Toyota, Wyly, Cuban, Lehman, JPMorgan, BP, Hewlett-Packard in Court News

A Maryland public pension fund was named lead plaintiff in a consolidated shareholder lawsuit against Toyota Motor Corp. accusing the carmaker of failing to disclose defects related to sudden-acceleration of its vehicles.

U.S. District Judge Dale Fischer, at a hearing yesterday in Los Angeles, appointed the Maryland State Retirement and Pension System as lead plaintiff and the fund’s law firm, Bernstein Litowitz Berger & Grossmann LLP, as lead counsel.

Fischer said in a July 16 ruling that a recent U.S. Supreme Court decision may exclude securities-law claims by investors in Toyota’s common stock rather than in the carmaker’s American depositary receipts. Among the funds vying for lead plaintiff status, the Maryland fund alleged the largest losses, $257,580, on its investments in Toyota’s ADRs.

The July 16 ruling doesn’t necessarily preclude investors from trying to seek damages based on losses from Toyota’s common stock, Gerald Silk, a lawyer for the Maryland fund, said after the hearing. Whether these claims will be allowed to proceed may be decided with a motion to seek class certification or a motion to dismiss the complaint, Silk said.

Patrick Robbins, a lawyer for Toyota, declined to comment after yesterday’s hearing.

The Toyota investors claim the carmaker misled them by not disclosing flaws in the acceleration system that prompted a recall of 2.3 million vehicles in North America in January. Toyota’s ADRs have fallen 22 percent from a 52-week high of $91.97 on Jan. 19.

The case is Stackhouse v. Toyota Motor Corp., 10-00922, U.S. District Court, Central District of California (Los Angeles).

Wyly Broker Schaufele Defended Offshore Firms in Testimony

Louis J. Schaufele, the former Lehman Brothers Holdings Inc. and Banc of America Securities broker sued by U.S. regulators for helping Charles and Samuel Wyly employ offshore entities to mislead investors, defended the use of the companies before Congress in 2006, Bloomberg News’ David Glovin reports.

“The firms that I was with knew that the Wylys were beneficial owners of these accounts, and I relied on the compliance folks for what they would recommend,” Schaufele told a U.S. Senate subcommittee examining offshore trusts, according to a transcript. “My work with the offshore companies has been subject to the compliance and guidance requirements of the firms where I’ve been employed.”

Schaufele at the time worked in Dallas for R. Allen Stanford’s Stanford Group Co. The committee in August 2006 was probing the use of offshore entities to bypass tax, securities and money-laundering laws.

Senator Norm Coleman, a Minnesota Republican, said he was concerned that transactions involving Wyly-related offshore entities “were done to circumvent or avoid federal security laws reporting.” Schaufele said he knew of no violations.

The U.S. Securities and Exchange Commission said in its July 29 fraud lawsuit that the Wylys used “an elaborate sham system of trusts and subsidiary companies” in the Isle of Man and Cayman Islands for 13 years to hide the control of securities linked to companies on whose boards they sat. They kept investors in the dark as they sold holdings, in one case making illegal insider trades, the SEC said.

The agency claimed the Wylys’ lawyer, Michael French, knew or was “reckless in not knowing” that the brothers were obligated to disclose stock transactions in regulatory filings. French’s lawyer, Robert Davis, didn’t return a call seeking comment.

Schaufele, now at JPMorgan Chase & Co., was accused in the suit of using his position as the Wylys’ longtime stockbroker to deceive his bosses at Lehman and Banc of America Securities about the brothers’ control of securities held in the offshore accounts. He was also accused of illegally trading in Sterling Software Inc. stock after learning of the Wylys’ intention to make a “massive, bullish and undisclosed transaction.”

Schaufele joined JPMorgan Securities Inc. in Dallas last year. He was employed at Stanford Group from February 2005 to March 2009, according to records of the Financial Industry Regulatory Authority.

Stanford, the group’s founder and chairman, is in jail awaiting trial on charges that he defrauded investors of $7 billion, which he denies.

