INSIDE THIS ISSUE
On January 17, 2017 the United States Supreme Court refused to review the U.S. Court of Appeals for the Second Circuit's ruling in In re: Libor-Based Fin. Instruments Antitrust Litigation. The Supreme Court denied the defendant banks' petition for a writ of certiorari regarding the Second Circuit's holding that the plaintiffs had plausibly alleged both antitrust violation and antitrust injury as a result of the alleged horizontal conspiracy to artificially depress the London InterBank Offered Rate ("LIBOR"), allowing the plaintiffs to clear the motion to dismiss bar.
The LIBOR rate is the most widely used benchmark for short-term interest rates and is often referred to as "the world's most important number." Several financial instruments have payments that are tied to the LIBOR benchmark, including asset-backed securities, corporate bonds, and various forms of interest rate insurance. The LIBOR rate is set daily, by averaging the individual submissions of each panel bank's short-term interest rate. To ensure that the LIBOR rate is a proper reflection of a competitive open market, there are crucial rules that govern the daily rate-setting process, including the requirement that each bank's interest rate submission is done independently and without reference to the other banks.
This antitrust litigation alleges that the LIBOR rate was artificially depressed and manipulated by over 20 LIBOR panel banks, corrupting the rate-setting process. The plaintiffs allege that since 2007, the panel banks have exerted downward pressure on LIBOR to increase profits for individual financial transactions. The plaintiffs contend that the banks' collusion resulted in a horizontal conspiracy, artificially depressing the LIBOR rates and not accurately reflecting market conditions. As a result of this deception, the plaintiffs allege that they were negatively affected and suffered financial harm.
In 2011, a consolidated class action antitrust case alleging artificial suppression of LIBOR was brought before the Honorable Naomi Reice Buchwald in the U.S. District Court for the Southern District of New York. In March 2013, Judge Buchwald dismissed the majority of claims against the Defendants, ruling that the plaintiffs lacked antitrust standing to purse their claims despite a vast amount of evidence and multiple governmental investigations that supported the contrary.
Plaintiffs appealed Judge Buchwald's district court ruling for dismissal of the antitrust claims to the Second Circuit. On May 23, 2016, the Second Circuit vacated the judgment of the district court, holding that the plaintiffs "plausibly alleged both antitrust violation and antitrust injury and thus, have cleared the motion-to-bar," remanding the case back to the district court for further proceeding consistent to their opinion. The Second Circuit vacated Judge Buchwald's judgment on the ground that (1) horizontal price-fixing constitutes a per se antitrust violation; (2) a plaintiff alleging a per se antitrust violation need not separately plead harm to competition; and (3) a consumer who pays a higher price on account of horizontal price-fixing suffers antitrust injury. The defendant-banks argued that LIBOR is not itself a price, as it is not itself bought or sold by anyone and therefore it could not have been a price-fixing conspiracy. The Second Circuit ruled this argument to be "immaterial" and found that LIBOR forms a component of the return from various LIBOR-denominated financial instruments, and fixing a component of price violates the antitrust laws. In reversing the district court's finding, the Court found that the plaintiffs plausibly alleged an antitrust violation because horizontal price-fixing conspiracies among competitors are unlawful per se. The Second Circuit also reversed the district court's dismissal due to failure to plead harm to competition. The Court held that the plaintiffs' constitutional standing was "easily satisfied" by the result of receiving a lower rate of returns on LIBOR-denominated instruments because of Defendants' manipulation of LIBOR.
The denial of Defendants' writ of certiorari by the U.S. Supreme Court is the latest development in the status of the LIBOR antitrust litigation. A writ of certiorari is the most common form of an appeal to the U.S. Supreme Court to review a circuit court's decision. A denial of a writ of certiorari by the Supreme Court does not necessarily mean it agrees or disagrees with the lower court's decision, but rather, asserts that the Supreme Court has no intention of altering the interpretation of the law by the lower court. Thus, the Supreme Court upheld the Second Circuit's finding for the plaintiffs, who therefore plausibly alleged an antitrust injury by identifying an illegal anti-competitive practice (horizontal price-fixing) and claimed an actual injury as a result of the banks' conduct; successfully demonstrating that their injustice is one that the antitrust laws were designed to prevent.
