Amaranth Advisors LLC, the hedge fund that lost $6.6 billion in September 2006, sued Paul Touradji and his employees, seeking at least $350 million for claims including breach of contract and misappropriation of trade secrets.
Amaranth says Touradji breached two contracts agreed to in September 2008 regarding the transfer and purchase of Amaranth’s base-metals portfolio, according to a complaint filed Sept. 18 in New York State Supreme Court in Manhattan. Touradji and employees at Touradji Capital Management LP used the information “to recover profits obtained by defendants through improper trading practices and misuse of plaintiffs’ proprietary and confidential information,” according to the document.
Touradji Capital Management has about $2.7 billion in commodities and raw-materials companies. The firm’s Global Resources Master Fund, its largest, has delivered positive returns to investors every year since its 2005 inception.
Crone was head of trading for industrial metals at Investec Bank U.K. and also worked for AIG International Trading. Dwan joined Touradji Capital from its start in January 2005.
Investors in Amaranth, founded by Nick Maounis in 2000, lost 60 percent of their assets in 2006 after bets on natural gas made by trader Brian Hunter drained the company by about $6.6 billion. Maounis closed his firm and returned the remaining money to investors. Maounis, through a spokesman, declined to comment on the Touradji suit.
The case is Amaranth LLC v. Touradji Capital Management LP, 09-602885, New York State Supreme Court in Manhattan.
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Fundraiser Nemazee Stole $292 Million, U.S. Grand Jury Alleges
Hassan Nemazee, a top fundraiser for President Barack Obama and Hillary Clinton who was arrested last month for defrauding banks, was indicted by a grand jury for stealing $292 million from Citigroup Inc., HSBC Holdings Plc and Bank of America Corp.
Prosecutors last month claimed Nemazee stole $75 million from Citigroup. The indictment adds Bank of America and HSBC to the case, expands the duration of the alleged fraud, and almost quadruples the amount that Nemazee, 59, is accused of stealing.
From 1998 to 2009, Nemazee “obtained hundreds of millions of dollars worth of loans from BofA, Citibank, and HSBC,” U.S. Attorney Preet Bharara in Manhattan said in a statement yesterday announcing the indictment. “Documents and signatures that Nemazee used to obtain these loans, including documents he submitted to purportedly show that he had hundreds of millions of dollars worth of collateral, were fake.”
Nemazee, the chairman of Nemazee Capital Corp., is under house arrest in his $20 million Manhattan apartment on a $25 million bond. He hasn’t entered a formal response to the criminal charges. His lawyer, Paul Shechtman, didn’t return a call seeking comment yesterday.
The indictment adds what prosecutors may say was Nemazee’s motive for his alleged fraud. It says he used proceeds of his scheme to make donations to candidates, political action committees and charities, to buy real estate in Italy, and to make monthly maintenance payments on properties in Manhattan and Katonah, New York.
As of August, Nemazee owed about $142 million to Charlotte, North Carolina-based Bank of America and about $75 million to Citibank, a unit of New York-based Citigroup Inc.
Nemazee made partial payments to one bank with loans he fraudulently obtained from other banks, according to the indictment. He repaid money owed to Bank of America with funds he got from Citibank, and he drew down on a line of credit from London-based HSBC to repay Citibank, prosecutors said.
The case is U.S. v. Nemazee, 09-mj-01927, U.S. District Court, Southern District of New York (Manhattan).
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U.S. Accuses Two Men of $80 Million ATM Ponzi Scheme
A North Carolina man and a Texas man were arrested on federal charges that they defrauded investors of $80 million in a Ponzi scheme using purported investments in automatic teller machines.
Vance Moore II and Walter Netschi were arrested and accused of lying to investors from 2005 to January 2008.
“It was a classic Ponzi scheme,” Joseph Demarest, assistant director in charge of the Federal Bureau of Investigation in New York, said yesterday in a statement. “The phantom revenue came from new investors. The scheme itself, until discovered, was one giant cash machine.”
According to a newly unsealed conspiracy and fraud investment, Moore, 55, and Netschi, 62, told investors that their money would be used to buy ATMs to be placed in retail locations around the country, and that fees from the machines would repay investors.
“In truth and fact, Moore and Netschi did not use the victims’ funds to purchase ATMs, but rather used the money to further the fraudulent scheme and to enrich themselves,” U.S. Attorney Preet Bharara in New York said in the statement.
Netschi will plead not guilty, said his lawyer, Michael Washor.
“We believe Walter Netschi was as must victimized as everyone else was” by Moore, Washor said.
Stuart Abrams, a lawyer for Moore, didn’t return a call.
