Help Center

ABI Blog Exchange

In 2011, companies included in their proxy ballots a choice for shareholders to advise on whether they preferred to cast advisory votes on executive compensation every 1, 2 or 3 years, the so-called "say-when-on-pay" or frequency vote. Item 5.07(d) of Form 8-K required issuers that did not otherwise announce their decisions earlier to file a second, amended Form 8-K. That deadline was months later, either 150 calendar days after the meeting or 60 days before the shareholder proposal deadline, whichever came first. The SEC Staff realized this year in reported news accounts that possibly hundreds of companies did not file the amended Form 8-K.  Failure to file this Form 8-K can lead to the loss of Form S-3 eligibility, but the SEC Staff appears willing to consider granting a waiver to those companies that have implemented the frequency that the majority of shareholders supported, which was the case for all but a handful of companies. To obtain a waiver (which the Staff prefers to characterize as a "non-objection"), a company with an existing shelf registration or one that is about to file a shelf registration must file the amended Form 8-K and make a request by writing a letter and uploading it to the new SEC site.  A company will work directly with Office of the Chief Counsel on the exact content of the letter, but in general the information may include: Whether the company has an existing Form S-3 registration statement or is planning to file one
6 years 2 months ago
“The court recognizes the difficulties presented by § 1129(b)(2)(A) for real estate developers trying to reorganize, but Congress has decided that debtors must bear the risk of reorganization by contributing additional capital and/or pledging additional collateral to their undersecured creditors before debtors may enjoy the benefits of a confirmed plan.”                                                       In re Saguaro Ranch Development Corporation,                                                      2011 WL 2182416 (Bankr. D. Ariz.

Read More from: SCG Bankruptcy Blog

6 years 2 months ago
Normally bankruptcy does not expand pre-petition contracts or impose different risks on contracting parties, but it appears that when the courts are firmly convinced of the public good of creating an asbestos trust, insurance contracts at least can be re-written.11 U.S.C §524(g) was added to the Bankruptcy Code after the historic Johns Manville asbestos bankruptcy case to codify the use of a trust and channeling injunction to allow asbestos defendants to channel all their asbestos liabilities into a trust, fund the trust with assets and stock, provide for present and future claimants of these long latency diseases, and take their productive assets and continue their businesses without being responsible for those liabilities beyond the trust assets. As the practice has evolved in many cases, the trusts are controlled by plaintiffs’ lawyers and payment decisions are not based on state law liability factors such as injury, damage or causation, but rather based on Trust Distribution Protocols which can provide compensation to persons who would not recover in the tort system.In Federal Mogul Global Inc., et al., (No. 09-2230, Third Cir.

Read More from: SCG Bankruptcy Blog

6 years 2 months ago
In year two of say-on-pay, we find that companies continue to file additional materials to solicit for favorable votes. These additional materials are generally in the form of a brief letter to shareholders highlighting aspects of executive compensation.  Most are in the form of descriptive narratives, although a few companies use graphs and charts and even PowerPoints. While a few are filed early on following the proxy statement, the majority appear to be in response to negative recommendations on say-on-pay from proxy advisory firms.  Proxy disclosure this season has been thorough and detailed, which would suggest that additional materials are not technically necessary. However, even with lengthy disclosure on executive compensation, companies have many reasons to want to file additional materials. They may wish to highlight key aspects of compensation without worrying about including all the different aspects necessary for compliance with SEC rules, or the proxy advisory firms' reports have narrowed the main issues that become important to discuss. Some materials provide companies with a set of talking points or script for conversations with shareholders, and others believe that investors benefit from having a clear set of reasons in summary form as ammunition to reject the proxy advisory firms' recommendations.
6 years 2 months ago
The Occupy Wall Street Movement has turned its focus on annual meetings, which one media outlet is calling "a rare public forum in U.S. business." News reports indicate that a coalition of unions and other organizations calling itself the "99% Power" intends to target more than 200 meetings, although only a few dozen companies were listed on its website. Some of these organizations sponsored trainings for those interested shareholder protests. Reportedly, over 1,000 demonstrators descended upon the Wells Fargo meeting site, where activists bought single shares of stock to gain entrance and over a dozen were ejected for disrupting the meeting. The press today reported that GE's annual meeting was delayed in order to remove two dozen people chanting at the beginning. GE confronted about 100 protestors in Detroit. Videos of the demonstrations outside the meetings, as well as the protestors' efforts during the meetings, have been posted online.
6 years 2 months ago
Denise Frederico was injured October 15, 2008, when the FedEx truck she was driving hit a telephone pole, allegedly because the truck was defective.  The truck was manufactured in 1994 by Grumman Olson Industries, Inc. (“Grumman”).  In 2009, Ms. Frederico and her husband brought suit in New Jersey Superior Court and subsequently amended the complaint to assert that Morgan Olson, LLC (“Morgan”) was liable under the doctrine of product-line successor liability because Morgan continued Grumman’s product line.In December 2002, Grumman filed a Chapter 11 bankruptcy petition and on July 1, 2003, the Bankruptcy Court entered an order, approving the sale of certain of Grumman’s assets to Morgan’s predecessor in interest (“Sale Order”).  The Sale Order, under 11 U.S.C. §363 of the Bankruptcy Code, provided that the sale was to be free and clear of all liens, claims and other interests.  The Sale Order further provided that the purchase of the assets would not subject Morgan to any liability including, without limitation, successor liability. After Morgan was sued by the Fredericos in state court, it commenced an adversary proceeding in the Bankruptcy Court seeking declaratory injunctive relief that the Fredericos’ claims were barred.  The Bankruptcy Court ruled against Morgan, In re Grumman Olson Industries, 445 B.R.

