WHAT TO KNOW:
- Parent company L Brand agrees to corporate reforms
- Lawsuit alleged culture of harassment and misogyny
L Brands Inc., the parent company of Victoria’s Secret, agreed to spend $90 million on changes to corporate practices, including eliminating non-disclosure agreements, as part of a settlement to end shareholder lawsuits that alleged a toxic culture of sexual harassment and misogyny.
The deal, which is pending approval by the U.S. District Court for the Southern District of Ohio, resolves lawsuits filed by shareholders in 2020, following an expose in the New York Times that highlighted allegations of sexual harassment, including against top executives Leslie Wexner and Edward Razek, as well as photographers.
This is the latest in shareholder lawsuits taking aim at harassment and discrimination at major companies, following a $310 million settlement with Alphabet Inc.’s board of directors and another $90 million settlement with Wynn Resorts Ltd. Another similar case is ongoing against Pinterest Inc.
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Epstein Ties
The allegations included claims that L Brands’ officers and directors breached their fiduciary duties by maintaining ties with alleged sex offender and pedophile Jeffrey Epstein, who died in prison. Many of the top executives, including Wexner, have since resigned.
The settlement also ends separate lawsuits requesting records from L Brand executives and the company.
L Brands announced the agreement to investors on Friday, but a company representative didn’t immediately respond to a request for comment. The company will also update its policies on sexual harassment and retaliation to increase training and oversight of outside contractors. The company will also continue to invest in its Diversity Equity and Inclusion Council.
The settlement terms will apply to both Bath & Body Works Inc. and Victoria’s Secret & Co. Each company has committed to invest $45 million over at least five years to fund policy changes. The shareholders included individuals, but also the state of Oregon and the Oregon Public Employees Retirement Fund.
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The prohibition on the use of non-disclosure agreements, which has been seen as a tool to suppress harassment allegations, will release any current and former employees who signed the pacts.
The shareholders were represented by a group of lawyers led by Quinn Emanuel Urquhart & Sullivan, Scott+Scott Attorneys at Law LLP, and Cohen Milstein Sellers & Toll PLLC.
The chairwoman of the U.S. House Committee on Oversight and Reform has responded to last week’s Metro Times cover story that included new, previously unreported revelations of a cover-up in the Flint water crisis. “It would be deeply troubling if any of the officials involved in the poisoning of Flint’s children destroyed evidence of their misconduct,” U.S. Rep. Carolyn Maloney, a New York Democrat, said in a statement. “Governor Snyder obstructed the Committee’s investigation from the outset and set the tone that his decisions were above accountability. Governor Snyder made the choice to put money over the lives of the children in Flint and he must be held accountable.”
Additionally, a source tells reporters Jordan Chariton and Jenn Dize of independent news organization Status Coup that the committee is now investigating potential destruction of evidence by the Snyder administration based off the report.
The report, by Chariton and Dize and co-published by Metro Times and The Intercept, featured a slew of new details of the Flint water crisis cover-up, including obtained emails and documents from the Flint criminal investigation showing top health department officials’ phones had no messages on them for all of 2014 through October 2015 — the full period Flint received water from the Flint River and the deadly waterborne Legionnaires Disease spread throughout the city, killing an untold number of residents. According to other documents obtained by Metro Times and The Intercept, phones belonging to officials with the state environmental department were dropped off to the IT department “wiped clean” soon after Governor Snyder announced Flint’s high lead levels in October 2015. Other documents showed the phone belonging to Sara Wurfel, the press secretary to Governor Snyder during the Flint water crisis, was erased when she left her role shortly before the launch of the Flint criminal investigation.
Prosecutors also discovered Richard Baird, Snyder’s top adviser and “right-hand man,” was interfering with the investigation by approaching state officials before their testimony to try and influence what they told prosecutors, according to the report. Baird also altered Flint water crisis timelines — created by the state environmental and health departments to provide their agencies actions during the water crisis — to prevent the full scope of the Snyder’s administration’s actions from going public. When one Genesee County official noticed glaring holes in Michigan’s environmental department timeline, he wrote “I doubt they want our help filling in the blanks.”
