Robert Moffat, an ex-International Business Machines Corp. (IBM) senior vice president ordered to spend six months in prison for his role in an insider-trading scheme, will start serving his sentence early to get it out of the way.
Moffat persuaded a federal judge in New York yesterday to let him begin his sentence eight months sooner than scheduled. He’s giving up his freedom before the Thanksgiving and Christmas season to be home before his son’s college graduation in May.
Moffat, 54, admitted he leaked information to Danielle Chiesi, a former consultant for New Castle Funds LLC and a defendant in the Galleon Group LLC insider-trading case.
Batts initially directed Moffat to surrender to prison authorities on June 30, 2011, specifically so that he could attend his son’s graduation. He is now scheduled to start his term Nov. 5 and may be out before May 5, depending on whether he earns early release for good behavior.
When Moffat pleaded guilty in March to securities fraud and conspiracy, he said he gave tips to Chiesi about IBM, Lenovo Group Ltd. (992) and Advanced Micro Devices Inc. (AMD) from August to October in 2008. He is one of 12 people who have pleaded guilty in two overlapping insider-trading cases related to Galleon Group and New Castle Funds. Nine others still face charges.
Moffat said he had an “intimate relationship” with Chiesi, 44, who was arrested along with Galleon Group co-founder Raj Rajaratnam. Moffat’s lawyers said Chiesi manipulated their client to obtain the information.
The case is U.S. v. Moffat, 10-cr-00270, U.S. District Court, Southern District of New York (Manhattan).
Ex-Galleon Trader to Pay $836,385 in SEC Settlement
A former Galleon Group LLC employee who pleaded guilty to criminal insider-trading charges in December agreed to settle related civil allegations with the U.S. Securities and Exchange Commission.
David Slaine, who neither admitted nor denied the SEC’s claims, agreed to disgorge $836,385 in illegal investment profits, U.S. District Judge Deborah Batts said in a filing yesterday in federal court in Manhattan.
The SEC said in February that Slaine used tips from Mitchel Guttenberg, a UBS AG (UBSN) institutional client manager. Guttenberg was sentenced to 6 1/2 years in prison in 2008 for helping two hedge-fund traders make more than $15 million by leaking news to them about changes to the firm’s analyst ratings.
The case is SEC v. Slaine, 1:10-cv-00754, U.S. District Court, Southern District of New York (Manhattan).
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White Settles Cuomo’s Pension Probe for $1 Million
Bill White, the former president of the Intrepid Sea, Air and Space Museum, agreed to pay $1 million to end a probe of his role in New York Attorney General Andrew Cuomo’s state pension fund investigation, Cuomo said.
White brokered investments worth several hundred million dollars from the New York State Common Retirement Fund on behalf of firms that paid him hundreds of thousands of dollars in fees, Cuomo said.
“The state pension fund, which should be safeguarded for taxpayers, was instead served up to fixers, finders, and fundraisers like Bill White, who used his access to fill his pockets,” Cuomo said in a statement. “Unlicensed placement agents, secret fees, and even the appearance of pay-to-play erode taxpayers’ trust and pose an intolerable risk to our pensioners’ retirement funds.”
White received almost $3 million in fees associated with investments by the state pension fund from 2003 to 2006, when it was run by former New York state comptroller Alan Hevesi, for whom White helped raise campaign money, according to a person familiar with the case.
White, who stepped down from the Intrepid in May, “is looking forward to putting this matter behind him and to cooperating with the New York Attorney General in his important efforts to reform the New York State pension system,” White attorneys Steven G. Kobre and Eric B. Bruce said in an e-mailed statement.
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Ex-Nexus Technologies Workers Sentenced Over Bribes
Three former employees and a partner of Nexus Technologies Inc., a Philadelphia-based exporter, were sentenced over bribes made to Vietnamese officials in exchange for equipment contracts.
Nexus President and owner Nam Nguyen, 54, of Houston and Vietnam, was sentenced to 16 months in prison yesterday in federal court in Philadelphia, according to a statement from the U.S. Attorney’s office in Philadelphia.
One of his siblings, Kim Nguyen, 41, was sentenced to two years of probation and another, An Nguyen, 34, received a nine-month sentence. Former Nexus partner Joseph Lucas was given two years of probation, prosecutors said.
“The corporation, Nexus, also acknowledged that it operated primarily through criminal means, and agreed to cease operations,” according to the statement.
Prosecutors said Nexus identified U.S. vendors for helicopter parts, chemical detectors, bomb-containment gear, air tracking systems and other materiel, then negotiated contracts and bribes with Vietnamese government agencies including the army and ministry of transport.
