The Legal Intelligencer Blog

'Don't Ask, Don't Tell' Repeal Just the Beginning for Former Pa. Congressman

By Gina Passarella
Of the Legal Staff

Former U.S. Congressman Patrick Murphy, D-Pa., made his rounds today to media outlets to discuss Tuesday's official repeal of the military's Don't Ask, Don't Tell policy regarding gays in the military.

Before losing his seat in last November's election, Murphy (pictured, left) was a driver of efforts to do away with the policy.

The media tour will culminate with an HBO documentary airing at 8 p.m. tonight in which Murphy, an Iraq war veteran, is interviewed. He said the stars of the documentary are the servicemen who describe how the country's national security was hurt by the policy's enforcement.

According to HBO's website highlighting the documentary, "The Strange History of Don't Ask, Don't Tell," more than 13,000 service members were discharged from the military in the 17 years the policy was in place.

"There's a lot of folks … that thought it was impossible[to repeal the policy] because of the power of the far right wing," Murphy said. "We proved the naysayers wrong."

But Murphy was quick to point out this is just one step toward full equality. He said there are still no protections for gays in the workplace and unequal protections when it comes to marriage. Now that he is running for Attorney General of Pennsylvania, Murphy created a website to discuss issues of having one set of rules for everyone.

Murphy said he has "absolutely" no regrets about his push to abolish Don't Ask, Don't Tell - an effort, he said, that some say may have cost him his congressional seat.

Gina Passarella is the senior reporter for The Legal. She can be contacted by e-mailing [email protected] or calling 215-557-2494. Follow her on Twitter at @GPassarellaTLI.

Fresh Ink: Inside Today's Legal (and Delaware!)

By Jaime Bochet
Of the Legal Staff

Welcome to your daily round-up of stories in today's edition of The Legal Intelligencer. Click the links below to access stories directly, or head to The Legal homepage.  (Some stories may require registration or a paid subscription.)

Just as Tuesdays always include our Pennsylvania Law Weekly section, Wednesday is the unofficial "Day of Delaware," when we roll out the fresh ink from our First State to the south. That includes the Delaware Law Weekly, available online at www.delawarelawweekly.com, as well as our newest product, the Delaware Business Court Insider, an online newsletter that definitely warrants a look.

But more about Delaware in a bit … let's get to today's Legal.

Topping the front page, U.S. Courthouse Correspondent Shannon P. Duffy has news that deals a legal setback to the Obama administration: "A federal judge in Harrisburg has struck down several provisions of the Affordable Care Act after concluding that the law's 'individual mandate' is an unconstitutional extension of Congress's authority under the Commerce Clause. 'The issue is whether Congress can invoke its Commerce Clause power to compel individuals to buy insurance as a condition of lawful citizenship or residency,' U.S. District Judge Christopher C. Conner wrote in his 53-page opinion in Goudy-Bachman v. United States."

Below the fold, reporter Amaris Elliott-Engel was there as the Supreme Court heard (televised) oral arguments in an historic setting in Old City Philadelphia yesterday. In the case she covered, a state Supreme Court justice characterized the drugmaker Wyeth as asserting that there is enough protection for persons harmed by prescription drugs in federal regulation of the release of drugs onto the market, and limiting plaintiffs to lawsuits for drugmakers' alleged failures to adequately warn of risks.

Today's Page 3 Regional News story is by reporter Zack Needles, who chronicles the growth of an area law firm: Philadelphia-based Zarwin Baum DeVito Kaplan Schaer Toddy has acquired four transactional lawyers from the Philadelphia office of Maryland-based Offit Kurman, saying increased work in that practice area over the last few months has necessitated the growth.

As always, our People in the News sectionis on Page 2. The top stories from our sister publications across the country make up the Page 4 National News section.

Today's contributed columns begin on Page 5 with an "Employment Law" column by Sid Steinberg of Post & Schell, who writes that as cases under the amended Americans with Disabilities Act begin to reach the courts, less emphasis will be placed on whether an employee is "disabled" and a greater emphasis will be placed on the questions of whether an employee is a "qualified individual" under the act and whether an employee could be reasonably accommodated.

Page 7 features our weekly "GC Mid-Atlantic" page, with an article from affiliate Corporate Counsel magazine, which profiles the new head of the Minority Corporate Counsel Association (MCCA), Joe West.

