Starr, Chevron, BP, Lilly, David Jones in Court News

Kenneth Starr, a former Manhattan money manager who handled a roster of celebrities, pleaded guilty to defrauding his clients out of as much as $50 million.

“From 2009 to 2010, instead of using my clients’ money as I promised, I knowingly used a portion of the money for my own purposes,” Starr, 66, told U.S. Magistrate Judge Theodore Katz Sept. 10 in federal court in New York.

Starr, who was arrested in May and charged with 23 criminal counts, pleaded guilty to one count each of wire fraud, investment adviser fraud and money laundering.

Katz said he will recommend that U.S. District Judge Shira Scheindlin accept Starr’s plea. Prosecutors and Starr’s attorney, Flora Edwards, agreed that sentencing guidelines call for him to serve from 121 to 151 months in prison. Scheindlin may ignore those guidelines when she sentences Starr on Dec. 15.

“He has committed a horrible error in judgment, but that’s not the sum total of the man’s life,” Edwards said outside court.

Starr, whose celebrity clients included Sylvester Stallone and Wesley Snipes, was originally accused of defrauding at least 11 of them, including heiress Rachel “Bunny” Mellon, out of $59 million. Edwards and the government agreed, for sentencing purposes, that the amount lost in the fraud was between $20 million and $50 million.

As part of his agreement with the government, Starr will forfeit his $7.5 million apartment on Manhattan’s Upper East Side. Scheindlin will determine how much Starr must pay in forfeiture and restitution, up to a total of $50 million, according to the agreement.

The case is U.S. v. Starr, 1:10-cr-520, U.S. District Court, Southern District of New York (Manhattan).

Chevron Victory in Nigerian Protesters’ Suit Upheld on Appeal

Chevron Corp.’s trial victory in a lawsuit brought by Nigerian protesters blaming the company for violence at an offshore oil platform was upheld on appeal.

A three-judge panel of the U.S. court of appeals in San Francisco ruled Sept. 10 that the trial judge made no errors in admitting challenged evidence or in the jury instructions. The appellate panel also agreed with the judge that the 1992 U.S. Torture Victim Protection Act is intended to sue individuals rather than corporations.

“For years, the events that transpired on the Parabe platform have been misrepresented to courts and the public,” Chevron spokesman Kent Robertson said in an e-mailed statement. “While we are sympathetic to the challenges that people of the Niger Delta face, hostage taking is never the answer.”

The case stems from a 1998 incident in which protesters, who boarded a Chevron oil drilling platform, were attacked by Nigerian soldiers. Two men were killed, others were shot and beaten and one man was hung by his wrists and tortured after a protest about jobs and alleged environmental damage to the area, according to the 1999 lawsuit against Chevron. Nineteen Nigerians sued the company, claiming it was liable for the actions of the Nigerian soldiers it hired to provide security for the oil platform.

After almost 10 years of trial court proceedings, the case went before a jury in October 2008. The jury cleared Chevron, the second-largest U.S. oil company, of wrongful death, torture, assault, battery and negligence claims.

Theresa Traber, a lawyer representing the Nigerians and their families, didn’t return a call seeking comment.

The case is Larry Bowoto v. Chevron, 09-15641, 9th U.S. Court of Appeals (San Francisco).

For the latest verdict and settlement news, click here.

New Suits

BP Sued by Environmental Group Over Atlantis Platform in Gulf

BP Plc’s Atlantis oil and gas production platform in the Gulf of Mexico should be shut until the company can prove it meets U.S. safety and engineering standards, an environmental watchdog group said in a lawsuit.

Food & Water Watch sued BP in federal court in Houston Sept. 10. The group revised a lawsuit that it filed against U.S. regulators in May, accusing them of failing to investigate Atlantis after a whistleblower warned that the platform lacks critical safety documentation.

The group withdrew the initial lawsuit in June, after London-based BP won court permission to intervene in the case. BP then asked the court to require opponents to post a $15 billion bond to cover the company’s damages if Atlantis’s production was halted.

“We have evidence that Atlantis is unsafe and is in danger of creating an even worse spill than the one caused by the Deepwater Horizon explosion,” Wenonah Hauter, Food & Water Watch’s executive director in Washington, said Sept. 10 in a statement.

The Deepwater Horizon, owned by Transocean Ltd., was under contract to BP about 100 miles (161 kilometers) north of the Atlantis platform. The damaged well leaked more than 4 million barrels of crude oil into the Gulf.

