Howard Schiffman

Practice Areas

Investigations and enforcement proceedings brought by various exchanges and government agencies, including the Securities and Exchange Commission (SEC), the Department of Justice (DOJ), and the Financial Industry Regulatory Authority (FINRA, formerly known as the National Association of Securities Dealers [NASD]), as well as on diverse civil litigation, including securities class actions. Special internal investigative counsel to public companies.

Education

Selected Representations

Clients have included many of the leading financial institutions and investment banks, largest Nasdaq market-makers, institutional and retail brokerage firms and their registered representatives, trade execution and clearing firms, prime brokers, national accounting firms, hedge funds, and numerous public and private companies and their senior officers.

Has advised and/or represented clients in connection with securities litigation and regulatory developments in wide variety of areas, including stock option grant backdating, mutual fund market timing and late trading, alleged market manipulation, legal exposure arising out of prime brokerage services, and securities registration and insider-trading issues arising out of private investment in public equity (PIPE) offerings.

Extensive trial experience includes impressive record of successfully litigating to conclusion numerous SEC enforcement actions, SRO proceedings and FINRA arbitrations.

In addition to representing clients in adversarial and quasi-adversarial proceedings, has provided counseling on compliance with federal, state and SRO securities regulatory provisions; develops customized securities compliance and record-keeping policies and procedures; and assists clients in formulating and implementing internal audit programs.

SEC and DOJ Enforcement Proceedings

Has successfully represented numerous clients in complex securities matters before the SEC and the DOJ. The investigations and enforcement proceedings have focused on, among other things, accounting and financial disclosure issues, stock option grant backdating issues, PIPE offerings, sales of unregistered securities, executive compensation and perks, sales practices, soft dollars, late trading and market timing, insider trading, alleged Foreign Corrupt Practices Act violations, alleged antitrust violations, money laundering compliance, and market manipulation.

Has represented the largest New York State Stock Exchange (NYSE) specialist and leading Nasdaq market-making firms, national retail brokerage firms and their management and representatives, and public companies and their officers and directors. For example, before the SEC and in private litigation, represented the Special Committee of the Board of Directors of a Fortune 100 technology company in connection with a worldwide investigation of allegations of stock option backdating and earnings manipulation. Also represented the CEO of one of the world’s largest food processing companies in an SEC proceeding involving proxy disclosure, and the CEO of a leading market-maker in connection with allegations of fraud and inadequate supervision.

Has been involved in many complex accounting cases. Served as trial counsel in the SEC’s first successful fully-litigated accounting case, which involved a shifting of quarterly earnings based on improper recognition of sales and an improper accounting of inventory (SEC v. Aydin Corp.). Involvement in complex accounting matters before the SEC and the DOJ has included representation of one of the largest energy companies in connection with allegations of improper revenue recognition of wash trades.

SRO Investigations and Proceedings

Has represented numerous securities professionals in regulatory investigations conducted by NASDR and the NYSE, American Stock Exchange (AMEX), Chicago Board Options Exchange (CBOE), Commodity Futures Trading Commission, and various other exchanges. Has represented many of the largest securities firms, including Goldman Sachs & Co., Knight Securities, Spear, Leeds & Kellogg, First Options of Chicago, National Discount Brokers, Cantor Fitzgerald, Wolverine and PaineWebber. Has represented market professionals in connection with allegations that range from failure to supervise, violation of option trading rules, and improper clearing to trading irregularities and reporting violations. Also has successfully assisted numerous issuers in connection with NASD (now FINRA) delisting proceedings.

Appellate Experience

Has appeared before the federal circuit courts of appeal to argue cutting- edge issues related to securities and corporate litigation and has represented the Securities Industry and Financial Markets Association (fka Securities Industry Association) (collectively, SIFMA) in appearances as amicus curiae in cases of industry-wide significance.

Appellate success requires innovation, experience, and careful investment of resources. Has received many significant favorable appellate decisions, including matters on behalf of Duke Energy (2d Circuit), First Options of Chicago, Inc., Spear, Leeds & Kellogg, L.P. (11th Circuit), the State of Hawaii Insurance Commissioner (9th Circuit) and Herbalife (9th Circuit).

