BP Board Sued, JPMorgan, Trafigura, BA, Google, Xerox, Kagan in Court News
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A BP Plc investor has sued the company’s board of directors on claims its pursuit of profits at the expense of safety led to the Gulf of Mexico oil spill that could cost the company billions of dollars.
The lawsuit claims Chief Executive Officer Tony Hayward and other directors who sit on internal environmental and ethics panels failed to improve safety practices as promised by a settlement in an earlier shareholder lawsuit over a fatal explosion at BP’s Texas City refinery and oil leaks at company pipelines in Alaska.
“Even after a 2006 shareholder derivative proceeding brought as a last resort to require BP to address safety concerns was voluntarily settled out of court, these defendants continued to ignore and disregard safety issues concerning the company’s deepwater operations,” Lewis Kahn, of Kahn, Swick & Foti LLP, said in papers filed May 7 in New Orleans federal court.
The directors made “purely cosmetic changes at the corporate level while ignoring the substance of the safety violations and the threat they posed to the entirety of the Gulf, commercial and private property, and the company’s own survival as a going concern,” Kahn said in the filing on behalf of Katherine Firpo, a shareholder since 2007.
BP spokesman Scott Dean declined to comment on the lawsuit.
BP directors “elected to cut costs, including safety and maintenance expenditures, in pursuit of profitable results to report to Wall Street,” Kahn said.
More than 5,000 barrels of oil a day have been leaking from a damaged subsea well 40 miles off the Louisiana coast, following last month’s explosion and sinking of the Deepwater Horizon, which was under hire to BP.
The case is Firpo v. Hayward et al, 2:10-cv-01430, U.S. District Court, Eastern District of Louisiana (New Orleans).
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JPMorgan Loses Motion to Dismiss Alabama Sewer Bond Fraud Suit
JPMorgan Chase & Co. lost a bid to dismiss a lawsuit filed by Jefferson County, Alabama, that claims the bank enticed it into a risky refinancing of about $3 billion of sewer debt by making $8 million in payments to friends of county officials.
Circuit Judge Caryl Penney Privett in Birmingham rejected the New York-based bank’s arguments that the county is barred by the statue of limitations, a time limit for bringing action, and its contention that the county failed to show that JPMorgan was involved in a conspiracy, in a ruling issued May 7.
Jefferson County, in the suit filed in November, alleged fraud, conspiracy and “unjust enrichment against those who have brought the county and its citizens to the brink of financial disaster while lining their own pockets.”
JPMorgan, the second-biggest U.S. bank by assets, advised the state’s most populous county in 2002 and 2003 to enter into a series of floating-rate bond and interest-rate swaps that created an “inherently flawed financial structure that imploded within just a few years,” according to the county’s complaint.
Brian Marchiony, a JPMorgan spokesman, declined to comment yesterday.
Charles LeCroy and Douglas MacFaddin, also named in the suit, were the managing directors at New York-based JPMorgan who oversaw the sewer-debt transactions. LeCroy and MacFaddin are accused of arranging $8.2 million in illegal payments to local broker-dealers who were friends of county commissioners, in exchange for the county’s business.
Larry Langford, former mayor of Birmingham and president of the county commission at the time of the debt refinancing, is serving a 15-year sentence in a federal prison in Kentucky for accepting $241,000 in bribes from William Blount, of Montgomery investment firm Blount Parrish & Co. Blount was paid $2.8 million by JPMorgan during the bond transactions.
In November, JPMorgan agreed to a $722 million settlement with the U.S. Securities and Exchange Commission to end a probe into derivative sales to the county.
The bank paid $50 million outright to the county, and agreed to cancel $647 million in fees the county faced to unwind the transactions. JPMorgan, which also paid $25 million to be placed in a fund to compensate affected investors, neither admitted nor denied wrongdoing.
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Trafigura Asked to Pay $157 Million in Fees in Suit
Trafigura Beheer BV was asked to pay as much as 105 million pounds ($157 million) in legal costs by the law firm that represented Ivory Coast residents who said they were made sick by waste dumped from a ship.
Trafigura, a closely held commodities trading company, called the amount “staggering” and told a London court that the fees sought by lawyers at Leigh Day & Co. is almost three times what the company agreed to pay in a settlement last year.
“I am told that this is one of the largest, if not the largest, costs case in legal history,” Sean Wilken, a lawyer for Trafigura, said at a hearing yesterday. In comparison Trafigura spent 14 million pounds on its defense, he said.
Trafigura last year settled the lawsuit filed by Leigh Day on behalf of Ivory Coast residents who claimed to have fallen ill from waste dumping in 2006. The company agreed to pay thousands of residents about 1,000 pounds each, a lawyer for the residents said in September.
Justice Alistair MacDuff said that the costs issue should be decided by a specialist judge at a hearing later this year or early next year.
