On the Nature of Being Mistaken in Contract,Reverse Break-Up
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Former BigLaw Associate Gets 5 Years in $5m Ponzi Scheme That Bilked Friends and Relatives A former Skadden Arps lawyer who cheated friends and relatives of life savings in a Ponzi scheme and then tried to kill himself was sentenced in New York to five years in prison Thursday, reports the Associated Press and the New York Post. His crime was revealed when he wrote a long suicide note and jumped into the Hudson River in a 2014 suicide attempt that ended with his rescue by police divers. A U.S. District Court judge gave Bennett a sentence at the high end of federal sentencing guidelines. She announced it after hearing several of the 58-year-old’s friends describe giving hundreds of thousands of dollars for a supposedly safe investment. Some of them told the judge he is a “pathological liar.” Read the AP story and the Post story. On the Nature of Being Mistaken in Contract Image created by Meredith Atwater for opensource.com It is possible to be mistaken about the existence or terms of an agreement and for that mistake to thereby prove that no contract exists, writes Glenn West in Weil, Gotshal & Manges LLP’s Global Private Equity Watch. As a general rule, being mistaken about whether you contracted, or what you contracted for, does not mean that a contract does not exist based upon the terms of the written agreement you signed. A party’s protestations that he or she did not understand the agreement, or believed it said something other than what it said, or that the words used in the agreement meant something other than what they are determined by a court to mean, will generally not be entertained by a court,” he wrote. He discusses the case of Patterson v. CitiMortgage, Inc., which illustrates that “a unilateral mistake made by a party that is not made manifest to the other party will not be a basis for reformation because, absent knowledge of the mistaken belief, the other party is entitled to rely on the written agreement as manifesting the intentions of the otherwise mistaken party.” Read the article. Reverse Break-Up Fees and Specific Performance: A Survey of Remedies Thomson Reuters is offering a complimentary copy of the 2016 edition of Practical Law’s study, Reverse Break-Up Fees and Specific Performance: A Survey of Remedies for Financing and Antitrust Failure. This year’s edition analyzed all 85 merger agreements entered into in 2015 for debt-financed acquisitions of U.S. reporting companies in deals valued at $100 million or more. The study provides a detailed guide to the negotiation of remedies for buyer breach by: Examining how deal characteristics such as the size of the transaction and the profile of the buyer affect the negotiation of enforcement and monetary remedies. Reviewing the sizes of reverse break-up fees in leveraged deals as percentages of deal value and as multiples of the target company’s break-up fee, and compares reverse break-up fees that cap the damages payable by the buyer against those that do not. Analyzing other techniques for allocating risk in debt- financed transactions, including the buyer’s financing covenants, the definition of the lenders’ marketing period, and the agreement’s “Xerox” provisions. New this year, the study contains a supplement analyzing antitrust-triggered reverse break-up fees and other mechanisms for allocating the risk of antitrust failure. For this inquiry, the study surveyed all 49 agreements in the Practical Law What’s Market M&A database for 2015 that contained a reverse break-up fee payable for antitrust failure. These included 27 agreements for the acquisition of a US reporting company in deals valued at $100 million or more and 22 publicly filed agreements for private M&A deals involving the acquisition of a US company or business valued at $25 million or more. Download the study and receive free temporary access to Practical Law online resources. Judge: Dallas’ Billionaire Wyly Brothers Committed Tax Fraud A federal bankruptcy judge in Dallas ruled late Tuesday that Dallas entrepreneurs Sam and Charles Wyly committed tax fraud when they created a series of offshore trusts in the Isle of Man in the 1990s to shield more than $1 billion for the family tax-free, according to a report in The Dallas Morning News. There is “clear and convincing evidence” that the “heart of the Wyly offshore system had been established through deceptive and fraudulent actions,” wrote U.S. Bankruptcy Judge Barbara Houser. “The IRS claims that the Wylys, who made billions of dollars growing and then selling Michaels Stores and Bonanza steakhouses, set up the series of offshore trusts in the Isle of Man in order to hide income from being taxed, while still using the money in the trusts to fund a lavish lifestyle,” the report says. Under the ruling, Sam Wyly, the surviving brother, could be required to pay the IRS as much as $1.4 billion in back taxes and penalties. Read the article. What is a Smart Contract and What’s It Good For? Blockchain technology is gaining