U.S. citizens and residents with UBS AG accounts are racing the clock to disclose their secret holdings to the Internal Revenue Service after the Swiss Parliament ratified an agreement to surrender the names of 4,450 bank clients, tax lawyers said.
Swiss lawmakers yesterday ended a standoff and approved the bank’s settlement with the U.S., allowing the names to be transmitted to tax authorities as early as this week. Lawyers said Americans who ignored an IRS offer last year to reduce penalties in exchange for voluntary disclosures are now flooding their offices with calls seeking advice on how to avoid possible sanctions, which could include prison sentences.
“For UBS account holders, they have mere hours to run to the IRS and hope they can disclose the account before the Swiss hand the data over,” said Asher Rubinstein, a partner at Rubinstein & Rubinstein LLP in New York who said he has been “getting panicked calls all week.”
The Parliament’s vote ends Switzerland’s long tradition of bank secrecy and is a victory for the IRS and U.S. Justice Department, which fought a two-year battle to gain access to the accounts. It also removes the threat of further civil litigation against Zurich-based UBS and additional fallout under criminal law.
IRS Commissioner Douglas Shulman said yesterday he expects the Swiss government to “move quickly” to transmit the information.
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BP Atlantis Whistleblower Drops Suit Against U.S. Over Safety
A lawsuit seeking to force U.S. regulators to temporarily shut BP Plc’s second-largest oil platform in the Gulf of Mexico was dropped at the request of the whistleblower who lodged the complaint, court records show.
Kenneth Abbott, a former contract employee in charge of the BP Atlantis platform’s engineering documentation database, claimed the company lacks key safety and engineering approvals on specifications used to build it. Atlantis produces 120,000 barrels of oil and 170 million cubic feet of gas daily, according to a BP court filing.
“We were actually required to dismiss the case once BP intervened,” said Kate Fried, a spokeswoman for Food & Water Watch, an environmental group that supported Abbott’s lawsuit.
The suit criticized the U.S. Minerals Management Service, which oversees offshore drilling, for failing to act on Abbott’s concerns about the platform’s documentation until February, when 19 Congressional representatives asked the agency to investigate the allegations.
The whistleblower lawsuit will be refiled shortly, naming BP as a defendant, Fried said yesterday in a phone interview. “I have no immediate timetable for that other than to say it will be soon.”
London-based BP has said its Atlantis platform, located about 100 miles (161 kilometers) south of the undersea gusher where the Deepwater Horizon drilling rig sank, is safe and is in compliance with federal regulations.
“The plaintiff’s allegations are factually and legally unsupportable,” Otway Denny, BP’s lawyer, said in the company’s June 14 motion to intervene in the Atlantis action. He said Abbott’s information “is critically incomplete and it has been grossly misinterpreted by plaintiffs and their purported expert witness.”
Toby Odone, a BP spokesman, declined to comment on the dismissal of the lawsuit.
The case is Abbott v. Salazar, 4:10-cv-01759, U.S. District Court, Southern District of Texas (Houston).
Celebrity Adviser Starr Used Name-Dropping in Alleged Fraud
Kenneth I. Starr knew how to cultivate relationships with powerful people, and he did it in the most transparent way -- by serial name-dropping.
Dining with Starr in the Grill Room at the Four Seasons in New York meant listening to him reel off bold-face names as fast as he guzzled Diet Cokes, according to one occasional lunch companion who asked not to be identified.
Certain people would come up again and again in his boasts, according to a story in the June 21 issue of Bloomberg Businessweek. Starr would say he had lunch with Peter Peterson, co-founder of the private-equity firm Blackstone Group LP, or that he and “Pete” were talking at the Council on Foreign Relations, long chaired by Peterson, or that he had done something with “Pete,” according to the companion.
Starr managed money for a living, and his relationship with Peterson was one of his key assets. Rachel “Bunny” Mellon, the 99-year-old widow of the bank heir and philanthropist Paul Mellon was a longstanding client, according to Alex Forger, Mellon’s lawyer. It was his connection to the Mellons that started Starr on his path to wooing the rich, according to people who knew Starr and who asked not to be identified.
Starr’s career famously came to an end last month when government agents arrived at his home on Manhattan’s Upper East Side and found him hiding in a closet, prosecutors in Manhattan said on the night of his arrest. His $7.5 million condominium, which he shared with his fourth wife, Diane Passage, a pole dancer, featured floor-to-ceiling windows, a granite lap pool, and a 1,500-square-foot garden, financed with what prosecutors said was plundered cash, according to a criminal complaint.
The civil case is SEC v. Starr, 1:10-cv-04270, and the criminal case is U.S. v. Starr, 1:10-mj-01135, U.S. District Court, Southern District of New York (Manhattan).
