SocGen, Vivendi, Massey, Rajaratnam, BP, BDO, Adelson, AIG in Court News

The U.S. appealed a federal judge’s June 22 order lifting a moratorium on deepwater oil drilling that was imposed after the BP Plc spill in the Gulf of Mexico.

U.S. District Judge Martin Feldman in New Orleans said the drilling ban, issued in the wake of the explosion and sinking of the Deepwater Horizon oil rig, was overly broad and ordered federal regulators not to enforce it. The U.S. appealed that decision yesterday, according to a one-sentence notice of appeal filed in the district court.

The government also asked Feldman to put his order on hold while it appeals the decision, or alternatively, to issue a temporary stay until the U.S. Court of Appeals resolves its request for an emergency stay.

Interior Secretary Kenneth Salazar, in addition to appealing the court’s decision, “will undertake a process to issue a new suspension decision,” the U.S. said in court papers filed with the request for a stay. This would reflect “information learned since the original decision” and provide “further explanation of the need for a pause in deepwater drilling operations,” according to the filing.

A stay pending appeal “would maintain the legal status quo,” the U.S. said. It would also “further serve the public interest by eliminating the risk of another drilling accident while new safety equipment standards and procedures are considered,“ the government said.

The U.S. said it would comply with Feldman’s order lifting the ban, while waiting for a stay or reversal.

President Barack Obama temporarily halted all drilling in waters deeper than 500 feet on May 27 to give a presidential commission time to study improvements in the safety of offshore operations.

Hornbeck Offshore Services Inc. and other offshore service and supply companies on June 7 sued Salazar and the head of the Minerals Management Service, along with that agency and the Interior Department, asking the court to lift the ban. Hornbeck and the other companies argued they would suffer irreparable economic harm from the suspension in drilling.

The case is Hornbeck Offshore Services LLC v. Salazar, 2:10-cv-01663, U.S. District Court, Eastern District of Louisiana (New Orleans). The Transocean subpoena case is In Re. The Complaint and Petition of Triton Asset Leasing GmbH, 4:10- cv-01721, U.S. District Court, Southern District of Texas (Houston). The investor suit is Jerry D. Goodwin v. Anadarko Petroleum, 10-CV-4905, Southern District of New York (Manhattan).

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Trials/Appeals

SocGen Asks Court to Make Kerviel Pay for Bank Trading Loss

Societe Generale SA asked a French court to order Jerome Kerviel to pay it the 4.9 billion euros ($6 billion) the bank lost in January 2008 unwinding 50 billion euros in unauthorized positions the former trader had taken.

“This is the story of a liar, it is the story of a faker,” Jean Veil, a lawyer for Societe Generale, told the court yesterday during the bank’s closing statement to judges. Kerviel “played like the bank was a casino.”

Kerviel, 33, is on trial for abuse of trust, faking documents and hacking into the bank computers, creating fake hedges to mask the trades. He argued his superiors condoned his actions, lifting trading limits and “turning a blind eye” to questions. His actions were “professional mistakes,” not criminal offences, he said in a final statement June 22.

Societe Generale, based in Paris, has victim status at the criminal trial that allows it to seek damages. In France, criminal trials precede civil claims and an acquittal would block any possible civil lawsuits.

Kerviel faces as many as five years in jail and a criminal fine of 375,000 euros if found guilty.

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Lehman Releases Barclays Interviews in ‘Windfall’ Recovery Bid

Lehman Brothers Holdings Inc. published 18 interviews with witnesses including Barclays Plc lawyers and executives in a bid to recover an $11 billion “windfall” allegedly collected by the U.K. bank when it bought the defunct firm’s brokerage.

Witnesses include Edward Rosen of Cleary Gottlieb Steen Hamilton, Barclays’s law firm for the brokerage deal, Mike Keegan, a Barclays trading executive, and Paolo Tonucci, Lehman’s former treasurer who is now with Barclays. The depositions were published yesterday on the Web site of the U.S. Bankruptcy Court in Manhattan, where Lehman and the brokerage trustee are due to finish making their case against Barclays on Friday.

Lehman, which wants money to pay off creditors, has accused the U.K.’s third-biggest bank of conspiring with former Lehman executives to get an undisclosed discount on the deal. The brokerage’s trustee has said changes were secretly inserted in the sale contract without telling him or Lehman’s lawyers, including a late alteration allocating $4 billion in margin accounts to Barclays.

