A former Bank of America Corp. executive pleaded guilty to participating in a criminal conspiracy to rig the bids on investments sold to municipal bond issuers and profit at the expense of taxpayers.
Douglas Lee Campbell, who is identified as working for “Bank A,” entered guilty pleas to fraud and conspiracy, the U.S. Justice Department said yesterday. Campbell was employed by Bank of America until 2002, when he joined Piper Jaffray Cos., according to National Association of Securities Dealers records.
The plea marks the second time an employee of an investment bank has admitted to participating in an industrywide conspiracy to pay state and local governments below-market rates on the investments purchased with bond proceeds. The scheme stretched from California to Pennsylvania and included more than 200 deals involving about 160 state agencies, local governments and non- profits, Bloomberg News has reported.
Entered in U.S. District Court in New York, Campbell’s plea is the seventh in the continuing probe and the second in as many days. On Sept. 8, Adrian Scott-Jones of Morriston, Florida, who worked for an unidentified company that handled investment- contract auctions for local issuers, pleaded guilty to conspiracy and wire fraud, the Justice Department said.
William Halldin, a spokesman for Charlotte, North Carolina- based Bank of America, declined to comment on Campbell’s case. He said that the company is helping investigators in the probe.
Jennifer A. Olson-Goude, a spokeswoman with Piper Jaffray in Minneapolis, didn’t immediately return a message seeking comment. Campbell, who now lives in New York, left the firm by March 2007. He couldn’t be reached immediately to comment.
Scott-Jones agreed to cooperate in the investigation, which is continuing, the agency said. Attempts to reach him on Sept. 8 were unsuccessful.
Adria Perez, of Kilpatrick Stockton LLP in Atlanta, identified by a Justice Department spokeswoman as a lawyer for Scott-Jones, didn’t respond to a call for comment.
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Halliburton, KBR Ordered to Face Military Lawsuits
Halliburton Co. and KBR Inc. must face lawsuits brought by military personnel and contractors allegedly harmed by contaminated water and toxic emissions from burning waste in Iraq and Afghanistan, a judge said.
U.S. District Judge Roger Titus in Greenbelt, Maryland, who is overseeing 43 lawsuits on the matter, yesterday rejected the companies’ claims of immunity for combat-related activities, saying he was concerned it would limit legal remedies for people who allege they were injured.
“Courts must be prepared to adjudicate cases that ultimately expose defense contractors to appropriate liability,” Titus wrote. The judge said he favored a “limited” pre-trial exchange of information in the case, to avoid burdening the military and its personnel in wartime.
Plaintiffs claim the Houston-based companies ignored the terms of contracts with the U.S. that required safe and environmentally sound waste disposal for troops. Improper disposal of waste in “burn pits” led to injuries including cancer and respiratory illness, law firms Motley Rice LLC and Burke PLLC said yesterday in a statement.
“KBR is confident that the evidence will confirm that it performed waste disposal and water services pursuant to military direction and guidelines,” KBR said in a statement.
Teresa Wong, a spokeswoman for Halliburton, didn’t have an immediate comment.
The case is In Re KBR Inc., Burn Pit Litigation, 09MD2083, U.S. District Court for Maryland (Greenbelt).
Wall Street Banks Benefit From Tougher Suit Standards in U.S.
Two U.S. Supreme Court decisions making it tougher to pursue lawsuits may have begun to bear fruit for corporations fighting investor claims or employee litigation, Bloomberg News’s Thom Weidlich reports.
Where once it was enough to give a defendant “fair notice” of a claim and the grounds on which it rested, the high court’s 2007 holding in Bell Atlantic Corp. v. Twombly required an antitrust complaint to contain enough facts to show a claim that is “plausible on its face.” Two years later, in Ashcroft v. Iqbal, the court applied Twombly to all federal civil suits.
The Supreme Court rulings mean that someone who wants to sue in federal court “should not subject a defendant to the costs and burdens of litigation when there is no plausible basis for their claims,” Lisa Rickard, president of the U.S. Chamber of Commerce’s Institute for Legal Reform, said in an e-mail. The Washington-based business advocacy group filed a friend-of-the- court brief in Twombly.
The rule aided financial-services companies after the February 2008 collapse of the $330 billion auction-rate securities market.
Judges cited Twombly alongside the 1995 Private Securities Litigation Reform Act, which also added hurdles to investor cases, in dismissing suits against Citigroup Inc. and Bank of America Corp.’s Merrill Lynch unit over the sale of the securities.