The office of Attorney General Dana Nessel removed then-Special Prosecutor Todd Flood after he spent three years leading the investigation to start the investigation “from scratch.” As a result of Nessel’s new investigation, Snyder faces just two counts of willful neglect, misdemeanors that carry a maximum sentence of one year in prison or a $1,000 fine.
Previous reporting suggests Flood’s team was building an involuntary manslaughter case against Snyder before they were dismissed. It’s unknown whether AG Nessel’s Flint prosecutors presented the evidence revealed in this report to the secretive one-man grand jury — Judge David Newblatt — who indicted Snyder with a misdemeanor.
A federal appeals court in Washington, D.C. rejected an attempt by the government of Turkey to dismiss a lawsuit by protesters who were violently attacked by Turkish security officers in May 2017 during a visit by — and within view of — Turkish President Recep Tayyip Erdoğan in the nation’s capital.
A three-judge panel of the D.C. Circuit Court of Appeals on Tuesday unanimously decided to allow the lawsuit on behalf of the victims to move forward, affirming the district court’s decision from February of last year that Turkey is not entitled to immunity under the Foreign Sovereign Immunities Act.
The opinion of the court was written by Circuit Judge Karen Lecraft Henderson, who said that excessive use of force by Turkish security officials was not warranted as a security measure to protect the Turkish president.
“The nature of the challenged conduct was not plausibly related to protecting President Erdoğan, which is the only authority Turkey had to use force against United States citizens and residents,” Henderson wrote.
“In the same way that speeding down a residential street may occasionally be justifiable but is not an execution of policy, the Turkish security detail’s actions may have been justified in some circumstances but cannot be said in this case to have been plausibly grounded in considerations of security-related policy and thus do not fall within the discretionary function exception.”
The decision by the appeals court represents diminishing options for Turkey to try and throw out the civil lawsuit, which was filed on behalf of at least 20 individuals who were beaten by Turkish security officers outside the Turkish ambassador’s residence on May 16, 2017.
The appeals decision represents a key victory for the victims, who saw the Department of Justice under the Trump administration drop federal charges against nearly a dozen individual Turkish security officers in March 2018.
The dropped charges at the time coincided with the release of an American pastor held in a Turkish prison.
Lawyers for the plaintiffs welcomed the appeals court decision.
“Our clients include parents with young children and retirees who were peacefully protesting Turkey’s abuse of the Kurd community when they were kicked, punched and stomped by Turkish security officials – right here on Massachusetts Avenue in Washington DC,” said Agnieszka Fryszman, plaintiffs’ counsel from Cohen Milstein Sellers & Toll PLLC, who argued the case to a three-judge panel at the D.C. Circuit Court of Appeals in January.
Depositions often provide essential testimony that can make or break a wage and hour case, meaning thorough questioning, deep research of the opposing side’s case and in-depth client preparation are crucial for employers and workers as well as their counsel, attorneys say.
Here, Law360 shares some best practices that lawyers can use to ferret out important information and get clients ready for a pivotal step in the litigation process.
Know What You Want to Know
Both sides of the bar agree that depositions should be directed at obtaining information that could bolster one’s own case or poke holes in the case being constructed by the opposing party.
Worker advocates often seek information from employers using Section 30(b)(6) of the Federal Rules of Civil Procedure, which requires organizations to designate people to testify in depositions on the organization’s behalf.
“I’m a big fan of Rule 30(b)(6) depositions,” said Christine Webber, a partner at worker-side firm Cohen Milstein Sellers & Toll PLLC. “You can get the information you need and the company is required to find somebody who is knowledgeable, or get the knowledge to somebody and prepare somebody with the information.”
In wage and hour cases, worker advocates typically want to know about the details of employers’ timekeeping and pay systems, Webber said. And in class and collective actions, which require workers to prove they were affected by common policies, 30(b)(6) depositions can be particularly helpful.
“They keep the focus on what’s the practice overall,” Webber said. “Somebody’s got to be able to speak to the big picture.”
