BP, Kerviel's Claims, RBS, Fairfield, Deutsche Bank, Comcast in Court News

BP Plc faces more than 225 lawsuits in 11 states as litigation from businesses, individuals and investors continues to increase almost two months after the Deepwater Horizon oil rig exploded.

In addition to scores of claims brought in five states along the Gulf shore, coastal businesses and property owners in Georgia and South Carolina have sued for damages from the drifting oil, which has yet to round the southern tip of Florida and enter the Atlantic Ocean.

Investors in three states, including Louisiana and Alaska, have sued BP’s board of directors for allegedly causing more than $50 billion in shareholder losses by failing to implement safety policies that would have prevented the spill. In a separate class-action lawsuit in Florida, the company is accused of “a pattern” of criminal acts including fraud. That suit seeks triple damages under federal civil racketeering law.

“The damage is not just suffered at ground zero along the Gulf Coast,” said Mark Lanier, a Houston lawyer representing dozens of fishermen and property owners against BP. “The shock waves reverberate across state lines and across occupational lines.”

A judge may decide there isn’t a strong enough connection between some damage claims and the spill itself and those claims will be thrown out, Lanier said yesterday in a phone interview. “But we’re not at that point yet,” he said.

BP, as owner of the underwater lease, has primary liability for damages caused by the tens of millions of gallons of crude oil that have spewed from the damaged well since the April explosion and sinking of the Deepwater Horizon. Almost all the lawsuits also name Transocean Ltd., which owned the rig, along with Cameron International Corp. and Halliburton Energy Services Inc., which provided the rig’s blowout prevention equipment and cementing services, respectively.

David Nicholas, a BP spokesman, didn’t return a call seeking comment yesterday.

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Trials/Appeals

Kerviel Says SocGen Got Weekly Reports on Trading Accounts

Jerome Kerviel told a Paris court that he sent weekly reports to his Societe Generale SA bosses, bolstering his claims that the bank knew about the scale of his trades before they led to a 4.9 billion-euro ($6 billion) loss.

Kerviel has based his defense since the loss was disclosed on Jan. 24, 2008, on the argument that his supervisors were aware of, and encouraged, his activities.

Kerviel, 33, is charged with falsifying documents, computer hacking and abuse of trust in connection with the trading loss that prosecutors say was caused by the liquidation of 50 billion euros in unauthorized positions. Current and former bank employees have testified they didn’t know of his bets, which he has told the court he “masked” by faking hedges and lying to risk managers.

The treasury reports “to me represented a reflection of my activities,” Kerviel told Judge Dominique Pauthe. “Every week I made a report and sent it to Eric Cordelle and Martial Rouyere,” his supervisors.

The treasury worked like a small bank for the traders, Kerviel said. He borrowed billions to supplement the 20 million euros he was allotted, based on his trading desk’s 125 million- euro limit, and paid back interest on the loans, he said. “It was like an internal loan,” he said.

In the summer of 2007, Kerviel said he borrowed 1 billion euros to help while he was in a losing position, and by July was ahead again. “None of my superiors asked questions,” he said. They “could see exactly what was in the treasury of each trader.”

Claire Dumas, deputy to the head of operational risk at Societe Generale, said the fact that Kerviel reported such large results wouldn’t necessarily raise suspicions. Markets “were on a very strong rise” at the time, she said.

Societe Generale, France’s second-largest bank by market value, blames Kerviel for the loss and has asked the court to award it the full 4.9 billion euros in damages. The bank told reporters ahead of a presentation to investors that it is confident it will prevail.

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Legal Reviews

Ex-RBS Chief Goodwin Said to Face Questioning by FSA

Fred Goodwin, the former chief executive officer of Royal Bank of Scotland Group Plc, will be questioned by the U.K.’s financial regulator, which has at least three open investigations into the bank, according to two people familiar with the matter.

The interviews, which may be delayed, were scheduled to take place as early as yesterday, said the people, who declined to be identified because the talks are private. Goodwin resigned in 2008 after the U.K. injected 20 billion pounds ($29.5 billion) of taxpayer money into the lender to prevent its collapse.

