Legal News for Fri 6/21 - Trump Challenges Special Counsel Appointment, SEC Shutdown of BF Borgers Causes Issues, DE Corp. Law Amendment and Tom Girardi Trial

Minimum Competence

This Day in Legal History: Halifax Founded

On June 21, 1749, British colonists established the town of Halifax in what is now Nova Scotia, Canada. This strategic move was part of Britain's broader efforts to assert control over the North American territories and to counter French influence in the region. Halifax's founding was spearheaded by Edward Cornwallis, the colony's first governor, who arrived with over 2,500 settlers. The site was chosen for its excellent natural harbor, which would later become one of the most important naval bases in the British Empire. The establishment of Halifax also marked the beginning of complex and often fraught relationships with the indigenous Mi'kmaq people, who resisted the encroachment on their lands. Over time, Halifax grew into a key military and economic hub, especially during conflicts such as the Seven Years' War and the American Revolution. The town's early development set the stage for its eventual role as the capital of Nova Scotia, integrating its rich colonial heritage with its modern-day significance. Halifax's founding is a pivotal moment in Canadian history, reflecting the colonial ambitions and geopolitical strategies of the 18th century.

Former President Donald Trump is challenging the appointment of Special Counsel Jack Smith in the criminal case accusing him of mishandling classified documents. His legal team will argue over three days of hearings against both the appointment and a gag order. Trump's allies in Congress have also criticized Smith's appointment and funding. The hearings, presided over by Judge Aileen Cannon, will be the first since Trump's conviction in May on 34 felony counts of falsifying business records in New York. Trump is also awaiting a Supreme Court decision on his claims of presidential immunity related to his efforts to overturn the 2020 election. Trump's legal team argues that Smith's appointment is invalid because he was not confirmed by the Senate, but courts have previously upheld special counsel authority. Trump's challenges are part of a broader effort to dismiss the classified documents charges, with the trial's start indefinitely delayed. The hearings will also address other issues, including Trump's bid to suppress evidence from the FBI's Mar-a-Lago search and Smith's request to bar Trump from making potentially dangerous statements.

Trump to challenge special counsel appointment in documents case | Reuters

After the SEC shut down BF Borgers CPA accounting firm for fraud in early May, about 40% of its nearly 180 clients are still searching for new auditors. Trump's social media company quickly secured a new auditor, but many former Borgers clients, including Nasdaq-listed and OTC companies, are struggling due to high costs and potential new auditors' hesitance to start audits from scratch. The SEC's closure of Borgers, which fabricated audits and violated rules, resulted in a $14 million fine and a permanent ban for the firm and its founder. Companies without new auditors face financial reporting issues, impacting their ability to raise funds and maintain public listings. While larger firms have mostly found replacements, smaller OTC companies find the cost barrier significant, with some new auditors quoting fees two to three times higher than Borgers’. The SEC’s scrutiny means firms taking on former Borgers clients face intense regulatory oversight. Some clients have found new auditors abroad, often driven by cost considerations, although the transition remains challenging.

Trump Media Auditor’s Shutdown Strands Nearly 40% of Ex-Clients

Amendments to Delaware corporate law are headed to Governor John Carney's desk, aiming to reverse a court decision that invalidated certain contracts between corporations and influential investors. The legislation, S.B. 313, passed the House with a 34 to 7 vote and previously cleared the Senate without opposition. These amendments follow a February ruling by Delaware's Chancery Court, which struck down stockholder agreement clauses granting significant managerial authority to founders, preferred investors, or activists. This decision impacted agreements like those between Moelis & Co. and its founder.

Delaware Senate Majority Leader Bryan Townsend sponsored the bill, supported by the Delaware State Bar Association's Corporation Law Council, to restore certainty to such contracts. Critics, including over four dozen law professors, argue the amendments were rushed and need thorough judicial review. Delaware is a key hub for business incorporation, housing over 1 million businesses and nearly 70% of Fortune 500 companies, due to its sophisticated legal environment and expert Chancery Court.

Delaware Corporate Law Amendments Headed to Governor’s Desk

Disbarred attorney Tom Girardi’s defense is attempting to shift blame to his ex-CFO Christopher Kamon for the alleged theft of millions in client funds. This strategy emerged during a pre-trial hearing on evidence inclusion and witness testimony before US District Judge Josephine L. Staton. Despite cognitive impairment claims, Girardi was deemed competent for trial, prompting a defense shift focusing on Kamon's role. Girardi’s lawyers argue disorganization at the firm or Kamon's manipulation caused the theft, noting Girardi's lack of technological use and reliance on Kamon for fund access.

Both defense and prosecution want to present evidence implicating Kamon, who faces charges in multiple jurisdictions for embezzlement. Kamon’s attorney, Michael Severo, counters that others had account access and opposes complicating the trial with excessive evidence.

The trial strategy is also influenced by a recent US Supreme Court ruling in Diaz v. United States, allowing expert testimony on what defendants typically know during offenses. Judge Staton may allow limited testimony from Dr. Helena Chui on Girardi's dementia, although concerns remain about linking dementia symptoms directly to criminal intent.

Jury selection will involve questionnaires to assess potential jurors' exposure to “Real Housewives of Beverly Hills,” where Girardi’s ex-wife Erika Jayne is featured. This high-profile case is set for a 12-day trial, with significant media and public interest expected.

Girardi Lawyers Try to Pin Blame on His Ex-CFO Ahead of Trial

This week’s closing theme is by Ludwig van Beethoven, a composer of some note.

Ludwig van Beethoven, one of the most celebrated composers in Western music history, left an indelible mark on the world with his innovative compositions and profound musical genius. Born in 1770 in Bonn, Germany, Beethoven's talent was evident from a young age. His early works followed the classical traditions of Mozart and Haydn, but he soon developed his unique style, characterized by emotional depth and structural complexity.

As we close this week, we feature Beethoven's "Adieu to Piano," a piece that reflects the composer's intimate relationship with the piano. This work, though less known than his symphonies and sonatas, captures Beethoven's ability to convey a wide range of emotions through music. "Adieu to Piano" is a poignant composition, embodying a sense of farewell and nostalgia, perhaps hinting at Beethoven's struggles with his deteriorating hearing.

This piece serves as a fitting end to our week, reminding us of the power of music to express the inexpressible. Beethoven's work continues to inspire and move listeners, transcending the boundaries of time and culture. As we listen to "Adieu to Piano," we can reflect on the themes of departure and remembrance, appreciating the beauty of Beethoven's musical legacy.

Without further ado, “Adieu to Piano” by Ludwig van Beethoven. Enjoy.

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