Sept. 9 (Bloomberg) -- Seventy-two former Dresdner Kleinwort bankers sued Commerzbank AG claiming about 34 million euros ($49 million) in unpaid bonuses and interest.

The former bankers at Dresdner Kleinwort, the German investment bank taken over by Commerzbank in January, filed the lawsuit in London’s High Court yesterday. The suit claims the bankers, some of whom still work for Frankfurt-based Commerzbank, were paid a tenth of the amount they’re owed in bonuses under a contract with Dresdner Kleinwort.

Commerzbank, which has tapped Germany for 18.2 billion euros of capital, withheld bonuses and severance pay for Dresdner executives after taking control of the firm in January. More than a dozen lawsuits have been filed against the bank in London and Frankfurt over unpaid bonus and severance.

“Dresdner Bank was fully entitled to take the actions it did in relation to Dresdner Kleinwort employees’ discretionary bonuses in light of the marked deterioration in the investment bank’s performance in the months of November and December 2008,” Commerzbank said in an e-mailed statement. “The bank will be defending these claims vigorously in the courts.”

Eight of the bankers claim to be owed more than 1 million euros for work they did last year, according to the lawsuit. The largest individual claim was by Jonathan Powell, seeking 1.67 million euros.

New York Money Manager Charged With $45 Million Ponzi Scheme

A money manager from Brooklyn, New York, was arrested and charged with operating a 30-year Ponzi scheme that claimed more than $45 million in assets.

Philip Barry, 52, a resident of the Bay Ridge section of Brooklyn, began accepting money in the late 1970s from investors, guaranteeing fictional annual profits, according to a statement yesterday by the U.S. Attorney in Brooklyn. Instead, he used new investors’ money to pay earlier ones in a “classic Ponzi scheme,” U.S. Attorney Benton Campbell said.

“The positive rates of return were simply pre-determined interest rates made up by Barry,” ranging from 21 percent in 1979 to 12.55 percent in 2006, Campbell said in the statement.

Barry is accused of luring about 800 investors who put more than $40 million into his so-called Leverage Group, which claimed to be investing in stock options. His reported ending balance of more than $45 million far exceeded assets held by the Leverage Group, producing “substantial losses” for many investors, according to the statement.

The case is U.S. v. Philip Barry, 09-0878, U.S. District Court, Eastern District (Brooklyn).

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

Lawsuits/Pretrial

Lilly Paid Doctors to Prescribe Zyprexa, Notes Show

Eli Lilly & Co. paid doctors in South Carolina for participating in a speakers’ program in exchange for prescribing the antipsychotic Zyprexa, and used golf bets to get more patients on the drug, according to notes by sales representatives.

During a golf game, one doctor agreed to start new patients on Zyprexa for each time a sales representative parred, or put the ball in a hole within a predetermined number of strokes, according to the notes.

“I got four pars out of nine holes,” Lilly salesman Vince Sullivan said in a February 2002 note. “I said I wanted my four new patients.”

The notes were made public for the first time in a court hearing yesterday in South Carolina in the state’s lawsuit against Lilly over Zyprexa marketing practices. State officials contend Indianapolis-based Lilly marketed the drug for unapproved uses.

South Carolina wants to recoup $200 million it contends it wrongfully spent on Zyprexa prescriptions as a result of Lilly’s push to get doctors to use the medicine, approved only for schizophrenia and bipolar disorder, for other ailments. The state also contends the drugmaker withheld information about Zyprexa’s side effects.

“Call notes are jottings written by sales reps and most reps make hundreds of notes monthly,” Marni Lemons, a Lilly spokeswoman, said in telephone interview. “They are not literal recitations of interactions with physicians.”

Lemons said the state’s lawyers took the notes “out of context” and “not one physician employed by the state of South Carolina has testified Lilly promoted off-label to them.”

The case is State of South Carolina v. Eli Lilly & Co., 2007-CP-42-1855, Common Pleas Court for South Carolina’s Seventh Judicial Circuit (Spartanburg).

To read more of this story, click here.

PDVSA May Sue ConocoPhillips on Texas Refinery, Universal Says

Petroleos de Venezuela SA plans to sue to prevent ConocoPhillips from exercising an option to buy the state oil producer’s stake in a joint venture in Texas, El Universal reported, citing a government official.

