According to one of the complaints, a derivative suit filed by a California shareholder, what Chief Executive Jamie Dimon called a "failed hedging strategy" was really an act of deceit. The lawsuit accused the defendants of committing a breach of fiduciary duty, wasting company assets and being unjustly enriched in the process.
]]> "What the company did not reveal was that those losses were the result of a marked shift in the company's allowable risk model, undisclosed to investors," said the complaint. It went on to say that the company announced that a group within the company would provide "a conservative risk-reduction function." This change instead resulted in a "short-term trading enterprise" that instead opened the company up to the risk that eventually resulted in the multi-billion dollar loss.A second lawsuit was filed on behalf of owners of the company's common stock. The second lawsuit said that the Dimon and the Chief Financial Officer Douglas Braunstein held a conference call on April 13 in which they made "materially false and misleading statements and omissions." These misleading statements failed to disclose the true nature of the losses that were suffered.
The type of mismanagement and deceit claimed in the two lawsuits is exactly the type of violations that could negatively affect a shareholder's investment interest and rise to a level of actionable litigation.
Source: Reuters, "Shareholders sue JPMorgan Chase over trading loss," Grant McCool, May 16, 2012
]]>Earlier this week, Allscripts Healthcare Solutions, Inc. implemented a shareholder rights plan that provides investor protection from potential hostile takeovers, commonly referred to a poison pill plan. The term poison pill is a corporate strategy that makes company stock less desirable in an attempt to avoid a hostile takeover. This additional shareholder protection was adopted as a protective measure to ensure investors are not taken advantage of after the company's stock price decreased.
]]> Allscripts Healthcare Solutions, Inc. is a company that provides healthcare IT services. The company has recently endured change in management and endured shareholder discontent due to a weak company forecast. Recently, the company's shareholders even called for the CEO's resignation. The shareholders cited weaknesses with the CEO's execution and leadership as well as stock underperformance as compared to its competitors as the reasons for the resignation demand. The price of the company's shares fell 34 percent since last month's quarterly results.It was reported that the addition of the shareholder rights plan was not due to an active hostile takeover attempt. The newly implemented shareholder rights plan will be actionable by the shareholders if 10 percent or more of the company's common stock is acquired by a person or a group. The shareholder rights plan will also become actionable if a tender offer is presented that would result in an ownership of the company's stock that is greater than 10 percent.
Shareholder rights are an important aspect within a company. The implementation of the poison pill plan can be indicative of an acknowledgement of the company's understanding and appreciation of shareholder rights.
Source: Reuters, "UPDATE 1-Allscripts adopts poison pill," May 07, 2012
]]>Less than one year ago, the company agreed to pay an $85 million fine to settle claims brought by the Federal Reserve. The charges centered over the company's subprime loan business, including allegations that Wells Fargo employees may have influenced customers eligible for prime interest rates involving a real estate transaction into subprime loans intended for riskier borrowers.
]]> In the wake of that scandal -- the largest assessed by the Federal Reserve in a consumer-protection enforcement case at the time -- it may be easy to forget that subprime loans actually play a legitimate role in the mortgage lending market.For families whose credit histories prevent them from qualifying for prime, conventional loans, subprime loans empower them with the means of fulfilling their dreams of homeownership. Because subprime loans constitute a greater risk for the lender, they tend to cost more and may have less favorable terms -- including higher interest rates -- than conventional loans.
Given the size of Wells Fargo's fine, it may be easy to assume the company was at fault. However, a settlement, by definition, usually does not involve an admission of liability. That was the case with Wells Fargo's settlement.
If the government fails to regulate one business practice as closely as another, the fault should hardly lie on the shoulders of the California company. If you find your business in a position such as this, an experienced business law attorney.
If the government failed to regulate subprime loans as closely as conventional lending transactions, that fault hardly lies with California's lending companies.
Source: Bloomberg, "Wells Fargo Says DOJ May Seek Penalties Over Fair Lending," Bradley Keoun and Dakin Campbell, May 8, 2012
]]>The Fair Housing Act makes it unlawful for a lender to discriminate in residential real estate transactions because of race, color, religion, sex, handicap, familial status or national origin. Although a spokesperson for the Department declined to comment on the investigation, it will presumably center on whether Wells Fargo violated these anti-discrimination laws in its mortgage transactions with homeowners. A spokesperson for Wells Fargo stated that the claims "should not be brought" and the company would continue to demonstrate its compliance with fair-lending laws.
