June 28, 2013 – July 5, 2013
The summaries provided in this Weekly Recap do not necessarily represent the views of Squire Sanders (US) LLP and should not be deemed to be endorsements of them. The Recap is intended to be a compilation of articles and events to encourage discussion within the conflict minerals community and to keep our readers updated on the most recent developments.
U.S. District Court for the District of Columbia Holds Conflict Minerals Oral Arguments
On July 1st, a federal judge questioned attorneys from both the SEC and the business groups concerning the conflict minerals rule.
As Reuters reports in its article titled, “Judge Questions Court’s Role in SEC’s ‘Conflict Minerals’ Rule,” Judge Robert Wilkins appeared swayed by each party at moments during the three-hour oral argument. At one point, Reuters reports that Judge Wilkins “suggested to an attorney for the trade groups that federal courts should consider deferring to Congress on the matter.” Later on, when questioning the SEC’s attorney, Reuters notes that Judge Wilkins challenged the SEC’s view that the Dodd-Frank Act failed to permit the SEC to issue a de minimis exemption. Judge Wilkins stated, “the agency seems to have not really performed the legal analysis correctly and that the agency has an inherent authority in every case” to issue an exemption.”
Our very own Dynda Thomas, contributor to the conflict minerals blog and leader of Squire Sanders’ conflict minerals practice, attended the hearing. Dynda had the following observations…based on the pleading, oral arguments and decisions in API v. SEC and NAM v. NLRB, there is a basis to believe that the court could vacate the rule and remand it to the SEC., but the judge did not send any clear signals on where he might come out on this.
Co.Exist: Why Nintendo is Being Targeted for Using Conflict Minerals
It all began in August 2012 when the Enough Project released its 2012 Corporate Ranking Report ranking Nintendo dead last out of twenty-four companies based on its progress on conflict minerals. Enough Project’s report stated, “Nintendo has made no known effort to trace or audit its supply chain.”
Since then, Nintendo issued a conflict minerals policy and has taken steps to reduce its use of conflict minerals in its video game consoles. Despite these steps, Nintendo is still being targeted for using conflict minerals. Co.Exist explores why Nintendo is a target in a recent article titled “Why Nintendo is Being Targeted for Using Conflict Minerals.”
Debra Rosen, movement director of Walk Free, referring to Nintendo’s conflict minerals policy, stated “There’s nothing substantive in that [conflict minerals] policy. When asked for what steps are taken to audit suppliers they’ve [Nintendo] been unresponsive.” According to Co.Exist, “Walk Free wants more: That Nintendo audit its supply chain itself to ensure there are no conflict minerals.”
CFO Magazine: Compliance Chiefs Seek Bigger Budget
A new report undertaken by PricewaterhouseCoopers and published by CFO Magazine suggests that depending on the size of the company anywhere from approximately 70% to 84% of companies responded that their compliance budgets either stayed the same or increased over the last 12 months.
Sally Bernstein, a principal with PwC and a leader of the firm’s ethics and compliance services unit, stated that the reason might “stem in part from the changing nature of regulation. Regulatory reach is increasing.” Ms. Bernstein then highlights the conflict minerals rule as an example of one such regulation.
Local Wisconsin Companies Discuss Compliance Efforts with Conflict Minerals Rule
Michael Burke of the Journal Times (Racine, Wisconsin) reports the status of local companies, Twin Disc, Inc. and Modine Manufacturing Company, as they navigate the complexities of the conflict minerals rule.
Twin Disc’s Chief Financial Officer, Chris Eperjesy, stated, “[Twin Disc is] just at the doorstep and [hasn’t] really dug into the issue yet.”
Jessie Lochmann, an attorney and partner at Milwaukee law firm Foley & Lardner, provided a “benchmark” highlighting where most companies are today in their compliance efforts with the conflict minerals rule, “Most public companies/manufacturers are now at the stage of creating a questionnaire for all of their suppliers.”
Another local Wisconsin company, Modine Manufacturing Company, began implementing compliance measures shortly before the final rule was adopted in August 2012. Modine’s corporate counsel, Peggy Kelsey, commented on the breadth of the company’s compliance, “We expect that our assessment will involve over 1,600 global direct material suppliers and over 20,000 global direct material parts. You literally go through all your bills of materials.”
As evident from the status of these two Wisconsin companies, with less than a year before the initial reports are due, some companies are farther ahead than others in their compliance efforts. To read the entire article, please see “Local Companies Begin Grappling With Legislation About ‘Conflict Minerals’“.