Legal News

Former CBOE Founder Pleads Guilty to Obstructing Justice

A founding member and former director of the Chicago Board Options Exchange has pleaded guilty in Manhattan federal court to obstructing an insider-trading investigation by giving fake documents to the Securities and Exchange Commission.

Elliot K. Smith, 76, of New York, also asked his administrative assistant to help him with the deception and lied under oath about his securities trading, federal prosecutors said.
Click here to find out more!

He pleaded guilty Dec. 2 to a single count of obstruction of justice before Judge George B. Daniels in the U.S. District Court for the Southern District of New York.

In addition to the CBOE affiliation, Smith is a former director of the American Stock Exchange and a founding member of the AMEX Commodities Exchange.

According to prosecutors, Smith was the managing director of New York-based broker-dealer Broadband Capital Management in July 2003 when the SEC began investigating him for alleged insider trading.

The agency was looking at trades Smith made in the securities of a North Carolina pharmaceutical company, prosecutors said.

In response to an SEC subpoena, Smith handed over documents that purported to show his trading was driven by independent research, not insider information.

Prosecutors said the documents were fakes and that Smith knew they were bogus when he testified under oath to their authenticity in 2004.

The SEC investigation was continuing in February 2006 when the agency asked Smith to explain his trades in the stock of a Florida medical device company.

He again produced memos and other documents that purported to show his trading was based on independent research and not confidential information.

Prosecutors said those materials were fakes as well, noting that Smith had asked his administrative assistant of 17 years to falsely tell investigators that the memos were in a file that pre-dated the medical device company trades.

Smith has not been charged with insider trading.

He faces a maximum of five years in prison on the obstruction count when he is sentenced March 18, prosecutors said.

Next Stop On Gay Marriage Debate In Courts: Iowa

The gay marriage debate moves to the Midwest this week as the Iowa Supreme Court hears arguments in a challenge to the state's ban on same-sex marriage.

If the high court rules in favor of the half-dozen gay couples who sued, it would make Iowa the fourth state after Massachusetts, California and Connecticut to uphold the right of same-sex couples to legally marry. In California, however, voters have negated the courts by amending the state constitution to ban gay marriage.

The Iowa case has been moving through the legal system for more than three years, and it could take a year or more for the state Supreme Court to issue a ruling after hearing oral arguments Tuesday morning.

Camilla Taylor, an attorney for Lambda Legal, a gay rights organization representing the gay and lesbian couples behind the lawsuit, said the state has historically been a leader in supporting minority and women's rights.

"Iowa has an opportunity to play the role that it often has played in the past being at the forefront of civil rights struggles often long before other states were willing to be similarly courageous," she said. "This is not an uncomfortable role for Iowans, and we are looking at them to make a reality out of the promise of equality in the Iowa Constitution."

Lambda Legal filed the lawsuit in 2005 on behalf of six Iowa couples who were denied marriage licenses, as well as three of the couples' children. It names former Polk County recorder and registrar Timothy Brien.

The lawsuit prompted a ruling in August 2007 by Polk County District Court Judge Robert Hanson, who said a state law allowing marriage only between a man and a woman violated the constitutional rights of due process and equal protection.

Are Conflicts Issues Ahead for Attorney General Nominee?

One afternoon shortly after the 2001 inauguration, Eric Holder Jr. considered his future from his lavishly appointed office in the Justice Department's Robert F. Kennedy Building, still his a while longer, until his Republican successor arrived. One of his old friends, Covington & Burling's Thomas Williamson Jr., was visiting for lunch.

"It was a lengthy lunch, because a number of firms were coming to him to join their partnership," says Williamson, head of the firm's employment practice. "I wanted to be sure I didn't just rely on, ‘Come be my partner because we're old friends.'" Williamson, who met Holder in the late 1970s, says he told the longtime public official that he could channel a portion of his private work into Covington's pro bono efforts, and he told Holder that the firm could offer exciting work.

"It took a couple of weeks," Williamson says, "but he came around."

While much is known about Holder's more than two decades in government, supporters and critics of his nomination to be attorney general have said relatively little about his seven years with one of Washington's premier law firms. His private practice -- following his time as a lawyer for the Justice Department's Public Integrity Section, D.C. Superior Court judge, U.S. Attorney, and No. 2 Justice official -- focused on complex criminal and ethical investigations and defending major companies from claims of discrimination. Holder has been in the spotlight as a lawyer for the National Football League in Michael Vick's dogfighting case and for Chiquita Brands International regarding its payments to Colombian guerrillas. He also advised the campaign of President-elect Barack Obama, who last week named Holder as his choice for the nation's top law enforcement official.

His work at Covington, which averages $1.175 million in profits per partner, reveals some of the qualities he would bring to his next job and some of the conflict-of-interest challenges he'll likely think about as he goes through the confirmation process and -- if confirmed -- takes over as AG.

MR. FIX-IT

Since 2001, Holder has been a sought-after figure for companies, nonprofits and government agencies caught up criminal or ethical investigations. In 2004, he represented the United Way of the National Capital Area when its former director of 27 years pleaded guilty to embezzling nearly $500,000 from the organization. That same year, he also represented the president of the University of the District of Columbia in an ethics inquiry, and the Illinois governor recruited him -- until the state attorney general intervened -- to conduct a public review of the awarding of a casino license.

"His transition to private practice was effortless," says Lanny Breuer, co-chairman of Covington's white-collar defense and investigations group. "He just brings this extraordinary level of judgment and this remarkably calm and thoughtful demeanor to every problem."