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BP’s $20 Billion Fund May Not Stop Spill Lawsuits, Judge Says
BP Plc’s $20 billion oil spill fund, established yesterday at the request of U.S. President Barack Obama, may not stop more than 230 lawsuits filed by people and businesses harmed by the worst environmental disaster in U.S. history, a judge said.
U.S. District Judge Carl Barbier said while BP’s new fund is a welcome step, he believes some spill damage claims won’t be resolved through either the interim-claims process BP has set up under the Oil Pollution Act of 1990 or by the panel of mediators, led by Ken Feinberg, appointed by Obama to administer the fund.
“Hopefully, everybody will be satisfied through the OPA 90 claims process, and nobody will end up in court,” lawyer Steve Herman, who represents multiple hotels and fishing industry workers, told Barbier at a New Orleans federal court hearing yesterday.
“I’m not as optimistic as you,” Barbier told Herman and more than 75 other lawyers for fishermen, seafood processors, property owners and tourist businesses that are suing BP.
Barbier said judges will also be required to decide which damage claims are too “remote” from the oil spill to be legally valid. According to data compiled by Bloomberg, litigation against BP and other companies involved in the Gulf spill now extends beyond the Gulf Coast, including cases filed in Kentucky, South Carolina and Alaska.
“It could be geographic remoteness or legal remoteness,” Barbier said. “It’ll be about where the line is drawn up the chain.”
As of yesterday, “BP has paid 60,000 claims totaling nearly $100 million,” BP’s lead lawyer Don Haycraft told Barbier. All of these claims have been resolved so far through the OPA 90 claims process.
BP Suits Should Be Sent to New Orleans, U.S. Says
Justice Department lawyers, in a June 10 filing made public yesterday, urged a panel of judges to gather all the suits before a single judge in New Orleans for pre-trial proceedings. The government didn’t identify the judge. BP officials have asked that the cases be sent to U.S. District Judge Lynn Hughes in Houston.
New Orleans “is centrally located and is geographically closest to the key events giving rise to liability in these matters,” U.S. lawyers said in the nine-page filing.
Most of the at least 232 cases filed in state and federal courts so far against London-based BP are proposed class actions representing potentially thousands of commercial fishermen, shrimpers, seafood processors, property owners and tourism- related businesses harmed by the spill, the largest in U.S. history.
The company also faces wrongful-death suits brought by the families of workers killed in the April 20 explosion of the Deepwater Horizon drilling rig. On June 2, Credit Suisse Group AG estimated that the combined cleanup, restoration and litigation costs of the spill may top $37 billion.
“BP continues to believe that the federal district court in Houston will provide the most convenient location for all of the related cases, and has the judicial resources and experience necessary to properly manage a large and complex group of cases,” Robert Wine, a company spokesman, said in an e-mailed statement.
The multidistrict case is In re Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico on April 20, 2010, U.S. Judicial Panel on Multidistrict Litigation, MDL-2179, Washington.
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Kerviel Offered Me Champagne, SocGen Controller Tells Court
Jerome Kerviel offered a Societe Generale SA internal controller champagne and presented “coherent” explanations when questioned about his trading, according to testimony in a Paris court yesterday.
Marine Auclair, in charge of comparing traders’ reports with the bank’s accounts, said she contacted Kerviel and his superiors in April 2007 after finding a “mismatch” of 94 million euros ($116.4 million) between trades he reported and what was booked in the accounting system.
When asked about the discrepancy, Auclair said Kerviel “had a fairly nervous, worried air about him and said, ‘If you take care of this gap, I’ll give you a bottle of champagne.’”
She testified that she never received any champagne.
Kerviel is on trial for faking documents, abuse of trust, and computer hacking related to the 4.9 billion-euro trading loss the bank incurred in 2008 after unwinding 50 billion euros worth of unauthorized positions. He admitted yesterday to the accusations, while insisting the bank knew of his actions.
While some of his trades “appeared fictitious” and “didn’t have a real counterparty,” Auclair said Kerviel gave her and other controllers “explanations that seemed coherent, that corresponded to the situation.” He also provided documents appearing to show they were genuine.
When asked about Kerviel’s testimony earlier this week that his excuses were too “crude” to be believed, Auclair said, “I’m not an idiot.” Faced with the same circumstances again, she would still have believed what Kerviel told her, she said.
Judge Dominique Pauthe opened yesterday’s hearing saying Daniel Bouton, who stepped down as Societe Generale chief executive officer in April 2008, will be called to testify on June 22, the final day of testimony at the trial, which is to end June 25.
Vivendi Board Didn’t Weigh Share Sale, Bronfman Tells Court
The Dec. 14, 2001, meeting was dominated by discussion of the company’s purchase of entertainment assets from USA Networks Inc., Bronfman said. Bronfman, who was Vivendi’s vice chairman from 2000 until 2003, is accused of improperly gaining $12.8 million from exercising stock options based on non-public information he had about a planned share sale.
