Kobre & Kim LLP, a New York-based law firm that has represented hedge funds in connection with Bernard Madoff’s fraud, hired Morgan Stanley’s William McGovern to head a new Hong Kong office targeting Asian clients in disputes with U.S. regulators or global banks.
“What we’re seeing is the globalization of rules relating to anti-bribery, antitrust and securities regulation,” firm founder and former assistant U.S. Attorney Steven Kobre said in an interview. The Hong Kong office will have five lawyers by the end of the year, he said.
International law firms have been expanding their disputes resolution practices in Asia. Los Angeles-based Gibson, Dunn & Crutcher LLP opened a Hong Kong office earlier this month, hiring Kelly Austin, formerly an Asia Pacific compliance and litigation counsel at General Electric International Inc. Global banks are also being sued more often by Asian investors who claim the institutions misrepresented financial products.
“There is a real demand in Asia for a law firm willing to take an adverse position against larger companies,” Kobre said. The firm doesn’t have a corporate practice and doesn’t need repeat business from large financial institutions, he said.
“That gives the firm a freedom to pursue claims that come in the door,” said McGovern, who worked as a lawyer at Morgan Stanley for six years including as an Executive Director in Hong Kong since 2008. “It means we can represent institutions like hedge funds and pension funds against large banks.”
Bank of America, Galleon
Kobre & Kim represented Maxam Absolute Return Fund LP, which sued last year in a bid to recover $280 million from Bernard L. Madoff Investment Securities LLC. Kobre & Kim’s clients also include a South American bank in a $30 million claim against Bank of America, Ali Far, a hedge fund manager in the Galleon Group LLC insider trading case and former Amaranth Advisors LLC energy trader Brian Hunter.
U.S. and Asian regulators are cooperating more closely, leading to more complex investigations, said McGovern, 44, who worked for the Securities and Exchange Commission in Washington and New York from 1999 to 2004.
Asian regulators are tightening oversight as they compete to attract capital, according to Mark Johnson, who leads Herbert Smith’s disputes practice in Asia.
Insider Trading
Hong Kong criminalized insider trading in 2003 and authorities in many Asian jurisdictions have been stepping up their anti-corruption investigations, he said. Herbert Smith LLP, a London-based law firm, has increased the number of its disputes lawyers in its seven Asian offices by 15 percent to 93 since 2008.
Herbert Smith which opened in Hong Kong when it was still a British colony in 1982, has acted for U.S. and European banks being investigated for improperly selling financial products in the city, according to Johnson.
An estimated $1.8 billion of securities that became worthless following the bankruptcy of Lehman Brothers Holdings Inc. were sold to about 43,000 investors in Hong Kong. Banks offered to pay at least 60 cents on the dollar to investors in July last year as part of a buyback agreement brokered by Hong Kong’s securities watchdog.
“There’s now a tail off in such regulatory investigations in Asia and a pick up in civil claims,” he said.
One of those claims may proceed in New York after a U.S. district court judge last week allowed Hong Kong investors to sue HSBC Holdings Plc’s U.S. unit, the trustee for collateral, securing the Lehman-designed structured notes.
Oaktree, Silver Point
In Hong Kong, Herbert Smith has acted for private equity clients like Oaktree Capital Management LP and Silver Point Capital LP in their dispute with their partners in a Macau casino project.
Gibson Dunn’s Austin said multinational corporations are seeing a “greatly increased” risk of anti-corruption regulation. “A number of investigations have involved matters across Asia and this will be a key focus for our practice.”
Avon Products Inc.’s shareholders sued the board and three former directors in New York on July 22 claiming the company failed to prevent improper payments in China.
Avon has said the cost of an internal investigation into its business practices may rise to as much as $95 million this year from $35 million in 2009 as the probe broadened beyond China.
Hong Kong is Kobre & Kim’s first office in Asia and second outside the U.S. after a London office it opened last year. Spokeswoman Pallas Knight said the Hong Kong office is expected to open at the end of September.
Separately, New York-based Davis Polk & Wardwell LLP announced that it hired two new partners for its Hong Kong office – Bonnie Chan from the Hong Kong Stock Exchange and Antony Dapiran from Freshfields Bruckhaus Deringer LLP.
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