Vintage Filings Legal Blog

We’ve covered the aerospace previously in this blog and how it related to the Boeing labor dispute.  And it seems like Boeing is in the legal news once again.  In the highly competitive landscape of large-scale defense contracts, one of the keys to continued innovation and technology growth are healthy bidding wars.  However, once a bidding battle has been completed, it should not have to be performed once again due to one company’s dissatisfaction with their loss.  Although it appears to be the what is occurring in the current Pentagon Tanker Competition.

Photo Courtesy of WSJ

The Wall Street Journal reported that the bidding war, for the pentagon’s highly sought after $40 billion dollar tanker contract, has been temporarily called off due to the political entanglements involved in the situation.  This is despite the fact that Northrop Grumman Corp. had already been declared the winner over Boeing this past February.  Boeing’s domestic domination has caused a slowdown in the competitive marketplace and it is clear that the next US Presidential regime will not be forced to make the decision between the two companies.

So does this decision give Boeing a legitimate chance at winning back this contract?  Most likely not.  And there are two main reasons:

1. Boeing currently does not have a plane large enough to fulfill the Air Force’s request.  And with the current Boeing labor dispute (coverage), the company will certainly be meeting with delays for all new projects, especially its new 787.  Conversely, Northrop Grumman has already satisfied the Pentagon’s demand due to the fact that they won the original contract at the end of this past Winter.
2. If the new President is Sen. John McCain, Boeing will find itself on an uphill slope considering that McCain has previously blocked contracts from the aerospace firm that he believed were won ‘too easily’.

Austin Cole from the WSJ says this about the situation,

“Although the decision gives Boeing a chance at a fresh start, the company will face the prospect that one of its key critics, Sen. John McCain, could potentially be the next president when the matter is decided. Five years ago, the Republican senator helped scuttle an original plan to lease a fleet of tankers from Boeing because the contract was not competitively bid. His office played a key role in opening up the competition to Northrop Grumman and its partner, European Aeronautic Defence & Space Co.”

So despite the fact that Boeing has been given a second chance to win this contract, Northrop Grumman still appears to be the most likely company to win this bidding war, and rightfully so.

With the current US financial crisis, and pending government bailout, you may be wondering if anyone is legally pursuing any of the financial institutions that have gone under.  Well on September 24, Wolf Haldenstein Adler Freeman & Herz LLP filed a class action lawsuit on behalf of the investors who purchased the Preferred Series “J” stock of Lehman Brothers.

The Complaint asserts that Lehman’s Prospectus contained both material misstatements and omissions, which Plaintiff and the Class relied upon to their detriment. The representations made in the Company’s Prospectus were materially false and misleading because at the time of the Offering, Lehman was already suffering from several adverse factors that were not revealed and/or adequately addressed in the document; including the failure to set aside adequate allowances to cover the Company’s ever increasing portfolio of underperforming sup-prime related products and to adequately write-down commercial and residential mortgage and real estate assets. These factors were already causing a material adverse affect on Lehman’s business and directly led to Lehman’s September 15, 2008 announcement that it was seeking protection under the Federal Bankruptcy Code in the largest bankruptcy filing in U.S. history.

The Complaint alleges that Defendants could have – and should have – discovered the material misstatements and omissions in the Company’s Prospectus prior to its filing with the SEC and distribution to the investing public. Instead, they failed to do so as a result of a negligent and grossly inadequate due diligence investigation.

It’s the complaint’s perspective that as a result of the dissemination of the false and misleading statements set forth in the complaint, the market price of Lehman Preferred J was artificially inflated during the Class Period. In ignorance of the false and misleading nature of the statements described in the complaint, plaintiff and the other members of the Class relied, to their detriment, on the integrity of the market price of Lehman Preferred J. Had plaintiff and the other members of the Class known the truth, they would not have purchased said securities, or would not have purchased them at the inflated prices that were paid.

We all knew it was simply a matter of time until the shareholder lawsuits began, it is simply a question of whether there are true assets remaining to be taken.  This event reminds me why it is vital to have 100% accurate phraseology and financial reporting data in all of your public filings.  To see how we at Vintage Filings can assist you today, click here.

So what happens when you go to battle with Visa?  Well, if you’re Cryptography Research it’s just a regular day at the office.  When you have strong patent protection, you will always have a solid position in the marketplace.  A great illustration of this happened this week when Cryptography Research signed a definitive agreement settling its litigation against Visa, under which Visa will become a licensee of Cryptography Research’s patent portfolio covering countermeasures to Differential Power Analysis (DPA). The license fee and other settlement terms are confidential per the agreement.

