Shelley is a respected regulator, but presumably is just a placeholder until a new chairperson of the SEC takes over after Obama’s swearing-in. He has nominated current head of FINRA Mary Schapiro for the job of SEC Chair. Once Schapiro takes over, one assumes she will put in her own head of Corporation Finance, who may want to bring in their own deputies.

With the current media shift towards digital media such as Internet and mobile devices, I thought it would be interesting to discuss what the industry experts had to say.  A new research study fielded among nearly 1,000 digital influencers demonstrates that traditional and online media are both important sources when it comes to sharing news. The study, developed by IM MS&L, MS&L’s influencer marketing practice to determine how to construct effective online influencer campaigns, in conjunction with leading research firm Ipsos Public Affairs, finds that traditional media play a vital role in igniting the process that leads influencers to share information online and via word of mouth. More than eight in 10 influencers say they often go online to find out more after reading something in a magazine or newspaper (84%) or hearing something on TV or the radio (84%.) These traditional media sources help shape public opinion in the complex world of online influence.

“This research supports the need for influencer marketing campaigns to leverage both traditional and online tools to connect with consumers,” said Renee Wilson, deputy MD of MS&L New York and director of the agency’s IM MS&L practice.

The research measured the behavior of digital influencers in three categories: beauty, environmental and personal health, and discovered that each type of influencer has unique methods of spreading word of mouth. Some of the key findings of the research include:

Beauty influencers rely on manufacturers’ Web sites for their POV.

• In a good sign for advertisers, company and product websites are more effective sources for driving word-of-mouth in the beauty category than in either personal health or environmental.
• Online community Web sites rank the highest of 15 sources for sharability among digital beauty influencers, and portals and search engines have the lowest sharability score.
• In the beauty category, consumer opinion may motivate more sharing than in other categories: Blogs, discussion boards and chat rooms are rated above average on the index.

Neglecting non-profit and academic Web sites for green content? Think again.

• Influencers in the environment space spend a great deal of time gathering information from non-profit, association and academic Web sites (42% do so at least once per week).
• Digital influencers in the category of environmental cause embrace traditionally credible and objective sites when it comes to sharability.
• The highest sharability scores go to Web sites of environment-related publications, magazines and TV networks, and non-profit/academic Web sites.
• Banner ads and online community sites have the lowest sharability scores, meaning that environmental influencers share information from these sources much less frequently than they do information from all other sources, relative to how often they gather information from each of these sources.

Nutrition is a hot topic for health influencers.

• Majorities of personal health influencers frequently gather information about nutrition (54%) and nearly half frequently share this content with others.
• The most “sharable” source among digital influencers in this category are national and local government Web sites, even though these sites are not as widely visited and used as other sites that provide health information.
• These government Web sites trigger a great deal of word-of-mouth on the part of the personal health influencers who access them, so the sites may provide the biggest bang for a marketer’s digital communications’ buck.
• While influencers often use portals and search engines to gather health information, these are among the sources with the lowest “sharability” rankings.

Interesting information for you marketers out there. Now if only we can start spreading the word in a way that will get our economy moving again….

Those who actually call themselves economists and prognosticators of the stock market are all over the place. Some say the recession will be over in six months and things will begin to improve before the end of the year. Some also say the stock market will begin to head up almost immediately after Obama takes office, as future expectations are that the economy will soon begin to turn. Start thinking about getting in now, they say, buy real estate and stocks because we are near or at the bottom. I should note that real estate values in places like Phoenix and Las Vegas have dropped over 40% in just this year alone.

Others, well they are not so optimistic. Some are predicting a 3-5 year severe downturn like nothing we have seen since the Depression. A few have even used the “D” word and think nothing short of a new “New Deal” a la FDR will save us.

I must say that I have never witnessed, from my armchair, such disparate views on where our economy and stock market are heading. So the only thing everyone seems to be able to agree on is that everything is very uncertain.

In the transactional side of our law office, we are reasonably busy, all things considered. The PIPE market is active, and reverse mergers are indeed continuing to move forward, albeit more cautiously.

So how does one prepare for something between a six month and five year recession? The same way many of us got through the last few downturns. Hunker down, tighten your belt, prepare for things to be bad in terms of your overhead, staffing, personal spending, and so on.