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Study Up on the Other Side
Since depositions are in large part about obtaining new information, it can help to have a good handle on what’s already out there, attorneys said.
Worker advocates can benefit from knowing which of an employer’s officers or managers would be able to testify on specific topics relevant to the case, Webber said. Having an idea of who knows what can head off attempts by employers to offer up witnesses who aren’t familiar with the topics workers want to ask about, she said.
Additionally, knowing more about an employer can help worker advocates focus the deposition on similarities in workforce-wide policies when employer representatives underscore the idiosyncrasies of their implementation of those policies, Webber said.
“If you depose somebody whose area of supervision is just one office or one facility or whatever, then they can easily say, ‘All I can tell you is what we do in my little corner of the universe,”‘ she said.
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Get Your Client Ready
Because attorneys tend to prepare so thoroughly for taking depositions, counsel for the deponent should make sure their client is ready to handle the grilling, attorneys said.
Workers often find the deposition process “intimidating” and “uncomfortable,” Webber said, emphasizing that advocates should help workers feel empowered to ask for clarification if they don’t understand something.
“Whenever you have witnesses answering a question that they don’t really understand, bad things tend to happen,” she said.
A lawsuit filed on Wednesday by a group of tenants against a major Washington, D.C.-area developer stands to be the first test of the bounds of the most robust tenants’ rights laws in the country.
The litigation could establish a model for renters to enforce their fundamental housing rights amid a spiraling housing affordability crisis that began well before the COVID-19 pandemic — one that has hit Black and Latino Americans particularly hard.
The lawsuit alleges that landlords waged a years-long obstruction campaign against tenants who formed a union to protest deteriorating housing conditions and that the city police department aided property owners in illegally suppressing tenants’ rights.
“They wouldn’t rely on police to actually maintain safety, but they would call the police on tenants who were organizing or approached them about issues in the building,” Tara Maxwell, president of the Park 7 Tenant Union and a resident of Park 7 Apartments, told me.
The group claims problems at the complex include water leaks, mold, pest infestation and insufficient security. The complex previously reached a settlement with the city attorney general to refund nearly half a million dollars to tenants who were improperly charged for water use that was falsely marketed as included in rent, according to an August 2020 report by the Washington City Paper.
Representatives of Donatelli Management didn’t respond to questions and requests for comment. The Metropolitan Police Department also didn’t respond to my questions about its role in the alleged incidents.
Management has prevented the Park 7 community from organizing by calling police, denying access to common areas, and intentionally disrupting residents’ meetings, according to the complaint, which also says management threatened union members and leaders with unlawful evictions, and removed fliers from public spaces.
The Washington Lawyers’ Committee for Civil Rights and Urban Affairs filed the suit on behalf of the tenant union and several residents of Park 7, a 377-unit complex in Northeast D.C. composed mainly of Black and lower-income residents. The group is suing Park 7 Residential and Donatelli Management, which are owned by prominent local developer Christopher Donatelli.
The lawsuit was filed under the District’s Right of Tenants to Organize Act, which was enacted in 2006, and gives tenants the right to self-organize and advocate to address and improve their living conditions.
Wiped Phones and the Battle for Evidence in Former Michigan Gov. Rick Snyder’s Prosecution
In October 2015, then-Michigan Gov. Rick Snyder finally announced that Flint’s water was contaminated with dangerous lead levels. That public admission had come after more than a year of pleading from the city’s residents to examine the situation. The city, Snyder promised, would immediately stop using water from the Flint River, which residents had been drinking for 18 months.
The public announcement raised as many questions as it answered and kick-started a yearslong investigation into how the decision that delivered the toxic water to Flint had been made in the first place, how many people were sickened and killed as a result, and when senior government officials first learned of the deadly consequences.
Along the way, however, investigators who were part of a three-year Flint water investigation beginning in 2016 kept drilling dry holes.
Dr. Eden Wells became Michigan’s chief medical executive in May 2015. By then, the Michigan Department of Health and Human Services had been aware for at least seven months of a significant increase in the deadly waterborne Legionnaires’ disease throughout Flint.
