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BP, HSBC, Wesizwe, Goldman, Natixis, Ford, AIG, Aquarius in Court News
BP Plc fired back at Transocean Ltd. in a dispute over the withholding of information about possible causes of the Gulf of Mexico oil spill.
James Neath, BP’s associate general counsel, said an Aug. 18 letter from a Transocean attorney asserting BP wasn’t releasing critical data contained “many false and misleading assertions.”
“Given its content and tone, your letter is nothing more than a publicity stunt evidently designed to draw attention away from Transocean’s potential role in the Deepwater Horizon tragedy,” Neath wrote Steven Roberts, the Transocean attorney, in a response yesterday.
Executives of London-based BP and Vernier, Switzerland- based Transocean have publicly disputed responsibilities for operations of the BP well and the Deepwater Horizon drilling rig that it leased from Transocean. The companies engaged in finger- pointing before Congress over steps that may have contributed to the April 20 explosion that killed 11 workers and triggered the largest U.S. oil spill.
Transocean said in its letter that BP’s “continued refusal to provide documents” was blocking efforts to determine the cause of the spill.
BP hasn’t provided documents requested by Transocean since June 21, Roberts said in the letter sent to BP and copied to officials in the Obama administration and members of Congress.
Neath said that BP made available on July 16 more than 100,000 pages of documents to Transocean “for access, download and review.” Neath copied his letter to the same administration officials and lawmakers.
“Our commitment to cooperate with these investigations has been and remains unequivocal and steadfast,” Neath said.
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HSBC Should Reveal Reports on Madoff Risk, Judge Says
HSBC Holdings Plc, Europe’s biggest bank, should turn over internal reviews of potential fraud and other operational risks at Bernard Madoff’s business from 2006 and 2008, a New York judge ruled.
U.S. Bankruptcy Judge Burton Lifland, in an Aug. 17 ruling, agreed to ask the High Court in London to order HSBC to hand over reports, contracts, audio recordings and documents related to examinations conducted by an affiliate of KPMG International. HSBC acted as custodian bank for several funds that invested with the con man.
HSBC commissioned the last review in September 2008, about three months before Madoff’s arrest, according to the ruling. London-based HSBC and trustee Irving Picard in New York reached an agreement on which documents should be turned over if the order is issued, Manhattan court filings show.
HSBC and UBS AG, based in Zurich, face dozens of investor lawsuits in Europe over claims they failed in their duties as custodians for European Union-regulated funds. Banco Santander SA, the Spanish bank that lost $3.2 billion in the scam, was sued by investors for allegedly identifying as early as 2006 risk tied to Madoff’s secrecy and accounting practices without notifying customers.
Picard is suing hedge funds and other parties that profited from the $65 billion fraud to repay victims. Madoff, 72, pleaded guilty last year and is serving a 150-year sentence.
HSBC spokesman Adrian Russell said the company can’t comment on ongoing litigation.
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SEC’s New Jersey Fraud Case May Be Harbinger in Muni Crackdown
The U.S. Securities and Exchange Commission’s fraud case against New Jersey may presage a wave of lawsuits seeking to crack down on misdeeds by public officials who raise money in the $2.8 trillion municipal bond market, Bloomberg News’ William Selway and Dunstan McNichol report.
New Jersey settled claims Aug. 17 that it didn’t disclose to investors that it failed to put enough cash into its two biggest pension plans when it sold $26 billion of bonds from 2001 to 2007. The case is the first SEC fraud charge against a state and follows the creation of a unit set up this year to focus on municipal securities and pension funds.
“They will be looking for other cases,” said James Doty, a former SEC general counsel who’s now an attorney with Baker Botts LLP in Washington. “It’s a harbinger that they expect disclosure standards to be scrutinized and be increased.”
SEC Chairwoman Mary Schapiro has pressed for tougher disclosure rules for municipal bonds, whose history as a safe investment has been jeopardized by dwindling tax collections, record budget deficits and rising defaults by state and local borrowers. Investment losses also left states $500 billion short of funds to cover promised pensions by mid-2008, even before the collapse of Lehman Brothers Holdings Inc. sent stocks tumbling, the Pew Center on the States said.
