The Use of Fraudulent ConveyancePrinciples to Overturn LBOsWednesday, June 6, 2012                            arnoldporter...
New York Seminar Series                                     Financial Markets Regulatory Roundtable                The Use...
Tab 1:	Agenda                arnoldporter.com
New York Seminar Series                        Financial Markets Regulatory Roundtable          The Use of Fraudulent Conv...
Tab 2:	Presentation Slides                             arnoldporter.com
The Use of Fraudulent Conveyance        Principles to Overturn LBOs                         D. Grant Vingoe, Arnold  Porte...
Leveraged Buyouts   An LBO is typically an acquisition using a significant amount of borrowed    money t meet th cost of ...
LBO Fraudulent Conveyance Litigation (cont’d) Fraudulent transfer law originally developed in response to the  situation ...
Theory of Clawbacks The term “clawback” is used generally as a theory for                                   g       y    ...
Potential Defendants in Fraudulent TransferLitigation Claims for Fraudulent Transfer (among others)  can be brought again...
Actual Fraud   Because direct evidence of fraudulent intent is often unavailable, courts    typically l    t i ll rely on...
Constructive Fraud A constructive fraudulent transfer typically  occurs when a debtor makes a transfer and  receives less...
Unreasonably Small Capital The Bankruptcy Code does not define the term “unreasonably small  capital.” Courts have descr...
Bankruptcy Code Provisions Under the Bankruptcy Code, generally the debtor has the “avoiding  power,” including the right...
Section 546(e) (cont’d)     – Case law has been inconsistent in applying the requirement that       the transfer be “by or...
Collapsing Transactions A threshold inquiry in certain LBO fraudulent transfer actions is  whether the particular transac...
Tribune Co. (cont’d) Tribune filed for bankruptcy on December 8, 2008. In February 2010, a group of unsecured creditors,...
Tribune Co. (cont’d)   In December 2010, Tribune ceded its rights to bring suits to the Committee,    which obtained perm...
Tribune Co. (cont’d)   Approximately 1,700 individual defendants have been named in the state    lawsuits, including i ti...
Lyondell Chemical Co. (cont’d) In July 2009, the Creditors Committee filed a fraudulent conveyance  lawsuit against Lyond...
Lyondell Chemical Co. (cont’d)   Since January 2011, the shareholders have filed numerous motions to dismiss and    relat...
Questions?             Contact:             Grant Vingoe             +1 212.715.1130             Grant.Vingoe@aporter.com ...
Tab 3:	Moderator/Speaker       Biographies                           arnoldporter.com
D. Grant Vingoe                      Partner                                       Contact Information                    ...
mergers and acquisitions transactions.      Conducts governance reviews for securities self-regulatory organizations.   ...
   D. Grant Vingoe. Cross Border Issues Financial Administrators Section Annual      Conference 2010, Investment Industry...
Michael L. Bernstein                       Partner                                         Contact Information            ...
Mr. Bernstein is a fellow of the American College of Bankruptcy and a member of the Board ofDirectors of the American Bank...
   Jonathan Friedland, Michael L. Bernstein, Prof. George Kuney and Prof. John Ayer.       Chapter 11-101 (co-author) 200...
   Michael L. Bernstein. Labor and Employment: Litigating the Section 1113 Dispute ABI    Annual Spring Meeting, May 1, 2...
   Michael L. Bernstein. Workout, Bankruptcy and Collateral Liquidation for Lenders      Lorman (Summer 2003).     Micha...
Stewart D. Aaron                      Partner                                          Contact Information                ...
plaintiff, and judgment in favor of plaintiff after trial awarding fees and warrants totalling      in excess of US$6 mill...
   Member, NYSBA Nominating Committee      Past Chair, NYSBA Committee on Federal Legislation      Member, Federal Bar ...
   Stewart D. Aaron. Inside The Minds: Securities Litigation Aspatore Books, Publishers of      C-Level Business Intellig...
Tab 4:	Practice Overviews                            arnoldporter.com
BANKRUPTCY AND CORPORATE RESTRUCTURINGArnold  Porter LLPs Bankruptcy and Corporate Restructuring practice represents a div...
Bankruptcy Advice and CounselingIn these challenging economic times, our clients often face concerns about the financial s...
bankruptcy/workers’ compensation counsel to a national retail chain in its successfulreorganization; and have represented ...
However, where an out-of-court strategy is not workable, we will help achieve the necessaryrestructuring in a chapter 11 p...
We represent both senior as well as subordinated secured lenders. We have particularexperience with issues concerning seco...
directors of the debtors (including breach of fiduciary duty claims), litigation relating to section363 asset sales, claim...
Healthcare IndustryBankruptcy and insolvency matters in the healthcare industry present unique business and legalissues. W...
FINANCIAL SERVICESWidely acknowledged as one of the nations premier financial services practices, the Arnold Porter LLP Fi...
concerns. Our lawyers were instrumental in preparing the Bank Mergers and AcquisitionsHandbook, a leading reference manual...
other card operations; funds and other money transmission; fiduciary and investmentmanagement activities; insurance; and l...
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
Arnold & Porter on Fraudulent Conveyance
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Arnold & Porter on Fraudulent Conveyance

  1. 1. The Use of Fraudulent ConveyancePrinciples to Overturn LBOsWednesday, June 6, 2012 arnoldporter.com
  2. 2. New York Seminar Series Financial Markets Regulatory Roundtable The Use of Fraudulent Conveyance Principles to Overturn LBOs Wednesday, June 6, 2012 12:00 − 2:00 p.m. Table of ContentsAgenda......................................................................................................................... Tab 1Presentation Slides..................................................................................................... Tab 2Moderator/Speaker Biographies................................................................................ Tab 3Grant Vingoe, Michael L. Bernstein, Stewart AaronPractice Overviews..................................................................................................... Tab 4Bankruptcy and Corporate Restructuring, Financial Services, LitigationSupporting Material.................................................................................................... Tab 5 . „„ For Some LBO Participants, Section 546(e)’s “Blanket” Protection for Securities Contract Settlement Payments Has Holes
  3. 3. Tab 1: Agenda arnoldporter.com
  4. 4. New York Seminar Series Financial Markets Regulatory Roundtable The Use of Fraudulent Conveyance Principles to Overturn LBOs Agenda12:00 – 12:30 p.m. Lunch and Registration12:30 – 12:40 p.m. Welcome and Overview12:40 – 1:45 p.m. Presentation and Discussion Grant Vingoe, Partner, Financial Services Practice, Arnold & Porter LLP, New York, NY Michael Bernstein, Partner, Bankruptcy and Corporate Restructuring Practice, Arnold & Porter LLP, Washington, DC tewart Aaron, Partner, Litigation Practice and Office Head, S Arnold Porter LLP, New York, NY1:45 – 2:00 p.m. Questions and Answers
  5. 5. Tab 2: Presentation Slides arnoldporter.com
  6. 6. The Use of Fraudulent Conveyance Principles to Overturn LBOs D. Grant Vingoe, Arnold Porter LLP Michael L. Bernstein, Arnold Porter LLP Stewart D. Aaron, Arnold Porter LLP June 6, 2012 1Fraudulent Conveyance Fraudulent conveyance laws exist to protect a company and its creditors from transactions that cause harm by extracting value without giving reasonable value in return. Anyone who benefited from the transaction can potentially be found liable for the fraudulent transfer. An LBO transaction that goes bad can be a prime target for fraudulent conveyance claims because lenders, management and shareholders may benefit g y greatly, while the debt used to finance the y, deal can render the company insolvent. Because fraudulent conveyance claims are difficult and expensive to litigate, these cases often, but not always, settle. 2
  7. 7. Leveraged Buyouts An LBO is typically an acquisition using a significant amount of borrowed money t meet th cost of th acquisition. Di tl or i di tl th assets of to t the t f the i iti Directly indirectly, the t f the company being acquired are used as collateral or support for the leveraged transactions. The purpose of LBOs is to allow companies to make acquisitions of companies without committing a lot of their capital to make the acquisition. LBOs are credited with creating a market for corporate control by funding potential owners who would not otherwise have access to sufficient capital. LBOs t ti ll LBO potentially create value for the firm as a whole but also potentially t l f th fi h l b t l t ti ll transfer value from creditors to equity holders. Loan proceeds are typically obtained by the acquiring entity, secured by the target entity’s assets, and used by the acquiring entity to buy-out the existing holder(s) of the target entity. 3LBO Fraudulent Conveyance Litigation If the target of an LBO fails, parties may initiate fraudulent transfer litigation to: – Avoid the liens granted to the third party lenders that financed the LBO; and – Recover the payments made to the target company’s former shareholders when they cashed out their equity positions. The potential for fraudulent conveyance liability most frequently arises when it is alleged that the debtor failed to receive adequate consideration for the transfer and the debtor at the time of, or as a result of, the transfer was balance sheet insolvent, equitably insolvent, or left with unreasonably small capital. Unsecured creditors need recourse under fraudulent conveyance laws because: – They Th are not a party to the LBO; t t t th LBO – They have no good proxy among the parties to assert their claims; and – Absent legal recourse, many have no ability to negotiate protection against uncompensated harm. 4
