U.S. prosecutors are seeking forfeiture of more than $5.1 million from former Bernard Madoff aide Annette Bongiorno, according to an e-mailed statement.
Government lawyers, who originally sued Bongiorno on June 22 seeking to seize assets allegedly tied to Madoff’s fraud, yesterday filed an amended civil complaint identifying additional assets. Bongiorno hasn’t been criminally charged in the case.
Bongiorno, who worked for Madoff for 40 years, knowingly aided the fraud by communicating with clients, answering questions about their investments and overseeing the preparation of phony account statements, trade confirmations and other records, prosecutors said in the amended complaint.
“In fact, as Bongiorno knew, no such securities transactions were being conducted,” prosecutors said.
Bongiorno’s lawyer, Roland Riopelle, didn’t return a call seeking comment.
Madoff, 72, is serving a 150-year federal prison term in North Carolina after pleading guilty to running the biggest Ponzi scheme in history from his firm, Bernard L. Madoff Investment Securities LLC.
The case is U.S. v. $304,041.01 on Deposit at Citibank NA, 10-cv-04858, U.S. District Court, Southern District of New York (Manhattan).
Angelo Mozilo Says SEC Admits Investors Knew Risks
Countrywide Financial Corp.’s former chief executive officer, Angelo Mozilo, said the U.S. Securities and Exchange Commission now admits the home lender wasn’t hiding from investors that it was originating risky mortgages.
Mozilo, 71, in a filing Aug. 2 in federal court in Los Angeles, asked U.S. District Judge John F. Walter to rule on the SEC’s fraud allegations, saying the “undisputed evidence” shows there was no wrongdoing. Former Countrywide Chief Operating Officer David Sambol and former Chief Financial Officer Eric Sieracki also asked Walter to decide the case in their favor without a trial.
“The undisputed evidence establishes, and the SEC now admits, that stockholders understood Countrywide’s underwriting guidelines expanded over time,” lawyers for Mozilo and the two other defendants said in the filing.
The SEC admitted in response to inquiries from the defendants’ lawyers that information about its riskier loans was reflected in the company’s stock price, according to Mozilo’s filing. Countrywide provided information about those loans in prospectus supplements for mortgage-backed securities sold in the secondary market, Mozilo said in the filing.
John McCoy, a lawyer for the SEC, didn’t return a call seeking comment.
The SEC sued Mozilo in June 2009, saying he publicly reassured investors about the quality of Countrywide’s loans while he issued “dire” internal warnings and sold about $140 million of his own Countrywide shares. Mozilo wrote in an e-mail that Countrywide was “flying blind” and had “no way” to determine the risks of some adjustable-rate mortgages, according to the SEC complaint.
The case is SEC v. Mozilo, 09-03994, U.S. District Court, Central District of California (Los Angeles.)
Glitnir Among Lenders Winning Asset Freezes in U.K.
Glitnir Bank hf, the failed Icelandic bank, and other lenders allegedly stung by internal fraud are winning U.K. court orders freezing the worldwide assets of former executives with ties to Britain, reports Erik Larson of Bloomberg News.
Glitnir had the assets of Jon Asgeir Johannesson, its former principal shareholder, frozen in May and won a second court victory last week after he violated the order by paying bills. Kazakhstan’s BTA Bank, which defaulted on $12 billion of debt, and Intercontinental Bank Plc, the bailed-out Nigerian lender, won similar orders against ousted executives in the past year.
The U.K. is a popular venue for seeking asset freezes because the orders can be won rapidly, often with a phone call to a judge and without the defendant’s knowledge, in order to prevent them from moving money, lawyers said.
“Somebody who believes they’re being ripped off can get an order from the court really quickly in England and it’s an order with teeth,” said Christopher Style, a lawyer with Linklaters LLP in London, who isn’t involved in the bank cases. Style said he once obtained a freeze over the phone from a judge who was playing cricket.
The freezes, often used in civil cases to hold assets in place before a trial, follow a financial crisis that exposed scams such as Bernard Madoff’s $65 billion Ponzi scheme and led to U.S. fraud claims against a Goldman Sachs Group Inc. worker over the marketing of investments tied to subprime mortgages.
Johannesson, the former chairman of Glitnir’s parent company Baugur Group hf, said he was “surprised” by the bank’s decision to use a U.K. court to win the freeze. He also said Glitnir wrongfully claims he has 202 million pounds ($322 million) in Britain.
