Arthur Chong, Sheppard Mullin.
SAN FRANCISCO — In just a few months, Yahoo Inc.'s new general counsel Arthur Chong will have to oversee a complex web of intellectual property assets, minority investments and corporate securities and debt. A lawyer who has worked with him says he's more than prepared.
"He deals extremely well with complexity," said Leif King, partner at Skadden, Arps, Slate, Meagher & Flom. King previously served as outside counsel to Chong, representing Broadcom Corp. in its $37 billion sale to Avago Technologies Ltd. At the time, it was the largest tech M&A deal ever recorded.
Chong takes over as the company's chief legal officer at a difficult time for the beleaguered tech company.
Effective March 10, Chong became Yahoo's general counsel, replacing former GC Ron Bell, who stepped down from his position March 1 after an internal investigation found fault with the legal department's handling of several big data breaches, according to a filing with the U.S. Securities and Exchange Commission. Many of Bell's former colleagues and friends described him as a good, thoughtful lawyer, whom they suspected was made the fall guy for the company's problems.
Yahoo suffered two massive data breaches in years prior—one in 2013 that affected more than 1 billion users, and another in 2014 that affected 500 million users' accounts. Both breaches were disclosed in 2016. Yahoo was forced to cut $350 million from its previously agreed upon sale price to Verizon Communications Inc. to $4.48 billion as a result of the breaches. Bloomberg reported Monday, based on the SEC filing, that Verizon initially requested a $900 million price cut and even considered terminating the deal.
On Wednesday, the Department of Justice unsealed indictments for four individuals in Russia and Canada related to Yahoo's 2014 data breach. Yahoo previously had identified those responsible for the breach as possibly "state-sponsored actors."
Former colleagues say Chong, who did not respond to requests for comment for this story, is prepared to handle the difficulties surrounding the company's sale and fallout from the previous incidents.
Chong, 63, served as an outside legal adviser to Yahoo from October 2016 to March 9, 2017. From June 2016 to October 2016, he served as a special advisor to Sheppard, Mullin, Richter & Hampton. It has not been disclosed whether Chong was engaged in any legal matters connected to the data breaches.
As special adviser at Sheppard, Mullin, Richter & Hampton, Chong built client relationships and advised on business development, and, at the time, he told The Recorder he did not plan to bill hours. A press representative and a partner at Sheppard Mullin did not respond to emails and phone calls seeking comment Wednesday.
From October 2008 to February 2016, Chong was general counsel at Broadcom Corp., a San Diego-based wireless and broadband communications company. He was responsible for legal, corporate secretary, governance, litigation, intellectual property, compliance activities and government relations for the company, according to the SEC.
In May, 2015, Broadcom reached an agreement with Singapore-based Avago Technologies Ltd. to sell itself for $37 billion. (Multiple former and current Broadcom attorneys did not return calls and emails seeking comment.)
The deal was immensely complicated because of tax implications that arose from Avago's desire to pay half-cash, half-stock. Broadcom and outside counsel at Skadden created a workaround, forming a partnership vehicle that acted as a holding company. That partnership offered "units" to stockholders who wanted to delay taxes on the deal. The units could not be sold, but could be held until a later date to be sold for Avago stock.
Skadden's King told The Recorder earlier that the entire deal relied on the complex structure.
"I don't think we'd be able to do it otherwise," King said then.
Following the closing of the Yahoo's sale expected in the second quarter of this year, Chong will then become the lead lawyer at Altaba, a holding company for Yahoo's remaining stock in Alibaba and Yahoo Japan. Altaba also retains ownership of Excalibur IP LLC, a subsidiary with thousands of noncore patent assets.
According to the March 10 SEC filing, Altaba plans to sell minority investments it has in other companies and to either sell or license out Excalibur assets. That filing said Altaba will operate as an investment company and be registered under the Investment Company Act of 1940.