GN Store Nord, Kuehne & Nagel, Gabriel Partners, Google, TD in Court News

Ex-Enron Corp. Chief Executive Officer Jeffrey Skilling, under a court ruling denying him bail, will remain in prison while he appeals his 2006 fraud convictions.

The U.S. Court of Appeals in New Orleans denied Skilling’s request for bail Sept. 3 in a one-sentence ruling that didn’t provide an explanation for the decision.

Skilling, 56, is serving a 24-year sentence after a Houston jury convicted him for leading what prosecutors said was a widespread accounting fraud that deceived investors about Enron’s true financial condition.

Skilling has asked that his convictions be reversed and that he be retried by a jury that isn’t allowed to consider so- called honest-services fraud in weighing his guilt or innocence.

In June, the U.S. Supreme Court ruled in Skilling’s favor, saying he was prosecuted under a law regarding honest services fraud that doesn’t apply to his case. The justices said the law, which covers fraud schemes to “deprive another of the intangible right to honest services,” could be constitutionally applied only to cases involving bribery or kickbacks.

Skilling’s lawyer, Daniel Petrocelli, didn’t return a call seeking comment.

The case is U.S. v. Skilling, 06-20885, 5th U.S. Circuit Court of Appeals (New Orleans).

New Suits

Johnson & Johnson Sued Over Hip-Replacement Devices

Johnson & Johnson was sued by a California construction worker over an implanted hip-replacement device that the drugmaker stopped selling last month after defect reports surfaced.

Officials of J&J’s DePuy Orthopaedics unit knew for years many of the 93,000 patients with ASR hip implants required corrective surgeries due to the mechanisms’ defects, lawyers for Maurice Brigham said in their lawsuit. Brigham, a heavy- equipment operator, received two implants in 2007, the suit said.

“For more than two years, defendants have known the ASR Hip Implant Devices were failing early and causing harm in a high number of patients,” Brigham’s attorneys said in the suit, filed earlier this week in federal court in San Francisco.

The recall last week came just two days after U.S. Food and Drug Administration officials warned DePuy about selling two other hip-replacement systems for unapproved uses. DePuy generated more than $5.4 billion in sales last year, according to court filings.

Bill Price, a Johnson & Johnson spokesman, didn’t return a call last week for comment on Brigham’s suit.

The case is Brigham v. DePuy Orthopaedics Inc. 10-CV-3886, U.S. District Court, Northern District of California (San Francisco).

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New Zealand Indicts Kuehne in Antitrust Suit Against, BaZ Says

New Zealand authorities indicted Switzerland’s Kuehne & Nagel International AG and Panalpina Welttransport Holding AG as well as other logistics companies in an antitrust case, Basler Zeitung reported.

The companies allegedly “artificially” increased air- freight prices from and to New Zealand since 2001, the newspaper said, citing New Zealand’s authorities.

Kuehne & Nagel rejects the charges and will defend itself in court while Panalpina is in settlement talks with New Zealand’s authorities, Basler Zeitung cited the companies as saying.

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

Lawsuits/Pretrial

Google Loses German Court Ruling Over YouTube Videos

Google Inc.’s YouTube video service lost a Hamburg court ruling over copyrighted video material that was posted online without permission for rebroadcast.

YouTube may be liable for damages involving material shown in violation of copyright law, the Hamburg Regional Court said Sept. 7 in an e-mailed statement.

The court in Hamburg during the week ending Aug. 28, declined to issue an emergency order forcing Google to block German access to some music videos on its YouTube website in a dispute over monitoring files on the Internet. Still, the judge in that case said he might ultimately rule in favor of a group of music-royalty collecting societies if they filed a new suit under standard court procedures.

Henning Dorstewitz, a spokesman for YouTube in Hamburg, said the company will appeal the ruling. He said that while the two cases are different, they involve similar issues.

Conrad Mueller-Horn, a spokesman for the Hamburg court, couldn’t be reached to comment.