“I don’t think he’s in any way related” to the Stanford case, Schaufele’s lawyer, Martin Auerbach, said of his client in a July 30 phone interview. He declined to comment on the SEC’s allegations against Schaufele, who is on leave from JPMorgan.

The case is SEC v. Wyly, 10-cv-05760, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

Virginia Health-Care Lawsuit May Proceed, Judge Says

Virginia may proceed with its lawsuit challenging the health-care overhaul signed by President Barack Obama, a federal judge said.

U.S. District Judge Henry E. Hudson in Richmond, Virginia, yesterday denied a U.S. Justice Department request to throw out the suit, rejecting arguments that the state had no right to sue.

Virginia, in a lawsuit filed in March, complained that the U.S. Congress unconstitutionally exceeded its powers in requiring individuals to buy insurance.

“While this case raises a host of complex constitutional issues, all seem to distill to the single question of whether or not Congress has the power to regulate -- and tax -- a citizen’s decision not to participate in interstate commerce,” Hudson wrote in his 32-page ruling.

Neither the U.S. Supreme Court nor any other federal appeals court has “squarely” addressed the issue, for which there is “some authority arguably supporting the theory underlying each side’s position,” the judge said.

The case is Commonwealth of Virginia v. Sebelius, 10-cv- 00188, U.S. District Court, Eastern District of Virginia (Richmond).

For more, click here.

Cuban Fights Effort to Revive Insider-Trading Case

Mark Cuban, the billionaire owner of the Dallas Mavericks, should face insider-trading allegations that were dismissed last year by a lower-court judge, securities regulators told an appeals court.

The U.S. Securities and Exchange Commission sued Cuban in 2008 for allegedly trading on confidential information when he sold his stake in Inc., a Canadian Internet search company, just before the firm announced a private placement. U.S. District Judge Sidney A. Fitzwater in Dallas threw out the case in July 2009, finding flaws in the government’s claim.

Cuban has denied any wrongdoing. He claims he had no legal obligation to refrain from selling stock after the head of informed him of the upcoming private offering in a 2004 telephone call. Cuban sold in advance of the private investment in public equity deal, known as a PIPE, which diluted the company’s shares by 8.5 percent.

“The district court was not correct and should be reversed,” Randall Quinn, the SEC’s lawyer, told a three-judge panel in oral arguments at the U.S. Court of Appeals in New Orleans yesterday. The judge didn’t give “proper weight” to an agreement by Cuban not to sell stock after receiving confidential information, he said.

Cuban avoided $750,000 in losses by ordering the sale of his 6.3 percent stake in the Montreal-based company now called Copernic Inc. within hours of talking to Guy Faure, then’s chief executive officer, the SEC alleged.

Fitzwater dismissed the case, ruling that Cuban didn’t agree not to trade on the information, only to keep it confidential.

Cuban wasn’t an officer or corporate insider who owed the company a duty to disclose, his lawyers said in court papers.

The case is SEC v. Cuban, 09-10996, 5th U.S. Circuit Court of Appeals (New Orleans).

For more, click here.

CRC Wins U.K. Ruling on Lehman Client-Money Accounts

CRC Credit Fund Ltd., Lehman Brothers Inc. and Lehman Brothers Finance AG can have access to billions of dollars deposited with Lehman Brothers Holdings Inc.’s U.K. unit that wasn’t protected in separate accounts, a London appeals court ruled.

CRC and the Lehman affiliates appealed a December ruling that Lehman Brothers International Europe clients whose money wasn’t properly separated into “client money” accounts when the bank collapsed in 2008 would be treated as unsecured creditors in the U.K. insolvency case, likely giving them only a fraction of what they are owed.

LBIE’s insolvency administrator, PricewaterhouseCoopers LLP, will have to identify all client money which wasn’t properly segregated from the bank’s other funds and pool it with the accounts that were kept separate, according to the judgment yesterday. Clients whose money wasn’t kept separate will be able to claim from the expanded pool. The case was brought by PwC, which asked for the court’s direction on how to deal with the claims.

The decision is “a boost for investor protection,” said CRC’s lawyer, Robert Turner at Simmons & Simmons in London.

