As if we needed proof that worldwide financial markets are inexorably entangled, consider the collapse of the Madoff Ponzi scheme. The vaporization of as much as $50 billion invested in Madoff funds extends around the globe with concentrations of victims in unexpected places including Austria and South America. An international probe by New York-based Zwerling, Schachter & Zwerling, LLP, is focusing on whether major Austrian banks used financial funds to fraudulently funnel billions into Bernard L. Madoff's bogus investment enterprises. The New York-based law firm already is working with nearly a dozen individuals, partnerships and companies whose funds with Bank Austria and Bank Medici may have been improperly channeled to Madoff's firm. The firm also has been contacted by potential victims in Mexico, Argentina, Austria, Spain, Switzerland and Ireland.

"The auditors of these funds allowed this financial disaster to occur, and we think they have responsibility along with the banks and the feeder funds through which the banks invested in Madoff's firm," says attorney  Robert S. Schachter. "Our investigation has revealed that if financial advisors had performed basic due diligence, they could have spotted the ruse that Madoff was perpetuating with his scheme." To speak with Mr. Schachter about the Madoff investigation, contact Mark Annick at 800-559-4534 or mark@androvett.com.

Pity the junior attorney. Before the economic crash, recent grads with the right pedigree were woo'd by major law firms offering increasingly escalating salaries. Associate compensation became a benchmark of success that big firms fought to keep up with. No more, says Stacy Humphries of Houston's MS Legal Search. Instead, salaries are mostly flat while associates are hunkering down, focusing on keeping their jobs rather than looking for greener pastures. Meanwhile, it's the experienced attorneys with loyal clients that are doing the job-hopping in this climate, Humprhies says. "Junior attorneys are keeping their heads down and hoping to ride out the economic downturn while more senior attorneys, particularly those with portable business, are more proactive about trying to improve their situations." To interview Ms. Humphries about law firm compensation issues, contact Barry Pound at 800-559-4534 or barry@androvett.com. .

Texas Attorney General Greg Abbott has filed suit against Houston's Memorial Hermann Healthcare System, charging that the hospital has violated state antitrust laws

by conspiring to restrain competition from a competing hospital. Attorneys Rusty Hardin of Houston's Rusty Hardin & Associates and Richard Zook of Houston's Thompson & Knight are representing  representing the doctors and physician partnership that started Houston Town & Country Hospital. The litigation contends that Memorial Hermann engaged in improper acts against the doctors and the hospital by coercing insurance companies to boycott the smaller, start-up hospital and, as a result, depriving many patients and their doctors from using the hospital.

The two attorney's praised the AG's action. "This is a huge victory for the doctors who built Town & Country Hospital, and for the general public seeking quality health care at competitive prices. The AG's office should be congratulated for taking such a bold, non-political action on behalf of consumers," says Hardin. 

Mr. Zook agrees, "Although the AG's findings validate our claims of unlawful conduct by Memorial Hermann, the doctors' civil case against Memorial Hermann is set for a jury trial in late March 2009," says Zook. "We look forward to showing the jury the entire story of Memorial Hermann's improper actions that damaged these doctors, their patients and the public at large." 

A copy of the final judgment and news release from the Attorney General's Office can be found at http://www.oag.state.tx.us/oagNews/release.php?print=1&id=2812. For more information, contact Barry Pound 800-559-4534 at barry@androvett.com.

There's a plot for a crime-thriller in here somewhere...Behemoth banks secretly taking out life insurance policies on their employees and collecting benefits upon their deaths. The practice is so common in the international high-finance world that there's even an acronym to describe it: BOLI, for "bank-owned life insurance." The way banks are falling like dominoes lately, the conspiracy theorist in me wonders if current and former bank employees who have BOLIs are looking twice when they cross the street these days.

Attorneys from Houston's The Clearman Law Firm have begun a nationwide investigation into the practice. "It is ironic that thousands of bank employees have been laid off, yet banks still stand to benefit financially when those employees die," says class-action attorney Scott Clearman.  "These types of policies benefit only the banks, not their employees."