At the meeting, “we were asked to approve what Vivendi had said it would do” with the USA Networks assets, Bronfman said. “We were not asked to approve what it might do sometime in the future.”
Bronfman said he was later surprised by the decision to initiate a share sale, which came as he was beginning a planned exercise of his options.
Bronfman and former Chief Executive Officer Jean-Marie Messier are among seven defendants at the trial, which focuses on a $77 billion acquisition spree under Messier that almost bankrupted Vivendi. A New York jury in January found the company liable for making misleading statements to investors during the same period, prompting it to set aside 550 million euros ($682 million) to cover a possible award in the lawsuit.
In his charges, investigating judge Jean-Marie d’Huy focused on a single English-language slide presented at the meeting which said that a sale of shares “could be envisaged” in the future.
Lawyers for Bronfman and Vivendi’s former Chief Financial Officer Guillame Hannezo have argued the sale wasn’t certain at the time the men sold their own shares, making insider trading impossible. Paris prosecutors advised against trying any of the defendants before being overruled by d’Huy.
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BP, Nalco Sued Over Dispersant Used in Gulf Spill
BP Plc and a Nalco Holding Co. unit, the maker of a chemical dispersant used to deal with the Gulf of Mexico oil spill, were sued by Louisiana residents claiming the product is four times more toxic than the oil itself.
BP has been using the dispersant to break up oil and reduce harm to the coast following the April explosion of the Deepwater Horizon drilling rig. The plaintiffs claim BP used the dispersant to save money “and lessen the public reaction to the oil spill” by forcing it to the bottom of the Gulf.
The lawsuit, filed yesterday in federal court in New Orleans, is a proposed class action that would include all workers and Gulf Coast residents claiming harm from the chemical. The plaintiffs are seeking at least $5 million in actual damages and unspecified punitive damages.
“The dispersant has been sprayed over the Gulf of Mexico and has caused a toxic chemical to be a permanent part of the sea bed and food chain in the bio structure,” according to the complaint. The chemical causes “an even more dangerous condition to exist in the Gulf of Mexico than if the oil was allowed to float to the shoreline,” the residents said in the complaint.
More than 1.3 billion gallons of dispersants have been sprayed into the Gulf since April 20, according to the Deepwater Horizon Unified Command linking companies and government agencies responding to the spill.
The lawsuit is one of more than 230 filed against BP over the spill in federal and state courts.
Charlie Pajor, a spokesman for Naperville, Illinois-based Nalco, declined to comment on the lawsuit. “We feel our product is safe and effective,” he said in a phone interview.
Toby Odone, a spokesman for London-based BP, declined to comment.
The case is Parker v. Nalco Co., 2:10-cv-01749, U.S. District Court, Eastern District of Louisiana (New Orleans).
Two Charged by U.K. SFO in Alleged $27 Million Bank-Loan Fraud
A former property developer and former law firm partner were charged with conspiracy to commit fraud after allegedly using false documents to get a 22 million-euro ($27 million) bank loan from a unit of Zurich-based EFG International AG.
Michael Shephard, 49, obtained the loan in 2008 by stating he had 76 million pounds ($112.5 million) on deposit at Bank Julius Baer in Guernsey, the U.K. Serious Fraud Office said in an e-mailed statement yesterday. He was helped by Kevin Steele, formerly a lawyer at Mishcon de Reya Solicitors in London, the SFO said.
Steele abused his position in relation to “an undertaking given to EFG Bank in respect of the EFG loan, the general mishandling of the Michael Andrew Shephard client account and the theft of 1.8 million pounds from that account” to pay an unrelated claim, the SFO said.
The men were charged yesterday at a London court and released on bail, the SFO said. EFG International spokesman Keith Gapp didn’t respond to a request for comment.
“On behalf of Mr. Shephard, we’d be most interested to see what evidence the SFO has to introduce to support the charges,” Shephard’s lawyer, Stephen Gilchrist, said.
Steele’s lawyer Nick Brett couldn’t be reached.
“Kevin Steele was expelled from Mishcon de Reya in September 2008, nearly two years ago,” the firm said in an e- mailed statement. “The firm carried out a thorough internal investigation and brought in the police and the Solicitors Regulation Authority. It has ensured that the interests of its clients have been fully protected.”
Financial Adviser Kenneth Starr Sued by City National Bank
Kenneth Starr, the investment adviser accused in a criminal indictment of stealing at least $59 million from clients, was sued by City National Bank, according to state court records in New York.
City National’s court filing June 16 refers to an agreement with Starr over a “term promissory note” dated Feb. 25 and says he is required to answer the bank’s summons. A complaint with City National’s allegations wasn’t yet available.