“There are a lot of states that are significantly underfunded,” said Lynn Turner, a former SEC chief accountant who served on an independent panel that investigated San Diego’s pension fund. The SEC sanctioned the city in 2006 for hiding gaps in its retirement system after the Internet stock bubble burst. “There’s likely to be a dozen that have the same type of problems as New Jersey, and it’s not just states but cities too.”
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Wesizwe AGM Halted by Court Order Amid Investor Spat
Wesizwe Platinum Ltd., which agreed in May to a takeover by China’s Jinchuan Group Co., was forced to cancel its annual general meeting yesterday after shareholders obtained a court order blocking the event.
The meeting was postponed as stockholders dispute who has the right to vote using the shares of South Africa’s Bakubung community, represented by Bakubung-Ba-Ratheo Community Development Corp. and Newshelf 925, Wesizwe Chairman Dawn Mokhobo said at the scheduled start of the AGM in Johannesburg.
The court application was filed by four members of the Bakubung community, resident in the Ledig area near Sun City, where Wesizwe plans to build its first platinum mine at the Bushveld Geological Complex, the world’s richest deposit of the metal. The community controls about 17.9 percent of the company’s shares, Wesizwe said.
The disagreement relates to “whether the community shares have been alienated into the hands of third parties, where the shares are, and who has the right to vote these shares,” Mokhobo said in an e-mailed statement, adding that the company is “deeply concerned about the dispute.”
The Bakubung-Ba-Ratheo Traditional Community appointed Roseman Sipho Matshoba and Keneilwe Danke at an Aug. 17 meeting to vote the 73.6 million shares held by BCDC and 43.9 million of the 70 million shares held by Newshelf at the AGM yesterday, according to a copy of the court application. The community lodged the application after being advised that other entities were nominated by BCDC to vote its shareholding at the AGM.
Jinchuan “understands” the issue and the court order doesn’t have any bearing on the two companies’ talks, Wesizwe’s Chief Executive Officer Mike Solomon said in an interview yesterday.
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New Suits
Goldman Sachs Sues Natixis in London Over Credit-Default Swaps
Goldman Sachs Group Inc. sued Natixis SA in London over whether the French bank can terminate bond transaction protection it sold to Goldman.
In a lawsuit filed last month, Goldman said that Natixis, the investment-banking unit of BPCE SA, France’s second-largest lender by branches, shouldn’t terminate three credit-default swaps. New York-based Goldman bought the swaps with a potential value of around $530 million three years ago and is seeking damages for breach of contract.
At a hearing on Aug. 4, Justice David Steele at the High Court in London said the case should go to trial Nov. 9.
Goldman Sachs spokeswoman Pavla Shaw declined to comment in a telephone interview. Natixis spokeswoman Viviane Desailly didn’t respond to a request for comment.
The case is Goldman Sachs International v. Natixis, High Court of Justice, Queen’s Bench Division.
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Trials/Appeals
Ford Wins New Trial in $31 Million SUV Rollover Case
Ford Motor Co. won a new trial in a lawsuit over brain injuries suffered by a teenager in a Bronco II rollover accident that resulted in a $31 million jury award against the U.S. automaker.
The South Carolina Supreme Court found a judge overseeing Jesse Branham III’s case allowed the teen’s lawyers to use inadmissible evidence to convince jurors Ford officials knew the sport-utility vehicle was defectively designed and had a propensity for rolling over. The judge also shouldn’t have allowed Branham’s attorneys to offer evidence of Ford executives’ pay when seeking punitive damages against the automaker during the 2006 trial, the court said Aug. 16.
Branham’s case was one of 12 verdicts against second- biggest U.S.-based automaker involving rollovers of the company’s vehicles stretching back to June 2004, according to data compiled by Bloomberg. Juries ordered Ford to pay a total of $568 million in damages over the accidents. The teen’s verdict also was one of the largest jury awards in 2006 against an automaker, according to the data.
Branham was disappointed with the appellate court’s decision, said Ronnie Crosby, a Hampton, South Carolina-based lawyer for the family.
“We believe there is ample evidence to demonstrate the Bronco II is defective and unreasonably dangerous and we’re eager to present that evidence to another jury,” Crosby said in a phone interview. Marcey Evans, a spokeswoman for Dearborn, Michigan-based Ford, declined to comment.
The South Carolina case is Jesse Branham Jr., et. al. v. Ford Motor Co., 26860, Supreme Court of South Carolina (Columbia).