Venezuela’s reduction of crude supplies to the refinery, leading ConocoPhillips to seek control of the joint venture, was a “sovereign decision,” the newspaper cited PDVSA’s Vice President of Exploration and Production Eulogio del Pino as saying.

ConocoPhillips has said that PDVSA isn’t honoring its contract to supply crude to the jointly owned refinery in Sweeny, Texas, El Universal reported.

PDVSA seized operating control of a joint venture in Venezuela’s Orinoco Belt from ConocoPhillips in May 2007. ConocoPhillips left the country and filed for international arbitration against PDVSA.

Nigeria’s Anti-Graft Body to Prosecute Brokers, Nation Reports

Nigerian equity traders who manipulated share prices with loans from five banks will be prosecuted, the Nation newspaper reported, citing Farida Waziri, the head of the Economic and Financial Crimes Commission.

The loans formed part of bad debts of 747 billion naira ($4.84 billion) that forced the Central Bank of Nigeria to sack the chief executive officers of five banks on Aug. 14 and inject 420 billion naira into their companies, Waziri said, according to the Lagos-based newspaper.

The banks affected are Intercontinental Bank Plc, Union Bank Plc, Oceanic Bank Plc, Afribank Plc and Finbank Plc.

For more lawsuits news from yesterday, click here.

Trials/Appeals

Bank of America Faces Cuomo Probe, Settles Texas, Ohio Cases

Bank of America Corp. and some executives may face charges if the company keeps invoking attorney-client privilege to avoid answering questions about the Merrill Lynch & Co. takeover, New York Attorney General Andrew Cuomo’s office said.

In the New York case, “Bank of America’s indiscriminate invocation of the attorney-client privilege is hindering this office’s ability to make fair and fully informed decisions as to what charges, if any, to bring and whether individual Bank of America officers should be charged,” Cuomo’s office said in a letter yesterday to Lewis Liman, a lawyer for the Charlotte, North Carolina-based bank. Cuomo’s office said the company can’t rely on such a defense while refusing to disclose the substance of the legal advice.

Senior bank officials didn’t disclose “material non-public information” to shareholders on at least four instances in the fourth quarter, said the letter. The bank has blocked former General Counsel Timothy Mayopoulos and Chief Financial Officer Joe Price from answering questions, citing attorney-client privilege, according to the letter, which was signed by the chief of New York’s investor protection bureau David Markowitz.

Shareholders approved the merger on Dec. 5. Chief Executive Officer Kenneth Lewis and Price told federal regulators later that month the bank might cancel the acquisition because of New York-based Merrill’s mounting losses. Regulators pressed the bank to complete the acquisition on Jan. 1, combining the largest U.S. bank and the largest securities firm.

To read more of this story, click here.

Merck Jury Told to Keep Deliberating in Fosamax Case

A federal judge instructed a jury to continue deliberating whether Merck & Co.’s osteoporosis drug Fosamax caused a Florida woman’s “jaw death,” after the panel told the judge it couldn’t decide.

U.S. District Judge John Keenan in Manhattan told the jurors to keep working yesterday. He explained that the case is important to both the plaintiff and Merck. The jurors got the case Sept. 2 and have deliberated about nine hours since then. The trial started with jury selection Aug. 11.

“It’s very stressful to sit here and an agreement cannot be reached,” a juror wrote in one of four notes to Keenan yesterday about the lack of unanimity among the eight-member panel. “I feel that we never will reach a verdict because everyone has a different opinion.”

Merck, based in Whitehouse Station, New Jersey, as of June 30 faced about 900 Fosamax cases, including suits with multiple patients, the company said in an Aug. 3 regulatory filing. The trial is the first of three so-called bellwether trials that may point the way to out-of-court settlements and show each side the other’s strategy.

Shirley Boles, 71, of Fort Walton Beach, Florida, said she used the drug from 1997 to 2006 and by September 2003 developed jawbone death, called osteonecrosis of the jaw, or ONJ. Boles’s lawyers asked the jury for at least $1 million. Keenan has ruled out punitive damages in her case.

Jacqueline Emerson, a Merck spokeswoman, declined to comment about yesterday’s instruction to the jury. Boles’s attorney, Timothy O’Brien, also declined to comment.

The federal lawsuits are combined in In Re Fosamax Products Liability Litigation, MDL 1789, U.S. District Court, Southern District of New York (Manhattan).