Starr, 66, of Manhattan, was charged in May in a federal grand jury indictment in New York with 20 counts of wire fraud and one count each of securities fraud, money laundering and fraud by an investment adviser. The alleged victims of the fraud include an actress, a former executive of a talent agency, the stepson of a deceased heir to a business fortune, a 99-year-old heiress, and a film producer.
Starr’s clients have included actors Sylvester Stallone and Wesley Snipes and heiress Rachel “Bunny” Mellon.
Sabrina Shroff, a public defender who represents Starr in the criminal case, and Abbe Lowell, a lawyer for Starr in a civil suit brought by the U.S. Securities and Exchange Commission, didn’t return calls seeking comment.
Cary Walker, a spokesman for Los Angeles-based City National, declined to comment.
The case is City National Bank v. Kenneth I. Starr, Supreme Court of the State of New York, County of New York.
Mortgage-Fraud Crackdown in U.S. Brings 485 Arrests
Authorities arrested 485 people since March in the largest nationwide mortgage-fraud crackdown of its kind, the U.S. Justice Department said.
During the enforcement effort, 1,215 criminal defendants responsible for $2.3 billion in losses faced some type of legal action, the department said. The crackdown, dubbed Operation Stolen Dreams, also included 191 civil cases resulting in the recovery of more than $147 million.
“This represents the largest collective enforcement effort ever brought to bear in confronting mortgage fraud,” said Attorney General Eric Holder at a news conference in Washington. “These schemes are despicable, they are dangerous to our economy and they will not be tolerated.”
The initiative was organized by President Barack Obama’s financial fraud task force. The Federal Bureau of Investigation has more than 3,000 pending mortgage-fraud cases, almost double the number in fiscal year 2008, Holder said.
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Lafarge Loses Challenge to $307 Million EU Antitrust Penalty
Lafarge SA, the world’s largest cement maker, lost a challenge at the European Union’s highest court to a 249.6 million-euro ($307 million) antitrust fine levied by EU regulators almost eight years ago for colluding on plasterboard prices.
The European Court of Justice in Luxembourg rejected Lafarge’s appeal in its entirety and confirmed the penalty. Yesterday’s ruling conflicts with the view of an adviser to the top EU court, who said that the case should be re-examined.
Lafarge was appealing a fine levied by the European Commission in November 2002 for its role in a cartel which covered about 80 percent of the EU plasterboard market. Lafarge’s fine was upheld by a lower EU court in 2008.
The EU plasterboard market was worth about 1.2 billion euros at the time of the violations. The Brussels-based commission, the EU’s antitrust regulator, fined four companies in 2002 for fixing prices of plasterboard for at least four years until 1998. The regulator said collusion started in 1992 when BPB Ltd. and Knauf Group’s Gips agreed to end a price war and lessen competition.
Claire Mathieu, a spokeswoman for Lafarge, declined to immediately comment.
An EU court in 2008 cut the fine for BPB, a Cie. de Saint- Gobain SA unit, to 118.8 million euros from 138.6 million euros.
Jan Mazak, an advocate general at the court, said in February that a lower court’s analysis of the case did “not deal adequately” with Lafarge’s arguments concerning discrimination and the duration of the antitrust breach.
The case is C-413/08, Lafarge v. Commission.
Mitsubishi Motors Wins Appeal of $11 Million Florida Verdict
Mitsubishi Motors Corp. won reversal of a $10.9 million jury verdict awarded in 2008 to the family of a Florida man who died in a rollover accident.
Scott Laliberte, 25, was killed in September 2004 when the seat back collapsed and he was partly ejected from a 2000 Mitsubishi Nativa. His family claimed defects in the seat back and seat belt. In February 2008, a West Palm Beach, Florida, jury found a defect in the Nativa caused Laliberte’s death.
Florida’s Fourth District Court of Appeal yesterday ordered a new trial, finding that the Tokyo, Japan-based automaker was unfairly prevented from putting on evidence of seat-belt and seat-back tests by the company’s expert witnesses.
“When the trial court excluded Mitsubishi’s demonstrative evidence, its expert’s opinions were barren and unsubstantiated. The trial court’s error was not harmless,” the court said yesterday.
“Our experts were allowed to offer opinions but they weren’t allowed to show the reasons behind the opinions,” Mitsubishi lawyer Scott Paxton said yesterday in an interview. This “reduced their credibility” to the jury, he said.
No new trial date has been set, Paxton said. The Laliberte family is likely to appeal the decision, he said.
Don Fountain, the family’s attorney, didn’t return a call seeking comment yesterday.
The lawsuit is Laliberte v. Mitsubishi Motors Corp., CA 05- 6369, Circuit Court, Palm Beach County, Florida (West Palm Beach). The appellate case is Mitsubishi v. Laliberte, 4DO8- 2211, Florida Fourth District Court of Appeal.
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