Goldman, Cantor, Abu Dhabi Bank, JPMorgan, Drill Ban, Toyota in Court News

Fabrice Tourre, the Goldman Sachs Group Inc. executive director sued by the Securities and Exchange Commission for fraud, disputed the claims and said he relied on his firm’s legal and compliance department.

Tourre, in a filing July 18 in federal court in Manhattan, denied making any materially misleading statements or omissions related to the 2007 sale of the Abacus 2007-AC1 collateralized debt obligation linked to subprime mortgages.

Goldman Sachs, the most profitable securities firm in Wall Street history, agreed five days ago to settle its role in the case for $550 million and admitted making a “mistake” in marketing materials about the investment. The firm is cooperating in the SEC’s investigation of Tourre, 31, who remains an employee. He is on leave, with legal expenses being paid by New York-based Goldman Sachs.

“The purported claims against Mr. Tourre and the allegations upon which they are based are improperly vague, ambiguous and confusing, and omit critical facts,” the filing said. “Mr. Tourre, a French citizen and engineer by training, reasonably relied on Goldman Sachs’ institutional process to ensure adequate legal review and disclosure of material information, and cannot be held liable for any alleged failings of that process.”

Goldman Sachs created and sold the CDO, which was linked to subprime mortgages, without disclosing to investors ACA Management LLC and IKB Deutsche Industriebank AG that Paulson & Co. helped pick the underlying securities and bet against the vehicle, the SEC said.

Lucas van Praag, a Goldman Sachs spokesman in New York, declined to comment on Tourre’s filing. John Heine, an SEC spokesman in Washington, declined to comment. Tourre is being represented by Pamela Rogers Chepiga, David C. Esseks and Brandon D. O’Neil of the law firm Allen & Overy LLP in New York.

In the filing, Tourre said he was aware that Paulson “was considering taking some or all of the short side” of the transaction. He added that the offering document for the CDO contained all relevant information for investors, including the complete portfolio of assets, the fact that no one was purchasing the equity portion of the deal and that a Goldman Sachs affiliate had a short interest and could transfer that interest.

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Trials/Appeals

Cantor Says Broker Fired Over EcoSecurities Talks

Former carbon credits brokerage executive Stephen Drummond is suing for wrongful dismissal after a unit of Cantor Fitzgerald LP fired him in March 2009 for discussing a job with a competitor.

At a High Court trial that began yesterday in London, Paul Nicholls, a lawyer for Cantor’s environmental-markets specialist CantorCO2e, said the firm was within its rights to dismiss Drummond when it learned he kept secret an approach from EcoSecurities.

“He was CO2e’s most senior employee, the CEO of its parent and plainly central to its business,” Nicholls said in court papers. “CO2e has a legitimate interest in knowing if its staff are considering a move to a competitor.”

In late 2008 and early 2009, Drummond met a headhunter to talk about a job at EcoSecurities, and met the full board of the company at a meeting in Dublin, Nicholls said in court papers. He also told EcoSecurities how they could buy him out of his contract with Cantor. At the time, Drummond had just signed a five-year contract, Nicholls said.

Cantor Chairman Howard Lutnick is scheduled to testify at the trial on July 21.

In a separate claim, Cantor is suing Drummond for the return of $2 million it says it lent him in 2008 to buy a home in Oxford, England. Cantor said the loan would only be called if Drummond broke a contract.

Drummond, according to court papers, said Cantor paid him the money in return for his shares in CantorCO2e LLC. Drummond didn’t return a call to his mobile phone. His lawyer, Tom Leech, will argue his case later in the trial.

“Cantor Fitzgerald is seeking to recover money owed to it after Mr. Drummond failed to repay a $2 million loan that the firm provided,” Cantor spokesman Robert Hubbell said in an e- mailed statement. “Instead of safeguarding the funds to assure its use for their expected purpose, including providing Cantor with security for the loan, Mr. Drummond deposited the money into an account with high interest rates in an Icelandic bank which later went into receivership.”

The cases are Cantor Fitzgerald LP v. Stephen Drummond and Stephen Drummond v. CantorCO2e Ltd.

