J&J, Transocean, AIG, SocGen, Hornbeck, Vodafone, Canwest in Court News

Johnson & Johnson asked a judge to dismiss a U.S. lawsuit claiming the company paid kickbacks to Omnicare Inc. to push prescriptions, arguing that the government seeks to brand allowable rebates as illegal.

The U.S. sued J&J and two units on Jan. 15, claiming they paid millions of dollars to induce Omnicare, the largest U.S. pharmacy for nursing home patients, to buy and recommend J&J drugs including its antipsychotic Risperdal. J&J filed its first detailed response June 7, arguing it didn’t violate the False Claims Act or Anti-Kickback Statute, as the government claims.

“This case is a remarkable attempt to attack common discounting arrangements that are expressly protected under federal and state law,” J&J’s lawyers wrote in a 53-page memorandum filed in federal court in Boston.

The Justice Department claims J&J relied on kickbacks such as “market share rebate programs” that sought to induce Omnicare to buy and recommend J&J drugs. Omnicare, based in Covington, Kentucky, agreed Nov. 3 to pay $98 million to settle civil claims by the U.S. and several states that it took kickbacks from J&J. Omnicare didn’t admit liability in settling the case.

J&J argued it engaged in common commercial practices such as giving customers higher rebates based on the “share” of a manufacturer’s product used and trying to get its drugs on formularies, which are lists of medications that an insurer, public health-care program or other payer will reimburse.

Photographer: Antoine Antoniol/Bloomberg

Former trader for Societe Generale SA Jerome Kerviel arrives at the court house in Paris. Close

Former trader for Societe Generale SA Jerome Kerviel arrives at the court house in Paris.

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Photographer: Antoine Antoniol/Bloomberg

Former trader for Societe Generale SA Jerome Kerviel arrives at the court house in Paris.

The case is U.S. ex re. Lisitza and Kammerer v. Johnson & Johnson, 07-10288, 05-11518, U.S. District Court, District of Massachusetts (Boston).

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Transocean Says Cap Won’t Limit Government Claims

Transocean Ltd., after seeking to limit its liability for oil-spill damage to $27 million under a 159-year-old maritime law, agreed yesterday the cap doesn’t apply to environmental losses by the U.S. and Gulf Coast states.

Last week, the U.S. Justice Department objected to Transocean’s limitation request, telling a Houston judge the statute the company invoked can’t be used to limit governmental claims brought under more recent laws.

Governments are entitled to pursue claims “for pollution response costs, environmental damages and other injuries,” including civil and administrative penalties stemming from the largest oil spill in U.S. history, Assistant U.S. Attorney General Tony West said in a June 1 filing.

“There is no dispute between the government” and Transocean that its limitation action can be “modified for certain yet-to-be-filed claims of the government,” Frank Piccolo, the company’s lead attorney, said in papers filed yesterday in Houston federal court. Transocean agrees that “certain putative claims” by state and national governments should be excluded from the company’s limitation action, he said.

Transocean also agreed that its limitation action doesn’t cap any fines or penalties the U.S. may bring against the company, should the government determine state or federal environmental protection laws have been violated, Piccolo said in the filing.

The company seeks the cap as protection against more than 170 lawsuits including class actions filed by individuals and coastal businesses harmed by the spill, which threatens the coastline of at least five states.

The case is In Re the Complaint and Petition of Triton Asset Leasing GmbH, Transocean Holdings LLC, 10-01721, U.S. District Court, Southern District of Texas (Houston).

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AIG Judge Sets Deadline for Workers’ Comp Documents

American International Group Inc. was ordered by a federal judge to turn over records by Sept. 1 to competitors that sued the company and said it was responsible for workers’ compensation fraud of $1 billion.

AIG must review 400,000 documents and produce those that aren’t confidential, Magistrate Judge Sidney Schenkier said in a June 4 order in the civil fraud case. Liberty Mutual Group Inc. sued AIG last year, saying the company underpaid industry-funded pools by hiding revenue used to calculate its obligations. AIG has filed a complaint against rivals, including Liberty Mutual and Travelers Cos., saying underreporting happened industrywide.

“What they’re trying to prove is that AIG was systematically misreporting workers’ compensation premiums as being other lines and knowingly avoiding proper fees,” said Edward Priz, president of Riverside, Illinois-based commercial insurance consulting company Advanced Insurance Management LLC. “AIG is basically saying, to whatever extent we did this, we didn’t do anything different from you guys.”

The insurers, fighting over who pays for state workers’ compensation funds, are seeking information to support their claims and attempting to limit the scope of material they provide. New York-based AIG has already produced more than 287,000 pages, according to the order from Schenkier in U.S. district court in Chicago.