Government Wants Hecker Jailed Pending Fraud Trial

The federal government Sept. 2 asked the U.S. District Court in Minneapolis to revoke the bail of Dennis Hecker, awaiting trial for bankruptcy fraud, on the grounds that he “has been committing other crimes while on release” according to court papers filed by the government.

The government seeks an order revoking a Feb. 12 order that set conditions for Hecker’s release from jail to await trial. While on release, “the defendant has committed multiple additional acts of bankruptcy fraud by secretly liquidating and concealing assets belonging to the bankruptcy estate,” the government said in a court filing.

“Clearly, it doesn’t look good for Dennis,” Brian Toder of Chestnut Cambronne Attorneys at Law in Minneapolis, who represents Hecker in the criminal case, said in an interview with Bloomberg Sept. 3. “It will make his defense exponentially more difficult because of the magnitude of the file” and Hecker’s knowledge of it, Toder said.

The motion means there will be “more of an uphill battle for us,” Barbara J. May, Hecker’s bankruptcy lawyer, said Sept. 3 in an interview with Bloomberg.

The motion to revoke the order of release will be heard Sept. 6.

The criminal case is U.S. v. Dennis Earl Hecker, 10-cr- 00032, U.S. District Court, District of Minnesota (Minneapolis); the bankruptcy case is In re Dennis Hecker, 09-50779, U.S. Bankruptcy Court, District of Minnesota (Minneapolis).

For the latest lawsuits news, click here.

Trials/Appeals

Barclays Says It Saw No $5 Billion Lehman Loan Gain

Barclays Plc didn’t make a $5 billion “windfall” on a $45 billion loan to bankrupt Lehman Brothers Holdings Inc. when it bought Lehman’s brokerage business, an accounting specialist for the U.K. bank testified.

The loan collateral was worth $45.5 billion, almost equal to the sum lent, Gary Romain, Barclays Capital’s head of technical accounting, told U.S. Bankruptcy Judge James Peck in Manhattan Sept. 3. Lehman has said that the value of the collateral approached $50 billion and that Barclays understated it by $5 billion.

“It would require collusion by a significant number of Barclays employees for it to be understated by that amount, including me,” said Romain, who flew to New York from London in September 2008 to produce a balance sheet for the brokerage purchase.

Romain was called to testify in a trial to determine whether London-based Barclays should pay Lehman as much as $11 billion for the allegedly undisclosed windfall on the September 2008 brokerage purchase.

A Barclays attorney tried to show that Lehman may have calculated a large part of the alleged gain without an understanding of the international accounting standards Barclays used, which differ from U.S. accounting rules.

The trial before Peck, who approved the original deal almost two years ago, pits the U.K.’s third-biggest bank against Lehman and the trustee, who want money from Barclays to pay creditors and customers. Peck said when he approved the sale, less than a week after Lehman filed for bankruptcy, that it would help stabilize financial markets left in disarray after Lehman’s failure.

A recovery in the case would help Lehman creditors, who may recoup only 15 cents to 44 cents on the dollar, Lehman has said, and hurt Barclays, which made 2.4 billion pounds ($3.7 billion) in the first half.

The cases are In re Lehman Brothers Holdings Inc., 08- 13555, and Giddens v. Barclays Capital Inc., 09-01732, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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Yucaipa Appeals Barnes & Noble Defense Ruling

Yucaipa Cos. said it challenged a Delaware judge’s decision upholding Barnes & Noble’s poison pill anti-takeover defense during a fight for control of the U.S.’s largest bookstore chain.

Officials of Los Angeles-based Yucaipa, headed by billionaire Ron Burkle, said in a statement Sept. 3 that they asked the Delaware Supreme Court to overturn a ruling that Barnes & Noble properly enacted the defense. Burkle is waging a proxy fight to replace three of the company’s directors.

“We believe that the important stockholder rights at issue in our suit” must be reviewed by the state’s highest court, Frank Quintero, a Yucaipa spokesman, said in the release.

