A former UBS AG client who played soccer on the Soviet national team pleaded guilty to failing to tell U.S. tax authorities about $2.6 million held in an offshore account.
Leonid Zaltsberg, 75, admitted that he didn’t declare to the Internal Revenue Service a nominee Panamanian account set up with the help of a UBS banker and a Swiss lawyer he didn’t identify in federal court in Newark, New Jersey.
“Did you seek advice from UBS employees on how to keep your foreign bank account hidden from the IRS?” U.S. District Judge Stanley Chesler asked Zaltsberg, who answered in the affirmative.
UBS, the largest Swiss bank, paid $780 million last year to avoid prosecution, admitted it aided tax evasion from 2000 to 2007, and gave the IRS data on 250 secret accounts, including Zaltsberg’s, court records show. UBS later agreed to reveal data on another 4,450 accounts.
The case is United States of America v. Leonid Zaltsberg, U.S. District Court, District of New Jersey (Newark).
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Ex-Lewis Charles Broker Bunn Sentenced to 30 Months
A former broker at Lewis Charles Securities Ltd. was sentenced to 30 months in prison yesterday for making unauthorized trades worth about 38 million pounds ($57 million).
Jonathan Bunn pleaded guilty to four counts of false accounting, the Crown Prosecution Service said in an e-mailed statement. Bunn was banned in May from holding similar jobs by the U.K. Financial Services Authority for the trades, which resulted in losses of 2.7 million pounds.
Bunn “went well beyond his authority when he gambled with his employer’s reputation and money in the hope of bumping up his commission,” prosecutor David Levy said in the statement. “It is clear he knew exactly what he was doing when, motivated by greed and personal gain, he carried out unauthorized trades.”
Bunn, who worked on the inter-dealer broker desk, took a short position of almost 7 million HSBC Holdings Plc shares without authorization in July 2009 and concealed the trades when questioned by Lewis Charles, the FSA said.
Gregory Fishwick, Bunn’s lawyer, didn’t respond to a request for comment.
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AstraZeneca Loses Court Appeal, Has Cartel Fine Cut
The European Union’s second-highest court upheld a ruling that AstraZeneca Plc misled patent officials and flouted antitrust rules to keep a generic competitor off the market, while reducing the associated fine against the company.
The EU’s General Court yesterday cut the company’s fine from 60 million euros ($74 million) to 52.5 million euros. The court upheld the decision by the region’s antitrust regulator that AstraZeneca, the U.K.’s second-largest drugmaker, “abused its dominant position by preventing the marketing of generic products” of its Prilosec heartburn medicine.
AstraZeneca, based in London, had challenged the commission’s June 2005 decision to fine it for market abuse and misleading patent authorities over Prilosec. The court overturned the commission’s finding that AstraZeneca breached EU rules by withdrawing market approvals for older versions of the medicine in Denmark and Norway, which prevented entry by generic producers and parallel importers.
“The company is disappointed that our position wasn’t confirmed in full,” AstraZeneca spokeswoman Sarah Lindgreen said in an interview. “Obviously, it’s very complex and we need to review it in detail to comment further.”
The commission welcomed the decision, spokeswoman Amelia Torres told reporters at a regular briefing in Brussels.
The case is T-321/05 AstraZeneca v Commission.
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Knauf Loses Appeal of Plasterboard Cartel Fine at Top EU Court
Knauf Group lost an appeal at the European Union’s highest court to overturn an 85.8 million-euro ($105.5 million) antitrust fine for a unit’s collusion on plasterboard prices.
The unit, Knauf Gips, “is solely liable for the infringements committed by the companies constituting the Knauf Group,” the Luxembourg-based European Court of Justice, the EU’s top court, said yesterday, upholding the fine by EU antitrust regulators.
The ruling follows the EU court’s decision on June 17 to reject a last challenge by Lafarge SA, the world’s largest cement maker, of its 249.6 million-euro fine in the cartel. The penalties are part of a November 2002 decision by the European Commission, the EU’s antitrust regulator, to fine four companies for fixing plasterboard prices in a scheme that ended in 1998.
