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The Modern General Counsel

The role of the modern General Counsel has evolved in both scope and prominence. As vital legal and business advisors, today’s General Counsel are leading the charge in navigating an increasingly complex macroeconomic, regulatory and geopolitical environment.

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Expert Services: Crypto Investigations

Steve McNew, Senior Managing Director, Global Leader of Blockchain and Digital Assets, on why expert testimony is required so often in crypto investigations, and what outside counsel should look for in lead investigators.

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Cybersecurity Regulation

Simon Onyons, Managing Director, Cybersecurity, on the new cyber regulatory landscape and what general counsel and risk and compliance teams need to do to meet evolving and fragmented regulatory requirements across a range of different geographies.

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Steps GCs Can Take to Be Smart on Cybersecurity

Jordan Rae Kelly, Senior Managing Director, Head of Cybersecurity, Americas, discusses why GCs need to prepare for a cybersecurity incident.

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Cybersecurity and White-Collar Crime

Mike Driscoll, Senior Managing Director, Cybersecurity, on the tools, methods and technology that are changing the nature of white-collar fraud — and how companies can get ahead of the challenge to maintain a secure environment.

Mitigating Risk and Building Resilience

The role of the General Counsel is most visible when a company is facing pivotal value creation or destruction – times of major opportunities, such as a megamerger or regulatory approval to bring an innovation to market, and times of crisis, such as a cyber breach or internal investigation. At moments of crises and opportunities, it is important that the General Counsel has a trusted partner with the expertise and experience to help lead the way.

Meet Our Experts

CASE STUDIES

CASE STUDY

Luckin Coffee

Trouble Brewing: Helping Luckin Coffee Uncover Fraud

When short-sellers alleged Luckin Coffee Inc., a US listed China-based company founded in 2017, of accounting fraud and employee misconduct, discredited public disclosures and questioned the overall health of the business, FTI Consulting was engaged by a Special Committee of the Board of Directors of Luckin Coffee as an independent forensic accounting expert to assist in an independent investigation into the allegations.¹

¹ Luckin Coffee Announces Formation of Independent Special Committee and Provides Certain Information Related to Ongoing Internal Investigation

Situation

Luckin Coffee promoted itself as a technology-based domestic rival to Starbucks, bringing different business models and concepts to the coffee chain industry. After its maiden fundraising round the startup was valued at US$1billion making it one of the quickest firms to reach ‘unicorn’ status in China.¹

Luckin Coffee continued to grow rapidly and expanded to more than 4,000 stores by 2020.

An anonymous short-selling report cited by Muddy Waters alleged that Luckin Coffee was involved in an elaborate accounting fraud.² Luckin Coffee’s Board of Directors formed a Special Committee to undertake an independent investigation of the allegations. The Special Committee engaged Kirkland & Ellis as its legal advisor and FTI Consulting as its independent forensic accounting expert.³

¹ Luckin Coffee's journey from hot startup to $5billion share wipeout ² Luckin Coffee's journey from hot startup to $5billion share wipeout ³ Luckin Coffee Announces Formation of Independent Special Committee and Provides Certain Information Related to Ongoing Internal Investigation

Our Role

Over the course of the Investigation, the Special Committee, Kirkland & Ellis and FTI Consulting reviewed over 550,000 documents collected from over 60 custodians, interviewed over 60 witnesses, and performed extensive forensic accounting and data analytics testing.¹

¹ Luckin Announces the Substantial Completion of the Internal Investigation

The Impact

The Special Committee, Kirkland & Ellis and FTI Consulting were able to establish that the fabrication of transactions commenced in April 2019, and as a result Luckin Coffee’s net revenue was overstated by approximately RMB2.12 billion.¹

Documentary evidence confirmed that Luckin Coffee’s Chief Executive Officer, Chief Operating Officer and certain employees reporting to them actively participated in the creation of the fabricated transactions and attempts to hide them. Their employment was ultimately terminated.²

