May 20, 2011

Say-on-Pay: 21st – 26th Failed Votes

This week, four more companies filed Form 8-Ks reporting failed say-on-pay votes: PICO Holdings (39%); Nutrisystem (41%); Masco (45%); and Hercules Offshore (41%).

In addition, I have found a Form 8-K filed by IsoRay from back in February where the company reported failing its SOP even though there were many more “For” votes than “Against” based on the way it decided to interpret Minnesota law (in comparison, Target – another Minnesota corporation – described the SOP standards a bit differently in its proxy statement – their way seems to make more sense). Actually, Seth Duppstadt of found this for us – thanks!

I keep maintaining our list of Form 8-Ks for failed SOPs in’s “Say-on-Pay” Practice Area.

The SEC’s First Deferred Prosecution Agreement

Here’s news culled from this Wachtell Lipton memo (we are posting memos on this action in our “White Collar Crime” Practice Area):

The SEC recently announced its first use of a deferred prosecution agreement, one of the initiatives announced in January 2010 to encourage greater cooperation in enforcement investigations. The announcement of this agreement with Tenaris S.A. follows the agency’s first non-prosecution agreement in December with Carter’s Inc.

Tenaris, a manufacturer of steel pipe products, is incorporated in Luxemburg and has American Depository Receipts listed on the New York Stock Exchange. Tenaris allegedly bribed Uzbekistan government officials in bidding for government pipeline contracts, and made almost $5 million in profits from the contracts. A world-wide internal investigation triggered by other matters and conducted by outside counsel revealed Foreign Corrupt Practices Act violations in Uzbekistan. The company self-reported to the SEC and the Department of Justice, cooperated with the government and undertook extensive remediation efforts.

The SEC explained that Tenaris was an “appropriate candidate” for the agency’s first deferred prosecution agreement because of the company’s “immediate self-reporting, thorough internal investigation, full cooperation with SEC staff, enhanced anti-corruption procedures, and enhanced training.” The SEC noted that the “company’s response demonstrated high levels of corporate accountability and cooperation.”

Under the deferred prosecution agreement (available here), the SEC will refrain from bringing civil charges against the company; however, if the Enforcement Staff determines that the company has failed to comply with its obligations under the agreement, the Staff may then proceed with an enforcement recommendation to the Commission. The agreement includes a statement of facts that is not binding against Tenaris in other proceedings. Tenaris also agreed to cooperate with the SEC, DOJ and other law enforcement agencies; although the company shared the results of its internal investigation with the government, its continuing cooperation does not require it to waive the attorney-client privilege. Tenaris further agreed to pay $5.4 million in disgorgement and prejudgment interest. Relatedly, the company entered into a non-prosecution agreement with DOJ under which the company is paying a $3.5 million criminal penalty.

The factors and considerations that the Staff will rely upon in determining whether to enter into a non-prosecution agreement, a deferred prosecution agreement or a conventional settled enforcement action remain uncertain at this point, but, based upon the Commission’s actions to date, it is apparent that the breadth of any misconduct, the involvement of more senior corporate officers and a willingness to disgorge all profits from the alleged misconduct will likely be relevant factors beyond those specifically highlighted by the Staff in the Carter’s and Tenaris cases.

Wilson Sonsini Wins Chancellor Chandler Sweepstakes

As noted in this press release, Delaware Chancellor William Chandler announced he’s headed to Wilson Sonsini to open a Georgetown, Delaware office (as well as work in NYC). This WSJ blog captures the essence of the story – and here is more from Francis Pileggi…

Coming Soon: Over 175 New Derivatives Provisions

In their memo, Davis Polk notes that over 175 new Dodd-Frank derivatives provisions are scheduled to automatically go into effect on July 16th. Many of these provisions do not require action from market participants. Many other provisions could be deferred by the regulators based on their close connection to proposed rules. Yet, a number of significant self-executing provisions remain. The firm’s memo identifies some of these new provisions and some of the required tasks to become compliant with them.

– Broc Romanek