Cambridge Place Investment Management Inc., founded by ex- Goldman Sachs Group bankers Martin Finegold and Robert Kramer, lost more than $1.2 billion as a result of the banks’ untrue statements, the company claims in a complaint filed July 9 in state court in Massachusetts.
The banks sold securities backed by mortgages that came from a “small group of now notorious subprime mortgage originators,” used faulty appraisals, accepted misleading information in loan applications, and violated their own standards for underwriting, the firm claims in the lawsuit. The banks offered or sold $2.4 billion of residential mortgage- backed securities using untrue statements, according to the lawsuit.
“The Wall Street banks conducted inadequate due diligence and failed to satisfy their own responsibilities,” Cambridge Place said in the lawsuit.
The bundling of the riskiest type of mortgages into securities played a role in turning the U.S. housing slump into a global recession as foreclosures deflated bond values and toppled Wall Street firms including Lehman Brothers Holdings Inc.
Representatives from Citigroup, Goldman Sachs and Morgan Stanley declined to comment on the lawsuit.
The case is Cambridge Place Investment Management Inc. v. Morgan Stanley, 10-2741, Suffolk Superior Court (Boston).
Credit Suisse Seeks to Dismiss Ambac Suit Over Mortgage Deals
Credit Suisse Group AG asked a judge to throw out an Ambac Financial Group Inc. lawsuit over mortgage-backed securities transactions, saying the bond insurer is too “sophisticated” to claim it was fraudulently induced to take part in the deals.
An Ambac division sued two units of Zurich-based Credit Suisse in New York state court in January, alleging breach of warranties, breach of repurchase and other damages in addition to fraudulent inducement. Ambac said that a Credit Suisse unit misstated the attributes of securitized loans and the underwriting guidelines used to select them, Ambac Assurance said in the complaint filed Jan. 12 in Manhattan.
Credit Suisse said in court filings July 8 that Ambac, after agreeing to insure $175 million in home-equity lines of credit in March 2007, didn’t perform a review of the underlying loans in the securitization, which Credit Suisse underwrote.
“Its decision to conduct no independent due diligence on files and information equally available to it amounts to a failure to take ‘reasonable steps’ to protect itself against the purported deception it now alleges,” DLJ Mortgage Capital and Credit Suisse Securities said in the motion to dismiss.
Peter Poillon, a spokesman for New York-based Ambac, declined to comment.
The case is Ambac Assurance Corp. v. DLJ Mortgage Capital, Inc. 600070/2010, filed in New York State Supreme Court (Manhattan).
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Citigroup Bondholder Suit Can Go Forward, Judge Rules
A lawsuit claiming that Citigroup Inc. misled investors who bought 48 of its corporate bonds issued from May 2006 to August 2008 can go forward, a federal judge in New York ruled.
U.S. District Judge Sidney Stein yesterday denied part of a motion by Citigroup to dismiss the suit, which was originally filed in New York state court in 2008. The investors claim Citigroup failed to disclose information about the bank’s exposure to “toxic mortgage-linked exposures” that affected its creditworthiness, according to an opinion by Stein.
The plaintiffs allege that when the facts about Citigroup’s liabilities related to mortgage-backed investments became public, its bonds “plummeted in value,” according to Stein. Citigroup and the other defendants argued the investors lacked legal standing to bring the claims.
The suit names as defendants Citigroup, its wholly owned Citigroup Funding Inc. subsidiary, eight Citigroup trusts, 28 current and former Citigroup officers and directors and almost 80 banks that underwrote the bonds, according to Stein’s opinion.
Danielle Romero, a spokeswoman for Citigroup, said the bank is reviewing the decision.
The case is Louisiana Sheriffs’ Pension and Relief Fund v. Citigroup Inc., 602830/2008, filed in New York State Supreme Court (Manhattan).
Buffett May Be Deposed in Berkshire Hathaway Lawsuit
Warren Buffett, the billionaire chief executive officer of Berkshire Hathaway Inc., may be ordered to submit to questioning under oath in a wrongful-dismissal lawsuit.
Brad Mart, a former executive at Berkshire unit Forest River Inc., petitioned for a deposition of Buffett to demonstrate the parent company’s role in his firing, according to a June 17 motion in federal court in South Bend, Indiana. Omaha, Nebraska-based Berkshire, one of the defendants named in Mart’s lawsuit, has said it wasn’t involved in the dismissal. In a July 6 brief, Berkshire asked the court to protect Buffett from questioning.