And yes think about whether this is time to make big changes. I have always said that the depth of a recession is the best time to start a new business. So also make this a time of opportunity. We are talking to “rainmaker” lawyers whose business is way down and so are being shunned by their current firms. But we know that business will rebound, so we are talking. I am refinancing the mortgage on my home thanks to lower rates. I am driving more, thanks to lower gas prices. The news is not all bad.

Oh yeah, and as we cautiously optimistically welcome 2009, remember to focus on what’s really important. The people that matter to you in your life and those things that you enjoy doing. As I write it is already the New Year in Australia, so to the Aussies, and all my faithful blogees, a very happy, healthy and prosperous New Year….

The ongoing credit crisis and turmoil in the financial sector have fueled a major surge in securities class action litigation in 2008, according to a new study from NERA Economic Consulting. Filings are projected to reach 267 by year’s end, which would represent a 37% increase over 2007 and the largest annual total since 2002. Excluding atypical cases (related to the IPO securities litigation, analyst cases, and mutual fund market timing), filings in 2008 are on pace to reach a 10-year high.

According to NERA’s study, 2008 Trends in Securities Class Actions, the credit crisis is the most significant factor contributing to the increase, continuing a trend that began in 2007. Of the 255 cases filed as of December 14, 2008, 43% or 110 are related to the credit crisis, nearly tripling from 40 in 2007.

Settlement Values Remaining Steady—For Now

While filings have steadily increased from 2006 through 2008, median settlement values have remained relatively stable. The 2008 median settlement resolved for $7.5 million, below the 2007 median of $9.4 million, and above the 2006 median settlement of $7.0 million.

Although it is too early to tell what impact the surge in credit crisis filings may have on future settlement values, there are two intriguing hypothetical outcomes, according to study co-author Dr. Stephanie Plancich. Historically, large investor losses have been positively correlated with a larger settlement size, and the median investor loss for a credit crisis case in 2008 is almost $3.5 billion—approximately nine times the median amount of a non-credit crisis case filed this year ($387 million). This suggests that average and median settlement sizes could grow in the future as these cases begin to be resolved.

“On the other hand,” says Dr. Plancich, “defendants with ‘deep pockets’ are the ones who can afford big settlements. However, the credit crisis has dramatically shrunk the size of many defendants’ pockets. The financial distress faced by defendant companies could therefore pull median settlement values down.”

Other Notable Findings of the Study Include:

• Nearly 50% of all filings in 2008 named a company in the finance sector as the primary defendant.
• Auction-rate securities cases peaked in the first half of 2008, following the massive failure of auctions in late February. The pace of these filings has since slowed, but they have not disappeared.
• The concentration of filings in the Second and Ninth Circuits remains a continuing trend, with a particular spike in the Second Circuit in 2008 due to a clustering of credit crisis cases in this Circuit.

Many of us thought that the implosion of class action law firm Milberg Weiss and its progeny, along with a law passed in 2005 to limit the ability to bring these cases, would reduce the number of cases. Maybe even with this increase there would have been an even greater rise in cases, but who knows.

The involvement of the financial sector in the new cases is telling. One wonders if the New York Times is right: that “Wall Street” as a concept is basically kaput.

I love it when technology and Wall Street come together in a seamless fashion, and it appears that is what occurred with a new venture that launched officially this past week. The company is called kaChing, and they have created a socially-minded service for the investor community.

Inexperienced investors can use kaChing to learn about investing by experimenting in a realistic risk free environment. They also have the option of using kaChing to find managers to emulate. Experienced investors use kaChing’s SuperCruncher tools to find managers with whom they have common investment interests and with whom they can share investment ideas. In the future kaChing’s best performing managers could have the opportunity to earn a lucrative living from their outstanding performance. Everyone, independent of experience, benefits from the opportunity to create, find and follow specific portfolios.

kaChing pursued the ‘Open Source’ philosophy of dramatically reducing the barriers to adoption to build a critical mass of investors. It then used social networks to accelerate its growth. The first barrier to adoption addressed was the perception that great investors must have an established track record with real money to prove they are capable of earning superior investment returns. kaChing believes that there are many individuals capable of proving that they can generate compelling risk adjusted returns who haven’t yet earned the money necessary to invest. Therefore it allowed members to manage virtual stock portfolios in a realistic environment to attract the largest possible audience.