As we move south in our weekly coverage to Delaware, we'll stop first at the Delaware Law Weekly, where reporter Jeff Mordock has the top stories. Please note: all of our Delaware coverage is for paid subscribers, but you can register for a free 30-day trial by clicking here.

In the top slot, Jeff writes that four Sussex County residents have filed a lawsuit accusing the county's legislative council of explicitly endorsing Christianity by beginning each meeting by reciting the "Our Father."

Jeff also reports that St. Paul Fire and Marine Insurance Co. has filed a lawsuit seeking to remove itself from the duty of defending or reimbursing the Beebe Medical Center in Lewes, Del., from civil lawsuits related to the crimes committed by former pediatrician Earl Bradley.

Finally, we'd like you to meet (if you haven't already) the Delaware Business Court Insider.  As the name suggests, this is a national product covering the latest news, analysis and cases from the Delaware Chancery Court, Bankruptcy Court and Supreme Court. The accompanying website is www.delbizcourt.com, where you can go to subscribe to this newsletter weekly. You can also follow us on Twitter at: @delbizcour.

Top stories there include the following:
- President Obama is set to overhaul the nation's patent system, but attorneys say it is too early to see how the law will affect business.
-  Plaintiffs filed yet another amended complaint in their derivative suit against News Corp., including new allegations against the company.
- Vice Chancellor Noble denies plaintiffs' request for interim attorney fees in the Novell shareholder dispute.

Have questions or comments about any of today's stories, or our coverage as a whole? E-mail me or any of the reporters directly. We hope you'll enjoy today's Legal and our Delaware coverage!

Jaime Bochet is the Magazines & Supplements Editor for The Legal. Follow her on Twitter at @JaimeBochetTLI or e-mail [email protected].

Phila. Bar Association Opposes Immigration Bills

By Amaris Elliott-Engel
Of the Legal Staff

The Philadelphia Bar Association has submitted testimony opposing 14 immigration bills pending in Pennsylvania's House of Representatives' State Government Committee.

Among other proposals, the bills proposed a requirement that law enforcement officers who stop anyone "who is or should reasonably be suspected of being unlawfully present in the United States" must produce a government-issued identification card; a requirement that employers must screen applicants in a database; and a requirement that all adult applicants for public benefits must produce photo identification.

The written testimony by Philadelphia Bar Association Chancellor Rudolph Garcia argues that the bills would impair the rights of people who are citizens or lawful residents of the United States, not just illegal immigrants. The solution is to pressure the federal government to act to secure the country's borders, not to enact "a patchwork of inconsistent state laws," Garcia wrote.

"We believe the best approach to a sensible immigration policy is comprehensive regulation and enforcement at the federal level," Garcia wrote. "It is far easier to control immigration at our borders than to sift through our entire population to determine which of us are rightfully here. The latter approach is like adding salt to your food, then trying to remove it again one grain at a time. Yet that is the method proposed by the current package of legislation."

Garcia also wrote that the Philadelphia Bar Association does not condone unlawful immigration.

State Rep. Daryl D. Metcalfe, R-Butler, is the primary sponsor of the bills. Metcalfe says on his website that the legislation is modeled after Arizona legislation and would "provide our law enforcement with full authority to apprehend illegal aliens for deportation; to punish employers who knowingly hire illegal aliens; and to eliminate public benefits, welfare, education, and all other economic attractions for illegal aliens."

The full testimony is available here.

Amaris Elliott-Engel is a reporter for The Legal. She can be contacted at 215-557-2354 or [email protected]. Follow her on Twitter: @AmarisTLI.

Fresh Ink: Inside Today's Legal

By Jaime Bochet
Of the Legal Staff

Welcome to your daily round-up of stories in today's edition of The Legal Intelligencer. Click the links below to access stories directly, or head to The Legal homepage. (Some stories may require registration or a paid subscription.)

U.S. Courthouse Correspondent Shannon Duffy shares the top of today's front page: More than 10 years after attorney Nicholas Panarella Jr. pleaded guilty to assisting state Sen. Joseph Loeper in a fraud scheme, a federal judge has vacated Panarella's conviction due to a recent decision from the U.S. Supreme Court that shows the conduct he confessed to was never a crime.

