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Dear WBLA Members and Friends, Last February, the Wharton Business Law Association hosted the nation’s first-ever undergraduate business law conference. With panels in Mergers & Acquisitions, Intellectual Property, Antitrust and the Financial Crisis, this event brought together partners from some of the best law firms in the United States and students interested in law. The caliber of the debate and the opportunities for networking greatly impressed both speakers and attendees. On behalf of the entire organizing team, I would like to thank everyone who helped make this conference a success. We, at the Wharton Business Law Association, are passionate about the intersection between business and law, and are truly looking forward to your continued participation in our future activities and events. Julio Germán Arias and Tony Goo Conference Co-Chairs

Inside This Issue

• Recently in Business Law

• AIG vs Bank of America

• Employee Poaching: Ethics and Legality

• Whistle-Blowers and Healthcare Fraud

Wharton Business Law Association Newsletter Volume I: Issue III March 2013

Recently in Business Law

Why AIG did not sue the Federal Government

Newly released court documents have just shed insight into why AIG decided not to sue the federal government. Their motivation to consider pursuing a 25 billion dollar lawsuit stemmed from the fact that there was concern in the financial industry that the government had cost shareholders billions of dollars in losses due to the manner in which the 2008 bailouts were crafted. However, AIG backed off from legal action for two reasons. First, court documents showed that lawyers assigned the case about a 20% chance of success. Second, even if AIG won, their reputation risked damage, especially after they had invested a lot of time and effort into rebuilding it after the financial crisis. Ultimately, these two factors heavily outweighed any gains AIG could potentially garner, and thus AIG is focused on moving forward to financially stabilize itself.

By Rohan Bopardikar

ICO fines Sony as hackers steal customer information

In April 2011, hackers accessed details of more than two million credit cards through Sony’s outdated software and insecure passwords. Because Sony failed to keep credit card details and log-in details secure, the ICO imposed a £250,000 fine (nearly $400,000) on Sony, which is the highest ever imposed by the ICO against a private company. The ICO awarded this punishment because of the large impact of Sony’s failure to keep the information of so many consumers safe and for putting so many consumers at risk of identity theft. Furthermore, Sony hadn’t even told its users of the hack until several days later, which caused the most public outrage when the news came out, but the ICO did not further penalize Sony for that detail.

By Linda Yao

Lance Armstrong’s doping confession gets him sued by readers

Readers are suing Lance Armstrong for book refund after doping admission. As many people read Lance Armstrong’s bestseller “It’s Not About the Bike,” many disgruntled readers are demanding their many back. Armstrong and his book publishers are being accused of peddling fiction as fact. Stutzman and Wheeler are two cycling enthusiasts who are disgraced now, as they were too moved by the book. The lawsuit was filed this week in the California federal court as Armstrong and his publishers are being sued for fraud and false advertising. The suit states “Throughout the book, Defendant Armstrong repeatedly denies that he ever used banned substances before or during his professional career.” Those who purchased the book believed that it was an honest work of nonfiction, when indeed it was a work of fiction. After Armstrong’s confession of doping, it is likely that there will be many more lawsuits to follow.

By Anthony Geordiades

How Goldman Sachs Beat the Volcker Rule

The Volcker Rule, which was aimed at limiting private investment of a bank customer’s money, was supposed to be put into effect seven months ago. However, Congress has not agreed upon specific, enforceable language of the rule. If Congress were to agree on wording today, it would take until 2014 for the rule to become enforceable. What this has caused are banks like Goldman Sachs going against the Volcker Rule without punishment and banks like Bank of America who are abiding by the rule going without praise. The rule was meant to avoid economic collapses like those of 2008, but until Congress can agree on wording, banks can still make the risky deals that were a factor in the Great Recession of 2008.

By Michael Fisher

Wharton Business Law Association Newsletter Volume I: Issue III


AIG Sues Federal Bank for the Right to Sue Bank of America

Corporate lawsuits have become commonplace in the business structure. Often, there are lawsuits by firms against other firms for things such as breach of contract, unpaid mortgage paynents, employment relatioms, and compliance issues. However, AIG has decided to sue a federal bank for -- get this -- the right to sue another firm for misrepresented mortgage securities! In a bizarre series of events, the American International Group (AIG), a multinational insurance corporation who was also a recipient of an $182.3 billion bailout in the financial crisis of 2008, has sued the Federal Reserve Bank of New

York, who sponsored their bailout, over a condition outlined in their bailout clause that may prevent them from suing Bank of America for $28 billion worth of unpaid mortgage securities. As part of their bailout package in 2008, the New York Federal Reserve Bank created a separate Limited Liability Company (or LLC) in December 2008 called Maiden Lane II to take the strain off of some of AIG’s bad Resident Mortgage-Backed Securities (RMBS), a type of security whose flows come from residential debt (mortgages and subprime mortgages, home-equity loans) rather than commercial debt. Maiden Lane II bought AIG’s RMBS (worth $39.3 billion in terms of face value) for merely $20.8 billion. However, with this offer, NY Fed bank officials also claim that Maiden Lane II has also acquired the right to all litigation claims made on those RMBS from AIG as well. AIG is not seeking money in this litigation, but is merely looking for a clarification from courts as to whether or not the group still retains the legal rights to sue Bank of America for those Residential Mortgage-Backed Securities. However, it is seeking legal compensation for about $7 billion from Bank of America.