By building an engaging application that runs on Facebook and MySpace, kaChing was able to rapidly build a user base. As a result, the company has attracted 350,000 members of whom more than 1,500 manage diversified portfolios that generated positive returns over the past seven months (during a time when the stock markets were down more than 30%). That compares extremely favorably to the fewer than 200 mutual funds that have earned positive returns over the same time period. kaChing investor Richard Jones earned a 392% return over the last six months!

Marc Andreessen, the renowned Internet entrepreneur, and an investor in and advisor to kaChing, said: “It makes total sense to apply the open source approach to a business other than software. Finance is a perfect example — kaChing will surface all kinds of financial market information and insight that you’d normally never get to see.” Check it out at www.kaching.com.

As always, I have no direct or indirect personal interest in the company. I just like the idea of showcasing successful individual investors who beat all the smartypants guys on the Street.

“What do you call 500 lawyers at the bottom of the ocean? A good start.”

“How do you save a drowning lawyer? Take your foot off his head.”

“What’s the difference between a lawyer and a bucket of pond scum? The bucket.”

And of course the joke that became famous because then Presidential candidate John McCain told it in a speech: “What’s the difference between a lawyer and a catfish? One is a slimy, bottom dwelling, scum sucker. The other is a fish.”

There’s even a popular website - www.lawyer-jokes.us (I hesitate to give that one out, but alas).

None of us in the legal profession is perfect. I tell my associates the minute you stop making mistakes, you should just hang it up. Some even dance the line of ethics in terms of the choices they make in what clients to represent or when to look the other way when clients do questionable things. Some even cross that line, sometimes without horrible intent, “borrowing” money from an escrow account to tide them over before a big fee comes in (this is unethical and illegal even if paid back).

It is alleged that the founder of 250-lawyer firm Dreier LLP, Marc Dreier, took it to a ten thousand times more horrible level. A prominent, respected attorney who had run the litigation department at the law firm I worked at, Fulbright & Jaworski (he came there after I left), he started his own firm and built it by stealing lawyers from other firms with promises of lavish salaries and perks. He was the sole equity partner and never gave other partners access to information about the firm’s finances. Partners didn’t realize, for example, that the firm’s malpractice insurance had been allowed to lapse.

Then it appears he duped hedge funds into investing hundreds of millions of dollars in promissory notes issued by well-known real estate firm Solow Realty, which was in fact a client of Dreier. The notes, allegedly, were fake and forged and it is amazing that none of these funds did proper due diligence.  He even brazenly conducted meetings in Solow’s offices without their knowledge. Then he got caught impersonating the in-house counsel of a major Canadian pension fund, and everything spiraled down from there.

He may not have done it alone. It now appears that one of Solow’s top deputies may have been in cahoots with Dreier, according to yesterday’s Wall Street Journal (http://blogs.wsj.com/law/2008/12/23/new-defendant-in-dreier-scandal-may-have-had-history-with-marc-dreier/).

On December 17 the law firm filed for bankruptcy protection, owing nearly a million dollars to their landlord, among other things. The firm’s website has been shut down. Unlike $50 billion alleged swindler Bernard Madoff, who is out on bail and under house arrest, Dreier was denied bail after the prosecuter called him a ”Houdini of impersonation and false documents.” He faces up to 20 years in prison.

I know people close to Mr. Dreier. They said the best thing that could have happened was the Madoff scandal, which indeed drove Dreier’s mere $300 million alleged scam off the front pages for Madoff’s $50 billion. I have already seen resumes of several attorneys from his firm desperately seeking employment in this tremendously difficult job environment.

In the reverse merger world and smallcap markets, we have struggled to overcome a bad reputation from years past. There remain some questionable players in our world, but there are scams both big and small out there and it is not limited to the small and microcap markets.

I hope my dear blogees will remember that in any industry, any profession, there are good and bad actors. Often in hindsight when these scandals arise, duped investors say they had a feeling something was not right. My advice: go with your gut and run, don’t walk, when you have those feelings. Then maybe, just maybe, we make it a little harder for these guys to take advantage.