  8. 8. LBO Fraudulent Conveyance Litigation (cont’d) Fraudulent transfer law originally developed in response to the situation where debtors on the verge of insolvency would transfer their assets to friends or relatives, leaving little or no value in their estates for creditors. The English legal system responded to this problem by allowing creditors to petition a court to void the transfer as a “fraudulent conveyance.” The standard under which a fraudulent transfer could be voided was first codified in England in 1570, which permitted creditors to set aside transfers made with the intent to delay, hinder or defraud creditors. Similar standards are used in modern U.S. law. 5LBO Fraudulent Conveyance Litigation (cont’d) There has been increased attention on fraudulent conveyance litigation over the last few years. During the credit boom, banks and bondholders financed many highly leveraged transactions. As the debts became due and businesses struggled to refinance their debts, there was a wave of defaults, bankruptcies and inter creditor disputes inter-creditor disputes. 6
  9. 9. Theory of Clawbacks The term “clawback” is used generally as a theory for g y y recovering benefits that have been conferred under a claim of right, but that are still recoverable because unfairness would otherwise result. – Retroactive Clawbacks- imposed after the contractual right has arisen and benefits have been conferred. – Prospective Clawbacks- introduced into contracts before the claim of right t the benefits h arisen. l i f i ht to th b fit has i 7Increasing Attention on Clawbacks Madoff Clawbacks- trustee has sought to recover payments of fictitious profits and withdrawals of principal. Executive Compensation Clawbacks- based upon restatements or subsequent period losses. Sarbanes Oxley Section 304 gives the SEC the power to recover certain restatement-related compensation and stock profits from CEOs and CFOs of public companies in the event the restatement was caused by misconduct. y Dodd-Frank Section 954 requires the SEC to order national securities exchanges and associations to prohibit the listing of a security whose issue does not have a clawback policy. 8
  10. 10. Potential Defendants in Fraudulent TransferLitigation Claims for Fraudulent Transfer (among others) can be brought against several parties involved in a failed transaction, including: – Officers and Directors; – Lenders; – Financial Advisors; and – Former Shareholders. 9Two Types of Fraudulent Transfer Actual Fraud involves intent to defraud where Fraud- the trustee must prove that the debtor made transfers with “actual intent to hinder, delay, or defraud” investors. Constructive Fraud- does not require fraudulent intent but looks at the underlying economics of y g the transaction. 10
  11. 11. Actual Fraud Because direct evidence of fraudulent intent is often unavailable, courts typically l t i ll rely on circumstantial evidence t i f f d l t i t t I i t ti l id to infer fraudulent intent. In evaluating the transferor’s actions, courts have looked at various “badges of fraud” including: – Becoming insolvent because of the transfer; – Lack or inadequacy of consideration; – Family or insider relationship among parties; – The retention of possession, benefits or use of property in question; – The existence of the threat of litigation; – The financial situation of the debtor at the time of transfer or after transfer; – The existence or a cumulative effect of a series of transactions after the onset of debtor’s financial difficulties; – The general chronology of events; – The secrecy of the transaction in question; and – Deviation from the usual method or course of business. 11Actual Fraud (cont’d) The presence of one or more badges of fraud shifts the p g burden of proof from the creditor to the debtor. The debtor must then prove that despite the circumstantial evidence, the transfer was made with no fraudulent intent. Proof of insolvency and fair consideration are not material to a determination of actual intent to defraud. 12
  12. 12. Constructive Fraud A constructive fraudulent transfer typically occurs when a debtor makes a transfer and receives less than reasonably equivalent value, and at the time of such transfer the debtor: – Was insolvent; – Had unreasonably small capital for any business in which the debtor was or was about to become engaged; or – Intended to incur or believed that it would incur debts beyond the debtor’s ability to pay as such debts matured. 13Reasonably Equivalent Value In the LBO context, the party that assumes the debt and pledges its assets generally does not receive the proceeds of the loan financing the transaction. The value received and given does not need to be equal, but a significant shortfall in the value received will result in a finding that the debtor received less than reasonably equivalent value. Whether the debtor received reasonably equivalent value is measured from the perspective of the creditors. p p Bankruptcy Code Section 548(a)(1)(B)(i) provides for avoidance of an obligation if the debtor received less than reasonably equivalent value in exchange (and the other requirements of Section 548(a)(1)(B) are also met). 14
  13. 13. Unreasonably Small Capital The Bankruptcy Code does not define the term “unreasonably small capital.” Courts have described the term as a financial condition short of “equitable insolvency,” but which leaves the transferor unable to generate sufficient profits to sustain operations so that the transferor is technically solvent but doomed to fail. The transferor is left with so few assets that its inability to pay debts in the future should have been reasonably foreseeable. – Equitable insolvency occurs when an entity is unable to pay its debts as they become due in the ordinary course of business. Determination of “unreasonably small capital” is conducted on a case-by-case basis and often relies on industry-specific financial metrics. 15Unreasonably Small Capital (cont’d) Courts consider a variety of factors in determining y g “unreasonably small capital” including: – Historical performance; – Availability of funds; – Causation; – Time horizon; – Nature of business; – Likelihood of future growth or contraction; – Composition of asset portfolio; – Amount of insurance; – Likelihood of incurring substantial debt in the future. 16
  14. 14. Bankruptcy Code Provisions Under the Bankruptcy Code, generally the debtor has the “avoiding power,” including the right to commence an action alleging fraudulent transfers under the Bankruptcy Code. Section 548 allows avoidance of transfers made or obligations incurred within 2 years of the filing of a bankruptcy petition. 11 U.S.C. § 548. Section 550 allows the debtor to recover property that has been “fraudulently” transferred. 11 U.S.C. § 550. y Section 544 allows the debtor to avoid transfers under applicable non-bankruptcy laws, i.e., state fraudulent conveyance statutes. 11 U.S.C. § 544. Section 546(e) provides a safe harbor within which transfers cannot be avoided as fraudulent. 11 U.S.C. § 546(e). 17Section 546(e) Section 546(e) of the Bankruptcy Code is intended to reduce systemic risk to t markets th t can result f k t that lt from undoing t d i transactions upon which counter- ti hi h t parties have relied, hedged and re-allocated proceeds. Among other things, the trustee may not avoid transfers that are settlement payments or that are made in connection with securities contracts, by or to (or for the benefit of) a financial institution, unless the transfer was made with actual intent to hinder, delay or defraud creditors. – The term “settlement payment” is defined to mean “a preliminary settlement payment, a partial settlement payment, an interim settlement payment, a settlement payment on account, a final settlement payment, a net settlement payment, or any other similar payment commonly used in the forward contract trade or the securities trade.” 11 U.S.C. § § 101(51A); 741(8). – The term “financial institution” is defined to include, among other things, all commercial and savings banks, savings and loan associations and federally- insured credit unions. 11 U.S.C. § 101(22). 18
  15. 15. Section 546(e) (cont’d) – Case law has been inconsistent in applying the requirement that the transfer be “by or to (or for the benefit of)” a financial institution. The majority of courts have held that any participation by a financial institution is adequate under the plain language of the statute and some judges have interpreted the provision to protect shareholders who trade through financial institutions. – The safe harbor does not apply to claims for actual fraudulent conveyance. – Creditors have sought to find a way around the safe harbor by suing for constructive fraudulent conveyance under state law, where they argue that Section 546(e) does not apply. 19State Laws Section 544 of the Bankruptcy Code allows recovery under state law incorporating the Uniform Fraudulent Transfer Act (UFTA). (UFTA) 43 states and the District of Columbia have adopted the UFTA. The UFTA allows creditors to void transfers that are intentionally or constructively fraudulent under similar criteria to Section 548. UFTA Section 5 states: – (a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made … if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer … and the debtor was insolvent at the time or … became insolvent as a result of the transfer transfer. State laws generally have a longer statute of limitations than the Bankruptcy Code, allowing a trustee to avoid transfers not otherwise voidable under Section 548 of the Bankruptcy Code. – UFTA has a 4-year statute of limitations, though a number of states have varied this. – New York has a 6-year statute of limitations. 20
  16. 16. Collapsing Transactions A threshold inquiry in certain LBO fraudulent transfer actions is whether the particular transaction(s) sought to be avoided can be considered in isolation or should be considered as part of an integrated transaction. Treating a series of LBO or restructuring transactions as a whole is referred to as “collapsing” the transactions. Courts typically consider three things in determining whether to collapse transactions: – Whether all of the parties had knowledge of the multiple transactions; – Whether each transaction would have occurred on its own; and – Whether each transaction was dependent or conditioned on the other transactions. The fact that transactions were separated by considerable time does not, by itself, prevent collapsing transactions. 21Tribune Co. In 2007, the board of directors of Tribune Company approved an LBO proposal by Sam Zell to take the company private In connection with the LBO Tribune borrowed private. LBO, over $12 billion to buy out its public shareholders and become wholly owned by a newly formed employee stock ownership plan (“ESOP”). Two-Step Transaction: – In Step One, in June 2007, the ESOP purchased 8,928,571 shares of Tribune common stock at $28 per share. An entity owned by Mr. Zell also made an initial investment of $250 million in Tribune in exchange for 1,470,588 shares of Tribune common stock at a price of $34 per share and an unsecured subordinated exchangeable promissory note of Tribune in the principal amount of $200 million. Thereafter, Tribune commenced a cash tender offer to repurchase approximately 52% of its outstanding common stock. Tribune then retired the p pp y g repurchased shares. Step One Shareholders received approximately $4.3 billion for their shares. – In Step Two, in December 2007, Tribune merged with a Delaware corporation wholly owned by the ESOP, with Tribune surviving the merger. Upon completion of the merger, all issued and outstanding shares of Tribune’s common stock (other than shares held by Tribune or the ESOP) were cancelled and Tribune became wholly owned by the ESOP. Step Two Shareholders received approximately $4 billion for their shares. 22
