month in review – march 2016 - risk - retirement · regulatory exclusion does not bar coverage...

General NewsCornerstone Research: Securities Suit Settlements in 2015

According to a recent Cornerstone Research annual report, the number of securities class action settlements approved in 2015 increased significantly over 2014. The rise may be due, at least in part, to three years of increased case filings.

The total settlement amount in 2015 ($3.0 billion) was also substantially higher than the previous year ($1.1 billion). In 2015 there were eight “mega” settlements ($100 million or greater), compared to only one in 2014, which resulted in higher average and total settlement amounts. One case settled for more than $970 million. Although the average settlement increased from $17.0 million in 2014 to $37.9 million in 2015, two-thirds settled for less than $10.0 million, while the median settlement amount remained largely unchanged. Moreover, 2015’s total settlement dollar amount was far below the numbers seen in 2006 ($20.2 billion) and 2007 ($8.3 billion), and the average 2015 settlement was approximately 25% below the average settlement from 1996 to 2014. Additionally, median settlements as a percentage of “estimated damages” reached a historic low in 2015.

The proportion of “nuisance suit” settlements ($2 million or less), however, rose to its highest level in 18 years (29%) as a result of more Chinese Reverse Merger case settlements, which generally involve relatively low “estimated damages” and settlement amounts.

Certain factors tend to increase settlement amounts. On average, securities class action settlements are higher in cases involving accounting irregularities, a financial restatement, a corresponding SEC action, an underwriter and/or auditor named as a co-defendant, an accompanying derivative action, a public pension fund involved as lead plaintiff, a non-cash component to the settlement, filed criminal charges, or securities other than common stock alleged to have been damaged. Cases with allegations of accounting irregularities settle for the highest amounts relative to “estimated damages.”

Cases that settled quickly (within two years of the date of filing) usually resulted in lower settlements. There were 16 such “quick settlements” in 2015, more than two and a half times the number in 2014.

Slightly over half of the 2015 settlements occurred in the Second or Ninth Circuits.

Aon Risk SolutionsFinancial Service Group

Risk. Reinsurance. Human Resources.

2016Month in Review – March News and Developments in Executive Liability and Insurance

In this Issue

General News

Cases of Interest

•“Securities of” Phrase in D&O Policy Refers to the Insured’s Own Securities

•ERISA Claim Based on Response to the Affordable Care Act Survives

•New Jersey Supreme Court Upholds Late Notice Denial under a Claims Made Policy

•D.C. Appellate Court Refuses to Apply Overly Broad Professional Services Exclusion to Bar Coverage

•Pennsylvania District Court Affirms Insurer’s Right to Allocate between Covered and Non-Covered Loss

Cyber Corner

Filings, Settlements, and Dismissals

Cases of InterestRegulatory Exclusion Does Not Bar Coverage for FDIC Claim

The Federal Deposit Insurance Corporation (“FDIC”) prevailed in an action to secure insurance coverage for directors and officers that were sued as a result of the failure of the insured bank. The United States District Court for the Northern District of Georgia evaluated the legal issue of whether an insurance binder should be relied upon in determining insurance coverage. The binder issued to the bank contained a regulatory exclusion, but the primary policy was issued without it.

The FDIC successfully asserted that the issued policy controlled. Despite the binder, and testimony supporting the fact that the policy was intended to be issued with the regulatory exclusion, the Court considered federal statute 12 U.S.C. Section 1823(e), which provides, in relevant

part, that: “[n]o agreement that tends to diminish or defeat the interest of the [FDIC] in any asset acquired by it under this section is valid unless certain conditions are satisfied.” Because the FDIC acquired the insured’s D&O policy, the Court ruled that Section 1823(e) mandated that the policy could not be altered to match the binder. This case demonstrates a results-based outcome that is not surprising in light of the fact that the insured’s directors and officers would be facing personal liability without the benefit of any insurance coverage. It is not expected that there will be any precedential value due to the FDIC statute, the difference between the binder and the policy, and the equitable rationale for the conclusion reached. Federal Deposit Ins. Corp., as receiver for Silverton Bank, N.A. v. Tom A. Bryan, 2016 U.S. Dist. LEXIS 35090 (N.D.Ga. 2016).