“Glitnir is using the U.K. court system to obtain an order against me which is not available to them in any other jurisdiction,” Johannesson, who lives in London, said in an e- mail. “I have not hidden any assets, and if Glitnir had made any effort to contact me, I would have been pleased to provide them with the requested information.”
Glitnir, which collapsed in October 2008, sued Johannesson in New York in May, claiming he led a group that drained Glitnir of $2 billion. Johannesson said the suit is “just politics.”
The bank’s freeze order against him covers two apartments in Manhattan’s Gramercy Park neighborhood, for which he paid $25 million. Johannesson last month lost an appeal to lift the order and new freezes were issued after Glitnir said he violated the freeze by paying 585,648 pounds in bills.
For more, click here.
Spain Blocked From Suing American Bureau of Shipping
A $1 billion lawsuit by Spain against the American Bureau of Shipping over a 2002 oil spill was thrown out by a federal judge in Manhattan.
U.S. District Judge Laura Taylor Swain yesterday ruled that ABS can’t be held legally responsible for the sinking of the oil tanker M.T. Prestige on Nov. 19, 2002, near Spain. The ship discharged millions of gallons of oil into Spanish territorial waters, then sank 140 miles off the country’s coast.
Spain claimed that Houston-based ABS, which certifies ships as meeting its standards for design, structure and condition, was reckless in certifying the single-hulled tanker Prestige as fit to carry fuel, Swain said.
“Spain has identified no precedent for the duty it posits to avoid recklessness, and this court is not persuaded that any such duty to coastal states attended ABS’s vessel certification activities under federal maritime law,” Swain said in her ruling.
The decision marks the second time Swain has rejected Spain’s suit against Houston-based ABS. Swain dismissed the suit in January 2008, ruling that her court lacked jurisdiction over Spain’s claim. A federal appeals court overturned that decision and sent the case back to Swain for further proceedings.
Brian Starer, a lawyer representing Spain in the suit, called the decision “startling.” Starer said other countries in recent years have imposed liability in cases involving environmental catastrophes.
Starer said Spanish officials haven’t had a chance to review the ruling and no decision has been made whether to appeal.
John Grimmer, an attorney for ABS, had no comment on the ruling.
The case is Reino de Espana v. The American Bureau of Shipping, 03-cv-3573, U.S. District Court, Southern District of New York (Manhattan).
For more, click here.
Pfizer Wins Ruling Denying Neurontin Class-Action Lawsuit
Judge Donald L. McCullin in St. Louis refused on July 27 to allow Missouri Neurontin buyers to combine claims that Pfizer sold the drug for unapproved uses and misled users about its effectiveness, according to state-court filings. Two consumers sought to have their case certified as a class action to recover money spent on Neurontin prescriptions.
“The evidence in the record shows Neurontin is effective for treatment of many conditions,” McCullin wrote in his 13- page decision. “The court cannot certify this putative class because it appears from the record that it would include more than a small number of uninjured individuals.”
Pfizer, based in New York, faces at least 400 lawsuits accusing it of illegally promoting Neurontin. In March, a Boston jury ordered Pfizer to pay more than $140 million in damages to an insurer over its marketing practices in connection with the drug.
The judge found the case wasn’t suitable for class-action treatment because potential class members had different types of claims depending on how the drug worked for them.
“We think this ruling is subject to challenge,” Gerald Meunier, a New Orleans-based lawyer representing Missouri plaintiffs Elizabeth Judy and Stephen Brown, said in a phone interview. “This case is far from over.”
The case is Judy v. Pfizer Inc., 042-01946-02, Missouri Circuit Court, 22nd Judicial Circuit (St. Louis).
For more, click here.
Argentine Assets Properly Seized, U.S. Appeals Court Rules
Assets of the Republic of Argentina held in a trust administered by the U.S. Bank Trust National Association were properly attached to pay owners of defaulted bonds, a U.S. appeals court ruled.
The court in New York yesterday upheld an August 2009 decision by U.S. District Judge Thomas Griesa, ruling in favor of EM Ltd. and NML Capital Ltd., which have judgments against the republic for hundreds of millions of dollars.
“The record shows that the Republic, on numerous occasions, took action consistent with discretionary use of the public funds as part of the Republic itself and that the funds were properly attached and restrained to satisfy the debts of the Republic,” a three-judge panel of the appeals court said in a written opinion.
The court ruled that, because the trust assets are held in New York, the Foreign Sovereign Immunities Act doesn’t prevent their seizure.
