June 19 (Bloomberg) -- Siemens AG auditors at KPMG International alerted top company executives about ``suspicious cash payments'' in 2003, a witness told a Munich court yesterday at a corruption trial.

KPMG told former Siemens Chief Financial Officer Heinz- Joachim Neubuerger that it discovered cash payments of about 4 million euros ($6.2 million) that didn't have a clear purpose, said a KPMG auditor who can't be identified under German privacy laws. Karl-Hermann Baumann, then Siemens chairman, was also informed, he said.

``We informed the highest people at the company and were told the case would be investigated,'' the 47-year-old auditor told the Munich Regional Court at the trial of former Siemens unit manager Reinhard Siekaczek. ``That's all we have to do as auditors.''

The case is the first criminal trial in the Munich probe that has dogged Siemens since November 2006 and led to investigations in at least a dozen countries. Siemens, which is cooperating with prosecutors, found 1.3 billion euros ($2 billion) of ``unclear payments'' made from 2000 to 2006. Munich prosecutors are investigating about 300 suspects.

Siekaczek worked at Siemens's former ICN unit until 2004 and is charged with 58 counts of breach of trust. Last month, he told the court that he organized a system of sham contracts to conceal bribes at the Munich-based company. The scheme was used to extract 53.3 million euros from the company's regular accounts from 2002 to 2004, according to prosecutors.

Neubuerger's lawyer, Eberhard Wahle, didn't return a call seeking comment. Baumann didn't return a call to his office seeking comment.

Neubuerger once complained to him that KPMG auditors working at Siemens said in office-floor conversations that ICN pays bribes, the witness said. Neubuerger said the auditors should handle it professionally and discuss it with the unit's leadership, according to the witness.

``We talked to the ICN unit leadership, but four top unit managers, including ICN's internal auditor, conspired to deceive us,'' the auditor said. ``If bribes are hidden in this fashion, neither we nor the Siemens control mechanisms could have found out.''

KPMG later learned of an internal e-mail by a Siemens employee that advised use of non-round amounts for bribery payments since the auditors looked for round numbers, he said.

The payments at the time weren't large enough to withhold certification of an audit, yesterday's witness said. KPMG was later told the cash was needed for use on construction sites in Nigeria, he said.

The auditors weren't told to overlook anything, the witness said. Had KPMG found proof of misconduct, they promptly would have informed Siemens's supervisory board, he said.

``Investigating crimes is not an auditor's task,'' the witness said. ``If we see crimes, we have to alert the company, and that's what we did here.''

For more trial and appeals news from yesterday, click here.

New Suits

GFI Seeks $220 Million From Ex-Broker, Asbury Park Press Says

GFI Group Inc. Chief Executive Officer Michael Gooch and his partners are seeking $220 million from former North American brokerage head Donald Fewer, the Asbury Park Press reported.

The damages are being sought as part of a lawsuit filed in Monmouth County, New Jersey, where both Gooch and Fewer live, the newspaper reported yesterday.

GFI, which as of last year was the largest inter-dealer broker of credit-default swaps, in April accused Fewer of helping orchestrate a defection of 21 credit brokers to a unit of rival Cie. Financiere Tradition.

Fewer began working behind the scenes with Tradition after GFI went public in January 2005 and another partner, Colin Heffron, was named president, the newspaper said, citing the lawsuit. Fewer's BlackBerry device showed hundreds of electronic messages sent to Tradition North America chief Emil Assentato, the newspaper said.

Stephen Harmon, an attorney for Fewer, didn't return a telephone message.

Ex-EADS Executive Gut Is Charged With Insider Trading

Former European Aeronautic, Defence & Space Co. Chief Operating Officer Jean-Paul Gut was charged with insider trading for selling shares before disclosing production delays on Airbus SAS's A380 superjumbo airliner.

Gut, 46, was arraigned on a preliminary count of insider trading by investigating judges and released on bail of 400,000 euros ($619,000), said Isabelle Montagne, a spokeswoman for Paris prosecutors. Gut is the second former EADS executive charged in the case.

Paris prosecutors are investigating whether company executives and stockholders Lagardere SCA and Daimler AG sold EADS shares based on internal information about production problems for the A380, the world's largest passenger plane. Former EADS co-Chief Executive Officer Noel Forgeard was charged last month after being held for 35 hours.

``These preliminary charges in France are also a defense, which allows the charged to review the police dossier and to respond directly to the accusations,'' Anne Meaux, a spokeswoman for Gut, said in a telephone interview with Bloomberg News yesterday.

Meaux said June 17 that Gut didn't benefit from illegal share sales. ``He exercised his stock options in strict respect for EADS's internal rules and French law,'' she said.

If found guilty of insider trading, he could face as much as two years in prison and fines equal to 10 times the profit on any illegal share sales.

The probe is one of two over the timing of disclosures that wiring problems would delay the 525-seat A380s introduction. As many as 17 current and former executives at EADS and its Airbus unit are under investigation in a related Autorite des Marches Financiers civil case.