Prior Litigation Exclusion Triggered by Regulator’s Threat to File Action

The U.S. Court of Appeals for the Second Circuit affirmed a denial of coverage based upon a prior litigation exclusion. In the underlying matter, the insured had received a letter from the Maryland Attorney General’s office requesting that the insured acknowledge, in writing, that it would immediately cease certain activity, and requesting that it provide specified documents and information. A few years later the insured tendered to the insurance carrier a criminal prosecution brought against him by the U.S. Department of Justice involving the same activities. The parties conceded that the matters involved the same facts or circumstances. The insurer denied coverage based upon the “Prior Litigation” exclusion, which excluded coverage for “any Claim…in any way involving…any demand, suit or other proceeding pending…against any Insured on or prior to [February 20, 2008], or any Wrongful Act, fact, circumstance or situation underlying or alleged therein.” The insured challenged the position based upon the assertion that the Maryland Attorney General’s letter was not a “demand” as contemplated by the policy.

The Court stated that while the term “demand” was not defined in the policy, under New York law, “a demand requires an imperative solicitation for that which is legally owed” rather than a request with no legal consequences. The letter at issue did not state that the insured was in violation of the law, [but] it did state that a “failure to respond may result in more formal legal action.” Thus, the Court held that “[t]his was sufficient to make the ….letter a “demand” because it set forth the

Division’s request under a claim of right, including its entitlement to the documents identified therein, and put…on notice of the legal consequences of any failure to comply.”

The Court noted that because the letter referred to the government’s authority to seek forms of monetary and non-monetary relief, and carried the threat of more formal legal action if there was noncompliance, it was not just a “mere request for information.” The fact that the letter indicated that there would be consequences for non-compliance appeared important to the court’s ultimate determination.

This case points out the need to fully evaluate whether certain correspondence can be considered a “demand” under an insurance policy. Arguably, notice to the carrier of the original Attorney General correspondence may have been adequate to trigger the notice of circumstances provisions of the policy or, depending upon the policy wording, triggered the definition of “Claim.” Weaver v. Axis Surplus Ins. Co., 2016 U.S. App. LEXIS 4199 (2nd Cir. 2016).

The Court stated that while the term “demand” was not defined in the policy, under New York law, “a demand requires an imperative solicitation for that which is legally owed” rather than a request with no legal consequences.

Aon Risk Solutions 2

Financial Services Group, Month in Review March, 2016

Court Rules that Retailer’s Inaccessible Website Violates Americans with Disabilities Act

A state court ruled that a retailer violated the Americans with Disabilities Act (“ADA”) because the retailer’s website was not accessible to the visually impaired plaintiff. Title III of the ADA prohibits “discrimination on the basis of disability by public accommodations and requires places of public accommodations and commercial facilities to be designed, constructed and altered in compliance with the accessibility standards established by law.” The Court agreed with plaintiff’s argument that “Title III of the ADA applies to plaintiff’s use of a website where plaintiff has demonstrated he sought goods and services from a place of public accommodation because he demonstrated a sufficient nexus exists between

defendant’s retail store and its website that directly affects plaintiff’s ability to access goods and services.” The Court further agreed that the plaintiff “was denied full and equal enjoyment of the goods, services, privileges, and accommodations offered by defendant because of his disability.” The Court found that plaintiff’s access to the website was prevented at the time it was designed and ordered the defendant to take the necessary steps to make the website “readily accessible to and useable by individuals with visual impairments or to terminate the website.” Davis v. BMI/BND Travelware, 2016 Cal. Super. LEXIS 217 (Cal. Super. 2016).

Insured v. Insured Exclusion Barred Coverage for D&O Suit Brought By Bankruptcy Liquidation Trustee

The United States District Court for the District of Michigan applied a D&O Policy’s “insured v. insured” exclusion to bar coverage for a suit filed by a litigation trustee in a bankruptcy action against former directors and officers of the insured company. The Court applied the exclusion because the action was “by, on behalf of, or in the name or right of, the Company or any Insured Person.”