Rosen testified that handwritten notes of the late changes were shown to “the Lehman side.” While he didn’t speak to any Lehman representative and didn’t know which lawyer received the changes, Cleary “did not control the documents,” he said in his February deposition.

“Those changes were put into whatever revised draft emerged” from Lehman’s lawyers, Rosen told a lawyer for the trustee.

Trustee James Giddens seeks $6.7 billion from Barclays to pay hedge funds and other institutional clients. Barclays has said it owes Lehman nothing and has demanded from Giddens $3 billion, which it says he is withholding.

Barclays is due to make its case in late August and September.

Lehman, which spent $794 million on lawyers, advisers and managers in 19 months through April, has said it will spend five years selling assets to pay unsecured creditors as little as 14.7 cents on the dollar.

The cases are In re Lehman Brothers Holdings Inc., 08- 13555, and James W. Giddens v. Barclays Capital Inc., 09-01732, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Vivendi Prosecutor Says Messier, Bronfman Charges Lack Evidence

Criminal charges against former Vivendi SA executives including Edgar Bronfman Jr. and Jean-Marie Messier are without grounds, the prosecutor assigned to the case told a Paris court.

Evidence doesn’t strongly suggest the two men, or their five co-defendants, broke securities laws during a $77 billion acquisition spree at the media company, prosecutor Chantal de Leiris said. De Leiris recommended against prosecuting them, before being overruled by investigating judge Jean-Marie d’Huy.

Vivendi is a civil plaintiff in the Paris case, along with more than 200 investors who complain they were duped by overly positive communications from the company. The prosecutor de Leiris said the statements during the period at issue turned out to be too positive because of “poor knowledge of market conditions,” rather than deception by Messier.

The exercise of stock options by Bronfman, the former vice- chairman, and ex-Chief Financial Officer Guillaume Hannezo shortly before a January 2002 share sale by the company “were not motivated by privileged information,” de Leiris said. Investors were aware “that a strong possibility of a sale existed,” she said.

All the defendants deny wrongdoing. Messier and Hannezo weren’t deemed personally liable for misleading investors in the New York suit.

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New Suits

Anadarko Sued by Investors Over Drilling Statements

Anadarko Petroleum Corp., the Texas oil company that owns 25 percent of the damaged well pouring crude into the Gulf of Mexico, was sued by investors who said the company made false statements about drilling safety.

The proposed class-action, or group suit, filed yesterday in federal court in New York, alleges Anadarko misled investors about the safety of the Deepwater Horizon joint venture with BP Plc and as a result, investors lost money on news that the well couldn’t be capped. The rig exploded on April 20, killing 11 workers and injuring 17 others.

The plaintiffs allege that on June 1, after news reports about the failure to cap the well, shares fell about 20 percent in a day, and another 20 percent on June 9, on news that the company would be responsible for more than $1 billion in cleanup costs.

“In the wake of this tragedy, defendants continued to issue materially false and misleading statements representing the company would likely incur only approximately $177.5 million in liability,” the plaintiffs said. “However, these statements were materially false and misleading.”

John Christiansen, a spokesman for The Woodlands, Texas- based Anadarko, said in an e-mail that the company believes the suit “is without merit.”

The plaintiff, Anadarko shareholder Jerry D. Goodwin, seeks to represent a class of hundreds of thousands of Anadarko shareholders whose shares dropped in value from June 12, 2009, through June 9, 2010. The plaintiffs also allege that the venture’s oil spill response was a “complete sham” and that Anadarko knowingly undertook the joint venture despite the “terrible safety record” of BP.

The suit is Jerry D. Goodwin v. Anadarko Petroleum, 10-CV- 4905, Southern District of New York (Manhattan).

Massey Units Sue Mine Regulator Over Ventilation

Massey Energy Co., owner of the West Virginia mine where 29 people were killed in April, sued the U.S. Mine Safety and Health Administration, saying the agency rejected ventilation methods that would have benefited underground workers.

In a lawsuit made public yesterday in federal court in Washington, six Massey units ask a judge to rule that defendants including the U.S. Labor Department lack the authority to dictate how to ventilate mines. Such decisions are better left to mining companies, the units said.

