HP, Commerzbank, Perishing, Dow, UBS in Court News

Hewlett-Packard Co. and Oracle Corp. said they resolved litigation over the appointment of Mark Hurd as a president of Oracle and reaffirmed the long-term partnership between the two companies.

“HP and Oracle have been important partners for more than 20 years and are committed to working together to provide exceptional products and service to our customers,” Cathie Lesjak, HP’s interim chief executive officer, said yesterday in a statement.

Hurd was sued Sept. 7 by HP, which tried to block his move. The company said working as a president at Oracle would make it “impossible” for him to avoid using or disclosing HP’s trade secrets and confidential information. Hurd will adhere to his obligations to protect HP’s confidential information while fulfilling his responsibilities at Oracle, the companies said.

As part of the resolution of the legal dispute, Hurd and HP agreed to modify terms of his separation agreement from HP, including waiving his rights to 330,177 performance-based restricted stock units granted in January 2008, HP said in a regulatory filing. Hurd also waived his rights to 15,853 restricted stock units granted in December 2009, HP said.

The settlement is unlikely to affect HP’s stock price or limit Oracle’s ability to compete with HP, said Aaron Rakers, an analyst at Stifel Nicolaus & Co. in St. Louis.

Legal experts have said that HP would be unlikely to prohibit Hurd’s move because California’s courts favor letting employees move freely. The theory that trade secrets will inevitably be disclosed “won’t work in California as a reason to prevent someone from taking a job,” Mark Lemley, a professor at Stanford Law School who specializes in intellectual property, said in an interview earlier this month.

The case is Hewlett-Packard Co. v. Hurd, 110-cv-181699, California Superior Court, Santa Clara County (San Jose).

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Verdicts/Settlements

Commerzbank Wins Frankfurt Appeals Case Over Dresdner Bonuses

Commerzbank AG, Germany’s second-biggest bank, won dismissal of appeals cases filed by 14 former Dresdner Kleinwort investment bank employees over their bonuses.

The Frankfurt labor appeals court yesterday backed a lower tribunal which dismissed the suits last year. The employees seek bonuses for 2008 ranging from about 29,000 euros ($37,987) to 450,000 euros. Commerzbank acquired Dresdner Bank AG last year and faces similar suits in London.

Commerzbank, which was forced to tap Germany for 18.2 billion euros of capital during the credit crisis, cut prospective 2008 bonuses for Dresdner employees by as much as 90 percent after the unit posted an operating loss of 6.3 billion euros that year.

Yesterday’s ruling is the first by a German appeals court over the dispute and Manuel Rhotert, a lawyer for some the plaintiffs, said he will appeal the decision.

Commerzbank spokesman Thomas Bonk said the bank welcomed the ruling “which totally backs our view of the issue.”

Yesterday’s cases are Hess. LAG, 7 Sa 2082/09 u.a.

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BNP Paribas, Credit Agricole, Fined in French Check Cartel

BNP Paribas SA, Groupe Credit Agricole, BPCE SA and eight other banks were fined a total of 384.9 million euros ($504 million) after France’s competition regulator said an electronic check-processing program improperly levied fees on consumers.

BPCE, France’s second-largest bank by branches, was fined 90.9 million euros, the largest penalty. Credit Agricole was fined 82.9 million, the Autorite de la Concurrence said in a statement. Credit Agricole’s Credit Lyonnais unit was fined another 20.9 million euros.

The banks set a 4.3 euro-cent charge to exchange check images between lenders, one of nine interbank charges introduced when they switched to electronic processing. The check image fee was charged from January 2002 to July 2007, and only lifted “under the pressure of the ongoing proceedings,” the regulator said.

BNP, France’s largest bank, was fined 63 million euros, and Societe Generale SA 53 million euros. Societe Generale’s Credit du Nord unit was fined another 7 million euros. The Bank of France, which supervises French banks, was fined 350,000 euros.

Christelle Maldague, a spokeswoman for Paris-based BNP, said the check-processing program was “set up in full transparency and in full visibility of the banking authorities.”

Societe Generale is considering appealing the decision, said Laura Schalk, a spokeswoman for the Paris-based bank.

Credit Agricole and Credit Lyonnais “deplore” the decision, the lenders said in an e-mail. The interbank charges, “which didn’t hurt any client, were put in place under the aegis of the authorities charged with the sector” including the Finance Ministry’s competition unit.

The Bank of France defended the check-processing system, saying that it increased security for consumers and the financial system.

The other banks didn’t immediately comment on the decision.