BP insists the Atlantis, its second-largest Gulf production platform, is safe and in compliance with federal regulations. The Atlantis can produce 200,000 barrels of oil and 180 million cubic feet of gas daily from waters ranging from 4,400 feet to 7,200 feet deep.

Daren Beaudo, a BP spokesman, didn’t respond to a phone calls and e-mail seeking comment.

The case is United States of America Ex Rel. Abbott, 4:09- cv-01193, U.S. District Court, Southern District of Texas (Houston).

Investment Adviser Sandra Venetis Charged in $11 Million Fraud

Sandra Venetis, a New Jersey investment adviser, was criminally charged with defrauding more than 100 investors of more than $11 million in a Ponzi scheme that authorities said supported her lavish lifestyle.

Venetis, 59, who ran Systematic Financial Associates Inc. in Branchburg, New Jersey, persuaded clients to invest in a phony investment program in which she said the money would fund loans to doctors, malpractice premiums and pension plans, according to a Federal Bureau of Investigation complaint.

She used that money to pay early investors, cover gambling expenses in Las Vegas, and fund trips to Italy, France, India, Alaska and the Caribbean, according to the FBI. Venetis surrendered to the FBI Sept. 10 and appeared later that day in federal court in Newark, New Jersey. U.S. Magistrate Judge Claire Cecchi released Venetis on a $500,000 bond.

The case is United States of America v. Venetis, 10-mj- 04141, U.S. District Court, District of New Jersey (Newark).

Nine Containerboard Makers Named in Price-Fixing Suit

Packaging Corp. of America, International Paper Co. and seven other containerboard makers were sued and accused of conspiring to fix the price of materials used to make cardboard boxes.

The companies created a product shortage leading to higher prices, according to a complaint filed Sept. 9 in federal court in Chicago by Kleen Products LLC. The closely held floor-care company asked for class-action status for the case, to include containerboard buyers from the companies over the past five years.

Norampac Industries Inc., Cascades Inc., Domtar Corp., Weyerhaeuser Co., Georgia Pacific LLC., Temple-Inland Inc., and Smurfit-Stone Container Corp. were also sued. The defendants supply 83 percent of the containerboard market, according to Kleen Products.

Price increases from August 2005 till now outpaced cost increases by more than 50 percent, and the companies were “nearly simultaneous” in raising prices, according to the complaint.

International Paper, based in Memphis, Tennessee, said the allegations were “baseless.”

“Our company holds itself to the highest standards of ethical conduct and business practices,” the company said in an e-mailed statement. “We take seriously any allegations to the contrary and will vigorously defend ourselves in this litigation.”

Representatives of the other defendant companies didn’t return calls for comment on the suit or declined to comment immediately.

The case is Kleen Products LLC v. Packaging Corp. of America, 1:10-cv-05711, U.S. District Court, Northern District of Illinois (Chicago).

London Police Arrest Man in FSA Insider-Trading Investigation

London police arrested a man on suspicion of money laundering and providing false information as part of a Financial Services Authority investigation into insider trading where six have already been arrested.

The FSA didn’t identify the 64-year-old in a statement Sept. 10 announcing the arrest. Police also searched a location in Potters Bar, north of London, the regulator said.

The arrest is related to an ongoing insider-trading probe that led to the arrest of five men and a woman, age 27 to 34, in May 2009 following raids in London and Essex, England. The man, arrested Sept. 9, was released on bail after being interviewed. No one has been charged in the case.

The FSA, which has been increasing enforcement of market abuse after facing criticism it didn’t do enough to stop the crime, is currently prosecuting 11 people for insider trading. The regulator never prosecuted a criminal insider-trading case before 2008.

The U.K. government plans to abolish the FSA by 2012 and replace it with a Prudential Regulatory Authority at the Bank of England and an independent Consumer Protection and Markets Authority that would be funded by financial firms. Margaret Cole, the FSA’s enforcement chief, is pressing for her unit to become part of the CPMA, rather than joining the government’s planned economic crime agency, when the FSA is broken up.

For more, click here.

Crescent Resources Trust Sues Duke Energy Over Loan

A trust representing creditors of Crescent Resources LLC, a real estate developer, sued Duke Energy Corp. to recover $1.19 billion plus other damages tied to a 2006 loan deal.

Duke required Crescent, its subsidiary at the time, to borrow $1.23 billion and immediately transfer $1.19 billion back to Duke, the litigation trust said in its complaint filed Sept. 3 in U.S. Bankruptcy Court in Austin, Texas.