Sometimes I hear the following about reverse merger players: “He’s a jerk,” or “He’s a tough negotiator,” or “He’s not interested in helping our business grow.”  These may be good reasons not to do business with people, but they do not necessary indicate evil, illegal, or even shady tactics.

Thacher, like Heller Ehrman and Thelen Reid, large firms that also dissolved in the last few months, was heavily involved in the structured finance work on behalf of aggregators of mortgages into securitized pools. When the credit crisis hit, this business simply disappeared.

Thacher tried to complete a merger with King & Spalding, but that didn’t work out. Are there more large law firms headed this way? I believe so. Which ones? I’d rather not say, but I think most of us who have followed the news have a pretty good idea.

Without a doubt, the energy sector is going to be a hot topic for discussion and governmental development for the next presidency.  But what does one of the leading energy moguls, T. Boone Pickens think about the team President-elect Obama has chosen to lead the nation?

If you have even glanced through the ‘Picken’s Plan‘, you know that it consists mainly of America moving away from its dependence on foreign oil and focusing on developing renewable energy resources.  Therefore you should not be surprised that Pickens is extremely satisfied with the President-elect’s choices.  Below is Pickens’ full response to the Obama energy sector appointees.

“The nominations of Dr. Steven Chu and Carol Browner are excellent signals that the new Administration is going to be very serious about developing a national energy policy which is strong on alternative fuels, on using domestic resources and on conservation. In fact, the Pickens Plan – which calls for building our wind and solar capacity to produce electricity thus freeing natural gas to be used for heavy trucks, buses and fleet vehicles — is the bridge between our dependence on foreign oil today and the exciting carbon-neutral solutions that Dr. Chu is developing, which will hopefully satisfy the global need for energy 15 – 20 years out.”

He continued, “I recently met with Carol Browner in her capacity as the head of the energy transition team for the President-elect and was impressed by her understanding and appreciation of the energy crisis facing America today, importing 70% of our oil poses a significant threat to our economy and security. We also discussed how the Pickens Plan will provide 138,000 jobs in the first year and up to five million jobs over the next ten years, bringing employment to areas of the country that are in most need of economic relief.”

One still hot area of activity in reverse mergers is alternative energy. Watch for this sector to get hotter or at least stay hot under “no drama” Obama.

Bernard Madoff, who may turn out to be one of the greatest villains of all time, has no clothes. So many around him, even in the face of clear evidence of wrongdoing, could not believe it possible that a man of such distinction and stature could engage in such blatant thievery.

For those who have been behind a rock, Madoff, who ran an investment advisory and brokerage business, is accused of bilking investors large and small of as much as $50 billion. A still relatively quiet part of the story is that a significant portion of this money was given to him by leaders of the Jewish community, in particular in South Florida. Madoff’s background included serving as non-executive Chairman of the Nasdaq.

He kept total control of what apparently were two sets of books, had this huge firm’s accounting done by a tiny two-person firm in upstate New York, and it seems even his brother and children, in senior positions in the firm, knew nothing.

In his alleged hedging strategies, he bought stock options for clients, but in looking at the paperwork, it would have been impossible for him to buy options for all his clients or it would have constituted many times the total option trading for the particular days reviewed.

The SEC even investigated him at one point, but relied totally on information Madoff chose to provide him, never thinking to subpoena information or to enter his offices to review files. He got the benefit of the doubt despite multiple red flags. Then it looks even worse that Madoff’s niece, a senior person in the firm, married an SEC functionary who had worked tangentially on the investigation. Not that there’s any evidence of wrongdoing at the SEC, but it just makes them look bad.

I am willing to bet that there will not be any criminal behavior to be found at the Securities and Exchange Commission on this. It just shows that often regulators take on a view about a person or firm and that view then pervades the agency. Madoff was considered a “good guy,” and so the presumption was with him absent any smoking gun, which apparently they only just found.

A client called me last week and explained that his retired, elderly parents had given their $2 million life savings to Madoff. It’s now all gone.

Time to find a new weaver, Bernie. You’ll need one where you’re going.