But when investigators obtained access to Wells’s phone, they discovered something unusual. “For Dr. Wells’ phone the earliest message is from November 12, 2015,” then-Flint special prosecutor Todd Flood wrote in a subpoena petition obtained by The Intercept. During the key period that investigators were probing, no messages were found. In 2018, a judge ruled that Wells would have to stand trial for involuntary manslaughter, along with obstruction of justice, over her role in the water crisis. (Those charges were dropped by current Attorney General Dana Nessel in 2019; in January 2021, Nessel’s Flint water prosecutors recharged Wells with involuntary manslaughter, misconduct in office, and neglect of duty.)
Other searches turned up similar results. The phone of Tim Becker, MDHHS’s chief deputy director, had no messages on it prior to April 14, 2016, two months before he left his role with MDHHS. Becker testified to having first asked questions about Flint’s Legionella outbreak in January 2015.
Patricia McKane, an epidemiologist with MDHHS who testified that she was pressured to lie by Wells about elevated blood-lead levels in Flint’s children, was found to have only had four text messages on her phone from 2015 and seven total messages. (Wells denied pressuring her to lie.) Fellow MDHHS epidemiologist Sarah Lyon-Callo, director of the state Bureau of Epidemiology and Population Health, who Wells copied in an email responding to accusations by a Wayne State University professor that she was trying to conceal the link between the Flint River switch and the Legionella outbreak, had no messages prior to June 2016.
“Again, for some strange reason the earliest text message in time on her device begins June 20, 2016,” Flood wrote. Wesley Priem, manager of the MDHHS’s Lead and Healthy Homes program, who emailed colleagues erroneously challenging the findings of high blood-lead levels in Flint children discovered by Flint pediatrician Dr. Mona Hanna-Attisha, had just one text message found on his state-issued phone from January 22, 2016.
The lack of phone messages from top MDHHS officials was a major red flag to investigators and an obvious impediment to those investigating who knew what and when. Despite department epidemiologists hypothesizing in October 2014 that the source of Flint’s deadly Legionnaires’ disease outbreak was the switch to the Flint River six months earlier, Flint residents weren’t informed of the deadly outbreak until 16 months later, when Snyder announced it in January 2016. PBS found a 43 percent increase in pneumonia deaths in Flint during the 18 months the city received drinking water from the Flint River — and also found that scientists believed that some of those 115 pneumonia deaths could be attributed to Legionnaires’ disease, which has similar symptoms to pneumonia and is often misdiagnosed as such.
Gladyes Williamson holds up a discolored jug of water and chants along with other protestors outside the Farmers Market downtown on April 25, 2015, which marks the one year anniversary of the City of Flint switching from using Detroit water to Flint River water. Flint residents of all ages gathered outside Flint City Hall, located on S. Saginaw Street, with signs, t-shirts, and megaphones before walking throughout many streets downtown to voice their concerns with the public. (Sam Owens/The Flint Journal-MLive.com via AP)A protestor holds up a discolored jug of water outside a farmers market on April 25, 2015, which marked the one-year anniversary of the city of Flint switching from using Detroit water to Flint River water. Photo: Sam Owens/The Flint Journal-MLive.com via AP
Investigators also discovered that phone data belonging to a key official close to Snyder was completely erased shortly before the Flint criminal investigation was launched.
For six months, Prince Foster III woke up at 6 a.m. every day and hung clothes at a red-bricked Salvation Army warehouse in Charlotte, N.C. He spent 40 hours a week working — but instead of receiving the North Carolina minimum wage, he earned a tiny weekly stipend worth far less.
The rest of Foster’s pay went to his room and board at the Salvation Army Adult Rehabilitation Center (ARC) in Charlotte, North Carolina. From May to November 2020, Foster, 37, was a patient at the Charlotte ARC’s program, recovering from a cocaine addiction he’s faced since his early twenties.
Foster declined to specify how much he was paid, but Richard New, an administrator at the Charlotte ARC, said patients receive a $26/week gratuity. The Fair Labor Standards Act requires a nationwide minimum wage of $7.25 per hour. With the ARC’s $26 weekly allowance, participants who work 40-hour weeks receive approximately 65 cents per hour.
