This article examines the federal government's growing use of 18 USC § 1346 to prosecute public company executives for breaching their fiduciary duties. Section 1346 is a controversial but under-examined statute making it a felony to engage in a scheme "to deprive another of the intangible right of honest services." Although enacted by Congress over twenty years ago, the Supreme Court repeatedly declined to review the statute, until now. The questions before the Supreme Court are of particular interest to public company executives and their professional advisors. Traditionally, Delaware law has governed the content and enforcement of executives' legal duties, largely protecting public company fiduciaries from civil liability. Now, with the emergence of honest services fraud as a weapon ...
... prosecution of corporate officers and directors for any crimes that contributed to the economic do... courts reason, the defendant must owe some duty to provide honest services to some person who has ... responsible for rigging government contracts may or may not violate § 1346. Although the defen...
The very role of a board of directors in the system of corporate governance is to oversee a corporation's business and affairs, including its management, because numerous dispersed stockholders cannot effectively perform that function on their own. But if directors incurred liability for every misstep they took, or bad decision they made, it would indeed be rare to find a person willing to serve as a director. In Delaware, where the majority of US corporations are incorporated, the hallmark fiduciary duties are the duties of care and loyalty. But if Delaware corporate law is considered the national corporate law, the Sarbanes-Oxley Act of 2002 is perhaps best described as its smash sequel. While competent, good, or best corporate practices vary from circumstance, from company to company...
... care and loyalty.10 These two also involve a duty of candor to the corporation's stockholders.11 The... of a guide specifying the types of contracts it was able to enter into with physicians and hosp...
... (3) and even wives (4) have all been saddled with fiduciary duties. Commentators have attempted to i...) partners to partners, (28) corporate directors to shareholders, (29) general partners to limited ... that a contractually bound record company and recording artist shared a "long and enduring r... may arise expressly, through contracts and statutes, or may be implied under the specific...
... violated §36(b)(1) of the Investment Company Act of 1940, which imposes a “fiduciary duty [onn investment advisers] with respect to the receipt of compensation for service... breach of the investment adviser’s fiduciary duty plays in the Act’s overall structure, Garte...In recognition of the disinterested directors’ role, the Act instructs courts to give board appro..., they must “review and approve the contracts of the investment adviser” annually, id., at 483...
Corporate law theory and practice considers shareholder relations with companies and the implications of ownership separated from control. Yet through the Troubled Asset Relief Program (TARP) bailout and the government's resultant shareholding, ownership and control at many companies have merged, leaving corporate theory and practice for the financial and automotive sectors in chaos. The government's $700 billion bailout is a unique historical event; not merely because of its size, but also because of a resulting ripple through corporate scholarship and practice. This article builds on the author's five testimonies before Congress during the financial crisis and implementation of the TARP bailout and his consultation for the Special Inspector General for TARP. After considering corporat...
... efficient working of a board of Bank Directors depends on its internal harmony .. . In France the... controlling interest in a publicly traded company chartered under state law. As such, the government... law in agency theory and nexus-of-contracts theory. In both contexts, it considers the effects... only control shareholder that evades fiduciary duties to other shareholders under corporate law, ..., they would not be subject to fiduciary duty laws that apply to state-chartered companies under...
This document contains notices of pendency before the Department of Labor (the Department) of proposed exemptions from certain of the prohibited transaction restrictions of the Employee Retirement Income Security Act of 1974 (ERISA or the Act) and/or the Internal Revenue Code of 1986 (the Code). This notice includes the following proposed exemptions: D-11517, JPMorgan Chase & Co. and its Current and Future Affiliates and Subsidiaries (JPMorgan Chase); D- 11579, Delaware Charter Guarantee & Trust Co. d\b\a\ Principle Trust Company (Principle Trust); D-11628, Aztec Well Servicing Company and Related Companies Medical Plan Trust Fund (the Plan); D-11669, Genzyme Corporation 401(k) Plan (the Plan or the Applicant); and Retirement Program for Employees of EnPro Industries (the Plan),...
... in the Notice of Proposed Exemption, within 45 days from the date of publication of this Feder... Auction Rate Security is made by a Plan fiduciary or Plan participant or IRA owner who is independen... owned by an employee, officer, director or partner of JPMorgan Chase, or a relative of any... long-life systems in the medium- and heavy-duty truck and trailer markets; Compressor Products Int... a series of MetLife guaranteed annuity contracts, whose aggregate funding amount is not known. The ...
This article suggests that statutes governing both corporations and limited liability companies should require all owners to read several warnings about the dangers of a lack of advance planning before starting a business, or before purchasing an equity interest in an existing closely held business. Part I of this article reviews the current landscape of available business forms and details the many ways in which the majority owners of a business can take advantage of the minority owners. Part I also reviews the many ways in which the minority owner could have protected himself -- if he had the foresight to do so. Part II then reviews the main statutory and judicial responses to the problem of minority owner oppression and discusses their inadequacy. After discussing some other suggesti...
... "S" corporation), or a limited liability company (LLC). After learning that the partnership form im... one-third of the equity and serve as directors of the corporation (or managers of the LLC). Altho...With dividends discontinued, he receives no return on h... that their actions have breached the fiduciary duties that shareholders in a closely held corpora...Suing the majority owners under a fiduciary-duty claim or bringing an involuntary dissolution claim... or those who simply write poor contracts), it reflects the view that the parties' desires a...
This article explores the competing interests between director authority and accountability within the doctrinal developments underpinning the arguments for and against director oversight liability. The historic losses suffered by companies entangled in the web of subprime mortgages, collateralized debt holdings, and the ensuing credit crisis have brought the role of corporate directors as risk managers under renewed public scrutiny. Directors' authority and their accountability to shareholders are two critical pieces to striking the appropriate balance among the roles, rights, and responsibilities of directors, officers, shareholders, and other corporate constituencies who operate within the corporate power puzzle. Numerous shareholder derivative suits brought in the wake of such losse...
... That authority, coupled with directors' fiduciary duties of loyalty (and its derivative duties of go... corporation in accordance with the fiduciary duty of loyalty, which requires "good faith"-raises dif... factors are (1) the potential harm to the company, (2) the time directors had to react, (3) the part... voted to approve the renewal of these contracts.81. The nonfeasance directors who turned a blind e...
In July 2008, bankruptcy courts across the US prepared themselves for a busy season. As many as 5,664 companies sought to liquidate or restructure that month alone, a 57% increase from the prior year. This Note looks behind the shield of D&O insurance and examines its treatment under the Bankruptcy Code. Part I provides an overview of the duties of directors and officers of a corporation, as well as the protections they receive under the business judgment rule and indemnification contracts. Part II explains the three different "sides" of D&O insurance policies. Part III discusses basic bankruptcy concepts including directors' and officers' duties in bankruptcy, automatic stay, and property of the estate provisions of the Code, as well as the treatment of contracts in bankruptcy....
... sixty-one other countries.4 When the company's CFO, Richard S. Fuld Jr., stood before a Congres..., greed, and deception are common accusations with which investors stone the directors and officers (...Directors and officers owe fiduciary duties of due care, good faith and loyalty6 to me ... the shareholders of those corporations.8 The duty of care requires directors and officers to conduct...
...Scienter b. Willfulness 4. In Connection With the Purchase or Sale of a Security a. Definition o...Instruments Deemed Investment Contracts a. Investment of Money b. Common Enterprise c. Exp...Under certain circumstances, a company may be liable under Rule 10b-5 for misstatements o... or sell any security in breach of a fiduciary duty. (177) In United States v. O'Hagan, the Supre... violators from serving as officers or directors of public companies. The 1990 Act provides that a ...
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