Also topping today’s front page, Charles Toutant from our sister publication, New Jersey Law Journal, writes that the 3rd U.S. Circuit Court of Appeals found Wednesday that doctors challenging President Obama’s health care plan had suffered no injury, and therefore lacked standing to sue.

Inside, on Page 3 in our Regional News section, reporter Amaris Elliott-Engel writes that the state Superior Court has ordered a new trial in a products liability case because a trial judge decided against re-charging jurors when they asked questions about their jury instructions.

As always, our People in the News section is on Page 2, and the top stories from our sister publications across the country make up the Page 4 National News section.

Our contributed articles begin with our Intellectual Property column by Paul F. Prestia of Ratner Prestia, who writes that China’s intellectual property regime has come of age.

On our weekly Young Lawyer page, we feature a column by anonymous columnist “The Rodent,” who writes for our Florida affiliate, the Daily Business Review. According to him, the nation’s law schools are producing too many lawyers!

Have questions or comments about any of today's stories, or our coverage as a whole? E-mail me or any of the reporters directly. We hope you'll enjoy today's Legal!

Jaime Bochet is the Magazines & Supplements Editor for The Legal. Follow her on Twitter at @JaimeBochetTLI or e-mail [email protected].

 

Creating an Effective FCPA/UKBA Compliance Program

By David A. Anderson
Special to the Legal

Last month I discussed the potential risks that a company faces under the U.S. Foreign Corrupt Practices Act of 1977 (FCPA) and the U.K. Bribery Act of 2010 (UKBA) when conducting business in foreign countries. This month, I'll present the key components of an effective FCPA/UKBA compliance program.

There are seven key components to an effective FCPA/UKBA compliance program. They are the following:

1) Establish standards and procedures to prevent and detect criminal conduct and ensure compliance with government regulations and industry standards.

2) Create a culture of compliance led by the company's senior management. This means that senior management must:

- Be knowledgeable about the content and operation of the compliance program;
- Exercise reasonable oversight of the implementation and ongoing review of the effectiveness of the compliance program;
- Assign specific senior level manager(s) overall and day-to-day operational responsibility for the program; and
- Provide the necessary authority and resources to enable successful implementation and ongoing review of the program.

3) Use reasonable efforts to exclude known violators from activities that could lead to program violations. This also requires that the company exercise due diligence in the screening of current and prospective employees for past illegal or improper conduct.

4) Provide reasonable ongoing communication and training to senior management, employees and third-party agents regarding the standards and procedures of the compliance program.

5) Monitor, audit and evaluate the effectiveness of the compliance program on a regular basis. Included within this component are:

- The establishment of a monitoring/auditing program to verify that the compliance program is being followed, which will necessitate the use of internal audit staff or external forensic auditors;
- Evaluation of the effectiveness of the compliance program at regular intervals, including analysis of monitoring/auditing results as well as use of feedback from senior management, employees, third-party agents and others; and
- The use of hotlines to enable employees, third-party agents and others to anonymously or confidentially report or seek guidance about potential criminal conduct without fear of retaliation. 

6) Establish of appropriate performance incentives and disciplinary measures that are promoted and enforced consistently within the company to support the compliance program.

7) Establish appropriate response to detected criminal conduct, and subsequent reassessment of the compliance program to reduce the risk of the same conduct occurring again. This requires that the company take the appropriate steps to report detected criminal conduct and cooperate with law enforcement. In addition, the company must take reasonable steps to modify, if necessary, its compliance program to prevent similar conduct in the future.

Of course, no program can prevent rogue employees or agents from violating the FCPA or UKBA, but a well-designed and implemented compliance program -- with effective communication and training as well as regular monitoring and evaluation -- can minimize the risk of a company and/or its employees violating the FCPA or UKBA. In addition, the existence of such a program can mitigate punishment of the company in event of violation of either statute.

David A. Anderson, CPA, CFE, is a director in the Valuation & Forensic Services Group of Citrin Cooperman, an accounting, tax and business-consulting firm in Philadelphia. He has more than 30 years combined experience in public accounting and consulting as well as service at the CFO and COO level in private and public companies. Anderson specializes in business valuations, insolvency and reorganization, and litigation support including commercial and matrimonial litigation. He can be reached at [email protected] or 215-545-4800.

Are Your Clients at Risk Under the Foreign Corrupt Practices Act or the U.K. Bribery Act?