  17. 17. Tribune Co. (cont’d) Tribune filed for bankruptcy on December 8, 2008. In February 2010, a group of unsecured creditors, the Official Committee of Unsecured Creditors (the “Committee”) sued for relief under fraudulent conveyance law arguing that Tribune did not receive reasonably equivalent value in exchange for the debt it incurred in the LBO and that Tribune took on this debt for the benefit of the parties driving the deal (i.e., the buyers, the former shareholders, and the lenders financing the LBO). The Committee argued that Tribune was rendered insolvent by the LBO or, if not, it was foreseeable Tribune would become insolvent if the LBO occurred. They asked the Delaware bankruptcy court to strip the lenders of their liens and subordinate their claims, denying them their position at the front of the line for distribution of the remaining value in Tribune. 23Tribune Co. (cont’d) In April 2010, the bankruptcy court directed the appointment of an independent examiner, Kenneth Klee, to evaluate allegations that the LBO violated bankruptcy law. In July 2010, the examiner issued a report concluding that Tribune did not receive reasonably equivalent value in exchange for the obligations it incurred to finance the LBO, that it was “highly likely” that Tribune was rendered insolvent and without adequate capital by Part Two of the LBO. The examiner wrote in his report that fiduciaries charged with the responsibility f overseeing management’s actions and d t ibilit for i t’ ti d determining i i whether the Step Two transactions would render Tribune insolvent did not adequately discharge their duties. The examiner found some evidence suggesting intentional fraud in Step Two of the transaction, however, he said that the evidence supporting constructive fraud was much stronger. 24
  18. 18. Tribune Co. (cont’d) In December 2010, Tribune ceded its rights to bring suits to the Committee, which obtained permission to file a claim alleging intentional f d against hi h bt i d i i t fil l i ll i i t ti l fraud i t shareholders before the two-year statute of limitations expired. – The bankruptcy court recently granted the Committee’s motion to dismiss claims against former named shareholders who received less than $50,000 in proceeds from the LBO. The bankruptcy judge stayed the suit pending the completion of the Chapter 11 process, hoping that the various parties could find a way to settle the charges. The Committee let the statute of limitations lapse on the constructive fraudulent conveyance claims in December 2010, which meant that individual creditors could bring claims under state law, arguably beyond the reach of the Section 546(e) safe harbor. In March 2011 creditors sought authority from the bankruptcy court to bring state law fraudulent conveyance actions. 25Tribune Co. (cont’d) Several parties objected to the state law fraudulent conveyance actions arguing that, among other things: – the debtor has exclusive authority to pursue the claims; and – the prohibition on pursuing avoidance of transfers subject to Section 546(e) has preempted state law and cannot be avoided by pursuing the claims in state court instead of bankruptcy court. In April 2011, the bankruptcy court issued an order allowing noteholders to file their avoidance actions in state court, stating: – “Because no state law constructive fraudulent conveyance claims against shareholders whose stock was redeemed or purchased in connection with the [LBO] were commenced by or on behalf of the Debtors’ estates before the expiration of the applicable statute of limitations under 11 U.S.C. § 546(a), the Debtors’ creditors have regained the right, if any, to prosecute their respective state law constructive fraudulent conveyance claims against [the shareholders] to recover stock redemption/purchase payments made to such shareholders in connection with the LBO.” – The bankruptcy court, however, specifically stated that it was making no finding regarding the standing of the noteholders or any creditors to assert the state fraudulent conveyance claims or whether such claims were preempted or otherwise impacted by Section 546(e). 26
  19. 19. Tribune Co. (cont’d) Approximately 1,700 individual defendants have been named in the state lawsuits, including i tit ti l it i l di institutions and i di id l who sold more th $75 000 d individuals h ld than $75,000 worth of stock. Junior noteholders have also asserted “class allegations” intended to include all other shareholders. In all, 33,000 to 35,000 investors are potentially liable for money they received in 2007 when the company went private. On December 20, 2011 the U.S. Judicial Panel on Multidistrict Litigation consolidated 44 fraudulent conveyance suits that had been filed in 21 states in the U.S. District Court for the Southern District of New York. However, the consolidated cases were stayed due to Tribune’s bankruptcy proceedings pending further order of the Bankruptcy Court for the District of Delaware or the Southern District of New York. The Tribune case differs from many other fraudulent conveyance cases because it includes a number of large deep-pocketed shareholders who have sold billions of dollars worth of stock in the deal. 27Lyondell Chemical Co. Lyondell Chemical Company merged with Basell AF S.C.A. in July 2007, creating one of the world’s largest polymers, petrochemicals and fuel companies. Basell was an international chemicals company controlled by Leonard Blavatnik. Over a few years, Blavatnik made several offers for Lyondell’s shares. In May 2007, Blavatnik acquired 21 million shares of Lyondell stock and disclosed in his SEC filing that he might seek to acquire of all Lyondell’s outstanding stock. In July 2007, Basell agreed to purchase Lyondell in an LBO for $48 per share. As a result of the LBO, Lyondell shareholders received $12.5 billion. In January 2009, Lyondell and certain affiliates and subsidiaries filed for Chapter 11 protection. 28
  20. 20. Lyondell Chemical Co. (cont’d) In July 2009, the Creditors Committee filed a fraudulent conveyance lawsuit against Lyondell and its financing parties, among others, alleging that at the time of the merger (i) Lyondell was insolvent because the stated value of its liabilities exceeded the fair value of its assets; (ii) Lyondell was insufficiently capitalized to fund its operations through a downturn; and (iii) the bankruptcy was foreseeable. In the same action, the Creditors Committee sued Barclays Global Investors, N.A. individually and as class representative of the Lyondell shareholders. shareholders In a settlement approved by the bankruptcy court in March 2010, the Creditors Committee settled with the LBO lenders for $450 million. 29Lyondell Chemical Co. (cont’d) In April 2010, the bankruptcy court confirmed a plan of reorganization for Lyondell. The Creditors Committee then amended its complaint and removed the claim against the shareholder class. A creditor trust was created to litigate state law avoidance actions against the former Lyondell shareholders. In October 2010, the trustee of the creditor trust filed a lawsuit against former Lyondell shareholders, asserting only state-law g y , g y fraudulent conveyance claims in the Supreme Court of the State of New York. In December 2010, the case was referred to the United States Bankruptcy Court for the Southern District of New York, which is administering the Lyondell bankruptcy case. 30
  21. 21. Lyondell Chemical Co. (cont’d) Since January 2011, the shareholders have filed numerous motions to dismiss and related joinders arguing in part that the creditor trust may not make an end run joinders, part, around the safe harbor of Section 546(e) of the Bankruptcy Code. – Shareholders have argued that the creditor trust’s claims are preempted by the Bankruptcy Code. – The creditor trust has countered that, although creditors may not prosecute fraudulent transfer claims against nondebtors as long as the trustee retains standing to do so, the bankruptcy case does not relieve a transferee’s liability to such creditors. The creditor trust asserted that these causes of action could revert to the creditors once relinquished by the trustee, through abandonment, expiration of the automatic stay of Section 362 of the Bankruptcy Code or otherwise. – The creditor trust has also taken the position that the language, context and legislative history of Section 546(e) indicate that Congress intended to protect financial markets only from the sweeping avoidance powers of the bankruptcy trustee and not the independent state law claims of creditors. – The court has not yet ruled on the motions to dismiss. 31Consequences of Fraudulent Conveyance Suits Markets that depend on the finality of a settled p y transaction can be disrupted. Investors may not be able to properly assess the risks of participating in a leveraged buyout. 32
  22. 22. Questions? Contact: Grant Vingoe +1 212.715.1130 Grant.Vingoe@aporter.com Michael L. Bernstein +1 202.942.5577 Michael.Bernstein@aporter.com Michael Bernstein@aporter com Stewart D. Aaron +1 212.715.1114 Stewart.Aaron@aporter.com 33
  23. 23. Tab 3: Moderator/Speaker Biographies arnoldporter.com