Across the country, The Salvation Army of California is now facing a class action lawsuit for alleged labor violations. In Spillman v. Salvation Army, the Superior Court of California ruled that the organization must pay damages to participants including unpaid overtime, minimum wage compensation and rest period compensation.
In that case, plaintiffs claimed to receive anywhere between $1-$25 a week in “canteen cards” and wages, often working more than 40 hours.
Considering the FLSA and legal precedent from the Supreme Court case Tony and Susan Alamo Foundation vs. Secretary of Labor, the Salvation Army’s type of work-based therapy program is almost certainly illegal.
Yet an ongoing lack of oversight and jurisdiction from both federal and state agencies enables rehabs like the Charlotte ARC to skirt around labor law and pay recovering addicts next to nothing for their long hours of work.
About the program
The Salvation Army, a Christian organization known for its thrift stores and charity work, has 101 rehabilitation centers across the country. The centers are notorious for their use of “work therapy,” where participants in recovery work full-time jobs for little to no pay: a process some have called “slave labor.”
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Lawyer D. Michael Hancock, former assistant administrator for the U.S. Department of Labor’s Wage and Hour Division, wrote an NBC guest column about work therapy rehab programs. Hancock said The Salvation Army makes an immense amount of money from its thrift stores.
In 2019, the Salvation Army’s North and South Carolina branch received over $115 million in revenue. Of this, thrift stores provided $26 million and donations provided another $59 million.
There’s a thrift store adjacent to the Charlotte ARC, and two others in the area that ARC participants help support.
“All of this sort of behind-the-scenes work—a lot of that’s being done by these residents, and it’s resulting in a massive amount of revenue,” Hancock said.
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A lack of oversight and impact
The Charlotte ARC isn’t licensed. Charles Epstein, legal communications specialist for the North Carolina Department of Health and Human Services (NCDHHS), said the agency does not license or inspect the ARC due to a religious exemption.
Murphy said part of the reason the center is unlicensed is that “the services provided at the program are not clinical in nature.”
In addition, no state or federal labor organizations oversee or regulate the Charlotte ARC.
In 1990, the U.S. Department of Labor ruled that the Salvation Army must pay its workers minimum wage, according to reporting from The Charlotte Observer. Charlotte Salvation Army representatives said work therapy programs would be difficult to operate if the beneficiaries received wages.
Salvation Army officials said the organization didn’t intend to comply with the minimum wage requirement. And three decades later, they still aren’t.
In response to the 1990 investigation, the Salvation Army filed a lawsuit and lobbied lawmakers, refusing to pay rehab participants. The Department of Labor quickly backed off, suspending its investigation of the Salvation Army.
The Department even added new rules to its field operations handbook that said investigators had to get approval before investigating the Salvation Army’s rehabilitation centers, according to a 2020 report by Reveal.
“One of the things that you’ll find in the field operations handbook is a statement that says they’re not to bring cases against the Salvation Army,” Hancock said. “But it also makes it clear that the Salvation Army is still covered by the Act, and that the workers have the right to bring their own lawsuit to recoup whatever wages they’re not being paid.”
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What’s next for these programs?
The Charlotte ARC isn’t the only rehabilitation facility in the state accused of unethical practices in work therapy programs. Despite efforts to expose these work therapy programs for labor violations, facilities continue offering programs due to an unwavering demand for drug rehab programs in North Carolina.
Recently, concerns about the legality of work-based programs flouting fair wage standards have reached members of Congress.
In November 2020, U.S. Senators Elizabeth Warren (MA) and Tammy Baldwin (WI) sent a letter to the Government Accountability Office, requesting that it begin investigating federally funded facilities.
“Requiring individuals to work without compensation is a violation of the Fair Labor Standards Act (FLSA),” the senators wrote in the letter. Further, they said, federal funding dedicated to supporting individuals with substance use disorder must be used in facilities of evidence-based treatment.
Also mentioned in the letter was the apparent lack of evidence supporting the idea that work therapy programs are beneficial to addiction treatment.