Breuer says he and Holder were the lead attorneys for a committee of Hewlett-Packard's independent directors, managing a team that investigated allegations in 2006 that the company spied on journalists following the leak of sensitive information about company strategy. Holder also represented Chiquita in a 2007 settlement with the Justice Department in which the company agreed to a $25 million fine for payments it made to a Colombian terrorist group that was threatening company employees.

In defending Chiquita, Holder at one point criticized the Justice Department for not giving the company clear guidance after it notified Justice of the payments. He said in court that if department staff had failed to act on such information when he was deputy attorney general, "heads would have rolled," according to a 2007 article in Corporate Counsel magazine, a sibling publication to Legal Times.

Annual Survey Shows Law Firm Leaders Wary but Confident

What will next year look like at the biggest law firms in the land? For the first time since The American Lawyer began surveying law firm leaders in 2003, their answer is: We're not sure.

"Anybody who is running a law firm who pretends to be able to predict with certainty what the firm is going to be doing in the next year and how it's going to fare is dreaming," says DLA Piper joint CEO Francis Burch, Jr., summing up the general feeling of his counterparts in The Am Law 200. Of the more than one dozen managing partners interviewed about their responses to our survey, all expressed the same sentiment: The future is up for grabs.

Full survey results, including responses to additional questions click here.

Smoker's Widow Seeks $79.5M Award At Supreme Court

A cigarette maker and a smoker's widow squared off for the third time at the Supreme Court on Wednesday over a $79.5 million punitive damages award, but the real battle was between the justices and their counterparts on Oregon's high court.

Twice before, the Supreme Court has struck down the judgment against Altria Group Inc.'s Philip Morris USA and ordered the Oregon court to take another look at the case. Each time, the Oregon high court has upheld the award to Mayola Williams, the widow of a longtime smoker of Philip Morris' Marlboro brand.

In its latest appeal, Philip Morris contended the Oregon judges were essentially thumbing their noses at the Supreme Court. "We're here today because the Oregon court failed to follow this court's decision," Philip Morris' lawyer, Stephen Shapiro, told the justices.

Justice Stephen Breyer, who sided with Philip Morris in its last round, was more skeptical of the cigarette maker's arguments Wednesday.

At first, Breyer said, "I thought this was a runaround. I'm not sure I think that now."

At the same time, however, the justices worried that state courts could ignore Supreme Court rulings on constitutional issues.

"How do we guard against making constitutional decisions which are simply going to be nullified by some clever device?" Justice David Souter asked.

Robert Peck, Williams' lawyer, tried to allay the concern. "There was no sandbagging here," Peck said. "The Oregon Supreme Court did not act in bad faith."

The case has bounced around appellate courts since 1999, when Williams convinced a jury that Philip Morris should be held accountable for misleading people into thinking cigarettes were not dangerous or addictive.

Williams' husband Jesse was a janitor in Portland who started smoking during a 1950s Army hitch and died in 1997, six months after he was diagnosed with lung cancer.

She was awarded $800,000 in actual damages. The punitive damages intended to punish a defendant for its behavior and deter a repeat are about 97 times greater. A state court previously cut the compensatory award to $521,000.

The value of the award has climbed to more than $145 million because of accrued interest, the company said. Sixty percent of it would go to an Oregon crime victims fund. If Philip Morris wins, a new trial would result.

The Oregon high court made its first decision in 2002, refusing to hear an appeal from Philip Morris.

Then the U.S. Supreme Court rejected the judgment of nearly $80 million, saying in another case that damages generally should be held to no more than nine times actual economic damages. It declined, however, to make that a firm rule.

Next, the Oregon Supreme Court upheld the punitive damages, citing "extraordinarily reprehensible" conduct by Philip Morris officials.

Then came the U.S. Supreme Court's second take on the case. In 2007, the court said in a 5-4 decision that jurors may punish a defendant only for harm done to someone who is suing, not other smokers who could make similar claims.

The state court was told to reconsider the award in the context of instructions for the trial jury that Philip Morris proposed and the trial judge rejected.

In January, the Oregon court said there were other defects in the instructions that violated Oregon law, and supported the trial judge's decision not to give the proposed instructions to the jury.

The arguments Wednesday were only about whether the Oregon Supreme Court in essence ignored the U.S. high court's directive. The justices previously declined to decide whether the amount of the judgment is constitutionally permissible.

But late in Wednesday's session, Chief Justice John Roberts suggested the court could end the back-and-forth with Oregon by taking on the broader constitutional issue.

If the other justices agree to that, the court most likely would order both sides to submit written arguments and then schedule another argument session in March or April.

Tax Cases Could Bring Massachusetts $1B

Massachusetts courts are poised to rule on three tax disputes at the crux of the Department of Revenue's efforts to reclaim $1 billion from corporations it has accused of skirting tax laws. The outcome will have major ramifications, as a massive budget shortfall is causing Massachusetts to cut staff and services.

Push for the Nation’s First Hispanic Underway

Barack Obama hasn’t yet taken the oath of office, and as of now, none of the Supreme Court Justices has indicated a desire to step down. But that’s not stopping interest groups from making their preferences known on who they’d like to see appointed next.

Obama Introduces Holder as Choice for AG

President-elect Barack Obama held a news conference in Chicago Monday morning to introduce his national security team, including Eric Holder Jr., his nominee for the country's top law-enforcement official.

Holder's name has been at the top of the list of potential attorneys general since Obama's victory Nov. 4, and in recent weeks his nomination has been considered all but certain. Key senators have signaled they will support confirmation, though Republicans say they intend to question Holder about his role in the pardon of commodities trader Marc Rich in the waning days of the Clinton administration.