In House - The FindLaw Corporate Counsel Blog

September 2016 Archives

The fallout from Wells Fargo's fake account scandal continued this week, as California suspended its business relationships with the bank and former employers filed two class actions lawsuits, alleging that they were illegally fired for abiding by the law and not opening fake accounts in consumers names.

Earlier this month, Wells Fargo agreed to pay $185 million in fines after it was revealed that the banks employees had created millions of fake accounts in order to meet internal cross-selling goals. Additionally, Wells Fargo's CEO John Stumpf forfeited $41 million in unvested stock awards. But, as this week's developments have shown, the aftermath is far from over.

OSHA has revised its guidance on settlement agreements in whistleblower cases, taking a stricter approach to what provisions can be included in OSHA-approved settlements.

OSHA's new guidance, part of the revisions to its Whistleblower Investigations Manual, parallels efforts by the SEC to combat agreements that could impede employees from reporting violations to the government.

Consider ransomware a form of digital kidnapping. Ransomware takes over your computers, encrypts your most essential files, then demands payment or else your data gets it. And such attacks have become increasingly common, especially in industries that hold sensitive information, such as healthcare organizations.

Dealing with these electronic hostage takers can leave computer systems disturbed for days, even weeks, and cost tens of thousands of dollars to rectify. But even if you have cyber insurance, your policy may not cover a ransomware attack.

Fox wants to keep its executives from streaming over to Netflix, and it's calling on its lawyers to help it out. 21st Century Fox sued Netflix in Los Angeles Superior Court last Friday, accusing the online video streaming company of engaging in a "brazen campaign to unlawfully target, recruit, and poach valuable Fox executives."

Such a lawsuit is unusual in the entertainment industry, the Los Angeles Times notes, where back-and-forth hiring of executive talent is common. But Fox thinks the lawsuit is worth it, saying that Netflix "is defiantly flouting the law by soliciting and inducing employees to break their contracts."

A data breach can tarnish a company's reputation and end up costing millions. And yet, when companies consider new acquisitions, questions about data and cybersecurity often go unasked.

That could be changing, though, as corporations start adding cybersecurity to their pre-M&A due diligence, sniffing out a potential partner's "data hygiene" before any deal is done.

It's the dream of almost every new tech startup: grow big, gain buzz, and get acquired. Indeed, acquisition has largely replaced IPOs as the get rich quick strategy of choice, as giant companies like Google, Yahoo, and Facebook have paid out billions to acquire promising new companies.

But for a startup's lawyers, getting acquired can mean major and sudden changes to their job, if they get to keep it.

Litigation costs are a major part of most in-house legal department budgets. After all, outside counsel aren't cheap and corporate legal disputes can drag on for years and years.

But you can help reduce those costs, and help increase your department's cost-effectiveness, in several ways. Here are three tips on how to bring down your litigation spend, without compromising your legal position.

Multinational companies aren't putting much faith in the "Privacy Shield" agreement between the United States and the European Union, a recent survey of privacy professionals shows. Barely a third of surveyed businesses plan on using the agreement, which makes it easier to for companies to transfer personal information on European citizens outside the EU. The Privacy Shield agreement was meant to replace a previous data sharing agreement, known as Safe Harbor, which was struck down last October, in part because U.S. companies could not protect European data from NSA snooping.

But the alternative to the Privacy Shield isn't too great either. Instead of relying on the Privacy Shield agreement, most companies have turned to model contract clauses -- clauses that many expect to be invalidated by the European Court of Justice, the Wall Street Journal reports.

Wells Fargo agreed to pay $185 million in fines yesterday, after years of opening more than two million fake bank accounts and credit cards in the names of the bank's real customers. The scandal is particularly notable given how widespread the illegal banking practices were -- over several years, Wells Fargo fired more than 5,000 employees for engaging in the fraud, but never ended the practice entirely. Now, some are calling for even more heads to roll.

How can you make sure you don't find yourself in a similar position? While the fallout from the revelation continues to play out, here are some of the initial lessons in-house counsel can learn from the scandal.

For years, employees at Wells Fargo crushed sales targets and pulled down bonuses by opening millions of fake accounts on behalf of the bank's real customers, all without those customers' knowledge or consent. Those fake banking and credit card accounts would then wrack up fees which customers would be stuck with. In total, more than 2 million fake accounts could have been created, according to Wells Fargo's own analysis.

The massive fraud was made public today, when the Consumer Financial Protection Bureau announced it was fining the bank $100 million, its largest fine ever. And that's just the start. Wells Fargo has also agreed to pay $35 million to the Office of the Comptroller of the Currency, and $50 million to Los Angeles, for a total of $185 million in fines. The company will also payout "full restitution to all victims," on top of the fines.

EMC is getting a Dell, dude. Lots and lots of them, probably. Dell Inc. announced today that it has completed its $60 billion merger with EMC, the data storage company.

The news marks the culmination of the largest technology sector merger ever and leaves Dell, with $74 billion in revenue, as the largest privately controlled tech company in the world.

A little over a year ago, the Department of Justice released the Yates Memo, named after its author, Deputy Attorney General Sally Quillian Yates. That memo set out a new approach for the DOJ: when companies do wrong, individuals will be held accountable.

That's great news if you're part of the "tough on corporate crime" camp. It's less exciting if you're a corporate lawyer or chief compliance officer who could be held personally liable for your company's failings. A recent survey shows that the vast majority of in-house counsel and CCOs are worried about personal liability following the Yates Memo and almost two-thirds of in-house attorneys and CCOs are less likely to remain in their position as a result.

The SEC engineered the perfect seed for future whistleblowers this week: a $22 million award for a Monsanto executive who reported improper accounting at the genetic engineering and pesticides agrocorp. The award is the second largest ever doled out by the agency.

Monsanto agreed to settle for $80 million in February, after the SEC was told that the company's accounting practices for its Roundup herbicides were being used to overstate earnings.