attention for its promise to enable value and asset transfer across a wide range of industries and use cases — and its potential to disintermediate financial institutions, remittance companies and lots of other transactional middleman businesses, according to a report written by Sue Troy, an editorial director at TechTarget. Smart contracts, meanwhile, work hand- in-hand with blockchain technology and have the potential to automate — and also disrupt — processes in many industries. “Whereas a traditional legal contract defines the rules around an agreement between multiple people or parties, smart contracts go a step further and actually enforce those rules by controlling the transfer of currency or assets under specific conditions,” she explains. She discusses sample use cases for the insurance industry, real estate, and supply chain. Read the article. Liberty Reserve Head Sentenced to 20 Years in Prison A federal judge sentenced the leader of digital currency company Liberty Reserve to 20 years in prison for running a global money-laundering scheme that prosecutors said was unprecedented in size and scope, reportsReuters . Arthur Budovsky, 42, had earlier pleaded guilty to one count of conspiracy to launder money related to his role in Liberty Reserve, which allowed cybercriminals to conceal and move their illegal proceeds anonymously through a digital currency. Authorities shut down the company in 2013. “Liberty Reserve operated a widely used digital currency, processing more than $8 billion in financial transactions and earning Budovsky over $25 million, prosecutors said,” according to the report. “Much of its business came from criminals seeking to launder proceeds from Ponzi schemes, credit card trafficking, identity thefts and computer hacking, prosecutors said.” Read the article. Want to Sue Your Bank? Regulators Push to Make It Easier The Consumer Financial Protection Bureau proposed a rule Thursday that would ban arbitration clauses, which would affect the entire financial industry and the hundreds of millions of bank accounts, credit cards and other financial services Americans use, reports the Associated Press. “The CFPB’s proposal does have a significant limitation,” the report explains. “The ban would only apply when consumers want to create or join a class-action lawsuit. Financial companies will still be able to force individuals to settle disputes through arbitration; however cases where a lone customer wants to sue his or her bank are far less common.” The financial industry claims that arbitration is a more efficient way for customers to resolve disputes, and a study commissioned by the CFPB in lends that claim some credence. “However, when large numbers of customers were negatively impacted by the same issue, the same study showed arbitration clauses hinder the ability for customers to seek relief,” the AP report says. Read the article. CFPB Arbitration Rule Vulnerable to Legal Challenge, Industry Lawyers Say Financial services lawyers are predicting that efforts by the Consumer Financial Protection Bureau to prevent companies from keeping consumer complaints out of a courtroom will wind up being challenged in court, reports The Wall Street Journal. A rule proposed by the agency Thursday would prohibit financial companies from using mandatory-arbitration clauses as a way to block class-action lawsuits, according to the report. “While companies would still be able to require consumers to enter arbitration to resolve individual disputes, the elimination of the no-class arbitration provisions would strip away incentives for companies to include arbitration clauses in their contracts. And many are predicting that as a result, companies would discontinue using them.” But the CFPB counters that class actions are a “more effective means for consumers to challenge problematic practices by … companies” than arbitration, which it says gives financial service providers an unfair advantage over customers. Read the report. Former Assistant Director and Deputy GC of CFPB, Joins Stroock in Washington Quyen Truong, former assistant director and deputy general counsel of the Consumer Financial Protection Bureau (CFPB), has joined Stroock & Stroock & Lavan LLP as a partner in the firm’s Washington, DC office. Truong, a member of the firm’s national Financial Services/Class Action Practice Group, was instrumental in building the new federal agency while implementing the Dodd- Frank Act for finance reform, the firm says in a release. Among other responsibilities, she advised leadership on analysis of consumer financial laws, oversaw review of all enforcement actions and responded to legal challenges to the agency. “Quyen’s proven track record bridging the technical complexities of financial reforms and their regulatory implications will complement our already prominent Financial Services/Class Action practice and enhance our ability to provide high level strategy and counsel to our clients,” stated Julia Strickland, chair of the Financial Services/Class Action Practice Group and a member of the firm’s Executive Committee.