Waste from a ship hired by Trafigura four years ago was given to a local company, Compagnie Tommy, and was dumped near Ivory Coast’s commercial capital, Abidjan. Residents claimed the pollution caused deaths and widespread illness. An Ivory Coast appeals court in 2008 dropped criminal charges against Amsterdam-based Trafigura.
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British Airways Executives Cleared in Cartel Case
Four current and former British Airways Plc executives were acquitted of price-fixing charges at a London court after the prosecution’s case collapsed amid problems with evidence, including corrupted e-mails.
The Office of Fair Trading, the U.K.’s antitrust regulator, asked jurors yesterday to give a not guilty verdict at the criminal trial after saying it had overlooked thousands of e- mails to or from a Virgin Atlantic Airways Ltd. employee related to fuel surcharges and other issues related to the case.
The watchdog had accused the men of scheming with Virgin Atlantic to fix fuel surcharges on trans-Atlantic flights from July 2004 through April 2006. Virgin won immunity by admitting its role in the scheme.
“There can be only one verdict, not guilty,” prosecutor Richard Latham told the jury after saying the OFT wouldn’t offer any evidence. He explained how e-mails were recovered from Virgin computers too late and weren’t provided to the defense.
The jury cleared Andrew Crawley, British Airways’ head of sales; Martin George, a former board member; Iain Burns, ex-head of communications; and Alan Burnett, former head of U.K. and Ireland sales. They each faced as many as five years in prison if found guilty of operating a cartel with Virgin.
The OFT said in a statement that it will review Virgin Atlantic’s cooperation in the probe and whether it should lose immunity from any civil penalties in the case.
“The OFT will also be reviewing the role played by Virgin Atlantic and its advisers in light of the airline’s obligations to provide the OFT with continuous and complete cooperation,” the OFT said in the statement. “ This may have potential consequences for Virgin’s immunity from penalties.”
Virgin said in a separate statement that it denies any suggestion that it hasn’t fully co-operated with the OFT and there is no reason to withdraw any immunity granted in the case.
Outside court, George said he was relieved by the outcome.
“I’ve maintained my innocence since day one,” he said. “I want to get on with the rest of my life.”
Defense lawyer Ben Emmerson told the jury that the OFT is “guilty of incompetence on a monumental scale,” and that the regulator’s chief, John Fingleton, “must shoulder personal responsibility for this fiasco.”
OFT spokeswoman Kasia Reardon declined to comment.
The recovered e-mails showed that at least some of Virgin’s surcharges were increased without any consultation with British Airways, Emmerson said.
Prosecutors had said the carriers colluded from July 2004 through April 2006 to match fees to cover rising fuel costs. The U.K. criminalized antitrust violations in 2002.
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Glaxo Said to Pay $60 Million in Avandia Settlements
GlaxoSmithKline Plc agreed to pay about $60 million in the first settlements of lawsuits alleging the company’s Avandia diabetes drug causes heart attacks and strokes in some users, people familiar with the accords say.
Glaxo, the U.K.’s biggest drugmaker, agreed to resolve more than 700 Avandia suits filed by three attorneys, including Houston-based plaintiffs’ lawyer Mark Lanier and Philadelphia- based litigator Sol Weiss, the people said. The settlements come as Glaxo is set to face its first Avandia trial in state court in Philadelphia in July. The company faces about 4,000 lawsuits that have been filed so far over the drug.
Mary Anne Rhyne, a U.S. spokeswoman for London-based Glaxo, said she couldn’t immediately comment on the Avandia settlements yesterday.
Regulators approved Avandia for sale in the U.S. in 1999 and the medicine tallied annual revenue of $3 billion by 2006, including sales of a combination of Avandia and another drug.
Avandia sales plunged after a May 2007 report in the New England Journal of Medicine linked the drug to a 43 percent increased risk of heart attacks, prompting U.S. and European regulators to order Glaxo to strengthen its warnings. Avandia was the world’s best-selling diabetes pill before safety concerns emerged.
The case is In Re Avandia Marketing, Sales Practices and Products Liability Litigation, 07-1871, U.S. District Court for Eastern District of Pennsylvania (Philadelphia).
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Google Book Accord Violates Treaties, Opponent Says
A $125 million settlement that would allow Google Inc. to create the world’s biggest digital-book library breaks international laws and treaties, according to a memo written by an opponent of the deal.
“On its face” the agreement “eviscerates copyright owners’ exclusive rights” to approve the reproduction of their books, wrote Cynthia Arato, a lawyer representing authors in New Zealand, Italy, Austria and other countries.
Her memo was released by the Open Book Alliance, which is leading the challenge to the settlement.
U.S. District Judge Denny Chin in New York is deciding whether to approve the agreement. Google was sued in 2005 by authors and publishers who said the company was infringing their copyrights on a massive scale by digitizing books and allowing “snippets” of them to be seen online.
The settlement would create a Book Rights Registry to compensate copyright holders and public access to certain books through Google.