  24. 24. D. Grant Vingoe Partner Contact Information Grant.Vingoe@aporter.com tel: +1 212.715.1130 D. Grant Vingoe is a partner in the New fax: +1 212.715.1399 York office of Arnold Porter LLP. He concentrates his practice in cross-border 399 Park Avenue securities transactions and financial New York, NY 10022-4690 services regulation. Mr. Vingoe has been deeply involved in regulatory policy Practice Areasmatters for the Canadian securities industry. He has represented Corporate and Securitiesnumerous non-US issuers and underwriters in US public Financial Servicesofferings and private placements. He has established many Educationfinancial services affiliates for non-US banks and brokerage LLM, New York Universityfirms. He also advises these firms on ongoing compliance, School of Law, 1984governance, and risk management issues. He has also advised JD, Osgoode Hall Law Schoolsenior management of International stock exchanges and self- of York University, 1981regulatory organizations concerning regulatory policy matters Admissionsand cross-border business initiatives. Additionally, he has New Yorkreceived the ICD.D director certification from the Institute of Ontario, CanadaCorporate Directors.Representative Matters  Advises international financial services trade organizations on US and cross-border developments affecting their members.  Established financial services affiliates of non-US banks and brokerage firms and counsels them on US regulatory compliance, corporate finance, and risk management issues.  Advises non-US securities market participants on the impact of US regulatory developments on their operations and competitive positions.  Represents Canadian and other non-US issuers and underwriters in inbound corporate finance transactions, including Rule 144A and Regulation D private placements and offerings effected under the Multi-jurisdictional Disclosure System.  Represents participants in cross-border financial servicesarnoldporter.com
  25. 25. mergers and acquisitions transactions.  Conducts governance reviews for securities self-regulatory organizations.  Conducts internal investigations involving securities market activities.  Public policy advice concerning financial services regulation.Professional and Community ActivitiesProfessional Activity  Guest lecturer on US securities law in the Osgoode Hall Law School LL.M Program  Investment Industry Regulatory Organization of Canada (IIROC), Canadas investment industry self-regulatory organization  Independent director  Chair, Governance Committee  Previously an independent director and chair of the Governance Committee of Market Regulation Services Inc., the self-regulatory organization for trading activities on Canadian marketplaces, later merged with IIROC.  Appointed in 1999 to a term with the Ontario Securities Commission Securities Advisory Committee  Member, Securities Industry and Financial Markets Association, Compliance Legal Society  Member, Ontario Bar Association, Securities Law Subcommittee  Member, Atlantic Council of Canada  Member, Institute of Corporate Directors  Member, National Society of Compliance ProfessionalsCommunity Activity  Director and Chair of the Human Resources and Strategy Committee, Reach the World, a New York-based nonprofit that uses a mixture of computer-based and real time connections with sponsored travelers and class visits to enhance elementary and secondary student knowledge of the world beyond their neighborhoods.Presentations  D. Grant Vingoe. Fundamentals of U.S. Securities Law-2011: The Public Offering Process Osgoode Professional Development, Toronto, ON, June 7, 2011. D. Grant Vingoe Arnold Porter LLP 2
  26. 26.  D. Grant Vingoe. Cross Border Issues Financial Administrators Section Annual Conference 2010, Investment Industry Regulatory Organization of Canada, Toronto, ON, September 24, 2010.  Kevin F. Barnard and D. Grant Vingoe. Financial Regulatory Reform Osgoode Professional Development, Toronto, ON, October 19, 2009.  D. Grant Vingoe. Regulatory and Industry Differences Between Canada and the US National Society of Compliance Professionals Annual Seminar, Philadelphia, PA, October 7, 2009.  D. Grant Vingoe. Fundamentals of US Securities Law-2009 Osgoode Professional Development, Toronto, ON, April 21, 2009.  D. Grant Vingoe. The Canadian Institutes 19th Annual Securities Superconference The Canadian Institute, Toronto, ON, February 17-18, 2009.Advisories  International Implications of New FINRA Registration Rules for Securities Back Office Personnel. Aug. 2011.  Private Fund Provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Jul. 2010.  SEC Adopts Restrictions on Short Sales. Mar. 2010.  SEC Seeks Comments on Alternative Short Sale Rule. Aug. 2009.  SEC Announces Additional Steps to Prevent Abusive Short Sales and Increase Market Transparency. Jul. 2009.  FINRA Proposes Registration Category for Investment Banking Professionals. Mar. 2009.  SEC Adopts Significant Amendments to the Foreign Private Issuer Exemption from Securities Exchange Act Registration. Oct. 2008.  SEC Proposes to Ease Requirements on Foreign Broker-Dealers. Jul. 2008.  SEC Answers Questions Relating to Rule 15a-6 and Regulation Analyst Certification. Jun. 2005.Multimedia  Alan Avery, Kevin F. Barnard, Michael F. Griffin, Kathleen Scott and D. Grant Vingoe. WEBCAST: Implications of the Dodd-Frank Act for Non-US Banking Organizations, Securities Firms, and Other Financial Companies December 02, 2010. (also available as a Podcast) D. Grant Vingoe Arnold Porter LLP 3
  27. 27. Michael L. Bernstein Partner Contact Information Michael.Bernstein@aporter.com tel: +1 202.942.5577 Michael Bernstein is chair of the Firm’s fax: +1 202.942.5999 national bankruptcy and corporate restructuring practice. He is consistently 555 Twelfth Street, NW distinguished as one of the top bankruptcy Washington, DC 20004-1206 and restructuring lawyers in Washington, DC by Chambers USA Leading Lawyers Practice Areasfor Business, which praises him as a creative and loyal Bankruptcy and Corporate Restructuring (practice chair)advocate whose knowledge of the Bankruptcy Code makes him Financial Servicesincredible at getting the best results for his clients’’ (2011), anoutstanding lawyer [with] fantastic analytical skills and Educationintellectual prowess’’ (2009), for being ‘‘creative and practical JD, Northwestern University(2008), noting that he ‘‘completely understands [his client’s] School of Law, 1989business’’ (2007), and has ‘‘an ability to assess risks in a BA, Brandeis University, 1986meaningful way and address the tribunal in a strong and Admissionstenacious manner’’ (2006). District of Columbia Supreme Court of the UnitedHe represents secured and unsecured creditors, creditors Statescommittees, bondholders, investors, asset purchasers, debtors,and other parties in a wide variety of bankruptcy and workoutmatters, and in related litigation throughout the United States.He has been involved in large bankruptcy cases, includingChrysler, Lehman Brothers, US Airways, LandAmerica, TWA,Adelphia, Asarco, G-1 Holdings, Mirant, Criimi Mae, Enron,FoxMeyer Drug, Alterra Healthcare Corporation, Fruit of theLoom and Continental Airlines, as well as many other casesthroughout the United States.Mr. Bernsteins bankruptcy experience spans many industries,including telecommunications, energy, real estate, finance,mining, manufacturing, technology, retail, airline, healthcare,and pharmaceuticals. His clients have included AOL, AmericanCapital, American Red Cross, Ardent Communications CreditorsCommittee, Bear Stearns, Boehringer Ingelheim, BBT, CingularWireless, Criimi Mae Creditors Committee, Dynex BondholdersCommittee, Gate Gourmet, Glaxo, Guinness Import Company,Health Care REIT, Hilton Worldwide, Lennar Partners, MajorLeague Baseball, Perseus LLC, Sodexo, Texas Pacific Group, TheGeorge Washington University, and the WashingtonCorporations, among others.arnoldporter.com
  28. 28. Mr. Bernstein is a fellow of the American College of Bankruptcy and a member of the Board ofDirectors of the American Bankruptcy Institute. He has co-authored two books and has publishedmany articles on bankruptcy-related topics. He is a frequent lecturer, has been interviewed bymajor newspapers and on television and radio, and has been recognized as a leading bankruptcylawyer by numerous publications. Mr. Bernstein served as co-chair of the Labor andEmployment Committee of the American Bankruptcy Institute. He has testified before Congressas an independent expert on the status of collective bargaining agreements, retiree and pensionbenefits, and executive compensation in bankruptcy.Rankings  Washingtonians Top Lawyers for Bankruptcy  Chambers USA: Americas Leading Lawyers for Business for Bankruptcy/Restructuring  Washington, DC Super Lawyers for Bankruptcy Creditor/Debtor Rights, Real Estate, and Business Litigation  Best Lawyers Washington, DC Bankruptcy and Creditor-Debtor Rights Lawyer of the Year  The Legal 500 US Leading Lawyer for Bankruptcy  Fellow of the American College of Bankruptcy  Washington Business Journals Top Washington Lawyers Finalist for Bankruptcy  ABI Publications Award  Euromoneys ‘‘Guide to the Worlds Leading Insolvency Restructuring Lawyers’’Professional and Community Activities  Fellow, American College of Bankruptcy  Member, Board of Directors, American Bankruptcy Institute  Member, Advisory Board, ‘‘Views From the Bench’’ program, co-sponsored by Georgetown University Law School and American Bankruptcy Institute  Master of the Bench, Walter A. Chandler American Inn of Court  Served as co-chair of the Labor and Employment Committee of the American Bankruptcy InstituteBooks  Prof. John Ayer and Michael L. Bernstein. Bankruptcy in Practice (co-author) (4th Ed. 2007). Michael L. Bernstein Arnold Porter LLP 2
  29. 29.  Jonathan Friedland, Michael L. Bernstein, Prof. George Kuney and Prof. John Ayer. Chapter 11-101 (co-author) 2007.  Michael L. Bernstein. Bankruptcy Workouts Chapter, Small Business Compliance Advisor (Thompson 1994).Articles  Michael L. Bernstein and Charles A. Malloy. Bankruptcy Venue Laws May Be Changing Dow Jones DBR Small Cap Nov. 2011.  Michael L. Bernstein and Rosa J. Evergreen. Labor Issues: What Impact Would the Protecting Employees and Retirees in Business Bankruptcies Act of 2007 (H.R. 3652) Have on Chapter 11 Reorganizations? November 2009.  Michael L. Bernstein and Charles A. Malloy. Bankruptcy and the Board NACD----- - Directors Monthly September 2008.  Michael L. Bernstein and Charles A. Malloy. Deepening Insolvency: An Emerging Theory of Liability Bloomberg Corporate Law Journal Summer 2006 (Volume 1: Issue 3).  Michael L. Bernstein. Chapter 11-201 column -- ongoing monthly column in ABI Journal on intersection of bankruptcy and other areas of law (2008).  Michael L. Bernstein. Chapter 11-101 column -- monthly column in ABI Journal (2003- 2005).  Michael L. Bernstein and Charles A. Malloy. Master Leases and Cross Default Clauses in Bankruptcy, Real Estate Finance Journal, Spring 2003.Presentations  Michael L. Bernstein. Intercreditor Issues: Trends in Tranche Warfare, Mezzanine Lender Issues, Syndicated Loans and Standing for Certificate Holders Bankruptcy 2011: Views from the Bench, Georgetown University Law Center, Washington, DC, September 16, 2011.  Michael L. Bernstein. Bankruptcy Practice and the Law of Unintended Consequences: Be Careful What You Wish For American Bankruptcy Institute 29th Annual Spring Meeting, National Harbor, MD, April 2, 2011.  Michael L. Bernstein. Intercreditor Issues and Subordinate Financing: Tranche Warfare Bankruptcy 2010 Views from the Bench, Georgetown University Law Center, Washington, DC, October 1, 2010.  Michael L. Bernstein. Protecting Employees and Retirees in Business Bankruptcies Act of 2010 Testimony before the US House Committee on the Judiciary, Subcommittee on Commercial and Administrative Law on proposed legislation to amend certain provisions of Chapter 11 of the US Bankruptcy Code, May 25, 2010.  Michael L. Bernstein and Susan E. Hendrickson. WMACCA Technology IP Forum: Treatment of IP in Bankruptcy/Buying IP Assets out of Bankruptcy Arnold Porter LLP, McLean, VA, May 2010. Michael L. Bernstein Arnold Porter LLP 3