More than 20 years ago, the federal Substance Abuse and Mental Health Services Administration also expressed concern in work-based rehab programs. Their 2000 findings revealed that these programs do not help participants advance from low-skilled work into higher-paying job opportunities. They noted that basic education and sufficient training procedures for low-skilled labor are more helpful.
As concerns about work-based programs continue to reach government agencies and public officials, the future of these programs is in question.
Recent developments in the legal battle with The Salvation Army may be the beginning of the end for the organization’s countless attempts to stave off action from the Department of Labor.
On May 14, a New York-based law firm filed a national class action lawsuit against The Salvation Army. The firm accused it of violating anti-discrimination laws after the Boston ARC barred Mark Tassinari from its facility for using buprenorphine, a drug that helps individuals with opioid-use disorder manage their addictions.
The Salvation Army’s policy against medications violates the American Disabilities Act, the Rehabilitation Act and the Fair Housing Act.
The Charlotte ARC’s program has proven ineffective for the vast majority of its participants. But the few success stories that emerge keep it up and running.
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Graduation rates for government-run programs—like the Walter B. Jones Center in Greenville and the Julian F. Keith Alcohol and Drug Abuse Treatment Center in Black Mountain—generally hover around 70 to 90%.
Meanwhile, at many work-based rehabs, the graduation rate is 30% or less. But that’s not the case for the Charlotte ARC. Not even close.
It’s 12%.
A new resolution in Congress seeks to abolish the 13th Amendment’s so-called slavery loophole allowing people convicted of a crime to work for little or no pay. But current litigation over carceral subminimum wages shows that eliminating the clause might not be enough to boost wage protections, experts say.
Introduced by Rep. Nikema Williams, D-Ga., and Sen. Jeff Merkley, D-Ore., in June, the resolution proposes to amend the U.S. Constitution by adding the phrase “neither slavery nor involuntary servitude may be imposed as a punishment for a crime.”
“We can’t celebrate Juneteenth as a federal holiday on one end of the spectrum and still have in our Constitution of the United States of America an exception that allows for slavery for people who have been convicted of crime,” Williams told Law360 recently.
People incarcerated for criminal offenses who work in facilities’ maintenance or in state correctional industries to make goods, like eyeglass lenses or license plates, are not constitutionally entitled to minimum wage. This arrangement is a vestige of the 13th Amendment’s abolition of slavery and “involuntary servitude” save for “as a punishment for crime whereof the party shall have been duly convicted.”
But circuit courts have also repeatedly ruled that the custodial relationship between an incarcerated person and their imprisoner/boss does not constitute an employee-employer relationship under the Fair Labor Standards Act.
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Abolition Amendment’s Impact is Hard to Predict
It is unclear what immediate impact the abolition of the 13th Amendment’s exclusionary clause would have on incarcerated workers’ rights.
If such a constitutional amendment were enacted, further action might not be needed, said D. Michael Hancock, of counsel at Cohen Milstein Sellers & Toll PLLC and a former assistant administrator in the Wage and Hour Division of the U.S. Department of Labor. But it would be “prudent” to make clear that criminal detainees are covered by the FLSA through a statutory amendment, for example, he said.
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‘Distorting’ the FLSA
The crux of incarcerated workers’ failed efforts to secure pay for hours worked comes down to the idea that inmates’ particular circumstances — they are in custody, their basic needs are met, and they are not part of the free labor market — negate the kind of employee-employer relationship envisioned by Congress under the FLSA.
Litigation involving civil immigration detainees in privately run facilities has wrestled with this recently. These individuals, unlike their criminal detention counterparts, are free from the13th Amendment’s exclusionary clause.
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Still, courts have determined that detainees are not covered by the FLSA “without any clear reason or any clear articulation,” Hancock said.
“I think it’s useful to bear in mind there’s no specific exemption in the FLSA that could plausibly extend to civil detainees, and one of the core principles of the FLSA is unless you’re specifically exempt then you’re covered,” he said.
