The NLJ's ABA Annual Meeting Blog

Stock-for-stock is the way to make a deal

Cash isn’t king now, but some deals will still get done in the next three months. M&A and project finance attorneys on an ABA finance panel singled out stock-for-stock and government-backed transactions as the most likely deals to go forward in that time frame.

Stock-for-stock transactions will be attractive partly because they allow companies to combine without “refinancing someone else’s broken balance sheet,” said Scott Mulcahy, an Evanston, Ill., lawyer with the investment banking boutique XMS Capital Partners who took part in the “Financial Meldown and Its Aftermath” panel on Friday. There will be more activity in the health care industry, he predicted, but deal volume in general will still be lower.

Jeff Barnes, a Toronto lawyer with Heenan Blaikie who moderated the discussion, agreed that stock-for-stock deals will rise, in part because they lure in buyers by offering some stock upside at a time when the sellers won’t budge on pricing.

The panelists also foresaw a lot of deals coming together with government financial aid. “We will continue to see a dramatic volume of government-sponsored transactions,” said Elihu Robertson, a partner in New York's Milbank, Tweed, Hadley & McCloy.

Similarly, project financing for power plants, toll roads, manufacturing plants and other facilities or infrastructure will only happen with strong corporate sponsors, companies like General Electric Co., that are willing to back the debt involved, said Carol Maters, an attorney with International Finance Corp. in Washington.

Tony West, civil division chief, names top priorities

Tony West, who was confirmed as head of the Justice Department’s civil division in April, has put on his top-priority list three big items: resolving the cases of enemy combatants at Guantanamo Bay, expanding the department’s fight against consumer fraud, and recouping money lost in fraud against the government.

The assistant attorney general, who was in Chicago to address the ABA meeting, said in an interview that resolving the Guantanamo cases is a “national security” issue, and he’s determined to meet President Barack Obama’s goal of closing the detention facility by January 2010. In keeping with past Obama administration statements, West reiterated that the military tribunals would proceed in some cases. He also said those proceedings would be reviewed to ensure that they are consistent with the rule of law and that options for individuals to challenge the process are available. Another process must be established for cases where the evidence has been tainted, he said.

The former Morrison & Foerster attorney, who was plucked from that law firm’s Oakland, Calif., office, said that he also wants to expand his division’s ability to pursue consumer fraud cases in cooperation with the Federal Trade Commission, especially to help people being preyed on in recession-driven scams.

“I want to expand our capacity and expand the number of cases we’re bringing in that arena,” West said.

In the interest of “protecting taxpayers,” West said he wants to bring more cases under the False Claims Act, especially in the areas of health care and mortgage fraud. The department is on track to claw back $2 billion from such frauds for the Medicare Trust Fund this year, he said. In an effort to work with other government officials on that goal, he planned to meet today with Illinois Attorney General Lisa Madigan and met yesterday with Tom Walsh, the civil chief of the U.S. Attorney's Office in Chicago.

West declined to express any opinion on some of the proposals moving through Congress to amend the False Claims Act.

“The False Claims Act is one of the most important tools that the federal government has to try to recover monies lost to fraud, and I think that using that tool in an appropriate but an aggressive way is to the taxpayer’s benefit,” he said.

Attorneys general agree: White House should keep some distance

Six former attorneys general speaking at an ABA panel this morning tended to agree that the communication between the Justice Department and the White House should be limited to a finite group of people to avoid inappropriate contact.

The growth of the White House counsel’s office has contributed to recent problems, said former AG Edwin Meese III, who served under President Ronald Reagan. Some other former AGs agreed.

“Trouble happens when you’re trying to run too much from the White House and the White House Counsel’s Office,” said William Barr, who led the Justice Department under President George H.W. Bush.

Michael Mukasey, who served under President George W. Bush, said that when he came in as AG at the end of 2007, he had to reinstitute rules as to who could speak to the White House and who could not.

Inappropriate meddling by lower-level Justice Department and White House employees earlier in the Bush II administration was pinpointed as a major factor in the questionable firings of U.S. attorneys. Some "dumb things" were done there, said Meese.

In addition to Meese, Barr and Mukasey, the panel included John Ashcroft from the Bush II years, Benjamin Civiletti from the Carter years, and Dick Thornburgh, who served under Reagan and Bush I.

Ashcroft says AG has to put 'the best legal face on it'

Former Attorney General John Ashcroft deftly defended his tenure as the country’s top prosecutor while sidestepping a few questions that arose in an ABA panel discussion among former attorneys general on “Lessons From History.”

When asked about the tension between faithfully enforcing the law and answering to the president on policy, Ashcroft, who served under President George W. Bush, said it was important to remember that the president is “not above the law, but he is the president so that means he’s above you.”