The insured bank holding company filed for bankruptcy in 2012. A liquidation trust was created whereby all causes of action belonging to the debtors, including causes of action against the directors and officers, were transferred into the trust. The trustee of the litigation trust then filed a suit in 2014 against former directors and officers of the company, including the CEO, who had signed the litigation trust agreement. The suit, tendered to the insurer as a claim under the D&O policy, was denied based on the “insured v. insured” exclusion.

The insurer argued that the exclusion bars coverage because “causes of action belonging to a company must be asserted ‘in the name or right of’ that company, and the assignment to the Liquidation Trust does not permit the Liquidation Trustee or the officers to circumvent the exclusion.” The Court specifically stated that the circumstances were “unique” and “significant” in deciding whether the exclusion should apply.

The Court recounted that the “primary intent of the development of the insured v. insured exclusions was to prevent collusive lawsuits in which an insured corporation would in essence force its insurer to pay for the poor business decisions of its officers and directors by the corporation filing an action against its own officers and directors.” The Court went on to say that “although collusion is frequently considered in cases deciding the applicability of the insured v. insured exclusion, collusion, in and of itself, may not be an appropriate determinative factor, particularly in the realm of bankruptcy due to the various constituents interested in the reorganization process.”

The Court applied a four part test in deciding if the exclusion should apply: 1) whether “true adversity” exists between the litigating parties; 2) the status of the plaintiff at the time the claim is made; 3) the identity of the beneficiaries of the claim, or on whose behalf are the claims being pursued; and 4) the reasonable expectations of the parties. The “farther removed from the debtor in possession, the more likely the insured v. insured exclusion will not apply.”

In this case, the Court found that there was a direct connection between the debtor/company/insureds and the liquidation trust, which was created by agreement of the debtors and the creditors committee. Thus, the Court agreed the exclusion barred coverage. Indian Harbor Ins. v. Zucker, As Liquation Trustee for the Liquidation Trust of Capitol Bancorp Ltd. and Financial Commerce Corporation, 2016 U.S. Dist. LEXIS 43148 (W.D.Mich. 2016).

In this case, the Court found that there was a direct connection between the debtor/company/insureds and the liquidation trust, which was created by agreement of the debtors and the creditors committee. Thus, the Court agreed the exclusion barred coverage.



Letter Requesting Return of Funds Is Not a Claim

The United States District Court for the Western District of Missouri ruled that certain letters directed to an insured requesting return of money did not constitute a “claim” within the meaning of a claims made and reported policy. In this matter, the insurer issued successive claims made policies for the July 1, 2011-12 and 2012-13 policy periods. In the underlying dispute, and beginning in December 2011, the insured received a series of transmittals from an attorney. The earliest letter followed a meeting between the claimant and the insured whereby the claimant requested return of $500,000 originally deposited with the insured in 2004. By letter of January 30, 2012, the claimant’s attorney stated “I request a valid check in the amount of $500,000 plus the accrued interest be sent to me payable to the [claimant].” The letter also enclosed a copy of the agreement between claimant and the insured and referenced a provision within the agreement relating to the return of the funds. The attorney letters and requests for the return of the proceeds were discussed at the insured’s board meetings in February and March, 2012. In a further letter of April 9, 2013, claimant’s counsel stated “[Claimant] had made a prior demand and request that the [insured] return and make immediate payment and

access of the $500,000 conveyed to it on March 2, 2004.” The letter continued “consider this correspondence to also be a demand for payment of $500,000 with any interest accrued.” When the funds were not returned, the claimant filed an action in state court against the insured for return of the proceeds and the insured sought coverage under its D&O policy. The insurer argued the letter of January 30, 2012 was a “claim” and should have been reported in the earlier policy period. The insurer further argued the claim was not covered by the subsequent policy, because the claim arose during the previous policy year, and is an “interrelated wrongful act.” The Court disagreed, and ruled the letter was not a claim but “requests payment of funds [claimant] believed [it] was entitled to pursuant to an agreement.” The Court further stated, “[t]here is no evidence of any allegations of a wrongful act on the part of the insured, or its officers and directors, prior to the April 9, 2013 letter.” Additionally, the Court found the earlier transmittals were requests for information regarding the funds, documentation of the agreement, and a request for performance of the agreement. Philadelphia Indem. Ins. Co. v. Community Foundation of the Ozarks, Inc., 2016 U.S. Dist. LEXIS 26948 (W.D.Mo. 2016).