]]> The investigation is the latest in a series of lending inquiries against the company. Last year, Wells Fargo was the target of a probe into whether it directed African Americans to subprime loans. It also faced a review of whether it neglected bank-owned homes in minority neighborhoods.The penalties for lending violations are steep. Last July, the company agreed to pay an $85 million fine to settle Federal Reserve claims that it had falsified information in mortgage documents and pushed subprime loans onto customers who otherwise may have been eligible for prime interest rates. At the time, the fine was the largest of its kind for a consumer-protection enforcement case.
Wells Fargo is the largest mortgage lender in the country, with an estimated 34 percent share of the domestic market. One wonders whether that status makes them an easier target.
Source: Bloomberg, "Wells Fargo Says DOJ May Seek Penalties Over Fair Lending," Bradley Keoun and Dakin Campbell, May 8, 2012
]]>A single Yahoo shareholder discovered that Yahoo's Chief Executive, Scott Thompson, had misrepresented certain details of his academic credentials on his resume. Specifically, Thompson stated in filings with the Securities and Exchange Commission that he held degrees in both accounting and computer science from Stonehill College. In fact, Stonehill College didn't even offer computer science as a major when Thompson graduated. In fact, it was not offered as a major until four years later.
]]> The shareholder -- who is also the manager of the hedge fund Third Point -- is perhaps more involved than the typical shareholder: he has been waging a proxy battle for board seats at Yahoo. Nevertheless, his shareholder inquiry has produced a big response from Yahoo. Thompson sent out a staff-wide apology, and one board member decided not to seek reelection. In addition, another source claims that the Yahoo director in charge of the search that led to Thompson's hiring in January has decided not to seek reelection to the board at its next annual meeting.Yahoo has not only had to face this most recent shareholder debacle, but has also faced financial pressures in the recent past. Although it remains one of the largest Internet names, the corporation has had to downsize its workforce by nearly 14 percent. The announcement of the 2,000 employee layoff came only one month ago.
The rights of shareholders often take center stage -- either in the press or in courts -- during mergers and acquisitions. However, the fiduciary duty that executives owe to shareholders may extend even to something as small as ... a resume.
Source: The Los Angeles Times, "Yahoo CEO apologizes in resume flap; board member Patti Hart to depart," Andrea Chang, May 8, 2012
]]>American Perspective Bank and Pacific Western Bank have publicly announced a definitive agreement that provided for Pacific Western Bank's merger to acquire American Perspective Bank's outstanding common stock and restricted stock. The agreement was finalized for the amount of $58 million, in cash.
]]> Previously, American Perspective Bank made a public statement it had a definitive agreement that provided for Umpqua Bank's acquisition of the same terms for the amount of $44.7 million. Although the two agreements had essentially the same terms, the final amount differed because Pacific Western Bank paid $13.00 per share compared to Umpqua Bank's offer at $10.00 per share.Since American Perspective Bank had previously entered into an agreement with Umpqua Bank, there were clauses in the agreement that provided for the termination of the agreement. After Pacific Western Bank made its offer, the board of directors for American Perspective Bank had a fiduciary duty to make a decision that was most beneficial to the shareholders.
As provided in the agreement with Umpqua Bank, American Perspective Bank exercised its right to have discussions with Pacific Western Bank. Another provision in the agreement with Umpqua Bank was a termination provision, which stated if the agreement was terminated American Perspective Bank is obligated to pay a termination fee. The termination fee was $1.6 million, which is due within 30 days of the termination date.
Source: Market Watch, "Pacific Western Bank Signs Definitive Agreement To Acquire American Perspective Bank For $58.1 Million," April 30, 2012
]]>Research varies from one source to another, but no matter who you get your information from anywhere from 50 to 85 percent of mergers fail. Success often comes down to the nitty-gritty details, according to some analysts. Some of the theories behind a failed merger include failed due diligence, momentum, debt and post-merger possibilities.