“We hope the principal beneficiary will be miners, who will have cleaner air, safer mines, and more secure jobs,” Don Blankenship, chief executive officer of Richmond, Virginia-based Massey, said in a statement.

The April 5 explosion was the worst U.S. coal mining accident in 40 years. The Labor Department said in a preliminary report to President Barack Obama in April that most mine blasts of that magnitude are sparked by accumulations of methane, combustible coal dust and air.

Massey has said that the Labor Department’s Mine Safety and Health Administration forced it to install a complex ventilation system in the so-called longwall area, where the miners were working when the explosion occurred, months before the accident.

Amy Louviere, a spokeswoman for the Mine Safety and Health Administration, said in an e-mailed message that the agency doesn’t comment on pending litigation.

The case is Elk Run Coal Co. v. U.S. Department of Labor, 10-cv-01056, U.S. District Court, District of Columbia.

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Lawsuits/Pretrial

Stockman Reveals Reputations Don’t Return When Prosecutors Walk

When David Pinkerton’s lawyer called to say that the U.S. prosecutors who had charged the former American International Group Inc. managing director with bribery had dropped the case, the relief was so great that Pinkerton broke down and cried.

David Stockman, a former U.S. budget director, lived under the shadow of a fraud indictment for two years before prosecutors dropped the charges without explanation or apology.

Stockman and Pinkerton are among a growing number of executives who have been indicted for corporate crimes in recent years and then had the charges dropped, David Glovin reports in Bloomberg Markets’ August 2010 issue.

From 2006 to 2008, the most recent period available, U.S. prosecutors dismissed charges against 42 such defendants for which the most serious charge was securities fraud. That’s more than twice the 20 dismissals in the prior three years, according to the Federal Justice Statistics Resource Center.

The collapse of so many cases is surprising, legal experts say, because U.S. prosecutors are expected to have thoroughly investigated the facts and law before asking a grand jury to bring charges.

At least five indictments were returned -- and then dropped -- by the U.S. Attorney’s Office in Manhattan, which oversees Wall Street.

“This strikes me as very unusual,” says Duke University law professor Samuel Buell, a former prosecutor who brought fraud cases stemming from the collapse of Enron Corp. “These are some of the best prosecutors in the Justice Department.”

The increasing number of dismissals may signify that the transactions in some corporate cases have become so intricate that even top prosecutors have trouble mastering them, Buell says.

The phenomenon may become more widespread as investigators sift through the wreckage of the global financial crisis. Criminal investigators have probed Lehman Brothers Holdings Inc., which filed for bankruptcy in 2008; Countrywide Financial Corp., which Bank of America Corp. acquired that year; and AIG, which got $182 billion in the U.S. bailout, according to people familiar with the probes.

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Rajaratnam, Chiesi Seek Order for Details of Charges

Raj Rajaratnam and Danielle S. Chiesi, co-defendants in the biggest hedge-fund insider-trading case, sought to force prosecutors to give them separate trials and more information about the charges they face.

The pair appeared yesterday before U.S. District Judge Richard J. Holwell in New York where Rajaratnam’s lawyer Robert H. Hotz urged the judge to compel prosecutors to disclose details of alleged insider trades in 31 stocks.

“It’s been heralded as the biggest insider trading case in history, but we don’t have the trades,” Hotz said.

Rajaratnam, co-founder of New York-based Galleon Group, is accused of using secret tips from hedge-fund executives including Chiesi, corporate officials and other insiders to earn millions of dollars in illegal stock trades. The allegations involve trading shares in 12 companies, including Intel Corp., International Business Machines Corp., Akamai Technologies Inc., Google Inc. and Advanced Micro Devices Inc.

Rajaratnam, 53, and Chiesi, 44, are among more than 20 people accused since October in two overlapping criminal and civil insider-trading cases. Rajaratnam and Chiesi are scheduled to be tried Oct. 25.

The judge didn’t say when he will rule on the defense requests. He also said he will wait to rule on a request by Rajaratnam’s lawyers to postpone the Oct. 25 trial date.

The criminal case is U.S. v. Rajaratnam, 1:09-cr-1184, and the civil case is SEC v. Galleon Management LP, 09-cv-08811, U.S. District Court, Southern District of New York (Manhattan).