Sony Corp., which makes an e-book reader that competes with Amazon.com’s Kindle and is a Google partner, has said the agreement would promote competition in the electronic book market.
The settlement would give Google immunity from copyright laws, allowing the company to distribute millions of books on the Internet in exchange for sharing revenue it generates.
If approved, Arato said the agreement would violate an internationally respected copyright treaty from 1886 and allow exceptions for copyright holders in Australia, Canada and the U.K. that run counter to a World Trade Organization accord.
Foreign copyright holders would have to tell Google it didn’t want to be part of the settlement in an “opt-out” process that is “burdensome,” she said.
The case is Authors Guild v. Google Inc., 05cv8136, U.S. District Court, Southern District of New York (Manhattan).
Affiliated Computer Settles Case Over Xerox Takeover
Affiliated Computer Services Inc.’s shareholder lawsuit over the company’s $6 billion takeover by Xerox Corp., set to begin trial yesterday in Delaware Chancery Court, was tentatively settled. Terms weren’t immediately released.
The settlement “all came together at the last minute,” investors’ lawyer Stephen Lowey of White Plains, New York, said in a phone interview. He said terms of the settlement may be released on May 13, after the paperwork is completed.
Investors alleged ACS directors wrongly agreed to allow former Chairman Darwin Deason to collect a “massive incremental premium” in the buyout, completed in February.
“This premium put Deason’s overall payout over the $1 billion mark,” including $340 million in convertible stock, $600 million in common stock and $200 million in “personal benefits,” plaintiffs’ lawyer Stuart M. Grant said May 4 in court papers.
Deason’s lawyer David C. McBride said in a May 7 brief to Judge Donald Parsons Jr. in Wilmington, Delaware, that the transaction was “demonstrably fair” and shareholders targeted Deason “to extract further consideration for themselves.”
McBride said founder Deason built ACS into a Fortune 500 company in 20 years, and investors “have been remarkably well served by Darwin Deason’s stewardship.”
ACS said Sept. 28 that Xerox would buy each share for $18.60 in cash plus 4.935 Xerox shares. ACS was sued by a union and a pension fund. They claimed the price was too low and Deason was getting an unfair windfall.
Carl Langsenkamp, a Xerox spokesman, had no immediate comment.
The cases are Sheet Metal Workers Local 28 v. Affiliated Computer Services, CA4933, and New Orleans Employees’ Retirement System v. Deason CA4940 (Consolidated), Delaware Chancery Court (Wilmington).
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Elena Kagan Selected by Obama for U.S. Supreme Court
President Barack Obama selected Elena Kagan, his top U.S. Supreme Court lawyer and the former dean of Harvard Law School, to fill a vacancy on the court and for the first time give it three female members.
Kagan, 50, would succeed retiring Justice John Paul Stevens and likely take his place in the court’s liberal wing on many issues. She would be the youngest member of the nine-justice court and the only one who hadn’t previously served as a lower court judge.
Obama called Kagan a “trailblazing leader” who became the first woman to lead Harvard Law School and then the first female solicitor general. Pointing to her advocacy as solicitor general in support of securities lawsuits, he said she “has repeatedly defended the rights of shareholders and ordinary citizens against unscrupulous corporations.”
A New York native and former Clinton administration official, Kagan will face attacks from Republicans for opposing military recruiting on the Harvard campus because of the services’ gay ban.
Confirmation is probable because Democrats and independents hold 59 seats in the Senate and need help from only a single Republican to ensure a floor vote on the nomination.
Kagan last year won confirmation as solicitor general on a 61-31 vote.
Senator Lindsey Graham, a South Carolina Republican and member of the Judiciary Committee, said he has “been generally pleased” with Kagan’s performance as solicitor general, especially on legal issues related to the war on terror.
Senate Judiciary Committee Chairman Patrick Leahy predicted Kagan will be confirmed. He called her a “superb nominee” and said he is pleased that Obama chose someone from “outside the judicial monastery.” Leahy, a Vermont Democrat whose panel will hold her confirmation hearings, predicted the process will be completed in time for her to take the bench for the court’s next term in October.
Republicans began questioning her qualifications. Senate Republican Leader Mitch McConnell of Kentucky said lawmakers “will carefully review her brief litigation experience” and weigh whether Kagan shows any ideological predisposition in deciding cases.
Kagan received a bachelor’s degree at Princeton University, a master’s in philosophy at Oxford University’s Worcester College and a law degree at Harvard.
She clerked for Thurgood Marshall, whom she describes as one of her heroes, and spent two years as a litigator at Williams & Connolly LLP in Washington. She later took a teaching job at the University of Chicago Law School, where she helped recruit Obama to the faculty.
Kagan worked in the Clinton administration’s White House counsel’s office and then as a domestic policy adviser, acting as the administration’s lead negotiator on anti-tobacco legislation. In 2003, she became the first female dean of Harvard Law School.
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