The defendants earlier pleaded guilty to charges including conspiracy, according to the statement.
The case is U.S. v. Nam Quoc Nguyen, 08-00522, U.S. District Court, Eastern District of Pennsylvania (Philadelphia)
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BP Sued by Mexican States Over Gulf Oil Spill Damage
BP Plc (BP/) was sued by Veracruz and two other Mexican coastal states over alleged losses stemming from the company’s 87-day oil spill in the Gulf of Mexico.
The states claim that the financial damages from the spill, set off by the explosion and sinking of the Deepwater Horizon oil rig in April, will grow, said attorney Enrique Serna, who represents Veracruz, Quintana Roo and Tamaulipas. The states suing include the industrial hub of Veracruz and the tourist-beach centers of Cancun and Cozumel on the Yucatan Peninsula.
“The three states have accrued a good amount of damages as a result of the spill,” Serna said in a telephone interview yesterday from San Antonio, where the suits were filed in federal court. As cold fronts move into the area, the underwater “plume” of oil generated by spill will invade Mexico’s fishing waters in the Gulf and possibly its shores, he said.
The Mexican states also sued Transocean Ltd. (RIG), owner of the rig, and contractors Halliburton Co. (HAL) and Cameron International Corp. (CAM) The suits were filed yesterday in federal court in San Antonio.
Daren Beaudo, a BP spokesman, didn’t immediately respond to phone or e-mail messages seeking comment.
“The complex litigation landscape is being sorted out by the courts and Transocean will respond -- and defend its position vigorously -- when the issues have been clarified,” Lou Colasuonno, a company spokesman, said in an e-mail.
The suits are State of Veracruz v. BP, 5:10-cv-00761; State of Tamaulipas v. BP, 5:10-cv-00762; and State of Quintana Roo v. BP, 5:10-cv-00763, all in U.S. District Court, Western District of Texas (San Antonio).
MTV Sues Turkish TV Distributor Seeking Fees, Broadcast Halt
In lawsuits filed at the High Court in London, MTV alleges that Multi Channel Developers Inc., a Turkish television distribution company, has reneged on an agreement to pay for MTV and Nickelodeon content. MTV is seeking unspecified damages for misuse of its programming and a court order blocking the channels from being aired.
The company “threatens, and intends unless restrained,” to continue to broadcast the channels, MTV’s lawyers said in a filing.
Paul Renney confirmed his firm, Keystone Law, was representing MCD in the U.K. case and declined to comment further.
Louise Eckersley, spokeswoman at MTV’s London law firm Field Fisher Waterhouse, declined to comment. Neither MCD or MTV responded to messages seeking comment.
The cases are MTV Networks -and- MCD, HC 10C02362 and HC 10C2363.
Hong Kong ICAC Charges 3 With Corruption in TVB Case
Two employees of Television Broadcasts Ltd. and an advertiser were charged with conspiracy to defraud the operator of Hong Kong’s biggest TV station, the city’s Independent Commission Against Corruption said.
The ICAC charged Stephen Chan Chi-wan, 51, TVB general manager; Wilson Chan Wing-shuen, 63, a TVB marketing and sales executive; and Tseng Pei-kun, 28, director of an advertising and production company, with alleged corruption and conspiracy to defraud in relation to the business affairs of TVB, according to a statement yesterday from the city’s corruption watchdog.
In January and February, the ICAC said, Stephen Chan and Tseng conspired to defraud TVB and some of its artists by asking them to attend a promotional event as a show of support for Chan’s new book after Tseng’s company had made promises to a corporate sponsor ensuring their attendance. The ICAC also charged Tseng and Wilson Chan with creating a false service agreement between TVB and Tseng’s company for HK$550,000.
TVB spokeswoman Winnie Ho said the two TVB employees had been temporarily suspended since March 11. Ho declined to comment further, citing the pending court case. No phone number was available for Tseng’s company.
The defendants will appear in court Sept. 21, the ICAC said.
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Morgan Stanley Executives Ask to Toss Suit Over Pay
A lawyer for Mack, Gorman and Morgan Stanley executives named in the lawsuit asked New York State Supreme Court Justice Shirley Werner Kornreich to dismiss the complaint at a court hearing yesterday in Manhattan. Morgan Stanley directors also sought to throw out the lawsuit.
“In times of crisis you want the most talented people to stay. You pay them to stay,” said Evan Chesler, who represents Mack, Gorman and the executives. The court, he added, can’t second-guess company decisions over pay for its 60,000 employees.
