Robert Moffat, the former International Business Machines Corp. executive who pleaded guilty in the Galleon Group LLC insider-trading scheme, said accused tipster Danielle Chiesi “played him” to obtain tips.
Moffat, 54, who pleaded guilty to securities fraud and conspiracy in March, made the claim in court papers seeking leniency when he’s sentenced Sept. 13. Moffat claimed he had an “intimate relationship” with Chiesi, 44, a former executive at New York-based New Castle Funds LLC who was arrested along with Galleon Group co-founder Raj Rajaratnam.
“Ms. Chiesi was not the passive recipient of information from Mr. Moffat,” his lawyers said in the court filing yesterday. “To the contrary, she manipulated or ‘played’ him to obtain information she could use to New Castle’s advantage.”
Moffat, who started at IBM as a junior programmer in 1978, admitted that he leaked Chiesi information about IBM, Lenovo Group Ltd. and Advanced Micro Devices Inc. He said he wasn’t asked to cooperate with prosecutors in the case and hasn’t done so.
Prosecutors asked U.S. District Judge Deborah Batts Aug. 16 to sentence Moffat to six months in prison. Moffat is seeking probation.
Moffat met Chiesi in 2002 and the two became professional friends, according to the papers filed by Moffat yesterday. Chiesi often told Moffat her ideas about how IBM could best present itself to investors.
“Over time, Bob’s relationship with Ms. Chiesi became an intimate one,” according to the filing. “Bob’s personal relationship with Ms. Chiesi unfortunately led him to lose sight of the principles that he had lived by.”
The case is U.S. v. Moffat, 10-CR-270, U.S. District Court, Southern District of New York (Manhattan).
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Barclays Judge Questions ‘Sweetheart Deal’ With U.S.
A federal judge questioned Barclays Plc’s $298 million settlement with the U.S. government over dealings with banks under U.S. sanctions, calling the accord a “sweetheart deal.”
U.S. District Judge Emmet Sullivan in Washington said yesterday the settlement “concerns the court.” He scheduled a hearing for today to further discuss the accord.
Under a deferred-prosecution agreement filed in court Aug. 15, the London-based bank agreed to pay $149 million to the U.S. and another $149 million to New York state. Barclays was accused of violating U.S. financial sanctions against Cuba, Iran, Libya, Sudan and Burma from about March 1995 through September 2006.
Sullivan said that the average American who gets caught robbing a bank doesn’t get deferred prosecution and the option of returning the ill-gotten gains, like Barclays.
“Why isn’t the government getting tough with the banks?” Sullivan asked.
Frederick Reynolds, an attorney for the U.S., said the settlement is fair and “in excess of what the company earned.” Michael O’Looney, a spokesman for Barclays Capital, declined to comment.
The case is U.S. v. Barclays Bank Plc, 10cr218, U.S. District Court, District of Columbia (Washington).
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Indicted Apple Manager Was Paid for Consulting, Cresyn Says
Cresyn Co., a maker of earphones for Apple Inc. iPods, said it paid a manager of the U.S. company, who was indicted by a federal grand jury, for market consulting services.
“It was our understanding the contract was with Apple since we knew he was an Apple employee,” Kim Chang Jun, a spokesman for the Seoul-based company, said in a telephone interview Aug. 16. “Apple was specified in the contract, and we believed it, so we sent the money.”
Paul Devine, 37, a global-supply manager indicted on 23 counts including money laundering and wire fraud, pleaded not guilty in federal court in San Jose, California, on Aug. 16.
Devine gave the suppliers of iPhone and iPod accessories confidential data that helped them win better contracts from Cupertino, California-based Apple in exchange for payments, according to the indictment. The suppliers included Cresyn, China’s Kaedar Electronics Co. and Singapore-based Jin Li Mould Manufacturing Pte., according to a civil complaint Apple filed against Devine.
