Wall Street Journal
If you can't trust your lawyer, who can you trust? Visa, MasterCard and millions of merchants may see the $6 billion settlement of a class-action lawsuit go up in smoke. The reason is what a legal ethics expert described as "gross misbehavior" by the lawyers involved. The settlement resolved a lawsuit alleging the credit-card networks engaged in price-fixing when they banned merchants from charging customers more when they used a credit card instead of other payment forms. In the recent controversy, Keila Ravelo, a lawyer who had represented MasterCard, and her husband were charged with setting up fake companies to steal more than $5 million from law firms where she had worked. During the investigation of her theft, Ravelo's former law firm found emails between Ravelo and another lawyer, Gary Friedman, who was her friend and who represented merchants in the class-action lawsuit. The two exchanged confidential information about their clients in the case, which unnamed sources say resulted in the merchants getting inadequate representation in the case. As a result, Home Depot, Walmart, 7-Eleven and other merchants plan to file a motion in court on Tuesday to blow up the $6 billion settlement. Additionally, the merchants plan to seek to do the same thing to a $79 million settlement with American Express. Attorneys for the merchants also plan to ask a judge to vacate the $32 million award that Friedman received. The merchants' case to dismiss the settlements isn't a slam-dunk; MasterCard and American Express have said in court filings that Ravelo and Friedman did not play large enough roles in the cases to justify vacating the settlements. (If Friedman was awarded $32 million for a not large role, sign me up for that job.)
Some Democratic lawmakers want to help consumers fight back against creditors. The Consumer Reporting Fairness Act, introduced by Sen. Sherrod Brown, D-Ohio, would make it easier to fix inaccurate credit reports. It would also punish creditors that ignore consumers' requests to fix inaccurate credit reports, by allowing borrowers to sue for damages. The bill was introduced after some borrowers sued creditors, claiming they didn't remove negative information on their credit reports even after the debts were erased in personal bankruptcy. Some borrowers have already sued banks, claiming the companies didn't furnish updated information to credit bureaus, resulting in inaccurate credit reports. Banks sued thus far include Bank of America, Synchrony Financial and Citigroup. The Consumer Financial Protection Bureau earlier this month ordered JPMorgan Chase to pay $216 million for selling "zombie debts" to third-party debt buyers, including accounts that had inaccurate information or weren't collectible.
Stripe, the online payments startup, raised around $100 million from a group of investors; the significance is the funding round values Stripe at $5 billion. Investors in the funding round include Visa and American Express.
McGraw-Hill Financial had to outbid at least two other suitorsto win its agreement to buy SNL Financial, the provider of financial information and news on the banking industry. Hearst and FactSet Research Systems also submitted bids. McGraw-Hill ended up paying a multiple that one analyst deemed "probably a little high," which sent McGraw-Hill's shares plunging on Monday.
Financial Times
Sir Richard Branson may be having a tough go of it with his Virgin Galactic spaceflight venture. But at Virgin Money, things appear to be moving on quite swimmingly. The U.K. Lender reported a 37% increase in profits versus a year earlier, thanks in part to mortgage lending.
New York Times
Place Hillary Clinton on the side of those who oppose activist investors. Her plan for capital-gains taxes, disclosed during her presidential campaign, is intended to discourage short-term "quarterly capitalism" and encourage long-term "investors who want to build companies," she said last week. Her proposal could be significant, Andrew Ross Sorkin writes in a column. "Helping create an incentive system that makes investors and therefore chief executives and their boards of directors less focused on quarterly profits and their immediate stock price should be a boon to the economy," he writes.
The paper has a story on the background leading up to Bruce Thompson's unexpected firing/resignation as Bank of America's chief financial officer. The revelations, based on comments from unnamed sources, are far from enlightening, much less informative. Regulators had been informed "well in advance" of Thompson's potential exit. Other unnamed former executives described relations between Moynihan and some members of his leadership team as "strained." The paper also publishes the blockbuster news that many of Moynihan's "loyal lieutenants" worked with him at FleetBoston Financial.