Read More from: SCG Bankruptcy Blog

6 years 2 months ago
California has three separate statutory provisions that prohibit a lender from obtaining a deficiency judgment after foreclosure.  These provision are found at Cal. Civ. Proc. § 580b, Cal. Civ. Proc. § 580d in conjunction with Cal. Civ. Proc. § 726(a), and after July 15th, 2011, Cal. Civ. Proc. § 580e.  A deficiency is simply the loss that a lender sustains after the property is foreclosed.  The deficiency is measured by the difference between what is owed on the loan and what the bank collected from selling the property after foreclosure. A deficiency judgment after foreclosure may result in a wage garnishment, bank account levy, and a judgment lien against other property owned by the borrower.  Because of the seriousness of a deficiency judgment sound legal advice should be sought out whenever foreclosure appears imminent.
6 years 3 months ago
Glass Lewis released a brief overview that it calls a "Primer for Issuers." Glass Lewis reiterates that it does not engage in discussions with companies during the proxy solicitation period because of concerns about the possibility of receiving material, nonpublic information. However, it will sometimes host a Proxy Talk conference call during which a company's management or board can speak directly to Glass Lewis' clients. Board Matters. It is not always clear when a director will run afoul of Glass Lewis' voting recommendations. The Issuer FAQ provides some information about related person transactions, noting that a director who controls more than 20% of voting stock would be deemed an affiliate. Different types of relationships receive varying levels of scrutiny assessed against different financial thresholds. The condensed proxy voting guidelines are truly "abridged" and only provide the most general of discussions on different voting matters.
6 years 3 months ago
Glass Lewis released a brief overview that it calls a "Primer for Issuers." Glass Lewis reiterates that it does not engage in discussions with companies during the proxy solicitation period because of concerns about the possibility of receiving material, non-public information. However, it will in some cases host a Proxy Talk conference call where a company's management or a board can speak directly to Glass Lewis clients. Board Matters. It is not always clear when a director will run afoul of Glass Lewis' voting recommendations. The Issuer FAQ provides some information about related person transactions, noting that a director who controls more than 20% of voting stock would be deemed an affiliate. Different types of relationships receive varying levels of scrutiny assessed against different financial thresholds. The condensed proxy voting guidelines are truly "abridged" and only provides the most general of discussions.Pay-for-Performance Analysis. Some of the information in this section also raises more questions than provides answers.The Glass Lewis model examines six indicators (stock price change, change in book value per share, EPS growth, total return, return on equity and return on assets) and the total compensation of the executives against four different peer groups (industry peers, sector peers of similar size, companies of similar market capitalization and companies in the same geographic regions).
6 years 3 months ago
Glass Lewis released a brief overview that it calls a "Primer for Issuers." Glass Lewis reiterates that it does not engage in discussions with companies during the proxy solicitation period because of concerns about the possibility of receiving material, non-public information. However, it will in some cases host a Proxy Talk conference call where a company's management or a board can speak directly to Glass Lewis clients.  Board Matters. It is not always clear when a director will run afoul of Glass Lewis' voting recommendations. The Issuer FAQ provides some information about related person transactions, noting that a director who controls more than 20% of voting stock would be deemed an affiliate. Different types of relationships receive varying levels of scrutiny assessed against different financial thresholds. The condensed proxy voting guidelines [http://www.glasslewis.com/issuer/us-abridged-guidelines/] are truly "abridged" and only provides the most general of discussions.
6 years 3 months ago
Student-loan relief has recently become a hot topic.  Several studies suggest that student-loan debt now exceeds $1 trillion – or what the National Association of Consumer Bankruptcy Attorneys calls, the next “debt bomb.” The federal student loan program provides those who cannot afford to go to college a unique opportunity to finance their education.  The typical student-loan customer is an 18-year-old, generally with only a limited credit history.  Student loans are unusual in that the student provides nothing in the loan application to prove his or her ability to repay the loan.