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SEC to ‘Vigorously’ Sue Bank of America, May Add to Accusations
The U.S. Securities and Exchange Commission will press its case that Bank of America Corp. misled investors, and said additional claims may be added, after a judge rejected a $33 million settlement with the company.
“We will vigorously pursue our charges against Bank of America and take steps to prove our case in court,” the agency said yesterday in a statement, a week after U.S. District Judge Jed Rakoff set trial for February. The SEC said it will use the pretrial process to obtain information and “determine whether to seek the court’s permission to bring additional charges.”
The regulator sued the Charlotte, North Carolina-based bank on Aug. 3, claiming the company misled shareholders in a proxy statement last year while buying Merrill Lynch & Co. Rakoff called the proposed settlement a “contrivance.” He questioned why the agency didn’t punish executives or lawyers involved in the disclosures and raised concerns that levying a fine unfairly compounds damage to the bank’s investors.
The statement signals the agency may seek to target individuals in the case, even after telling Rakoff in filings that it lacked evidence to do so, said Peter Henning, a law professor at Wayne State University in Detroit, a former SEC attorney.
“I think that means they’re at least open to adding individuals as defendants,” Henning said. “That’s certainly what the judge indicated he wanted.”
The SEC said in its lawsuit that Bank of America promised in a proxy statement that Merrill wouldn’t pay year-end bonuses before the takeover without consent. Shareholders were unaware the bank had already told Merrill it could pay as much as $5.8 billion, the SEC said. Merrill later paid out $3.6 billion, as the brokerage’s annual loss widened to a record $27.6 billion.
“The proxy met all legal requirements and we intend to fully pursue that position in litigation if necessary,” bank spokesman Robert Stickler said yesterday.
The case is Securities and Exchange Commission v. Bank of America Corp., 09-cv-06829, U.S. District Court, Southern District of New York (Manhattan).
Lawyer for Ex-Bear Fund Manager Tannin Assails U.S.
A lawyer for a former Bear Stearns Cos. hedge fund manager, Matthew Tannin, 47, said allegations that he deleted e-mails after the U.S. Securities and Exchange Commission began an investigation were an “11th-hour smear.”
Prosecutors told U.S. District Court Judge Frederic Block in Brooklyn at a hearing last week that Tannin, or someone who had access to his Gmail account, erased all the e-mail messages in March 2008 when there was a federal inquiry into the funds and he had received a subpoena and order to preserve documents.
Federal prosecutors on Sept. 19 filed a letter saying that they wanted to offer this evidence at trial against Tannin, who is slated to go to trial on Oct. 13 with former Bear Stearns hedge fund manager Ralph Cioffi, 53, for an alleged fraud that helped bring down the securities firm.
“This 11th-hour smear, made shortly before the start of jury selection, should not be permitted,” said Susan Brune, Tannin’s lawyer, in a letter to Judge Block filed yesterday. More than 300 prospective jurors are slated to come to court Oct. 5 to answer jury questionnaires in connection with the case, Block said last week.
Brune alleged that contrary to their claims, prosecutors hadn’t provided a letter from Google Inc., which operates the Gmail system, supporting such claims. She said that a letter shows that Google said in a July 2009 letter that there hadn’t been any activity in the account and that it had since been “deleted.”
Judge Block said at the Sept. 17 hearing that he wouldn’t immediately rule on the matter.
Tannin was indicted last year for misleading investors about the health of two hedge funds that failed in July 2007, costing investors $1.6 billion. The implosion helped trigger the credit crunch and the eventual sale of Bear Stearns to JPMorgan Chase & Co.
The case is U.S. v. Cioffi, 08-CR-00415, U.S. District Court, Eastern District of New York (Brooklyn).
AEP Among Six Utilities That Must Defend Warming Suit
American Electric Power Co., Xcel Energy Inc., Cinergy Corp., Southern Co. and the Tennessee Valley Authority must defend a lawsuit by eight states seeking a reduction in carbon- dioxide emissions, an appeals court said.
The U.S. Court of Appeals in New York yesterday restored the lawsuit, dismissed by a judge in 2005. New York, New Jersey, California and five other states claim that power plants operated by the utilities pump 650 million tons of carbon dioxide into the atmosphere each year, constituting a “public nuisance” that contributes to global warming.
The appeals court disagreed with the lower court’s ruling that the dispute was a political one that judges should avoid.
“Nowhere in their complaints do plaintiffs ask the court to fashion a comprehensive and far-reaching solution to global climate change, a task that arguably falls within the purview of the political branches,” the court said. “Instead, they seek to limit emissions from six domestic coal-fired electricity plants on the ground that such emissions constitute a public nuisance.”
Carbon dioxide from the utilities represents about 25 percent of emissions from U.S. power plants and 10 percent of emissions from all U.S. sources, the states said in the 2004 lawsuit. Vermont, Rhode Island, Iowa, Wisconsin, Connecticut and New York City are also plaintiffs in the case.