The U.K. Financial Services Authority is probing RBS’s takeover of parts of ABN Amro Group NV in 2007, a 2008 rights offering and handling of customer complaints. Johnny Cameron, the former chairman of RBS’s investment bank, agreed last month to never take a senior management role at a financial company to resolve an FSA investigation into his actions.

“The FSA has got to find some wrongdoing, and they can do that if they think Sir Fred breached the principles of senior management,” said Simon Morris, a lawyer at CMS Cameron McKenna in London, of Goodwin. “They could ban him, they could take a fine against him, and it would be an exceedingly high-profile scalp, more so than Johnny Cameron.”

RBS posted the biggest loss in corporate history in 2008 and required the world’s biggest banking bailout at 45.5 billion pounds. The FSA first said it would examine senior managers of collapsed banks, or those that had accepted government money, in March 2009.

“The FSA is conducting several extensive supervisory investigations of the major U.K. banks that ‘failed’ during the crisis and required full or partial taxpayer bailout support,” the regulator said in its annual report last week. “The work is still ongoing.”

Spokesmen for the FSA and RBS declined to comment. Goodwin didn’t respond to a phone message left at his office in Edinburgh.

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Lawsuits/Pretrial

Money Manager Chais Remains Subject of Madoff Probe

Money manager Stanley Chais and partnerships he ran remain under criminal investigation stemming from the Ponzi scheme orchestrated by convicted con man Bernard Madoff, a U.S. prosecutor said in a court filing.

Assistant U.S. Attorney Lisa Baroni told a judge in Manhattan yesterday that federal prosecutors continue to probe activities of Chais and his partnerships and need “additional time to determine whether charges should be presented” to a grand jury.

Baroni’s disclosure came in a court filing in which she asked for a further postponement in a lawsuit against Chais by the Securities and Exchange Commission. Prosecutors in Manhattan had said in December that they expected to decide whether to charge Chais by June. Now the government wants more time and asked that the SEC case be further delayed.

“In the next several months, the government anticipates conducting several additional interviews of other potential witnesses and subjects in the government’s investigation,” Baroni wrote. “The defendant in the SEC complaint remains a subject of the government’s criminal investigation.”

Chais has denied wrongdoing and said he was duped by Madoff. Chais’s lawyer, Eugene Licker, didn’t return a telephone call and e-mail seeking comment.

The SEC sued Chais a year ago, saying that since the early 1970s he steered assets from three investment funds to Madoff, “despite having clear indications” the money manager was engaged in fraud. Chais was among Madoff’s largest investors.

The case is Securities and Exchange Commission v. Stanley Chais, 09-cv-05681, Southern District of New York (Manhattan).

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Madoff Feeder Fairfield Seeks U.S. Court Protection

Fairfield Sentry Ltd., the biggest feeder fund in Bernard Madoff’s fraudulent investment business, asked a New York bankruptcy court for protection from creditors.

Fairfield Sentry filed a petition June 14 seeking U.S. recognition of the bankruptcy case filed in the British Virgin Islands in April 2009. Recognition by the U.S. court will help identify assets and distribute them to creditors under the foreign proceeding, Fairfield Sentry said in the filing.

Fairfield Sentry was a fund that took money from non-U.S. residents and some U.S.-based tax-exempt entities to be invested with Madoff, according to the bankruptcy petition. In its petition, Fairfield Sentry said it has between $100 million and $500 million in assets and no more than $500,000 in debts.

According to the court filing, 95 percent of Fairfield Sentry’s assets were invested with Bernard L. Madoff Investment Securities LLC. Account statements showed $7 billion of Fairfield Sentry assets Madoff claimed to hold in October 2008, it said.

Madoff, 72, pleaded guilty in March to running the world’s biggest Ponzi scheme. He’s serving a 150-year sentence in federal prison in North Carolina.

Fairfield Sigma Ltd. and Fairfield Lambda Ltd., two funds that channeled money to Fairfield Sentry for investment with Madoff, also filed for protection on June 14.

