Month: April 2008

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Enron and Citigroup Settle: MegaClaims Litigation Comes to an End

I. Introduction

In late March Enron Creditors Recovery Corp. ("Enron") settled its latest and final MegaClaim against Citigroup, the largest bank in the U.S. [1] Citigroup agreed to pay $1.66 billion to Enron over its alleged responsibility in Enron's downfall. [2] In addition, Citigroup is releasing $4.25 billion in claims against the Enron estate, including a $4 billion claim reserve established by the U.S. Bankruptcy Court for the Southern District of New York. [3] Citigroup denied any wrongdoing in its dealings with Enron, but stated that it settled solely to avoid the expense and uncertainty of litigation. [4] Trial was set to start in April. Initially, Enron had sought $3 billion from Citigroup, alleging that number represented the amount fraudulently transferred by Enron to Citigroup. [5] Enron contended that Citigroup, in particular, played a central role in its collapse. [6]

This settlement effectively put an end to the MegaClaims litigation. … Read the rest

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Is a Franchise for You? Making the Right Decision on Starting a Franchise

I. Introduction

Starting a franchise can be a lucrative business. However,
franchising is also an expensive start-up venture and can have
significant legal consequences if not done properly. This article will
first define a franchise and discuss the different types. It will then
discuss financing a franchise and the legal issues of starting a
franchise. Finally, the article will conclude by discussing the best
way to go about starting a franchise.

II. Defining Franchise

A franchise is "the right or license granted by a company to an
individual or group to market its products or services in a specific
territory." [1] In other words, franchising is similar to cloning a
business. [2] The process of buying a franchise involves renting the
franchiser's trademark and business model. [3] Most franchises, like
McDonald's and Taco Bell, are considered "turnkey" business
opportunities because all the purchaser needs to do it turn a
rhetorical … Read the rest

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Ambiguity In Contemporary Money Laundering Statutes

I. Introduction

At the end of last year, the United States Supreme Court granted a petition for writ of certiorari for the appeal of convicted felon Humberto Fidel Regalado Cuellar. [1] The Court's ultimate decision in the case of United States v. Cuellar will be of immense importance, and can have far reaching effects. The Cuellar case will allow the United States Supreme Court to give lower courts guidance in the proper interpretation of current statutes criminalizing money laundering. Currently, a plethora of crimes are in the penumbra of money laundering charges. Such aggressive interpretation and application of money laundering charges is troubling in light of its original purpose. Clearly, much has changed since the passage of the 1970 Bank Secrecy Act "BSA". [2] Furthermore, the meaning of money laundering has expanded to "cover almost any financial crime", and marks a far departure from its original conceptualization. [3] Should the Court … Read the rest

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M&A Trend In 2008

In the first financial quarter of 2008, a steady trend in M&A activity is patent. The weak dollar, the economic slowdown, banks’ lack of liquidity, or the motivation to add shareholder value are all viable reasons for the trend in M&A activity. Some corporations, in 2007, projected M&A to remain strong until, “private-equity buyers pushed up target prices too high and economic growth slow[ed].” [1] A New York investment bank for media and information industries tracked buyouts in the media world for the first quarter of 2008 and reported 202 transactions that had a total value of $13.4 billion. [2] This figure is in no way a cap on the total dollar value of all M&A activity in the first quarter since the $13.4 billion represents only M&A activity in the media and information industries.

 

M&A Trend In the Second Quarter

 

The second quarter of 2008 has seen

… Read the rest
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Unauthorized Aliens and Credit Cards: Are Banks Violating Federal Law?

I. Introduction

An estimated 11.6 million unauthorized aliens [1] are currently in the United States.  [2]  This growing population has not gone unnoticed by American financial institutions.  For years banks have offered checking and some savings accounts to aliens without requiring them to prove valid immigration status.  [3]  In recent years, however, banks have widened the scope of financial products available to aliens who do not have a Social Security Number.  [4]  While the intent of these products was to provide services to green card holders and legal nonimmigrants, fairly relaxed identification requirements and the overly general specifications of the USA PATRIOT Act ("Patriot Act") allow unauthorized aliens to take advantage of these products in many situations.  [5]  Although some have argued that banks are violating the Patriot Act's Customer Identification Program ("CIP") requirement by agreeing to accept non-traditional identification to establish new accounts, this argument does not appear to … Read the rest