Conrad Black Granted Bail While Appealing Conviction

Conrad Black, the former Hollinger International Inc. chairman jailed since March 2008 following a conviction for fraud, was granted bail by an appeals court.

The U.S. Court of Appeals in Chicago yesterday sent the case back to U.S. District Judge Amy St. Eve, who presided over Black’s trial, delegating to her the responsibility of setting conditions for Black’s release.

Black’s request for bail followed a U.S. Supreme Court decision in June that narrowed the scope of a federal statute used at his trial, returning the Hollinger executive’s case to the appeals court.

Black is “granted bail pending the disposition of his appeal in this court,” the appeals court wrote in yesterday’s order. The case is sent back “for the limited purpose of permitting the district court to determine the conditions of release.”

Black and three associates were found guilty in the theft of $6.1 million from Hollinger International -- once the world’s third-largest publisher of English-language newspapers -- as they engineered its sale of assets.

“We’re working very hard to get in front of the district court as soon as we can so we can get him out,” said Miguel Estrada, Black’s appellate lawyer.

Black has been serving a 6 1/2-year sentence at a low- security federal prison in Coleman, Florida.

The case is U.S. v. Black, 07-4080, 7th U.S. Circuit Court of Appeals (Chicago). The tax case is Conrad M. Black v. Commissioner of Internal Revenue, 8928-10, U.S. Tax Court (Washington).

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Abu Dhabi Bank Seeks $32 Million From Saad Group in U.K. Trial

Abu Dhabi Commercial Bank PJSC told a U.K. judge that a unit of the Saudi conglomerate Saad Group owes it about $32 million for defaulting on a foreign-currency swap agreement.

Saad Trading Contracting & Financial Services Co. defaulted when its credit rating was downgraded in June 2009, the bank’s lawyer, Peter Cranfield, said at a trial yesterday at the High Court in London.

Saad Trading has argued that the default applied only to other deals between the parties and that Abu Dhabi didn’t serve a termination notice about the swap agreement on time.

“Saad Trading’s defense to the bank’s claim is without merit and designed only to delay judgment day against it,” Cranfield, with the firm 3 Verulam Buildings in London, said in court papers.

Saad Group’s press office in London declined to comment.

For the latest trial and appeals news, click here.

New Suits

Valeant Sued by Investor Over Biovail Merger Terms

Valeant Pharmaceuticals International’s $3.2 million merger with Biovail Corp., Canada’s largest publicly traded drugmaker, shortchanges Valeant investors while enriching the company’s executives, a shareholder said in a lawsuit.

The combination of the drug companies, which includes a total cash payment of $18.55 for each share of Valeant stock, is being carried out “at an unfair price via an unfair process,” Valeant shareholder Donald Porto said in a Delaware Chancery Court complaint made public yesterday.

Valeant shareholders are left without “fair value for their interests” while the company’s chief executive officer and directors “are reaping windfall benefits and profits” from the deal, Porto contends.

Officials of Aliso Viejo, California-based Valeant said June 21 that they were combining the drugmaker with Mississauga, Ontario-based Biovail to create a company with $1.75 billion in annual sales. Valeant is best known as the maker of the antiviral drug ribavirin. Biovail sells the antidepressant Wellbutrin XL in the U.S.

Laurie Little, a Valeant spokeswoman, declined to comment on the suit. Nelson Isabel, a Biovail spokesman, didn’t return calls for comment.

The case is Porto v. Valeant Pharmaceuticals International, CA 5644, Delaware Chancery Court (Wilmington).

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JPMorgan Sues Rangers for Transferring Stadium Lease

JPMorgan Chase & Co. sued the Texas Rangers, claiming the bankrupt baseball team breached the terms of a loan by taking over the lease for its stadium, Rangers Ballpark.

Transferring the lease to Texas Rangers Baseball Partners made it harder for lenders to collect at least $411 million owed by the team’s owner, Tom Hicks’s HSG Sports Group LLC, JPMorgan said in a lawsuit filed July 16 in U.S. Bankruptcy Court in Fort Worth, Texas.

