Attorney Olivier Metzner says thousands of Societe Generale SA (GLE)’s own computer records will clear his client, Jerome Kerviel, of responsibility for the bank’s record 4.9 billion-euro ($6 billion) trading loss, Bloomberg News’ Alan Katz and Heather Smith report.
Riding through Paris in his chauffeur-driven Jaguar XF, Metzner, 60, chuckles. He suspects that his success in getting that data -- more than a year after French investigators had completed their probe without digging into them -- unnerved prosecutors.
“Ah, yes, I irritate the powers that be,” said Metzner.
Metzner took over Kerviel’s defense more than a year after the 33-year-old former trader was blamed for Societe Generale’s loss. Kerviel goes on trial June 8 for abuse of trust, faking documents and computer hacking. He faces as many as five years in jail if found guilty.
The trial pits him against France’s second-biggest bank by market value. The bank’s former chairman, Daniel Bouton, described Kerviel as a “fraudster” and a “terrorist” the day he announced the loss on Jan. 24, 2008.
The disclosure came months before Lehman Brothers Holdings Inc.’s bankruptcy and the revelation of the Bernard L. Madoff Investment Securities LLC Ponzi scheme. It also turned Kerviel into a local hero, seen by 77 percent of France as a victim of the system, according to a poll taken two weeks after the loss was announced.
Metzner has made a career mining case files and legal technicalities to spring clients from jail and get companies and executives out of trouble.
While he speaks passionately of defending the underdog, Metzner’s clients include a lot of big names. About 80 percent of his practice is corporate. He’s on retainer for Bouygues SA (EN), France’s second-biggest construction company. And he defended Houston-based Continental Airlines Inc. against manslaughter charges after a French investigation concluded debris from a Continental plane brought down the Concorde supersonic jet in 2000. A verdict in the four-month trial, which ended May 28, is due in December.
Metzner “can grasp things quickly, keep them all in mind, and distill them,” said Carson Seeligson, head of Continental’s Concorde crash legal team. “And he always keeps the bigger picture in mind.”
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Wells Fargo Wins Minnesota Verdict on Punitive Damages
Wells Fargo & Co. (WFC) won a jury decision yesterday rejecting punitive damages above the $30.1 million awarded to four Minnesota nonprofits that claimed the bank marketed a risky securities-lending program it portrayed as safe.
The nonprofits asked the jury to impose at least $100 million in punitive damages in the second phase of the trial yesterday. Wells Fargo argued that no punitives were warranted in the case.
A state court jury in St. Paul, Minnesota, found Wells Fargo liable for breach of fiduciary duty and violations of Minnesota’s consumer fraud act on June 2.
The Minnesota Workers’ Compensation Reinsurance Association and three charitable foundations sued in 2008, claiming the bank failed to disclose the deteriorating value of the investments until it was too late and blocked them from getting out of the program.
The case is Workers Compensation Reinsurance Association v. Wells Fargo Bank, 62-cv-08-10825, District Court, Ramsey County, Minnesota (St. Paul).
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JPMorgan London Unit Gets Record Fine From U.K.’s FSA
JPMorgan Chase & Co. (JPM)’s London unit was fined a record 33.3 million pounds ($48.8 million) by Britain’s financial regulator for not properly separating client money from the firm’s accounts.
An average of $8.6 billion wasn’t properly segregated by JPMorgan Securities Ltd. in an error that went undetected for seven years, the Financial Services Authority said in a statement yesterday. As much as $23 billion of client money held by the bank’s futures and options business wasn’t put in separate overnight customer accounts between 2002 and 2009, the FSA said.
The bankruptcy of Lehman Brothers Holdings Inc., which roiled financial markets worldwide in 2008, forced the FSA to put financial companies on notice that they must properly separate client funds. New York-based Lehman’s creditors filed more than $830 billion of claims and regulators worldwide are trying to unravel how money moved through its global units.
“The FSA has repeatedly emphasized the importance of ensuring that client money is adequately protected,” said Margaret Cole, the FSA’s enforcement director. “This penalty sends out a strong message to firms of all sizes that they must ensure client money is segregated in accordance with FSA rules. Firms need to sit up and take notice of this action -- we have several more cases in the pipeline.”
Had the company gone bankrupt, clients could have lost all their money because they would have been unsecured creditors rather than having the right to claim back money from ring-fenced accounts, according to the regulator.