By David A. Anderson
Special to the Legal

If any of your clients conduct or plan to conduct business in any foreign country, then you should read this blog.

The U.S. Foreign Corrupt Practices Act of 1977 (FCPA) makes it a crime for a business or any of its officers, directors, employees, agents or shareholders to bribe a foreign official, foreign political party or candidate for political office, for the purpose of influencing a foreign official in order to obtain or retain business.

The U.K. Bribery Act of 2010 (UKBA), which is due to take effect on July 1 and has been described as "the FCPA on steroids," takes this further by giving the U.K. jurisdiction over any commercial organization that conducts operations in the U.K., regardless of where the bribe is paid.

This means, for example, that if an agent of a U.S. company with operations in multiple countries, including at least one U.K. country, pays a bribe to a foreign official in any of those countries (U.K. or not), the U.S. company could be convicted under the UKBA. The UKBA also prohibits facilitation payments and certain entertainment and promotional expenditures permitted under the FCPA.

Recently, the Securities & Exchange Commission, U.S. Justice Department and FBI have aggressively investigated and prosecuted companies for FCPA violations. In 2010, the top eight FCPA settlements (with either the SEC or DOJ) totaled more than $1.5 billion. As of December 2010, the U.S. Justice Department had about 150 ongoing investigations and prosecutions.

Both the SEC and DOJ have also been focusing on prosecuting individuals, including company management, in addition to the financial settlements. In one recent case, the SEC brought claims against both the CEO and the CFO of a large nutritional/personal care products company for failing to adequately supervise the miscreant employees of a foreign subsidiary. The U.K. Justice Ministry, instead of providing specific written guidance regarding the key provisions of the UKBA and the applicability of the UKBA to non-U.K. companies, has decided to let the U.K. courts decide these issues.

All of this means that a company currently conducting or planning to conduct business in any foreign country could face a significant financial risk and a risk of prosecution of its management under either the FCPA or UKBA.

So, how does a company minimize this risk? The answer is to put in place an effective and robust FCPA/UKBA compliance program and to actively audit and/or monitor compliance, especially in high-risk locations. Having such a program will minimize the risk of violating the FCPA and UKBA and is the only acceptable mitigating factor to reducing the size of financial settlements and penalties if a company is convicted of violating either statute. Forensic accountants can assist you in this role.

In the next edition of this blog, I'll address the key components of an effective FCPA/UKBA compliance program. Stay tuned.

David A. Anderson, CPA, CFE, is a director in the Valuation & Forensic Services Group of Citrin Cooperman, an accounting, tax and business-consulting firm in Philadelphia. He has more than 30 years combined experience in public accounting and consulting as well as service at the CFO and COO level in private and public companies. Anderson specializes in business valuations, insolvency and reorganization, and litigation support including commercial and matrimonial litigation. He can be reached at [email protected] or 215-545-4800.

Reporter Live-Tweeting Hearing on Fair Share Act

By Amaris Elliott-Engel
Of the Legal Staff

The state Senate Judiciary Committee is slated to hold another hearing on a proposal that would change Pennsylvania's liability regime, and I will be live-Tweeting from it beginning at 12 noon today.

The state House of Representatives voted last month in favor of the Fair Share Act, which would change Pennsylvania's doctrine of joint and several liability so that defendants that are apportioned responsibility for causing a plaintiff's injuries at 60 percent or less would only pay the portion they were found liable for, rather than being on the hook if other liable defendants can't pay their portion of the plaintiff award. If the legislation passes the Senate, it will likely become law.

During his budget address in March, Gov. Tom Corbett, a Republican, said that he would sign legislation abrogating the doctrine of joint and several liability, arguing legal liability scares jobs away and leaves minor players stuck paying the full price of lawsuits.

However, the state Senate is considering an alternative to the Fair Share Act: Senate Bill 500, which is primarily sponsored by state Sen. Stewart Greenleaf, R-Montgomery. That bill would not be as radical a shift as the Fair Share Act. In that legislation, joint liability would be abolished for any defendant whose percentage share of liability is less than the percentage share attributed to the plaintiff. The bill would bar a plaintiff from recovering damages from the defendant in excess of the defendant's percentage share.

Follow me on Twitter at @AmarisTLI as I live-Tweet from the hearing, which is set to start 12 noon today at the Philadelphia Bar Association's building. 