The scheme, which brought in more than $2.5 million, lasted from about February 2007 until this month, prosecutors said. Cresyn began to supply earphones for iPods in 2007, Kim said.
Jill Tan, a Hong Kong-based spokeswoman for Apple, declined to comment on Cresyn’s statement that its consulting contract was with Apple.
Cresyn only received information on market trends in the U.S. and the sales trends of other companies, Kim said. The closely held company agreed to Devine’s proposal after he approached them in 2006 because it had no U.S. office and only limited information on that market at the time and considered the information useful.
The case is U.S. v. Devine, 10cr603, U.S. District Court, Northern District of California (San Jose).
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Madoff Feeder Fund, Fairfield Sentry, Sues Investors
Fairfield Sentry Ltd., a feeder fund that transferred $3.2 billion to convicted swindler Bernard Madoff, sued 17 of its shareholders to try to recover money they received.
Fairfield Sentry, an affiliate of Fairfield Greenwich Group, said it had no way to repay the $3.2 billion without getting back the money its shareholders received since about 2004, according to the complaints it filed in U.S. Bankruptcy Court in Manhattan. Fairfield Sentry said it raised money for Madoff without knowing he was running a Ponzi scheme.
Fairfield Sentry is trying to recover more than $160 million in payments it made to shareholders, including Banco Bilbao Vizcaya Argentaria SA, Merrill Lynch Pierce Fenner & Smith Inc. and RBC Dominion Securities Sub A/C.
The lawsuits target investors who “have been unjustly enriched,” according to the complaints, filed by the firm Brown Rudnick LLP.
Fairfield Sentry is being liquidated under the supervision of the Commercial Division of the High Court of Justice in the British Virgin Islands. Fairfield Sentry’s liquidators are Kenneth Krys and Christopher Stride, according to court papers.
The biggest claims are being made against Banque Privee Edmond de Rothschild SA for $33.7 million, Meritz Fire & Marine Insurance Co. for $21.9 million and Bank Hapoalim (Suisse) Ltd. for $20 million.
Madoff, 72, is serving a 150-year term in federal prison in Butner, North Carolina, after pleading guilty to orchestrating history’s biggest Ponzi scheme. Fairfield Greenwich was a marketing and investor-relations arm for Bernard L. Madoff Investment Securities LLC, helping to enable the scheme, Picard said.
The first case filed is Fairfield Sentry Ltd. v. Theodoor GGC Amsterdam, 10-03496, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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Nokia Siemens Sued in U.S. Over Iran Torture Case
Nokia Siemens Networks, the joint venture of Nokia Oyj and Siemens AG, was sued in a U.S. federal court by a journalist who was arrested and tortured, after the Iranian government eavesdropped using the company’s technology.
Isa Saharkhiz and his son Mehdi Saharkhiz said in their complaint that equipment provided by Nokia Siemens helped the Iranian government commit human rights violations. Isa Saharkhiz has been imprisoned without trial since June 20, 2009, after publishing pro-democracy articles, according to the complaint. Nokia Siemens hadn’t seen the lawsuit, spokesman Ben Roome said by telephone.
Nokia Siemens was among the vendors that supplied wireless network equipment to Iranian operators, including a call monitoring center, according to a statement by marketing chief Barry French to a European Union Parliament human rights subcommittee in June. The Espoo, Finland-based vendor has exited the monitoring center business and is revising its policies to avoid oppressive uses of its products in the future, it said.
“The lawsuit seeks, among other things, Nokia Siemens to cease all unlawful support of intercepting centers of the Iranian government,” Moawad & Herischi LLP, the Chevy Chase, Maryland-based law firm representing the Saharkhizes, said in a statement. The lawsuit filed Aug. 16 “also asks Nokia Siemens to help secure the release of Isa Saharkhiz through the use of their connections with the Iranian government. Lastly the suit seeks relief that would prevent defendants from harming others in the future in similarly situated countries.”