  30. 30.  Michael L. Bernstein. Labor and Employment: Litigating the Section 1113 Dispute ABI Annual Spring Meeting, May 1, 2010. Michael L. Bernstein. Chapter 11 at the Crossroads: Does Reorganization Need Reform? A Symposium on the Past, Present and Future of U.S. Corporate Restructuring (panel on Labor Issues: Would Reform of Federal Law Employee and Benefits Claims Help or Hurt Reorganizations?), November 16-17, 2009. Michael L. Bernstein and Rosa J. Evergreen. Bankruptcy and Restructuring: Navigating Employment Issues Under the Code Best Practices to Negotiate, Modify and Terminate Employment Agreements and Benefit Plans, Strafford, August 20, 2009. Michael L. Bernstein. Advising Emerging Growth Companies in Turbulent Times Panel, DC Bar, April 28, 2009. Michael L. Bernstein. Nuts and Bolts of Bankruptcy ABI Annual Spring Meeting (panel, April 2010 and prior years). Michael L. Bernstein. Views From the Bench Georgetown University Law Center (panel on real estate-homebuilders, commercial and hotels), September 12, 2008. Michael L. Bernstein. Understanding Todays Capital Markets 4th Annual Mid-Atlantic Bankruptcy Workshop, American Bankruptcy Institute, Chesapeake Bay, Cambridge, MD, July 31-August 2, 2008. Michael L. Bernstein. Protecting Employees and Retirees in Business Bankruptcies Act of 2007 Testimony before the US House Committee on the Judiciary, Subcommittee on Commercial and Administrative Law on proposed legislation to amend certain provisions of Chapter 11 of the US Bankruptcy Code, June 5, 2008. Michael L. Bernstein. Twelfth Annual Great Debates (Whether Congress Should Amend the Bankruptcy Code to Eliminate All Forms of Incentive, Bonus or Similar Compensation for Senior Executives and Other Insiders), ABI Annual Spring Meeting, April 2008. Michael L. Bernstein. Views From the Bench Georgetown University Law School (panel on reclamation and other trade vendor issues), October 2007. Michael L. Bernstein. American Workers in Crisis: Does the Chapter 11 Business Bankruptcy Law Treat Employees and Retirees Fairly? Testimony before the US House Committee on the Judiciary, Subcommittee on Commercial and Administrative Law on the status of collective bargaining agreements and employee benefits in Chapter 11 proceedings, September 6, 2007. Michael L. Bernstein. ABI Mid-Atlantic Program (panel on union, pension and labor issues in bankruptcy), August 2007. Michael L. Bernstein. Economic Paradox - Healthy Economy, Sick Healthcare Provider Sector - 2007 Outlook Thoughts on Avoiding or Dealing with Operating Distress Turnaround Management Association, January 2007. Michael L. Bernstein. Labor Issues in Bankruptcy ABI Southeast Regional Meeting (Fall 2005). Michael L. Bernstein Arnold Porter LLP 4
  31. 31.  Michael L. Bernstein. Workout, Bankruptcy and Collateral Liquidation for Lenders Lorman (Summer 2003).  Michael L. Bernstein. Dealing with Insolvent and Bankrupt Companies AOL Time Warner in-house CLE (Spring 2002).Advisories  Are You Prepared? A Compendium of Advisories on the Dodd-Frank Act. Jul. 2010.  Dodd-Frank Act Creates New Resolution Process for Systemically Significant Institutions. Jul. 2010.  Purchasing Real Estate and Loan Assets from the FDIC. Oct. 2008. Michael L. Bernstein Arnold Porter LLP 5
  32. 32. Stewart D. Aaron Partner Contact Information Stewart.Aaron@aporter.com tel: +1 212.715.1114 Stewart Aaron heads the firms New York fax: +1 212.715.1399 office. He practices commercial litigation with an emphasis on securities law 399 Park Avenue matters. For over 25 years, Mr. Aarons New York, NY 10022-4690 practice has involved the representation of clients in litigated matters in state and Practice Areasfederal courts, and before regulatory bodies and self regulatory Securities Enforcement and Litigationorganizations. Litigation Appellate and Supreme CourtMr. Aaron currently serves as President of the 9000-memberNew York County Lawyers Association. He is a frequent author Educationand lecturer on legal topics, generally in the areas of securities, JD, summa cum laude,commercial, and prisoners civil rights litigation. Syracuse University College of Law, 1983 BS, Cornell University, 1980Representative Matters Admissions  Fairfax Financial Holdings Limited v. S.A.C. Capital New York Supreme Court of the United Management, LLC, et al., Docket No. L-2032-06 (N.J. States Superior Court, Morris County). Successfully US Courts of Appeals for the represented hedge fund defendant against, among Second, Fourth, and Ninth others, claims alleging violations of the New Jersey Circuits Racketeer Influenced and Corrupt Organization Act US Tax Court related to short selling of Fairfax stock.  In re Initial Public Offering Securities Litigation, 21 MC 92 (SAS). Represented underwriter in 67 of 310 consolidated actions in the US District Court for the Southern District of New York alleging that IPO underwriters, IPO issuers and individual officers and directors of issuing companies engaged in scheme to inflate the issuers share price, in violation of the federal securities laws.  Scott-Macon Securities, Inc. v. Zoltek Companies, Inc., 2005 WL 1138476 (S.D.N.Y. 2005), affd in part, 2007 WL 2914873 (2d Cir. 2007). Represented plaintiff placement agent in connection with action for breach of agreement pursuant to which plaintiff was to act as exclusive placement agent in connection with placement of equity and/or debt securities of defendant Zoltek. Obtained partial summary judgment as to liability on behalf ofarnoldporter.com
  33. 33. plaintiff, and judgment in favor of plaintiff after trial awarding fees and warrants totalling in excess of US$6 million. Affirmed in substantial part by Second Circuit, and remanded for consideration of whether fees and warrants are due on two take-downs of fifth and final placement.  In re Mutual Funds Investment Litigation, 384 F. Supp. 2d 845 (D. Md. 2005). Represented mutual fund management company in class and derivative actions involving allegations of market timing and late trading.  Waldock v. M.J. Select Global, Ltd., 2005 WL 2737502 (N.D. Ill. 2005). Represented hedge fund and its principals in securities fraud lawsuit. Obtained dismissal with prejudice of all claims against them.  Keeney v. Larkin, 306 F. Supp. 2d 522 (D. Md. 2003), affd, Fed. Sec. L. Rep. 92,868 (4th Cir. 2004). Obtained dismissal of securities fraud claims against Chief Executive Officer and Chief Financial Officer. Affirmed by Fourth Circuit.  Decker v. Yorkton Securities, Inc., 106 Cal. App. 4th 1315 (Ct. App., 1st Dist. 2003). Affirming summary judgment in favor of broker that transferred stolen stock certificates; in deciding issue of first impression under California Commercial Code, appellate court held that, in order to hold broker liable, plaintiff must show that broker had subjective knowledge of a significant probability of an adverse claim.  JPMorgan Chase Bank v. LibertyMutual, et al., 189 F. Supp. 2d 24 (S.D.N.Y. 2002). Represented surety company in this Enron-related litigation during month-long trial; favorably settled prior to jury deliberations.Rankings  Chambers USA: Americas Leading Lawyers for Business 2009-2011 for Litigation: Securities  New York Super Lawyers 2006-2011 for Business Litigation and Securities LitigationProfessional and Community Activities  President, New York County Lawyers Association (NYCLA)  Member, Board of Directors, NYCLA Foundation  Member, NYCLA Executive Committee  Past Chair, NYCLA Committee on the Federal Courts  Member, NYCLA Task Force on Judicial Independence  Past Chair, Litigation Committee, New York City Bar  Member, Entertainment Committee, New York City Bar  Past Member, House of Delegates, New York State Bar Association (NYSBA) Stewart D. Aaron Arnold Porter LLP 2
  34. 34.  Member, NYSBA Nominating Committee  Past Chair, NYSBA Committee on Federal Legislation  Member, Federal Bar Council  Member, Lawyers Committee, National Center for State Courts  Member, New York American Inn of Court  Fellow, Litigation Counsel of America  Fellow, American Bar Foundation  Fellow, New York Bar Foundation  Mediator, US District Court for the Southern District of New YorkBooks  Stewart D. Aaron. Ethical Issues in Commercial Cases Author of Chapter 58 in Commercial Litigation in New York State Courts, Second Edition (Robert L. Haig ed.) (West NYCLA 2009).Articles  Stewart D. Aaron. Reflections on 9/11 and the Law New York Law Journal Sep. 2011.  Stewart D. Aaron and Cara Peterman. Rule 10b-5 Liability of Secondary Actors: Second Circuit Rejects Creator Theory and Adopts Attribution Requirement in Pacific Investment Management Co. v. Mayer Brown Bloombergs Securities Law Report, Vol. 4, No. 26, July 2010.  Stewart D. Aaron and Cara M. Peterman. Rule 10b-5 Liability of Secondary Actors: Second Circuit Rejects Creator Theory and Adopts Attribution Requirement in Pacific Investment Management Co. v. Mayer Brown Bloomberg Law Reports, Vol. 4, No. 26, July 2010.  Stewart D. Aaron and Lauren R. Bittman. Proposed Investor Protection Act Could Clarify Reach of U.S. Securities Laws March 2010.  Stewart D. Aaron, Marcus A. Asner and Yue-Han Chow. Second Circuit Rules Computer Hacking May Be Deceptive Under Section 10(b) of the Securities Exchange Act of 1934 Privacy Data Security Law Journal, Octobe 1, 2009.  Stewart D. Aaron and Laura Weiss Tejeda. The Realities and Economics of Civil Litigation in Federal Court and Its Impact on Litigation Management Bloombergs Litigation Law Report, Vol. 2, No. 25, June 23, 2008.  Stewart D. Aaron and Susan L. Shin. Considerations Surrounding Motions in Limine New York Law Journal April 2, 2007. Stewart D. Aaron Arnold Porter LLP 3