Pierre Bayle, a spokesman at Paris- and Munich-based EADS, declined to comment. EADS CEO Louis Gallois, who has never been named in either investigation, told shareholders at the annual meeting May 25 that he has faith in his managers' innocence.

``This decision is all part of the process of the case,'' Meaux said.

Gut, who left EADS in October and now works for Lagardere as chief international affairs officer, was taken into custody June 16 and released June 17.

Ramzi Khiroun, a spokesman for Lagardere, declined to comment.

The Paris prosecutors opened the inquiry in 2006, after EADS shareholders filed a lawsuit claiming insider trading and the French market watchdog began a probe into shares sold ahead of announcements that Lagardere and Daimler were each selling 7.5 percent stakes in EADS and about delays in the A380 program at EADS's Airbus SAS unit.

For more new suits news from yesterday, click here. For copies of recent civil complaints, click here.

Lawsuits/Pretrial

Parmalat Can Seek Compensation at Trial, Judge Rules

Parmalat SpA, Italy's biggest dairy company, won the right to seek compensation in a criminal trial over the Italian foodmaker's 2003 collapse.

Judge Eleonora Fiengo in Parma, Italy, yesterday granted Chief Executive Officer Enrico Bondi's request to seek cash for the company in a criminal trial against Parmalat founder Calisto Tanzi and 53 other people accused of fraudulent bankruptcy. Fiengo also allowed 30,000 individual investors to seek redress.

``The court upheld our request to receive damages from the defendants in the trial,'' said Manuela Cigna, Bondi's lawyer.

Bondi, 73, is seeking compensation for the full 14 billion- euro ($21.6 billion) shortfall declared by Parmalat when it sought bankruptcy protection from creditors in 2003. The amount of the award would be decided by the court at the end of the trial if Tanzi and the others are found guilty.

Tanzi's lawyer, Fabio Belloni, said his client and the other defendants didn't oppose Bondi's request.

Fiengo also decided to proceed with the trial of Mediobanca SpA Chairman Cesare Geronzi on charges of extortion and fraudulent bankruptcy in connection with the sale of dairy company Eurolat to Parmalat in 1999. She transferred the case to Rome, citing jurisdictional reasons.

``Finally the court has upheld the request we made from the beginning to move the trial to the competent jurisdiction,'' Geronzi's lawyer Ennio Amodio said in an interview. ``Now the trial will be transferred to Rome, where we expect to clarify that Cesare Geronzi had no responsibility for the charges he is accused of.''

Parmalat, which came out of bankruptcy in 2005 after a two- year reorganization, is trying to recoup funds by suing banks and auditors that allegedly contributed to its bankruptcy. Under Italian law, civil damage claims can be made during criminal proceedings.

Investors in the failed Parmalat were given shares in the reorganized company, partly compensating them for losses.

The decision is a victory for Bondi after he lost the right to seek damages in a criminal trial in Milan for market manipulation and in April had most of his claims against Citigroup Inc., a banker for Parmalat, thrown out in a separate case in the U.S.

For more lawsuits news from yesterday, click here.

Verdicts/Settlements

Hoechst Wins EU Ruling Cutting Fine by EU25 Million

Sanofi-Aventis SA's Hoechst unit won a European Union court ruling cutting an antitrust fine by 25 million euros ($38.7 million) to 74.25 million euros in a case involving the price of food preservatives.

The European Court of First Instance in Luxembourg ruled yesterday that the European Commission didn't apply ``equal treatment'' when it levied the fine in 2003. Hoechst had challenged ``irregularities'' in the EU's investigation and an ``unlawful advantage'' given to the other companies.

Hoechst was one of five companies that at one point controlled about 85 percent of the market for sorbates, the most-used preservative in food and drinks in Europe, the EU's antitrust authority said. Hoechst was among four companies the European Commission fined a total of 138.4 million euros for rigging prices of the chemical between 1979 and 1996.

``The commission erred in attributing the role of leader of the cartel to Hoechst and infringed the principles of sound administration and equal treatment,'' the Court of First Instance, the second-highest EU court, said. The commission also ``didn't make it possible'' to conclude ``precisely'' that the role of leader could be attributed to Hoechst.

Hoechst was the largest producer of the main type of sorbates, sorbic acid, until it transferred the business to Nutrinova in 1997, according to the commission. Paris-based Sanofi, France's largest drugmaker, acquired Hoechst in 2005.

``We welcome this decision,'' said Jean-Marc Podvin, a Sanofi-Aventis spokesman. ``We have to read the decision before we can comment any further.''

Jonathan Todd, a commission spokesman, said the EU regulator ``is studying the ruling carefully.''

Lawyers for Hoechst in a separate case yesterday asked the EU court to annul or cut a 74 million-euro fine the company got in 2005 for colluding with two other companies, including Akzo Nobel NV, on prices of monochloroacetic acid, a chemical used in detergents and other products.

``It appears that the commission was dead-set on applying as high a fine as possible on Hoechst,'' Martin Klusmann, a lawyer for the company, told the court yesterday. The Hoechst unit that committed the infringement now belongs to Clariant AG, which is ``completely liable,'' he said.