Securities Civil Litigation and Arbitration

Has successfully represented a wide range of clients, including the largest broker-dealers (Goldman Sachs, Merrill Lynch, PaineWebber, Knight Securities), clearing firms (iSpear, Leeds & Kellogg, Pershing), investment companies (Vanguard, Federated), investment banks (Royal Bank of Scotland, Lehman Brothers), fixed-income trading firms (Cantor Fitzgerald, Greenwich Capital), and Fortune 500 public companies (Duke Energy, Comverse Technology) in class action, derivative, and other types of cases in federal and state courts, and before FINRA, NYSE, CBOE and American Arbitration Association (AAA) arbitration forums, involving, among other things, claims of securities fraud, breach of fiduciary duty, trading improprieties, RICO violations, antitrust violations, inadequate compliance and supervision, fraud in connection with private and public offerings, market structure issues, and accounting irregularities.

Securities Litigation and Arbitration Cases

Has been very active representing clients in securities litigation, both in federal and state courts and in arbitration. The following are some of the significant cases in which he has participated:

Comverse Technology, Inc. Investigations and Litigation

Represents the Special Committee of the Board of Directors of Comverse Technology, Inc. in connection with allegations of stock option backdating and earnings manipulation. With other firm attorneys, conducted worldwide internal investigations on behalf of the Comverse Special Committee, dealing with both the SEC and the Office of the U.S. Attorney for the Eastern District of New York. After criminal charges were filed against former senior executives of the company, the DOJ singled out the thoroughness and speed with which the internal investigation was conducted. Also represents the Special Committee in related derivative litigation brought in federal and state courts against current and former officers and directors of the company.

Strategic Income Fund Litigation

Represented Goldman Sachs Execution & Clearing, L.P. and certain of its predecessors (collectively, GSEC) in a federal court lawsuit brought by Strategic Income Fund and its investors in federal district court and in related state court and CBOE arbitration proceedings—all arising out of GSEC’s liquidation of assets that had been transferred to the fund manager’s account as collateral for its options trading program. Successfully moved to dismiss the federal court complaint alleging $22 million in compensatory damages and obtained an affirmance of the dismissal from the 11th Circuit. Also successfully defended a four-day CBOE arbitration hearing that had been commenced by two plaintiffs who did not pursue the 11th Circuit appeal. Finally, successfully moved to dismiss the state court claims subsequently brought by the remaining federal plaintiffs and obtained an affirmance of that dismissal on appeal.

Securities and Exchange Commission v. Kenneth D. Pasternak and John P. Leighton

Successfully represented Kenneth Pasternak, the former CEO of Knight Securities, L.P., the largest Nasdaq market-making firm, in connection with an action brought by the SEC in New Jersey federal court. The SEC alleged in its complaint, filed on Aug. 8, 2005, that Joseph Leighton, one of Knight’s institutional sales traders, overcharged the firm’s institutional customers in executing their orders to purchase or sell Nasdaq securities during 1999 and 2000. The SEC claimed that Mr. Pasternak, as CEO, and John Leighton, Joseph’s brother and supervisor, participated in and aided and abetted Joseph’s alleged violations of the securities laws. After a 14-day bench trial, the court concluded that the SEC failed to prove that Joseph committed any fraud and completely cleared Mr. Pasternak of any wrongdoing.

Bear, Stearns Securities Corp. Prime Brokerage Litigation

Utilizing his experience in the areas of securities clearing and prime brokerage, represented SIFMA, as amicus curiae, in the appeal of a bankruptcy court ruling that held a prime broker liable for alleged fraudulent transfers made by one of its hedge fund clients in the form of margin payments and other deposits into its prime brokerage account.

Medical Assets, LLC v. Emmet A. Larkin Co., Inc.

Successfully represented a West Coast-based clearing firm in an NASD (now FINRA) arbitration brought by a bio-venture capital firm from which $15 million worth of securities, on deposit with the clearing firm, had allegedly been converted by a foreign business partner. The case raised novel issues regarding the application of the “safe harbor” under UCC § 8-115 for transfers by securities intermediaries such as clearing firms. Following more than 40 hearing sessions, the panel of arbitrators unanimously dismissed all claims against the clearing firm.

Weiss, Peck & Greer, L.L.C. v. National Discount Brokers

Represented National Discount Brokers, a former division of Deutsche Bank, in an NASD (now FINRA) arbitration proceeding against it involving more than $12 million in losses resulting from a correspondent firm’s failure to cover a large short position in a highly volatile stock. The case raised significant issues regarding the responsibility of clearing firms and Nasdaq market-makers with respect to monitoring the risk exposure of correspondent firms. At the conclusion of several weeks of hearing sessions during which the clearing firm, represented by a major Wall Street law firm, called the former director of the SEC’s Division of Enforcement as an expert witness, the panel unanimously dismissed all claims against National Discount Brokers.