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Stanford Will Be Tried Alone, Without Fraud Case Co-Defendants

R. Allen Stanford will face a federal jury alone on charges he swindled investors of more than $7 billion, and his alleged co-conspirators can be tried later, a judge ruled.

The Texas financier is in jail in Houston awaiting trial on 21 criminal charges he defrauded more than 20,000 investors through allegedly bogus certificates of deposit at Antigua-based Stanford International Bank Ltd.

U.S. District Judge David Hittner in Houston ruled yesterday that Stanford’s trial will go forward in January as previously set. In a three-paragraph order, Hittner granted a request by three former Stanford executives also charged in the scheme that they be tried separately from their former boss.

Laura Pendergest-Holt, the former chief investment officer of the Houston-based Stanford Financial Group of companies, “very much wanted to be tried on her own conduct,” her attorney, Dan Cogdell, said in a phone interview.

Pendergest-Holt made the request after Stanford repeatedly changed defense attorneys and engaged in conduct Cogdell described in a June 9 filing as “egregious and circus-like.” Stanford’s former accounting chief Gil Lopez and global controller Mark Kuhrt joined Pendergest-Holt’s request for a separate trial. In yesterday’s order, Hittner said the three colleagues will be tried together sometime after Stanford’s trial concludes.

“This decision by the court was expected, and we will welcome an opportunity to show that R. Allen Stanford is innocent as charged,” his lawyer, Robert Bennett of Houston, said in an e-mailed statement.

The criminal case against Stanford and the other defendants is U.S. v. Stanford, H-09-342, U.S. District Court, Southern District of Texas (Houston). The civil case is SEC v. Stanford International Bank, 3:09-cv-00298-N, U.S. District Court, Northern District of Texas (Dallas).

Toyota Must Tell Dealers to Keep Evidence, Judge Says

Toyota Motor Corp. must direct its dealers to preserve documents related to allegations of sudden acceleration, a judge overseeing federal lawsuits ruled.

The company has to order the preservation of material held by Lexus and Toyota dealers because such evidence could be relevant to hundreds of lawsuits, U.S. District Judge James V. Selna in Santa Ana, California, said yesterday at a hearing. Selna is overseeing all federal suits against the automaker over sudden-acceleration claims.

Toyota lawyers told the judge that the company doesn’t have direct control over dealerships, particularly those that don’t file documents electronically, and that it couldn’t enforce such an order.

Brian Lyons, a Toyota spokesman, didn’t return a call for comment after the ruling.

Toyota, the world’s largest automaker, faces more than 300 federal and state lawsuits including proposed class actions over economic losses and claims of personal injuries or deaths caused by sudden-acceleration incidents. The federal lawsuits in April were combined before Selna in a multidistrict litigation, or MDL.

The company, based in Toyota City, Japan, has recalled more than 8 million vehicles for repaired related to sudden, unintended acceleration. In September the automaker announced a recall of 3.8 million Toyota and Lexus vehicles because of a defect that may cause floor mats to jam accelerator pedals. The company later recalled vehicles over defects involving the pedals themselves.

The cases are combined as In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices and Products Liability Litigation, 8:10-ml-02151, U.S. District Court, Central District of California (Santa Ana).

Adelson Ready to Settle Casino Dispute With Law Group

Las Vegas Sands Corp. Chairman Sheldon Adelson said his Singapore casino is ready to settle “any day they want” with the lawyers’ group that accused it of using their conference to hasten its gaming license.

“We much rather make love than war,” Adelson said in a Bloomberg Television interview in Singapore. “We tried to settle with them; they didn’t want to and were quite unreasonable.”

Marina Bay Sands sued the lawyers after they withheld payment for the first conference it hosted. IPBA 2010 Pte, on behalf of the Inter-Pacific Bar Association conference, countersued for misrepresenting a “complete disaster” as a world-class venue. Sands used the attendance of Singapore Minister Mentor Lee Kuan Yew at the event to speed up its casino and occupation permits, according to the IPBA lawsuit.

“People should know that there will be little glitches in an opening of a new property,” said Adelson, 77, who was in Singapore for the grand opening of the casino resort yesterday. “They couldn’t stand even one glitch.”

Delegates at the conference complained of unfinished rooms, power failures, closed facilities and lost luggage, and the Bar Association’s annual general meeting discussed an “unprecedented” motion empowering it to sue Sands, according to IPBA’s lawsuit.