The case is Fairfield Sentry Ltd., 10-13164, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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New Suits

Oracle Faces U.S., Whistleblower Suit Over Alleged Overcharges

Oracle Corp., the world’s second-biggest software maker, faces a lawsuit brought by a whistleblower and the U.S. Justice Department claiming it overcharged the government by tens of millions of dollars.

The complaint, filed in federal court in Alexandria, Virginia, claims Oracle failed to disclose discounts that it gave its most favored commercial customers. Under General Services Administration contracts, the government must get the company’s best prices, according to the complaint.

“Oracle knowingly and recklessly employed these techniques to offer commercial customers deeper discounts without offering those deeper discounts to the U.S. government,” according to the complaint.

Former Oracle employee Paul Frascella filed the complaint in May 2007 under the False Claims Act, which lets private citizens sue on behalf of the government and share in any recovery. The U.S. joined Frascella’s complaint on April 2, when the case was unsealed.

Deborah Hellinger, a spokeswoman for Redwood City, California-based Oracle, didn’t return a call and e-mail seeking comment yesterday. Frascella’s attorney, Christopher Mead, declined to comment beyond saying his client no longer works at Oracle.

The case is United States of America v. Oracle Corp., 07- cv-00529, U.S. District Court, Eastern District of Virginia (Alexandria).

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Verdicts/Settlements

Surgeon Avoids Prison for Plotting to Hide HSBC Cash

A Virginia surgeon avoided prison after admitting he hid assets at HSBC Holdings Plc from U.S. tax authorities and smuggled more than $200,000 in cash to his home when the bank said it would close his Swiss bank account.

Andrew B. Silva was sentenced June 11 to two years of probation, including four months of home detention, according to records in U.S. District Court in Alexandria, Virginia. U.S. District Judge Liam O’Grady imposed a $20,000 fine on Silva, who forfeited $211,200 and paid $16,484 in back taxes.

O’Grady granted leniency to Silva, who helped prosecutors probe how the bank closed his account in a manner that would protect its “reputation for bank secrecy,” according to a Justice Department filing outlining his cooperation. Silva also helped build a case against the Swiss lawyer who administered his undeclared account, prosecutors wrote.

“We expect that the information provided by Silva or derived from that information, will lead to an indictment of the Swiss lawyer,” Justice Department prosecutors wrote on June 4. “Silva’s cooperation has furthered the government’s efforts to investigate and prosecute individuals and entities who engage in or facilitate tax evasion through illegal cross border banking.”

Silva, who pleaded guilty to conspiring with a Swiss banker and a Zurich attorney to defraud the U.S. and to making false statements, faced as much as five years in prison on each count.

Silva’s attorney, Christopher Rizek, didn’t return a call seeking comment. HSBC spokeswoman Juanita Gutierrez declined to comment.

The case is USA v. Silva, 10-cr-44, U.S. District Court, Eastern District of Virginia (Alexandria).

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Canadian Developer Agrees to Guilty Plea in Mining Fraud

Canadian developer Alberto DoCouto, who bilked investors of more than $26 million in bogus mining projects, agreed to plead guilty to securities fraud after almost three years in jail awaiting trial in Las Vegas.

DoCouto, who relied on a public defender for most of the time since he was charged, agreed to pay the U.S. a penalty of $26.1 million. His agreement with federal prosecutors also calls for a sentence ranging from 63 months to 150 months under the U.S. guidelines. The term, to be determined by a judge, will depend on his criminal history.

“The United States expressly states that it intends to recommend a sentence at the high end of the applicable sentencing range,” according to the June 11 agreement, which was posted on a court website yesterday.

DoCouto, of Henderson, Nevada, moved to the U.S. in 2002 after he was acquitted of fraud charges in Canada in 1998. He was accused in Nevada of persuading Japanese, Canadian and U.S. investors to give him money to develop mines in Peru, Nevada and Guyana. He admitted he made no effort to carry out the projects, and as a result investors lost more than $26 million.

“While investors lost almost all the money they invested in DoCouto’s scheme, DoCouto enriched himself at their expense,” according to a statement he and prosecutors agreed was true. “DoCouto used funds obtained from investors for the express purpose of developing the purported mining and real estate projects to lead a lavish lifestyle complete with an opulent home, luxury automobiles and profligate spending,”

The case is U.S. v. DoCouto, 02:07cr00203, U.S. District Court, District of Nevada (Las Vegas).