When HSG borrowed the money, it agreed that certain units and affiliates would help pay back the loan if necessary, according to court papers. The HSG unit that controlled the lease was obligated to repay the full amount while Texas Rangers Baseball Partners was liable only for $75 million, New York- based JPMorgan said in court documents.

JPMorgan, the agent for investors who loaned the money to HSG, asked the judge to declare the transfer null and void because it violated the mortgage on the property. The lease on the stadium in Arlington, Texas, is collateral for the loan, according to court documents.

Mark Semer, a spokesman for the Rangers, declined to comment.

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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Lawsuits/Pretrial

Drilling Ban Judge Won’t Step Down Due to Investments

The judge who threw out the government’s deep-water drilling ban refused to step aside over alleged conflicts of interest because of his energy investments.

“The motion for disqualification is without merit,” U.S. District Judge Martin Feldman said in an order posted yesterday on the New Orleans federal court’s website.

The Obama administration imposed a six-month ban on drilling in waters deeper than 500 feet in May in response to the worst oil spill in U.S. history, caused by the sinking of the Deepwater Horizon drilling rig off the coast of Louisiana. The Transocean Ltd. rig is leased to BP Plc.

Hornbeck Offshore Services Inc., more than a dozen offshore-service providers and Louisiana Governor Bobby Jindal sued to overturn the ban, claiming the drilling suspension is turning an “environmental disaster into an economic catastrophe.”

Feldman threw out the ban on June 22, declaring it was overly broad and punitive to a regional economy dependent on the oil and gas industry. Feldman’s order is being appealed by the government. As the trial judge, he will preside over any future proceedings in the district court.

Environmental groups asked the judge to withdraw from the moratorium case on July 2. The organizations said they investigated Feldman’s investments after joining the case in support of the government’s attempt to restore the drilling ban.

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, U.S. Court of Appeals for the Fifth Circuit (New Orleans).

BP Fund Claimants May Sue Firms Tied to Spill, Feinberg Says

Oil-spill victims paid from BP Plc’s $20 billion fund retain the right to sue companies such as rig owner Transocean Ltd. and BP partner Anadarko Petroleum Corp., the administrator of the independent claims facility said.

The escrow account established by the London-based oil producer has “nothing to do with anybody but BP,” Kenneth Feinberg told the Economic Club of Washington yesterday.

Feinberg, a Washington-based attorney, said he plans to offer emergency payments covering about six months of costs to individuals and businesses damaged by the spill. Accepting final lump-sum payments requires recipients to waive their rights to sue BP for additional compensation.

Feinberg said individuals and companies with costs or losses tied to the spill are “crazy” not to file a claim with his program, which he has pledged to make “more generous” than any court ruling on a lawsuit.

Asked if companies with some role in the spill should contribute to the claims fund established by BP, Feinberg called it a “legal issue as well as a political one.”

“It’s up to those companies,” he said.

Companies that could face litigation include The Woodlands, Texas-based Anadarko, which owns 25 percent of the ruptured Gulf well, and a subsidiary of Mitsui & Co., which owns 10 percent.

Anadarko Chief Executive Officer Jim Hackett said on June 18 that his company will look to BP to pay all claims from the spill.

Transocean, the Geneva-based owner of the drilling rig that exploded and touched off the largest spill in U.S. history, also may face lawsuits.

For the latest lawsuits news, click here.

Verdicts/Settlements

Toyota Settles Infringement Case Over Hybrid Patent

Toyota Motor Corp., the world’s biggest automaker, settled a patent-infringement dispute that had threatened U.S. imports of its newest hybrid vehicles, including the Prius.

The agreement with Paice LLC, ending six years of litigation, was announced yesterday as a hearing was to begin on a claim against Toyota before the U.S. International Trade Commission in Washington. Terms weren’t disclosed and lawsuits pending in Texas and at a U.S. appeals court will be dismissed.