  35. 35.  Stewart D. Aaron. Inside The Minds: Securities Litigation Aspatore Books, Publishers of C-Level Business Intelligence, October 2005.Advisories  The Second Circuit Clarifies the US Supreme Courts Ruling on the Extraterritorial Reach of US Securities Laws. Mar. 2012.  US Supreme Court Limits Extraterritorial Reach of the US Securities Laws; Congress Acts. Jul. 2010.  Pacific Investment Mgmt. Co. v. Mayer Brown: The Second Circuit Rejects the Creator Theory and Adopts the Attribution Requirement For 10b-5 Liability of Secondary Actors. May. 2010.  Supreme Court to Consider Whether Foreign-Cubed Securities Fraud Cases May Be Heard in US Courts. Apr. 2010.  First Circuit Rejects Attempt to Impose Rule 10b-5 Primary Liability for Implied Statements. Mar. 2010.  SEC Announces New Guidance For Cooperation with Investigations. Jan. 2010.  US Supreme Court Grants Certiorari to Review Foreign-Cubed Securities Transaction Case Despite Solicitor Generals Opposing View. Dec. 2009.  The Eleventh Circuit Finds Subject Matter Jurisdiction in Foreign-Cubed Securities Lawsuit. Sep. 2009.  Fourth Circuit Reinstates Complaint But Maintains Strict PSLRA Scienter Pleading Standard. Aug. 2009.  Second Circuit: SEC May Investigate and Regulate Certain Forms of Computer Hacking. Jul. 2009.  Fourth Circuit Adopts Strict Standard for Pleading Scienter in Securities Fraud. Jan. 2009.  Second Circuit Rejects Bar on Foreign-Cubed Securities Lawsuits. Oct. 2008.  In re: Initial Public Offering Securities Litigation. Dec. 2006.  The Supreme Court Toughens the Requirements for Private Securities Fraud Claims. Apr. 2005. Stewart D. Aaron Arnold Porter LLP 4
  36. 36. Tab 4: Practice Overviews arnoldporter.com
  37. 37. BANKRUPTCY AND CORPORATE RESTRUCTURINGArnold Porter LLPs Bankruptcy and Corporate Restructuring practice represents a diverseclient base, including corporate debtors, investors and asset purchasers, committees,bondholders, secured and unsecured creditors, parties dealing with distressed businesses,officers and directors, and other interested parties in corporate restructurings, bankruptcyproceedings, and related litigation throughout the United States.Our firm and its bankruptcy partners have been recognized by numerous publications as beingamong the leading bankruptcy lawyers in the United States. Bankruptcy Court Decisions-WeeklyNews Comment named Arnold Porter one of 12 law firms in the United States providingexemplary service to corporate bankruptcy clients. We have repeatedly been recognized inChambers USA: Americas Leading Business Lawyers as a leading bankruptcy and restructuringpractice. Our lawyers have also appeared in The Best Lawyers in America, Lawdragon 500, Legal500 US: Corporate and Finance, Super Lawyers, Guide to the Worlds Leading Insolvency andRestructuring Lawyers, and other publications. Our bankruptcy partners are frequent lecturers,published authors, and widely recognized professionals in their field.Our bankruptcy lawyers are experienced litigators. We appear in trial and appellate courtsthroughout the United States and are often involved in precedent-setting cases. Ourtransactional experience is equally extensive. Our Bankruptcy and Corporate Restructuringgroup has taken the lead in a number of sophisticated transactions in some of the countryslargest bankruptcy cases. We have also negotiated and structured successful out-of-courtrestructurings, helped clients acquire distressed assets or businesses, and advised clients ontheir dealings with troubled companies.Our practice includes full-time bankruptcy professionals as well as attorneys from other practiceareas, such as litigation, corporate and securities, finance, tax, environmental, antitrust, realestate, intellectual property, and government contracts, who assist with particular issues on anas-needed basis. As bankruptcy issues rarely arise in a vacuum, this multidisciplinarycoordination is particularly valuable to our clients. Readily available substantive experience inrelated areas of the law is often essential to efficient and effective representation.Although we have a national practice and are often involved in high profile, complex cases, wealso can (and regularly do) handle smaller local and regional bankruptcy matters in an efficient,cost-conscious way. Our lawyers staff matters leanly and are mindful of the economic pressuresunder which many of our clients operate. We provide the same standard of excellence whetherthe case is a routine bankruptcy litigation matter, a large international insolvency, or a majorcorporate reorganization.arnoldporter.com
  38. 38. Bankruptcy Advice and CounselingIn these challenging economic times, our clients often face concerns about the financial strengthand viability of parties they are doing business with-----their suppliers, customers, joint venture -partners, lenders, borrowers, licensors, licensees, or other contract counterparties. Many of ourclients recognize that they are better off considering these issues before a default or abankruptcy occurs. They are interested in understanding their rights in the event of acounterpartys insolvency or bankruptcy, and maximizing their protections through thestructuring and documentation of their transactions. We have been able to help our clients-----on -a cost-effective basis-----to understand their rights and to maximize their protections. We often -come up with creative solutions to address bankruptcy and insolvency risks. This sort ofpreventive medicine can add enormous value-----helping to avoid significant expense and -business disruption.Large ReorganizationsWe play a prominent role in many of the country’s largest corporate reorganizations. Companiesinvolved in these cases often turn to us because we are able to mobilize a team of experiencedlawyers quickly, providing bankruptcy and cross-disciplinary experience. For example, we haverepresented major airlines in their bankruptcy reorganizations; debtors and other parties incross-border insolvency proceedings; investors in billion-dollar-plus bankruptcy investments;major parties in some of the country’s largest mass tort and environmental bankruptcies;creditors’ committees in large and complex chapter 11 cases; broker-dealers and customers incomplex securities industry liquidations; banks and bank holding companies in financialinstitution reorganizations; parties engaged in litigation with corporate debtors; and a widevariety of other parties in large bankruptcy and reorganization matters.Corporate DebtorsArnold Porter LLP’s restructuring lawyers combine their experience in bankruptcy law with thecapabilities of the firm’s lawyers in other practice areas to address the many corporate, tax,environmental, real estate, litigation, antitrust, and regulatory issues that a company faces whenoperating in chapter 11.In 2009, we guided Quebecor World, the second largest commercial printer in North America,through a cross-border restructuring that resulted in confirmation of a successful stand-aloneplan of reorganization only 18 months after the company filed chapter 11. We were also leadbankruptcy counsel to US Airways in its second chapter 11 proceeding, obtaining confirmationof its successful plan of reorganization just one year after the commencement of its chapter 11case and culminating in its successful merger with America West. We also represented thelargest South American cable company in its successful cross-border restructuring, with formalchapter 11 proceedings in the United States and simultaneous consensual out-of-courtrestructurings of its subsidiary companies in six South American countries.In other cases, we have served as special counsel to chapter 11 debtors. For example, we servedas special environmental/bankruptcy counsel to a roofing company facing hundreds of millionsof dollars of environmental claims and government cleanup orders that threatened the successof its reorganization effort; acted as special bankruptcy/labor counsel to an airline ingroundbreaking trial and appellate litigation regarding a debtor’s right to modify its collectivebargaining agreements and a union’s right to strike; were retained as special Bankruptcy and Corporate Restructuring Arnold Porter LLP 2
  39. 39. bankruptcy/workers’ compensation counsel to a national retail chain in its successfulreorganization; and have represented several debtors as special intellectual property counsel,addressing the unique issues involving the status of IP in bankruptcy. In each of these cases, ourclients benefitted from our combined experience in bankruptcy and other substantive areas ofthe law.In addition to our representation of corporate debtors in chapter 11 proceedings, we havesubstantial experience in advising corporations and other business entities regardingalternatives to bankruptcy, including state-law mechanisms and out-of-court workouts. We havefrequently helped clients avoid bankruptcy and achieve consensual, out-of-court restructurings,which may be faster and less costly than a chapter 11 proceeding.Finally, we have been called upon to counsel boards and independent directors with respect totheir duties as directors of troubled companies, both before and after a bankruptcy filing.Out-of-Court RestructuringsIt is sometimes said that the mark of a good bankruptcy lawyer is not how many bankruptcycases she files, but instead how many companies she is able to help keep out of bankruptcy. Wehave deep experience representing companies and their lenders in negotiating out-of-courtrestructuring agreements. In many cases, these agreements enable the parties to achieve theirobjectives quickly, and without the risks and expense of a chapter 11 proceeding. Ourbankruptcy lawyers understand corporate finance. Where necessary, we are also able to callupon our colleagues with particular experience in securities law, debt finance, mergers andacquisitions, and tax law-----many of whom have significant experience working in the -restructuring arena-----to assist in these matters. -Our clients are all over the capital structure-----from borrowers and equity investors, to senior -lenders, second lien lenders, mezzanine lenders, unsecured lenders, bondholders, and otherconstituencies. We are familiar with the complex, multi-tier structures that have becomeincreasingly common. We are sensitive not only to borrower versus lender issues, but also tothe complex intercreditor issues that must be faced in the typical corporate restructuring.Real Estate Bankruptcy and Restructuring MattersWe regularly represent developers, lenders, landlords, investors, and other parties in real estate-related bankruptcies, workouts, and restructurings. We understand the business of real estate, aswell as the legal issues, and we work closely with our colleagues in the firms highly regardedreal estate practice, several of whom also have substantial bankruptcy experience. This enablesus to achieve our clients objectives with creative, expeditious, and cost-effective solutions.Our bankruptcy lawyers regularly represent secured lenders in enforcing their remedies,including through foreclosure or receivership and in bankruptcy court. In single-asset real estatecases, we have had success in obtaining relief from the automatic stay, defeating cramdownplans, confirming creditors plans, pursuing collection litigation, and defending lender liabilitysuits. We have also negotiated creative, consensual resolutions, quickly and with relatively littleexpense, in many single-asset cases.We also represent real estate developers, owners and investors in resolving issues with theirlenders. Often we are able to achieve the desired results without the need for a bankruptcy filing. Bankruptcy and Corporate Restructuring Arnold Porter LLP 3