Isa Saharkhiz, a magazine editor and supporter of opposition presidential candidate Mehdi Karrubi in the June 2009 election, was arrested in Iran last year, according to a statement on an Amnesty International website.
“It is those who misuse technology who must be accountable for their actions,” Nokia Siemens’s Roome said in a statement condemning human rights violations and the use of technology to commit them. “We are confident that our business activities are fully compliant with United States law and with international standards of business conduct.”
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Ralphs, Albertson’s Must Face Antitrust Lawsuit
Three California supermarket chains must face an antitrust lawsuit over an agreement in 2003 to share profit in case any of the three was singled out for a strike, a U.S. appeals court ruled.
The court in San Francisco overturned a lower court ruling that the agreement, reached during a conflict with the companies’ unions, didn’t violate antitrust law. The appellate panel’s 2-to-1 ruling rejected the argument by Ralphs Grocery, Albertson’s and Vons that the agreement wasn’t anticompetitive because it lowered prices for consumers by reducing labor costs.
“It is a primary object of our nation’s laws to protect the rights and interests of working persons, and to enable them to obtain a fair and decent wage through collective action,” Judge Stephen Reinhardt, writing for the majority, said. “Reducing workers’ wages and benefits is hardly an objective that would justify a violation of our antitrust laws.”
Meghan Glynn, a spokeswoman for Cincinnati-based Kroger Co., the parent of Ralph’s; Mike Siemienas, a spokesman for Eden Prairie, Minnesota-based Supervalu Inc., the parent of Albertson’s; and Teena Massingill, a spokeswoman for Pleasanton, California-based Safeway Inc.’s, owner of the Vons brand, didn’t return calls for comment.
The case is State of California v. Safeway, 08-55671, U.S. Court of Appeals for the Ninth Circuit (San Francisco.)
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Pfizer Seeks to Duck Prempro Liability, Jury Is Told
A Pfizer Inc. unit is seeking to duck responsibility for two women’s breast cancers linked to its Prempro menopause drug, a lawyer argued at the end of a trial.
Pfizer’s Wyeth subsidiary rejected Sharon Buxton’s and Joy Henry’s claims that its hormone-replacement medicine helped cause their cancers in the face of a wealth of evidence to the contrary, Zoe Littlepage, a lawyer for the women, told a state court jury yesterday in Philadelphia.
“Wyeth accepts responsibility for not a single breast cancer,” Littlepage said in closing arguments in the trial of the two women’s lawsuit against the drugmaker. The pair seek at least $100,000 total in damages in the first phase of the case.
Wyeth’s witnesses testified during the five-week trial that researchers haven’t conclusively found Prempro causes breast cancer, and Buxton’s and Henry’s lawyers didn’t produce enough evidence linking their cancers to the drug to win, Beth Wilkinson, one of the company’s attorneys, told jurors.
The case is Buxton v. Wyeth, 00202, Philadelphia Court of Common Pleas (Philadelphia).
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L’Oreal Heiress Fights Tapes Probe in Billion-Euro Dispute
L’Oreal SA heiress Liliane Bettencourt said a French judge shouldn’t be allowed to review secretly made recordings as part of a proceeding over 1 billion euros ($1.3 billion) in gifts she gave to a friend.
Bettencourt’s lawyer yesterday asked an appeals court in Versailles, near Paris, to rule that trial judge Isabelle Prevost-Desprez erred by not setting a deadline to complete her investigation, which violates French law.
The supplementary investigation is “neither judicially possible nor practically possible” without setting parameters including a time limit, said Georges Kiejman, lawyer to the 87- year-old Bettencourt. The appeals court will rule Sept. 14.
The dispute pits France’s richest woman against her only child, Francoise Bettencourt Meyers, over gifts including art, real estate and insurance policies given to photographer and author Francois-Marie Banier. The family’s battle spawned a French political scandal after recordings of Bettencourt’s conversations with friends and advisers prompted inquiries into claims including campaign-finance law breaches tied to President Nicolas Sarkozy’s 2007 campaign.