JPMorgan spokesman David Wells declined to comment. The New York-based bank escaped a 47.6 million-pound fine by cooperating with the regulator, according to the FSA’s statement. No clients lost money, and the mistake didn’t affect the bank’s financial reporting, the FSA said. JPMorgan said in August that it may have mixed 8.5 billion pounds of clients’ money with its own funds, and that it hired KPMG LLP to review its accounts.
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Ex-NeuTec Executive, Two Lawyers Cleared in FSA Case
NeuTec Pharma Ltd.’s former chief financial officer and two lawyers were cleared of insider-trading charges yesterday by a London court, handing the U.K. financial regulator its first defeat in a criminal case.
Andrew King, the former CFO of Novartis (NOVN) AG’s NeuTec unit, and Michael McFall, a former mergers lawyer at McDermott Will & Emery LLP were cleared by a London jury. The judge told the jury to find Andrew Rimmington, another lawyer whose case was halted last month after his brother was killed, not guilty after they gave their verdicts on the other two men.
Wallace said she was “delighted” with the verdict.
“We always believed the FSA’s case against him was flawed but Mr. King has faced a long fight to clear his name and he and his family have faced years of worry,” Wallace, a partner at Irwin Mitchell LLP in London, said in a statement. “Having worked with them throughout this, we are very pleased that they can now move on with their lives.”
McFall declined to comment outside the courtroom.
“Insider dealing cases are challenging to prove, but these were serious charges and we considered that the evidence provided a proper basis to put the case before a jury for them to decide,” Margaret Cole, the FSA enforcement director, said in a statement. “Criminal prosecutions are integral to the FSA’s long-term strategy of delivering credible deterrence and combating insider dealing.”
Prosecutor Michael Bowes said during the trial that the two lawyers made 39,000 pounds each ($57,000) in June 2006 after King gave McFall an early warning about Basel, Switzerland-based Novartis’s plan to purchase NeuTec. McFall gave the information to Rimmington, Bowes said.
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Ladbrokes, Betfair Lose Dutch Betting-Ban EU Appeal
Ladbrokes Plc (LAD), owner of more than 2,700 betting shops, and Betfair Ltd. lost a European Union court challenge to Dutch rules blocking them from opening their websites to gamblers in the Netherlands.
“This prohibition may, on account of the specific features associated with the provision of games of chance on the Internet, be regarded as justified by the objective of combating fraud and crime,” the European Court of Justice in Luxembourg said yesterday in a ruling that applies to the EU’s 27 nations and can’t be appealed.
Ladbrokes and Betfair have been fighting in Dutch courts for at least seven years seeking to overcome the government’s refusal to grant them licenses or allow citizens access to their services. Dutch courts handling the cases sought guidance from the EU tribunal on the legality of the policy.
At least 11 cases over challenges to German, Austrian and Swedish gambling restrictions are pending at the EU court. Germany and Sweden are among countries which have been threatened by the European Commission to loosen some of their restrictions and some recently started to do so.
Ladbrokes said in an e-mailed statement it was “confident” that the ruling will lead to a detailed assessment in the Dutch courts.
“The Ladbrokes and Betfair cases have clearly demonstrated the fragility of the entire Dutch legal framework in relation to gambling,” said John O’Reilly, a managing director at Ladbrokes.
Yesterday’s ruling “once again demonstrates the need for the” commission “to take a lead on this issue, so that we can separate fact from fiction and settle the online gambling debate once and for all,” said Tim Phillips, a Betfair spokesman, in an e-mailed statement.
The cases are C-203/08 The Sporting Exchange Ltd, trading under the name ‘Betfair’ v. Minister for Justice, Stichting de Nationale Sporttotalisator and Scientific Games Racing; C-258/08 Ladbrokes Betting & Gaming Ltd. and Ladbrokes International Ltd. v. Stichting de Nationale Sporttotalisator.
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Philip Morris, Reynolds Sue New York for Smoking Ads
U.S. cigarette makers Philip Morris USA (MO) and R.J. Reynolds Tobacco Co. (RAI) sued New York, alleging the city’s mandated anti-smoking ads violate their First Amendment rights and are preempted by federally mandated warnings.
The cigarette makers and Lorillard Tobacco Co. (LO) allege in a complaint filed yesterday in U.S. District Court in Manhattan that the city’s graphic health-warning signs force them to carry messages they wouldn’t carry at the point of sale. The signs show cancerous lungs, a decayed tooth and a brain damaged by stroke and bear the message “Quit Smoking Today.”
The companies, joined by state retail associations, seek a court order to stop New York from enforcing the law. The city resolution, amended in September, requires that any business selling tobacco “face-to-face” to consumers also prominently display the tobacco health-warning signs.