“AIG remains committed to a full development of the record” in the case, said Mark Herr, a spokesman for the company. “In contrast, certain competitors of AIG continue fighting to avoid the production of their own evidence that would reveal how much they and others may have underreported.” He didn’t name the rival companies.

The case is National Council on Compensation Insurance Inc. v American International Group Inc., et al. 1:07-cv-02898, U.S. District Court, Northern District of Illinois (Chicago).

Cuomo’s Lawsuit Against First American Can Go Forward

New York’s lawsuit against title insurer First American Corp. can proceed, a state appeals court ruled.

Neither federal law nor rules of the Office of Thrift Supervision bar the New York attorney general from suing First American and its EAppraiseIT unit, the state appeals court in Manhattan ruled yesterday.

Attorney General Andrew M. Cuomo sued in 2007, accusing First American of inflating home values under pressure from Washington Mutual Inc.

First American reincorporated June 1 under the name CoreLogic Inc., as part of the separation of First American Financial Corp. and CoreLogic into independent, publicly traded companies, according to a company statement.

The case is New York v. First American Corp., 406796/2007, New York State Supreme Court, New York County (Manhattan).

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U.S. Cellular Wins Dismissal of Investor’s Suit

U.S. Cellular Corp., a wireless telephone service provider, won dismissal of an investor lawsuit claiming its board failed to properly oversee more than $900 million in fees paid to parent Telephone & Data Systems Inc.

The Monroe County, Michigan, Employees’ Retirement System didn’t establish that it had a case, Delaware Chancery Court Judge William B. Chandler III concluded in an opinion released yesterday in Georgetown.

The investor’s complaint contains “no factual allegations” that would prove “the intercompany agreement transactions were executed at an unfair price,” Chandler wrote in the six-page opinion.

Chicago-based U.S. Cellular, with $4.21 billion in revenue last year, is more than 70 percent owned by Telephone Data, also based in Chicago, according to data compiled by Bloomberg. U.S. Cellular says it’s the sixth-largest U.S. wireless carrier, serving 6.2 million customers.

The companies are run by the Carlson family, with Leroy T. Carlson Jr. as chairman of U.S. Cellular and chief executive officer of Telephone & Data.

Officials of U.S. Cellular and the investor’s lawyers weren’t immediately available to comment on the ruling.

The case is Monroe County Employees’ Retirement System v. Leroy T. Carlson, CA4587, Delaware Chancery Court (Wilmington).

German Court Says Letter in Euro Area Fund Case Is ‘Routine’

Germany’s highest constitutional court said that a request for arguments from the government in a lawsuit seeking an injunction blocking German participation in the euro rescue fund was “routine.”

Courts routinely ask for similar comments, Anja Kesting, the Constitutional Court’s spokeswoman, said in an interview yesterday. Der Spiegel reported on the letter to the government earlier this week, saying the court was considering how to rule on the rescue plan.

German lawmakers approved their country’s share of a 750 billion euro ($895 billion) package in a vote on May 21. Peter Gauweiler, a lawmaker from the Bavarian wing of Chancellor Angela Merkel’s Christian Democrats, filed a lawsuit seeking a preliminary injunction to block the country’s participation.

“This is totally normal, you always have to hear the other side before you decide on a complaint,” Kesting said. “This was a routine letter with no indication as to what the court thinks about the case.”

European finance ministers yesterday put the finishing touches on a rescue fund designed to combat the region’s fiscal woes and end speculation the euro area might break apart. The crisis is threatening to slow global economic growth and has pushed the euro down 17 percent against the dollar this year.

The court has received three additional complaints seeking to block the package, Kesting said. She declined to identify the plaintiffs. The government, parliament and the European Central Bank have already submitted comments in the case, she said. It’s unclear when the court will issue a ruling.

The government argues that any preliminary order by the court against Germany’s participation would jeopardize the package, the Finance Ministry said in an e-mailed statement. Germany, the biggest EU member state, carries the biggest share of the package.

“If Germany was to refrain from participating because of an interim order, the rescue package could fail,” the ministry said.

For the latest lawsuits news, click here.

Trials/Appeals

Kerviel Tells Paris Court Nothing Hidden From SocGen Bosses

Jerome Kerviel, accused of causing a 4.9 billion-euro ($5.9 billion) loss at Societe Generale SA, told a Paris court he “hid nothing” from co-workers at the bank and that all of his actions were visible to his employer.

Kerviel, 33, answered questions from Judge Dominique Pauthe on his personal and professional history on the first day of his trial.

The former trader recounted his education, saying he was “interested in finance” when asked why he focused on market operations, including financial controls, in his master’s program. He described his salary and bonus history, telling the judge he knew “strictly nothing” about decisions such as the one awarding him a payment of 60,000 euros in 2006.