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Dollar Thrifty Holders Lose Bid to Stop Hertz Vote
Delaware Chancery Court Judge Leo Strine Jr. rejected Dollar Thrifty investors’ request for an injunction against the Sept. 16 vote so company officials could reconsider a competing offer from Avis Budget Group Inc.
The plaintiffs’ argument “does not support their claim that the Dollar Thrifty Board likely breached its fiduciary duty to take reasonable steps to maximize the value” stockholders would receive, Strine said in an 83-page opinion made public yesterday.
Hertz said April 26 it would buy Tulsa, Oklahoma-based Dollar Thrifty. Park Ridge, New Jersey-based Hertz is the second-largest U.S. rental-car company behind closely held Enterprise Holdings Inc.
David Reno, a Dollar Thrifty spokesman, didn’t immediately return a phone call and e-mail messages seeking comment. Michael J. Barry, a plaintiffs’ lawyer in the case, didn’t immediately return a call.
Officials of Parsippany, New Jersey-based Avis, the third- largest U.S. rental-car company, said in July they would pay $46.50 a share in cash and stock for Dollar Thrifty. Avis increased its bid on Sept. 2 to $40.75 in cash and 0.6543 of an Avis share for each Dollar Thrifty share, valuing the offer at $47.13 a share, based on Sept. 1 closing prices.
The case is In re Dollar Thrifty Shareholder Litigation, consolidated CA5458, Delaware Chancery Court (Wilmington).
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Monsanto Engineered Beets Face New Court Challenge
Monsanto Co.’s genetically engineered sugar beets face a new court challenge by a food safety group that sued to block the U.S. Agriculture Department from issuing permits to produce seeds for the plants.
The Agriculture Department hasn’t adequately studied the environmental effects of “seed production pursuant to these numerous permits along with the intended and inevitable flowering of the seed crop, harvesting, storage of seed, and planting and harvest of sugar beets,” the Center for Food Safety said in a complaint filed yesterday in federal court in San Francisco.
The group, together with organic seed organizations and the Sierra Club, claims wind-blown pollen from the genetically engineered crops will contaminate conventional sugar beets and other closely related plants. St. Louis-based Monsanto, the world’s biggest seed company, engineered sugar beets to be resistant to the Roundup herbicide, according to the complaint.
The Agriculture Department said Sept. 1 that it plans to have interim rules governing genetically modified sugar beets in place by the end of the year. U.S. District Judge Jeffrey S. White in San Francisco revoked the government’s approval of the plants last month, saying the department hadn’t properly considered the potential environmental impacts.
Suzanne Bond, a spokeswoman for the Agriculture Department, and Kelli Powers, a Monsanto spokeswoman, didn’t return calls seeking comment after regular business hours.
The case is Center for Food Safety v. Vilsack, 10-04038, U.S. District Court, Northern District of California (San Francisco.)
U.S. Sued by Alaska Over Improper Ban on Offshore Oil Drilling
U.S. Interior Secretary Kenneth Salazar was sued by the state of Alaska over claims he improperly banned drilling off the state’s coast after BP Plc’s Gulf of Mexico oil spill.
The U.S. hasn’t issued drilling permits in the Arctic since the sinking of the Deepwater Horizon rig in the Gulf in April and Salazar announced at a press conference this month that he wouldn’t allow exploration plans to resume this year, according to the complaint filed yesterday by Alaska and its Republican governor, Sean Parnell.
The U.S. in May imposed a moratorium on deep-water drilling in the wake of the Gulf spill. Regulators including Salazar have improperly stopped drilling as well in the shallower waters off Alaska’s coast without issuing a formal ban, the state said.
“Defendants have not issued a final, appealable decision on a moratorium for the Alaska region,” the state said in the complaint filed in federal court in Anchorage. “Nor have defendants issued any findings, analysis, or explanation to support such a moratorium.”
The lawsuit claims that Salazar and the Interior Department didn’t consult the state or give it a chance to participate in the moratorium decision, as legally required. The state asked the court to order the U.S. to end any moratorium on drilling in the Alaska region.
“There is no moratorium in Alaska and therefore nothing to sue on,” Kendra Barkoff, an Interior Department spokeswoman, said in an e-mail yesterday. “The moratorium is on deep-water drilling and there is no deep-water drilling in Alaska.”
The case is State of Alaska v. Salazar, 3:10-cv-00205, U.S. District Court, District of Alaska (Anchorage).