Sixth Circuit Confirms Notice-Prejudice Rule has No Application to Claims Made Policy

The Sixth Circuit Court of Appeals, applying Kentucky law, recently reviewed a late notice case involving a claims made D&O policy. The underlying claim involved a Department of Justice investigation of the insured hospital with respect to allegations that the hospital billed the government for unnecessary procedures. The hospital ultimately paid $40.9 million to resolve the allegations and sought coverage from its D&O insurers.

The primary carrier was notified in a timely fashion and afforded coverage. However, the excess carrier was not notified until nearly nine months after the policy period expired. It declined coverage based on failure to comply with the policy’s notice

requirements. Coverage litigation ensued and the insured argued that it was entitled to coverage because the insurer could not show that it was prejudiced by the delay. The Court disagreed, concurring with the District Court’s prediction that the Kentucky Supreme Court “would not extend the notice-prejudice rule to a claims-made policy like the policy here, which contains unambiguous notice requirements as conditions precedent to collecting under the policy.” This decision serves as the latest warning to policyholders that strict compliance with notice provisions is often required in order to secure coverage. Ashland Hosp. Corp. v. RLI Ins. Co.., 2016 U.S. App. LEXIS 4056 (6th Cir. 2016).

Arizona Court Rules on Claim Relatedness

The Arizona Court of Appeals affirmed a trial court decision that a D&O insurer was not obligated to provide coverage for a claim filed against an insured that was related to an excluded claim.

The insured, a publicly-traded developer and distributor of televisions, purchased a D&O insurance program consisting of $20 million in limits via four insurers (Tower 1) effective from November 30, 2006-November 30, 2007. The

insured renewed that program with five insurers providing $25 million in limits (Tower 2). The Tower 2 program included a Side A/DIC policy, which would drop down if the underlying insurer on the program wrongfully refused to indemnify an insured person for loss or the underlying insurance was not liable for loss. The insured entity, and several individual directors and officers, were sued for securities fraud alleging misrepresentation in public filings. A few months later, a different

The Court disagreed, and ruled the letter was not a claim but “requests payment of funds [claimant] believed [it] was entitled to pursuant to an agreement.” The Court further stated, “[t]here is no evidence of any allegations of a wrongful act on the part of the insured, or its officers and directors, prior to the April 9, 2013 letter.”

The Court disagreed, concurring with the District Court’s prediction that the Kentucky Supreme Court “would not extend the notice-prejudice rule to a claims-made policy like the policy here, which contains unambiguous notice requirements as conditions precedent to collecting under the policy.”



plaintiff sued the insured entity and several individual directors and officers, alleging inducement to enter into and maintain a $250 million credit facility agreement with the insured based on false and misleading statements. These allegations were the same as those in the securities lawsuit; however, the plaintiff maintained they received the information privately, rather than through the public filings, and that the insured made additional misrepresentations after the securities lawsuit was filed.

The securities lawsuit was tendered to Tower 1 and the credit facility lawsuit was tendered to both Tower 1 and Tower 2. Tower 1 accepted the securities claim, but the credit facility claim was denied by all the insurers on Tower 2. The first excess insurer maintained that an “interrelated wrongful act” exclusion on the Tower 2 primary policy prohibited excess coverage for the credit facility claim. Specifically, the insurer posited that the exclusion prohibited excess coverage for the credit facility claim because it arose from the same facts, circumstances or situations underlying or alleged in the securities action. The insurer also argued that coverage was prohibited because the

credit facility claim related back to the securities claim per the primary policy’s definition of related claim. The trial court granted the summary judgment motion for the insurer, agreeing that the exclusion for interrelated wrongful acts applied. The plaintiff appealed.