Many of the world's largest banks have taken out life insurance policies on their workers, including Bank of America, JP Morgan Chase, Bear Stearns, Citigroup, Wachovia, Washington Mutual, Wells Fargo and many others. Nearly half of all U.S. banks have reported owning BOLI policies at an estimated value of $120 billion. Ethics aside, the practice raises serious questions about unauthorized use of personal information. A bank purchasing a BOLI policy must provide the insurer with personal information belonging to each covered employee, including his or her name, sex, age and Social Security number. Employees' Social Security numbers are then used to conduct "death sweeps" where banks typically hire outside brokers to sweep public records in order to learn if an employee or former employee has died. A person whose life a bank insured without consent may have a right to sue for the bank's misappropriation of their identity, and may be able to recover profits made by the bank, broker and insurer. To interview Mr. Clearman about the BOLI investigation, contact Bruce Vincent at 800-559-4534 or bruce@androvett.com.

Weeks after stepping down as United States Attorney for the Northern District of Texas, attorney Richard B. Roper, III, says he expects 2009 to bring a renewed emphasis on white-collar prosecutions and securities law violations. "To the extent that our current financial crisis can be tied to these types of crimes, the Justice Department will likely have more resources and a broader mandate to pursue them," he says. "As a result, investigators and prosecutors will be able to move more quickly in detailing evidence of corporate fraud and seeking criminal penalties."  Roper previously served as United States Attorney for the Northern District of Texas from 2004-2008, and directed some of the most high-profile prosecutions in the country, including cases targeting international terrorism financing and exportation of sensitive technologies, public corruption, insider trading, tax, securities, mortgage, corporate and health care fraud, human trafficking, and international drug trafficking. He served on six Attorney General Advisory Committees, including White Collar Fraud, Cyber/Intellectual Property, Controlled Substances, Office of Management and Budget, Violent and Organized Crime, and Child Exploitation and Obscenity. In addition, he served as Co-Chair of the Department of Justice's Internet Pharmacy Working Group. As a Trial Partner in the Dallas office of Thompson & Knight, Mr. Roper will focus his practice on white collar criminal litigation. To interview Mr. Roper about the DOJ's focus on white-collar crime, contact Barry Pound at 800-559-4534 or barry@androvett.com.

Economic bad news often feeds on itself, especially in the real estate world. Consider all those underwater homeowners out there(those who owe more on their house than its current market value). Beleagured homeowners may be motivated to sell for a variety of reasons, but they are often stonewalled from selling because mortgage companies can't agree to sell a property at a loss. Even when mortgage lenders agree to such short sales, it's not an easy process, says real estate attorney, Jerome Prager of Dallas-based Prager & Miller. In the meantime, the market stagnates.

Enter the Texas Real Estate Commission, which is working to reduce the number of residential foreclosures by providing some much-needed uniformity for homeowners and mortgage lenders in these situations. Until now, mortgage agents often altered sales contracts to address the need to sell a home at a loss, but this created a new set of problems because the contract language was often inaccurate or exposed agents to allegations of practicing law without a license. Newly adopted contract language simplifies the process and could lead to more such short sales and fewer foreclosures.

"Essentially there have been situations in which these edits and insertions by a real estate agent in contracts may lead to disputes and could be deemed to be the unauthorized practice of the law" says real estate attorney Jerome Prager, of Dallas' Prager & Miller. 

"These are obviously difficult times for the real estate industry, as well as for homeowners and prospective buyers," says Mr. Prager, who as co-chair of the Commission's Broker-Lawyer Committee helped draft the language. "It's more important than ever that unambiguous closing documents are legally binding, enforceable and drafted to cover virtually any contingency."

To speak with Jerome Prager about the contract addendum concerning short sales of homes, please contact Mark Annick at 214-559-4630 or mark@androvett.com.

Interesting perspective on the state of the legal industry from the Law360 Litigation Almanac: shrinking legal budgets have so far had no impact on case volume. In fact, litigation rose 9 percent last year. According to a news release on the findings:

Class actions hit a new peak in 2008, rising 8% from the previous year on the back of an increase in antitrust - and employment - related filings. -- The economic crisis sparked a surge in corporate bankruptcy filings in 2008, while credit conditions also forced more companies to resort to quick, nontraditional bankruptcies -- trends that attorneys predict will continue until at least 2010.

Other highlights from Law360:

• Antitrust filings grew at a rate of 27%, extending a multiyear trend of dramatic increases as private plaintiffs firms closely track government investigations and prosecutions. A look at the dockets just for 2008 shows a slew of cases against chocolate makers, egg product processors, packaged ice distributors and many others, all filed soon after a government investigation was disclosed.
• The number of federal environmental lawsuits filed in 2008 rose for the first time since 2005, suggesting that the Bush administration's drop in enforcement actions, growing state activism and the U.S. Supreme Court's ruling on greenhouse gas regulation have worked to drive litigation upward.
• Employment litigation rose 6% in 2008, marking a reversal in the gradual decline in employment litigation seen over the previous four years.
  