“Through words and imagery, the signs urge consumers not to purchase plaintiffs’ products,” the cigarette makers said. “The mandated signs also restrict plaintiffs’ ability to communicate about lawful products with their adult customers.”
Elizabeth Thomas, a spokeswoman with the city’s Law Department, said in an e-mailed statement that her office is reviewing the complaint.
“However, while these proposed changes were under consideration, we carefully considered all of the legal issues, as well as comments we received from the public,” she said. “We are confident that the health code provisions being challenged will withstand legal scrutiny.”
The case is Lorillard Tobacco Co. v. New York City Board of Health, 10-cv-4392, U.S. District Court (Manhattan).
BanxCorp Sues Dow Jones, New York Times Over Rate Sites
BanxCorp, operator of the BanxQuote website, sued media companies including News Corp. (NWSA)’s Dow Jones & Co. and New York Times Co. (NYT), accusing them of forming a cartel to sell information on bank interest rates on their websites.
The companies conspired with BanxQuote competitor Bankrate Inc. to “gain an unfair advantage over the plaintiff” by fixing the prices banks pay to have rates listed on websites, according to the complaint. BanxCorp, based in Scarsdale, New York, estimates damages at more than $500 million.
Financial institutions pay to list their interest rates on websites run by BanxCorp and Bankrate, then consumers use the sites to find the most competitive rates for financial products such as certificates of deposit and mortgages. The media companies republish the data.
The other defendants named are General Electric Co. (GE)’s CNBC, Time Warner Inc. (TWX)’s Cable News Network, Microsoft Corp. (MSFT)’s and GE’s MSNBC Interactive News LLC, News Corp.’s Fox News Network and Move Inc. (MOVE)
Jack Horner, a News Corp. spokesman; Sara Anissipour, an outside spokeswoman for Microsoft; and Anne Eisele of GE, Alysia Lew of AOL and Julie Reynolds of Move.com said their companies had no comment.
“We haven’t been served and haven’t seen the complaint,” Diane McNulty, a New York Times spokeswoman, said in an e-mail. Mona Marimow of LendingTree and Christa Robinson of CNN didn’t return messages for comment.
BanxCorp also sued Bankrate in federal court in New Jersey. That suit is pending, BanxCorp Chief Executive Officer Norbert Mehl said in a telephone interview.
The case is BanxCorp v. LendingTree LLC, 10-02467, U.S. District Court, District of New Jersey (Newark).
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Miami Beach Hotel Developers Enter Not Guilty Pleas
Two Miami Beach hotel developers pleaded not guilty yesterday to charges of hiding more than $150 million in assets from the Internal Revenue Service.
Mauricio Cohen Assor, 77, and his son, Leon Cohen Levy, 46, were indicted May 25 on charges of conspiracy and filing false tax returns. They face as long as 14 years in prison if convicted.
The pair is accused of using shell companies such as American Leisure Resorts Inc. as part of a conspiracy to conceal their ownership of a $45 million investment portfolio, $55 million in commercial properties in Miami Beach, homes in New York and Florida, and cars including a Rolls-Royce Phantom, a Porsche Carrera GT and Ferrari Testarossa. They failed to pay taxes on their assets, prosecutors said.
The Cohens were arrested April 15 as part of a tax-day sweep targeting offshore tax evasion. U.S. Magistrate Judge Lurana Snow in Fort Lauderdale, Florida, on May 20 ordered the two men held without bail, saying they posed a flight risk.
The Cohens developed high-end hotels under the name Flatotel International. After selling the New York Flatotel in 2000, they used “numerous nominee and shell corporations” to hide $33 million in proceeds from tax collectors, prosecutors said in the indictment.
The case is USA v. Assor, 10-cr-60159, U.S. District Court, Southern District of Florida (Fort Lauderdale).
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Infineon Loses Bid to Dismiss Lawsuit in Canada Court
Infineon Technologies AG (IFX) and other computer memory manufacturers lost a bid at Canada’s top court to throw out a group lawsuit claiming they fixed prices and overcharged customers between 1999 and 2002.
The Supreme Court of Canada yesterday denied the chipmakers’ request for a hearing, upholding a British Columbia Court of Appeal ruling that allowed the suit to proceed.
Infineon, Hynix Semiconductor Inc. (000660) and Samsung Electronics Co. were sued in British Columbia after having pleaded guilty in the U.S. to criminal charges arising from an international conspiracy to fix prices of dynamic random access memory, or DRAM, computer chips. The companies weren’t charged in Canada and haven’t paid any fines to regulators.