Marina Bay Sands executive George Tanajisevich met IPBA President Lee Suet Fern once after the conference and didn’t make any settlement offer, the IPBA organizing committee said.

The case is Marina Bay Sands Pte Ltd. v. IPBA 2010 Singapore Pte Ltd. S348/2010 in the Singapore High Court.

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Verdicts/Settlements

BDO Seidman’s $521.7 Million Penalty Reversed

BDO Seidman LLP won’t have to pay Portuguese client Banco Espirito Santo SA $521.7 million for failing to detect a fraud, a Florida appeals court ruled in reversing a 2007 jury award and ordering a new trial.

The state Third District Court of Appeal in Miami yesterday decided the case should be tried again because of possible jury confusion in a three-part trial over four months in Miami-Dade County Circuit Court.

The trial’s so-called trifurcation “impermissibly allowed the jury to render a verdict” on gross negligence two months before it considered issues including causation and comparative fault, possibly prejudicing jurors, the three-judge appeals panel decided.

The verdict was the second-largest U.S. jury award in 2007, according to data compiled by Bloomberg. Banco Espirito sued BDO Seidman in 2004, claiming it suffered a loss when the New York- based accounting firm certified as real fake accounts receivables at E.S. Bankest LLC.

“We have consistently stated that we were confident that the jury’s erroneous verdict in this case would be reversed,” Jack Weisbaum, BDO Seidman’s chief executive officer, said in an e-mailed statement. “We will prove that BDO acted at all times consistent with its professional obligations and that its audit opinions were based on the proper application of generally accepted auditing standards.”

“This case has been sent back for another trial because of the procedural ‘bifurcation’ issue,” Steven W. Thomas, an attorney for Banco Espirito, said in an e-mailed statement. “We specifically note that the court did not dispute BDO unethical conflicts of interest or its negligence. The evidence of BDO Seidman’s failures of even the most basic auditing procedures is so overwhelming that we expect a new jury will reach the same conclusion as the original jury.”

The case is Banco Espirito Santo International Ltd. v. BDO Seidman LLP, 04-14009-CA-01, 11th Judicial Circuit of Florida (Miami-Dade County). The appeal is 3D09-324, 07-2746 BS 07-2472, Third District Court of Appeal (Miami).

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Litigation Departments

New York Aims to Lead Investor Litigation on BP Spill

New York Comptroller Thomas P. DiNapoli, trustee of the $132.6 billion State Common Retirement Fund, said he hired a law firm to represent the fund in a class-action investor lawsuit against BP Plc.

The state fund will seek lead-plaintiff status in an action stemming from the Deepwater Horizon explosion and oil spill in the Gulf of Mexico in April, DiNapoli said yesterday in a statement. He said the fund held more than 19 million shares of BP at the time. He retained the law firm Cohen Milstein Sellers Toll PLLC, the comptroller said.

“BP misled investors about its safety procedures and its ability to respond to events like the ongoing oil spill, and we’re going to hold it accountable,” DiNapoli said in the statement.

Four actions are pending against BP, one in California and three in Louisiana, Robert Whalen, a spokesman for the comptroller, said in a telephone interview. DiNapoli believes the suits will be consolidated at some point and wants Cohen Milstein to manage the litigation on the state’s behalf, Whalen said.

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Mayer Brown Litigation Co-Head Goes to BuckleySandler

BuckleySandler LLP, a 90-attorney law firm in Washington, hired David S. Krakoff, the former co-leader of the litigation practice at Mayer Brown LLP.

Krakoff and another former Mayer Brown partner, Christopher Regan, are joining as partners and will specialize in financial- services enforcement, BuckleySandler said yesterday in a statement.

“From the day we started the new firm in March 2009, our intention was to have a full-service financial-services boutique,” Andrew Sandler, BuckleySandler’s co-chairman, said in a telephone interview. “This completes the enforcement side of our practice.”

BuckleySandler was formed by the merger of Buckley Kolar LLP and a group of 15 lawyers led by Sandler, a former partner at Skadden, Arps, Slate, Meagher Flom LLP.

BuckleySandler handles commercial litigation, regulatory and enforcement work for banks, credit-card companies, mortgage issuers and mortgage servicers. Clients include Wells Fargo Co., Citigroup Inc. and American Express Co., Sandler said.

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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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