On policy matters, Ashcroft said he was willing to defer to the president, but if there was a point at which he was asked to contravene his oath to uphold the Constitution he would decline. “You vote with your feet in that circumstance,” Ashcroft said. Other attorneys general agreed there was a clear distinction between implementing the law and advising on policy.

When the discussion turned to whether it’s most important to give the president the straight view of the law or put the best legal face on what the president wants, Ashcroft said he wanted to answer the question with “yes.”

“It’s always important to live within the law, but even when you do, you have to put the best legal face on it,” Ashcroft said.

On the issue of how Attorney General Eric Holder Jr. should handle calls for possible prosecution of U.S. officials who may have enabled torture of imprisoned enemy combatants, Ashcroft advised Holder to consider issues of national security and the power of the president to protect national security. He suggested Holder should also distinguish between people acting within the given legal advice and people who stepped outside those limits.

“Obviously, you realized now that I’m not answering this question,” Ashcroft said. “This is a tender arena.”

Still, ultimately, he said, “I think you have to give the president the benefit of the doubt in areas of ambivalence.”

Times tough all over, say state and local bar leaders

Image crises, government budget cuts and efforts to recruit young lawyers amid big-firm layoffs are big problems facing state and local bar associations across the country, those bar leaders said at a morning breakfast meeting of the National Conference of Bar Presidents.

County government budgets in Wake County, N.C., were so bad that Nan Hannah, president-elect of the Wake County Bar Association in Raleigh, held an office supply drive for the county courthouse’s judges, clerks, public defenders and district attorneys in one of her first initiatives. The issue came up when discovery in a case had to be delayed because the courthouse didn’t have compact discs available, she said.

“I’m getting hugs from the clerks,” Hannah said.

Hannah was one of several new attendees at the NCBP breakfast, held in conjunction with the ABA meeting, who were asked to name the biggest concerns facing their local and state bar groups. Other leaders said their local courthouses were also struggling with reduced hours, less security and possible closures as a result of budget cuts.

Robert Jeffs, president-elect of the Utah State Bar, said he's trying to clear up an image crisis for lawyers in his state: Among other blots on the Utah bar, a lawyer there was recently caught stealing from clients. Image is also an issue for a bar leader from Buffalo, N.Y., where an attempt to fix a case by a judge and a lawyer just came to light.

Local and state bar leaders from North Carolina, Virginia and Georgia said they’re straining to attract new members at a time when specialty bar associations are on the rise, lawyers are facing layoffs, and young lawyers seem particularly uninterested in coming on board.

But “it’s really very reassuring that we’re all sharing the same problems,” said Nina Tollison, president-elect of the Mississippi Bar.

Ex-Judge Mikva tells prosecutors to zip it

Former federal judge Abner Mikva yesterday castigated prosecutors for making headline-grabbing remarks at press conferences before trial, potentially tainting the jury pool. The onetime chief judge of the U.S. Court of Appeals for the D.C. Circuit and former White House counsel was speaking at the panel on public corruption investigations.

“The argument is made by some prosecutors that this is a part of a public information factor of a prosecutor’s job, and they have to do it,” Mikva said at the panel, according to a report by the Chicago Sun-Times. “That’s nonsense.”

Mikva singled out U.S. Attorney Patrick Fitzgerald for comments that the lead federal prosecutor in Chicago made at a press conference following the arrest in December of then-Illinois Gov. Rod Blagojevich before there was an indictment. Fitzgerald wasn’t on yesterday's panel, but he’ll be on one Saturday regarding a federal shield law for journalists. We’ll see if there’s an exchange of barbs then.

Prosecutors chose not to talk about Ted Stevens

We hoped for some ripped-from-the-headlines remarks on the first morning of the ABA's annual meeting. Representatives from the U.S. Attorney’s Office in Chicago and the U.S. Department of Justice’s Public Integrity Section were invited to sit on a panel discussing public corruption investigations and government ethics.

But alas they didn't come.

The discussion that proceeded without them focused partly on proposed amendments to Federal Rule of Criminal Procedure 16, the rule requiring prosecutorial disclosure of exculpatory evidence that took center stage in the botched case against former Alaska Sen. Ted Stevens. The Justice Department is reviewing the issue. The Judicial Conference’s Committee on Rules of Practice and Procedure is also considering an amendment to the rule.

“These are issues that are pending before [Attorney General Eric] Holder, and they’re not in a position where they can speak definitively,” said moderator Patrick Collins in explaining Justice’s reluctance to take part despite his invitation.

Collins is a former federal prosecutor himself and now a partner with Perkins Coie in Chicago. The panel also featured U.S. District Judge Amy St. Eve, former D.C. Circuit Judge Abner Mikva and Chicago defense lawyer Ed Genson.

ABA says hands off us

Whatever the ABA may think of greater regulation of other industries, it’s generally not in favor of more federal oversight of lawyers. Rep. Barney Frank’s bill to create the Consumer Protection Financial Agency is just the latest legislation on its target list.