Luckin Coffee was delisted from Nasdaq and agreed to pay a USD$180 million penalty to the U.S. Securities and Exchange Commission³ in addition to reaching a USD$175 million settlement of shareholder class action claims.⁴

¹ Luckin Announces the Substantial Completion of the Internal Investigation ² Luckin Announces the Substantial Completion of the Internal Investigation ³ https://www.sec.gov/news/press-release/2020-319Luckin Coffee in $175 million class action settlement over accounting fraud

Introduction

1. Situation

2. Our Role

3. The Impact

CASE STUDY

Microsoft & Activision

Microsoft and Activision Prevail in Landmark Merger Case

FTI Consulting subsidiary Compass Lexecon secures a landmark victory for clients Microsoft and Activision Blizzard, a leading game developer and publisher, in a highly contested vertical merger, the largest technology merger in history.

Situation

In December 2022, the U.S. Federal Trade Commission (“FTC”) filed a complaint in the federal court in California to halt Microsoft’s acquisition of Activision Blizzard, citing antitrust concerns.

The FTC alleged that the deal would allow Xbox-maker Microsoft to suppress competition in the gaming industry and monopolize Activision Blizzard’s popular game titles such as World of Warcraft and Call of Duty. Microsoft and Activision Blizzard retained FTI Consulting subsidiary Compass Lexecon to respond to FTC’s complaint.

Our Role

Overview

Compass Lexecon was engaged to provide economic analysis and expert testimony on the deal’s impact on competition and procompetitive efficiencies in the gaming industry.

Process

Compass Lexecon expert, Professor Dennis W. Carlton, testified before the federal court that the FTC expert’s economic analysis was flawed, relied on unsupported assumptions, and failed to show that the transaction would lead to unfair competition and foreclosure of Activision Blizzard’s content from Microsoft rivals.

Result

Compass Lexecon’s economic analysis and expert testimony identified deal-specific benefits, including expanded access to Activision Blizzard’s gaming content, lower costs for gamers and increased incentives for investment in game development.

The Impact

Judge Jacqueline Scott Corley of the United States District Court for the Northern District of California denied the FTC’s request for a preliminary injunction, ruling that the FTC had failed to demonstrate that it would likely prevail in its claim that the proposed merger would substantially lessen competition and that, in contrast to the FTC’s claims, there would be more consumer access to Activision content following the merger. The U.S. Appeals Court for the 9th Circuit then denied the FTC’s appeal, thereby allowing the acquisition to close.

Judge Corley repeatedly referenced Professor Carlton’s testimony in her opinion criticizing the FTC expert’s analysis and acknowledged several post-transaction benefits noted in Professor Carlton’s testimony.

Judge Corley’s opinion relied on several recent challenges to vertical mergers where judges ruled for the defendants — United States of America v. AT&T Inc., DirecTV Group Holdings, LLC, and Time Warner Inc.; Federal Trade Commission v. Meta Platforms, Inc.; and the FTC ALJ opinion in In the Matter of Illumina, Inc. and Grail, Inc. — all of which are cases where Professor Carlton served as an economic expert for the merging parties.

Introduction

1. Situation

2. Our Role

3. The Impact

CASE STUDY

Hertz

Hertz Gets Its Wheels Back in Motion

When COVID-19 put a pause on travel, Hertz was forced to file for bankruptcy to protect its business. In its moment of truth, Hertz enlisted FTI Consulting to support its global restructuring activity.

Situation

Following the outbreak of COVID-19 and associated travel restrictions, Hertz experienced a severe decline in its global business and mounting liquidity demands, while its vehicle financing structure required significant monthly mark-to-market payments.

Despite undertaking various liquidity initiatives, such as reducing vehicle purchase commitments, securing airport concession deferrals and abatements, and implementing furloughs and terminations, Hertz filed for Chapter 11 in May 2020.

Our Role

Overview

FTI Consulting was engaged by Hertz to develop its Chapter 11 plan and support its domestic and international restructuring activities. Leveraging its global footprint, FTI Consulting deployed more than 150 experts across the U.S., UK, Germany, France, Italy, Spain and Australia to support the engagement.