“Our goal is not money damages, but a change in company practices to stem the pollution,” Connecticut Attorney General Richard Blumenthal said in a statement. “This ruling restoring our legal action breathes new life into our fight.”
Valerie Hendrickson, a spokeswoman for Atlanta-based Southern, and Tom Shiel, a spokesman for Charlotte, North Carolina-based Duke Energy Corp., which now owns Cinergy, said the companies are reviewing the opinion and declined to comment.
“Litigation is not the best way to address the climate change issue,” Pat Hemlepp, a spokesman for AEP, said in a statement. “It is a public policy issue that is best addressed by legislation or regulation.”
The TVA “will thoroughly review the decision,” spokeswoman Laura Smith said in an e-mail.
Representatives of Minneapolis-based Xcel didn’t respond to calls seeking comment.
The 139-page opinion was signed by two judges from the Court of Appeals. The third judge who heard arguments on the case in 2009, Sonia Sotomayor, has since been elevated to the U.S. Supreme Court and didn’t participate in the decision.
The appeals court ruling, which also rejected other legal arguments by the power companies, returns the case to Manhattan federal court for further proceedings.
The suit is Connecticut v. AEP, 05-5104, 2nd U.S. Circuit Court of Appeals (New York).
AstraZeneca Loses Dismissal of Ontario Seroquel Suit
AstraZeneca Plc lost a bid to dismiss an Ontario suit claiming it was negligent in the development and sale of the antipsychotic drug Seroquel and didn’t tell people of the drug’s harmful side effects.
Ontario Superior Court Judge Maurice Cullity yesterday threw out AstraZeneca’s request to dismiss the suit before a hearing to determine whether Canadians can sue as a group.
AstraZeneca, based in London, claimed people who seek to represent all others who used the drug can’t prove they were harmed by Seroquel. At this point, the judge said, they don’t have to.
“It is sufficient that a cause of action be disclosed,” Cullity wrote in yesterday’s ruling. “The defendants seek to reverse this procedure to the extent that the plaintiffs would be required, at the outset, to withstand a motion for summary judgment on the merits of individual issues affecting their claims.”
More than 15,000 patients have sued AstraZeneca in U.S. state and federal courts, claiming the company withheld information about a connection between diabetes and Seroquel use from doctors and users of the drug. The federal cases are combined in a multidistrict litigation.
Tony Jewell, an AstraZeneca spokesman, said of the U.S. lawsuits: “The heart of these cases are unproven claims that Seroquel causes diabetes in individual patients.”
Jewell couldn’t be reached for comment on the Ontario ruling yesterday.
The case is Between Joanne Martin and AstraZeneca Pharmaceuticals Plc, 06-cv-314632CP, Ontario Superior Court of Justice (Toronto)
Lehman Administrators Say Court Will Hear Arguments on Payments
Lehman Brothers Holdings Inc.’s U.K. administrators said a court hearing next month will determine how some money received after the investment bank sought protection from creditors is paid out.
PricewaterhouseCoopers said in a Sept. 18 statement it asked the High Court in London to determine how it should pay out redemption proceeds, dividends, coupons and other securities it held after Lehman Brothers collapsed last year. PwC is asking whether money received by Lehman Brothers International Europe’s prime brokerage without “client money protection” should be held in a trust, repaid as a claim ranked above unsecured creditors or treated as an unsecured claim.
Two parties will make arguments at the hearing scheduled to begin Oct. 5, PwC said. A prime brokerage client, RAB Market Cycles (Master) Fund Ltd., will argue that cash proceeds should be paid to the client in full, PwC said. A so-called general estate creditor, Hong Leong Bank Berhad, “will make submissions to the contrary,” the administrators said.
PwC has received a “significant amount of money” from securities held by LBIE, the firm said.
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Google Can Sell Trademarked Keywords, EU Adviser Says
Google Inc. should be able to continue selling trademark- protected terms as “keywords” that link Internet searches and ads, an aide to the European Union’s highest court said in a case involving LVMH Moet Hennessy Louis Vuitton SA.
Google doesn’t violate EU trademark law by allowing advertisers to choose protected words that trigger sponsored links for Internet searches, said Advocate General Luis Miguel Poiares Pessoa Maduro in a non-binding opinion to the European Court of Justice today in Luxembourg.
It’s the first time the EU tribunal has been asked to clarify the rights of companies, such as LVMH, to prevent search engines in the 27-nation EU from distributing protected names as keywords. Internet ads tied to keywords generate most of Google’s revenue.
“As far as the trademark infringement-part of the case is concerned, it is a big victory for Google,” said Stijn Debaene, a lawyer with Field Fisher Waterhouse LLP in Brussels.