Burger King Sued Over $3.3 Billion 3G Buyout Plan
Burger King Holdings Inc., the U.S. hamburger chain being bought by investment firm 3G Capital for $3.3 billion, was sued by a stockholder contending the deal undervalues the shares.
Burger King, the second-largest U.S. purveyor of burgers after McDonald’s Corp., said Sept. 2 it would be bought by 3G, backed by Brazilian investors, for $24 a share.
The price “is unfair and grossly inadequate because, among other things, the intrinsic value of Burger King is materially in excess of the amount offered,” stockholder Roberto Queiroz said in a lawsuit made public yesterday in Delaware Chancery Court.
Under the agreement, Miami-based Burger King, with $2.5 billion in sales for the year ended in June, will be able to solicit higher bids through Oct. 12. The sale is the biggest restaurant acquisition in at least a decade.
Officials of Burger King didn’t immediately return an e- mail message seeking comment on the lawsuit.
The case is Roberto Queiroz v. Burger King Holdings Inc., CA5808, Delaware Chancery Court (Wilmington).
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Stem-Cell Research Ban Suspended by Appeals Court
President Barack Obama’s administration can fund embryonic stem-cell research while it appeals a decision banning government support for any activity using cells taken from human embryos, an appeals court said.
The U.S. Court of Appeals in Washington yesterday put on hold a ruling by District Judge Royce Lamberth during its review of the ban. The Justice Department argued that the judge’s decision would cause irreparable harm to researchers, taxpayers and scientific progress.
Lifting the ban allows the government to temporarily continue funneling tens of millions of dollars to scientists seeking cures for diseases such as Parkinson’s, spinal cord injuries, and genetic conditions. Embryonic stem cells can grow into any kind of tissue and may have the potential to accelerate a range of research.
“The purpose of this administrative stay is to give the court sufficient opportunity to consider the merits of the emergency motion for stay and should not be construed in any way as a ruling on the merits of that motion,” the appeals court wrote in its decision
Opponents of federal stem-cell funding have until Sept. 14 to file a response, and the U.S. can submit a response on Sept. 20, the appeals court said.
Lamberth on Aug. 23 issued an order temporarily stopping the Health and Human Services Department and the National Institutes of Health from funding or conducting the studies. On Sept. 7, Lamberth denied a U.S. request to reconsider his ruling.
The judge cited the still-in-force 1996 Dickey-Wicker Amendment in his ruling, saying that Congress prohibited funding any research in which a human embryo was destroyed. By implication, that included all stem-cell research, Lamberth said.
The case is Sherley v. Sebelius, 10-5287, U.S. Circuit Court of Appeals for the District of Columbia (Washington).
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Craigslist Takeover Defenses Invalidated by Judge in EBay Case
Craigslist Inc.’s poison-pill plan was invalidated by a Delaware judge who upheld most of EBay Inc.’s rights as a minority investor in the online classified-advertising company.
EBay, one of the world’s most-visited e-commerce sites, claimed in its lawsuit that Craigslist created its anti-takeover defenses to weaken its role as an investor. While ruling in favor of EBay on those claims yesterday, Delaware Chancery Court Judge William B. Chandler III left in place a provision allowing for staggered director elections. Craigslist officials used that provision to help strip EBay of its board seat, according to the ruling. EBay bought a 28 percent stake in Craigslist in 2004.
The poison pill was enacted “to punish EBay for competing with Craigslist” and not “in response to a reasonably perceived threat or for a proper corporate purpose,” Chandler said in his decision.
Chandler’s ruling will give EBay “access to information that was not available to them,” said Sandeep Aggarwal, an equity analyst at Caris & Co. who has a ‘buy’ rating on EBay shares. “They will not have a board seat, so I don’t know how much they will be able to influence strategy of the company.”
Susan MacTavish Best, a spokeswoman for San Francisco-based Craigslist, didn’t return a voice-mail yesterday seeking comment on Chandler’s ruling.
“We are very pleased that the court gave EBay what it sought from the lawsuit,” Michael Jacobson, the online-auction site’s general counsel, said in an e-mailed statement. “EBay brought this suit to protect its own shareholders and preserve its valuable investment in Craigslist.”
The Delaware case is EBay Domestic Holdings Inc., v. Craig Newmark, CA3705, Delaware Chancery Court (Wilmington).
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Austria’s Curbs on Casinos Are Unlawful, Court Says
Austria’s state gambling monopoly breaches European Union law by blocking foreign casino companies, the EU’s highest court said.