Griesa ruled July 26 that a different set of creditors couldn’t attach bonds held in a government trust fund in Buenos Aires.
A phone message for Jonathan Blackman, a lawyer who represented Argentina in the case, wasn’t returned.
The case is EM Ltd. v. Republic of Argentina, 09-3908, Second Circuit U.S. Court of Appeals (Manhattan).
Australia Challenges Hong Kong in International Dispute Market
Australia opened its first international dispute resolution center, challenging Hong Kong and Singapore for business in the growing legal market.
“Unfortunately we let those regional centers get the jump on us,” federal Attorney General Robert McClelland said at the opening of the Australian Centre for International Commercial Arbitration in Sydney yesterday. “Now, we’re back in the game.”
Australia’s cross-border and export legal services income was worth A$675 million ($615 million) in fiscal 2007, a report by a government advisory council said. Companies and investors want to avoid the uncertainty of litigation in foreign courts and are increasingly opting to resolve disputes by arbitration, said Doug Jones, president of the Australian center.
Australia is constrained by its location, being more than seven hours flying time from key jurisdictions including Hong Kong, Yu-Jin Tay, lawyer in Shearman & Sterling LLP’s International Arbitration Group in Singapore, said in a phone interview yesterday. “That’s a natural disadvantage,” Tay said.
Australia should focus on domestic disputes and may win business that spills over from Indonesia or Malaysia, he said.
Singapore tried to take on Hong Kong’s dominance last year, when the city-state opened its legal market to foreign firms, offered tax incentives and developed a building with 14 hearing rooms. Hong Kong hosted about three times as many international arbitration cases as Singapore in 2009.
For more, click here.
For the latest lawsuit news, click here.
Trump SoHo Condominium Buyers Claim Sales Were Inflated
Buyers in the Trump SoHo hotel-condominium development in lower Manhattan sued developer Donald Trump and other backers of the project for falsely inflating sales figures to encourage them to buy units in the project.
Fifteen plaintiffs who claim they signed agreements to buy units in the building alleged in a suit filed in Manhattan federal court yesterday that sponsors falsely told the press and individual buyers “that the Trump SoHo was 30, 40, 50, 60 percent or more sold.”
Instead, when the project was completed, the sponsors of the building filed a required disclosure that showed just more than 15 percent of the units had buyers, the plaintiffs said in court papers.
The defendants “engaged in a coordinated pattern of falsely overstating the number and percentage of Trump Soho units sold,” the buyers said in their complaint.
The Trump Organization isn’t the project’s developer and “merely the manager of the hotel,” said Rhona Graff, a Trump spokeswoman, in an e-mailed statement. “I know that numerous people have closed on their units and this case is simply a matter of buyers’ remorse.”
The case is Palmer Gardens LLC v. Bayrock/Sapir Organization LLC, 10-CV-5830, U.S. District Court, Southern District of New York (Manhattan).
Cerberus’ LNR Property Accused of Defrauding Retirees
LNR Property Corp., the real estate finance company co- owned by Cerberus Capital Management LP, was accused in a lawsuit of defrauding creditors including retired California public employees of $700 million.
Creditors of a defunct California land company sued LNR in U.S. Bankruptcy Court in Wilmington, Delaware, claiming LNR and homebuilder Lennar Corp. drained $1.4 billion out of a joint venture that left their partners with nothing. Those partners, including the California Public Employees’ Retirement System, lost their $970 million investment, according to the suit.
LNR and Lennar knew that the company they controlled, LandSource Communities Development LLC, was insolvent when lenders represented by Barclays Capital Plc loaned it as much as $1.55 billion in February 2007, creditors claimed in the lawsuit. Instead of using the money to recapitalize LandSource just as the real estate market began to collapse, the company paid a special distribution of $1.4 billion to LNR and Lennar, creditors claimed.
“LandSource painted a fraudulent picture of its corporate health in order to induce an equity payout to Lennar and LNR under the guise of a recapitalization,” the lawsuit said.
LandSource filed for bankruptcy in June 2008. Under the company’s plan of reorganization approved last year, creditors set up a litigation trust that filed the lawsuit against LNR. Lennar wasn’t named in the complaint, filed on June 8.
LNR spokeswoman Jen Brown declined to comment. A spokesman for Lennar didn’t return a message.
The case is Landsource Creditor Litigation Liquidating Trust V. LNR NWHL Holdings Inc., 10-51219, U.S. Bankruptcy Court, District of Delaware (Wilmington).
