Photo by Laura Barisonzi.
Look no further than Salvatore Graziano to find the type of veteran litigator that has enabled founding partner Max Berger to develop and maintain the nation’s most renowned securities litigation firm. The son of immigrant parents and a New Yorker to his core, Graziano has spent his entire career pursuing wrongdoing, first as an assistant district attorney in Manhattan. Joining Bernstein Litowitz Berger & Grossmann after government service was a natural move for Graziano, who has helped recover billions of dollars for investors while providing a measure of accountability for corporate misconduct.
Lawdragon: Can you discuss some of the cases that are taking up your time this year?
Salvatore Graziano: This year, I, along with numerous others at my firm, have spent a significant amount of time working on the Wells Fargo securities litigation (Gary Hefler et al. v. Wells Fargo & Company) pending in the Northern District of California. Representing lead plaintiff Union Asset Management Holding on behalf of a class of Wells Fargo shareholders, we successfully opposed defendants’ numerous motions to dismiss, with U.S. District Judge Jon Tigar upholding our complaint and refusing to dismiss the bulk of our allegations against the bank and its former and current executives. Thereafter, Union reached a proposed class action settlement of $480 million with the defendants, subject to final approval by the District Court, which would represent the fourth largest recovery ever in the Ninth Circuit. Considering the substantial risks we would have faced in continued litigation and at trial, including proving loss causation and demonstrating damages, it is an excellent recovery.
Among other cases, in contrast to the proposed resolution of the Wells Fargo case, our litigation against SunEdison, Inc. (In re SunEdison, Inc. Securities litigation) pending in the Southern District of New York, continues apace. Briefly one of the largest renewable energy companies in the world, we allege that SunEdison’s former officers, directors and underwriters misled investors concerning the Company’s financial condition, including through a preferred share offering raising $650 million at a $1,000 per share, less than one year before being worth zero after SunEdison’s bankruptcy filing. The case is a tough fight and has proceeded to a fully briefed motion for class certification and merits discovery with numerous depositions scheduled through the early fall of 2018.
LD: You’ve spent many years litigating securities fraud cases. Please share your view on ongoing trends, as broadly as you want to go, from the firm’s point of view. The firm was at the top of rankings put out by Securities Class Action Services, but what do the number of filings and settlement values tell us about the state of the practice?
SG: The state of our firm’s practice is, and has always been, highly unpredictable. There are economic research firms out there who run the numbers and attempt to find meaning and trends each year, but these analyses do not predict much and are often merely a summary of the most recent prior events. We react to fraud, and while we have been doing this a long time and put very significant resources into monitoring the markets for misconduct, we are always surprised by what we find. The wrongdoing takes many forms – from accounting gimmickry, to deceptive and anti-shareholder business practices, to brazen self-dealing in the boardroom, to outright lying regarding a company’s financial reporting. Corporate insiders are constantly developing new ways to try and get around the laws which keeps the field dynamic and interesting for a litigator.
Judges who have seen enough of these cases tend to see the misconduct and perhaps become inured to the various nature of some of it so, at times, it can be a challenge demonstrating to them how each case is unique, with important distinctions in the specific fact patterns. Interestingly, lay juries who have less “experience” with these cases accept them as standalone cases and typically see the fraud at work quite clearly even absent insider selling or other expected checklist items.
LD: Do you expect any continuation or shifting of certain trends with respect to the types of claims filed, the industries targeted, or the litigation strategies employed?
SG: See my prior answer for this, as well. If I could predict any those trends, I would be a far better investor. There is no crystal ball to any of this, in my experience. We are forced to keep our monitoring of the markets as comprehensive and rigorous as possible for exactly that reason.
LD: Has the current administration’s overall view or sentiment towards regulation affected your clients’ or potential clients’ access to the courts, or do you expect it to?