The EU plasterboard market was worth about 1.2 billion euros at the time of the breach. The Brussels-based commission said collusion started in 1992 when BPB Ltd. and Knauf Group’s Gips agreed to end a price war and lessen competition. 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.
Spokespeople at Iphofen, Germany-based Knauf Gips couldn’t immediately be reached to comment.
The case is C-407/08, Knauf Gips v Commission.
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Environmentalists Sue U.S. to Stop Hybrid Tree Tests
Environmental groups sued the U.S. Department of Agriculture to block tests of a genetically-engineered hybrid of the eucalyptus tree in “secret sites” across southern states.
The groups, including the Center for Biological Diversity and the Sierra Club, said yesterday in a statement that the government agency approved the tests at 28 undisclosed sites in seven states “with minimal environmental review.” The tests will be conducted by a joint venture that includes International Paper Co, the world’s largest maker of white paper used in offices.
The fast-growing “cold-tolerant” genetically-engineered eucalyptus trees could displace native species of plants and increase the risk of wildfires, according to the complaint filed in federal court in West Palm Beach, Florida.
ArborGen LLC, the venture that will conduct the tests, also includes MeadWestvaco Corp. and Rubicon Ltd., according to the statement. ArborGen may use the trees for pulp and biofuels, said Marc Fink, with the Center for Biological Diversity. The test sites are in Alabama, Florida, Georgia, Louisiana, Mississippi, South Carolina and Texas.
In the complaint, the environmental groups ask the court to order the agriculture department to set aside the test permits and prepare an impact study. They also seek a court order barring ArborGen from allowing any of the trees to flower.
“We don’t comment on pending litigation,” Alison von Puschendorf, a spokeswoman for Richmond, Virginia-based MeadWestvaco, said in an e-mail. “We are a partner of ArborGen and support the research to develop safe, reliable solutions to fiber needs for our products, and trials such as the one ArborGen is leading are an important part of this research.”
Patty Neuhoff, a spokeswoman for Memphis, Tennessee-based International Paper, deferred comment to ArborGen spokeswoman Nancy Hood, who wasn’t available.
Caleb Weaver, a spokesman for the agriculture department, said the agency doesn’t comment on “active litigation.” He described the tests as “limited.” Efforts to reach Auckland, New Zealand-based Rubicon weren’t successful.
The case is Center for Biological Diversity v. U.S. Department of Agriculture, U.S. District Court, Southern District of Florida (West Palm Beach).
Isramco Is Sued by Shareholder Claiming Mismanagement
Isramco Inc., which formerly explored for oil and gas in Israel and now develops wells in the U.S., was sued by a shareholder contending some officials including Chairman and Chief Executive Officer Haim Tsuff mismanaged the company.
In a lawsuit filed June 30 in Delaware Chancery Court, investor Yuval Lapiner contends Tsuff, company director Jackob Maimon and some other directors violated duties to shareholders, wasted corporate assets and should pay damages to the Houston- based company.
Isramco, which reported a $13.5 million net loss on $31.7 million in revenue last year, according to data compiled by Bloomberg, said in February 2008 that it paid $102 million to buy rights to 590 wells in Texas, Oklahoma and New Mexico.
The lawsuit includes allegations that valuable assets of Isramco were transferred to entities controlled by Tsuff and Maimon “at bargain-basement prices.”
Tsuff and Edy Francis, Isramco’s chief financial officer, didn’t return voice and e-mail messages seeking comment on the lawsuit.
The case is Lapiner v. Tsuff and Isramco Inc., CA5612, Delaware Chancery Court (Wilmington).
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BP Criminal Case in Oil Spill May Be Inevitable, Analysts Say
It’s almost a foregone conclusion, legal experts agree, that the federal investigation of the Gulf of Mexico oil spill will produce criminal charges, Paul M. Barrett and Justin Blum report in Bloomberg’s Businessweek. After all, mere negligence leading to serious oil pollution constitutes a misdemeanor under the Clean Water Act, they note.
Prosecutors “are very likely to bring criminal charges against BP and other companies involved,” says David M. Uhlmann, a former chief of the Justice Department’s environmental crimes section who now teaches at the University of Michigan Law School.