  40. 40. However, where an out-of-court strategy is not workable, we will help achieve the necessaryrestructuring in a chapter 11 proceeding.We also represent investors in acquiring real estate assets from chapter 11 proceedings, and inpurchasing debt secured by real estate assets. We have particular experience in the uniqueissues involving hotel debtors and have represented creditors, owners, and investors in a widevariety of bankruptcy and debt restructuring matters involving hotels.We also regularly represent landlords facing the bankruptcy or insolvency of their tenants orseeking to structure their lease transactions in a way that will minimize their risk of aninsolvency or bankruptcy.In addition to our extensive experience in single-asset bankruptcy cases, we also play asignificant role in some of the largest and most complex real estate-related bankruptcy cases inthe country. Many of these matters involve complex financing structures, novel legal issues, andhundreds of millions of dollars in debt.Creditors and Equity CommitteesWe represent creditors’ and equity committees in a variety of bankruptcy cases, from medium-sized local cases to mega-cases involving hundreds of millions of dollars of debt, across all typesof industries. Our lawyers also represent ad hoc committees in workouts and out-of-courtrestructurings. We have had success in reconciling the diverse interests of committee membersand in structuring negotiated solutions that avoid litigation and expedite recoveries. Where anegotiated solution is not possible, we have the litigation capability to pursue creditors’remedies aggressively. The breadth of our practice allows committees to rely upon us not onlyfor bankruptcy advice, but also for advice in other substantive areas of the law.Investors and Asset PurchasersOur lawyers regularly represent clients interested in purchasing assets, business units, andentire operating businesses out of bankruptcy. Our experience ranges from straightforwardsingle-asset acquisitions to complex billion-dollar-plus mergers and acquisition transactions. Wehelp clients structure investments to minimize costly bidding wars, obtain protections such asbreak-up and topping fees, minimize the risks of successor liability, defer and/or reduce taxliabilities, and otherwise take advantage of the procedural and substantive protections offeredby bankruptcy. Working with our corporate and tax lawyers where appropriate, we are able tohandle all aspects of distressed MA transactions. We also represent parties buying and sellingdistressed debt and bankruptcy claims.Secured LendersWe regularly represent secured lenders in bankruptcy cases, state law insolvency proceedings,and non-bankruptcy restructurings and workouts. We have also successfully defended securedlenders in litigation brought by debtors, trustees, and committees, including claims for equitablesubordination, recharacterization, deepening insolvency, breach of duty, and other lenderliability theories, as well as efforts to challenge liens or prepetition payments.We have also represented debtor-in-possession lenders in structuring, documenting andobtaining court approval of their loans. Bankruptcy and Corporate Restructuring Arnold Porter LLP 4
  41. 41. We represent both senior as well as subordinated secured lenders. We have particularexperience with issues concerning second lien, tranche B, and mezzanine financing, and weadvise both senior and junior lenders on intercreditor issues, restructurings, rights inbankruptcy, and related issues.Unsecured and Trade CreditorsWe represent trade creditors in some of the largest bankruptcy cases, as well as in smaller casesthroughout the country. Our lawyers have represented unsecured creditors with claims as largeas hundreds of millions of dollars. Our lawyers advise clients on reducing or altering tradecredit;planning for a customer’s bankruptcy; filing and pursuing claims against debtors; potentialrecoveries from non-debtor parties;rights of reclamation, set-off, and recoupment; and otherissues faced by trade creditors. We also represent clients in selling bankruptcy claims, as a wayto achieve a quick and certain recovery. We represent unsecured creditors in a wide variety oflitigation, including preference and fraudulent conveyance matters.Environmental MattersWe have substantial experience in representing the interests of clients impacted by theintersection of environmental law and bankruptcy law and have been involved in some of themost prominent cases in this area. We have represented both debtors and creditors in thisregard, and have addressed a broad array of issues, such as the scope of the automatic stay andbankruptcy discharge in relation to environmental claims, as well as the liquidation andestimation of complex environmental claims in the bankruptcy context. Our work in this areabenefits from the fact that we have attorneys who practice in both the environmental andbankruptcy areas. Moreover, we can, as necessary, access the extensive resources of ournationally-recognized environmental practice.Structured FinanceBankruptcy lawyers play a vital role in structuring corporate and financial transactions toanticipate and avoid bankruptcy risks. Much of our work involves helping clients structuretransactions to avoid or minimize the perils of bankruptcy or state insolvency laws.We work closely with our corporate, tax, and finance colleagues in structuring off-balance-sheetfinancing transactions, employing multitier structures and otherwise crafting the complexstructures required, and providing the requisite legal opinions that are the predicate for suchtransactions. Moreover, we have considerable experience in the structuring and documentationof securitized transactions in the areas of receivables financings, structured financing of financialproducts, real estate financing, and other structured finance transactions.Bankruptcy LitigationBankruptcy litigation is often fast-moving, and significant cases can proceed from filing throughtrial in a matter of weeks or months. The pace of these cases, and the complexity of the legalissues, demands trial lawyers who have a sophisticated understanding of bankruptcy law (bothprocedural and substantive) and can quickly get up to speed in order to effectively try a case.Our experience includes bankruptcy litigation on behalf of debtors, creditors, and other parties.The firm’s bankruptcy litigators have represented clients in, among other things: avoidanceactions (including preference and fraudulent conveyance claims), claims against the officers and Bankruptcy and Corporate Restructuring Arnold Porter LLP 5
  42. 42. directors of the debtors (including breach of fiduciary duty claims), litigation relating to section363 asset sales, claims under the Worker Adjustment and Retraining Notification Act (WARN)Act, lender liability issues, successor and alter ego liability, recharacterization and equitablesubordination claims, cash collateral and debtor-in-possession financing litigation, and litigationregarding the confirmation of plans of reorganization. We have also handled environmental,intellectual property and antitrust litigation in bankruptcy court proceedings. Several of ourlitigators have particular experience in emergency litigation.Arnold Porter bankruptcy litigators have been involved in some of the most prominent casesin the country, including Adelphi, TWA, and Chrysler.Appellate PracticeClients often turn to us for counsel in bankruptcy appellate matters, particularly whereconsiderable sums of money or novel or important legal issues are at stake. Arnold Porter LLPhas had a reputation since its founding as a firm with a highly respected appellate practice, andthe bankruptcy group continues that tradition. Our group includes highly regarded appellate andSupreme Court advocates.Airline IndustryOver the past 25 years we have played a significant role in nearly every major airline bankruptcyor restructuring, including those involving US Airways, TWA, Northwest, United, Continental,Delta, and many others. In these airline bankruptcy cases, we have represented debtors, majorcreditors, suppliers, investors, and other parties.Banking and Financial InstitutionsOur bankruptcy lawyers regularly partner with lawyers in our highly regarded financial servicesgroup to counsel banks and other financial institutions, officers and directors of suchinstitutions, and investors in, and creditors of, such institutions, on issues that arise when banks(or bank holding companies) and other financial institutions encounter bankruptcy, insolvency,or receivership situations. Our firms combined experience in financial institutions regulationand bankruptcy law enables us to provide effective representation in these matters.Broker-Dealer / Securities IndustryWe have substantial experience in addressing client needs at the intersection of bankruptcy lawand the securities and derivatives industry. Our bankruptcy lawyers represent creditors,customers and broker-dealers in SIPA proceedings and represent individual customers, largefinancial institutions, creditors, and committees in significant bankruptcy and insolvencyproceedings involving broker-dealers or other securities and derivatives market participants. Wealso represent hedge funds and private equity funds in their creditor, lender, and investoractivities in the bankruptcy arena and counsel foreign exchanges and clearing houses on thebankruptcy implications of their US activities. Where appropriate, we call upon the experience ofour colleagues in the securities regulatory practice, including lawyers who have held seniorpositions at the Securities and Exchange Commission and the Commodity Futures TradingCommission. Bankruptcy and Corporate Restructuring Arnold Porter LLP 6