Buffett isn’t accused of wrongdoing. His deposition would help determine facts of the case, and may lead to his testimony at trial. Buffett didn’t immediately respond to an e-mail request for comment sent to an assistant.
Mart has also asked to depose Berkshire Chief Financial Officer Mark Hamburg and Secretary Forrest Krutter. The company offered Hamburg in exchange for Mart’s renouncing his request for depositions of other executives including Buffett, according to court filings. Mart rejected that offer. Berkshire’s Krutter declined to comment.
Mart’s lawyer, Stephen Kennedy, of Kennedy Clark & Williams PC in Dallas, said it would be inappropriate to comment. Kennedy made the deposition request.
Judge Christopher Nuechterlein scheduled a hearing for July 26 to consider Mart’s requests for discovery.
The case is Mart v. Berkshire Hathaway Inc., 3:10-cv-00118, U.S. District Court, Northern District of Indiana (South Bend).
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Pfizer, Drug Companies Must Face Price-Fixing Suit
Pfizer Inc., the world’s largest drugmaker, and other drug companies must face a price-fixing suit claiming they conspired to keep cheaper medicines from Canada out of the U.S. market.
The California Supreme Court yesterday reversed a lower court, which two years ago granted dismissal of the suit by allowing the companies to use a “pass-on” defense. The companies argued they couldn’t be held liable for illegal drug overcharges -- and that the pharmacies weren’t harmed -- because any overcharge was passed on to consumers.
The ruling means that in California “no price-fixer is going to get off on the basis that the victim might have passed on to its customers the amount of the price fix,” Joseph M. Alioto, a lawyer representing pharmacies said in an interview. “Price fixers cannot raise this defense against anybody.”
A California appeals court had upheld a trial judge’s dismissal of the suit, filed in 2004, against Pfizer and 18 other pharmaceutical makers alleging they inflated drug prices, leading drugstores to pay more than they should have. The court ruled retailers passed the alleged price increases onto their customers, so they can’t seek damages.
Yesterday, the California high court rejected that argument and sent the case back to the trial court in Oakland, Alioto said.
Pfizer spokesman Chris Loder said he couldn’t comment on the case.
The defendants include Eli Lilly & Co., AstraZeneca Plc, and GlaxoSmithKline Plc.
The case is James Clayworth v. Pfizer, S166435, California Supreme Court (San Francisco).
Goldman Loses Control Over Nanso Golf Club in Japan
Goldman Sachs Group Inc. lost management control of bankrupt Nanso Country Club outside Tokyo after a court accepted a petition by members to remove executives appointed by the Wall Street firm.
The Tokyo District Court on July 6 appointed attorney Yuzo Miyama to take over management of Nanso Country Club, Kunihiko Nishimura, a lawyer representing members, said in an interview. Miyama replaced Shigeki Kiritani, a Goldman Sachs managing director who was overseeing the club’s operations.
Goldman Sachs bought Nanso Country Club in November 2006 and took it into bankruptcy protection in January this year. Members last month voted against a rehabilitation plan proposed by the Wall Street firm, citing concerns that Goldman Sachs would allow more visiting players onto the course, depressing the value of memberships that cost about 1 million yen ($11,225).
Hiroko Matsumoto, a Tokyo-based spokeswoman for Goldman Sachs, declined to comment on the court decision or say how much the company paid for the club.
Goldman Sachs mainly owns golf courses in Japan through its Accordia Golf Co. affiliate, which the U.S. bank took public in 2006 and owns 45 percent of. Accordia, based in Tokyo, owns 130 golf courses in Japan.
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U.S. Asks Courts to Dismiss Challenge to Drilling Ban
Interior Secretary Kenneth Salazar asked two New Orleans courts to dismiss an industry lawsuit challenging a U.S. deep- water drilling moratorium, saying a new drill ban made the suit irrelevant.
U.S. District Judge Martin Feldman in New Orleans on June 22 threw out the six-month ban imposed by federal regulators on oil and gas drilling in waters deeper than 500 feet, finding it was too broad. A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit in New Orleans on July 8 refused regulators’ request to put Feldman’s order on hold while the government appeals.
Yesterday, Salazar issued a revised ban that may allow new wells if the industry shows it has raised safety standards. The new policy replaces the earlier ban and renders the challenge to it moot, U.S. Justice Department lawyers said yesterday in filings with both courts in New Orleans.