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New York Man Gets Probation in Foreign-Exchange Scheme

A New York man received five years’ probation for defrauding his customers of more than $66 million they thought was invested in the foreign-exchange market and instead was spent on art and an Aston Martin car.

Bradley D. Eisner was sentenced yesterday by U.S. District Judge Dora Irizarry in Brooklyn, New York. He pleaded guilty in July 2008 and cooperated with the government. He agreed to forfeit more than $28 million, prosecutors said in March.

“This is an extraordinary case,” the judge said. “But for Mr. Eisner coming forward, we wouldn’t be sitting here today.”

Michael R. MacCaull, Eisner’s partner in Great Neck, New York-based Razor FX, was sentenced in March to 15 years and eight months. MacCaull, who also pleaded guilty in the Razor FX case, spent 13 months in prison after pleading guilty in 2001 in a crackdown on Sterling Foster & Co., a defunct New York boiler- room firm that manipulated stock prices. He’s in federal prison in Fort Dix, New Jersey.

The case is U.S. v. Eisner, 08-cr-401, U.S. District Court, Eastern District of New York (Brooklyn).

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Hochfelder Sentenced to Prison for as Long as 8 Years

Adam Hochfelder, co-founder of the real estate investment company Max Capital Management Corp., was sentenced to as long as eight years in prison for stealing about $20 million from banks, friends and family.

Justice Michael Obus pronounced the prison sentence of two years eight months to eight years yesterday in New York state Supreme Court in Manhattan and ordered Hochfelder to pay $9.5 million in restitution. Hochfelder, 39, pleaded guilty in May to 15 counts of grand larceny and three counts of scheming to defraud.

Hochfelder is a former chairman and chief executive officer of New York-based Max Capital, which he helped start in 1996 with Richard Kalikow. Max Capital’s properties included the Helmsley building at 230 Park Avenue in Manhattan.

Manhattan District Attorney Cyrus Vance Jr. said Hochfelder misrepresented the value of his personal holdings and collateral to obtain millions of dollars in loans from a childhood friend, an uncle and two banks. He also got a family member to invest $1.3 million in a fictitious business, Vance’s office said in May, when it announced the plea.

“Not one day has gone by in the last several years that I have not felt great remorse and great regret for what I have done,” Hochfelder said yesterday in court. He said he had already paid back millions of dollars. “I will complete the payment to all of you,” he said.

The cases are People v. Hochfelder, 01979-2008 and 00050- 2010, New York state Supreme Court (Manhattan).

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Lawsuits/Pretrial

Standard Chartered Urges Judge to Dismiss Beauty Tycoon’s Suit

Standard Chartered Bank Ltd. urged a Hong Kong judge to throw out a local beauty tycoon’s lawsuit, with the bank’s lawyer claiming the business owner didn’t suffer any losses on her Lehman Brothers-related investment.

Joyce Tsang Yue, chairwoman and founder of Modern Beauty Salon Holdings Ltd., can’t sue as a beneficiary of a trust that incurred the investment losses, Russell Coleman, a lawyer representing the bank, said yesterday at a hearing.

“If there is a claim, it’s a claim that belongs to the trust,” Coleman said. “This plaintiff has no standing to sue.”

Tsang filed a $1.65 million (HK$12.9 million) claim against Standard Chartered in December after she invested, on the recommendation of a bank employee, some of the trust’s funds in a product linked to bankrupt Lehman Brothers Holdings Inc., according to her lawyer Edward Chan.

The case is Tsang Yue Joyce and Standard Chartered Bank (Hong Kong) Ltd., Standard Chartered Trust (Cayman) Ltd., HCA2488/2009 in the High Court of Hong Kong.

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Singapore Central Bank Vows More Action After Share-Rigging Win

Singapore’s central bank said its victory in the country’s first civil lawsuit for stock rigging against fund manager Tan Chong Koay and Pheim Asset Management Sdn. shows its determination to enforce market rules.

Tan and his Malaysian fund management company were fined S$250,000 ($187,000) each for manipulating United Envirotech Ltd.’s share price in December 2004 to maintain their performance benchmarks and boost their reputation, according to a Sept. 17 ruling by Justice Lai Siu Chiu.

“There are relatively few prosecutions and even fewer convictions in the Commonwealth for market manipulation,” as they may be difficult to detect, said Alvin Yeo, senior partner at Singapore-based Wong Partnership LLP. “The lesson that fund managers might take away is that industry practices such as window-dressing, which are assumed to be widely acceptable, may not be.”

Singapore, which expanded its fund management industry to a record S$1.2 trillion at the end of 2009, joins other financial centers in cracking down on market misconduct.