The Appellate Court construed the term “related claim” as meaning any wrongful act which is the same as, similar to, or arises out of the same “core financial misstatements” that brought about the securities claim. Using the ordinary meaning of the words, the Appellate Court agreed that the credit facility claim arose out of, or was similar to the wrongful acts alleged in the securities claim. The Appellate Court also found that the matters were related. The credit facility plaintiff claimed that it made $40 million in new loans to the insured based on misrepresentation. However, the Court said that although the loans were new, they were made based on the restatements of the earlier representations rather than facts not related to the securites claim. Therefore, the “new loans” claim was a related claim and was properly denied. SP Syntax LLC, SP3 Syntax LLC, v. Fed. Ins. Co., 2016 Ariz. App. Unpub. LEXIS 278 (Ariz. App. 2016).

The Importance of the Word “Solely”

An insurer issued a D&O policy to the insured bank. One of the bank’s directors or officers notified the insurer of an investigation by the Office of Thrift Supervision (“OTS”) and other regulatory agencies concerning his conduct and involvement in certain transactions. The OTS issued a Notice of Charges concerning the individual’s misconduct as a member of an LLC that owned townhomes. The individual settled the OTS claim without an admission of alleged wrongdoing, but paid a $125,000 penalty. The insurer denied coverage for the OTS matter because it involved alleged wrongdoing as a member of the LLC, not as a director or officer of the bank. The insured commenced a lawsuit to recover defense costs and the $125,000 penalty. The trial court granted summary judgment in favor of the insurer and the individual appealed.

The issue on appeal was whether the OTS charges against the individual fell within the policy’s definition of “wrongful act.” The policy defined “wrongful act” as “any matter claimed against a director or officer solely by reason of his or her status as a director or officer” of the bank. The individual argued that since the OTS only had jurisdiction over him by virtue of his status as an officer of the bank, the “wrongful act” definition

was satisfied. The appellate court observed that by applying the definition of solely to “wrongful act” “without another” or “to the exclusion of all else,” it is clear that if any other reason for the OTS charges exists, then the claim does not qualify under the policy’s definition of “wrongful act” and is not covered by the policy. The appellate court noted that there were two reasons why the OTS was able to issue a Notice of Charges and impose civil penalties against the individual: first, his status at the bank; and second, his conduct as a member of the LLC, not the bank. Accordingly, the Court stated “[b]ecause the individual’s conduct as a member of the LLC was one of the reasons for the OTS action against him, the OTS matter was not “claimed against [the individual] solely by reason of his …status as a director or officer of” [the bank]. Therefore, we reject [the] assertion that the OTS charges fall within the Policy’s definition of “wrongful act.”” The Court also noted that the absence of an adjudication of wrongdoing did “not render the wrongdoing meaningless” and did not entitle the individual to coverage under the policy. Whereupon, the appellate court affirmed the grant of summary judgment in favor of the insurer. Feldman v. Fidelity & Deposit Co. of Md., Case No. 0102 (Md. Ct. Spec. App. 2016).

Accordingly, the Court stated “[b]ecause the individual’s conduct as a member of the LLC was one of the reasons for the OTS action against him, the OTS matter was not “claimed against [the individual] solely by reason of his …status as a director or officer of” [the bank]. Therefore, we reject [the] assertion that the OTS charges fall within the Policy’s definition of “wrongful act.””

The Appellate Court construed the term “related claim” as meaning any wrongful act which is the same as, similar to, or arises out of the same “core financial misstatements” that brought about the securities claim.