In an interview while attending the ABA’s annual meeting, outgoing President H. Thomas Wells Jr. said the association is working to thwart language in H.R 3126 that might end up regulating some lawyers, such as tax attorneys, under the label “financial advisors.” Frank, who chairs the House Financial Services Committee, introduced the legislation earlier this month. The bill doesn’t yet have a Senate companion.

“In part, we view it as a lawyer independence issue,” Wells said. “Lawyers in this country have historically been regulated by the states. In general, we are opposed to federal regulation of the profession.”

To fight the legislation, the ABA has ramped up its financial markets regulatory task force led by former FDIC general counsel William Kroener III, now a partner with Sullivan & Cromwell in Washington and Los Angeles, and former SEC general counsel Giovanni Prezioso, now a partner at Cleary Gottlieb Steen & Hamilton in Washington. For now the association has a draft resolution on the issue in a holding pattern, but Wells is hoping the House of Delegates will move ahead next week to approve a general set of principles with respect to financial services regulation, he said.

The effort is the latest in a string of battles the ABA has waged this year against increased federal regulation of the industry. The association won one round this week when it successfully pushed the Federal Trade Commission to delay enforcement of new rules designed to prevent identity theft. The ABA has been lobbying for months to have lawyers exempted from the rules, calling them burdensome regulation as applied to the legal profession.

The ABA may also weigh in with an amicus brief in the Supreme Court’s review of Milavetz, Gallop & Milavetz v. United States, a suit over the application of certain provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to lawyers and law firms. The House of Delegates will review that issue when it meets early next week.

Wells doesn’t favor cutting membership rates

Cutting ABA membership rates isn't the answer to shoring up lawyers' interest in joining the professional association, outgoing ABA President H. Thomas Wells Jr. said in an interview.

"The surveys that we have done have given some mixed signals on that," Wells said. "If we thought that halving the rates would double membership overnight, we would have done that."

Still, some within the organization, including President-Elect Carolyn Lamm, have suggested that lowering rates for some members might increase the appeal to certain groups of lawyers, such as young attorneys, public-interest lawyers and judges. Lawyers who have passed the bar in the past year are admitted free of charge, and after that there’s a sliding fee scale that climbs from $125 to $399 per year.

While Wells is concerned about meeting lawyers’ needs amid the recession’s job-cutting, he has ideas other than cutting the ABA rates. For instance, just last week the association started a new service on its Web site where lawyer job openings are posted, Wells said. The association’s publications, continuing education programs and webinars are also important association resources for lawyers in tough times, he said.

“The most important time to be a member of the ABA is when times are tough,” Wells said.

'Justice for Sale?'

Lawyers on the panel “Justice for Sale?: Contributions to Judicial Elections in the Wake of the Supreme Court’s Decision in Caperton v. Massey” agreed that it’s time for more states to craft rules determining when judicial recusal is appropriate and to consider restrictions on political contributions.

Attorney Meryl Chertoff, director of Georgetown University Law Center’s Sandra Day O’Connor Project on the State of the Judiciary (and, yes, wife of former Homeland Security Secretary Michael Chertoff), suggested that how judges are elected should also be part of the discussion. Although there has been much criticism of the whole process of electing judges, Chertoff did say that it works well in some states.

“This is a rule-of-law case,” she said. “At the same time we’re exporting the rule of law all over the world, we left the back gate open.”

With respect to the parameters defining a “significant” political contribution, $3 million may be appropriate in one state while $30,000 is appropriate in another, Chertoff said. In fact, Montana is considering a $250 limit, while Georgia is reviewing $5,000, said Keith Fisher, a former law professor who authored two amicus briefs on behalf of the ABA in the Caperton case.

“We’re going to see a lot of experimentation,” Fisher said.

Still, the panelists noted that ABA rules of conduct for judges on the recusal issue, which were adopted by the association in 1999 and which left blank some dollar amounts so states could determine their own, have largely been ignored with few states adopting the rules. Fisher was at a loss to explain why.

“This has sparked so much public debate that I think the states realize they need to revisit this,” Fisher said after the discussion.

If states are waiting for a further cue from the ABA, it’s coming. Attorney Bill Weisenberg, who moderated the panel and leads the association’s Standing Committee on Judicial Independence, said the committee will solicit input from state bar associations, ABA affiliates and others starting next month over a 30-day period and develop a proposal for review at a February meeting of the ABA’s House of Delegates.

In the June 8 Caperton decision, the Supreme Court ruled in a 5-4 split that Justice Brent Benjamin of the West Virginia Supreme Court of Appeals should have recused himself from a case in which the chief executive of the company being sued had spent more than $3 million to support Benjamin’s election to the court.

“The states need guidelines and this is a teachable moment,” Weisenberg said after the discussion.