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Deutsche Bank Loses Case Over 2008 Shareholder Meeting

Deutsche Bank AG, Germany’s biggest bank, lost an appeals court ruling over votes at its 2008 shareholder meeting, including the re-election of Clemens Boersig to its supervisory board, a lawyer for the bank said.

The Frankfurt Higher Regional Court backed a lower tribunal that said shareholders weren’t properly invited to the meeting, Markus Meier, a lawyer for Deutsche Bank, said in an interview yesterday.

“The ruling conflicts with several decisions of other German appeals courts and even with the assessments of other chambers of the same court,” Meier said. “We will ask Germany’s top civil court to review the case and are optimistic that we will prevail in the end.”

The lawsuit is one of about a dozen filed by Leo Kirch, the German businessman who blames Deutsche Bank for the collapse of his media empire. Among the plaintiffs is Michael Bohndorf, a Deutsche Bank shareholder targeted by detectives hired by the lender.

The appeals court said at a hearing last month that Deutsche Bank’s invitation to the meeting may have limited shareholders’ rights to appoint a representative by seemingly requiring a three-day notice period. The way the invitation was drafted may have deterred some shareholders from asserting their right to be represented at the meeting, the court said.

Kirch started a legal battle against the lender after the bank’s former Chief Executive Officer Rolf Breuer commented about the creditworthiness of Kirch’s former media group on Bloomberg TV in February 2002. Kirch has sued the bank over each annual shareholder meeting at Deutsche Bank since 2003.

The case is OLG Frankfurt, 5 U 144/09.

Comcast’s $16 Million Web-Slowdown Accord Approved

Comcast Corp., the largest U.S. cable company, won final approval of a $16 million settlement of consumers’ claims that it intentionally delayed some file transfers over its high-speed Internet service.

U.S. District Judge Legrome D. Davis in Philadelphia yesterday said the accord, which gives customer who had file transfers that were slowed to a crawl on Comcast’s system as much as $16 apiece, is the first under which an Internet service provider is paying to resolve so-called data-bias claims. About 1 million Comcast users might have claims under the settlement.

“It’s the first and only monetary settlement of one of these cases,” the judge said.

Customers sued Philadelphia-based Comcast in November 2007 alleging it slowed or delayed attempts to download files using applications including Ares, BitTorrent, eDonkey, FastTrack or Gnutella for transferring movie and audio files.

The settlement fund will be distributed to customers who used the targeted applications between 2006 and 2008 and who file a claim, according to court filings.

Lawyers for Comcast told Davis the company believed the steps it took to regulate the transfer of large files within its network were reasonable. The cable provider decided to settle the case to “move on,” said Seamus Duffy, one of the company’s attorneys.

The case is In Re Comcast Corp. Peer-to-Peer (P2P) Transmission Contract Litigation, 08-1992 U.S. District Court, Eastern District of Pennsylvania (Philadelphia).

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Mediaset Loses Appeal of EU Order to Repay State Aid

Mediaset SpA, Italy’s biggest private television broadcaster, lost a court challenge to a European Union decision forcing it to repay millions of dollars in subsidies for the purchase of digital-broadcast decoders.

Mediaset “should have known not only that the measure at issue was not technologically neutral, but also that it had not been notified to or authorized by” EU antitrust regulators, the Luxembourg-based EU General Court said in a ruling yesterday. The decision confirmed the subsidies were unlawful state aid which must be repaid to the Italian government.

Italian Prime Minister Silvio Berlusconi, who owns Mediaset, originally introduced the grants. Mediaset runs three free-to-air TV channels that compete with the network of state- owned RAI SpA and satellite broadcaster Sky Italia SpA, owned by Rupert Murdoch’s News Corp. Mediaset also controls Spanish TV station Gestevision Telecinco SA.