A group of Morgan Stanley shareholders sued Morgan Stanley executives and directors earlier this year over $45 billion in employee compensation in 2006, 2007 and 2009. In the complaint, it calls the pay “unconscionable” and “staggering” given the company’s performance, including relying on government bailout money in 2009.
Jay Eisenhofer, an attorney for the shareholders, told Kornreich at the hearing that there was “no relationship” between pay and profitability at Morgan Stanley.
The case is Security Police and Fire Professional of America Retirement Fund v. John J. Mack, 600359-2010, New York State Supreme Court (Manhattan).
Countrywide’s Mozilo Must Face Trial in SEC Lawsuit
Angelo Mozilo, the former Countrywide Financial Corp. chief executive officer, lost a bid to have a government lawsuit on claims he misled investors about risks tied to subprime lending thrown out of court.
U.S. District Judge John F. Walter in Los Angeles yesterday denied Mozilo’s request for a ruling that there were no genuine issues to be tried. The ruling set the stage for a jury trial in October.
The SEC sued Mozilo, 71, in June 2009, saying he publicly reassured investors about the quality of Countrywide’s loans while he issued “dire” internal warnings and sold about $140 million of his own shares.
He wrote in an e-mail that Countrywide was “flying blind” and had “no way” to determine the risks of some adjustable-rate mortgages, according to the SEC complaint.
The ex-CEO argued that he repeatedly made negative public statements about market conditions.
The case is SEC v. Mozilo, 09-3994, U.S. District Court, Central District of California (Los Angeles.)
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BP Will Face ‘Thousands’ of Spill Cases, Judge Says
BP Plc and other companies will face “thousands” of lawsuits over the oil spill set off by the explosion of the Deepwater Horizon drilling rig in April, a judge with about 400 such cases in his court said.
U.S. District Judge Carl Barbier in New Orleans is overseeing oil-spill lawsuits already filed seeking damages for everything from loss of business revenue to environmental cleanup costs. Barbier began a hearing yesterday to organize the cases over the largest offshore oil spill in U.S. history, saying he wasn’t sure how many have been moved to his court.
“There will be thousands of cases consolidated in this court,” he told about 150 lawyers crowded into his courtroom. “One of the tasks we have is to find a way to organize and structure this litigation.”
Another 50 attorneys were listening in a spillover room.
Lawyers for victims seeking billions of dollars asked Barbier in court filings to set test-case trials over the spill within a year. Defense lawyers asked the judge to delay the litigation while administrators of a claims fund sort out demands for compensation.
In its own filing, BP dismissed the victims’ push for early trials as “premature and overly ambitious.”
Barbier said he may set a trial for as early as October 2011 on a claim by Transocean Ltd., which owned the Deepwater Horizon rig, seeking to limit its liability. The company argues its financial liability for the spill should be capped at $26.7 million, citing a 159-year-old maritime law that limits a vessel-owner’s exposure to the value of its ship and cargo.
BP has set aside $32.2 billion to pay spill costs and legal claims.
The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, 2:10-md-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).
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Judge Prods Cuomo, Ex-Hevesi Aide to Resolve Pension Case
Henry “Hank” Morris, former political adviser to New York’s ex-comptroller, was prodded by the judge overseeing his criminal case to resolve the charges against him involving corruption at the state’s pension fund.
The case is at the center of New York Attorney General Andrew Cuomo’s investigation of fraud related to the fund’s operations. Six people have pleaded guilty to criminal charges in the probe, including the former chief investment officer at the pension fund, David Loglisci.
Morris, who advised former Comptroller Alan Hevesi, is accused of skewing the investment process to favor deals that benefited him, his associates and contributors to Hevesi’s campaign. Hevesi hasn’t been accused of wrongdoing in the case.
Morris faces a trial on about 75 charges, including enterprise corruption, which carries a prison term of as long as 25 years. His “group” participated in 19 separate alternative investments generating $35 million in placement fees, with Morris himself or entities he owned, taking $19 million, according to court papers.
“Any discussion of possible resolution of the case other than trial?” State Supreme Court Justice Lewis Bart Stone asked the two sides at a hearing in Manhattan yesterday.
Morris’s attorney William Schwartz and Ellen Biben, deputy New York attorney general, looked at each other.
“Not really,” Schwartz said.
“I would suggest that you do that,” Stone said.
The judge, who said the case could take from two to five months to try, set another court date for Oct. 21 and a trial date for April 26.