The first drilling suspension “has been revoked and superseded by a new directive issued yesterday that is based on additional information, separate analysis and a separate administrative record,” lawyers for the U.S. said in the district court filing. The lawsuit should be withdrawn “because the decision challenged by the plaintiffs’ complaint no longer exists,” the U.S. said.
President Barack Obama initially imposed a six-month suspension on deep-water drilling in reaction to the BP Plc oil spill, the worst in U.S. history, caused by the sinking of the Deepwater Horizon drilling rig off the Louisiana coast in April. Obama said the moratorium is needed to give a presidential commission time to study offshore operations safety.
Hornbeck Offshore Services Inc. and more than a dozen other offshore service and supply companies sued U.S. regulators, including Salazar, last month, seeking to block the moratorium.
“We’ve just received the decision memorandum of the government,” Carl Rosenblum, Hornbeck’s lawyer, said in a phone interview. “We’re still evaluating it, but we have substantial concerns about whether it is consistent with Judge Feldman’s order.”
The case is Hornbeck Offshore Services LLC v. Salazar, 2:10-cv-01663, U.S. District Court, Eastern District of Louisiana (New Orleans). The appeal case is 10-30585, 5th U.S. Circuit Court of Appeals (New Orleans).
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Switzerland Won’t Extradite Polanski Over 1977 Case
The Swiss government freed director Roman Polanski from house arrest after refusing to extradite him to the U.S. in a case tied to a more than 30-year-old sex scandal in California.
Polanski was released from electronic monitoring at his chalet in Gstaad, Switzerland, Justice Minister Eveline Widmer- Schlumpf said yesterday at a press conference. She said the U.S. refused to release documents to support its extradition request. Polanski, whose films include “The Pianist” and “Chinatown,” is wanted for unlawful sexual conduct with a 13-year-old girl.
The Oscar-winning director was arrested at Zurich airport on Sept. 26, as he arrived to collect an award at the city’s film festival. Polanski, 76, was held in a Swiss jail before being placed under house arrest at his holiday home. He still would be arrested if he returns to the U.S.
The film director was initially charged on six felony counts alleging he drugged and raped the teenager in 1977. He later pleaded guilty to one count of unlawful sexual conduct with a minor after the lawyer for the girl’s family asked prosecutors to avoid a jury trial.
Widmer-Schlumpf said the U.S. refused to disclose trial records that would shed light on Polanski’s claim he served his sentence by spending 42 days under psychiatric evaluation.
“Considering the persisting doubts concerning the presentation of the facts of the case, the request has to be rejected,” the ministry said on its website. It also cited issues of “good faith” as the U.S. never previously sought Polanski’s extradition by Switzerland, where he is a regular visitor and has owned a home since 2006.
Widmer-Schlumpf said the U.S. can’t appeal the ruling through the Swiss courts, and is unlikely to do so through an international tribunal. She said she discussed the case at length with the U.S. Embassy in Bern, and “they understand the reasoning. I expect a further good cooperation with the U.S.”
State Department spokesman Philip J. Crowley said the U.S. was “disappointed” by the Swiss decision.
“The rape of a 13-year-old girl by an adult who should know better and does know better is a crime,” said Crowley. “We will continue to seek justice in this case, and we will evaluate our options.”
The case is People of the State of California v. Roman Polanski, A334139, California Superior Court (Los Angeles).
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Texas Rangers Sued by Greenberg-Ryan Group Over Sale
The Rangers violated the deal by soliciting and negotiating with other potential buyers, the Greenberg-Ryan group said in court papers filed yesterday in the U.S. Bankruptcy Court in Fort Worth, Texas. William Snyder, the chief restructuring officer for the equity owners, has said the Rangers may negotiate with a new buyer to lead off bidding at an auction.
“The CRO does not, and never had, any authority to solicit alternative bids or negotiate with prospective bidders,” the Greenberg-Ryan group said.
Snyder declined to comment.
After filing for bankruptcy in May, the Rangers sought court permission to sell the club to a group led by Greenberg, an attorney, and Nolan Ryan, a Hall of Fame pitcher and the team’s president, in a transaction it valued at $575 million.
The case is In re Texas Rangers Baseball Partners, 10- 43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).