So what is DPA?  Differential power analysis is a side-channel attack which involves statistically analyzing power consumption measurements from a cryptosystem. The attack exploits biases varying power consumption of microprocessors or other hardware while performing operations using secret keys. DPA attacks have signal processing and error correction properties which can extract secrets from measurements which contain too much noise to be analyzed using simple power analysis. Using DPA, an adversary can obtain secret keys by analyzing power consumption measurements from multiple cryptographic operations performed by a vulnerable smart card or other device.[1]

“We are happy to add the world’s largest payment system to our growing list of DPA licensees,” said Paul Kocher, president and chief scientist at Cryptography Research. “Following the recent announcements of signed agreements with Infineon and Renesas, it is clear that the major players at all levels of the smart card industry are recognizing the value and importance of CRI’s DPA technology and the strength of our intellectual property in the area of tamper-resistant semiconductors.”

As your partners in the EDGAR filing industry, we feel a strong obligation to keep you informed on all of the breaking news events that occur in the market as they happen.  And with that in mind, it’s very important to note that on September 18th the U.S. Securities and Exchange Commission announced an order mandating that hedge funds will now be required to report all short selling through EDGAR. As of September 22nd, 2008, certain institutional investment managers will be required to file a report on new Form SH with the SEC on the first business day of every week following a week which resulted short sales. The first SH form will be required to be filed on September 29th, 2008.

Let Vintage Help You
Vintage Filings is prepared to assist you in this new matter. As the fastest growing EDGAR and financial printing company in the nation, we continue to be at the forefront with respect to regulatory developments. We look forward to continuing to manage your disclosure needs for you. Please feel free to contact us anytime.

For more information, read the release or contact Shai or Seth directly.

I’ve been following the BlogWorld conference out here in Las Vegas very closely the past few days. One of the more interesting companies I found was The Media Bloggers Association who have just launched a comprehensive program to provide bloggers access to the same sort of legal and financial resources long available to traditional media organizations including BlogInsure, a first of its kind liability insurance program for bloggers which provides coverage for all forms of defamation, invasion of privacy and copyright infringement or similar allegations arising out of blogging activities.

The cornerstone of the new program is an online course in media law developed by the Media Bloggers Association in partnership with The Poynter Institute’s News University. The course, Online Media Law: The Basics for Bloggers and Other Online Publishers, was co-authored by David Ardia of the Citizen Media Law Project, which is jointly affiliated with Harvard Law School’s Berkman Center for Internet & Society and the Center for Citizen Media and Geanne Rosenberg of the City University of New York’s Graduate School of Journalism and Baruch College. Scott Swift of Media/Professional Insurance created an assessment to evaluate the student’s understanding of the material.

“The past few years have seen unprecedented changes in the media landscape,” said Robert Cox, co-Founder and President of the Media Bloggers Association. “From a handful of bloggers in 2000 to tens of millions today, bloggers have been granted full press credentials, broken major news stories, and dethroned high-profile politicians and media figures. With that success has come greater scrutiny and the inevitable rise in legal threats facing bloggers,” said Cox. “In this new environment, blogger access to education, training, legal advisory services and liability insurance is critical to the sustainability of a strong and vibrant citizen media.”

Because the MBA believes so strongly that all bloggers should take this course, it is made available at no charge and, although the course is an integral part of the new MBA membership application process, bloggers are not required to join the MBA to take the course. Payment of annual dues for MBA membership is not requested until after the course has been completed and bloggers may opt-out of the application process at any time.

After completing the exam, bloggers will be asked to take a course assessment; this exam is a prerequisite for individuals interested in joining the Media Bloggers Association so those wishing to join must opt to report their test scores to the MBA. It is also the basis for the significant discount on liability insurance available to bloggers through the BlogInsure program.

By joining the Media Bloggers Association, individuals have the exclusive opportunity to purchase liability insurance for bloggers through Media/Professional Insurance, a business unit of the Select Markets Division of AXIS Insurance. Insurance will cover costs and damages for claims of defamation, copyright infringement and privacy violation. Media/Professional Insurance, the largest underwriter of media liability insurance in the world, has offered media liability coverage for publishers and broadcasters since 1979, protecting against claims of defamation and infringement.

“As a leader with over 30 years experience protecting free-speech, it is a natural progression to offer coverage for emerging media such as blogs,” according to Leib Dodell, Chairman of Media/Professional Insurance. “Affordable, readily available and easily accessible coverage was critical in our development of the program. Our web-based format allows those interested in BlogInsure to apply, pay for, and get coverage at the click of a button.”

Insured bloggers will have access to a new legal hotline beta program. Through the hotline, MBA Members who purchase insurance will, for a limited time only, have access to a web extranet through which they may submit queries and get answers to legal questions before problems arise. The hotline was created and is operated by the law firm of Sonnenschein Nath & Rosenthal LLP, and overseen by Sonnenschein partner Blaine Kimrey. Sonnenschein is widely regarded as one of the top media defense firms in the United States. This program may be continued beyond the beta period depending on initial results.

