Yetter Coleman’s senior partner, Charlie Parker, is profiled in Law360’s weekly Q&A series.
Q&A With Yetter Coleman’s Charlie Parker
Law360, New York (April 15, 2013) — Charlie R. Parker is a partner in Yetter Coleman LLP’s Houston office. With more than 35 years of trial experience, his practice focuses on complex commercial litigation and securities cases. Parker is a Fellow of the American College of Trial Lawyers, and a member of the American Board of Trial Advocates and the International Society of Barristers.
Q: What is the most challenging case you have worked on and what made it challenging?
A: My most challenging case is a recent one representing a not-for-profit hospital system against a large money management company. The hospital system, through its investment adviser, had invested $100 million in what they thought was a diversified institutional money market fund. The fund documents allowed almost any type of investment or concentration including leverage. What was sent to the hospital system and its investment adviser basically showed returns and a concentration in what was identified as ABS or asset backed securities. It turned out, however, that the ABS were actually residential mortgage backed securities (RMBS) rather than auto and equipment loans that traditionally comprise ABS.
The investment was made in 2004, but by 2006, the RMBS became commonly referred to as subprime in the markets. By early 2007, the concentration of RMBS (subprime) in the portfolio had reached 95 percent, with the subprime crisis hitting a peak in June/ July that year. In two months time, the hospital system’s portfolio had lost 40 percent of its value, and the fund was later liquidated leaving it with a $40 million loss. Our basic claim was breach of fiduciary duty for nondisclosure. The defense took the position that it was an unforeseeable collapse of the real estate markets, that all the rating agencies had given the securities an AAA rating, and that the investment advisor had all the information needed to analyze the investments. Four years later with over 100 depositions taken, after asserting every theory of defense, and filing every possible motion, the case was settled confidentially prior to trial, and the hospital system was very satisfied with the result.
Q: What aspects of your practice area are in need of reform and why?
A: Federal securities laws should protect American purchasers from fraud regardless of whether the securities were purchased in the U.S. or in foreign markets. Fraudsters should not escape U.S. courts and civil liability merely by completing a transaction abroad, especially in today’s global financial environment.
The U.S. Supreme Court’s 2010 ruling in Morrison v. National Australia Bank placed fraud in the sale of securities traded only on foreign exchanges out of reach of U.S. securities laws. It is not enough that Congress later reformed the law to allow the SEC and DOJ to bring antifraud actions relating to these foreign securities. Congress should go one step further and restore the right of private citizens to bring suit against such frauds, and it should consider allowing foreign investors to avail themselves of U.S. securities laws and courts when there is substantial fraudulent conduct in the U.S. but involving the purchase or sale of securities only on foreign exchanges.
Q: What is an important issue or case relevant to your practice area and why?
A: Judge Melinda Harmon’s ruling in In re Enron Corp. Securities, Derivative & ERISA Litigation, 235 F. Supp.2d 549 (S.D.Tex. 2002), held that a secondary actor, such as a bank or law firm, can be found primarily liable under federal securities law if it creates a misrepresentation on which an investor relied and acted with the requisite scienter. The secondary actor can be liable if it “writes misrepresentations for inclusion in a document to be given to investors, even if the idea for those misrepresentations came from someone else,” and even if it did not sign, distribute, or identify itself publicly with the misrepresentation.
The entire complexion of a securities case changes based on whether secondary actors like investment banks are viable defendants, and this ruling provides a substantial avenue for such defendants to be included, even if the question of when an investment bank crosses the line from being a mere drafter to a “co-author” of a misrepresentation is not entirely clear.
Q: Outside your own firm, name an attorney in your field who has impressed you and explain why.
A: Tim McCormick with Thompson & Knight has an outstanding grasp of the securities laws, how to conduct internal investigations, and how to deal with the regulatory authorities. In addition, he is a fine trial lawyer and mentor to those who work with him.
Q: What is a mistake you made early in your career and what did you learn from it?
A: Believing what my client told me before checking everything out and reviewing the applicable documents. Unfortunately I have learned that the story from a client may be exaggerated or may not be supported by the documentation. It is best to be sure before making representations to opposing counsel or presenting the client for deposition. And be double sure if you are dealing with a regulatory agency like the SEC and/or other enforcement departments.
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