Last Atlantis Litigation

Currently representing Goldman Sachs Execution & Clearing, L.P. and its affiliate, SLK-Hull Derivatives, LLC, in an action filed in U.S. District Court for the Northern District of Illinois by six direct access option traders. The complaint names as defendants most major firms who act as specialists, lead market-makers, and/or designated primary market-makers, and alleges that the market-maker defendants conspired to discriminate against direct access traders who attempted to exploit arbitrage opportunities in violation of the antitrust and securities laws.

Options Industry Antitrust/Securities Litigation

Represented Goldman Sachs & Co. affiliate, First Options of Chicago, Inc., the largest equity options trading specialist firm, in class action litigation alleging that the national options exchanges and their members conspired to restrict the listing of options to a single exchange. Served as liaison counsel for the specialist firm and market-maker defendants and for certain settling market-makers.

Cambridge Partners Litigation

Represented Goldman Sachs Execution & Clearing, L.P. in a lawsuit and arbitration brought by a court-appointed receiver and investors who lost more than $40 million in Cambridge Partners, a hedge fund clearing client. The New Jersey state court granted the client’s motion to compel arbitration. The arbitration was resolved favorably.

Duke Energy Securities Litigation

Represented Duke Energy and its officers and directors in an internal investigation relating to the recognition of revenues on “wash” trades in electrical power and gas derivative securities and related SEC and DOJ investigations and securities class action lawsuits filed in New York and North Carolina. Secured an early victory for Duke Energy in the New York action by successfully moving the federal court to dismiss the class action in its entirety on the pleadings. Also successfully defended the dismissal on appeal to the Second Circuit Court of Appeals.

NatWest Securities Litigation

Represented National Westminster Bank Plc and its investment banking subsidiaries in connection with eight lawsuits filed in both state and federal courts by the purchasers of $450 million of high-yield bonds that financed a steel mill in Thailand. Plaintiffs have alleged fraud and misrepresentation in connection with a Rule 144A offering.

Brantley Capital Corporation Investigation

Represents closed-end mutual fund Brantley Capital Corporation and certain of its current and former directors in connection with an SEC investigation into portfolio valuation and other issues involving the fund and its former management. Also represents the fund in a federal class action filed by fund shareholders in Manhattan federal court, and represented the fund in an earlier derivative action that was filed in the same court but was later voluntarily dismissed.

Brandon v. Taylor Financial Group, Inc.

Represented Pershing, a division of Donaldson, Lufkin & Jenrette Securities Corporation, in an NASD (now FINRA) arbitration proceeding brought by an investor who claimed that his broker, to whom Pershing provided securities clearing services, committed fraud and made unsuitable trades that caused millions of dollars of losses in the investor’s accounts. The arbitration panel granted pre-hearing motion to dismiss all claims against Pershing.

Nasdaq Market-Makers Antitrust Litigation

Represented a leading broker-dealer (Goldman Sachs Execution & Clearing, L.P., formerly Spear Leeds & Kellogg, L.P.) in the Nasdaq market-makers securities litigation involving allegations of collusion relating to quote activity in the over-the-counter market. Served as one of three liaison counsel for the 35 largest over-the-counter market-makers in connection with the SEC and DOJ investigations and 20 class actions. This case was resolved favorably on behalf of the client.

Performance Specialist Group, LLC Class Action

Represents Performance Specialist Group, an NYSE specialist, in a class action against the NYSE and all the NYSE specialists filed in Manhattan federal court. The plaintiffs allege that the NYSE and the specialist firms violated the securities laws through such practices as “front-running,” “trading ahead,” “inter-positioning,” and “freezing” the specialists’ books, causing millions of dollars of losses to those people who traded on the NYSE.

