rankings of their universities.

I computed a comparison score for each of the top 100 law schools by subtracting its ranking  from the ranking of its university on the U.S. News list of national universities. (Some of the top law schools aren’t affiliated with a U.S. News “national university,” so they don’t get to play.) The higher the number in a positive direction, the better the law school did in comparison to its university. The lower the number, the worse the law school did in comparison to its university. (U.S. News only provides national university rankings down to number 201, so I used 201 for any university below that in the list, with a plus in the comparison score to indicate that the difference is actually greater than that.)

These comparison scores might actually have greater validity than the rankings themselves, because they net out some of the factors, such as geographical differences and name recognition, that bias the underlying rankings. A university and its law school share the same name and they’re in the same location.

Here are the ten law schools with the highest comparison rankings (those which are outperforming their university the most):

Georgia State 145+
Nevada-Las Vegas 134+
Houston 130
New Mexico 118
Arizona State 103
George Mason 96
Utah 87
Hawaii 86
Arizona 79
West Virginia 74

Here are the ten law schools with the lowest comparison ranking:

Northeastern -45
Syracuse -29
Yeshiva (Cardozo) -27
Penn State -23
Case Western Reserve -21
Wake Forest -20
Pittsburgh -16
Miami -15
Michigan State -9
Notre Dame -6

(The comparison numbers tend more to the positive because there are so many national universities without law schools.)

Here’s a full listing of the comparison scores if you want to look up your school.

As I said, the U.S. News rankings don’t mean much, so these comparisons probably don’t mean much. I will leave it to others to figure out why these particular schools are so different from their universities. In the interest of full disclosure, the comparison score of Nebraska, where I teach, is 43.

It was recently announced that the SEC has reached a settlement in its lawsuit against Freddie Mac executives Richard Syron, Patricia Cook, and Donald Bisenius.  The basic allegation in the case was that these executives violated Section 17 of the Securities Act and Section 10(b) of the Exchange Act by dramatically understating Freddie Mac’s exposure to subprime mortgages.  The executives falsely claimed that Freddie Mac’s portfolio included $2 to $6 billion of subprime loans, when the true figure was closer to $141 billion to $244 billion.  Freddie Mac’s exposure to subprime loans ultimately caused it to experience dramatic losses, thus harming investors.

The SEC ran into difficulty because there is no accepted definition of “subprime.”  The SEC alleged that investors understood the term to refer to certain loans issued with a high likelihood of default, such as loans with high loan to value and debt to income ratios.  The executives, however, claimed that “subprime” was understood by investors only to refer to loans that were designated as subprime by their originators.

The case has now settled, and, under the terms of the settlement, the executives will make payments to a Fair Funds account for the benefit of investors, in the amounts of $250K, $50K, and $10K, respectively. 

Unusually, this is not your classic “no admit, no deny” settlement.  Instead, it appears to be straight up “no admit,” because after the settlement was reached, Bisenius said that “The dismissal of the case today under these terms vindicates me completely.”

Perhaps even more unusually, the payments are characterized as neither fines nor disgorgements.  Instead, they are described as “donations.”  Meanwhile, the amounts – coincidentally! – were calculated in proportion to the stock and options granted to the defendants during the (alleged) fraud period.

So what gives?

As far as I can tell, the euphemism is because of who’s paying.  The settlement amounts will be paid by insurance (which itself is paid for by Freddie Mac).  D&O insurance tends to exclude coverage for disgorgement and regulatory fines, see Lawrence J. Trautmana & Kara Altenbaumer-Price, D&O Insurance: A Primer, 1 Am. U. Bus. L. Rev. 337 (2011-12); Jon N. Eisenberg, How Much Protection Do Indemnification and D&O Insurance Provide?, and the SEC has taken the position that contracts to indemnify for Securities Act violations are unenforceable as against public policy.  See 17 C.F.R. §229.512. 

But I guess the SEC doesn’t feel too strongly about it, because by characterizing the payments as donations rather than fines or disgorgement, the defendants are able to get the benefit of insurance and avoid paying out of pocket.

Though the SEC’s fair funds statute does contemplate that donations may be included in a fund, see 15 U.S.C. § 7246(b), the settlement is an outlier, by SEC standards.  According to Urska Velikonja’s article, Public Compensation for Private Harm: Evidence from the SEC’s Fair Fund Distributions, 67 Stan. L. Rev. 331 (2015), executives who pay fines and disgorgement to an SEC fair fund typically pay out of pocket – an important feature, if the SEC is to avoid the criticism that fair fund distributions suffer from the same “circularity” problem that plagues private lawsuits. 

Given all of this, one wonders why the SEC even bothered.  If they thought they had a case, they could have just taken it to trial, risks be damned. And if they had doubts about the merits of the case, they should have simply dropped the matter.

One possibility is that the SEC believed its legal case was too weak for trial but that the reimbursement to investors was worth it – after all, circularity criticisms notwithstanding, not all investors are diversified, and some may have suffered losses that they did not make up in gains elsewhere.  But that’s not the motivation here, because the SEC will not establish a new fund to compensate investors for the alleged fraud.  Instead, the defendants’ donations will be added to an existing fair fund that was set up for the SEC’s earlier case against Freddie Mac, brought in 2007, regarding accounting fraud that took place from 1998 through 2002.  Which apparently means that the SEC will not even pretend to distribute the funds to the investors who were harmed by the more recent misconduct. 

(I suspect this is because the SEC believes it lacks authority to establish a fund consisting solely of donations, with no penalties or disgorgements.)

In any event, $310K is a rather paltry sum if investor compensation was the goal; according to the parallel private lawsuit (dismissed on the pleadings, see Ohio Pub. Emples. Ret. Sys. v. Fed. Home Loan Mortg. Corp., 2014 U.S. Dist. LEXIS 155375 (N.D. Ohio Oct. 31, 2014)), Freddie Mac’s misrepresentation of its subprime exposure resulted in over $6 billion in losses to shareholders.

So the point is, if paid by insurance, the amounts aren’t large enough to deter, and as it stands, they are facially not even intended to compensate.  Instead, the settlement seems an exercise in face-saving – the SEC believed it had a weak legal case (though possibly a strong moral one) but didn’t want to exit the field with nothing at all.  The whole adventure thus raises the question whether face-saving payments are appropriate for regulators to collect (as well as the question whether much face-saving was actually accomplished).