Pro-Sys Consultants Ltd., a Richmond, British Columbia, computer consulting company, sued Infineon, Hynix, Samsung and Micron Technology Inc. (MU) on behalf of all buyers of the memory in the province, claiming it paid more for the memory chips that it should have because the companies fixed prices. They seek to recover damages, including restitution for unjust enrichment and an order for the companies to give up profits earned.
The companies claimed a group, or class-action, suit was improper because each customer would have to prove damages individually. Supreme Court of British Columbia Judge David Masuhara agreed with the companies and dismissed the suit. He also ruled Pro-Sys wouldn’t fairly or adequately represent the interests of the class.
The Court of Appeal overturned the decision, unanimously saying liability can be determined on a common basis “without resort to individualized inquiries,” and a class suit was preferable.
The case is Infineon Technologies AG v. Pro-Sys Consultants Ltd., 33522, Supreme Court of Canada (Ottawa).
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J&J Misled Pennsylvania on Drug’s Risks, Lawyer Says
A Johnson & Johnson (JNJ) unit misled Pennsylvania officials about the health risks of its Risperdal anti-psychotic drug and duped the state into paying $289 million more than it should have for the medicine, a lawyer said.
Pennsylvania officials wouldn’t have paid a premium for Risperdal had they known it was no more effective than existing anti-psychotic drugs and was found to cause diabetes, Fletch Trammell, a lawyer for the state, told a Philadelphia jury yesterday. Pennsylvania is seeking to recover $289 million it paid for Risperdal prescriptions.
“There were a dozen anti-psychotics that were just as good as Risperdal and cost a fraction” as much, Trammell said in opening statements in the trial of the state’s rebate lawsuit against J&J.
J&J’s lawyer contended in his opening statement that the drugmaker did nothing wrong in marketing Risperdal to state-sponsored health-care programs.
“There is no merit in the case that” the state will present, Thomas Campion, J&J’s lawyer, told jurors yesterday.
“We have always been committed to ethical business practices and we are fully prepared to defend ourselves against these claims,” Greg Panico, a J&J spokesman, said in a written statement.
The case is Commonwealth of Pennsylvania v. Janssen Pharmaceutica Inc., 002181, Philadelphia Court of Common Pleas (Philadelphia).
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Dechert Defense Lawyer Andrew Levander to Be Chairman
G. Daniel O’Donnell, a lawyer representing private-equity groups and financial institutions, will become Dechert’s chief executive officer, according to a statement yesterday. Both will take over in 2011. Barton Winokur, now chairman and CEO, will practice law full time after stepping down from the posts.
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New Orleans Judge Sells Bonds to Avoid Spill Conflict
A New Orleans federal judge said he sold his investments in companies tied to the Gulf of Mexico oil spill to avoid any conflict of interest in presiding over lawsuits involving spill-damage claims.
“So there is no perception of a conflict in these cases, yesterday I instructed my broker to sell the few Transocean and Halliburton bonds in my account,” U.S. District Judge Carl Barbier said in an e-mail yesterday.
BP Plc (BP/) and Transocean Ltd. (RIG) oil-spill lawsuits may be combined before a judge from outside the Gulf Coast states, because judges in the region are withdrawing from cases, citing conflicts of interest.
Six of 12 active judges assigned to the federal judicial district based in New Orleans already have removed themselves from spill-damage lawsuits, according to a court official and public records. The judges found conflicts tied to oil investments or personal relationships with lawyers or companies involved.
Several additional federal judges in districts based in Lafayette, Louisiana; Mobile, Alabama; and Pensacola, Florida, have also disqualified themselves from oil-spill cases, according to public records.
Barbier’s portfolio contained Transocean Sedco Forex notes and Halliburton Co. (HAL) debentures, according to financial disclosure forms posted by Judicial Watch, a self-styled conservative advocacy group based in Washington.
More than 170 proposed class-action lawsuits, representing potentially thousands of claims, have been filed in courthouses from Texas to Florida. BP, the owner of the offshore lease, and Transocean, the rig owner, are named in virtually all the cases. Halliburton Energy Services Inc., which provided cementing services to the well, and Cameron International Corp. (CAM), which supplied blowout prevention equipment, are also named in most of the lawsuits.
The case is In re Oil Spill By the Oil Rig “Deepwater Horizon” in the Gulf of Mexico on April 20, U.S. Judicial Panel on Multidistrict Litigation, MDL-2179, Washington.
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