  43. 43. Healthcare IndustryBankruptcy and insolvency matters in the healthcare industry present unique business and legalissues. We represent hospitals and healthcare facility operators; lenders and lessors of hospitals,senior living facilities and similar facilities;parties to contracts with such entities; investorsacquiring such facilities; and other parties that are affected by insolvencies and bankruptcies inthe healthcare industry. We also represent creditors and other parties in pharmaceutical,biotechnology, and medical device bankruptcies and insolvencies. Where appropriate, we areable to call upon our colleagues in the healthcare and pharmaceutical practice groups forassistance, including deep regulatory experience. Bankruptcy and Corporate Restructuring Arnold Porter LLP 7
  44. 44. FINANCIAL SERVICESWidely acknowledged as one of the nations premier financial services practices, the Arnold Porter LLP Financial Services practice group of over 35 lawyers provides US and internationalfinancial institution clients with comprehensive regulatory, litigation, legislative andtransactional services. The practice group handles complex regulatory and transactional issues,represents clients in legislative matters (including Congressional hearings and investigations)and litigates cases involving the financial services industry at the administrative level and in thestate and federal courts, including the US Supreme Court.The practice group is recognized for developing innovative structures and novel solutions toregulatory issues, which allow clients to optimize their business strategy. Clients include a broadcross-section of bank holding companies, savings institutions, foreign banks, insurancecompanies, securities firms, investment managers, electronic commerce businesses, and foreigngovernments.The practice group offers extensive experience in dealing with financial institutions andsecurities regulatory agencies, both federal and state, and with state insurance regulatoryauthorities, as well with the recently established Federal Insurance Office. Several members ofthe practice group have served in senior positions at the key federal regulatory agencies. Theteam is supported by the full interdisciplinary resources of Arnold Porter, including theCorporate and Securities; Litigation; Public Policy and Legislative; Antitrust/Competition; Tax,Trusts, and Estates; ERISA; Environmental; and Intellectual Property practice groups.Anti-Money Laundering and USA Patriot Act DefenseWe have been active in a variety of Patriot Act, anti-money laundering, and computer securitymatters for our financial services clients, including internal investigations, defense ofenforcement actions and civil and criminal litigation, development and documentation ofcompliance programs, public policy issues, and regulatory counseling. Our information privacyand security team includes former federal prosecutors as well as former senior officials from theUS Department of Justice, the Federal Trade Commission, the Central Intelligence Agency, theNational Security Administration, the Department of Defense, and the US federal bankingagencies.Antitrust and CompetitionBank mergers are unique in the antitrust world. Both the process and standard of review aredifferent from those followed in the antitrust review of mergers in other industries. We assistclients in analyzing potential transactions and shepherd them through the multiple agencyreview process. Historically, we have had one of the leading bank mergers and acquisitionpractices in the US. In this regard, for the last two decades, our team has been involved inshaping some of the most complex divestiture proposals ever designed to cure competitivearnoldporter.com
  45. 45. concerns. Our lawyers were instrumental in preparing the Bank Mergers and AcquisitionsHandbook, a leading reference manual devoted to this area of law. In addition, as a full-servicefirm, we are also able to draw upon the resources of our consistently top-ranked antitrust andcompetition practice in such instances as when a non-bank is being acquired and FTC issues areraised.Charter AssessmentWe regularly assist clients in assessing which is the optimal charter to operate under to bestmeet their business goals. We have extensive experience in advising clients on the advantagesand disadvantages of the various types of charters-----state bank charter, national bank charter, -federal savings bank charter, or a specialized or limited purpose charter-----and the implications -of a charter choice on the parent holding company. As one of the few national firms with aseparate, sophisticated thrift practice, we have been at the forefront in developing novel uses forthrift charters, especially by securities and insurance companies, in addition to advising our bankholding company clients on such matters. In the last several years, we have represented severalof the nations largest insurance and securities companies in forming federal savings banks inorder to offer banking services to their customers.Corporate Control Contests and Corporate GovernanceWe help financial institutions develop takeover defenses, handle unsolicited takeover attempts,and prepare shareholders rights plans, and we advise on corporate governance and shareholderrelations issues. We also represent acquirors in takeovers, offering special value in resolvingregulatory and antitrust issues raised by proposed transactions.Enforcement Counseling and DefenseWe assist individuals and institutions-----and their boards of directors and holding companies----- - -with the negotiation of consent agreements, memoranda of understanding and other writtensettlements, the development of compliance programs, and the defense of enforcement actionsin administrative and judicial proceedings, and in addressing financial reporting and disclosureissues presented by agency enforcement initiatives. We also represent officers and directors,accountants, and other professionals in actions by receivers of insolvent financial institutionsand in shareholder suits.We are experienced in such currently high-profile issues as subprime lending, vendormanagement, privacy, nontraditional lending products and practices, money laundering, banksecrecy, and various activities considered inconsistent with safe and sound practices. Inaddition, we have substantial experience representing individuals and entities who are allegedto have the control provisions of the Change in Bank Control Act, the Bank Holding Company Actand the Savings and Loan Holding Company Act. Many of our attorneys have served as seniorenforcement officials or on the enforcement staffs of the federal banking agencies, adding depthand insight to our representation of clients in enforcement matters.Financial Products and ServicesHelping financial institutions enter new lines of business and structure new products andservices is a major focus of our financial services practice. We represent clients in establishing,acquiring, and operating lines of business, including securities underwriting and dealing;brokerage; investment advising; mutual and hedge funds; pension servicing; credit, debit, and Financial Services Arnold Porter LLP 2
  46. 46. other card operations; funds and other money transmission; fiduciary and investmentmanagement activities; insurance; and leasing.  Broker-Dealer and Investment Advisers. We represent broker-dealers and investment advisers on regulatory matters related to their creation, expansion, services, and operations.  Private Investment and Private Banking. We represent numerous clients in the creation, operation, and offering of private investment funds, in establishing and structuring the management companies that operate private equity and venture capital funds, and in connection with portfolio investment transactions by the funds. We advise clients on new fund development and structuring, required documentation, and compliance with state and federal securities and banking laws. We are also familiar with issues relating to specialized investment funds, such as SBICs, business development companies, collective investment funds, and employee securities companies. Drawing on the resources of our trust and estates, ERISA, and tax attorneys, our financial services team also represents clients in the bank regulatory and fiduciary law aspects of running a trust department.  Special Purpose Institutions. Our lawyers have helped create special purpose institutions designed to take advantage of favorable regulatory treatment and exploit niche markets. For example, we assist clients in establishing non-depository banks and thrifts created to offer trust services on a nationwide basis, as well as credit card and other limited purpose institutions.  Credit Card/Debit Card/Stored Value and Payments Systems. We assist clients in the card area with litigation, product development, and regulatory policy, and in negotiations of their processing, co-branding, and other agreements. Our clients include representatives of all parts of the credit and debit card industry, including one of the major credit card associations, card issuers, diversified financial services companies offering card products, merchant processors, merchants, and ATM and POS operators. We represent clients that operate other types of payment systems, as well. Clients in this area include funds and other money transmitting companies, a major government- sponsored enterprise, and merchants in a variety of online businesses. Our work for these organizations has included product development, assistance with mergers and acquisitions, advice on compliance with a variety of regulations, development and documentation of internal policies and procedures, documentation of system rules and policies for users, and various commercial, litigation, and regulatory matters.Financial Regulatory ReformOn July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform andConsumer Protection Act, HR4173/Public Law 111-203, the most sweeping overhaul of the USfinancial sector since the Great Depression. The legislation will affect the manner in which manyfinancial services companies are supervised and, in some cases, structured. For example, thelegislation contemplates the creation of a new systemic risk council to monitor macroeconomicthreats to US financial stability. This council also will have the authority to impose heightenedsupervision on entities and activities presenting such risks. The legislation also gives specialattention to consumer financial products and services, by providing for the creation of a newconsumer protection authority responsible for reviewing the terms and conditions anddisclosures surrounding consumer financial products. Financial Services Arnold Porter LLP 3

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