Galleon Group LLC founder Raj Rajaratnam will get a court hearing on his claim that the government filed a misleading application to wiretap him and that the evidence produced by the taps should be excluded.
“Rajaratnam has made a substantial preliminary showing that the government recklessly or knowingly misleadingly omitted several key facts” from an affidavit filed in support of the wiretap application, U.S. District Judge Rich Holwell wrote in an opinion released Aug. 13.
Holwell at the same time denied requests by Rajaratnam and co-defendant Danielle Chiesi to bar evidence tied to transactions involving 23 companies, including Goldman Sachs Group Inc., Cisco Systems Inc. and AT&T Inc., which were identified by prosecutors in letters dated March 22 and April 14.
Rajaratnam, who was arrested Oct. 16, is the central figure in a probe in which 21 people have been charged criminally. Rajaratnam is charged with illegally using tips from company executives, hedge fund officials and other insiders to earn millions of dollars.
The case is U.S. v. Rajaratnam, 1:09-cr-1184, U.S. District Court, Southern District of New York (Manhattan).
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Conrad Black’s Libel Suits Can Proceed, Court Rules
Conrad Black’s six libel suits against employees of his former publishing company can proceed, the Ontario Court of Appeal ruled.
The court dismissed a challenge by the defendants at Hollinger International Inc., who argued the Ontario Superior Court doesn’t have jurisdiction to hear the case. The Toronto- based appeal court released the ruling on its website Aug. 13.
Black, the former Hollinger chairman released on bail last month, said that press releases and reports issued by Hollinger, which were downloaded and republished in newspapers including the Globe and Mail, damaged his reputation in Ontario.
Black, 65, was found guilty in Chicago federal court of three counts of fraud and one count of obstruction of justice after a four-month trial. The U.S. Court of Appeals in Chicago granted Black’s petition for bail last month while it considers his appeal, following a U.S. Supreme Court decision in June that narrowed the scope of a law used to prosecute him.
Ex-Hypo Alpe-Adria CEO Kulterer Placed in Pre-Trial Custody
Hypo Alpe-Adria Bank International AG’s former chief executive officer, Wolfgang Kulterer, was placed in pretrial custody yesterday, according to his lawyer.
Kulterer, who is being investigated for breach of trust and giving false testimony, was arrested on Aug. 13, his attorney Ferdinand Lanker said in an e-mailed statement.
“This action is scandalous,” Lanker said. His client had “always appeared punctually to all summons and fully cooperated with the investigating authorities,” he said. “Now suddenly a danger of flight is being assumed.”
Lanker will take all legal actions necessary, according to the statement.
Kulterer was arrested because of “danger of flight, danger of collusion and danger of repeat offenses,” Helmut Jamnig, a spokesman for the Klagenfurt, Austria, prosecutor, said in a telephone interview on Aug. 13 following the arrest.
Kulterer is being investigated for breach of trust and giving false testimony to an enquiry commission in the Province of Carinthia, Jamig said. Hypo Alpe was nationalized in December. Kulterer led the bank’s eastern European expansion from 1995 until he left day-to-day operations in 2006, when he pleaded guilty to accounting fraud for failing to write down 288 million euros ($369 million) in currency-trading losses.
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Tullett Prebon Sues Three BGC Executives Over ‘Raid’
The lawsuit, filed at the New York state courthouse in Manhattan on Aug. 13, claims that BGC Managing Director Anthony Verrier, President Shaun Lynn and Chief Operating Officer Sean Windeatt plotted a “raid” on Tullett personnel in its New York and New Jersey offices.
“Defendants secretly conspired and executed the meticulously planned scheme,” according to the complaint, by gaining the assistance and cooperation of key Tullett executives, then “bribing those senior-level employees with extraordinary compensation packages.”
London-based Tullett Prebon Plc, like BGC, is a firm that matches securities trades between banks. In June, the British firm lost a Newark, New Jersey, lawsuit filed against its American rival after U.S. District Judge Stanley Chesler ruled that it had failed to include its U.S.-based affiliates as a party in interest.
Claiming the hirings last year cost it $387 million in market capitalization, Tullett had sought more that $1 billion in damages in the unsuccessful federal court case.
The Aug. 13 lawsuit was brought by New Jersey-based Tullett Financial and Tullett Americas.
BGC spokesman Robert Hubbell didn’t reply to voice-mail and e-mail messages seeking comment on the new suit.
Tullett is “attempting to use the judicial and industry dispute-resolution mechanisms in an effort to shift blame to BGC for their own failures,” New York-based BGC said in a November regulatory filing, calling the litigation “unwarranted and unprecedented.”
Alleging contractual interference, theft of trade secrets and defamation, the U.K. firm seeks damages of at least $110 million per year for the three to five years it says it needs to replace the lost brokers and business, plus punitive damages of $1 billion.
The case is Tullett Prebon Financial Services v. Verrier, 651265, New York State Supreme Court, New York County (Manhattan).
Apple Manager Indicted on Fraud, Money Laundering Charges
An Apple Inc. manager was indicted by a federal grand jury in California for wire fraud and money laundering, according to court records.