Chevron May Foot Legal Bills for Man Who Taped Judge

Chevron Corp., battling a $27 billion environmental lawsuit in Ecuador, said it may pay the legal bills of a U.S. businessman whose secret recordings of meetings with the judge on the case led the jurist to step down.

Californian Wayne Hansen used a pen equipped with a tiny camera to record meetings he had in May and June with Judge Juan Nunez in Ecuador, Chevron announced Aug. 31. Hansen told the judge he was seeking contracts for his company to clean up oil contamination if Nunez ruled Chevron was responsible for environmental damage in the Amazon basin, according to Chevron’s translation of the conversations, which were in Spanish.

Chevron alleges that Nunez disclosed his intention to rule against the company at the meetings. Ecuador Prosecutor General Washington Pesantez said yesterday the recordings show Nunez said he couldn’t disclose how he will rule. Pesantez said he’s investigating the matter.

“If he incurs future legal costs related to this matter, it would only be fair that we consider assisting him,” Kent Robertson, a Chevron spokesman, said of Hansen in an e-mail.

Budvar May Lose ‘Bud’ Name in Austria, EU Court Says

Budejovicky Budvar NP may lose the “Bud” name on beer in Austria, the European Union’s highest court said in a dispute that blocked Anheuser-Busch InBev NV from selling its top brand in the country for a decade.

Budvar won’t be able to keep its national protection if an Austrian court decides that it’s a qualified geographical indication, a protection designating a product that is identified with a certain region, the European Court of Justice in Luxembourg ruled yesterday.

“The ruling will lead to the lifting of an injunction preventing Anheuser-Busch InBev from selling our brand and exercising our trademark rights in Austria,” Leuven, Belgium- based AB InBev said in an e-mailed statement, calling it a “clear and decisive” victory in Austria.

The case is part of a century-old dispute between Budvar and AB InBev, the world’s largest brewer. It’s the second time the fight over Austrian rights made it to the EU court. The protections at issue, so-called geographical indications, have been the subject of trademark disputes around the world involving French champagnes, Italian cheeses and other products.

The outcome for AB InBev depends on an Austrian court’s final interpretation of yesterday’s ruling, which could lead to the lifting of a blocking order that has prevented it from selling beer under the name American Bud in Austria since 1999.

Budvar says it owns the rights to “Bud” because its beer comes from Ceske Budejovice, or Budweis in German. The brewer argued that Bud has been a national geographical indication since 1975 in the Czech Republic and this protection was extended by a bilateral agreement to Austria in 1976.

Budvar may keep the rights to the name only if it’s deemed a simple geographical indication, referring only to a region, and if a survey shows that Czech consumers associate the name with beer from a specific region, the EU court said.

The case is C-478/07 Budejovicky Budvar narodni podnik v. Rudolf Ammersin GmbH.

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

Verdicts/Settlements

Fairfield to Pay Fine, Reimburse Madoff’s Massachusetts Victims

Fairfield Greenwich Advisors LLC agreed to pay a $500,000 fine and return as much as $7.5 million to Massachusetts investors, the full amount they placed with Bernard Madoff through the New York firm.

The hedge-fund manager invested “almost all” of its $7.2 billion in assets in its Sentry Fund with Madoff, Secretary of the Commonwealth William Galvin said yesterday in a statement. Galvin, the state’s top securities regulator, rejected an offer from Fairfield in August to pay Massachusetts investors $6 million.

Fairfield Greenwich defrauded investors by misrepresenting what it knew about Madoff’s business, Galvin said in an April 1 complaint. Galvin said the firm tolerated Madoff’s evasions and failed to catch his massive fraud while making hundreds of millions of dollars in fees from investments with Bernard L. Madoff Investment Securities LLC.

The Fairfield settlement “represents the first investor relief ordered by a regulator in the Madoff scandal and I hope that it will become a template for other resolutions,” Galvin said yesterday in a statement.

Merrill in $475 Million Settlement With Ohio on Subprime Deals

Bank of America Corp.’s Merrill Lynch & Co. reached a $475 million final settlement with Ohio’s State Teachers Retirement System and other shareholders over its writedown of assets backed by subprime mortgages, Ohio Attorney General Richard Cordray announced.

