Foley Hoag LLP

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

This guide is intended to provide foreign businesspeople with an introduction to the basic kinds of laws and regulations that affect the conduct of business in the United States, and particularly in the Commonwealth of Massachusetts. The level of detail is varied, reflecting the nature of the legal areas discussed. For example, environmental law and taxation are subjects of detailed and technical regulation, while labor relations are governed as much by custom and practice as by direct regulation.

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.