Although the world of electoral politics may seem distant from the directors’ and officers’ liability arena, there was one development in Tuesday’s elections that potentially could affect the D&O claims environment, and it happened right here in The D&O Diary’s home state of Ohio. It has not drawn much national attention, but Ohio’s activist Attorney General Richard Cordray (pictured) lost his reelection bid to his Republican challenger, former U.S. Senator Michael DeWine.
Regular readers of this blog know that during his time in office, Cordray has been both highly active and highly visible in leading securities class action lawsuits on behalf of the Ohio public pension funds. Cordray was prominently involved in the recently announced $725 million AIG securities class action lawsuit settlement (about which refer here). Cordray put himself forward in connection with the $400 million Marsh contingent commission securities class action lawsuit (about which refer here).
In addition, in November 2009, Cordray led the way on behalf of the Ohio pension funds in filing a securities class action lawsuit against the rating agencies, in which he accused the rating agencies of "wreaking havoc on U.S. financial markets by providing unjustified and inflated ratings of mortgage-backed securities in exchanged for lucrative fees from securities issuers." The rating agency lawsuit is discussed here.
Cordray’s office has also sought lead plaintiff status in the securities class action lawsuit filed against BP, as discussed in his July 21, 2010 press release.
While Cordray was Ohio Attorney General, his office regularly issued reports on the status of the various securities class action lawsuits his offices was leading. The reports were titled "Holding Wall Street Accountable." The most recent report, dated August 31, 2010, can be found here. His office’s webpage detailing the various securities class action lawsuits in which Cordray was involved can be found here
In Tuesday’s election, the Republicans made a clean sweep of the Ohio statewide offices, but the Attorney General contest was by far the closest of any of state level race and. Cordray lost to challenger Mike DeWine by a narrow margin.
It remains to be seen whether or not DeWine will try to take up his predecessor’s mantle of "Holding Wall Street Accountable." DeWine’s campaign advertisements emphasized his background as a former prosecutor, and (in light of various scandals in Cuyahoga County), his promises to pursue corruption, an approach that potentally could lend itself to a scourge of Wall Street kind of approach.
However, one of the key planks of DeWine’s campaign platform was his commitment to "creating jobs through a business-friendly environment." Given DeWine’s overall conservative background and his commitment to maintaining a "business-friendly environment," I suspect the securities class action litigation agenda will be deemphasized once DeWine takes office.
To be sure, even if (as seems likely) DeWine steps back from his predecessor’s securities class action leadership role, others elsewhere might step forward. But the absence of an aggressive attorney general whose agenda includes using securities class action litigation as a policy and political tool could impact the frequency and magnitude of future securities litigation, at least to a certain extent.
Reuters reporter Dan Levine’s November 4, 2010 article (here) also speculates that Cordray’s defeat, along with the losses of numerous other activist attorneys general nationally, could help speed resolution of the current foreclosure mess, as well, as the defeated candidates seek to advance measures before they leave office. Among other things, Levine describes Cordray as one of the "spiritual leaders" among the activist AG’s who were agitating on the foreclosure issues.
Some Data About Follow-On FCPA Lawsuits: I have written frequently on this blog about the possibility of follow-on civil litigation brought by investors against companies that have been the target of an FCPA enforcement action. A November 1, 2010 Reuters article by Brian Grow entitled "Bribery Investigations Spark Shareholder Suits" (here) provides some quantification for this observation.
The article reports that according to Westlaw data, since the beginning of 2010 alone, plaintiffs’ lawyers have filed 24 shareholder suits against companies that have disclosed FCPA investigations. (The cases are a mix of class actions and derivative suits). The past average has been about eight such suits a year. The article also reports that though some cases have been dismissed, plaintiffs generally have been successful in these cases. Of the 37 cases in the preceding four years, 26 resulted in settlements.
The November 2010 issue of Metropolitan Corporate Counsel published (here) a roundtable discussion entitled "Compliance and Litigation Issues As Foreign Corrupt Practices Act Enforcement is on the Rise." The article includes a discussion of some of the challenges involved with FCPA compliance issues.
I will be participating in a panel at the upcoming PLUS International Conference in San Antonio. The panel, which is entitled "Foreign Corrupt Practices Act: Unexpected Liabilities for D&O Insurers, will be moderated by my friend Joe Monteleone, and is scheduled as the first session on Thursday, November 11, 2010. More information about the Conference and the FCPA panel can be found here.
The Nuts and Bolts of D&O: I hope readers have noticed that I have added a reference in the right hand column of this blog to my multipart series on the nuts and bolts of D&O. The reference, which can be found right below the "Subscribe" dialog box, includes a link to the series index.