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Legal Reviews
Cuomo Said to Subpoena AIG, Lincoln in Benefits Probe
New York Attorney General Andrew Cuomo subpoenaed American International Group Inc. as part of a fraud investigation focusing on life insurers’ retention of death benefits, said two people briefed on the demands.
Lincoln National Corp., Aetna Inc., CNO Financial Group Inc. and Principal Financial Group Inc. also were ordered to turn over records, said one of the people, who declined to be identified because the subpoenas hadn’t been publicly disclosed.
Cuomo is widening a probe after saying on July 29 that he subpoenaed MetLife Inc. and Prudential Financial Inc., the two largest U.S. life insurers. Bloomberg Markets magazine reported July 28 that more than 100 carriers earn investment income on $28 billion owed to life-insurance beneficiaries. The companies hold money in so-called retained-asset accounts, which include a “checkbook” for clients to access their funds.
“The substantial interest earned on these accounts mostly benefit and enrich the insurers at the expense of the families to whom the money really belongs,” Cuomo said in a statement last month. “Beneficiaries are not adequately informed by the insurers of the details of these accounts including the fact that the insurers are making huge profits at the expense of the grieving family.”
AIG, the bailed-out insurer, said it will cooperate with Cuomo, as did Hartford, Connecticut-based Aetna and Carmel, Indiana-based CNO.
“Aetna believes that its checkbook program provides a valuable service to our beneficiaries,” Michener said. Employers sponsoring group life benefits programs through Aetna “appreciate the convenience, immediate access to funds, and additional interest that the checkbook program provides.”
AIG “will assist with Mr. Cuomo’s examination, as is our standard practice,” said Mark Herr, a spokesman for the New York-based insurer. CNO, previously known as Conseco Inc., “will, in fact, respond to the request,” said Tony Zehnder, spokesman for the insurer.
Lincoln’s Laurel O’Brien didn’t return messages seeking comment. Lincoln has about $800 million in retained-asset accounts, company executives said in a July 29 conference call.
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Verdicts/Settlements
P&G Must Pay Former Wella Shareholders More, Court Rules
Procter & Gamble Co., the world’s largest consumer-products company, was ordered by a Frankfurt court to increase payments to former shareholders of its Wella unit by 23 percent.
P&G must pay 16.97 euros more per preferred share and 16.46 euros more per common share to minority investors who were bought out in 2005, Judge Michael Mueller ruled in a commercial- court decision on Aug. 4 that was released Aug. 17. The decision may cost P&G at least 230 million euros ($295 million), a lawyer for the investors said. P&G plans an appeal, spokeswoman Petra Popall said by phone, declining to comment further.
The shareholders are challenging as too low the 72.86 euros a share that P&G offered in April 2004 as the Cincinnati-based company moved to buy full control of the hair-care products maker. The figure was less than the 92.25 euros a share P&G paid the Stroeher family, who held 78 percent of Darmstadt, Germany- based Wella’s voting rights, in March 2003.
“I am very confident that we would repeat this success” should the U.S. company appeal the ruling, Peter Dreier, a lawyer at the Dreier Riedel Rechtsanwaelte law firm representing Wella minority shareholders, said yesterday in a phone interview.
Procter & Gamble faces a minimum payment of 230 million euros, based on the 13 million shares held by the investors who filed suit plus legal costs, Dreier said. P&G must file any appeal in two weeks, he said.
Aquarius Settles Five-Year Mining Contract Dispute
Aquarius Platinum Ltd., the fourth-largest producer of the metal, settled a five-year contract dispute with Moolman Mining, a unit of Aveng Ltd.’s engineering division, by paying 86.8 million rand ($12 million).
“The settlement amount represents a payment for work actually done by Moolman Mining” at South Africa’s Marikana mine, Aquarius said yesterday in a statement.
The company canceled an open-cast mining contract with Moolman at Marikana in December 2005, saying there was “misrepresentation” in the foreign-exchange component of the agreement, according to the statement. Aquarius later withdrew a claim for damages while retaining a claim for costs. Moolman filed four counterclaims for 486.3 million rand, withdrawn in June this year, Aquarius said.
Brian Wilmot, managing director of Moolman, wasn’t immediately available for comment when Bloomberg News called.
For the latest verdict and settlement news, click here.
To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net.
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