For the latest new-suit news, click here. For copies of recent civil complaints, click here.
Kebble’s Killers Short-Changed for Assassination, Lawyer Says
The three men who killed South African gold magnate Brett Kebble may have been underpaid by one of the men who organized his assassination, a lawyer said.
Michael Schultz, Nigel McGurk and Faizel Smith expected to be paid 500,000 rand ($69,000) each for shooting Kebble dead in his car the night of Sept. 27, 2005, Laurence Hodes, a lawyer for Glenn Agliotti, who is on trial for organizing the murder, said in a Johannesburg court yesterday. Clinton Nassif, who says he set up the killing on Agliotti’s instructions, testified that he agreed to pay 800,000 rand for the act.
The murder was requested by Kebble himself because he feared jail on fraud charges after hundreds of millions of dollars of assets at Randgold & Exploration Ltd., a gold company that he led, went missing, Nassif said. Nassif was paid between 1 million and 2 million rand by Kebble to carry out the murder, he said in the South Gauteng High Court.
Agliotti’s lawyer has been trying to distance his client from the murder as well as the shooting of Stephen Mildenhall, a fund manager at Cape Town’s Allan Gray Ltd., who sought to oust Kebble.
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.
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 the Randgold & Exploration assets went missing.
The case is: State versus Agliotti, Norbert Glenn, JPV 2008/264, SS154/2009.
For the latest trial and appeals news, click here.
RBS Fined $8.9 Million for Failing to Check Sanctions
Royal Bank of Scotland Group Plc was fined 5.6 million pounds ($8.9 million) by the U.K. Financial Services Authority, for failing to check if its clients appeared on a list of people sanctioned by the U.K. Treasury.
RBS didn’t have controls in place between December 2007 and December 2008 to prevent financial-sanction breaches, the FSA said yesterday in a statement about the fine, the agency’s first against a bank for failing to check sanctions. RBS units Ulster Bank Ltd., National Westminster Bank Plc, RBS Plc and Coutts and Co. didn’t “adequately” screen customers and transactions against an HM Treasury list, the regulator said.
The bank “left itself open to the risk that it was facilitating terrorist financing,” FSA enforcement director Margaret Cole said in the statement. “The scale of the fine shows how seriously the FSA takes this issue and should act as a warning to other firms.”
To comply with anti-money-laundering regulations, the treasury created an asset-freezing unit in 2007 that maintains a list of people and firms under financial sanctions by the United Nations, the European Union and the U.K. Banks must have controls in place to prevent those under sanction from receiving funds or financial services, according to the regulator.
The investigation “confirmed the deficiencies we had identified and brought to their attention in our policies, procedures and controls during the year to December 2008,” Nathan Bostock, head of restructuring and risk at RBS, said in a statement yesterday. “The FSA noted that it did not consider this misconduct deliberate or reckless.”
For more, click here.
For the latest verdict and settlement news, click here.
Grant & Eisenhofer Firm Sued Over Fees in Tyco Case
Grant & Eisenhofer, a law firm specializing in shareholder litigation, was sued by an investor in Tyco International Ltd. over claims it committed malpractice by taking excessive fees from Tyco’s $3.2 billion settlement.
Grant & Eisenhofer “stole hundreds of millions of dollars from their clients in 2007” with a fee award of almost $500 million, investor Richard Gielata said in a complaint filed yesterday in federal court in Wilmington, Delaware.
His son and attorney in the case, Joseph Gielata, was a lawyer at Grant & Eisenhofer about six years ago, according to a statement yesterday by the firm.
The firm had a contract with the Teachers Retirement System of Louisiana, one of the co-lead plaintiffs, to limit its fee request to $210 million and to oppose anything higher, according to court papers. The agreement had been “kept hidden for years,” the complaint claims.
Tyco in December 2007 won approval of the settlement in federal court in Concord, New Hampshire. Plaintiffs accused the company of inflating revenue under former Chief Executive Officer L. Dennis Kozlowski.
Grant & Eisenhofer described Joseph Gielata in an e-mailed statement as a “former disgruntled employee.” The firm will defend the case vigorously, and its principals “vehemently deny these accusations,” according to the statement.
Joseph Gielata, who issued a press release after filing the complaint, declined to comment further when reached by phone.
The case is Gielata v. Eisenhofer, 10-00648, U.S. District Court, District of Delaware (Wilmington).
For the latest litigation department news, click here.