Read More from: SCG Bankruptcy Blog

6 years 3 months ago
Yesterday, the SEC sued two former executives of Arthrocare Corporation, a manufacturer of medical devices, to recover bonuses and stock profits they had received after the company had filed false financial statements. In doing so, the SEC continued its policy of seeking to apply Section 304 of Sarbanes-Oxley to executives who have not been personally charged with the fraudulent financial statements. Under Section 304, if “an issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer, as a result of misconduct,” then its CEO and CFO is required to reimburse the issuer for certain compensation received or profits made from the sale of the issuer’s stock during the 12-month period after the fraudulent financial statement was filed. While the SEC had previously settled charges against two other Arthrocare executives who were charged with fraudulently overstating the company’s revenues and earnings, it did not charge the CEO or CFO with any personal misconduct in its current complaint. In a previously litigated case, SEC v. Jenkins, the District Court of Arizona held that disgorgement of compensation and profit pursuant to Section 304 of Sarbanes-Oxley does not require personal misconduct.
6 years 3 months ago
Most experts agree that financial difficulties rate highly among the leading causes for divorce.  Not surprisingly, when couples are dissolving their marriage they will often seek my advice regarding bankruptcy.  I often hear from clients who are referred by a family law attorney.  I also sometimes see clients after a family court judge has advised them to seek counsel from a bankruptcy attorney.   This article explores a few of the most frequently asked questions involving bankruptcy law as it pertains to marital dissolution. The first and most common question that arises is whether or not bankruptcy removes an obligation to pay child or spousal support.  The answer pure and simple is that bankruptcy does not remove these obligations.  Bankruptcy Code Section 523(a)(5) excepts from discharge debts owed to a spouse, former spouse, or child of the debtor if such debt is in the nature of alimony, support, or maintenance and is in connection with a separation agreement, a determination made under state or territorial law by a governmental unit.  In fact bankruptcy often helps a party meet their support obligations in freeing up needed resources by removing other burdensome debts.
6 years 3 months ago
In late March, there was an analysis and recommendations in the American Banker which comprised the most succinct commentary on the current mortgage/foreclosure Bank-Owned real-estate problem and how to begin to solve it. I went through the Maryland S&L crisis running failed institutions. The last thing I wanted in any of them was more real estate. It's just a messy way to waste resources.Perhaps the most important portion of the author’s comments is "if mortgage lenders and servicers undertake the challenge of developing teams of highly trained loss-mitigating experts, each able to professionally and sensitively work through an increasingly complex range of loan modification, restructuring, or short sale options with troubled borrowers, then real progress can be made." To this point, not one mortgage company with whom I have dealt, Bank of America, JPMorgan Chase, Wells Fargo, Ally Bank, HSBC/HFC/Beneficial, and the OCWENs, GreenTrees etc has such a unit in place. The Call Centers read from a script and require the patience of a saint to negotiate. There is no Unit of specialists! Mention workout and you get transferred for 30 minutes+One of the major program additions, as proposed by the most recent housing stimulus is the concept of allowing principal reductions. The issue is not new, nor are the arguments against it.
6 years 3 months ago
Samuel Clemens' (or Mark Twain, under his better-known pen name) complaint about the reports of his death having been greatly exaggerated is apt also for what most people think about bankruptcy: It's NOT the end of your life. An essay by a high-tech entrepreneur and his personal bankruptcy that was published recently in the Washington Post makes this point very well. I won't bother to comment on it, because the author himself does a masterful job of describing how his own financial problem developed, his bankruptcy filing, and the changes in his attitude about bankruptcy as he launches another new start-up company. I commend it to anyone who is considering filing and still has doubts. The author also makes some very good points about "boot-strap" financing a business and living debt-free. If you want to discuss your situation personally, the initial consultation is free at our tax and bankruptcy law firm.
6 years 3 months ago
On Tuesday, I was fortunate to co-moderate a NYSE-sponsored webcast with Judy McLevey at the NYSE, as we discussed the leading proxy and governance issues for 2012 with a group of recognized experts that included Doug Chia from Johnson & Johnson, Michelle Edkins and Robert Zivnuska from BlackRock, Gordon McCoun from FTI Consulting and Pat McGurn from ISS.  An archive of the webcast is available here. Judy first informed us that while 285 companies have held annual meetings, 430 more are slated for April with another 970 currently scheduled for May.  The panelists then provided interesting perspectives and useful advice on several issues relevant to public companies today, including the following:
6 years 3 months ago
As the details of the Mortgage Settlement Agreement, the deal between 49 of 50 states and the U.S. on one side, and BanK of America, Wells Fargo, CitiBank, Ally Financial, and JP Morgan/Chase on the other, become analyzed, it a HUGE win for the Banks. The not only received a "Get Out Of Jail Free" card but are now assured that there will no jail and the cost will not hurt profits.Quoting from the March 13, 2012 American Banker's article about the agreement"The settlement includes releases from certain federal claims, including errors related to servicing conduct; origination; and errors specifically related to servicing loans for borrowers in bankruptcyThe claim "fully and finally" releases the company and any affiliated entities, from any civil or administrative claims and any civil or administrative penalties -- including punitive or exemplary damages--for:Servicing claims under the: Financial Institutions Reform, Recovery, and Enforcement Act; False Claims Act; the Racketeer Influenced and Corrupt Organizations Act; the Real Estate Settlement Procedures Act; Fair Credit Reporting Act; Fair Debt Collection Practices Act; Truth in Lending Act; Interstate Land Sales Full Disclosure Act and certain sections of the Gramm-Leach-Bliley Act.
6 years 4 months ago
At the Walt Disney Company’s annual meeting of shareholders today, shareholders approved Disney’s controversial executive compensation plan and voted to reelect Disney’s slate of directors, despite negative recommendations by the ISS.  ISS had recommended against voting for the members of Disney’s Governance and Nominating Committee because of the decision to appoint its Chief Executive Officer, Bob Iger, as Chairman of the Board at the annual meeting, thereby reversing “a commitment to independent board leadership without conducting outreach to shareholders beforehand.” Disney had not combined the roles of CEO and Chairman since 2004.   ISS also recommended against Disney’s say-on-pay vote. Disney had vigorously opposed the negative ISS recommendations. In recent SEC filings, Disney asserted that its action of combining the CEO and Chairman roles was part of a well thought-out succession and transition plan for its CEO who is expected to retire in 2016. Disney also stated that it expected to appoint an independent lead director with duties and responsibilities “that, ironically, exceed in scope those recommended by ISS.” Disney found that ISS’s recommendation on its compensation plan are “based on both flawed premises and methodology.”  Disney disputed ISS’s choice of peer group and also compared its total shareholder return to that of the S&P 500 and found that it was four times greater during Mr. Iger’s tenure as CEO.   
6 years 4 months ago
A number of companies have been unhappy to discover that ISS' recent adoption and resulting move to GRId 2.0 changed "low" or "medium" concerns to move up a notch (to "medium" or "high" concerns), especially in the compensation category.  Others were pleased to find that GRId 2.0 caused movement in the opposite direction.  Any dissatisfaction, or relief, may be short-lived, because the compensation data reflects information from the 2011 proxy statement, meaning 2010 pay. ISS has confirmed that they will update the data when companies file their 2012 proxy statements. When a company's proxy voting recommendation is published by ISS, the answers to the pay-for-performance related GRId questions will be updated along with the rest of GRId.  GRId scores will be reflected in the voting report.  The new GRId aligns more closely with the ISS proxy voting reports.  Note in particular that the pay-for-performance section under GRId is the same pay-for-performance analysis that ISS conducts for its voting reports.  These answers will not change until the following year’s proxy filing. Companies need not input anything through the data verification process, though should check the answers, as well as the proxy voting recommendations, for accuracy.
6 years 4 months ago
The Consumer Finance Protection Board ("CFPB") is trying to rein-in a common practice of mortgage companies country-wide. Very often, if a mortgage company or mortgage servicer believes that a homeowners policy has lapsed or been cancelled, the Servicer/Lender will put it's own insurance on the property. This HIGH PRICED coverage is called force-placed insurance, now euphemistically known as "Collateral Protection Insurance" or "CPI". Presently, Lenders have the right to protect their collateral, and if the borrower doesn't insure against loss, the lender can. That makes sense. However, CPI is wildly more expensive than standard Homeowners and has been the cause of at least 25% of my foreclosure cases. The SCENARIO: A Homeowner misses paying for insurance, the lender is notified and puts CPI on, adds the cost to the escrow account payment, then the homeowner makes regular payment, but lender deems it "short", and puts money in suspense until there is enough to "make" a full payment. Within 6 months borrower is in default of mortgage payments by 3 months and foreclosure starts. Yes, it is the borrower's responsibility to pay for the insurance as part of the agreement.
6 years 4 months ago