Paice founder Alex Severinsky, a Soviet emigrant who began his career developing antitank-warfare instrumentation, had said his 1994 patented system for a high-voltage method to power gas- electric hybrid cars was used by Toyota without permission. Severinsky, 65, has sought royalties from the automaker.

“Finally people understand the merits of what I invented and give it the proper value,” Severinsky said yesterday in an interview. “Toyota is the leading technology company and finally appreciates the value of the invention.”

Ford Motor Co., maker of the Fusion hybrid car, agreed to license Paice’s technology, the companies said on July 16 without revealing terms.

The Paice patent covers a way to supply torque to a car’s wheels from both an electric motor and internal combustion engine using a combination of high voltage and low current.

Toyota, which was found to have infringed the patent in an earlier case, had said its hybrid vehicles are the result of its own research and asked the trade commission to deny Severinsky’s latest claims.

“The parties agree that, although certain Toyota vehicles have been found to be equivalent to a Paice patent, Toyota invented, designed and developed the Prius and Toyota’s hybrid technology independent of any inventions of Dr. Severinsky and Paice as part of Toyota’s long history of innovation,” both companies said in separate statements.

The issue in the trial that was to begin yesterday hinged on what is more important: Severinsky’s right to protect the millions of dollars invested in his invention or the potential economic harm of banning Toyota’s hybrid-vehicle imports.

The ITC case is In the Matter of Hybrid Electric Vehicles, 337-688, U.S. International Trade Commission (Washington). The civil cases are Paice LLC v. Toyota Motor Corp., 04-cv-211; 07cv180 and 08-cv-261, U.S. District Court, Eastern District of Texas (Marshall).

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Father, Son Fined $274,000 by FSA Over Tower Resources Trades

The Financial Services Authority said it fined a father and son a total of 179,200 pounds ($274,000) for market abuse related to shares of Tower Resources Plc, an oil and gas exploration company.

Jeremy Burley, who was a director at BMS Minerals, a Ugandan company that provides services to Tower, passed on confidential information about Tower’s first oil well in the region to his father, Jeffery, the FSA said in a statement yesterday. His father opened an account and used it to trade on behalf of his son, the FSA said.

Lawyers at Challinors, representing Jeremy Burley, and Crowell & Moring, representing Jeffery Burley, didn’t return a message seeking comment.

Jeremy Burley was fine 144,200 pounds, including disgorgement of the 21,700 pounds he made from the trades. Jeffery Burley was fined 35,000 pounds, the FSA said.

For the latest verdict and settlement news, click here.

Court News

Kagan Says She Would Weigh Health Law Recusal ‘Case by Case’

Elena Kagan told Republicans on the Senate Judiciary Committee that, if confirmed to the U.S. Supreme Court, she would decide on a case-by-case basis whether to recuse herself from considering challenges to the new health-care overhaul.

Kagan, who as U.S. solicitor general represents the Obama administration in high court arguments, said she has had almost no role in the government’s response to a suit challenging the health-care law filed by states. Judiciary Committee Republicans pressed her to say whether as a justice she would disqualify herself.

“I neither served as counsel of record nor played any substantial role” in the case, Kagan wrote to Senator Jeff Sessions of Alabama and other Republicans on the panel. “I would consider recusal on a case-by-case basis, carefully considering any arguments made for recusal and consulting with my colleagues and, if appropriate, with experts on judicial ethics.”

More than 20 states, led by Florida, oppose the health-care law signed by President Barack Obama in March. They say the federal government lacks the authority to require almost all Americans to purchase a health insurance policy or pay a fine if they don’t.

Kagan said that while she attended “at least one meeting” of administration officials where the litigation was “briefly mentioned,” she was never asked her views on the case or reviewed any government court papers in the dispute.

The Judiciary committee will vote today on Kagan’s nomination to the Supreme Court, in time for her to be confirmed by early August. That would allow two months before the beginning of the next court term on Oct. 4.

Kagan, 50, was nominated by Obama on May 10 to replace Justice John Paul Stevens, who retired from the nine-member court. Kagan formerly was dean of Harvard Law School and worked for four years in President Bill Clinton’s White House as a lawyer and policy adviser.

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

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