Cyber CornerCyber Corner – Ethical Boardroom

In an article appearing in the Spring 2016 edition of Ethical Boardroom, Aon Risk Solutions’ National Cyber Sales Leader, Stephanie Snyder, describes how it is critical to implement effective enterprise risk management in a world increasingly made up of an Internet of Things (“IoT”). Snyder begins by noting that the analyst group Gartner predicts that 6.4 billion IoT devices will be in use in 2016, while Cisco predicts that the number will increase to over 50 billion by 2020. These devices are essentially computer devices that are sensor equipped and designed to collect and transmit data via the internet. These can include smart offices or factories, computer-based logistics systems, an autonomous vehicle or implanted healthcare device. If there is a network outage, there could be significant expense in terms of forensics, costs to keep operations open, as well as loss of net income. There may also be loss involving intangible or data assets, where data is wiped clean or access to servers is denied. It is also possible that there will be physical losses emanating from a network security incident or breach, as cyber losses migrate from the intangible to the physical worlds. There is potential exposure to the companies that produce and service the devices as well, if there is subsequent economic loss, bodily injury, or property damage.

Synder notes that there are risk transfer solutions available that fall into certain coverage categories, including breach event expenses, first party loss costs—such as business interruption or digital asset protection—cyberextortion coverage, and liability coverages for security, privacy or regulatory proceedings. But it is important to note that there are more than 60 different cyber insurance carriers with differing policy terms and conditions. As this insurance product is not yet mature, having only been in the market for approximately 15 years, there are significant variations in the products offerings.

Finally, it is important for organizations to look at cyber risk holistically and coordinate among the various stakeholders in the company. These include risk management, legal, IT, human resources, and senior management. As Snyder notes, “[w]hile cyber risk continues to morph and change, it is incumbent upon corporate boards to try to protect the organization’s balance sheet from exposure to loss through effective and strategic enterprise cyber risk management.”

Lessons Learned: It is important to have a thorough discussion about cyber risks with the internal stakeholders in the organization as discussed, and important to undertake a thorough review of the terms and conditions in the cyber insurance program. Keep in mind that the market is constantly evolving, so coverage offerings and participating markets vary from year to year.



Filings, Settlements and Dismissals*

Class Action Filings

Amaya Inc. (S.D.N.Y.) Technology

Apollo Education Group, Inc. (2016) (10b-5) Technology

Brixmor Property Group Inc. Financials

Cardiovascular Systems, Inc. (D. Minn.) Health Care

Chesapeake Energy Corp. (2016) Energy

Cliffs Natural Resources Inc. (2016) Materials

comScore, Inc. Technology

DS Healthcare Group, Inc. Consumer Staples

Fifth Street Asset Management Inc. Financials

FLY Leasing Limited Financials

Horizon Pharma plc Health Care

LPL Financial Holdings Inc. Financials

magicJack VocalTec Ltd. (2016) Communications

Mentor Graphics Corporation (D. Or.) Technology

Miller Energy Resources, Inc. (2016) Energy

NantKwest, Inc. Health Care

ODN Holding Corporation Technology

Performance Sports Group Ltd. Consumer Discretionary

Platform Specialty Products Corporation Materials

Precision Castparts Corp. (2016) Materials

PTC Inc. Technology

PTC Therapeutics, Inc. Health Care

Rockwell Medical, Inc. (2016) Health Care

Santander Consumer USA Holdings Inc. (2016) Financials

Sprouts Farmers Market, Inc. Consumer Staples

Tailored Brands, Inc. (f/k/a The Men's Wearhouse, Inc.)

Consumer Discretionary

Teekay Corporation Industrials

Vanguard Natural Resources, LLC/VNR Finance Corp.

Energy

Class Action Settlements

Alpha Natural Resources, Inc. (Pennsylvania Common Pleas Court)

Energy $3,600,000

Barclays PLC (2012) Financials $14,000,000

C&D Technologies, Inc. Energy $1,000,000

Deer Consumer Products, Inc. (2013) Consumer Discretionary

$1,425,000

ITT Educational Services, Inc. (2013) Consumer Discretionary

$16,962,500

ITT Educational Services, Inc. (2014) Consumer Discretionary

$12,537,500

JinkoSolar Holding Co. Ltd. Energy $5,050,000

MGM Mirage (n/k/a MGM Resorts International)