Tan, 60, and Pheim declined to comment, saying they are studying the judgment and working out their options before making a decision on an appeal, according to an e-mailed statement on Sept. 18. from Wong Soohow, Tan’s spokesman.

The case is Monetary Authority of Singapore and Tan Chong Koay, Pheim Asset Management Sdn Bhd., S658/2008/P in the Singapore High Court.

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Egypt’s Property Companies See Foreigners Exit Amid Court Cases

Foreign investors are selling shares of Egyptian real- estate companies on concern that court cases may force developers to pay more for past land purchases, according to two analysts.

A court on Sept. 14 upheld a ruling canceling the sale of 33 million square meters (355 million square feet) of government land on Cairo’s outskirts to Talaat Moustafa Group Holding, the country’s biggest publicly traded developer. A case was filed against Palm Hills Developments SAE, the second-biggest developer, by Hamdy Fakhrany, a private Egyptian citizen, seeking the annulment of its land purchase in New Cairo. Both cases were linked to irregularities in selling government land.

“We’re seeing a sell-off by foreign and institutional investors,” said Osama Mahmoud, team head of the foreign sales desk at Cairo-based Prime Holding. “Some people are panicking, but most are selling part of their holdings and waiting to see what’s going to happen.”

Foreign investors, who were the net buyers of 126.7 million shares on the Egypt’s benchmark EGX30 Index until Sept. 14, became net sellers of 54.3 million shares in the three days after the ruling against Talaat Moustafa, according to data compiled by Cairo-based EFG-Hermes Holding SAE. Talaat Moustafa and Palm Hills accounted for more than a quarter of trading volume during the period, according to Bloomberg calculations.

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Potential Lawsuits

UBS Holders Urge Bank to Consider Legal Action on Ex-Executives

UBS AG shareholders sent a letter to Chairman Kaspar Villiger urging him to reconsider the bank’s decision not to pursue legal action against former executives and board members.

Deminor, Actares and Euroshareholders “strongly request” the board of directors of the Zurich-based bank to confirm by Oct. 7 that it will reconsider the decision, the investors said in the letter, dated Sept. 17 and sent to media by e-mail yesterday. They didn’t disclose how many UBS shares they hold or represent.

UBS, which amassed more than $57 billion in writedowns and losses in the credit crisis, last year decided not to file charges against former executives after about 10 internal and external investigations.

Villiger told shareholders that the board will address the question of possible legal action again, adding that he still doesn’t expect lawsuits to follow because investigations haven’t found sufficient evidence.

Deminor and Actares have said they may consider taking legal action themselves if they find enough large shareholders to support them.

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Trials/Appeals

Pershing, Winthrop Seek Halt of Stuyvesant Foreclosure

Pershing Square Capital Management LP and Winthrop Realty Trust sought a court order halting the lender foreclosure of New York City’s Stuyvesant Town Peter Cooper Village apartment complex.

Pershing, a hedge fund run by William Ackman, and Winthrop filed a request yesterday with a state appeals court in Manhattan seeking to stay the Oct. 4 foreclosure planned by senior debt holders, said Edward Weisfelner, a lawyer for Pershing and Winthrop, in an interview. The firms are seeking to control the residential complex on Manhattan’s east side.

The move comes after Pershing and Winthrop, both junior debt holders, lost their bid to proceed with their own foreclosure sale. A lower court judge last week issued a preliminary injunction blocking their attempt. Yesterday’s motion includes a bid for an expedited appeal.

CWCapital Asset Management LLC, the special servicer for the senior mortgage, is seeking to move forward with its foreclosure after Stuyvesant Town owner Tishman Speyer Properties LP defaulted on its $3 billion senior loan and $1.4 billion of mezzanine, or junior, debt.

Greg Cross, a lawyer for CWCapital, declined comment.

The appeals court case is Bank of America NA v. PSW NYC LLC, 10-651293, New York State Supreme Court, Appellate Division, First Department (Manhattan).

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Dow Chemical Unit Stands Trial Over Illinois Cancer Cluster

A Dow Chemical Co. unit caused about 30 residents of an Illinois community to develop brain cancer because of industrial pollution from one of its plants, a lawyer told jurors.

A plant operated by Dow subsidiary Rohm & Haas dumped and leaked vinyl chloride, a byproduct of the plastics-making process, poisoning the air and water around McCullom Lake in northwestern Illinois, Aaron Freiwald, the residents’ lawyer, told a Philadelphia jury yesterday. Dow bought Philadelphia- based Rohm & Haas for $15.7 billion last year.

