Protecting Shareholder Rights Through Civil Prosecutorial Litigation
Posted by Dr. Joyce Starr August 24, 2008
Shocking details of a shareholder scandal that included hookers, extramarital affairs and the purchase of expensive jewelry with corporate funds. Cohen Milstein’s shareholder victory in the Xybernaut case. Rights Radio - STARRPublications launches Shareholder Rights Series.
The majority of Americans believe that the Securities & Exchange Commission (SEC) protects shareholder rights by prosecuting companies that violate those rights. While the SEC does launch civil litigation in defense of shareholder rights, its resources are extremely limited. The SEC therefore relies on private law firms to supplement such efforts.
What are the red flags? How does a leading law firm become involved in a particular case? Our guest explains the process. He also reveals shocking details of the Xybernaut case recently won by his law firm - Cohen, Milstein, Hausfeld & Toll - where he was the lead associate attorney.
This shareholder scandal spanned three continents, included extramarital affairs, hookers and the purchase of expensive jewelry with corporate funds.
Our guest is Jason M. Leviton, ESQ.
An Associate at Cohen, Milstein, Hausfeld & Toll , Jason Leviton joined the firm in 2004 as a member of the Securities Fraud/Investor Protection practice group. Prior to joining Cohen Milstein, Mr. Leviton was a securities class-action attorney with another well-known securities class action firm. He has been involved in several major securities fraud cases at the Firm, including the class actions In re Verisign Securities Litigation (N.D. Cal.; settled for approximately $78 million); Bovee v. Coopers & Lybrand, et al. (S.D. Ohio; settled for $7.5 million); In re Xybernaut Securities Litigation (E.D. Va.; motions to dismiss denied); Ong v. Sears, Roebuck, and Co. (N.D. Ill; motions to dismiss denied and class certification pending); Welmon, et al. v. Chicago, Bridge & Iron N.A., et al. (motions to dismiss denied and class certification pending); and In re SOURCECORP Securities Litigation (N.D. Tex.; motion to dismiss denied against non-speaking defendant pursuant to SEC Rule 10b-5(a) and (c)).
Mr. Leviton attended Gonzaga University where he received both a B.A. in Philosophy (2000) and a J.D. (cum laude, 2003). While in law school, he won the Linden Cup Moot Court competition and was a member of the Editorial Board of the International Law Journal. Mr. Leviton also received a Master of Laws (Dean’s Certificate, 2004) in Securities and Financial Regulations from Georgetown University Law Center. While at Georgetown, he was the inaugural LL.M. student selected for an externship with the SEC’s Division of Enforcement. Mr. Leviton is admitted to practice in the District of Columbia, State of Washington, and Florida.
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Xybernaut Corp.
On May 9, 2005, Cohen Milstein (or the “Firm”) filed a lawsuit in the United States District Court for the Eastern District of Virginia against Xybernaut Corp. (or the “Company”) and several of its officers and directors (collectively “Defendants”) which alleged that Defendants made materially false and misleading statements between May 10, 2002 and April 8, 2005, inclusive (the “Class Period) in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”). On January 19, 2007, the Firm was appointed as co-lead counsel for the class.
Specifically, the lawsuit alleged that the Company’s wholly insufficient internal controls allowed its then-Chief Executive Officer, amongst others, to improperly use a substantial amount of Xybernaut funds for personal expenses. In addition, it was alleged that senior management entered into major transactions in violation of Company’s internal control policies and concealed material financial conditions from the Company’s Board of Directors (the “Board”). Likewise, it was alleged that certain members of the Company’s senior management failed to disclose to the Audit Committee and Board written correspondences by its then-Chief Financial Officer outlining serious concerns over the breakdown of the Company’s internal controls. Finally, the lawsuit alleged that certain Defendants affirmatively impeded the Audit Committee’s investigation into the alleged fraud.
In April, 2005, the Company’s Chief Executive Officer and Chief Operating Officer were removed as officers and directors of the Company and, on July 25, 2005, Xybernaut filed a Chapter 11 bankruptcy petition with the United States Bankruptcy Court for the Eastern District of Virginia. Throughout the bankruptcy proceedings, Cohen Milstein was extremely active in protecting the rights of Xybernaut shareholders.
Then, after defeating several motions to dismiss the class action complaint, Cohen Milstein was able to reach a settlement with the Defendants. In total, the class received an all cash settlement of $6,300,000, which received final approval from the Court on or about February 20, 2008. The Firm believes this was an outstanding result, especially considering that the Company was bankrupt and was no longer a publicly-traded company.
Internet Access Restrictions by Major Phone Companies
Posted by Dr. Joyce Starr August 10, 2008