Whether BP or any individuals will face felony charges --or even prison time -- is a more complicated question. One hint of what a broader indictment might look like comes from an unlikely source: private civil-racketeering lawsuits that have been brought on behalf of property and business owners in Alabama, Louisiana, and Florida.
One of the suits, filed on June 12 in federal district court in Pensacola, Florida, by the plaintiffs’ firm, Levin Papantonio Thomas Mitchell Echsner Rafferty & Proctor, accuses BP and Chief Executive Officer Tony Hayward not only of discrete instances of pollution; it also alleges the company engaged in an illegal “enterprise” to mislead regulators over a period of years.
Included in this alleged pattern of wrongdoing was BP’s failure to improve its safety practices in response to past incidents, resulting in criminal fines, the suit says. An explosion in 2005 at BP’s Texas City refinery, which killed 15 workers, and an oil leak in 2006 from a BP pipeline in Alaska are among the episodes cited in the suit.
Taken together with the Deepwater Horizon disaster, the Florida suit alleges, these events show that BP engaged in a scheme that violated the civil provisions of the Racketeer Influenced and Corrupt Organizations Act. The RICO law was enacted in 1970 to help prosecutors put Mafiosi behind bars. It has been used more broadly against corporations and high-profile individuals, including junk-bond impresario Michael Milken in 1989.
It allows prosecution of people who operate or oversee an illegal enterprise, even if they did not commit the main criminal acts in question. The maximum prison term is 20 years for each count. In the hands of a bold prosecutor, the facts and theory that underpin the Levin Papantonio firm’s civil suit could add up to something more: a criminal indictment.
“I would be amazed if the U.S. government didn’t use this as a road map to some sort of criminal case,” says attorney J. Michael Papantonio. An outspoken liberal, he appears frequently on cable-TV talk shows. “This is not a case of a mistake,” he adds. “This is an intentional effort to subvert the law.”
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L’Oreal Heiress Tapes Must Be Probed, Trial Stayed, Judge Says
Recordings of L’Oreal SA heiress Liliane Bettencourt must be turned over for investigation into their contents, a judge ordered yesterday, staying a trial into whether the 87-year-old was manipulated into giving a friend 1 billion euros ($1.23 billion) in gifts.
Bettencourt’s only child, Francoise Bettencourt Meyers, filed a private prosecution against photographer and author Francois-Marie Banier last year, claiming he manipulated her mother’s infirmity to get art, real estate and cash gifts. The mother has opposed her daughter’s effort.
“It’s good, this is exactly what we asked for,” Meyers’s lawyer Olivier Metzner said. “The case could still evolve,” he said, since Judge Isabelle Prevost-Desprez didn’t specify what she would do next or give a time frame for resuming the trial.
The recordings, on 28 compact discs, were made secretly by a former butler beginning in May 2009 and given to Meyers. They have drawn politicians, including French President Nicolas Sarkozy and Labor Minister Eric Woerth, into the family dispute and raised questions about whether tax authorities ignored claims that Bettencourt hid 78 million euros in Swiss accounts.
Police have been investigating how the recordings of Europe’s wealthiest woman discussing political dealings and Swiss bank accounts were made, after Bettencourt made a privacy violation complaint.
“The decision consists of not deciding,” Bettencourt’s lawyer Georges Kiejman said of yesterday’s postponement.
Banier doesn’t have “a single fear” of a trial, his lawyer, Herve Temime, said outside the courtroom. “This additional investigation could clarify not only the recordings, but how they were made.”
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Former Ahold Executive Wins Reversal of Conviction
The former marketing chief of Royal Ahold NV’s U.S. unit, who was sentenced to seven years in prison for overstating earnings, won a new trial after an appeals court said the trial judge erred.
Mark Kaiser was convicted in 2006 of helping U.S. Foodservice inflate profits from 2000 to 2003 by wrongly recording promotional rebates as income. The U.S. Appeals Court in Manhattan yesterday vacated Kaiser’s convictions for securities fraud, conspiracy and four counts of making false filings with the U.S. Securities and Exchange Commission.