Uninsured MBA Members facing legal threats will still have access to the MBA’s extensive network of media liability attorneys around the United States, a program that has helped bloggers in hundreds of cases since 2004. Through the MBA Legal Referral program, MBA members are referred to a lawyer specializing in media law who can provide an evaluation of risks and costs associated with specific allegations and offer some general advice regarding how to respond to allegations of defamation, copyright infringement, and privacy violation. The primary purpose of this program is to rapidly match bloggers with lawyers with specific expertise in the types of allegations commonly arising out of blogging. There is no guarantee legal assistance will be available for a specific case; it is provided on a “best efforts” basis only. This program is not an offer to cover legal fees, related costs or judgments; it is not intended to be a substitute for liability insurance.

Bloggers wishing to join the Media Bloggers Association can visit the MBA web site at www.mediabloggers.org and click the “Membership” link. Membership dues are $25.00 annually.

There has been quite a legal battle brewing south of the border, in the country of Ecuador specifically.  Dan Slater, who writes the Legal Blog for the Wall Street Journal, explains the situation this way: “The group (Ecuador) reportedly hopes to hold Chevron accountable for alleged environmental abuses committed by Texaco, which Chevron bought for $35 billion in 2001. Texaco spent 30 years in the region, pumping billions of gallons of oil hundreds of miles west over the Andes to Ecuador’s port cities for shipment to the U.S.”

Chevron has been extremely proactive with their feelings on the situation, this past week in a broadly distributed press release, they intoned, “By issuing these baseless indictments, it is clear the government of Ecuador is trying to intimidate Chevron into forfeiting its legal rights. This outrageous tactic won’t work. Chevron intends to continue pursuing the rights it is owed under the law and its agreements with the government of Ecuador. Recent events in Ecuador leave no doubt that there is improper collaboration between the government and plaintiffs’ lawyers. The systematic denial of Chevron’s right to a fair trial is obvious, and it is clear that the proceeding has been thoroughly corrupted. By persecuting Chevron’s counsel and collaborating with the plaintiffs to undermine Chevron’s legal rights, Ecuador’s government has intervened in the legal proceeding. The Ecuadorian state continues to call into serious question the legitimacy of its judiciary and its commitment to the rule of law.”

The opposing group, the Amazon Defense Coalition, issued a statement saying, “An independent court-appointed expert in Ecuador has found that 42 out of 46 toxic waste pits inspected in the Amazon rainforest operated exclusively by Chevron contain high levels of toxins in violation of environmental norms in both Ecuador and the U.S.  The findings are a devastating blow to Chevron’s legal strategy in a class action trial in Lago Agrio, Ecuador filed in 2003 by 30,000 Amazonian residents. The court expert recently assessed damages at between $7.2 and $16.3 billion. A final decision on liability is expected in the coming months.  For years, Chevron has used the prior clean-up as its primary defense in the trial. New evidence – which includes sampling results from several pits Chevron claims to have remediated — has prompted Ecuador’s national prosecutor to open a fraud investigation against two Chevron employees and former Ecuadorian officials involved in the remediation.”

This legal dispute is currently still in progress, and this post is not meant to be a commentary on the situation itself, instead its focus is on global operations.  I have worked for several International companies that have offices in multiple countries around the world, and in each instance it was vital to first perform as much due diligence as possible to prevent any type of legal clashes.  So if you are looking to exand globally, make sure you establish positive relationships with the government and local legal systems before you make your move.

If you have followed the aerospace industry for the past few decades, you are well aware the the current Boeing strike is nothing new, and it is also important to note that the Boeing strikes are typically not short, with the last three ranging time spans of 28-68 days.  If you’re unfamiliar with the situation, the union’s 27,000 members are taking advantage of the record breaking orders for the new Boeing 787 aircraft in order to leverage a more profitable payday.  And if this strike is similar to the other labor disputes in Boeing’s history, it will not be easy for both sides to come to a mutually beneficial agreement.

A key factor to note in this situation is that Boeing and their customers are not the only enterprises affected by a prolonged strike.  Each of Boeing’s suppliers are now having to put safe guards in place and cut their own production.  Prime domestic examples of this are suppliers such as:

• GE
• Spirit Aerosystems
• Honeywell
• Rockwell Collins
• Hamilton Sundstrand
• Vought Aircraft
• Goodrich
• Moog
• Hexcel

Tim Hepher, from the International Herald Tribune, said this about the situation:

“Boeing itself is cushioned by a $4.1 billion profit last year and a record $275 billion worth of commercial plane orders, but analysts say each day of the strike will shave a cent per share off its annual profits.  The machinists, Boeing’s largest union, struck for 48 days in 1989, 69 days in 1995 and 28 days in 2005.  The machinists are protesting not only Boeing’s contract offer but also what they see as plans to shift more jobs to non-union and foreign companies.  Some were angered by a union decision to allow two days of extra talks after an overwhelming strike vote.”