On January 12, 2017, Judge Waverly D. Crenshaw, Jr. of the United States District Court for the Middle District of Tennessee, granted final approval to two settlements regarding the 2013 data breach at various locations of MAPCO Express, Inc. ("MAPCO"). One of the cases was brought on behalf of all financial institutions that suffered damages as a result of the breach, WinSouth Credit Union v. MAPCO Express, Inc., No. 14-cv-1573 (M.D. Tenn.). The second case was brought on behalf of all consumers who suffered damages as a result of the breach, Phillips v. MAPCO Express, Inc., No. 14-cv-1710 (M.D. Tenn.).
The MAPCO data breach occurred in March and April 2013, when hackers infiltrated MAPCO's data systems and stole consumers' personal information, including credit and debit card information. Financial institutions, such as banks and credit unions, suffer damages by having to, amongst other things, cancel and reissue their customers' payment cards, reimbursing their customers for fraudulent charges on their cards, and other backroom costs like overtime. Significantly, neither settlement received any objections by any potential class members whatsoever.
In WinSouth, Scott+Scott secured $700,000 in relief for impacted financial institutions. Class members have the right to elect to submit one of two different claim forms, enabling them to select their method of recovery. First, a class member could file a "No Documentation" claim form, whereby they would not need to document their losses, and could recover up to $3.00 per card the class member had to cancel and reissue because of the MAPCO data breach. Second, a class member could file a "Documentary Support" claim form, by which, after submitting specified documentation of their losses, they could receive up to 60% of their verified damages. These amounts are in addition to any recoveries impacted financial institutions received through Visa and MasterCard recovery processes.
In Phillips, Scott+Scott obtained $50,000 for consumers who suffered damages as a result of the MAPCO data breach, in addition to valuable injunctive relief. The per-card average amount of this consumer settlement is greater than in other data breach settlements, and consumers may recover up to $500.00. Furthermore, the injunctive relief obtained by virtue of the settlement requires MAPCO to significantly enhance its data security processes and procedures, including: (1) requiring significant employee training in information security; (2) the creation and maintenance of a written information security policy to identify internal and external risks; (3) maintenance of a process to monitor for information security events and to respond to such events that are determined to present a threat; and (4) the design and implementation of safeguards to control information security risks.
Scott+Scott considers these settlements to provide extremely valuable relief for both classes.
Court Grants Preliminary Approval of Settlement in In re Osi Systems Shareholder Derivative Litigation
On January 23, 2017, the Honorable Judge Michael W. Fitzgerald of the United States District Court for the Central District of California granted preliminary approval of a settlement in In re: OSI Systems Inc. Derivative Litigation, (Case No. 2:14-cv-02910-MWF). The case was originally filed in April 2014. The suit alleged that the Board of Directors of OSI Systems, Inc. ("OSI") breached their fiduciary duty to shareholders and the Company by causing OSI to disseminate false and misleading statements to investors and the government and by failing to implement adequate internal controls which resulted in conduct by the Company that was alleged to violate federal regulations and government contracts. Scott+Scott, Attorneys at Law, LLP ("Scott+Scott") was appointed co-lead counsel in the action in February 2015.
Based in Hawthorne, California, OSI produces x-ray security systems used in airports and counts the Department of Homeland Security ("DHS") and the Transportation Security Administration ("TSA") as two of its largest customers. The plaintiffs in the suit alleged that due to a lack of internal controls, OSI failed to disclose defects in certain of its x-ray systems and "cherry picked" the systems to be used in government testing, even though the chosen systems were not representative of the systems actually in use in the field at the time. The suit also alleges that the defendants' misconduct allowed the Company to use forbidden Chinese-made parts in its baggage scanners in violation of federal regulations. These practices led to the DHS issuing a Notice of Debarment to OSI and the TSA cancelling a lucrative $60 million contract. The Company's public statements around this time also gave rise to a securities fraud class action lawsuit, which was settled in 2015 for $15 million.