Process

FTI Consulting assisted with cash forecasting and liquidity management; oversaw vendor- and supplier-related matters; and prepared a quality-of-earnings report for the sale of Hertz’s Donlen subsidiary.

Result

FTI Consulting’s team of experts managed diligence activities and communications with financial and legal advisors and provided a temporary senior-level accounting resource, among other activities.

The Impact

In June 2021, Hertz announced that it had successfully completed its Chapter 11 restructuring process and “emerged as a financially and operationally stronger company that is well-positioned for the future.”

Hertz successfully negotiated many key aspects of its capital structure, including USD$1.65 billion in funds for general corporate purposes and critical fleet equity needs.

Hertz successfully de-fleeted approximately 200,000 vehicles, facilitating the repayment of USD$4.3 billion in debt principal and sold its Donlen business for approximately USD$875 million.

Introduction

1. Situation

2. Our Role

3. The Impact

CASE STUDY

Madoff Recovery

Unwinding the World’s Largest Ponzi Scheme

Bernard Madoff's unprecedented fraud spanned decades and defrauded thousands of investors of approximately USD$20 billion.

Situation

In December 2008, Bernie Madoff admitted that the Investment Advisory business within his firm was a Ponzi scheme, setting off his arrest and a chain reaction of events throughout the financial services world and philanthropic communities.¹

A Trustee under the Securities Investor Protection Act was appointed to liquidate Madoff’s firm and to recover the proceeds from his Ponzi scheme. ²

¹ Securities and Exchange Commission v. Bernard L. Madoff, U.S. District Court S.D.N.Y. (Dec. 11, 2008). ² Securities and Exchange Commission v. Bernard L. Madoff, U.S. District Court S.D.N.Y. (Dec. 15, 2008).

Our Role

Overview

FTI Consulting was engaged by Irving Picard, the Trustee, and BakerHostetler, the Trustee’s counsel, to investigate the financial affairs, identify and analyze the massive amounts of financial documents and data, and provide forensic accounting analysis and expert testimony to help the Trustee recover the stolen funds.

Process

The teams reconstructed books and records, determined amounts deposited and withdrawn from thousands of customer accounts and analyzed hundreds of millions of transactions.

Result

With the Trustee, the teams investigated more than 16,500 claims, ultimately allowing more than 2,600. Provided litigation support, including serving as expert witnesses, for more than 1,000 lawsuits, including two actions that reached the Supreme Court of the United States.

The Impact

FTI Consulting’s work allowed the Trustee to recover more than $14.5 billion to date, representing over 80% of the stolen funds.

¹ Aaron Katersky, “More funds recovered for victims of Bernie Madoff,” ABC News web site (Dec. 9, 2022).

Recoveries from the Madoff Recovery Initiative far exceed similar efforts related to prior Ponzi schemes both in terms of dollar value and percentage of stolen funds recovered.¹

Introduction

1. Situation

2. Our Role

3. The Impact

CASE STUDY

Wells Fargo

FTI Consulting Insights Help Wells Fargo Reform and Recover

Facing one of the largest instances of alleged customer fraud in U.S. banking history, Wells Fargo’s Board of Directors engaged FTI Consulting and global law firm Shearman & Sterling to conduct an independent investigation into how these alleged events occurred and help restore the bank’s reputation and enterprise value.

Situation

Wells Fargo shocked the nation when it announced it had fired 5,300 employees over several years for creating millions of fake customer accounts in a cross-selling practice to meet extremely aggressive sales quotas. Decades of reputational and brand value quickly evaporated as Wells Fargo made headlines for the size and scope of the sales practices and the subsequent resignations of both its CEO and COO.

FTI Consulting and Shearman & Sterling were retained by a special committee of Wells Fargo’s Board of Directors to conduct an independent investigation and give the Board of Directors more clarity on what happened and the actions to take going forward to restore credibility with impacted stakeholders.