The recordings deal with issues intrinsic to the complaint by Bettencourt’s daughter that Banier abused her mother’s “infirmity,” Meyers’s lawyer said, and therefore can be investigated by Prevost-Desprez under French law.
“We are simply seeking the truth, why block it?” her lawyer Olivier Metzner said.
Banier’s lawyer, Herve Temime, said his client opposes the additional investigation because it “interrupted the course of justice” and imposed an open-ended delay to the trial.
“Mr. Banier isn’t afraid of anything,” Temime said. “He wants to be judged because he is innocent.”
Prevost-Desprez suspended Banier’s trial on July 1, saying she needed to review the tapes, turned over to police just weeks before. The prosecutor in the Paris suburb of Nanterre opposed both Prevost-Desprez’s inquiry and Meyers’s complaint, dropping a criminal probe.
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Blagojevich Found Guilty in Chicago Corruption Trial
Rod Blagojevich, the former Illinois governor, was found guilty of a single count of lying to federal agents. U.S. prosecutors said they intend to retry him on the other 23 charges a Chicago federal jury couldn’t agree on.
Blagojevich, a 53-year-old Democrat, was accused of linking official acts, including selecting President Barack Obama’s Senate successor, to campaign contributions and personal favors. The false statements count carries a maximum penalty of five years in prison and a fine of $250,000.
U.S. District Judge James Zagel declared a mistrial on the remaining counts after the jury of six men and six women said it couldn’t reach a consensus. Assistant U.S. Attorney Reid Schar told the judge “it is absolutely our intention” to retry those counts. Blagojevich remains free on bail.
The jury deliberated for 14 days. It found that Blagojevich had made false statements when he told the Federal Bureau of Investigation that he tried to maintain a firewall between politics and government and that he didn’t track or want to know who made contributions to his election campaign.
Prosecutors rested their case July 13, after about five weeks of testimony. Prosecution witnesses who testified that Blagojevich connected fundraising to his agenda included two of his former chiefs of staff, Alonzo “Lon” Monk and John Harris.
Monk and Harris pleaded guilty to one criminal count each and agreed to cooperate in the government probe.
Lobbyist John Wyma, who worked for Blagojevich in Congress, testified against his former boss under a grant of immunity.
The case is U.S. v. Blagojevich, 08-cr-00888, U.S. District Court, Northern District of Illinois (Chicago).
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Wachovia Defeats Suit Saying It Cheated Fund on Swap
Wachovia Corp., the bank now owned by Wells Fargo & Co., won dismissal of a lawsuit that accused it of forcing a hedge fund to make higher margin payments than necessary on a credit- default swap.
U.S. District Judge Laura Taylor Swain in Manhattan also ruled Aug. 16 that the hedge fund, VCG Special Opportunities Master Fund Ltd., must pay Wachovia an as-yet-unspecified further amount under the deal.
In July 2009, Swain narrowed the suit to one claim that Wachovia, as the “valuation agent” of a collateralized-debt obligation the swap covered, violated “good faith and fair dealing” by determining that VCG owed more in collateral than the swap’s $10 million value.
“Wachovia’s calculation of exposure was not ‘arbitrary or irrational’ but, to the contrary, was performed according to its contractual obligations and yielded a result that was consistent with the prevailing market perception of the value of the trade,” Swain wrote in her order.
“We’re evaluating our options, including appeal,” Steven Mintz, a lawyer for VCG at Mintz & Gold LLP, said in a phone interview.
A different federal judge in November 2008 ruled that Citigroup Inc. didn’t cheat VCG out of collateral on a similar swap, and ordered the hedge fund to pay the bank $674,252 to complete the total $10 million in coverage. That ruling was upheld by a federal appeals court in December. Citigroup’s broker-dealer unit is in arbitration over the deal.