Commission lawyer Manuel Kellerbauer rejected the argument, saying Hoechst's ``responsibility can't retroactively be overturned by the fact that its unit was sold to Clariant AG.''

Clariant, which took over the unit from Hoechst in 1997, received full immunity from a fine for being the first to cooperate with the commission.

Yesterday's case is Hoechst v. Commission, T-410/03, European Court of First Instance.

Pfizer, Ranbaxy Delay Generic Lipitor for 20 Months

Pfizer Inc. and India's Ranbaxy Laboratories Ltd. agreed to keep copies of the cholesterol pill Lipitor off the U.S. market an extra 20 months, a move that may generate an added $12 billion for the U.S. drugmaker.

Under a lawsuit settlement, Ranbaxy won't sell generic versions of Lipitor, the world's best-selling drug, until November 2011, New York-based Pfizer said yesterday in a statement. Analysts had projected Ranbaxy would enter the market in March 2010, when the main patent expires, while Pfizer was using litigation to delay competition until 2016.

The deal buys Pfizer Chief Executive Officer Jeffrey Kindler more time to find new drugs to replace as much as $12 billion a year at risk when Lipitor copies become available. Investors have been skeptical that Kindler, a former lawyer, can offset the losses with a plan that includes increasing sales of current products, cost cutting and speeding new drugs to market. Since Kindler took command in July 2006, Pfizer, the world's biggest drugmaker, has lost 32 percent of its value.

``It is one of the most significant steps Kindler has made,'' said Michael Krensavage, president of Krensavage Asset Management in New York, in a telephone interview yesterday. ``It clearly will enhance the value of the company. Right now, it does help to have more time.''

Caduet, a Pfizer drug that combines Lipitor and the company's blood pressure medicine Norvasc, also will be available in generic form in 2011 under the deal. Caduet last year generated $568 million in global sales. In addition to the U.S. cases over Lipitor and Caduet, the agreement settles Lipitor lawsuits in 11 countries.

Pfizer and Ranbaxy have been fighting in U.S. courts since 2003 over Ranbaxy's bid to sell generic Lipitor. Pfizer sued Ranbaxy again in March, this time over patents expiring in 2016 related to the process of making atorvastatin, the active ingredient in Lipitor. Pfizer has another patent on Lipitor that expires in 2017.

Under the settlement, Ranbaxy will be able to enter the market at set dates in seven other countries, mostly around September 2011, depending on the expirations of patents and other regulatory periods in those areas. The seven countries are Canada, Belgium, Netherlands, Germany, Sweden, Italy and Australia.

Ranbaxy will continue to sell generic Lipitor in Malaysia, Brunei, Peru and Vietnam. Litigation remains in Finland, Spain, Portugal, Denmark and Romania.

The agreement also settles lawsuit over the Viagra impotence drug pending in Ecuador, and one over the blood pressure medicine Accupril pending in New Jersey.

The Lipitor case is Pfizer Inc. v. Ranbaxy Laboratories Ltd., 08cv164, U.S. District Court District of Delaware (Wilmington). The Caduet cases are Pfizer v. Ranbaxy, 08cv162 and 07cv138, also in Wilmington. The Accupril suit is Pfizer Inc. v. Teva Pharmaceuticals USA Inc., 05cv620, U.S. District Court in the Newark, New Jersey.

Petco Agrees to Pay $20.2 Million to Settle Shareholder Suits

Petco Animal Supplies Inc., the second-largest U.S. pet- store chain, agreed to pay $20.2 million to settle lawsuits over claims it misled investors about accounting errors in 2005, according to court documents.

Shareholders accused Petco in April 2005 of issuing misleading statements about its financial health, causing the stock to trade at artificial highs. The complaint followed an announcement that the company would trim fourth-quarter net income by as much as 16 percent because of expense accounting errors. Lawyers told U.S. District Court Judge Marilyn Huff in San Diego of the agreement at a hearing on June 16.

The case is In Re Petco Corp. Securities Litigation, 05- 0823, U.S. District Court, Southern District of California (San Diego).

For more verdict and settlement news from yesterday, click here.

On the Docket

Georgia Gulf Says Court Sets July Trial Date for Notes Lawsuit

Georgia Gulf Corp., North America's largest maker of vinyl construction products, said a Delaware judge set a July 21 trial date for its lawsuit seeking to avoid default on $100 million in notes.

A Chancery Court judge agreed June 12 to the company's request to expedite the case, Atlanta-based Georgia Gulf said in a U.S. Securities and Exchange Commission filing.

Georgia Gulf sued Sandelman Partners LP on June 8, saying the hedge fund had notified it two days earlier that the 7.125 percent notes must be paid within 30 days. Georgia Gulf said in the complaint it may be forced to declare bankruptcy if Sandelman is allowed to accelerate the payment.

The case is Georgia Gulf Corp. v. Sandelman Partners LP, CA3815, Delaware Chancery Court (Wilmington).

For Bloomberg articles by lawyers on litigation topics, click here.

For news about bankruptcy litigation, click here. For news about intellectual property litigation, click here. For news about securities and compliance litigation, click here.

To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net.

Last Updated: June 19, 2008 00:01 EDT