Our Role

Overview

Our forensic accounting and data analytics experts examined millions of records spread across multiple platforms, looking back a decade and a half for relevant data.

Process

Wells Fargo’s Board of Directors issued a report into Wells Fargo’s sales practices based on FTI Consulting’s and Shearman & Sterling’s findings. FTI Consulting conducted over 50 interviews and analyzed consumer bank data from millions of accounts to uncover underlying issues ranging from decentralized processes to poor corporate culture.

Result

As part of this investigation, the team met with dozens of attorneys, including Wells Fargo’s in-house counsel and several firms representing Wells Fargo. FTI Consulting’s professionals also presented findings and responded to requests from attorneys at numerous government agencies, including the SEC, civil and criminal divisions of the DOJ, and the California Attorney General’s office.

The Impact

Wells Fargo’s Board of Directors report, with numerous citations to FTI Consulting’s work, was publicly issued and led to wide-ranging reforms of Wells Fargo’s internal practices.

These reforms helped the bank avoid criminal prosecution and were referenced in its $3 billion settlement with the U.S. government in February 2020.

Wells Fargo has since regained most of its market capitalization (approximately $210 billion as of January 2022), and it remains one of the largest banks in the United States.

Introduction

1. Situation

2. Our Role

3. The Impact

Situation

Colonial Pipeline spans 5,500 miles across 14 states and serves some of the largest airports along the East Coast while providing just under 50 percent of the transportation fuels that power a large part of the country. In May 2021, it faced a ransomware attack that targeted its IT systems. While the cyber attack did not affect the operational technology systems that control the pipeline itself, Colonial Pipeline proactively shut down the system to prevent the ransomware from potentially spreading. The pipeline system ended up being offline for five days, creating a number of communication challenges the company had to navigate. FTI Consulting’s Strategic Communications segment was engaged to help the company navigate through the cyber attack, involving two distinct mandates: responding to the ransomware attack and the communications around the pipeline restart process.

CASE STUDY

Colonial Pipeline

Colonial Pipeline Rewrites the Rules of Cyber Crisis Communications

When faced with one of the most high-profile ransomware attacks in U.S. history, Colonial Pipeline – the largest refined products pipeline operator in the country – turned to FTI Consulting for strategic communications counsel and expertise.

Our Role

The FTI Consulting team supported the development and execution of a crisis communications strategy, produced materials for company stakeholders, supported daily briefings to senior government officials in the White House and Department of Energy and managed the company’s media engagement, which included more than 1,000 inquiries.

FTI Consulting supported the company in the months following the event as it worked through the system hardening and data recovery phases, which included employee, customer and shipper notifications. The team also helped prepare the CEO to testify before two congressional committees about the company’s response to the ransomware attack.

FTI Consulting provided the company early counsel on key stakeholder engagement and helped guide the organization’s communications through the initial days and weeks following the restart of the system.

The Impact

Colonial Pipeline successfully navigated the largest ransomware attack in U.S. history and prevented the pipeline shutdown from delivering major and lasting economic impacts along the East Coast through constant government, public and media engagement.

In 2022, Colonial Pipeline received the Silver Anvil Award of Excellence from the Public Relations Society of America for its communications response to the ransomware attack and navigating a national crisis.

Introduction

1. Situation

2. Our Role

3. The Impact

LUCKIN COFFEE

MICROSOFT & ACTIVISION

COLONIAL PIPELINE

HERTZ

MADOFF RECOVERY

WELLS FARGO

Featured Insights

WHITE COLLAR CRIME

SAFEGUARDING THROUGH CRISES

CYBERSECURITY & DATA PRIVACY

The Expert Briefing with FTI Cybersecurity

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High-profile cybersecurity and data privacy threats are pervasive and sophisticated. Explore our insights discovery tool to get personalized recommendations on how you can safeguard privacy, maintain governance, ensure regulatory compliance and protect against bad actors.

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