For 17 years, Rohm & Haas workers dumped “toxic chemical waste that causes cancer” into a pit at the Ringwood, Illinois- based plant, Freiwald, who represents the family of Franklin Branham, said in opening statements of a lawsuit over his death.

McCullom Lake residents contend the brain cancers suffered by Branham and others resulted from decades of exposure to carcinogenic vinyl chloride. Branham died in 2004 at age 63, according to court filings. Rohm & Haas officials dispute assertions that pollution from the plant fouled area wells or that the community is suffering from a pollution-related cancer cluster.

“The science will show chemicals from the Ringwood plant did not cause Mr. Branham’s cancer,” Kevin Van Wart, Rohm & Haas’s lawyer, told jurors in his opening statement.

Judge Allan Tereshko, who is presiding over the case in Philadelphia Common Pleas Court, told jurors yesterday the trial could last as long as 10 weeks.

The case is Joanne Branham v. Rohm & Haas Co., May Term 2006, 003590, Court of Common Pleas of Philadelphia County (Philadelphia).

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Yum! Brands KFC Unit’s Trial Begins Over ‘Grill Baby Grill’

Yum! Brands Inc.’s Kentucky Fried Chicken unit and some of its franchisees are embroiled in a battle over advertisements for crispy-versus-grilled products in a nonjury trial that began yesterday in Delaware.

The franchisee-dominated KFC National Council and Advertising Cooperative Inc., which designs marketing programs for the world’s most popular chicken restaurant chain, contends that KFC President Roger Eaton is seeking to promote grilled chicken over the company’s traditional product.

“It was ‘grill baby grill’” even though sales were falling and it seemed “things went to hell in a hand basket,” franchisee John R. Neal, who has 201 stores in 11 states, testified yesterday in Delaware Chancery Court in Wilmington.

The council’s January lawsuit contends ads for the company have been “lopsided towards grilled chicken” and asked Judge Leo Strine Jr. to determine who has authority to decide what to advertise.

The council has 17 board members, 13 of them representing franchisees that operate 83 percent of KFC outlets. KFC “has recently taken the position that KFC Corp. has the sole authority” to direct advertising, and the council can’t “modify or suggest changes” to KFC proposals, according to court papers.

Yum, based in Louisville, Kentucky, has said the lawsuit is “baseless.”

The case is KFC National Council v. KFC Corp., CA5191, Delaware Chancery Court (Wilmington).

Tax Fraud Trial Witness Denies Signing Documents

A prosecution witness at the tax fraud trial of hotel developer Mauricio Cohen Assor and his son testified yesterday that he never signed documents showing he owned companies at the heart of the case.

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 that concealed income and $150 million in assets. Cohen Assor hid assets through companies listed in the names of others, including his brother-in-law, Habib Levy Sibony, prosecutors say.

Levy Sibony testified he didn’t sign documents showing he owned a British Virgin Islands corporation, Whitebury Shipping Time-Sharing Ltd. Prosecutors say Cohen Assor used Whitebury to hide a $45 million investment portfolio from the IRS. Cohen Assor and his son deny they owned Whitebury. Levy Sibony said he didn’t sign a series of Whitebury documents.

“It’s not my signature,” Levy Sibony, a resident of Caracas, told jurors in Spanish, as an interpreter translated. “Supposedly, it’s my signature. But it’s not.”

Prosecutors are trying to show that Cohen Assor and his son used forged documents and false statements to defraud the IRS.

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

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James Hardie Industries to Appeal Australia Tax Dispute Ruling

James Hardie Industries, the biggest seller of home siding in the U.S., said it will appeal an Australian federal court ruling saying it owes back taxes on a A$478 million ($449 million) gain from a 1999 reorganization.

Federal Court of Australia Judge Margaret Stone on Sept. 1 upheld the Australian Taxation Office’s decision that Dublin- based James Hardie’s RCI unit owed the taxes, which the company said may result in a $330 million charge.

James Hardie “will remain in compliance with its debt covenants should a charge be taken,” the company said yesterday in a statement. “No cash will be required to be exchanged between RCI and the ATO until the matter has been ultimately resolved” except for quarterly interest payments on an unpaid balance of $168.8 million.

RCI was a holding company for James Hardie Group’s non- Australian operations and owned all the shares of a U.S. unit that held the company’s U.S. operations. In October 1998 RCI sold its shares in the U.S. unit to a new European holding company which planned to sell stock to the public. The initial public offering in the European unit didn’t proceed.

The case is RCI Pty Ltd. v. Commissioner of Taxation of the Commonwealth of Australia, NSD1336/2007, Federal Court of Australia (Sydney).

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To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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