Kerviel’s trial opened yesterday with the bank and investors angered by the trading loss allied with the prosecution as civil parties. He is charged with abuse of trust, faking documents and computer hacking related to the losses at France’s second-largest bank by market value, and faces as many as five years in jail and 375,000 euros in fines. The bank has asked to recoup the full 4.9 billion-euro loss in damages.

Kerviel, Societe Generale and investors presented their witness wish-lists, including former Chief Executive Officer Daniel Bouton and Jean-Pierre Mustier, the former head of Kerviel’s division.

Bouton wrote to the court declining to appear, a position Kerviel’s lawyer, Olivier Metzner, did not challenge. Bouton was cited by investors. Pauthe said he would decide later in the trial whether it would be worth-while insisting on his appearance.

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U.K. Men Fraudulently Tried to Sell Ritz Hotel, Lawyer Says

Three men went on trial in London accused of trying to sell the city’s landmark Ritz Hotel and Casino even though they didn’t own it.

Conn Farrell, 57, Patrick Dolan, 68, and Anthony Lee, 49, are accused of trying to sell the hotel, owned by billionaire British financiers David and Frederick Barclay, to a property development company for 250 million pounds ($359 million). That price was a “gross undervaluation” of the property, according to a prosecutor at the trial, which began yesterday at Southwark Crown Court in London. The men have all pleaded not guilty.

“They promised their targets something that seemed too good to be true -- the opportunity to buy the Ritz Hotel and Casino in Piccadilly for the bargain price of 250 million,” prosecutor Anuja Dhir told the jury.

The prosecution said the defendants defrauded London property investor and developer Terence Collins and one of his financial backers. The fraud took place between January 2006 and February 2007, the prosecutor said.

The defendants’ attorneys will present their case later in the trial, which is scheduled to last four weeks.

“These three defendants were each involved in a simple but well targeted and ambitious scam,” Dhir said. They “sucked their victims in with false promises” before managing to dupe them out of a million pounds.

Lee negotiated the deal with Dolan acting as his business partner, the prosecution said. Farrell was a lawyer working for them, according to the prosecution.

For the latest trial and appeals news, click here.

New Suits

Hornbeck Sues U.S. Over Deepwater Drilling Ban

Hornbeck Offshore Services LLC, a Louisiana offshore drilling services company, sued the U.S. Interior Department over its 6-month ban on deepwater drilling in the Gulf of Mexico.

Hornbeck, whose supply boats service a significant portion of the 33 drilling rigs that were operating in the deepwater Gulf of Mexico, said one customer has already notified the company it will cancel a contract as a result of the drilling moratorium. The ban was imposed by President Barack Obama after receiving a report issued by government officials in charge of exploration on the nation’s outer continental shelf.

“There is nothing in the report that suggests OCS drilling is more dangerous today than it was on the day immediately preceding the tragic incident involving the Deepwater Horizon,” Carl Rosenblum, an attorney for the company said in a lawsuit filed in New Orleans federal court.

“Hornbeck is suffering immediate irreparable harm” including the ability to retain trained staff for its vessels and offshore operations, which have been idled by a moratorium on drilling in waters deeper than 500 feet, according to the suit.

The case is Hornbeck Offshore Services LLC v. Salazar, et al. 2:10-cv-01663, U.S. District Courts, Eastern District of Louisiana (New Orleans).

Ex-Raymond James Trader Says He Was Fired After Chemo

A former executive at Raymond James & Associates Inc. sued the company for $6 million, claiming he was fired after falling asleep as a result of chemotherapy.

Stephen Fredericks, who was a managing director of sales trading, filed the complaint yesterday in New York state Supreme Court in Manhattan.

Fredericks, who worked for Raymond James from 2002 to 2009, said he underwent chemotherapy in 2008 after being diagnosed with lymphoma. As a side effect, he occasionally “spontaneously fell asleep,” he said, and was told that if he nodded off, he couldn’t continue to work. He went on disability in May 2009 and was terminated that July, according to the complaint.

“If you fall asleep again, I’m going to have to get rid of you or you will have to go onto disability,” Fredericks claims his supervisor told him, according to the filing.

Meanwhile, the complaint says, another sales trader with no medical disability fell asleep at the trading desk.

“This sales trader also viewed pornography on his computer and he was not fired until after” Fredericks raised his claims, according to the complaint.

Fredericks, who said his overall business grew from $3.5 million to $4 million in 2008 while working with his medical disability, claims he is owed back pay, unpaid commission and bonuses, benefits and interest in the amount of $3 million. He also is seeking $3 million in damages.

Anthea Penrose, a spokeswoman for St. Petersburg, Florida- based Raymond James Financial Inc., declined to comment.

The case is Stephen Fredericks v. Raymond James and Associates Inc., 107281-2010, New York state Supreme Court (Manhattan).

For the latest new suits news, click here. For copies of recent civil complaints, click here.