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Shades of Gray: A Perspective Behind the Skrobot Indictment

    The old legal maxim proceeds, ignorantia juris non excusat or, "ignorance of the law, is no excuse!" This ancient truism, thought to have its origins in Roman law, was eventually folded into the American legal system through the early English colonialists. The maxim reflected a common reality that much of law, particularly criminal law, was understood to be based on the natural and eventually, Canon law. A knowledge of such laws was thought to be held generally by all in common, the law written on the heart, so they have no excuse, as St. Paul refers to it.[1] However, much of that common traditional understanding, and particularly the natural law, has been jettisoned by modernity. To fill the void for our pluralistic and disjointed world, we have adopted a sterile, strict, and exclusive form of legal positivism. Reams and reams of state and federal statutes, municipal codes, administrative … Read the rest

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Will the XM-Sirius Merger Pass FCC Regulations?

I. Introduction

     On February 19, 2007 satellite radio rivals Sirius Satellite Radio and XM Satellite Radio announced their intention to merge. [1] Both companies have experienced billions of dollars in losses. [2] Their net debt is approximately $1.6 billion. [3] According to Wall Street equity analysts, this merger will help the financial future of both companies by cutting their costs and resulting in a savings of over $3 billion . [4] However, the two companies have major hurdles to overcome. One hurdle was antitrust concerns about the merger by the Department of Justice. [5] On March 24, 2008 the United States Department of Justice closed its investigation and approved the XM-Sirius merger, finding that the merger would not harm consumers or competition. [6] Still, the XM-Sirius merger has one more obstacle in its path – the approval of the Federal Communications Commission (FCC). [7] In order for XM

… Read the rest
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Lawyer-Turned-Entrepreneur: How the Collision of Diverse Careers can Blend into Success

I.  Introduction

    At first glance, it looks as though lawyers and entrepreneurs don't have much in common.  The legal profession "offers a low-risk (if high-stress) means to a long, relatively well-paid, and tightly-controlled career at a privately-held law firm or government position." [1]  The path of an entrepreneur, on the other hand, offers a high-risk means to a career with no guarantees or definite returns on investment. [2]  Yet, more than ten percent of the CEOs in the Forbes 500, a list of the 500 largest public companies in the United States, are former lawyers. [3]  How did this happen?  According to Gregg Engles, former lawyer and current CEO of Dean Foods, Inc., the discrepancy is simple. [4]  "Many lawyers let knowledge of risk paralyze them.  They focus exclusively on risk, while entrepreneurs focus primarily on opportunity.  The person who can simultaneously perceive the opportunity and the risk

… Read the rest
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Nationalization of Resources in Venezuela and Beyond: Do Corporations have Recourse?

I. Introduction 

Nationalization keeps multinational corporations and investors up at night. Simply put, nationalization is an exercise of sovereignty where a country seizes private property, resources, or other investments on its soil. The country usually decides whether to pay compensation to former owners after seizure. The recent nationalization of oil projects by Venezuela begs the question: what recourse do corporations like Exxon-Mobil ("Exxon") have if their investments are nationalized?

II. Background

The dispute between Exxon and Venezuela began with six firms – Exxon, Chevron, Statoil, Conoco Phillips, Total and BP – investing along with Venezuela in an oil project in the Orinoco river basin. [1] The deal took place under a period called the "Petroleum Opening," when the 1990’s-era Venezuelan government attempted to maximize the benefits of transnational corporate investment in PDVSA while minimizing public responsibility. [2] After the Chavez government took power, the Venezuelan legislature raised tax rates for … Read the rest

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Creating Stability in the Airline Industry through Merger

I. Introduction

In the mid-1980s the airline industry experienced merger mania. Delta bought up Western. [1] Pan Am merged with National [2]. Texas International and New York Air merged with Continental and People Express. [3] Now this trend has reemerged through the possible merger of Delta, the third-largest U.S. airline in terms of passenger traffic, with Northwest, the fifth-largest carrier, to create the largest passenger airline in the world. [4] Executives of both airlines have agreed on most of the basics of a merger, but talks have stalled over the issue of integrating workers. [5] As talks have stalled, the question remains whether Delta and Northwest should merge. This article will discuss the implications of the Delta-Northwest merger. First, it will discuss the antitrust considerations. Second, it will examine the likely impact of the merger on employers, shareholders, and customers. Finally, this article will conclude on whether or not the

… Read the rest