Clients whose money was kept in separate accounts, represented in the case by a GLG Investments Plc fund, will have to share the expanding pool of client money with CRC and others.

The judgment is disappointing, said Jennifer Marshall, GLG’s lawyer at Allen & Overy LLP in London.

“As a result of the court of appeal’s decision, the returns to segregated clients will be diluted and it could take years to resolve what goes into the pot and who is entitled to it,” Marshall said. “No clear guidance is given as to how the administrators are to approach these issues and so it seems inevitable that they will have to go back to court.”

The court of appeal will hear arguments in the next few weeks on whether any of the parties can appeal yesterday’s decision.

“CRC hopes that with this decision the LBIE administrators are now able to move forward to the next phase in the administration of the LBIE estate, getting in all client-money assets and releasing them to segregated claimants,” said CRC General Counsel Matthew Cavanagh.

For more, click here.

JPMorgan’s Kueng Loses Court Bid to Dismiss SEC Suit

Alissa Joelle Kueng lost a bid to dismiss a lawsuit by federal regulators claiming she passed inside information about a 2005 Electronic Arts Inc. acquisition while working as a JPMorgan Chase & Co. sales specialist.

Benjamin Jones, a former vice president at Jamdat Mobile Inc., a games maker for mobile phones, told his brother William Jones III that the company would be acquired by Electronic Arts for $27 a share the next day, according to the Oct. 15 complaint filed by the U.S. Securities and Exchange Commission in federal court in Manhattan. William Jones allegedly then tipped William Dailey, a friend who was a trader, who in turn told Kueng.

The next morning, “Kueng passed material, nonpublic information regarding Jamdat’s impending acquisition to a JPMorgan trader and several institutional clients” who bought Jamdat stock, according to the complaint.

The SEC claims the tips resulted in $350,000 in trading profits. The agency previously reached settlements with the Jamdat vice president, his brother and the trader, along with a fourth person.

U.S. District Judge Barbara Jones yesterday rejected an argument by Kueng’s attorneys that the SEC failed to allege a confidential relationship between Dailey and Kueng. She also said there is evidence that Kueng knew or should have known the tip she was getting was insider information. And the SEC sufficiently claimed that the insider in the case received a benefit from giving the tip, Jones ruled.

The acquisition of Jamdat by Redwood City, California-based video-game publisher Electronic Arts closed in February 2006.

An e-mail sent after regular business hours to Kueng’s lawyer, Philip Patterson, wasn’t returned.

The case is SEC v. Kueng, 09-cv-8763, U.S. District Court, Southern District of New York (Manhattan).

BP Ex-Employees Deny Wrongdoing in Singapore Lawsuit

Quek Chin Thean, a former BP Plc head of commodities trading who is being sued for misusing confidential information to help rival Shenzhen Brightoil Group, has denied any wrongdoing in papers filed at a Singapore court.

“I have never at any time during my employment with BP compromised BP’s interests,” Quek said in the papers filed with the Singapore High Court on July 29.

BP claimed in a July 5 lawsuit that Quek and five others breached their obligations by misusing confidential information and accepting a sign-on fee from Brightoil. Quek and legal manager Simon Cheong also lured another 14 BP colleagues to quit en masse and “actively assisted” Brightoil in setting up a competing business, BP said.

Quek denied engineering the mass departures from BP. The London-based company changed the way bonuses were paid from 2007, causing “unhappiness and distrust” among the traders, he said.

Lau Lu Ching, a Singapore-based BP spokeswoman, declined to comment.

The six former workers being sued include head of operations Paul John Bradshaw, trading manager John Foo, regional operating unit manager Clarence Chang, and executive assistant Laura Kuan.

They had “access to and possessed intricate knowledge” of BP’s business strategies and trade secrets, the oil company said. Unauthorized disclosure of the information would harm BP “immeasurably” and create a “significant new competitor that is well aware of our trading strategies,” BP said.

All six said they have never misused the confidential information, according to their affidavits.

The case is BP Singapore Pte vs Quek Chin Thean & Ors S482/2010 in the Singapore High Court.