The court follows the advice in most cases. Google may still be liable for trademark violations under national laws, Maduro said.
Five separate cases are pending at the EU tribunal with similar questions, seeking clarification on the liability of advertisers. One involves a dispute between L’Oreal SA and EBay, referred by an English court in August, which could affect the outcome of a series of European cases on EBay’s possible liability for trademark breaches.
Today’s cases are C-236/08 Google France v. Louis Vuitton Malletier; C-237/08 Google France v Viaticum; C-238/08 Google France v CNRRH, Pierre-Alexis Thonet.
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Lilly Reaches Zyprexa Agreement With Seven States
Eli Lilly & Co. agreed to settle, on confidential terms, lawsuits filed by seven states alleging the company improperly marketed its antipsychotic drug Zyprexa, a court-appointed official said.
“All of the states have essentially settled for the same” non-monetary arrangements, said Michael Rozen, special master appointed by the court to help settlement negotiations. The money terms, which weren’t disclosed, “have fallen roughly in line,” he said at a hearing yesterday in federal court in Brooklyn, New York.
Lawyers told U.S. District Judge Jack B. Weinstein, who is overseeing the cases, that finishing the settlements may be delayed while the parties determine how much money the U.S. government plans to claim in compensation for federal dollars spent on Zyprexa through state Medicaid programs.
If completed and approved in court, the settlements would leave four suits filed by states pending against Lilly.
Zyprexa, Lilly’s best-selling drug, has been the subject of federal and state investigations into whether the company marketed the medicine, approved for schizophrenia and bipolar disorder, for unapproved, or off-label, uses. Lilly resolved a marketing investigation in January with the U.S. Justice Department, promising to pay $1.42 billion, including about $362 million to more than 30 states.
The federal settlement left pending 12 lawsuits brought by individual states. Lilly announced July 22 that it would take a pretax charge of $102 million this quarter for settling “several” state lawsuits over Zyprexa. The company last month filed a $22.5 million settlement with West Virginia.
The lawsuits are part of In re Zyprexa Products Liability Litigation, 04-MD-1596, U.S. District Court, Eastern District of New York (Brooklyn).
Energy Transfer Pays Up to $30 Million in Settlement
Energy Transfer Partners LP, the third-largest U.S. pipeline partnership by market value, agreed to pay as much as $30 million to settle federal regulators’ allegations of manipulating natural gas prices in December 2005.
The Federal Energy Regulatory Commission approved Energy Transfer’s settlement agreement with agency staff in an order issued yesterday. The Dallas-based company neither admitted nor denied wrongdoing.
The commission in 2007 accused the company of manipulating prices in the aftermath of Hurricane Rita, and proposed more than $167 million in penalties. Energy Transfer paid $10 million in March 2008 to settle allegations from the Commodity Futures Trading Commission for trading after the hurricane.
“We find this settlement is fair and reasonable and in the public interest, and we therefore approve it,” the energy commission said in the order.
The accord includes $5 million in penalties, and Energy Transfer agreed to set up a $25 million fund to pay third parties who were harmed by the alleged manipulation. Hurricane Rita struck Louisiana and Texas in September 2005.
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Satyam Seeks to Hire Jones Day, Replace Wachtell
Satyam, the company at the center of India’s biggest corporate-fraud inquiry, made the request in papers filed Sept. 18 in federal court in Manhattan by Jayant Tambe, a Jones Day partner. The papers gave no reason for the switch. Wachtell Lipton Partner Warren Stern and Satyam Executive Vice Chairman Vineet Nayyar signed a “consent to substitution of counsel.”
Satyam’s shares and American depositary shares, or ADSs, lost most of their value after Chairman Ramalinga Raju revealed an accounting fraud on Jan. 7 and resigned. Investors in the U.S. filed at least a dozen class-action lawsuits, which have been consolidated before U.S. District Judge Barbara Jones in New York. Jones must approve the law-firm change.
Stern didn’t immediately return a call seeking comment. Tambe said he couldn’t comment. Satyam spokesman Sridhar Maturi didn’t respond to an e-mail sent after business hours in India.
Investors suing Hyderabad-based Satyam in the U.S. filed a consolidated complaint in the case on July 17. The defendants, including the company and Raju, must respond by Oct. 16.
Jones Day, based in Washington, has more than 2,400 lawyers in 32 global offices, according to its Web site. It represents collapsed bank Lehman Brothers Holdings Inc. and automaker Chrysler LLC in their bankruptcy proceedings.
The case is In re Satyam Computer Services Ltd. Securities Litigation, 09-md-2027, U.S. District Court, Southern District of New York (Manhattan).
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To contact the editor responsible for this story: David E. Rovella at email@example.com.