Verdicts/Settlements

Former Duane Reade Chief Cuti Convicted of Fraud

Former Duane Reade Inc. Chief Executive Officer Anthony Cuti was convicted of conspiracy and securities fraud for falsely inflating income at the drugstore chain and misleading investors.

Cuti and former Duane Reade Chief Financial Officer William Tennant, who was also convicted, were charged with engaging in a scheme to falsely increase revenue and lower expenses from 2000 to 2005. Cuti was convicted of both counts while Tennant was found guilty of securities fraud. The jury heard opening arguments on April 7.

U.S. District Judge Deborah Batts, who presided over the case, gave lawyers for both defendants 30 days to file motions seeking to set aside the verdict.

Reid Weingarten, a lawyer for Cuti, and John Kenney, a lawyer for Tennant, both declined to comment about the verdict after court was adjourned.

Batts set Cuti’s sentencing for Nov. 15 and Tennant’s for Dec. 6. The judge permitted both men to remain free on bond until they were sentenced.

The two men inflated Duane Reade income through fraudulent real-estate transactions and expense reductions using fictitious credits from company vendors, prosecutors said.

Both men pleaded not guilty to the charges.

The case is U.S. v. Cuti, 08-cr-00972, U.S. District Court, Southern District of New York (Manhattan).

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Vodafone, Telefonica Lose Challenge to EU Roaming Cap

Vodafone Group Plc, Telefonica SA’s O2 and other mobile- phone companies lost a challenge at the European Union’s highest court to legislation that forced them to cut international roaming rates.

The EU authorities had the right to impose EU-wide caps on the prices charged by mobile-phone operators for roaming calls to allow for a “smooth functioning” of the market, the European Court of Justice in Luxembourg said yesterday.

The legislation was proportionate “even if it might have negative consequences for certain operators” because it was designed to protect consumers and limited to a fixed time period, a 13-judge panel of the court ruled.

Companies, including Deutsche Telekom AG’s T-Mobile unit and France Telecom SA’s Orange, challenged the EU law that capped the rates they can charge customers for calls made while abroad. The regulation, adopted in June 2007, cut into annual revenue from international roaming fees, which amounted to 8.5 billion euros ($10.2 billion) in 2006, according to the EU.

The EU rules capped rates for making mobile-phone calls abroad at 49 euro cents a minute and for receiving calls at 24 euro cents. Charges have decreased further since then. Additional legislation adopted last year also regulated the price of text messages and data roaming.

“Vodafone’s roaming prices are already below those set by regulators so today’s decision will not have an effect on what our customers pay today,” company spokesman Simon Gordon said by telephone.

Telefonica spokesman Simon Lloyd declined to immediately comment.

A win for the companies would have allowed them to more freely set rates. It would also have undermined the legal basis for additional price caps adopted last year for sending mobile- phone text messages from abroad.

The Brussels-based European Commission, which first proposed the roaming price cap in 2006, welcomed yesterday’s ruling, spokesman Jonathan Todd said.

The case is C-58/08, Vodafone Ltd. v. Secretary of State for Business, Enterprise and Regulatory Reform.

Axel Springer Loses Appeals Case Over ProSieben Merger Veto

Axel Springer AG, Europe’s largest newspaper publisher, lost an appeals case seeking to overturn a regulator’s veto of its 2005 bid for broadcaster ProSiebenSat.1 Media AG.

The Federal Court of Justice in Karlsruhe, Germany, yesterday rejected a bid to overturn an antitrust regulator’s decision to block the planned 4.2 billion-euro ($5 billion) acquisition. The country’s top civil court upheld a lower court ruling in favor of the regulator.

Axel Springer has said that it would reconsider a bid for the company if it prevailed in the suit. The transaction was abandoned in 2006 after the Federal Cartel Office said it may harm competition. A Dusseldorf court in 2008 said ProSieben already has a dominant position in the market for television advertising, so even a small addition would hamper competition.

“The analysis of the Dusseldorf court that the planned takeover would have boosted the dominant market position” of companies in the television advertising market “stood the test of legal scrutiny,” the top court said in a statement distributed after the ruling was delivered.

Axel Springer will analyze the written judgment before it will comment, company spokesman Christian Garrels said.

The case is BGH, KVR 4/09.

Canwest to Pay Up to C$7.5 Million to Settle Writers’ Lawsuit

Canwest Global Communications Inc., the Canadian media company in bankruptcy protection, agreed to pay as much as C$7.5 million to settle a group suit by freelance writers who claimed republication of their work on the Internet broke copyright laws.

Because the company is in bankruptcy protection, the writers will be allowed to file a claim for the settlement amount and share in the distribution to creditors, either in cash or shares of a new company.

An Ontario judge will be asked to approve the settlement at a June 16 hearing.

For the latest verdict and settlement news, click here.

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

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