The terms of the settlement require OSI to institute a series of corporate governance reforms designed to promote corporate compliance and increase executive oversight over problematic business segments. The settlement also requires OSI to appoint a new independent director that has compliance related experience in a highly regulated field. The settlement is still subject to final approval, with Judge Fitzgerald setting a final approval hearing on May 1, 2017. The case is In re OSI Systems Inc. Derivative Litigation, Case No. 2:14-cv-02910 (C.D. Cal.).
Two Exchange Traders Plead Guilty and Three Traders Indicted in Foreign Exchange Currency Conspiracy
On January 4, 2017, Jason Katz pled guilty to participating in a price-fixing conspiracy in the FX market. On January 12, 2017, Christopher Cummins pled guilty to similar charges. According to the one-count information filed in the U.S. District Court for the Southern District of New York, Katz and Cummins were dealers of Central and Eastern European, Middle Eastern, and African ("CEEMEA") currencies for banks in New York. According to the Informations, from approximately January 2007 until July 2013, Katz, Cummins, and unnamed co-conspirators agreed to suppress and eliminate competition by fixing prices in CEEMEA currencies, in violation of Section 1 of the Sherman Act, 15 U.S.C. §1. As part of the conspiracy, Katz, Cummins, and their co-conspirators manipulated prices on an electronic FX trading platform through the creation of non-bona fide trades, coordinated the placement of bids and offers on that platform, and agreed on currency prices they would quote specific customers, among other conduct. Under the plea agreement, Katz and Cummins agreed to cooperate with the DOJ's ongoing investigation into the FX market.
On January 10, 2017, the DOJ reported that a federal grand jury returned an indictment against three former traders, Richard Usher, Rohan Ramchandani, and Christopher Ashton, for their alleged roles in a conspiracy to manipulate the price of USD/EUR. Richard Usher was Head of G11 FX Trading-UK at an affiliate of The Royal Bank of Scotland plc, as well as former Managing Director at an affiliate of JPMorgan Chase & Co. Rohan Ramchandani was former Managing Director and head of G10 FX spot trading at an affiliate of Citicorp. Christopher Ashton was former Head of Spot FX at an affiliate of Barclays PLC.
Previously, on July 20, 2016, the DOJ charged two FX executives, Mark Johnson and Stuart Scott, with fraud for conspiring to defraud a client of their bank through a front-running scheme.
These individual charges follow guilty pleas by major banks. On May 20, 2015, Citicorp, JPMorgan Chase & Co., Barclays PLC, and The Royal Bank of Scotland plc pled guilty at the parent level and agreed to pay collectively more than $2.5 billion in criminal fines for their participation in an antitrust conspiracy to manipulate the price of U.S. dollars and euros exchanged in the FX market.
Conferences and Educational Seminars
+ January 29-February 1, 2017
Florida Public Pension Trustees Association's (FPPTA) Certified Public Pension Trustee Program
Rosen Center Hotel
FPPTA has developed the most comprehensive program to provide attendees the best educational experience. The program is designed to benefit members so they can make sound decisions and meet the needs and requirements of the pension board. There are 18 break-out sessions beginning with new trustee sessions thru advanced classes. The program concludes with testing and certification upon acceptable test scores. Trustee certification is required in several states in order to remain a pension board trustee.
+February 11-14, 2017
National Association of State Treasurers (NAST) Legislative Conference
Grand Hyatt Downtown Hotel
The National Association of State Treasurers is a professional, nonpartisan organization that provides a forum of the exchange of information in state finance. NAST is an organization dedicated to helping the nation's financial leaders pursue and implement sound financial policies and programs benefitting the citizens of the nation. In addition to the legislative conference NAST offers a variety of educational conferences throughout the year designed to assist state finance officials. These conferences provide NAST members with an opportunity to meet and discuss matters of mutual concern, as well as exchange information regarding best practices and innovative policies. Topics will cover broad economic policy issues, financial regulatory reform, tax reform, pension fund issues, legislative efforts on behalf of state 529 education savings plans, municipal bond issues, and the 2017 economic outlook. The College Savings Plan Network (CSPN) is an affiliate of NAST.