The case is People v. Morris, 0025/2009, New York State Supreme Court, New York County (Manhattan).
Lehman Brothers Asks Court to Delay ‘Flip’ Lawsuits
Lehman Brothers Holdings Inc. asked a bankruptcy court to delay 50 lawsuits it filed challenging 230 transactions while it tries to work out settlements.
In filings yesterday in U.S. Bankruptcy Court in Manhattan, Lehman said it also wants more time to further investigate the facts behind the deals and try to work out settlements.
Lehman sought bankruptcy protection on Sept. 15, 2008, and most of the suits were filed this week to beat a two-year deadline for “fraudulent-transfer” claims. The New York-based investment bank also said yesterday that it may file more suits where the two-year limit doesn’t apply and sought more time to identify recipients of assets it wants restored.
“The issuance of the stay represents a sensible approach to promote the efficient resolution of these disputes without costly litigation and unnecessary expenditure of estate and judicial resources,” the company said in court papers.
Many of the lawsuits, according to Lehman, challenge so-called flip clauses in swap agreements where collateral ordinarily would go first to a Lehman subsidiary as the swap counterparty. The clause caused collateral to go first to noteholders and to Lehman only after the noteholders were fully paid.
Lehman said it had contracts giving it senior payment priority in derivative deals, which were replaced with junior payment priority after the bank filed for bankruptcy. The flip was improper, Lehman said in suing the U.S. Bank National Association, Deutsche Bank AG’s trust unit and dozens of companies that issued notes.
The Lehman holding company Chapter 11 case is In re Lehman Brothers Holdings Inc., 08-13555, while the liquidation proceeding under the Securities Investor Protection Act for the brokerage operation is Securities Investors Protection Corp. v. Lehman Brothers Inc., 08-01420, both in U.S. Bankruptcy Court, Southern District New York (Manhattan).
Ex-Merrill Banker Brown Won’t Face Retrial in Enron Barge Case
Merrill Lynch & Co. former banker James A. Brown won’t be retried on fraud charges related to his alleged role in an Enron Corp. scheme involving the sham sale of Nigerian electricity-generating barges.
Prosecutors, in a court filing Sept. 15, asked U.S. District Judge Ewing Werlein Jr. in Houston to dismiss three charges against Brown. The judge on Sept. 14 denied the government’s request to postpone the trial, which was set to start Sept. 20.
Brown, who headed Merrill’s strategic leasing and finance group, was convicted in November 2004 of wire fraud and conspiracy in an alleged scheme to help Enron inflate earnings through the sham sale of the barges to the bank. The U.S. Court of Appeals in New Orleans threw out fraud verdicts against Brown and three other men in August 2006.
Brown, whose conviction for lying to investigators was upheld, has asked the U.S. Supreme Court to review that case. Prosecutors had asked the judge to delay the trial until Brown’s appeal of his conviction on the other charge was completed to avoid the possibility of an additional trial.
Patrick Stokes, deputy chief of the fraud section with the criminal division of the Justice Department, didn’t return a call to his office after regular business hours Sept. 15.
The case is USA v. Bayly, 4:03-cr-00363, U.S. District Court, Southern District of Texas (Houston).
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Ex-HSBC Banker Tells Jury Cohen Denied Owning Account
A retired HBSC Holdings Plc banker told a Florida jury that accused hotel developer Mauricio Cohen Assor denied owning an offshore corporation that prosecutors say he used to help hide income and assets from tax authorities.
Cohen Assor, 77, and his son, Leon Cohen Levy, 46, are on trial in Fort Lauderdale, Florida, accused of conspiring to defraud the Internal Revenue Service and filing false tax returns. They deny the charges, including using a British Virgin Islands corporation, Whitebury Shipping Time-Sharing Ltd., to hide a $45 million investment portfolio from the IRS.
Retired HSBC (HSBA) banker Evelyne Klein told federal jurors that Cohen Assor, while denying he owned it, “almost exclusively gave me instructions” on how to handle assets in the Whitebury account.
Cohen Assor and his son were arrested April 15 and have been in jail since. They built hotels in Europe under the “Flatotel” brand, as well as one in New York, which was sold in 2000.
Prosecutors said they put proceeds of $33 million from that sale into a Swiss account of HSBC, Europe’s largest bank by market value, and failed to tell the IRS of the sale. Defense attorney Michael Pasano denied that they owned the New York hotel.
The case is USA v. Assor, 10-cr-60159, U.S. District Court, Southern District of Florida (Fort Lauderdale).
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