Yucaipa sued New York-based Barnes & Noble saying Chairman Leonard Riggio and other directors engineered a “self-dealing scheme designed to entrench the Riggio family” and stop Burkle from gaining control of board seats. Burkle targeted the company’s poison-pill defense in the suit.

The company adopted the poison pill, designed to make takeovers prohibitively expensive, in November after Burkle said his stake in the bookseller rose to 17 percent. Burkle argued that the pill was improperly designed and unfairly stymied his efforts to gain control of the board seats.

Delaware Chancery Court Judge Leo Strine rejected Burkle’s claims last month, finding the defense wasn’t defectively designed and didn’t hamper the investor’s chances in the proxy fight.

Burkle’s appeal forces Barnes & Noble to spend more on legal fees in the case, the company said.

The case is Yucaipa American Alliance Fund II LP v. Riggio, CA5465, Delaware Chancery Court (Wilmington).

French Appeals Court Slashes EBay Fine on LVMH Fakes

A French appeals court slashed the fines EBay Inc. must pay in a suit over sales of counterfeit LVMH Moet Hennessy Louis Vuitton SA goods from almost 40 million euros ($51.3 million) to 5.6 million euros.

The appeals court reduced the fines in a ruling in Paris Sept. 3, while upholding findings against San Jose, California- based EBay from the lower tribunal. The appeals court didn’t give any reasoning for the decision.

The case is part of an on-going dispute between EBay, the most visited U.S. e-commerce site, and French brand owners over online sales. The decision involves a trio of June 30, 2008, rulings by the Paris commercial court, awarding LVMH, the world’s largest luxury-goods maker, damages for trademark violations and harm to its brands’ images as well as halting the sale of some perfumes and cosmetics to French buyers.

Describing the ruling as a victory, Yohan Ruso, managing director of EBay in France, said in a telephone interview Sept. 3 that LVMH will have to repay “over 33 million euros to EBay,” because EBay already paid the original fine.

LVMH said in a statement that the ruling supported its claims because it didn’t overturn the lower court’s findings and allows the Paris-based company to seek to “seek redress” in foreign courts for the sale of “counterfeit products.”

For the latest trial and appeals news, click here.

Verdicts/Settlements

Ex-Qwest Chief Nacchio Settles SEC Case Without Extra Penalty

Joseph Nacchio, the former chief of Qwest Communications International Inc. convicted of insider trading, settled a related civil lawsuit brought by the U.S. Securities and Exchange Commission.

The SEC filed a request Sept. 2 asking U.S. District Judge Marcia Krieger in Denver to approve the settlement. The agreement would bar Nacchio from acting as an officer or director of a public company.

Nacchio, 61, of Rumson, New Jersey, was convicted in 2007 of illegally selling $52 million of stock in Denver-based Qwest in 2001 based on inside information. In the criminal case, Krieger upheld a $19 million fine -- the maximum Nacchio faced - - and approved forfeiture of $44.6 million, a figure agreed to by Nacchio and the government.

The SEC cited the fine and penalty, saying a civil penalty isn’t being imposed “in light of the sanctions ordered in the related criminal case,” according to the court filing.

Nacchio has appealed a 70-month prison sentence that reduced his original term by two months. An appeals court has not ruled on that request.

The case is U.S. v. Nacchio, 1:05-cv-00480, U.S. District Court, District of Colorado (Denver).

Merkin Investors Awarded $12.7 Million in Madoff Case

Investors in J. Ezra Merkin’s Gabriel Capital LP, a feeder fund for convicted Ponzi schemer Bernard Madoff, were awarded about $12.7 million by a panel of arbitrators.

Sandalwood Debt Funds A and B claimed that Merkin engaged in common-law fraud, breach of fiduciary duty and negligent misrepresentation, according to an award made public Sept. 2 in New York State Supreme Court. The panel awarded $10.5 million to Fund B and $2.1 million to Fund A without explaining its reasoning. The arbitrator also assessed fees of about $112,000. Sandalwood has asked a judge to confirm the award.

