Foley Hoag LLP

SUMMARY

The I.R.S. has recently issued its annual cost-of-living adjustments applicable in 2011 to qualified retirement (pension, profit-sharing, § 401(k), money purchase and stock bonus) plans. Generally, there has been such a low rate of inflation in the nation’s economy that many of these cost-of-living adjustments will remain unchanged.

SUMMARY

As the end of 2010 approaches and we receive numerous inquiries concerning developing hiring plans, I thought you might be especially interested to note some particulars about the Hiring Incentives to Restore Employment Act (the “HIRE Act”) which was enacted earlier this year to stimulate prompt hiring of workers by businesses.

SUMMARY

Excerpt:

Q: In the course of doing this year's audit, our independent auditor found a problem with our previously issued financial statements. What do we do now?

A: You need to know more. You do not have to restate your financial statements unless they are materially wrong, although bear in mind that the Securities and Exchange Commission (SEC) has said that materiality can be “qualitative” as well as “quantitative.” See Staff Accounting Bulletin No. 99.

Work through the potential issues and determine what, if anything, needs to be restated. Be sure that your independent auditor considers possible accounting alternatives to a restatement, like a cumulative catch-up. Also, you need to understand why the problems occurred; evidence of fraud, for example, will surely call for additional action. Once you have reason to believe that there is a material error, you should shut down trading in the company's securities by insiders. You may also have to suspend outstanding shelf registration statements, if there are any.

Other questions include:

• Okay, after reviewing everything, the Audit Committee has indeed concluded that some of our previously issued financial statements should no longer be relied on. And, it looks like we are going to be delayed in filing our Annual Report on Form 10-K. What do we do?
• What if we cannot file our periodic reports within the Rule 12b-25 grace period?   
• What happens when my periodic reports are late?
• What else do I need to be thinking about during this process?

SUMMARY

The Judge overseeing the bankruptcy proceeding of Lehman Brothers Holdings, Inc. and its affiliates (collectively "Lehman Brothers") recently approved Lehman Brothers’ proposed procedure for settlement or assignment of derivative contracts that Lehman Brothers entered into prior to filing for bankruptcy. (Order available at Lehman-Docket.com, Docket # 2257.) Under the procedure, Lehman Brothers will be permitted to terminate or assign all outstanding derivative contracts without obtaining express approval from its counterparties and without seeking individual approval from the court. Counterparties to existing derivative contracts with Lehman Brothers face the possible imminent loss of both the right to terminate the contracts and the right to expressly consent to assignment of the contracts.

SUMMARY

Excerpt:

Q: My company just filed a Chapter 11 bankruptcy reorganization proceeding. Our financial statements are a mess. We need to save every penny. Is the company excused from filing 10–Qs, 10–Ks and 8–Ks while we're in bankruptcy?

A: Unfortunately, no. Being in bankruptcy does not excuse you from making regular SEC filings.

Other questions include:

• Well, if we have to make some filings, is there some way I can appeal for relief to the SEC?
• If the SEC lets us modify our reporting requirements, what's "normal"? In other words, what's the least we are likely to be permitted to file? After we come out of Chapter 11, do we immediately have to be in full compliance? Any grace period?  
• While we are in bankruptcy, what's the effect of modified reporting on short-form registration statements, like S–8 and S–3? And can my officers and directors, and holders of privately purchased stock, still rely on Rule 144 if we are filing modified reports, or is that not possible?

SUMMARY

Excerpt:

Q: Has the situation on Wall Street made the current climate untenable for companies seeking funding?

A: No. While the threshold may be higher and funding sources more difficult to identify, they are still available. It depends on the company, its industry, its business model, its overall health and its operations. Creative companies will look for ways to raise capital in unconventional ways, or to make existing resources stretch longer than originally planned. But it is definitely an investor friendly environment, in which the lenders and venture capitalists who have money to put to work can be more selective and more demanding about the prices and other terms they can extract from issuers.

Other questions include:

• What are the industries likely to maintain their health and the activity during this time? Where do you see deals happening?
• What about debt financing? I heard that debt markets were completely closed.
• How is the crisis affecting due diligence? What should I expect to encounter?
• Where do IP assets fit into today’s dealmaking climate?
• I read that M&A is very slow. Is that true?

SUMMARY

Borrowers Need to Monitor Whether to Elect Prime Rate rather than LIBOR under Credit Facilities

U.S. Companies that borrow under bank credit facilities that provide for the borrower to elect payment of interest at either a LIBOR-based rate (sometimes called a "Eurodollar" loan) or a Prime Rate-based rate (sometimes called a "Base Rate" loan) need to be aware of a significant development resulting from the recent turmoil in the world’s credit markets...

SUMMARY

Foley Hoag LLP’s interdisciplinary team counsels and protects the interests of its clients facing new realities, challenges and risks framed by today’s tumultuous economic and market conditions. By maintaining an active and engaged dialogue with our clients during this period of economic distress, our lawyers are better able to adapt to the changing legal needs of clients affected in the short term. More importantly, our immersion in their businesses and industries enables our lawyers to provide sound, strategic counsel to protect our clients’ interests in the longer term. The Economic Crisis Team delivers forward-thinking advice, focusing on long-standing core, integrated strengths of the firm.