The agreement allows payment to the Ohio pension plan, the lead plaintiff, and others in the lawsuit filed in May 2008. Merrill Lynch was charged with misleading investors about the value of its collateralized debt obligations and other assets backed by subprime mortgages that artificially inflated the market price of its stock, according to a news release the attorney general issued yesterday.

“This settlement marks a significant step forward in holding Wall Street accountable for the subprime meltdown and compensating those who were harmed by these alleged misstatements and manipulations,” said Cordray, who represented the pension fund. “The settlement funds can now be disbursed.”

The Ohio pension and other investors in Merrill Lynch stock suffered “substantial losses” after the company wrote down billions of dollars in assets backed by subprime mortgages beginning in 2007, according to the release.

Charlotte, North Carolina-based Bank of America agreed to acquire Merrill Lynch, hit with $52.2 billion of losses and writedowns for subprime mortgage securities, for about $50 billion in September 2008.

William Halldin, spokesman for Merrill Lynch, declined to comment.

The case is In Re Merrill Lynch & Co. Inc. Securities, Derivative and ERISA Litigation, 07-9633, U.S. District Court, Southern District of New York (Manhattan).

Cox Radio Shareholder Suit Over Buyout Is Settled

Cox Enterprises Inc., the communications and media company, agreed to settle an investor lawsuit filed six months ago challenging the fairness of its offer to buy the outstanding shares of Cox Radio Inc.

Cox Radio stockholders sued in Delaware Chancery Court contending the proposed $3.80-a-share price was inadequate, and the 78 percent stakeholder ultimately agreed to raise the price to $4.80 a share. The buyout was completed in May.

“The efforts of plaintiffs’ counsel in the Delaware action were among the causal factors that led to the increased consideration,” Cox Enterprises lawyers said in settlement papers made public yesterday in Wilmington.

The agreement must be presented to a judge at a later hearing in which shareholders’ lawyers will ask for $5.72 million in fees and expenses, to be paid by the company.

Atlanta-based Cox Radio reported a $404 million net loss for 2008 on $410.2 million in revenue. Cox Enterprises is also based in Atlanta.

Officials of Cox Enterprises weren’t available to comment on the settlement.

The case is in re Cox Radio Inc. Shareholders Litigation, CA4461, Delaware Chancery Court (Wilmington).

Bwin Can Be Blocked by Portugal Monopoly, Court Says

Bwin Interactive Entertainment AG, an online bookmaker, lost a challenge to Portugal’s sports-betting monopoly after a European Union court said gambling restrictions are legal as long as they target fraud and crime.

Bwin had challenged Portugal’s national gambling monopoly and its extension to online wagering. The ruling yesterday by the European Court of Justice could affect other pending cases including a suit by Ladbrokes Plc against the Netherlands.

The EU’s highest court said restrictions such as in Portugal may be justified to meet certain policy goals, including the fight against crime, as long as they aren’t discriminatory and don’t go beyond what is necessary to achieve their aim.

“The verdict is a major setback,” Alfred Reisenberger, an analyst at CA Cheuvreuxin Vienna who rates Bwin “outperform” said by telephone. “Bwin has lost a battle, not the entire war. They will continue to fight and in the long term they will be successful.”

“The fight against crime relied on by Portugal may constitute an overriding reason relating to the public interest that is capable of justifying restrictions,” the Court of Justice in Luxembourg ruled.

Thomas Talos, a lawyer for Vienna-based Bwin, said the case shows there needs to be a political solution to disparate online gambling rules within the 27-nation EU.

The case is C-42/07 Liga Portuguesa de Futebol Profissional (CA/LPFP) and Baw International Ltd. v. Departamento de Jogos da Santa Casa da Misericordia de Lisboa.

To read more of this story, click here.

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

Court News

Judges Punish Wall Street as Regulators Just Talk About Reform

As the White House and Congress debate how to regulate financial firms to avoid another economic crisis, judges have assumed the point position in punishing Wall Street for causing the worst recession since the 1930s Bloomberg News’ Cary O’Reilly and Linda Sandler report.

The executive and legislative branches have been discussing reforms such as more regulation of hedge funds and transparency for derivatives as a response to the financial crisis that began a year ago. As that battle with a reluctant Wall Street inches forward about how to prevent another disaster, judges are taking the first steps toward the same goal, punishing executives and issuing rulings with national impact.