Prosecutors said Kaiser made fraudulent representations about U.S. Foodservice’s financial condition in a bid to burnish his resume and succeed Jim Miller as chief executive officer of the Columbia, Maryland-based unit. Ahold sold the unit for $7.1 billion in 2007 to buyout firms Clayton Dubilier & Rice Inc. and Kohlberg Kravis Roberts & Co.
Lawyers for Kaiser argued during his appeal last year that his innocence came to light in a SEC administrative proceeding against U.S. Foodservice’s auditors. Documents showed that Kaiser didn’t hide the scheme from KPMG LLP, and that others were the source of information that KPMG relied upon in preparing financial statements, Kaiser’s lawyers said.
“We’re obviously tremendously pleased with the court’s decision,” Daniel Brown, a Washington-based lawyer who represents Kaiser, said in a phone interview. “Mr. Kaiser maintains his innocence.”
Yusill Scribner, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, declined to comment.
The case is U.S. v. Kaiser, 04-cr-733, U.S. District Court, Southern District of New York (Manhattan).
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Morgan Stanley Names Barron as Chief Legal Officer
Morgan Stanley, the sixth-largest U.S. bank by assets, hired Frank Barron, a litigation partner at Cravath, Swaine & Moore LLP, to replace Gary Lynch as chief legal officer.
Barron, 59, will join the firm in New York after more than 30 years at Cravath, Morgan Stanley said yesterday in a statement. Lynch, 59, who announced in February that he would step down from his post, will remain vice chairman and a member of the firm’s operating and management committees.
Eric Grossman, the bank’s general counsel for the Americas and global head of litigation, was appointed to Morgan Stanley’s management committee, the New York-based firm said. Grossman was a candidate for the chief legal position, a person briefed on the matter said in February.
“The partnership between Frank and Eric will provide tremendous leadership on the legal and regulatory fronts in this challenging period for the securities industry,” Chief Executive Officer James Gorman said in an internal memo obtained yesterday by Bloomberg News. Morgan Stanley spokeswoman Jeanmarie McFadden confirmed the memo’s contents.
Barron was among Cravath lawyers who advised Morgan Stanley’s board on its conversion to a bank holding company and on Mitsubishi UFJ Financial Group Inc.’s $9 billion investment in the firm as its stock plunged after Lehman Brothers Holdings Inc.’s bankruptcy in 2008, according to the law firm’s website.
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National Rifle Association Opposes Kagan Nomination
The National Rifle Association said it opposes Elena Kagan’s U.S. Supreme Court nomination, taking a position that may make it harder for her to pick up Republican support as she moves closer to confirmation.
Kagan said in Senate testimony this week that she considers two recent high court rulings backing gun rights to be “settled law.” She said she had “absolutely no reason” to question the majority’s analysis in the 2008 District of Columbia v. Heller ruling, which said the Constitution’s Second Amendment protects individual rights.
Those statements weren’t enough for the NRA, which said in a press release that Kagan “refused to declare support for the Second Amendment.” The group said it would take the vote on Kagan into account in deciding whether to endorse senators for re-election.
The NRA pointed to a 1987 memo Kagan wrote as a law clerk to Justice Thurgood Marshall in a pending gun case. Kagan said she was “not sympathetic” to an individual’s claim that the District of Columbia’s firearms law violated his constitutional right to keep and bear arms.
The gun lobby also faulted Kagan, now President Barack Obama’s top Supreme Court lawyer, for not filing a brief in McDonald v. Chicago, a firearms case decided by the court this week. The court ruled 5-4 that the Second Amendment limits gun control laws by states and cities, as well as the federal government.
Ben LaBolt, a White House spokesman, said Kagan “made clear during the hearings that Heller and McDonald are the law of the land and therefore that the Second Amendment guarantees an individual, fundamental right to bear arms.”
Republicans and Democrats alike have said Kagan probably will be confirmed. Republican Senator John Cornyn of Texas referred to her June 30 as “soon-to-be Justice Kagan.” Democrats control 58 of the 100 Senate seats with one vacancy.