$75,000,000

NQ Mobile Inc. (2013) (S.D.N.Y.) Technology $5,100,000

Reserve Yield Plus Fund (S.D.N.Y.) Financials $5,750,000

Triad Guaranty Inc. Financials $1,600,000

Yongye International, Inc. (Nevada District Court)

Materials $6,000,000



Filings, Settlements and Dismissals*

Class Action Dismissals

Alcobra Ltd. Dismissed

Baxalta, Inc. (Delaware Chancery Court) Dismissed

China XD Plastics Company Limited Dismissed

Coty Inc. Dismissed

Eastern Platinum Ltd. (Canada) Dismissed

EveryWare Global, Inc. Dismissed

Keurig Green Mountain, Inc. (2015) (Delaware Chancery Court)

Dismissed

MobileIron, Inc. (10b-5) Dismissed

Nymox Pharmaceutical Corporation Dismissed

Paulson Capital Corp. (n.k.a. VBI Vaccines Inc.) Dismissed

QLogic Corporation Dismissed

Starz Dismissed

Subaye, Inc. (2013) Dismissed

The Williams Companies, Inc. (2016) (D. Del.)

Dismissed

World Wrestling Entertainment, Inc. Dismissed

Mergers and Aquisitions Filings

ADT Corporation (2016) (Delaware Chancery Court)


Blount International, Inc. (D. Or.) Consumer Discretionary

Blount International, Inc. (Delaware Chancery Court)


Columbia Pipeline Group, Inc. Energy

ITC Holdings Corp. (E.D. Mich.) Utilities

LeapFrog Enterprises, Inc. (2016) (D. California) Technology

Questar Corporation (D. Utah) Utilities

Williams Partners L.P. Energy

* Sources: http://securities.stanford.edu/ and https://link.issgovernance.com/



SEC Filings & Settlements/Judgments*

SEC Filings SEC Settlements/Judgements

• The SEC filed fraud charges against Navistar International Corp. and its CEO, Daniel C. Ustian. The SEC is seeking a permanent injunction, civil penalties, disgorgement plus prejudgment interest, an officer and director bar, and other relief.

• The SEC filed fraud charges against AVEO Pharmaceuticals, Inc., and its former officers: CEO Tuan Ha-Ngoc; CFO David Johnston, and Chief Medical Officer William Slichenmyer. The case against the company settled but remains pending as to the individuals. The SEC is seeking disgorgement plus interest and penalties, permanent injunctions, and officer and director bars against Ha-Ngoc, Johnston, and Slichenmyer.

• The SEC filed fraud charges against Uni-Pixel, Inc., former CEO, Reed Kellion, and former CFO, Jeffrey Tomz. The case against the company settled but remains pending as to the individuals. The SEC is seeking a permanent injunction, civil penalties, disgorgement plus prejudgment interest, an officer and director bar, and other relief. The SEC entered into a deferred prosecution agreement with the company’s former chairman of the board, Bernard T. Marren, who has agreed to cooperate and be barred from serving as an officer and director for five years.

• The SEC settled fraud charges against Navistar International Corp. for $7.5 million in penalties. Navistar neither admitted nor denied the charges. A separate suit remains pending against CEO Daniel C. Ustian.

• The SEC settled fraud charges against AVEO Pharmaceuticals, Inc. AVEO agreed to pay a $4 million penalty without admitting or denying the allegations. Charges remain pending against individual defendants.

• The SEC obtained a consent judgment against Uni-Pixel, Inc. The company agreed to pay $750,000 without admitting or denying the allegations. It is also enjoyed from future violations of the securities acts.

Foreign Corrupt Practices Act Settlements —Q1 2016

• In February 2016, the SEC announced that it settled charges against SAP SE for violations of the FCPA. The company allegedly paid bribes to Panamanian government officials in exchange for sales contracts. The company, without admitting or denying the SEC’s findings, consented to entry of a cease and desist order, and agreed to pay $3.7 million in disgorgement of profits plus $188,896 in prejudgment interest.