SG: So far it has not come to pass, but the rhetoric is as threatening as it’s ever been, and the risk is high. It is quite remarkable. Some members of SEC and Treasury staff have stated positions in favor of eliminating investors’ rights to sue for violations of the securities laws in favor of forced arbitration. The Trump Administration has endorsed a bill to roll back parts of Dodd Frank which looks to me like a solution in search of a problem. Corporate profits and the market are at all-time highs. If it ain’t broke, don’t fix it? The President has also asked the SEC to study reducing quarterly earnings reporting to twice a year and even The Wall Street Journal editorial page – no friend to regulation – has spoken out against that. The head of the Consumer Finance Protection Bureau (CFPB), Mick Mulvaney, told bankers in an amazingly brazen moment that, as a congressman, his position was: “If you’re a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you.” So the rhetoric, and the spirit of the ideas, coming from government is indeed in a new and worrying place. We must remain vigilant to protect investor access to the courts.
LD: With respect to any of the above, is “morale” at a very low point within the investor community – or is there a precedence for this era and reasons for hope?
SG: Morale is not low. Investors are by nature optimistic and, if anything, not sufficiently concerned about the risks ahead. Corporate profits and stock markets are at all-time highs, and the business lobby is actively calling for – and obtaining – further deregulation of corporate conduct and the elimination of key investor protections. The last two times we experienced this dangerous mix – in 2000 and 2008 – we saw an explosion in corporate fraud and the market indices cut in half. Did the dotcom and subprime crises teach us nothing?
LD: Have you come to any big-picture conclusions about the likelihood of another dramatic event in the market and the ability of investors to play a mitigating force through litigation?
SG: No. It’s the right question to be asking, but while the signs are concerning to me, events always seem to surprise.
LD: Going back to the start of your career: Why did you want to become a DA? Was being a prosecutor something you had always wanted to or did this emerge at NYU?
SG: My public path emerged as a result of an intensive third-year law school clinic where I practiced criminal law. It was entirely unexpected, but, in hindsight, how I really learned to understand what judges needed to know and what jurors expected to see at trial. It was a crash course on litigation that cannot be replicated any place else.
LD: Can you discuss some of the types of cases you handled and how this led you to a private practice focusing on securities litigation?
SG: I began my career as a criminal prosecutor. Upon leaving that office it seemed strange to me to start defending companies and individuals accused of wrongdoing. Not that there is anything wrong with that at all, it just seemed natural to me to keep going after wrongdoers. Practicing securities litigation on behalf of investors has been the right fit for me and a wonderful experience. As a private prosecutor, I feel that I am playing a meaningful role, being involved with important civil cases that the government would not have sufficient resources to focus on.
LD: What do you like about this type of work? What has kept you at it over the years?
SG: I like holding wrongdoers accountable. I think the world presents everyone with plenty of obstacles and imbalances and it is gratifying to address misconduct and perhaps make a small difference in checking abuses of power. I love the challenge of proving our cases. It is very difficult – they are more complex than a straight forward criminal case and conveying their facts and import to judges and juries requires serious preparation and the appropriate presentation. Because our cases always involve different industries and subjects, we must learn and master new materials and this keeps the work fresh and engaging. And of course I enjoy the challenge of facing off against the best of the private bar. Unless you bring yourself to the expert level of your adversary, you will not be successful.
LD: Why did you join Bernstein Litowitz in 2006? What do you think separates the firm from others who also litigate securities litigation?
SG: I joined Bernstein Litowitz in 2006 because I considered the firm the best of the bar. Over time, working with my excellent colleagues, my view on that has never changed. Our senior founding partner Max Berger sets the tone with his unparalleled commitment to excellence and integrity and it is very gratifying to be a part of this team. It’s also humbling and motivating to join an enterprise that was already outstanding and work to maintain and improve upon on it. I know we are always trying to, and I hope that we are achieving it.
LD: You did both your undergrad and law school in the City. Are you a life-long New Yorker or did you come here for school? Did you ever think about living or practicing anywhere else?
SG: I am a lifelong New Yorker, raised by immigrant parents. I did not learn to speak English until attending public school in New York City and I could not imagine living anywhere else. I live near a federal courthouse in NYC and see many people lining up for their naturalization hearing, as my parents once did. I can point them to the building before they finish asking me where it is. I hope their children continue to have the same opportunities I had 50 years ago.
LD: What do you do away from the office – whether for time with family and friends or community activities?
SG: I love to travel. I have two teenage daughters and my wife and I have taken them to every country in the world on our bucket list. I wonder how it will affect them. One of my daughters traveled alone to Europe as a minor and I asked her if she was fine doing that. Her response was, “Why not, it’s just a six-hour flight.” I like that.