April 18, 2008

Posted: Sample Advance By-Laws

In the wake of the two Delaware cases I blogged about Wednesday, companies need to review their advance by-law provisions. I have posted several samples of what they may look like in the wake of the new cases in our “Annual Stockholders’ Meetings” Practice Area.

Analyzing the DOJ’s Morford Memo

Last week, the NY Times ran this critical article about the growing use of deferred criminal prosecutions. It reminded me that I hadn’t yet blogged about the new Morford Memo, distributed internally by the Department of Justice a month ago. The Morford Memo provides guidance on corporate monitoring (eg. selection critieria, scope of responsibilities, terms). Here is the Morford Memo – and memos about it are posted in our “White Collar Crime” Practice Area.

In this 15-minute podcast, Gary DiBianco of Skadden, Arps provides some insight into the Morford Memo, including:

– What is the Morford Memo?
– What do the principles outlined in the Memo seek to address? What specific practices?
– What are the DOJ’s views on the duties of a monitor as expressed in the Memo?
– What does the Memo say about the monitor’s reporting obligations to the company and the government?
– What happens when a company disagrees with a monitor’s suggestions?

Congress remains skeptical of the DOJ’s unfettered discretion in this area. Rep. Frank Pallone (D-NJ) introduced legislation in January that would establish requirements for entry into deferred prosecution agreements.

The Treasury’s Restatement Study

Last week, Treasury Secretary Henry Paulson released a study on restatements that the Department commissioned last May when it began its look into reforming the capital markets. The study – “The Changing Nature and Consequences of Public Company Financial Restatements” – conducted by Professor Susan Scholz confirms what other studies have shown, that the number of restatements has soared over the past decade (although the restatements associated with fraud and revenue has declined since Sarbanes-Oxley was passed).

The numbers of restatements have dropped since the implementation of the requirement for an independent audit of internal controls of public companies, that provide reasonable assurance with respect to the accuracy of financial statements.

You can pluck out statistics from the Treasury’s study in this press release – and have a look-see at other studies about restatements in our “Restatements” Practice Area.

As noted in this article, a key focus for the SEC’s Advisory Committee on Improvements to Financial Reporting is restatements – some changes are bound to be recommended and ultimately acted upon by the SEC.

– Broc Romanek