In a counterclaim, Wachovia alleged VCG breached its contract and still owes it $1.03 million. Swain agreed the hedge fund owes the bank money. She ordered the parties to either agree on the amount or to argue the issue further.
The hedge fund never offered any evidence to dispute the valuation, the judge said.
The cases are CDO Plus Master Fund Ltd. v. Wachovia Bank, 07-11078, and VCG Special Opportunities Master Fund Ltd. v. Citibank, 08-01563, U.S. District Court, Southern District of New York (Manhattan).
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Bayer Said to Pay $60 Million to Settle Trasylol Lawsuits
The settlements, which Bayer announced in court earlier this month, provide an average payout of about $400,000 per patient, said three people familiar with the agreements who weren’t authorized to speak publicly about them. Bayer pulled Trasylol off the market in 2007 after researchers found the medicine posed a higher risk of death than competing drugs.
Bayer halted Trasylol sales after studies linked the product to a 50 percent higher risk of death than rival treatments in patients undergoing heart surgery. Trasylol was approved in the U.S. in 1993 to reduce bleeding and cut the need for transfusions during open-heart surgery.
“After thorough examination of each case, Bayer will, at times, consider the option of settling litigation on a case-by- case basis,” Marcy Funk, a Bayer spokeswoman, said in an e- mailed statement. She declined to comment on the size of the settlements.
Leverkusen, Germany-based Bayer faces at least 1,600 suits alleging the company hid Trasylol’s risks from patients and doctors, according to Bayer’s SEC filing. The vast majority of those cases have been consolidated before a federal judge in Florida, for pre-trial proceedings.
Steven Derringer, one of Bayer’s lawyers, told U.S. District Judge Donald Middlebrooks at a hearing in Palm Beach, Florida, earlier this year the company had devised a “settlement program aimed at resolving not just one or two cases at a time, but to provide an overall framework for resolving the litigation,” according to a hearing transcript.
The consolidated case is In RE Trasylol Products Liability Litigation, 08-01928-MD-Middlebrooks, U.S. District Court, Southern District of Florida (Palm Beach).
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Jefferson County, Alabama, Settles Dispute Over Tax
Commissioners in Jefferson County, Alabama, which faces surging costs on $3 billion in debt, agreed to refund $30 million minus attorneys fees to payers of a disputed occupational tax under a settlement approved yesterday.
The deal, unanimously backed by the five-member county commission and plaintiffs’ attorneys, calls for the county to receive $20.4 million plus interest that has accrued since June 30. In August 2009, the Alabama Supreme Court upheld a lower court ruling declaring the 0.5 percent levy illegal after a taxpayer challenge. The tax generated $75 million annually for the cash-strapped county.
“The court system has failed this county,” said Commission President Bettye Fine Collins.
Jefferson County’s sewer refinancing arranged in 2002 and 2003 by JPMorgan Chase & Co. collapsed in 2008 when companies guaranteeing the floating-rate debt lost their top credit ratings because of losses on unrelated mortgage-backed securities. Interest rates on the sewer bonds rose to as much as 10 percent and derivatives tied to the debt worsened the crisis by further increasing borrowing costs.
Refunds averaging $60 will go to business owners who paid the occupational tax from Jan. 12, 2009, through Aug. 13, 2009. The county also agreed not to challenge fees requested by plaintiffs’ attorneys or impose a retroactive tax that was passed by the state Legislature for the period.
Airbus Settles Swissair Dispute for $546 Million, FTD Reports
Airbus SAS is paying $546 million to settle a legal dispute related to the insolvency of Swissair, to compensate for advance payments plus interest on planes that were never delivered, Financial Times Deutschland reported, without saying how it got the information.
The plaintiffs included the insolvency administrator of Flightlease Holding Group, a jointly owned company of Swissair and U.S. leasing company CATX Corp., the FTD said. The settlement was agreed on in May, it said.
Airbus in 2001 canceled a Swissair order of 38 aircraft with a listed price of $2.2 billion after the carrier collapsed, according to the article.
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