]]> Due diligence is a part of every deal. In the broadest sense, the term means that there is a duty to investigate before making a deal or signing a contract. One problem with some mergers is that the "investigation" is not done properly whether that means that it was not thorough or that there was a problem with the person conducting it.Momentum and debt can even play a role. Some people are afraid to say what they really think once a deal is underway. We talked above about how complex these deals can be; they are expensive as well. When a lot of money has already been spent, it can be difficult for some people not to want to keep the process moving.
Last on our list are post-merger possibilities -- what is actually going to happen after the deal as well as the perception of what could happen. Fear of negative results can be a powerful emotion in a business deal. The right attorney will not only ensure that the details are taken care of, but that they are clearly communicated to those involved.
Source: cbs news, "Why mergers fail," Margaret Heffernan, April 23, 2012
]]>Sungevity's president and one of its co-founders, said the joint venture will take advantage of the increasingly high costs of electricity rates in cities like Sydney and Brisbane. Using imaging technology and the company's proprietary software, Sungevity can view a customer's roof on the internet and design a solar panel system that is sized appropriately for each home. By allowing customers to obtain price quotes and glimpse how the panels would look on their homes the company is able to cut marketing and installation costs.
]]> Sungevity's Australian customers in Sydney and southeastern Queensland will initially have their solar panel systems designed in California.Sungevity was originally started in Australia. In 2008 the company launched a startup in Berkeley, California, to take advantage of the generous subsidies for residential solar. They have since expanded into the Southwest and East Coast markets. For this latest joint venture, the company generated a small fund from investors to finance the residential power purchase agreements and will be looking for other financial resources from banks, leasing companies and other institutions.
Although the company did not disclose the financial terms of the joint venture, suffice it to say we have a significant minority stake in the venture, said the company's president. This marks the company's second overseas venture after the company took a minority stake in Zonline, a Dutch solar installer that uses Sungevity's remote design services.
Source: Forbes, "California's Sungevity Moves Into Australian Solar Market," Todd Woody, April 19, 2012
]]>The plan is in response to recent criticisms and a shareholder lawsuit claiming the company had mislead investors when it reported it had material weaknesses in the company's financial controls. Groupon's future looks bleak to one financial analyst at Irvine, California-based Ascendiant Capital Markets LLC, who recommends investors sell shares of their Groupon stock.
]]> In addition to its restatement of revenue, the company also reported lower than expected fourth quarter revenue than it had previously stated. After the company's stocked dropped by 35 percent since the announcement on March 30th, the lawsuit was filed by an investor naming Groupon's officers, directors and underwriters as defendants.In order to boost investor confidence the company clearly is in need of an infusion of financial competency in areas it seems to be lacking. Two new directors would be added to the current eight members of its board, which includes the company's founder and chief executive officer as well as the founder and CEO of Starbucks Corporation. Groupon held its initial public offering in November of last year and has been struggling to get its financials in order ever since.
The investor lawsuit is seeking class-action status on behalf of any investors who bought Groupon stock between November 4th of last year and March 30th of this year. The investor who filed the suit, which is seeking unspecified monetary damages, bought as many as 3,000 shares between February 9th and March 6th of this year for as much as $21.75 for each share. Groupon's shares closed at $11.96 in New York earlier this week.
Source: Bloomberg, "Groupon Is Said to Seek New Directors After Restatement," Douglas MacMillan, April 24, 2012
]]>Stockholders of the San Diego-based company decided to enforce their shareholder rights and rejected the $51 per share bid that Roche then let expire at 6 p.m. Eastern time on Friday, April 20.
]]> "We are pleased that Roche has decided not to extend its inadequate offer to acquire Illumina and that we can now return our full focus to growing our business, making the most of the expanding opportunities in our space, and delivering superior results for our customers and stockholders," said the Illumina CEO.The shareholder dispute began at the beginning of the year after a proposed bid of approximately $44.50 per share but was later increased to the $51 after receiving a less than lukewarm response. Roche had argued that Illumina's success required the assistance of the larger corporation. Illumina shareholders and representatives felt that the original bid and subsequent bid were simply an advantageous takeover of a company suffering from a momentarily depressed stock price due to governmental budget cuts that affected consumer confidence.
Whether it is the decision to sell or how management is handling the day to day operations, these decisions can affect the company profit. Shareholders not only own company stock, but the value of that stock is directly based on these major decisions. The shareholders have the right to protect their interests and at times this enforcement requires the assistance of an experienced and independent attorney.