Paul Shin Devine, an Apple global supply manager, is accused of taking more than $1 million in kickbacks from Asian suppliers of iPhone and iPod accessories in exchange for confidential data that helped them win better contracts from Apple, the San Jose Mercury News reported.
A U.S. grand jury in San Jose returned the indictment of Devine on Aug. 11 under seal. The order was lifted Aug. 13, according to the court docket, yet the charging documents weren’t immediately available.
Devine, 37, is now in custody, the paper reported, and couldn’t be reached for comment. He is scheduled to appear in court today for hearing on the appointment of a lawyer. A spokesman for the U.S. attorney’s office also couldn’t be reached.
Devine used a chain of foreign and domestic bank accounts along with one front company to receive payments, the paper reported. Code words, such as “sample,” were used to refer to the payments to avoid suspicion of other Apple employees, the paper said.
Apple also filed a civil suit against Devine, the paper reported.
Apple has “zero tolerance for dishonest behavior inside or outside the company,” spokesman Steve Dowling said in a statement, according to the Mercury News. Dowling didn’t return a message seeking further comment.
The case is U.S. v. Devine, 10cv603, U.S. District Court, Northern District of California (San Jose).
Kenneth Himmel Sued By Arizona Companies Over Obligations
Kenneth A. Himmel, president and chief executive officer of Related Cos.’ Related Urban unit, was sued by two Arizona companies over a $110.7 million judgment against another company in which he was a partner.
Epicenter Partners LLC and Gray Meyer Fannin LLC sued Himmel as a partner in Northeast Phoenix Partners, master developer of Desert Ridge, a 5,700-acre planned community in Arizona, according to a complaint filed Aug. 13 in New York state Supreme Court in Manhattan.
In 2004, Epicenter and Gray, known collectively as Gray Development, purchased 41 acres of land for $32 million, according to court papers. After an unsuccessful attempt to develop the land, Gray sued Northeast Phoenix Partners in Arizona, claiming the developer thwarted the project.
A jury in Maricopa County Superior Court in Arizona awarded Gray $110,658,800 in damages on July 26, according to the New York complaint. The developer’s assets are insufficient to satisfy the judgment, according to the complaint.
Gray brought the New York case seeking a declaratory judgment that Himmel, as a partner of Northeast Phoenix Partners, is liable for its obligations. Himmel lives in New York, according to the complaint.
A call to Himmel at Related after regular business hours wasn’t returned.
Related Cos., based in New York, built the city’s Time Warner Center. Related Urban, according to Related’s website, is the nation’s leading developer of large-scale mixed-use properties.
The case is Epicenter Partners v. Kenneth Himmel, 1011853/2010, New York state Supreme Court (Manhattan).
Lehman Finance Unit Sues ITV’s Carlton Over Swaps Deal in U.K.
Lehman Brothers Special Financing Inc. said it is owed 2.7 million pounds ($4.2 million) plus about 550,000 pounds in interest under the agreement made with Carlton in August 2004. According to the lawsuit, Carlton has said it doesn’t have to pay because the New York-based bank’s 2008 bankruptcy voided its obligation to do so when the contract matured in March 2009.
Carlton should be forced to pay by the court because the part of the agreement that allows them to stop payments violates bankruptcy law by depriving an insolvent entity of assets it is owed, Lehman said in the suit, which was filed June 28 in London and made public this week.
Lehman Brothers filed the biggest bankruptcy in U.S. history in September 2008, listing $613 billion in debt. It had more than 900,000 derivative contracts outstanding when it collapsed. Its financing unit filed for creditor protection the following month in New York.
ITV, the U.K.’s biggest private broadcaster, was created by the 2004 merger of Carlton Communications and Granada Plc. ITV spokesman Mike Large said Carlton no longer exists and declined to immediately comment on the lawsuit.
The case is Lehman Brothers Special Financing Inc. v. Carlton Communications Ltd., case no. HC10C02146, High Court of Justice, Chancery Division (London).
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Skilled Healthcare Seeks Mistrial on Damages Award
Skilled Healthcare Group Inc. asked a California judge to declare a mistrial or order a new trial over a jury’s $677 million damages award for claims the company improperly staffed its nursing homes.
Lawyers for Skilled Healthcare on Aug. 13 asked Superior Court Judge W. Bruce Watson in Eureka, California, to throw out the verdict because a juror lied about knowing one of the plaintiffs and was biased and hostile toward the company.
The plaintiffs accused Foothill Ranch, California-based Skilled Healthcare of improperly staffing 22 facilities in the state. A Humboldt County jury on July 6 found the company liable for statutory damages and restitution.
Lawyers for the plaintiffs said in a filing that Skilled Healthcare’s juror-misconduct allegations were based on “hearsay, speculation, and outright fabrication of the facts” and that the company’s request for a mistrial lacked merit.
In its request for a mistrial filed Aug. 6, Skilled Healthcare said a juror didn’t disclose before the trial that she had worked for the Humboldt County Coroner’s Office and had handled at least one corpse that came from one of the company’s facilities.
The juror, April Garwin, came to know the daughter of the deceased whose body was handled at the coroner’s office, according to Skilled Healthcare. The daughter was one of the plaintiffs in the case, the company said.