• Meanwhile, the number of intellectual property lawsuits declined 11% in 2008, thanks largely to a dropoff in copyright litigation instigated by the recording industry. The trend reflects the success of the recording industry in protecting its copyrights, leading the industry to bring fewer lawsuits in the past few years.
  

A gloves-off legal fight questioning legal fees charged by a Boston-based law firm is headed for a Collin County jury trial. In an opinion released New Year's Day, a Texas appeals court refused to dismiss fraud allegations that attorneys for Wilmer Cutler Pickering Hale and Door LLP submitted millions in questionable legal fees and expenses for its defense of a former executive of software company. Attorneys for Dallas-based  Rose•Walker, L.L.P., filed the lawsuit on behalf of software maker McAfee Inc., charging that dozens of different WilmerHale attorneys submitted millions of dollars in unjustifiable fees, including luxury hotel rooms, lavish meals and bar tabs in their defense of former CFO Prabhat Goyal. "This ruling says that if you defraud someone in Texas, you're going to be brought before a Texas court and held accountable," says Rose•Walker co-founder Marty Rose. To speak with Mr. Rose about the WilmerHale litigation, contact Mark Annick at 800-559-4534 or mark@androvett.com.

Residential mortgage industry was one of the first dominoes to fall in the economic downturn. Now many believe the commercial real estate market is teetering. With more than 500,000 U.S. jobs lost in December, the steep job losses are causing office vacancy rates to spike in cities across the country. As businesses shed workers and office space, fears that a wave of commercial property foreclosures is about to occur.  Real estate attorney Kathleen Wu of Dallas-based Andrews Kurth LLP predicts an industry shakeup that will affect everyone from office tenants to far-flung investors of securitized commercial real estate mortgages. "We are in the midst of a significant market correction," Wu says. "If there is a silver lining to this trend it's that the industry will experience some rightsizing and a greater focus on corporate responsibility. During this cycle, there are buying opportunities for those waiting on the sidelines with access to capital or credit." To speak with Ms. Wu about commercial real estate trends, contact Robert Tharp at 800-559-4534 or robert@androvett.com.

Deep down in last summer's housing rescue bill lies a provision that is already causing heartburn among credit card payment processors and individuals who do a lot of selling on eBay. According to the legislation, beginning in 2011 payment card processors like PayPal must keep tabs on online transactions and notify the IRS when individuals earn more than $20,000. Sure, individuals who use eBay to clean out their garage have little to worry about, and you could argue that eBay Power Sellers should be paying taxes already, but the changes will have major privacy implications and cause regulatory headaches for card processors. "This won't affect people cleaning out their garage, but if you're an eBay Power Seller making more than $20,000 annually, the tax man will know about it," says attorney Zahara Alarakhia of Dallas' Munck Carter. According to the Wall Street Journal, it also applies to intermediary banks that process card payments for restaurants and brick-and-mortar retailers. Congressional tax estimators predict the reporting change will help the IRS collect an additional $9.5 billion in taxes owed by online and traditional businesses over the next 10 years. The payment processors will be required to file a 1099 form for each merchant to the IRS and to the merchant. To speak with Ms. Alarakhia about payment card processing issues, contact Alan Bentrup at 800-559-4534 or alan@androvett.com.  

 

A company drying to dig out of Chapter 11 might not seem like a good bet for lenders, especially in this tight credit market. But as the number of companies in Chapter 11 bankruptcy spikes, their prospects for digging out often depend on having access to operating cash. That's where debtor-in-possession financing comes in. Such loans to struggling companies in Chapter 11 provide struggling businesses with a chance to get back in the black rather than liquidating. "Debtor-In-Possession' financing is fairly common, and a good number of Chapter 11 cases would probably be impossible without access to capital through this framework," says Robert Paddock of Houston's Thompson & Knight. "A debtor company may have cash flow, but that revenue stream may be pledged to other secured creditors. Structured correctly, DIP or post-petition financing can be an attractive means for both a debtor and lender to fund the business through the bankruptcy proceeding." Such financing is harder to find in the existing tight credit market but it is still available, particularly for large-scale debtors willing to pay premium interest rates. To speak with Mr. Paddock about DIP financing, contact Barry Pound at 800-559-4534 or barry@androvett.com.