Considering that the past year has seen Boeing’s stock price steadily decreasing due to several production delays of its new 787 model, I think we can all be certain that the company shareholders and senior level management are motivated to end this labor dispute as quickly and efficiently as possible so as to not incur further delays.

See below for Reuter’s coverage of the strike:

Ready or not, the SEC is mandating the use of XBRL, extensible Business Reporting Language, for the larger public companies in early 2009 and for all public companies shortly thereafter.  Documents filed into the EDGAR system will be required to be tagged in XBRL.  If you have not decided how to file, or are unsure how this affects your company, you should join us for this free webinar.  Click here to Register.

Even if you have been avidly following the progress of this SEC initiative, this webinar will bring you up to date on the process, taxonomy changes, and key issues you and your company should be reviewing now – before the actual implementation.

A short summary of XBRL is below and supplied by Wikipedia:

XBRL is an open standard which supports information modeling and the expression of semantic meaning commonly required in business reporting. XBRL is XML-based. It uses the XML syntax and related XML technologies such as XML Schema, XLink, XPath, and Namespaces to articulate this semantic meaning. One use of XBRL is to define and exchange financial information, such as a financial statement. The XBRL Specification is developed and published by XBRL International, Inc. (XII).

XBRL is a standards-based way to communicate business and financial information. These communications are defined by metadata set out in taxonomies. Taxonomies capture the definition of individual reporting concepts as well as the relationships between concepts and other semantic meaning.

XBRLS is a simplified form of this standard intended to enable the non-XBRL expert to create both XBRL metadata and XBRL reports in a simple and convenient manner. At the same time, it seeks to improve the usability of XBRL, the interoperability among XBRL-based solutions and to reduce software development costs.

In the past decade, companies have been tirelessly ensuring that their brick and mortar locations are fully handicap accessible, and now the movement is migrating online.  The most recent settlement came this past month when The National Federation of the Blind (NFB) and Target (NYSE: TGT) announced today that they have settled a class action lawsuit regarding access to the Target.com Web site by blind people.

Dr. Marc Maurer, President of the National Federation of the Blind, said: “Access to Web sites is critical to the full and equal participation of blind people in all aspects of modern life. The National Federation of the Blind is pleased to have reached a settlement with Target that is good for all blind consumers, and we recognize that Target has already taken action to make certain that its Web site is accessible to everyone. We look forward to working with Target in the coming months to help make additional improvements that will enhance the experience of blind visitors to Target.com. It is our sincere hope that other businesses providing goods and services over the Internet will follow Target’s example and take affirmative steps to provide full access to their Web sites by blind consumers.”

Bruce Sexton, Jr., a named plaintiff in the case from the beginning, added: “This settlement marks a new chapter in making Web sites accessible to the blind. I commend Target for committing to being a leader in online accessibility.”

Steve Eastman, president of Target.com, said: “First and foremost, Target is committed to serving all our guests. As our online business has evolved, we have made significant enhancements in order to provide an accessible shopping experience. We are pleased to have reached an agreement with the National Federation of the Blind regarding the accessibility of Target.com for individuals who use assistive technologies and will work with the NFB on further refinements to our Web site.”

As part of the settlement, Target will establish a $6 million fund from which members of the California settlement class can make claims. In addition, the National Federation of the Blind will certify the Target Web site through its Nonvisual Accessibility Web Certification program once agreed upon improvements are completed in early 2009. Target and NFB have agreed to a three-year relationship during which NFB will perform accessibility testing of the Target Web site.

It may be a good idea for other consumer facing online shops to begin researching how they can become fully accessible to all audiences.

Many public companies seem to look at corporate insurance as nuisance that can taken care by paying for the minimum amount of coverage.  However I came across a settlement case this morning that illustrated how vital it is to be fully covered. Clear Choice Health Plans (OTCBB: CCHN) announced that it had concluded a settlement agreement that completely absolves the company against liabilities related to a lawsuit filed in 2007 by Priscilla Evans and Dale Evans in Deschutes County Oregon Circuit Court.

Pursuant to the terms of the settlement agreement, the plaintiff will receive $1.5 million. The lawsuit sought to recover damages of $20 million, plus attorneys’ fees. The settlement was covered by insurance, with the company only being responsible for its deductible.

Clear Choice said that although it has always believed that the company had strong meritorious defenses, management concluded, in consultation with its insurance company, that it was in the best interests of the company, employees, customers and shareholders to settle this litigation and put the matter behind it. The settlement will have no material impact on the company’s financial results.

So please make sure you do not take the your corporate insurance needs too lightly, when you need it, insurance will be your best friend.