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Barnes & Noble Testimony Centers on Aletheia Fund
Barnes & Noble Inc.’s fight with billionaire Ron Burkle’s Yucaipa Cos. for seats on the bookseller’s board of directors may hinge on an alliance of Yucaipa with the investment fund Aletheia Research & Management Inc., according to court testimony.
If Aletheia, the third largest shareholder of Barnes & Noble, teams with No. 2 stakeholder Yucaipa, the two would be a “much more formidable” opponent for the company’s chairman and controlling stockholder, Leonard Riggio, Yucaipa’s proxy expert testified.
Daniel H. Burch, chief executive officer of MacKenzie Partners Inc., the expert, testified yesterday before Delaware Chancery Court Judge Leo Strine Jr. in Wilmington.
In support of the company’s poison pill anti-takeover defense, a Barnes & Noble expert, Peter C. Harkins, chief executive of DF King & Co., told Strine that a Yucaipa victory for three vacant seats is “mathematically possible and realistically attainable.”
Yucaipa sued Barnes & Noble, the largest U.S. bookstore chain, in May, saying Riggio and other directors launched a “self-dealing scheme designed to entrench the Riggio family” and stop Burkle from accumulating shares and gaining board seats.
The trial continues today.
The case is Yucaipa American Alliance Fund II LP v. Riggio, CA5465, Delaware Chancery Court (Wilmington).
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Total Contesting Court Rulings on Dunkirk Refinery in France
Total SA, Europe’s largest refiner, has filed two legal motions contesting rulings on the Dunkirk refinery in northern France that it shut in September because of falling demand for fuels such as diesel.
Total is disputing a June 30 Douai Court of Appeal ruling ordering it to restart the facility by July 16, Frederic Texier, a Paris-based company spokesman, said yesterday in a telephone interview. The refiner is also asking the Nanterre Court to “recognize that Total followed the rules in informing unions and consulting with staff” about plans for the site, he said.
Total has to pay 100,000 euros ($125,870) a day in the event the refinery isn’t restarted, according to the Douai Court of Appeal ruling. The court found that the company didn’t follow proper procedures for informing workers about its plans for a permanent shutdown, according to the ruling.
The case was brought by labor unions that opposed the oil company’s decision to shutter the plant, which lost more than 130 million euros last year. To protest the closure, Total workers embarked on nationwide strikes in February, leading to fuel shortages.
Rosneft CEO to Testify in Khodorkovsky Case, Interfax Reports
OAO Rosneft Chief Executive Officer Sergei Bogdanchikov will testify in the trial of Mikhail Khodorkovsky, the convicted owner of OAO Yukos, and his former business partner Platon Lebedev, Interfax reported, citing defense lawyer Konstantin Rivkin.
Bogdanchikov was summoned by Moscow’s Khamovniki District Court to give evidence, with the date yet to be set, the Moscow- based new agency said, citing Rivkin.
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AB InBev Wins Dispute Over Ownership of Modelo Stake
Anheuser-Busch InBev NV, the world’s largest brewer, said it won a dispute over its ownership of a 50 percent stake in Grupo Modelo SAB, reigniting speculation that it may bid for the rest of the Mexican beermaker.
An arbitration panel ruled that the 2008 merger of InBev NV and Anheuser-Busch Cos. didn’t violate an agreement over the transfer of the Budweiser maker’s stake in Modelo, Leuven, Belgium-based AB InBev said in an e-mailed statement yesterday. The panel awarded no damages or other remedies, the brewer said.
Modelo, Mexico’s largest beermaker, had sought $2.5 billion in damages in a claim that originally sought to prevent Anheuser-Busch from selling its stake to InBev as part of the $52 billion merger that led to AB InBev’s creation. The panel’s ruling means AB InBev can keep the stake and make plans to acquire the maker of Corona, Evolution Securities Ltd. analyst Andrew Holland said.
“My guess is that AB InBev will be keen to sit down with the controlling shareholders of Modelo to discuss an acquisition,” Holland said. “InBev would be keen to buy all of Modelo. It’s an attractive company in an attractive market.”
The ruling doesn’t change Modelo’s corporate structure or the way the Mexican brewer is operated, Jennifer Shelley, a Modelo spokeswoman, said in a telephone interview. Any action regarding ownership of Modelo is a decision for the controlling shareholders, she said.
Mexican families including the family of Chairman and Chief Executive Officer Carlos Fernandez own a majority of a holding company that controls Modelo.
AB InBev spokeswoman Karen Couck declined to comment on the possibility of a future transaction with Modelo.
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