+February 16-21, 2017
39th Annual National Labor and Management Conference
Westin Diplomat Conference Center
The National Labor and Management Conference has been described as the best Labor-Management meeting in the country. The six day event offers seminars for both labor and management in the following areas: Fiduciary & Legal, Pension Fund Investment, Health & Welfare as well as general topics including prevailing wage, labor shortages, and safety issues. More than 400 attendees participate in the annual forum representing Union leadership, senior corporate management, Trustees, Fund administrators, Labor lawyers, Fund counsel and advisors as well as Labor relations professionals from both labor and management. The program content is developed by a distinguished group of business executives, labor leaders, public officials and academics. The meeting agenda is designed for meaningful interaction and networking opportunities.
+ February 20-22, 2017
International Foundation of Employee Benefit Plans (IFEBP) Trustees and Administrators Institutes
Distney's Yacht & Beach Club
Lake Buena Vista (Orlando), Florida
IFEBP's Trustees' and Administrators' Institutes offer comprehensive education to trustees and administrators which meet most states' requirements. The curriculum includes classes on plan design, financing options, legal requirements, regulatory obligations and case studies. This is a unique opportunity allows attendees to receive continuing education credit based on requests. Actuaries, Attorneys, CPAs, CFPs, Insurance producers, as well as other professionals may apply for CE credit.
+February 22-24, 2017
The Louisiana Trustee Education Council (LATEC) in conjunction with Investment Education Symposium by Opal Financial Group
Astor Crowne Plaza
New Orleans, Louisiana
The purpose of the Louisiana Trustee Education Council (LATEC) is to encourage and facilitate the education of its membership in all matters related to their duties as the holders of trust assets by those bearing a fiduciary responsibility for such assets. LATEC develops and conducts educational programs and networking opportunities among trustees, administrators and staffs of pension funds designed to foster and maintain the level of expertise demanded of fiduciaries under applicable law so that they may better serve their members and their respective funds Opal Financial Group coordinates conferences for entities such as Public Funds, Family Offices, Foundations, and Endowment Funds.
+February 22, 2016
5th Annual Tri-State Institutional Investor Forum produced by US Markets Group
The Harmonie Club
New York, New York
Topics for this one day meeting will include presentations by Joshua Fenton and Meena Lakshman of the Helmsley Charitable Trust, Christopher Brockmeyer, Director Employee Benefit Fund-Broadway League, Larry Schimmel General Counsel for Investment and Operations, New York City Public Advocate, Andrew Russell, Director Pension Boards- United Church of Christ, Larisa Mueller, Senior Investment Manager, Ministers and Missionaries Benefit Board, Sean Crawford, CIO, NYC Metro Transportation Authority and insurance investment firms among others.
+February 22-24, 2017
National Association of Public Pension Attorneys (NAPPA) Winter Conference
Tempe Mission Palms Hotel
The National Association of Public Pension Attorneys is a legal professional and educational association. The NAPPA organization is a practical and valuable resource tool for attorneys in the public pension arena. Educational seminars provide peer to peer interaction in several practice areas as well as up to date information regarding pertinent litigation and legislation.
+ February 23, 2017
19th Annual Wall Street Hall of Fame Induction Event
United Federation of Teachers- 52 Broadway
New York City, New York
NASP is the national advocate for minorities in the financial services industry. Founded in 1986 to provide educational opportunities and create equal representation for people of color and women in all aspects of the securities industry, it is a non-profit organization and has become one of the most respected Pension and Financial Services Conferences. NASP, headquartered in Washington, DC currently has local chapters in several metropolitan cities, including Atlanta, Baltimore/Washington DC, Boston, Chicago, Detroit, New York, North Carolina, Philadelphia, San Francisco, Southern California and Texas. NASP brings together the nation's minorities who have achieved recognition as financial professionals including investment bankers, asset managers, public finance consultants, plan sponsors and many other finance professionals.