Allegheny International Litigation

Represented Goldman Sachs Execution & Clearing, L.P. and Mario Gabelli and his funds, in separate suits against the officers and directors of the multinational conglomerate Allegheny International, Inc. (Allegheny); its accountants, KPMG Peat Marwick; and its investment banker, Dillon Read & Co. The plaintiffs alleged that, in reliance on fraudulent financial statements and income projections, they were induced to make a significant investment in Allegheny, which entered bankruptcy soon thereafter. Numerous accounting and auditing issues were raised in the case, focusing primarily on whether Allegheny’s assets (including real estate) and liabilities were properly reflected on its financial statements under generally accepted accounting principles, and on whether Peat Marwick’s audit procedures were sufficient and appropriate under generally accepted auditing standards. These matters were successfully resolved for the clients.

Greenwich Capital v. Citibank Mortgage

Successfully represented Greenwich Capital, one of the largest fixed-income securities dealers, in connection with a disputed trade involving the sale of a $250 million pool of home loan mortgages.

Stock Exchanges Options Trading Litigation

Counsel for one of the nation’s leading securities firms, and liaison counsel for all market-maker defendants, in civil litigation alleging that various exchanges and certain of their members agreed to restrict the listing of certain options to a single exchange. The federal judge has dismissed plaintiff’s claims based on federal preemption.

Herbalife Securities Litigation

Represented Herbalife International, Inc., a California-based corporation that markets weight-control products, food and dietary supplements, and personal care products worldwide, as well as Herbalife’s CEO and CFO, in connection with a class action lawsuit filed in the U.S. District Court for the Central District of California alleging violations of federal securities laws. Plaintiffs alleged that the company issued overly optimistic earnings projections and that its financial statements overstated earnings. The action was dismissed for failure to allege sufficient facts in the complaint. The decision was affirmed by the U.S. Court of Appeals for the 9th Circuit.

Oxford Tender Offer Litigation

Represented Oxford Residential Properties I Limited Partnership and several of its affiliates in connection with litigation brought in the U.S. District Court for the Central District of California arising from a management tender offer. The case involved a derivative action brought by a unit holder of one of the partnerships who, among other things, challenged the adequacy of the tender offer materials and sought to enjoin the tender offer and obtain from the partnership the list of unit holders. The court did not require the partnership to disclose the list and the tender offer was successfully completed.

Haft v. Haft

Represented the international accounting firm of Arthur Andersen & Co. in connection with a myriad of lawsuits arising over the control of Dart Group and other corporations and partnerships owned by members of the Haft family. Arthur Andersen was the accounting firm for the Hafts and the related companies.

Farmers Group Litigation

Represented defendant PaineWebber in a class action, arbitration proceeding and PHLX proceeding arising out of alleged violations of the PHLX and OCC options exercise rules. The class action was dismissed based on defendants’ motion, the arbitration panel rendered judgment for defendants after a full hearing, and the PHLX proceeding was amicably resolved.

Geodyne Securities Litigation

Represented defendant PaineWebber in a class action brought by investors of hundreds of millions of dollars in oil and gas drilling programs. The investors claimed they purchased the securities based on misleading disclosures and false financial information. The action was dismissed with prejudice.

Oxford Securities Litigation

Represented Oxford Corporation and its affiliates in an action brought by investors in real estate limited partnerships that developed and built garden apartments. Plaintiffs filed actions in New York and Michigan, alleging false and misleading disclosures in the offering materials and improper financial statements. The matter was successfully resolved after defendants’ motion to dismiss was granted.

Selected Publications

“Understanding the Class Action Lawsuit Against Career Education Corporation from the Defendants’ Perspective,” Career Education Review, April 2004 (co-author)

Survey of Securities Class Actions and Derivative Suits, 1998, 1999, and 2000 (contributor)

“Overview of Current Derivatives Litigation,” American Conference Institute, 1995 (co-author)

“Current Developments in SEC Settlements of Securities Cases,” Practicing Law Institute,1989–1990 (co-author)

“The Use of the Fifth Amendment in SEC Investigations,” 41 Wash. & Lee L. Rev. 895 (1984) (co-author)

“Settlement of Securities Litigation Through the Issuance of Securities Without Registration,” 50 Fordham L. Rev. 533 (1982) (co-author)

“The Relationship Between the Investment Advisor and the Mutual Fund,” 45 Fordham L. Rev. 183 (1976)

Selected Speaking Engagements

“Prime Brokerage,” 40th SIFMA-CL Annual Seminar, Orlando, Fla., March 30–April 2, 2008

“Disciplinary Hearing Process,” 2007 FINRA Fall Securities Conference, Scottsdale, Ariz., Oct.10, 2007

