A daily look at legal news and the business of law:
AIG Faces Fraud Suit Over Credit Default Swaps
Although American International Group (AIG) has had a successful run of getting lawsuits against it dismissed, and saw three investigations of the company resolved without fraud charges, its winning streak has ended, reports The Wall Street Journal. On Monday, U.S. District Judge Laura Taylor Swain allowed a securities fraud class action case to proceed, finding that plaintiffs had "satisfied their burden of alleging facts giving rise to a strong inference of fraudulent intent."
The allegations relate to AIG's statements about its exposure to the subprime mortgage market, The Wall Street Journal reports. Specifically, the suit targets AIG's valuation of its credit default swap portfolio, and its assessment of the risks related to it. At this early stage of the litigation, of course, the allegations are merely that. Now that the case can go forward, however, we can look forward to learning how much proof of fraudulent intent the plaintiffs can offer.
MetLife's "Retained Asset" Accounts Face New Regulation
Fresh off a court victory in which a judge dismissed a case against MetLife (MET) for its practice of investing the payouts of life insurance policies in its own accounts, rather than cutting checks to the beneficiaries when the insured dies in the manner beneficiaries apparently expect -- MetLife is facing possible state regulation regarding the practice.
The regulators in California, Nevada and Georgia were inspired in part by the judge's comment that MetLife's marketing of the accounts holding the proceeds was "inherently deceptive," reports Bloomberg. MetLife isn't alone in this behavior. Prudential (PRU) also uses the same tactics to profit from beneficiaries' money. Strong regulations stopping these deceptive practices would be great for beneficiaries: While they may currently be legal, these practices are just wrong.
Biased West Virginia Justice Will Recuse Himself After All
Justice Menis Ketchum made a campaign promise to vote a certain way on a legal issue and, when it came before him, reiterated his "predisposition," then decided to judge the case anyway, despite the obvious appearance of bias his campaign promise created. Now, largely because of notoriety triggered by reporting on the Blog of the Legal Times, he has changed his mind. Justice Ketchum will now recuse himself, although he insists there's "no legal basis" to require him to do so. He asserts his campaign promise was nothing more than an exercise of his right to free speech.
Whether or not the justice is correct about a legal basis for his recusal, I want to live in a world in which judges running for office don't solicit votes with specific promises about policy, and I appreciate his decision to recuse himself. If a judge makes a campaign promise and fails to keep it, that's not good for the democratic process, but if he makes one and does keep it, he will appear to have pre-judged the issue in a way that judges just aren't supposed to.
"Prize" DA to Resign
Sexting Wisconsin DA Ken Kratz will resign, reports the ABA Journal. Hooray!
And in the Business of Law:
• Experienced attorneys laid off by firms may want to move to China: Chinese firms are snapping up U.S. and U.K. talent, reports Bloomberg.
• The cupcake business seems to be doing well, at least for one ex-lawyer, reports Above the Law.
• "Mandatory" pro bono service is being considered by Mississippi. I use the quotes because attorneys can opt to pay $500 to the legal services fund, a fee that is nowhere near equivalent to the 20 hours of service otherwise required, unless Mississippi attorneys routinely charge $25/hour, which is highly unlikely. So only unemployed or otherwise broke attorneys will actually end up doing pro bono work they wouldn't have otherwise done, a point Above the Law makes rather colorfully. (The National Law Journal notes that even without the requirement, on average, Mississippi attorneys do 45 hours of pro bono each. Still, averages can be deceiving.) Mississippi lawyers are not happy with the idea, according to the ABA Journal.