“The categorical exclusion of operators whose seat is in another” EU nation “is disproportionate as it goes beyond what is necessary to combat crime,” the European Court of Justice in Luxembourg said yesterday. Austria has the choice of “various less restrictive measures” to monitor casino operators, said the court.
The case is the latest in a series brought by betting companies including Bwin Interactive Entertainment AG, Ladbrokes Plc and Betfair Ltd., disputing whether it is legal for state monopolies to block them from operating freely across the 27- nation union.
In yesterday’s ruling, the court said the Austrian rules lacked any transparency and were discriminatory because of the absence of a competitive process allowing operators from other EU countries to apply for a casino license in the country.
The case is C-64/08 Ernst Engelmann.
Tomra Loses Court Appeal Over 24 Million-Euro Antitrust Fine
Tomra Systems ASA, a Norwegian maker of machines that collect cans and bottles for recycling, lost a court challenge to a 24 million-euro ($30.5 million) antitrust fine for hindering competition in the European Union.
The appeal “must be dismissed in its entirety,” a three- judge panel from the EU’s General Court, the region’s second- highest tribunal, ruled yesterday.
The European Commission, the 27-nation EU’s antitrust agency, fined Tomra in 2006 saying its practice of offering rebates and discounts to retailers restricted the market for competitors. The decision closed an investigation that started with raids in Norway, Germany and the Netherlands in September 2001.
It was the highest penalty levied as a percentage of revenue in this type of abuse case, the EU regulator said at the time. The fine was more than 7 percent of Tomra’s 2005 sales.
“We regret that the court has had a different opinion than we have in this case,” Espen Gundersen, Tomra’s chief financial officer said in a telephone interview. “It’s an old case related to contracts entered back mainly in 1998 to 2000. We have to read the entire document before we can make any further comments.” The company said it is considering whether to appeal yesterday’s ruling.
The case is T-155/06, Tomra Systems and Others v Commission.
National Lampoon Ex-Chief Gets 45-Month Term, Remains Wealthy
National Lampoon Inc. former Chief Executive Officer Daniel Laikin remains wealthy after being sentenced to 45 months in prison for conspiring to manipulate the stock price of the media company, a U.S. prosecutor said.
“Mr. Laikin was a millionaire and he’s still a millionaire,” Assistant U.S. Attorney Derek Cohen told U.S. District Judge Joel Slomsky in Philadelphia Sept. 8. He noted that Laikin’s Los Angeles mansion has been used to shoot the TV show “The Bachelor.”
Slomsky said Laikin deserved to spend almost four years in prison because he “undermined everyone’s confidence in our commercial markets” through the scheme to pump up the stock price of National Lampoon, which made the 1978 fraternity comedy “Animal House.”
Prosecutors alleged Laikin, 48, of Carmel, Indiana, bribed individuals to make it appear there was interest in the stock. He sought to fraudulently increase National Lampoon’s share price from $2 a share to $5 a share, according to court filings.
Laikin conspired with Dennis Barsky, a company consultant, and two stock promoters to inflate the share price from March 2008 to June 2008, prosecutors alleged in an indictment. Laikin stepped down after being charged as part of government sting operation against executives of several companies.
“I’m sorry for what I’ve done,” Laikin told Slomsky before he was sentenced. “I know what I tried to do was wrong. I crossed the line.”
As part of the plea, Laikin acknowledged he intended to cause between $2.5 million and $7 million in losses through the scheme, according to the government. Laikin was a successful real-estate developer in Indianapolis before taking the helm at National Lampoon.
Laikin’s case is U.S. v. Laikin, 08-cr-00733, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).
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JPMorgan Hires Bank of America Attorney to Oversee Regulation
JPMorgan Chase & Co., the second-largest U.S. bank by assets, lured away Bank of America Corp. Deputy General Counsel Gregory Baer to oversee global regulation and corporate legal matters.
Stephen Cutler, general counsel of New York-based JPMorgan, announced Baer’s appointment to the newly created position in an internal company memo yesterday. Baer, 48, will contend with new finance-industry laws and manage corporate legal matters ranging from mergers and acquisitions to securities filings.
Baer joined Bank of America in 2006. He is a former partner at the Washington-based law firm Wilmer Cutler Pickering Hale & Dorr. He also worked in the Clinton administration at the Treasury Department and as a managing senior counsel at the Federal Reserve Board. He graduated in 1987 from Harvard Law School, where he was managing editor of the Harvard Law Review.
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