“Market Manipulation in Energy Markets - Enforcement Risks and Compliance Protections,” Spring 2007 API Risk Control Committee Meeting, Chicago, May 2007

“Regulatory and Civil Liability of Clearing Firms and Prime Brokers,” SIFMA 2007 Annual Seminar, Phoenix, Ariz., March 25-28, 2007

“Prime Brokerage & Correspondent Clearing,” Securities Industries

Association (SIA) Compliance & Legal Division Seminar, Palm Desert, Calif., April 2005

“Outside Directors,” Practising Law Institute D&O Liability & Insurance Seminar: Directors & Officers Under Fire, New York, June 2004

“Clearing Firm and Prime Broker Liability,” 2004 Future Industry Association Law & Compliance Workshop,” Baltimore, May 2004

Securities Industries Association (SIA) Compliance & Legal Division Seminar, Phoenix, Ariz., March 2004

“Sarbanes Oxley Act (New SEC and NYSE Rules),” NY-ACC Ethics Marathon, September 2004

“Professional Conduct of Attorneys and Corporate Code of Ethics After Sarbanes Oxley,” NY-ACC Ethics Marathon, December 2004

“Corporate Governance & Liability Insurance: Drafting Disclosures and Advising the Board on Corporate Governance Under the Sarbanes Oxley Regime,” LexisNexis Corporate Governance Symposium, September 2003

“Increased Responsibilities for Outside Directors,” Practising Law Institute Seminar, October 2003

“Mini-MBA for the Corporate Practitioner: Recent Accounting Issues,” 2002 American Corporate Counsel Association, May 2002

“Retail Surveillance Techniques,” SIA Compliance & Legal Division Seminar, Orlando, Fla., March 2001

“SEC Order Handling Issues,” SIA Compliance & Legal Division Seminar, Palm Desert, Calif., March 2000

“Equity Trading Desk Activities and Best Execution Obligations,” National Society of Compliance Professionals (NSCP) Annual Meeting, Washington, D.C., October 1999

“SEC Order Handling Issues,” SIA Compliance & Legal Division Seminar, Boca Raton, Fla., April 1999

“Prosecuting and Defending Class Actions,” Insight Conference, New York, February 1999

“Compliance After Caremark: Avoiding and Mitigating Potential Civil and Criminal Liability,” ABA Section of Business Law Spring Meeting, St. Louis, April 1998

Frequently interviewed by the media, including:

BBC World Service
Bank and Lender Liability Reporter
Business Week
CNBC
Corporate Officers and Directors Liability Reporter
CNN Financial
CNN Moneyline
FindLaw Legal News and Commentary
Financial Times
Houston Chronicle
Los Angeles Times
MoneySense.ca
Moneycnn.com
MSN Money
National Post
Northwest Herald
Newsday
PBS – Nightly Business Report
Securities Litigation & Regulation Reporter
Smartmoney.com
Wall Street Journal
Washington Post

Memberships

American Bar Association
    Member, Litigation, Corporation, Finance and Securities Law Sections
Association of Securities and Exchange Commission Alumni, Inc. (ASECA)
    President, 1998-2000
    Director, 1995-present

Other Distinctions

Recognized in Washingtonian magazine's December 2007 edition listing of the 800 Top Lawyers, described by the publication as “Washington’s best—the top one percent.”

Named in Lawdragon’s “500 Leading Lawyers in America” guide (2007 edition).

Ranked in Chambers USA: America’s Leading Lawyers for Business (2007 edition) as a leading individual in the area of securities regulation for the District of Columbia, and described as a “committed and effective advocate” who is “aggressive in a calm, thoughtful way” and executes “killer attacks in an easygoing style.”

In 2007, named in Washington DC Super Lawyers.

In 2006, was honored by Lawdragon magazine as a “Leading Lawyer,” in a list that represents less than one percent of the legal profession and is determined based on a combination of independent research and peer reviews.

Included in The Best Lawyers in America (2007, 2008 and 2009 editions) in the areas of commercial litigation and securities law.

In 2004, named one of “Washington’s Top Lawyers” in the securities area by Washingtonian magazine.

Prior Experience

Partner, Dickstein Shapiro LLP, 1980–2008 
    Head of Securities Litigation, Regulatory and Compliance Practice
Trial attorney, SEC Division of Enforcement
Adjunct, Washington College of Law, American University, 1987–92 
    Taught classes on white-collar crime