AIG Sues Federal Bank for the Right to Sue Bank of America. Penn Law/WBLA Mentorship

AIG joins a long list of other corporate lawsuits against Wall Street banks for fraudulent sales of RMBS around 2008. Bank of American, alone, has legal costs up to $50 billion dollars alone for their part in bad mortgages in 2008. By Varun Desai The Penn Law / WBLA Mentorship Program, which is

launching this semester, will allow the Penn Law students to serve as mentors for the undergraduate WBLA students. Since many WBLA members are interested in pursuing law degrees, this mentor system will be a great way to integrate the undergrads with Penn Law and educate the WBLA students about the studies that the law students are pursuing. WBLA will facilitate the relationship by matching undergraduate students with the law students who volunteer according to their interests. It will then be up to the mentor and the mentee on an individual basis to develop a relationship. The program should not be a big time commitment, and it is a good opportunity for the WBLA students to learn about what it is like to be in law school.

Announcing: the Penn Law/ Wharton Business Law Association Mentorship Program

If you have any questions about the program, please feel free to contact Sherri Deckelboim, WBLA's Executive Vice President, at [email protected].

Employee poaching is a term that the public typically associates with the shadier side of business. In recent news, Marissa Meyers, the CEO of Yahoo, was poached from Google in July. Sherilyn McCoy, who was previously a Johnson and Johnson employee, started working for Avon in April. Donald Layton once worked at E* Trade Financial Corp and now works at J.P. Morgan Chase. Surprisingly, the issue of employee poaching is not as black and white as people seem.

What may be surprising for some is that employee poaching is widespread among companies, according to Patrick J. Kiger who writes for Workforce Management. According to Federal Reserve Board economists, of the 4 million workers who change jobs in a typical month, 80 percent are recruited by their new bosses. However, doesn’t employee poaching seem incredibly unfair to the companies who lose their vital employees? While those companies may want to blame the hiring organizations, the real issue comes down to the relationships they had with their employees. Too many employees jumping ship may be a signal that the companies need to adjust their work arrangements. From a free market perspective, employee poaching can be a blessing in disguise because it forces companies to evaluate the interaction between their employees.

Employee Poaching: The Ethics and Legality

So when does poaching become illegal? There are definitely some practices that turn poaching into a crime. It is definitely illegal if employees break contracts binding them to their organizations, or if they share trade secrets with their new employers. In addition, anytime theft or deception is involved, including stealing company directives, directories, and employee names, poaching becomes illegal. Finally, hiring someone solely to harm a company is also illegal.



Employee Poaching: The Ethics and Legality

What’s interesting is that companies who are vulnerable to employee poaching will make legal arrangements to cooperate with one another. For example, if two organizations are engaged in a joint venture, than they may specify specific groups of people who are off-limits for recruitment. However, these companies have to take into account that the government has a harsh stance on anti-poaching agreements? In 2010, the U.S. Department of Justice barred Silicon Valley's titans, including Google and Apple, from entering into nonsolicitation agreements for employees. The companies had informal agreements not to “cold-call” each other's employees. The U.S Department of Justice said the agreements were anticompetitive because they could deny employees access to better job opportunities. By Greg Chen

Whistle-Blowers Cracking Down on Healthcare Fraud


Amidst talk of Medicare plans and the controversial Obamacare, one thing the healthcare industry does not need is lawsuits further tainting its image as a failed and corrupt institution. Who would have known that the US, being the big powerhouse of development and progress, has one of the weakest healthcare systems in the developed world, built on a business platform with little focus on up-keeping its social welfare purposes. In recent years, insurance companies and pharmaceutical corporations have dominated health legislation and processes, leaving most citizens to think that the price for good health is just too much to pay. Such sentiments and alleged corrupt practices have increased emphasis on whistleblower cases that uncover the internal fraud within insurance companies who embezzled billions of dollars from the U.S. government.

The federal government broke all records in 2011, when it brought in close to $2.3 billion in whistle-blower settlements. Earning about $16 billion in settlements, whistle-blower qui tam cases have far exceeded the $5 billion collected by non-whistle-blower cases. According to Justice Department spokesman Charles Miller, the government, using the False Claims Act, can claim about three times the amount falsely taken by a company. Large health care fraud cases usually involve pharmaceutical companies either falsely advertising a product or marketing it for a use that has not been approved by the FDA.

With citizens feeling robbed daily by medical expenses and insufficient treatment, various lawsuits have also surfaced alleging pharmaceutical companies such as RxAmerica, a subsidiary of retail pharmacy chain CVS Caremark Corporation, are pursuing corrupt business practices, initiating a white collar investigation. RxAmerica was recently sued by two elderly Medicare recipients, “whistle blowers”, who claimed the company gave the government false prices for the Medicare Prescription Drug Program, known as Medicare Part D. After a $ 5.2 million settlement, the whistle-blowers received $ 1 million as compensation.

If the health care industry hopes to improve its image, strengthen its customer base and be in good standing with the government, serious organizational analysis and restructuring is much ado.

By Gelila Haile

http://content.usatoday.com/topics/topic/Charles+Miller





Staff

Jenny Lee Editor-In-Chief

Vice President of Marketing

Palash Shah Design Editor

Contributors

Rohan Bopardikar Linda Yao

Anthony Georgiades Michael Fisher

Varun Desai Greg Chen Gelila Haile

CREDITS

The Conference Committee

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