 Amaris Elliott-Engel is a reporter for The Legal. She can be contacted at [email protected]. Follow her on Twitter: @AmarisTLI.

Will Local Employers Be Required to Give Paid Sick Leave?

By Eric B. Meyer
Special to the Legal

Employers beware. The cost of doing business in Philadelphia may be on the rise.

City Council is currently considering a bill that would require businesses to provide paid sick leave to employees who work a minimum number of hours in Philadelphia County.

Businesses with 11 or more employees would have to provide 72 hours (approximately nine days) or more of paid sick leave or paid time off (PTO) and businesses with 10 or fewer employees would have to provide 40 hours (approximately five days) a year. Businesses that currently meet or exceed the bill’s standards would be exempt. However, employers with a PTO policy may not be exempt from the bill if employees lose vacation time as a result of utilizing sick leave.

You can read the full “Promoting Healthy Families and Workplaces” bill here.

On the heels of another employee-friendly measure under consideration in City Council, many local business owners showed up to a City Council meeting last week to voice their displeasure with the bill. The Greater Philadelphia Chamber of Commerce also strenuously opposes the bill.

The Philadelphia Inquirer reports that City Council may vote on the “Promoting Healthy Families and Workplaces” bill on March 24. Mayor Michael Nutter appears set to veto the bill, if it passes City Council.

Eric B. Meyer is a member of the labor and employment group at Dilworth Paxson. Meyer also has his own labor and employment law blog, The Employer Handbook and readers can contact him via e-mail and follow him on Twitter.

New Tax Law Calls for Extensive Work in Estate Planning

By Robert H. Louis
Special to the Legal

Nearly every news source has carried reports on the tax bill just passed by Congress. It makes fundamental changes in the laws applicable to planning to minimize federal taxation at death. And it does so in a bill that has those changes expiring in two years.

When that two-year extension comes up for renewal, we will know who will be the president for the following four years and who will control Congress. But right now, all we know is that there are extensive opportunities for planning for our clients that can save them significant amount of taxes; and there is a need to review almost all existing documents to see how they work under the new law. There are few areas of legal practice in which the basic laws used in the practice change so often and in such a broad and sweeping way.  And in this case, the change that came was hoped for, but it was surprising that it occurred so quickly and with so little opposition.

For the next two years, federal estate tax will be imposed at a flat 35 percent rate. There will be an exemption for the first $5 million of assets, indexed for inflation for the first time. This exemption will be available to married individuals in a way that is very different from prior law.

In essence, a married couple will have a $10 million exemption. The estate tax exemption will be “portable.” That means that if one spouse dies with, for example, $2 million, the surviving spouse will have his or her own exemption plus the unused $3 million from the first spouse. This change alone will necessitate review of all wills for married couples. And we have already had suggestions, perhaps only partly in jest, that aggressive tax planning might involve wealthy couples getting divorced and then each of them marrying someone with few assets and in poor health. I would say that it’s wholly in jest, but in due course we will read of someone doing just that.

Here is another very important change in the law. There will be an increase in the lifetime gift tax exemption from $1 million per person to $5 million per person.  This expands greatly the ability of wealthy people to make gifts during their lifetimes.

Other changes include an extension of the ability to do a charitable IRA rollover, a direct transfer of IRA assets to a charity. This is a provision limited in terms of who can make use of it, but it can be useful in the right circumstances. For those who died in 2010, the year of no estate tax, there will be a choice between paying estate tax or having no step-up in the basis of assets. There are also changes in the generation skipping tax that make such transfers easier to accomplish. A proposal to limit the effectiveness of grantor retained annuity trusts, by requiring a minimum 10-year term, did not make it into the final bill.

The combination of these changes means that lawyers who work in the estate planning field will have busy schedules over the next two years. In addition, as one commentator has already noted, this law moves us closer to the concept of the federal estate tax as a voluntary tax, imposed on those who don’t plan to avoid it.

Robert H. Louis is a partner and co-chairman of the personal wealth, estates and trusts department at Saul Ewing. His practice includes estate, tax and retirement planning for individuals and closely held businesses. He is a fellow of the American College of Tax Counsel and a graduate of the Wharton School and the Harvard Law School. Louis can be reached at [email protected] and 215-972-7155.