Topics include:

• Financial investigations, enforcement proceedings and litigation
• Federal and state securities regulation
• Deal-making, corporate finance and investment restructuring
• Bankruptcy, corporate reorganization and financial disputes

SUMMARY

Established in December 1980 by the partners of law firm Foley Hoag, The Foley Hoag Foundation is a private foundation that seeks to combat racism, especially among youth, in the City of Boston. The Foundation awards grants to organizations working to improve the racial climate in Boston by addressing issues of diversity and racism. Grantee organizations achieve their goals through a variety of means, including arts and cultural activities, youth leadership and recreational programs. Other grantees provide advocacy assistance, enabling individuals to confront racism through legal or political action. Some grantee organizations work to prepare young children to live in the reality of a multicultural society, others engage teens, and a few target a primarily adult constituency.

The Foley Hoag Foundation was the first—and remains the only— foundation to focus exclusively on the improvement of race relations in Boston. The trustees are fortunate to have the unqualified endorsement of Foley Hoag, which has provided an enormous amount of financial, administrative and moral support.

SUMMARY

Despite the fact that securities fraud lawsuits involving auditors are said to be relatively few in number as a percentage of total new filings and new filings are below the historical average, auditors often come to be added as defendants, particularly in high-profile cases.1 In the past few years, for example, auditors have been named as parties in the five proceedings with the largest total dollar value settlements to date -- Enron, WorldCom, Cendant, Tyco and AOL Time Warner -- and in several other well-known actions including Global Crossing, Parmalat and Delphi. With the majority of all cases historically alleging accounting irregularities and over 90% of last year’s filings reportedly containing alleged misrepresentations in financial documents, suits against auditors are never far off.

This article reviews first the role of the auditor and reminds counsel of the benefits of understanding and educating the court regarding the role of the auditor, namely that the auditor does not prepare a company’s financial statements; rather, the auditor opines on the fair presentation of management’s financial representations based on the auditor’s testing those representations. This article then surveys three areas of law germane in suits against auditors: (1) scienter requirements with respect to auditors; (2) the scope of primary liability and “scheme” liability with respect to auditors; and (3) “one firm” theories asserted against international audit firms.

SUMMARY

Successful dispute resolution requires perspective, from all vantage points. At Foley Hoag, we offer you clear insight into when to go to the mat and when to settle. If litigation becomes necessary, we focus on helping you make prudent upfront decisions that best represent your interests and aim to reach a prompt, cost-effective and viable solution.

SUMMARY

While securities fraud lawsuits involving auditors are said to be relatively few in number as a percentage of total new filings, auditors often come to be added as defendants in highprofile cases. In the past few years, for example, auditors have been named as parties in the four proceedings with the largest total dollar value settlements to date -- Enron, WorldCom, Cendant, and AOL Time Warner -- and in several other well-known actions including Global Crossing, Tyco and Parmalat. With the majority of all cases alleging accounting irregularities and over 90% of last year’s filings reportedly containing alleged misrepresentations in financial documents, suits against auditors are never far off.

This article reviews first the role of the auditor and reminds counsel of the benefits of weaving into each case the theme that the auditor does not prepare a company’s financial statements; rather, the auditor opines on the fair presentation of management’s financial representations based on the auditor’s testing those representations. This article then surveys three areas of law germane in suits against auditors: (1) scienter requirements with respect to auditors; (2) the scope of primary liability and “scheme” liability with respect to auditors; and (3) “one firm” theories asserted against international audit firms.

SUMMARY

The 2002 Sarbanes-Oxley legislation adopted a series of provisions intended to help protect against the corporate governance abuses of the turn of the century, as exemplified by Enron and WorldCom. Those provisions include: (a) Section 201 – Auditor Independence requirements; (b) Section 301 – Audit Committee qualifications; (c) Section 302 – CEO/CFO Certified Quarterly Reports; (d) Section 404 – Management Assessment of Internal Controls; and (e) Section 406 – Code of Ethics for Senior Financial Officers.

SUMMARY

On April 19, the U.S. Supreme Court issued a landmark decision that should provide a measure of relief to many companies facing "fraud on the market" class actions.

The decision, Dura Pharmaceuticals v. Broudo, addresses the requirements of a federal securities suit with respect to proving the cause of losses resulting from misrepresentations made in connection with the purchase or sale of securities.

SUMMARY

Passed in 1995, the Private Securities Litigation Reform Act (“PSLRA”) was designed to curb abuses occurring in private securities class action litigation. Among the enacted measures were provisions for appointment by the court of a lead plaintiff (or, in some instances, a lead plaintiff group or two or more co-lead plaintiffs), and approval by the court of lead plaintiff’s selection of lead counsel (or, again, in some instances, two or more co-lead counsel or lead or co-lead counsel and liaison counsel). The intent of these provisions was to have injured shareholders themselves, and not their lawyers, actually control securities class action litigation, so that there would be fewer baseless lawsuits brought and controlled by lawyers with the goal of simply extracting settlements. Courts have generally taken seriously the lead plaintiff and lead counsel requirements, and have carefully reviewed lead plaintiff applications and lead counsel selections to ensure that those requirements are being met.