For more, click here.

For the latest lawsuits news, click here.

New Suits

David Jones, Ex-CEO Sued in Sexual-Harassment Case

David Jones Ltd., Australia’s second-biggest department store chain, its board and former Chief Executive Officer Mark McInnes were sued by an employee who claims she was sexually harassed at work.

Kristy Fraser-Kirk said McInnes made unwelcome sexual advances toward her and she seeks punitive damages of 5 percent of the company’s profit and McInnes’s salary and benefits between 2003 and 2010 in a claim filed yesterday in the Federal Court of Australia in Sydney. The amount comes to at least A$37 million ($34 million), based on Bloomberg calculations.

“My whole life has been turned upside down,” Fraser-Kirk, a publicist with the company, said yesterday in comments broadcast on Sky television. The company will “defend the claims vigorously” and won’t comment while the matter is before the courts, David Jones said in a statement yesterday. McInnes resigned June 18.

Fraser-Kirk said David Jones ignored her complaints of unwanted advances, with her immediate supervisor and the company’s general manager of public relations advising her to tell McInnes to “back off” the next time it happened. That contravened the company’s policy that harassment in the workplace wouldn’t be tolerated, according to her claim.

Fraser-Kirk said in the complaint that McInnes put his hand under her clothes at a May luncheon and that, after a June party, he urged her to go to his home in Sydney’s beachside suburb of Bondi, “with the clear implication that such a visit would be for the purpose of sexual intercourse.”

The case is Between Kristy Anne Fraser-Kirk and David Jones Ltd. 964-2010. Federal Court of Australia (Sydney).

For more, click here.

For the latest new suits news, click here. For copies of recent civil complaints, click here.


Agliotti Not Involved in Allan Gray Shooting, Lawyer Says

A lawyer for Glenn Agliotti, charged with organizing the killing of mining magnate Brett Kebble and seeking to have four other people murdered, sought to pin the blame for the shooting of an Allan Gray Ltd. fund manager on his security manager.

Agliotti is charged with ordering Clinton Nassif to organize the shooting of Stephen Mildenhall, former chief investment officer at Cape Town’s Allan Gray, on Aug. 31, 2005.

Mildenhall had been pressuring Kebble, at that time a friend of Agliotti’s, to quit his role as the head of three mining companies. Prosecutors say that a month later Agliotti organized to have Kebble shot dead in his car in Johannesburg. Agliotti says the murder was requested by Kebble, who feared jail on fraud charges, and it was “an assisted suicide.”

Nassif “played the most important role in the shooting of Mr. Mildenhall,” Laurence Hodes, Agliotti’s lawyer, said in court yesterday. “The accused had absolutely nothing to do with it.”

Nassif and the three men who carried out the killing of Kebble have confessed to the crime in a bid to win immunity from prosecution. Agliotti has said that it was “an assisted suicide” carried out at Kebble’s request because he feared going to jail.

In an 11-year career in South Africa’s gold mining industry, Kebble, who died at the age of 41, helped set up two of the country’s four biggest gold companies, Harmony Gold Mining Co. and DRDGold Ltd. Investec Ltd., a bank, and Allan Gray pressed for his departure after hundreds of millions of dollars worth of assets went missing from Randgold & Exploration.

Agliotti is also charged with conspiring to murder Mark Bristow, the chief executive officer of Randgold Resources Ltd., Jean Nortier, the CEO of Uranium One Ltd., and Mark Wellesley- Wood, the former chief of DRDGold. Kebble was involved in disputes with the three men.

The case is: State versus Agliotti, Norbert Glenn, JPV 2008/264, SS154/2009.

For more, click here.

For the latest trial and appeals news, click here.


Bank of America, KPMG Win Approval of Lawsuit Accord

Bank of America Corp. and KPMG LLP’s $624 million settlement with investors in Countrywide Financial Corp. led by New York pension funds won initial court approval.

U.S. District Judge Mariana Pfaelzer in Los Angeles ruled yesterday on the accord. A fairness hearing will be held on final approval for the settlement, first announced in May.