“The sole purpose of the transaction was to benefit Duke at the expense of Crescent Resources and its many innocent creditors,” lawyers for the trust said.

Crescent, based in Charlotte, North Carolina, filed for bankruptcy in June 2009. At the time of the 2006 loan, the company was a wholly owned unit of Duke. Under the loan transaction, Duke sold a 49 percent stake in Crescent’s holding company to Morgan Stanley real estate funds, according to court papers.

“We think the case is without merit and will vigorously defend ourselves,” Thomas Williams, a spokesman for Charlotte- based Duke, said in an e-mail. Duke owns utilities in the U.S. Southeast and Midwest.

The case is Crescent Resources Litigation Trust v. Duke Energy Corp., 10-01111, U.S. Bankruptcy Court, Western District of Texas (Austin).


Lilly Wins Reversal of Class Action in Zyprexa Suit

Eli Lilly & Co. won reversal of a ruling that granted class-action status to a suit by pension funds, unions and insurers who alleged that improper marketing of Zyprexa, its schizophrenia treatment, raised their costs.

A U.S. appeals court in New York threw out a September 2008 ruling by U.S. District Judge Jack Weinstein in Brooklyn on Sept. 10. He had said the plaintiffs could pursue as a group claims that Indianapolis-based Lilly’s Zyprexa marketing caused them to pay more for the drug than what it was worth. The plaintiffs were seeking $6.8 billion in damages.

Weinstein had ruled in favor of the unions, pension funds and insurance companies, known as third-party payors, rejecting Lilly’s argument that their claims were too different to be tried together. The appeals court reversed, finding that the link between marketing Zyprexa to doctors and the injury claimed by the payors was “attenuated.”

“Crucially, the third-party payors do not allege that they relied on Lilly’s misrepresentations -- the misrepresentations at issue were ‘directed through mailings and otherwise at doctors,’” the appeals court said.

Marni Lemons, a spokeswoman for Lilly, didn’t return voice- mail messages seeking comment.

“We just got the decision and our legal team is in the process of evaluating the decision to see what the next step is,“ said James Dugan, a lawyer at the Murray Law Firm in New Orleans, who is co-lead counsel for the plaintiffs.

The case is UFCW Local 1776 and Participating Employers Health and Welfare Fund v. Eli Lilly & Co., 05-CV-4115, U.S. District Court, Eastern District of New York (Brooklyn).

Ex-David Jones CEO Accused of Harassment Earlier, Woman Says

David Jones Ltd.’s former Chief Executive Officer Mark McInnes was counseled against inappropriate behavior as many as 10 times while employed at Black & Decker Corp. from 1989 to 1991, claims a David Jones employee who is suing him and the company for A$37 million ($34 million).

Kristy Fraser-Kirk, 27, a publicist at David Jones, who claims McInnes sexually harassed her at work and work-related parties, submitted additional information to support her claims Sept. 10 in Sydney Federal Court.

McInnes’s conduct included “openly commenting on the size of women’s breasts and women’s appearances” at Black & Decker, according to Fraser-Kirk’s amended statement of claim.

Fraser-Kirk sued McInnes, David Jones and its board of directors Aug. 2, claiming McInnes made repeated, unwelcome sexual advances and that the company failed to address or prevent the conduct. Her claim for punitive damages of 5 percent of the company’s profit and McInnes’s earnings from 2003 to 2010 amounts to about A$37 million, which she says will be given to charity.

“These intolerable and wholly unsubstantiated accusations are an abuse of the legal process,” McInnes said in a statement Sept. 10. “I totally reject the 20-year-old Black and Decker allegations.”

David Jones said the new information refers to old complaints that have nothing to do with the company.

The case is between Kristy Anne Fraser-Kirk and David Jones Ltd. 964-2010. Federal Court of Australia (Sydney).

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MetLife Wins Dismissal of Beneficiary’s Lawsuit

A federal judge threw out a lawsuit claiming MetLife Inc. unfairly profited from the account of a policy beneficiary, while saying the company-described money-market account the life insurer uses to pay claims has an “inherently deceptive” name.

Plaintiff Jamie Clark didn’t prove she had a “special or confidential relationship” with the company required to advance the case, U.S. District Judge Larry Hicks in Reno, Nevada, said in a ruling Sept. 10. Clark, who sought class-action status on behalf of other beneficiaries, claimed that MetLife earned a greater return on the money it owed her than what it paid.