Last week, U.S. District Judge Shira Scheindlin threw out a key free-speech defense that credit raters had used for years to thwart investors’ fraud suits, knocking $1.5 billion off the market value of Moody’s Investors Service Inc. and the parent of Standard & Poor’s LLC.

Free from the pressures of lobbyists, judges typically refrain from showing emotion or expressing opinions during court proceedings to appear impartial. During sentencings in criminal cases, they sometimes let their hair down about their feelings about the damage Wall Street firms or their executives did.

In sentencing imprisoned con man Bernard Madoff June 29 to the maximum penalty of 150 years in prison, U.S. District Judge Denny Chin described Madoff’s crimes as “extraordinarily evil.” He made the sentences of Madoff’s various offenses run consecutively, rather than the more common concurrent method.

Former Monster Worldwide Inc. Chief Operating Officer James Treacy, who had proposed no prison time for what his lawyer called a “technical” crime, was sentenced to two years in jail for improperly accounting for backdated stock options.

U.S. District Judge Jed Rakoff called Treacy’s conduct, which prosecutors said earned him at least $14.5 million, “appalling.”

“It is disgusting that this practice went on,” Rakoff said at a Sept. 3 hearing in Manhattan.

Judges are also demanding more accountability from regulators and are urging rule changes to punish wrongdoers.

Rakoff last month refused to sign off on Bank of America Corp.’s $33 million settlement with the U.S. Securities and Exchange Commission over bonus disclosures. After an initial explanation that the executives in question relied on lawyers’ advice in not disclosing bonus information, Rakoff demanded a fuller explanation of the deal by Sept. 9.

To read more of this story, click here.

Litigation Departments

IPO Lawyers Seek $245 Million of $586 Million Accord

Lawyers for investors who won a $586 million settlement from banks such as Morgan Stanley and Credit Suisse Group AG in a lawsuit over initial public offerings of technology stocks want $245 million for themselves.

The plaintiffs’ lawyers are seeking $195 million in fees and another $50 million in expenses, or about 42 percent of the settlement, according to a court filing yesterday by an investor opposing a payment that large.

More than 50 underwriters have agreed to pay $586 million to settle claims stemming from the bursting of the Internet bubble in 2000, which led to lawsuits against 309 technology companies and the banks. U.S. District Judge Shira Scheindlin in Manhattan gave tentative approval to the accord in June and will hold a hearing on tomorrow to consider final approval and the request for legal fees.

“This court should not grant such a huge amount of money to class counsel,” says a legal brief by lawyer Edward Siegel, who represents seven investors in the class action, or group, lawsuit. “Counsels’ request is almost three times as much as the average” payment to lawyers in group lawsuits settling for more than $100 million, he said in a brief filed yesterday.

At one time, plaintiffs’ lawyers led by Melvyn Weiss, who has since been jailed in an unrelated kickback scheme, demanded $12.5 billion to settle the case. The lesser settlement came amid the fiscal distress of the world’s investment banks following the credit-market collapse.

The cases stem from the boom and collapse of the technology-stock market in 2000. Investors in 309 companies that went public claimed underwriters including Bear Stearns Cos., Lehman Brothers Holdings Inc. and Merrill Lynch & Co. manipulated the IPO market for technology firms, whose value soared to record heights before collapsing. None of those three firms remain as independent investment banks.

Stanley Bernstein, the lead lawyer for the group of investors who brought the case, didn’t return a call seeking comment.

According to an Aug. 25 legal filing by Bernstein, a team of 100 staffers from 30 different law firms spent eight years preparing 309 separate lawsuits, responding to numerous motions to dismiss by the banks, reviewing 30 million pages of documents, questioning at least 145 witnesses, engaging in intensive pretrial motion practice, meeting with many experts and negotiating a resolution.

The case is In Re Initial Public Offering Securities Litigation, 21-MC-92, U.S. District Court, Southern District of New York (Manhattan).

To read more of this story, click here.

Latham & Watkins Adds Former Solicitor General to Law Firm

Latham & Watkins, the fourth-largest U.S. law firm, said former U.S. Solicitor General Gregory Garre joined the firm as a partner.

Garre was the solicitor general, the federal government’s chief lawyer who argues cases before the U.S. Supreme Court, until January, the firm said yesterday in a statement.

For more litigation department news from yesterday, click here.

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

Last Updated: September 9, 2009 08:16 EDT