Source: Xconomy, "Illumina Stays Independent, Roche Walking Away," Luke Timmerman, April 18, 2012
]]>The competitors ranged from newer apprentices to tradesmen who have been in the business for years but wanted to get to show that they truly are at the top of their profession. Three winners were named in the electrical, plumbing and sheet metal crafts. The top three competitors will be able to represent their businesses and their state at the 2012 ABC National Craft Championships.
]]> Being one of the best in a profession and competing at events that publicly declare an individual or business association with such a title does not just give the winner bragging rights. Competitions such as these help businesses increase their name recognition and customer base. Homeowners and developers looking for a good electrician, plumber or sheet metal worker are certainly not going to turn down someone for being named the best.When small businesses such as the ones represented at the competition gain more customers, their business needs increase as well. They may choose to expand in terms of resources, which could mean mergers, acquisitions or new real estate purchases. They may choose to expand in terms of staff, which can mean employment contracts. Whatever the needs of an expanding business, it is important that they are handled properly and that every detail is covered.
Source: San Diego Source, "San Diego Craft Champions named in annual competition," April 23, 2012
]]>The reader may wonder why a company would buy another company that had no income and may also wonder how he or she could sell a startup company with no income for that billion-dollar prize someday. According to Rhonda Abrams, president of The Planning Shop, an entrepreneur needs three things to successfully sell a startup business, and that still doesn't guarantee they'll get the billion-dollar prize for it all.
]]> First, a company needs talented people. Those talented people should also be able to work well together as a team. A large company is always looking to acquire talent, and a team that puts their talents to use as one is appealing to larger companies.Source: Florida Today, "Small Business: Make your startup the next Instagram," Rhonda Abrams, April 16, 2012
]]>Source: Businessweek, "Hostess workers counter bankruptcy court proposal," Candice Choi, April 16, 2012
]]>That's part of the reason why the latest merger of Facebook and Instagram is making news. Facebook paid a billion dollars for the two-year-old photo service, which has 30 million users and no revenues. The company, which has 13 employees, is valued at $500 million. Risky or not, California venture capitalists, investment bankers and analysts are praising the deal.
]]> It could be that Facebook's Mark Zuckerberg is considered genius who can do no wrong. But his ability to make the deal despite the uncertain landscape of social media is generating lots of positive attention. Zuckerberg closed the deal before Google or Apple, companies that everyone was convinced would get in on the bidding.How will Facebook be affected by the deal? It's possible that this will be another instance in which whatever Zuckerberg touches turns to gold. But it's also possible that it may not turn out as he hopes. After all, consumers change their minds, and Instagram's users in the Twittersphere may not want to enter the Facebook world. New applications and social media sites come and go.
Is it possible that the change the public is constantly seeking could be the downfall of the merger? Only time will tell. But one thing is sure. As Zuckerberg preps to take the company public, he is getting in on the game and taking the risk. After all, change is the name of the game.
Source: Huffington Post, "Facebook, Instagram and the Disciplines of Mergers and Acquisitions," Robert Teitelman, April 11, 2012
]]>In the past, disputes such as the spilling of hot coffee have been in the hot seat. The current issue at hand is business disputes between large corporations, as well as smaller businesses that may have a difficult time staying afloat and an even more difficult time hiring new workers, a reality that could hurt the California economy as a whole.
]]> There are active lobbyists making their case both for and against restricting the right to sue. The California Citizens Against Lawsuit Abuse, an organization that encourages legislation which would make it more difficult to sue, claims on their website that too many bad lawsuits are standing in the way of developing good jobs.Of course real business disputes or personal disputes have every right to be heard. However, some disputes are more valid than others, and many believe the funds used for filing as well as the money awarded in settlements would be better spent in other ways. In the case of large corporations, losing a large business dispute can cost hundreds of millions of dollars, and in many business disputes it's discovered that both parties involved are guilty of wrongdoing.
Small and medium sized businesses in particular can take a hard blow in business disputes. Even lawsuits totaling in the thousands can be the difference between staying in business or not. Quality legal representation can help assure that business disputes are guided toward a fair solution. Regardless of which side you may be on in a California business dispute, it's something to that needs to be thought through and pursued in a responsible and professional manner.
Source: San Francisco Chronicle, "State's biggest verdicts involve business disputes," Lance Williams, April 1, 2012
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