• In February 2016, the SEC announced that it settled charges against the former CEO of LAN Airlines, Ignacio Cueto Plata. The charges relate to Cueto’s authorization of a sham consulting agreement whereby a portion of $1.1 million in “consulting fees” were used to bribe Argentinian union officials to settle a labor dispute. Cueto, without admitting or denying the findings, agreed to pay a $75,000 penalty and attend anti-corruption training.

• In February 2016, the SEC announced that it settled charges against SciClone Pharmaceutical for violations of the FCPA. The investigation found that employees of the company’s subsidiaries gave money, gifts, and other things of value to health care professionals over a five year period to secure sales of pharmaceutical products to Chinese state health institutions. The company consented to the order finding violations and, without admitting or denying the findings, agreed to pay $9.4 million in disgorgement of profits plus $900,000 in prejudgment interest and a $2.5 million penalty. The company also agreed to provide status reports for three years for remediation and implementation of anti-corruption compliance measures.

• In February 2016, the SEC announced that it settled charges against PTC Inc. and its Chinese subsidiaries for violations of the FCPA. The investigation found that the Chinese subsidiaries provided travel and other improper incentives to governmental officials in an attempt to win their business. The company agreed to pay disgorgement of $11.9 million and $1.8 million in prejudgment interest. The Chinese subsidiaries agree to pay a $14.5 million fine in a non-prosecution agreement. The SEC also entered into a deferred prosecution agreement with a former employee of one of the subsidiaries.

• In February 2016, the SEC announced a global settlement with the U.S. Department of Justice and Dutch regulators with respect to alleged violations of the FCPA by telecom provider, VimpelCom Ltd. The allegations relate to the company’s bribes to an Uzbek government official with significant influence over the Uzbek President. The settlement includes payment of $167.5 million to the SEC, $230.1 million to the U.S. DOJ, and $397.5 million to Dutch regulators. The company is required to retain an independent corporate monitor for a minimum of three years and is permanently enjoined from violating various provisions of the Securities Exchange Act.

• In March 2016, the SEC announced that Qualcomm Inc. agreed to pay $7.5 million to settle charges that it violated the FCPA. The investigation found that the company provided incentives to influence officials at government-owned telecom companies in China and that it hired relatives of Chinese government officials, in an effort to gain a competitive advantage. The company agreed, without admitting or denying the findings, to pay the penalty and self-report to the SEC for two years.

• In March 2016, the SEC charged an engineer with violating the FCPA. The engineer arranged improper payments from Nordion Inc. to a third party agent. A portion of the payment was used to bribe Russian officials to approve distribution of a cancer treatment. The engineer helped conceal the scheme and received $100,000 in kickbacks. The engineer agreed to settle the charges by paying $100,000 in disgorgement, $12,950 in prejudgment interest, and a $66,000 penalty. The company agreed to pay a $375,000 penalty to settle charges that it lacked proper internal controls. The settlements were made without admission or denial of the charges.

• In March 2016, the SEC announced that Novartis AG agreed to pay $25 million to settle charges that it violated the FCPA. The SEC investigation found that the company’s Chinese subsidiaries gave money, gifts, and other things of value to health care professionals in order to secure sales to Chinese state health institutions. The settlement payment consists of $21.5 in disgorgement, $1.5 million in prejudgment interest, and a $2 million penalty. The company also agreed to provide status reports for two years.

*Source: http://www.sec.gov/litigation.shtml



Jacqueline A. Waters, Esq. Managing Director & Practice Leader Aon Risk Solutions, Financial Services Group Legal & Claims Practice 312.381.4563 [email protected]

Robbyn S. Reichman, Esq. Managing Director & Practice Leader Aon Risk Solutions, Financial Services Group Legal & Claims Practice 212.441.2309 [email protected]

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About Aon Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 72,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, best reinsurance intermediary, best captives manager, and best employee benefits consulting firm by multiple industry sources. Visit aon.com for more information on Aon and aon.com/manchesterunited to learn about Aon’s global partnership with Manchester United.

© Aon plc 2016. All rights reserved.The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Risk. Reinsurance. Human Resources.

month in review – march 2016 - risk - retirement · regulatory exclusion does not bar coverage...

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