“Clark argues that a confidential and special relationship arose between her and MetLife when MetLife undertook to invest her insurance proceeds and pay her all earnings and gains,” Hicks wrote. “The court finds that there is no evidence that Clark had any ties with MetLife that could rise to such a special relationship.”

The U.S. Department of Veterans Affairs and New York Attorney General Andrew Cuomo started investigations of life- insurance industry practices after Bloomberg Markets reported in July that carriers profit by holding and investing $28 billion owed to beneficiaries. The insurers earn hundreds of millions of dollars a year in investment gains on the death benefits, including those due to families of U.S. military service members killed in combat in Iraq and Afghanistan.

Hicks did determine that MetLife’s Total Control Money Market Account Option, used to pay survivors their life insurance proceeds is “inherently deceptive” because it suggests the account is covered by FDIC insurance. MetLife keeps billions of dollars of its life insurance beneficiaries’ money in its general account, and sends them “checkbooks” instead of checks as it earns investment gains on their money.

The court said it awarded summary judgment to MetLife on the breach of contract claim because Clark admitted never reading or relying on the MetLife contract, nor understanding what a money market account is. Hicks also found that Clark, of Reno, Nevada, failed to prove damages.

Curtis Coulter, a lawyer representing Clark, didn’t return a call seeking comment after regular business hours Sept. 10. Christopher Breslin, a spokesman for New York-based MetLife, also didn’t return a call seeking comment.

The case is Jamie Clark v. Metropolitan Life Insurance Co., 3:08-cv-00158, U.S. District Court for Nevada (Reno).


Miami Area Father-Son Developers Begin U.S. Tax-Fraud Trial

Two Miami-area hotel developers accused of hiding more than $150 million in assets from the Internal Revenue Service go on trial today in a case that will display their mansions, yachts and luxury cars.

Mauricio Cohen Assor, 77, and his son, Leon Cohen Levy, 46, are accused of conspiring to defraud the IRS and filing false tax returns. Jury selection begins today in federal court in Fort Lauderdale, Florida, where prosecutors will try to prove the men used shell companies in tax havens to cheat the IRS.

Prosecutors claim they hid ownership of one home in Miami Beach worth $26 million and another valued at $20 million. They never declared $45 million in investments, commercial properties worth $55 million and cars like a Rolls-Royce Phantom, a Porsche Carrera GT and a Ferrari Testarossa, prosecutors say. Defense lawyers will try to show they never meant to break the law.

Defense lawyer Michael Pasano, who is representing both men, didn’t return a call seeking comment.

“In this case there will be no proof of any agreement to violate the law,” he said in a Sept. 9 court filing. “Nor will there be proof of any knowing participation in criminal acts.”

Cohen Assor and his son were arrested April 15 and have remained in jail in spite of several attempts to get bail. Prosecutors say they operated all-suite hotels in Europe under the “Flatotel” brand, as well as one in New York that they owned through nominees and sold in 2000.

They put proceeds of $33 million in a Swiss account of London-based HSBC Holdings Plc, Europe’s largest bank by market value, and failed to tell the IRS about the sale, according to prosecutors.

The men also used shell companies like American Leisure Resorts Inc. and hid assets in tax havens such as the Bahamas, Panama, Liechtenstein, Switzerland and the British Virgin Islands, according to prosecutors.

In court papers filed after the arrests, Pasano denied that Cohen Assor or his son owned the hotel. He said the criminal charges recycle failed claims made in a civil case by CDR Creances SA, a company set up by the French government to sell unprofitable businesses of Credit Lyonnais SA. Pasano also has disputed the government’s claims about his clients’ U.S. residency.

The case is USA v. Assor, 10-cr-60159, U.S. District Court, Southern District of Florida (Fort Lauderdale).

For more, click here.

Court Filings

TD Bank Lawsuit by Fired Bond Trader Most Popular Docket

A lawsuit settled by a bond trader fired by Toronto- Dominion Bank after an investigation into incorrectly priced credit derivatives was the most-read litigation docket on the Bloomberg Law system last week.

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 forced the bank to cut earnings by about C$96 million ($91 million) in mid-2008. Toronto- Dominion was fined 7 million pounds in December by the U.K. financial regulator, its fourth-largest fine levied at the time.

Naqui denied the claims in the Toronto-based bank’s suit and said the bank was attempting to make him a “scapegoat” for alleged failures in the bank’s systems and controls. He said he sometimes used different prices than the dealer quotes he received because of his own assessment of the correct price.

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

To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at

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