The courts have bypassed that idea by saying, “We don’t have to get to exemptions because you’re just not part of that universe of people that the act was intended to protect,” he added.
Hancock also said that by concluding civil detainees have their basic needs met and are not entitled to wage protections, the courts are “distorting the whole framework of the Fair Labor Standards Act.”
“If you’re going to go down that road, then in every wage and hour investigation, you’re going to have to ask if this person wasn’t being paid by their employer, would they otherwise have the basic necessities of life provided?” he said.
The SEC has been intense about ESG and wait-and-see on Reg BI. But new Enforcement Director Gurbir Grewal supported New Jersey’s fiduciary rule and may put teeth in the broker advice standard.
If you’re into sustainable investing, you must be thrilled with the Securities and Exchange Commission.
In his first three months in office, SEC Chairman Gary Gensler has given numerous speeches about the importance of environmental, social and governance factors in the investment climate. He has put on the SEC’s agenda rule proposals on climate risk and human capital reporting.
But if you’re into investment advice reform, you may be feeling a bit neglected by the SEC.
Regulation Best Interest, the broker advice standard, went into force last June. After more than a year of operating under Reg BI, we don’t know to what extent brokerages have changed their advice practices to ensure that their registered representatives are not placing their own revenue desires ahead of their customers’ interest in investment returns.
The brokerage industry maintains Reg BI is much stronger than the previous suitability standard. Investor advocates asserted that Reg BI was too weak to curb brokers’ conflicts of interest.
It likely will take a good while longer to know who is right.
The measure was the centerpiece of former SEC Chair Jay Clayton’s agenda. Gensler will not rip it up and start over. Rather, he told lawmakers when asked at an online congressional hearing, the agency will use guidance, examinations and enforcement to ensure the rule actually protects investors.
But much remains unanswered about Reg BI. For instance, “best interest” is an amorphous term, and what qualifies as “mitigation” of conflicts remains in the eye of the beholder.
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PUTTING TEETH IN REG BI?
Gensler already has made a major decision that likely will affect how Reg BI evolves. In late June, he appointed New Jersey Attorney General Gurbir S. Grewal to head the agency’s Division of Enforcement.
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In selecting Grewal, Gensler went in a completely different direction. Grewal has served as New Jersey AG for more than three years. Previously, he was a county prosecutor and an assistant U.S. attorney. He only worked in private practice for about seven years.
If the effectiveness of Reg BI depends on how it’s enforced, Grewal is uniquely qualified for the job. He was New Jersey AG when the state’s Bureau of Securities, a part of the AG’s office, proposed a fiduciary rule. State regulators said they needed to pursue their own advice standard because they didn’t have confidence in Reg BI.
Grewal’s support was instrumental for pushing ahead with New Jersey’s fiduciary rule, said Laura Posner, a partner at Cohen Milstein Sellers & Toll. A final rule has not yet been released.
“I believe he understands [investment advice] issues well and will not shy away from enforcing Reg BI to the fullest extent possible,” said Posner, who served as chief of the New Jersey Bureau of Securities before Grewal was AG but worked with him when he was an assistant U.S. Attorney. “I know him to be incredibly smart, conscientious and not afraid of a fight.”
As part of the submissions process for Bloomberg Law’s inaugural class for “They’ve Got Next: The 40 Under 40,” editors asked nominees to submit recommendations from senior partners, clients, outside counsel, and others who could speak to their client successes and leadership skills (on the record).
Read on for a sampling of what they said.
Mass Torts
On Emmy Levens: “Emmy manages all day-to-day aspects of the [Flint Water Crisis] case, including spearheading the investigations into the legal claims, making key legal arguments, and taking the lead on drafting key briefs, including a pivotal brief in August 2018, which led to the court reinstating former Governor Rick Snyder as a defendant in 2019. Persuaded by Emmy’s brief, the court determined that Snyder not only knew about the health consequence of the State of Michigan’s and the Emergency Manager’s decisions, but covered it up, and “misled” Flint residents and “even encouraged them to continue to drink and bathe in the water.” —Theodore Leopold, Cohen Milstein, co-lead of Flint Water Crisis litigation