The funds “alleged that they had been induced to make and retain their investments in Gabriel on the basis of misrepresentations and non-disclosures with respect to the fact that a portion of the capital had been invested” with Madoff, according to the award.

New York Attorney General Andrew Cuomo has sued Merkin and Gabriel, claiming Merkin secretly placed money with Madoff in exchange for $470 million in fees. The trustee overseeing the bankruptcy of Bernard L. Madoff Investment Securities LLC and investors also have sued Merkin, a New York financier who denies wrongdoing.

Andrew Levander, an attorney for Merkin in other Madoff litigation, didn’t handle the Sandalwood case, said a spokeswoman. His lawyer for the arbitration, Guy Petrillo , didn’t immediately return a call seeking comment. Laurence B. Orloff, a Sandalwood attorney, declined to comment. Sandalwood A and B are limited partnerships with offices in Roseland, New Jersey, according to the award.

The case is Sandalwood Debt Fund A v. Merkin, 651441/2010, New York State Supreme Court, New York County (Manhattan).

Fired Bond Trader, TD Bank Settle Suit Over Incorrect Pricing

A bond trader fired by Toronto-Dominion Bank after an investigation into incorrectly priced credit derivatives settled a lawsuit in which the bank sought to recoup his bonuses and the cost of the probe.

Nabeel Naqui, the former head of the credit products group for Europe and Asia, and Toronto-Dominion reached a settlement in July, according to a court filing in London that became public this month. The terms of the settlement weren’t disclosed. The bank sued Naqui last year seeking 3.1 million pounds ($4.8 million).

The trader was suspended in June 2007 and fired six months later, he said in a court filing last year. Toronto-Dominion said he overvalued his trading positions by altering quotes from dealers and forwarding them on to the bank without notification that they had been changed.

The mispriced derivatives resulted in a cut in earnings by the bank and a fine against the bank by the U.K. financial regulator.

Kathryn Garbett, Naqui’s lawyer, and Matthew Fortier, a Toronto-Dominion spokesman in London, didn’t immediately respond to requests for comment.

The case is Toronto-Dominion Bank v. Nabeel Naqui, 2009/3363, High Court of Justice, Chancery Division (London).

GN, TDC Awarded $502 Million in Telekomunikacja Arbitration

DPTG I/S, owned by GN Store Nord A/S and TDC A/S, was awarded about 2.9 billion kroner ($502 million) after a court said Poland’s largest phone service provider still owed the Danish companies for work they did in the early 1990s.

Telekomunikacja Polska SA didn’t correctly calculate the amount it owed for the installation of a fiber-optic transmission system, the arbitration tribunal in Vienna ruled, according to a statement published Sept. 3 by Ballerup, Denmark- based GN. DPTG, in which GN holds a 75 percent interest and TDC the rest, had claimed 5 billion kroner.

The total amount sought would have equaled around 11 percent of Warsaw-based TPSA’s market value and GN’s share would have equaled some 43 percent of its valuation.

A call placed to the cell phone of Wojciech Jabczynski, spokesman for TPSA, wasn’t immediately returned.

Under the 1991 contract, TPSA agreed to pay 14.8 percent of profits from 15 years of traffic over the transmission system. The companies disagreed over how to measure the traffic and calculate payments.

The Sept. 3 ruling covered the period from 1994 to the middle of 2004. GN has said that DPTG is planning to make a second claim for the remaining five years of the period covered by the contract.

The award was for 2 billion kroner plus interest, which GN estimated would be 900 million kroner, the company said. GN’s share is 2.2 billion kroner and TDC’s share is 700 million.

GN is the world’s largest maker of mobile headsets. Copenhagen-based TDC is Denmark’s largest phone company.

For the latest verdict and settlement news, click here.

To contact the reporters on this story: Carla Main in Jersey City, New Jersey, at cmain2@bloomberg.net; Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net.

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