The Brussels-based European Commission, the executive agency for the 27 EU nations, in its January 2007 decision said the subsidies amounted to more than 200 million euros ($243 million) for individuals who bought digital terrestrial decoders, while satellite technology was excluded. Mediaset was among companies that indirectly benefited from the aid, the commission said, ordering them to repay the money.

Mediaset said in a statement that it would appeal the ruling to the European Court of Justice. The Milan-based company said that the subsidies had been paid to consumers.

A spokesman for the Italian government declined to comment. Amelia Torres, a spokeswoman for the commission’s antitrust unit, “welcomed” the ruling.

The case is T-177/07 Mediaset v. Commission.

Canadian Pacific’s DM&E Acquisition Upheld By Court

Canadian Pacific Railway Ltd.’s acquisition of the Dakota, Minnesota & Eastern Railroad Corp. in 2008 was upheld by an appeals court, which rejected challenges by the Sierra Club and Chicago’s commuter rail agency.

The U.S. Court of Appeals for the District of Columbia said yesterday that the Sierra Club had no stake in the matter that would allow it to sue, and rebuffed claims by the agency, known as Metra, that the Surface Transportation Board abused its discretion in approving the purchase. Both plaintiffs claimed the board’s approval was premature.

Canada’s second-largest railroad won U.S. regulatory approval for the deal in September 2008. The company paid $1.48 billion for DM&E to expand its access to ethanol and coal markets in the U.S. Midwest.

Metra, which provides commuter rail service in the Chicago area, said the board should have attached conditions to the approval to protect its track rights between Chicago and Wisconsin. The Sierra Club challenged the board’s decision to approve the takeover while it deferred an environmental impact study.

A representative from the Sierra Club and an attorney for Metra didn’t return calls seeking comment.

The case is Commuter Railroad Division v Surface Transportation Board, 08-1346, U.S. Court of Appeals for the District of Columbia (Washington).

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Litigation Departments

Lawyer Who Helped Terrorist Deserves Enhanced Term, U.S. Says

Attorney Lynne Stewart, convicted of helping an extremist cleric pass messages from prison to terrorist followers, deserves an enhanced sentence because of statements she made after her conviction and sentencing, U.S. prosecutors said.

A federal appeals court in New York in November ruled that Stewart, 70 should be resentenced in a way that reflects the “seriousness” of her crime. U.S. District Judge John Koeltl in Manhattan, who originally sentenced Stewart to 28 months in prison and is presiding over the case, has scheduled her resentencing for July 15.

Stewart was convicted by a federal jury in New York in 2005 for helping her former client, the blind Egyptian sheik Omar Abdel Rahman, smuggle messages to followers in defiance of U.S. prison restrictions. Stewart, who was free pending appeal, was ordered to prison Nov. 19 and is being held at a federal jail in lower Manhattan.

“Stewart has made it clear that if given the opportunity to engage in the unlawful conduct for which she now stands convicted she would do it again,” federal prosecutors in the office of Preet Bharara said in court papers.

Stewart’s lawyers argued in court papers that the 28-month term imposed by Koeltl was “reasonable, just and satisfied the purposes of sentencing.”

The case is U.S. v. Stewart, 06-5015-cr, U.S. Court of Appeals (New York.)

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Justice Nominee Cole Quizzed on Terrorism at Hearing

James M. Cole, a corporate defense lawyer nominated by President Barack Obama for the No. 2 Justice Department job, was questioned by Republicans at his confirmation hearing about whether terror suspects should be treated as enemy combatants.

Senator Jeff Sessions of Alabama, the ranking Republican on the Senate Judiciary Committee, said at yesterday’s hearing that Cole has taken the position that al-Qaeda terrorists responsible for the Sept. 11 attacks on the U.S. are “common criminals” while Americans “believe they are war criminals.”

Cole, 58, is a partner at the law firm of Bryan Cave LLP in Washington and a former Justice Department prosecutor. If confirmed by the Senate, he would fill the deputy attorney general’s job vacated in February by David W. Ogden, who returned to private practice.

Cole was a Justice Department lawyer for 13 years and served as deputy chief of the department’s public integrity section, which handles corruption cases involving public officials. His law practice includes advising companies on securities, regulatory and criminal law matters.

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

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