Reviewing 6 of November's top stories

A resolution to the NBA's labor struggles, Facebook's privacy concerns and more

Corruption Catfight

The debate over whether or not to amend the Foreign Corrupt Practices Act (FCPA) raged on this month, as lobbyists with the U.S. Chamber of Commerce continued to push for change, while the Department of Justice (DOJ) continued to reject their proposals.

The act, which prohibits companies from making bribes to foreign officials, has begun to be more strictly enforced in the past five years, and has cost companies more than $4 billion in fines. You can browse these bribes, as well as all other bribes discovered since 1977 (and their penalties) on this interactive map created earlier this month by The Mintz Group, which is color coded by the severity of the fine.

According to the Wall Street Journal, a slew of high-profile settlements involving companies, including Siemens and Johnson & Johnson, have made the law a force to be reckoned with, but the U.S. Chamber of Commerce is saying that an unclear definition of exactly who is a foreign official is hurting American business interests abroad. The DOJ, on the other hand, feels that changing the law sends a bad message to other countries, such as China and the U.K., which have recently instated anti-bribing laws of their own. Even so, the DOJ said it will release “detailed new guidance” on the law next year.

 

Social Media Settlement

On Nov. 29, Facebook finally reached a settlement with the Federal Trade Commission (FTC) over charges that the social media company violated users’ privacy rights in 2009 when it changed its policy, making users’ profile information (including name, city, picture, gender and friends list) public by default

The settlement requires Mark Zuckerberg’s baby to “get consumers’ approval before it changes the way it shares their data,” refrain from “making any further deceptive privacy claims” and “obtain periodic assessments of its privacy practices by independent, third-party auditors for the next 20 years.”

Zuckerberg admitted that Facebook handled the situation poorly in a Nov. 29 blog post, and pledged to improve, writing: “I'm committed to making Facebook the leader in transparency and control around privacy.” The settlement and the statement both arrived in the wake of the announcement that Facebook may soon go public.

 

Taxation Troubles

Both Chicago and New York City were smacked down in the courts this month when they tried to extract taxes from online ticket resellers. The 7th Circuit upheld a lower court’s decision to throw out the city of Chicago’s case against StubHub! Inc. and its parent company, eBay Inc. The Illinois Supreme Court reviewed the initial decision, saying that local taxes cannot apply to online retailers. After hearing that, the 7th Circuit affirmed the decision, and denied the city a rehearing.

A similar ruling by a New York appeals court struck down the city’s law leveling a 6 percent occupancy tax on hotel-booking websites such as Expedia, Orbitz, Priceline and Hotels.com. However, this ruling only applies to the tax year between September 2009 and August 2010 because the New York state legislature changed its tax methodology in 2010, allowing New York City to collect the tax under state law instead of local law.

lockout

Lockout and Lawsuit

The end to the NBA lockout finally arrived Thursday, when players were allowed back at team practice facilities for the first time since the dispute began July 1. According to the New York Times, the players are re-forming their union and will work on a new labor deal.

Still, the rough road back to the hardwood continues for both players and owners, as talks have finally reached the courtroom. November saw lengthy rounds of stalemated negotiations over division of revenue, NBA Commissioner David Stern’s final proposal and its subsequent rejection by the National Basketball Players Association, which jeopardized the remainder of the 2011-2012 season.

After rejecting the owners’ labor agreement ultimatum, the NBPA officially dissolved to become a trade association, and filed antitrust action against the NBA. The players’ lawsuits were consolidated and moved to Minnesota toward the end of the month in an attempt to expedite the process. The plaintiffs in Carmelo Anthony, et al v. NBA et al include several players along with Anthony, such as Kevin Durant and Steve Nash. In return, the NBA also filed a lawsuit in the Southern District of New York.

David Boies, the players’ attorney, said he hopes the consolidated suit will receive a court date sometime in December.

Though league officials say details of the five-game opening day and the rest of the season are ready to begin this month, the courtroom battles are just beginning.

Attentive

Attentive Agency

November was a busy month for the Securities and Exchange Commission (SEC), which brought a record-breaking 735 cases in the 2011 fiscal year, according to a report early last month.

The SEC demonstrated its vigilance in its compliance efforts in early November, charging UBS AG with faulty recordkeeping, and later reaching an $8 million settlement with the Swiss bank. The agency also demonstrated its attentiveness with Olympus, interviewing Michael Woodford, the former president fired after publicly questioning $687 million in advisory fees. Later this month, the SEC targeted CPA Mark Konyndyk, formerly a manager at Ernst & Young, for insider trading.

But not everything went seamlessly for the SEC last month, as a federal judge stepped in to block a $285 million proposed settlement with Citigroup. In his ruling, Judge Jed S. Rakoff of the U.S. District Court in Manhattan challenged the SEC’s decades-old practice of settling with Wall Street giants who rarely admit wrongdoing. The SEC is expected to address the significant rejection of its practice, as Rakoff ordered a trial for July.

mystery

Money Mystery

MF Global Holdings Ltd. met its demise at the end of October when a potential buyer discovered about $700 million in customer money missing. The firm collapsed, and the effects of the bankruptcy reverberated across Wall Street in November, beginning with the ousting of CEO Jon Corzine.

As investors began the effort to recovery their money, two pension funds filed a lawsuit against seven banks later in the month, including units of Bank of America, Citigroup, Deutsche Bank, Goldman Sachs, Jefferies, JPMorgan Chase & Co and Royal Bank of Scotland. The suit claims the banks, as well as officials associated with MF Global, masked risky practices for about $900 million of the firm’s note.

The end of November saw MF Global continue to be shrouded in mystery, with conflicting reports over the exact amount of missing customer money. The firm allegedly moved $220 million the morning of Oct. 31 from its reserve accounts to customer accounts in its futures merchant operation, leading to the debate over where the money belongs.

Corzine and other former MF Global officials are scheduled to testify before a Congressional panel on Dec. 15.

Contributing Author

Contributing Author

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