The verdict is the largest jury award in the U.S. this year, according to data compiled by Bloomberg. Skilled Healthcare has said the award exceeds the policy limits of its insurance. The company had a net loss of $133 million last year on revenue of $759.8 million.
The case is Lavender v. Skilled Healthcare Group, DR060264, Superior Court, Humboldt County, California (Eureka).
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Threats to U.S. Judges Lead to Conviction in Third Trial
After three trials, a jury convicted Internet radio host and blogger Hal Turner of threatening the lives of three U.S. appeals-court judges.
Turner, 48, was found guilty by a federal jury in Brooklyn, New York, of a single count of threatening in Internet postings to assault and murder the judges because he disagreed with one of their rulings. That was the only count he faced. The jury deliberated for less than two hours and the judge ordered Turner taken into custody. Two previous juries had deadlocked.
“There goes the First Amendment for everybody,” Turner’s mother, Kathy Diamond, said after the verdict. “Since when does words mean you threatened to kill somebody?”
Prosecutors said Turner, of North Bergen, New Jersey, threatened judges Frank Easterbrook, Richard Posner and William Bauer in website postings because of their June 2009 ruling upholding handgun bans in Chicago and Oak Park, Illinois. A lower court previously dismissed a legal challenge to the ordinances by the National Rifle Association. The U.S. Supreme Court overturned the handgun bans on June 28.
Turner faces a maximum prison sentence of 10 years. His lawyer Peter Kirchheimer declined to comment after the verdict.
“You can’t threaten violence against people,” Assistant U.S. Attorney William Ridgway told jurors in his closing argument Aug. 13. “You can use hate speech, love speech and anything in between. But threats are not protected by the First Amendment.”
The case is U.S. v. Turner, 09-CR-00650, U.S. District Court, Eastern District of New York (Brooklyn).
Samsung Lieutenants Pardoned, Opening the Way for Old Guard
South Korea pardoned billionaire Lee Kun-Hee’s top lieutenants at Samsung Group, paving the way for their return to management after a corruption scandal prompted a wave of resignations at the nation’s largest industrial group.
Lee Hak Soo, who resigned as vice chairman in 2008 after being charged with tax evasion and breach of trust, and former President Kim In Joo are among 2,493 people who will receive presidential pardons on Aug. 15, South Korea’s Independence Day, the Ministry of Justice said. Lee Kun Hee, who had been convicted of tax evasion, was pardoned in December.
The announcement, made less than five months after Lee Kun Hee returned to the group’s flagship Samsung Electronics Co., may fuel perceptions that Korea’s resolve to rein in family run conglomerates, known as chaebol, is waning at a time of global economic weakness. Samsung is the nation’s largest private employer and its overseas sales account for about 20 percent of the country’s exports, according to the group’s website.
“It makes foreign investors recognize that the Korean government’s fostering of this economy toward transparency has to be taken with a grain of salt,” said Tom Coyner, who helps advise foreign investors in South Korea as president of Soft Landing Consulting Ltd. in Seoul.
The pardon may lead to Lee Hak Soo’s return to the group and the resurrection on its strategic planning office, which controlled operations across Samsung affiliates, said Kim Sang- jo, economics professor at Hansung University in Seoul and head of Solidarity for Economic Reform, a group that promotes corporate governance and minority shareholders’ rights. Lee ran the office between 2006 and 2008.
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UBS Hires Chung as Investment Bank’s Co-General Counsel
UBS AG hired Chul Chung from Goldman Sachs Group Inc. to be co-general counsel for its investment bank as Switzerland’s largest bank navigates the biggest overhaul of U.S. financial regulation since the Great Depression.
Chung, who worked at Goldman Sachs for 16 years, most recently as head of derivatives clearing strategies in its securities division, will begin in the newly created position in New York in late October, UBS General Counsel Markus Diethelm said in an Aug. 4 memo to employees. Spokeswoman Kelly Smith in New York confirmed the contents of the memo. Chung will work alongside David Graham, now general counsel to the investment bank, who becomes co-general counsel.
Chung’s work will “help the investment bank more assertively play a role in industry discussions regarding market structures and regulations, and -- critically -- to ensure that the investment bank remains in full compliance with all relevant laws and regulations in the markets in which we operate,” Diethelm said in the e-mailed memo.
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Facebook Lawsuit Most Popular Docket on Bloomberg
A lawsuit by a New York man who claims he owns 84 percent of Facebook Inc., the world’s biggest social networking service, was the most-read litigation docket on the Bloomberg Law system last week.
Paul Ceglia, of Wellsville, New York, sued Facebook and its founder and Chief Executive Officer Mark Elliot Zuckerberg in state court in New York’s Allegany County on June 30. In the suit, Ceglia claims that a contract he and Zuckerberg signed in April 2003 entitles Ceglia to ownership of most of the privately held company.
Chief Executive Officer Mark Zuckerberg said on July 21 that he is “quite sure” he never signed such a contract.
The case is Ceglia v. Zuckerberg, 10-CV-00569, U.S. District Court, Western District of New York (Buffalo).
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