+February 25-27, 2017
National Association of State Retirement Administrators (NASRA)
NASRA is a non-profit association whose members are the directors of the nation's state, territorial, and largest statewide public retirement systems. NASRA members oversee retirement systems that hold more than two-thirds of the more than $2 trillion in state and local government assets and that provide pension and other benefits to most state and local government employees. "Held typically the first weekend in March, in Washington, DC, NASRA hosts retirement system directors and their staff for a Sunday afternoon of roundtable of discussions and presentations. The following day, all NASRA members are invited to hear analysis, forecast, and overviews of current federal legislative and regulatory activities"
February 26-28, 2017
The 29th Annual Police, Fire, EMS, & Municipal Employee Pension & Benefits Seminar (NAPO) presented by Opal Financial Group
Hyatt Regency Grand Cypress Hotel
NAPO, National Association of Police Organizations, has evolved into an organization that represents uniformed and non-uniformed public safety workers and their pension plans. Founded in 1978, NAPO is a coalition of police unions and associations from across the United States that serves to advance the interests of America's law enforcement officers through legislative and legal advocacy, political action, and education. Founded in 1978, NAPO remains the strongest unified voice supporting law enforcement officers in the U.S. and represents more than 2,000 units and associations, 241,000 sworn officers, 11,000 retired officers, and more than 100,000 citizens who share a common dedication to fair and effective crime control and law enforcement.
+February 27, 2017
Whistleblowers & Compliance: In Depth
The Harmonie Club
New York, New York
This program is designed for directors of risk from mutual funds, hedge funds, pension funds, banks and consulting firms. The 2017 Conference will provide the most up to date developments in the Whistleblowers & Compliance arena. "IN FY 2016 alone, the agency issued awards totaling over $57 million-higher than all award amounts issued in previous years combined. The ten highest awards issued by the SEC to whistleblowers have each totaled more than $1 million, wht the largest exceeding more than $30 million. Six of the ten highest whistleblower awards were made in FY 2016. (2016 Report to Congress on Dodd Frank Whistleblower Programs."
+ February 27- March 1, 2017
National Association of Attorneys General (NAAG)
The Ritz Carlton
The National Association of Attorneys General (NAAG) was established more than 100 years ago to provide Attorneys General an opportunity to communicate between the states' chief legal officers on legal and law enforcement matters. NAAG's focus is: "To facilitate interaction among Attorneys General as peers and to facilitate the enhanced performance of Attorneys General and their staffs." NAAG offers "cooperative leadership," not only between the states, but also with their federal counterparts. NAAG has 3 major meetings: the Association's winter meeting in Washington, DC, the NAAP Presidential Initiative Summit and the Summer Meeting. Portions of these meetings may be open to the public and require advance registration.
+February 27- March 1, 2017
Council of Institutional Investors (CII)
Mandarin Oriental Hotel
Founded by 21 public pension and municipal visionaries in 1985, the Council of Institutional Investors is known as "The Voice of Corporate Governance". As a nonprofit association of public, union and corporate pension funds the council's mission is to educate its members, policymakers and the public about corporate governance and that environmental, social and corporate governance (ESG) issues can affect the performance of investment portfolios. More than 200 members are expected to attend this winter's conference. ICGN, International Corporate Governance Network works in conjunction with CII and a discounted registration rate will be provided to those who are members of both organizations.
Government Finance Officers' Association Conferences (http://www.gfoa.org)
+February 5, 2017
Government Finance Officers' Association of Missouri Winter Seminar
Stoney Creek Inn
+February 7-10, 2017
California Society of Municipal Finance Officers (CSMFO) Annual Conference
California Society of Municipal Finance Officers
Hyatt Regency Sacramento
+February 9, 2017
Connecticut Government Finance Officers' (GFOACT)
The Dolce Conference Center
+February 15-16, 2017
Arizona Government Finance Officers' Association Winter Conference
+February 22-24, 2017
Government Finance Officers' Association of Alabama (33nd Annual conference)
Hyatt Regency Birmingham-The Wynfrey Hotel
+February 22-23, 2016
Louisiana Government Finance Officers' Winter Workshop
Baton Rouge Embassy Suites
Baton Rouge, Louisiana