The New York State Common Retirement Fund and five New York City pension funds claimed former Countrywide Chief Executive Officer Angelo Mozilo and other executives hid the fact that the company was fueling its growth by letting underwriting standards deteriorate. Bank of America acquired Calabasas, California- based Countrywide, the biggest U.S. home lender, in July 2008.

“This settlement was reached, as I assume all settlements are, to resolve the uncertainty of continued litigation,” Brian Pastuszenski, a lawyer for Bank of America, said at the hearing. “It is by no means a concession that anything was done that violated securities law.”

Mozilo, 71, is also a defendant, together with two other former Countrywide executives, in a U.S. Securities and Exchange Commission lawsuit alleging he publicly reassured investors about the quality of the company’s home loans while he issued “dire” internal warnings and sold about $140 million of his own Countrywide shares.

Joel Bernstein, a lawyer for the New York funds, said at the hearing that the settlement represents about 22 percent of the maximum possible recovery the plaintiffs could have expected if the case had gone to trial.

Bank of America, based in Charlotte, North Carolina, is responsible for $600 million of the settlement, with New York- based KPMG responsible for the remaining $24 million.

The case is In re Countrywide Financial Corp. Securities Litigation, 07-05295, U.S. District Court, Central District of California (Los Angeles).

Hewlett-Packard Settles False Claims Case With U.S.

Hewlett-Packard Co., the world’s largest maker of personal computers and printers, agreed in principle to settle a U.S. probe of false billings, a deal that will trim earnings by 2 cents a share in the third quarter.

The agreement would resolve a Justice Department investigation of whether the company overcharged taxpayers through a General Services Administration contract, HP said yesterday in a statement. The accord also would settle claims in a False Claims Act lawsuit, first filed by a whistleblower and later joined by the U.S., that the company paid kickbacks.

Hewlett-Packard didn’t release details of the agreement, which needs approval of the Justice Department and a federal judge in Little Rock, Arkansas. The company also didn’t give a new forecast for the quarter or the year, aside from the 2-cent reduction. HP is scheduled to issue third-quarter results on Aug. 19.

“HP denies engaging in any illegal conduct in connection with these matters,” Gina Tyler, a spokeswoman for the Palo Alto, California-based company, said in an e-mailed statement. “We believe it is in the best interest of our stakeholders to resolve the matter and move beyond this issue.”

Charles Miller, a Justice Department spokesman, declined to comment on the settlement.

For more, click here.

For the latest verdict and settlement news, click here.

Court News

Obama Remake of Courts Bogged Down by Republicans

President Barack Obama, on the verge of winning confirmation of his second U.S. Supreme Court appointment in two years, is having limited success shaping the lower federal courts that handle thousands more cases.

Obama got off to a slow start picking judges for the federal trial and appeals courts, and Republican delaying tactics have stalled some confirmations. Filling judicial vacancies will get tougher after November with the likelihood that Democrats’ 59-41 control of the Senate will be eroded.

The president’s allies question his choice of nominees and complain that he has been too cautious in confronting Republican opposition.

“A lot of groups are still waiting for this president to nominate someone who will really reshape the bench,” said Barbara Arnwine, executive director of the Lawyers’ Committee on Civil Rights in Washington. The group supports expanding legal protection for blacks and other minorities.

The 13 appeals courts throughout the U.S. are particularly influential. They have the final say in thousands of cases, while the Supreme Court decides about 80 cases a year. Appellate courts ruled on or dismissed 59,600 cases in the year ending March 31, 2009, according to the Administrative Office of the U.S. Courts in Washington.

Obama has submitted to the Senate 63 trial court nominations and 22 for the appeals courts. At the same point in his first term, George W. Bush had nominated 83 trial judges and 32 for the appeals courts, according to Russell Wheeler, a scholar at the Brookings Institution in Washington.

The Senate has confirmed nine Obama appellate nominees, three fewer than for Bush at a comparable point for the former Republican president. The Senate has confirmed 27 of Obama’s nominees to be trial judges compared with 51 for Bush.

For more, click here.

To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.