GMAC, ACPI Investments, J&J, AstraZeneca, Venezuela, BP, KFC in Court News

Texas and Iowa have begun investigations into foreclosure practices at Ally Financial Inc.’s GMAC mortgage unit.

Texas Attorney General Greg Abbott opened an investigation “early this month,” said Tom Kelley, a spokesman for the office. Iowa Attorney General Thomas J. Miller began his own investigation into the company yesterday, Assistant Attorney General Patrick Madigan said.

“The integrity of the foreclosure process is of utmost importance and we are very concerned by the issues that have been raised regarding Ally Financial’s treatment of affidavits,” Madigan said. Iowa leads an 11-state working group of attorneys general and bank examiners exploring ways to prevent foreclosures.

Gina Proia, an Ally Financial spokeswoman, declined to comment.

Iowa and Texas follow an announcement by Florida Attorney General William McCollum, who last month said he was investigating three Florida law firms handling foreclosures.

Florida investigators issued subpoenas in the case to the Law Offices of Marshall C. Watson PA, Shapiro & Fishman LLP and the Law Offices of David J. Stern PA, according to a news release posted on the attorney general’s website.

The law firms were hired by loan servicers to begin foreclosure proceedings when consumers were in arrears on their mortgages, according to McCollum’s office.

Homeowners facing eviction have accused the companies of filing foreclosure actions without verifying that borrowers actually defaulted or who owns the loans.

The company notified agents and brokers on Sept. 17 that it had suspended evictions in 23 states. This week, Ally, the Detroit-based auto and home lender, said it found a “technical” deficiency in its foreclosure process allowing employees to sign documents without a notary present or with information they didn’t personally know was true.

New Suits

Ex-ACPI Partner Sues on Bonus, Bullying at U.K. Firm

The former chief investment officer of ACPI Investments Ltd.’s fund-of-hedge-funds business sued the firm for underpaying his bonus and claimed he was bullied by management.

Stephen Greene, who joined ACPI’s predecessor in early 2008 as a partner, said in the complaint filed in a London court this month that he was “bullied, harassed and threatened.”

“There was a ‘culture of aggression’ within the defendant in which partners shouted, swore and bullied staff on a regular basis,” Greene said in the complaint. The company said the claims are based on “fallacy.”

ACPI, which is based in London and says it manages more than $2.75 billion, was formed last year by the merger of ACP Partners LLP and TriAlpha Investment Advisors Ltd. Former Goldman Sachs Group Inc. partner Alok Oberoi helped found ACP in 2001 with a former Goldman colleague. Brett Lankester, the former head of Goldman’s U.K. private client business, joined ACP in 2007 and is now co-CEO of ACPI with Oberoi.

Lankester said in an interview yesterday that the company was defending the suit “extremely vigorously, and the truth will come out in court.”

“The whole case is completely baseless, it’s nonsense,” Lankester said. “There’s not a single one of his assertions which is based in fact.”

The case is Stephen Greene v. ACPI Investments Ltd., High Court of Justice, Queen’s Bench Division (London).

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Lawsuits/Pretrial

Mortgage Investors Target Banks Through Novel Clearing House

Talcott Franklin, a former partner at lobbying firm Patton Boggs LLP, found a unique solution to a big problem: getting money back for investors in residential mortgage-backed securities that went bad. Franklin created a clearing house where investors can pool claims and potentially create the necessary legal clout to force mortgage lenders to buy back improperly made loans at the heart of the securities, Bloomberg’s Thom Weidlich and Jody Shenn report.

Before Franklin’s innovation, investors in such securities had no way of knowing who other investors were. Franklin’s approach may cost banks such as Bank of America Corp. billions of dollars. Lenders can be required to buy back securitized mortgages if they misrepresented their quality.

“If we’re going to have a mortgage system in this country that’s not government controlled, this effort or an effort like it will have to succeed,” says Bill Frey, head of Greenwich, Connecticut-based securities firm Greenwich Financial Services LLC. If the investors “don’t act together, the deals are going to continue to take huge losses.”

Mortgage securities have been among the largest sources of the $1.8 trillion of writedowns and credit losses suffered by the world’s biggest financial companies since the start of 2007, according to data compiled by Bloomberg.

Mortgage repurchases have cost the four biggest U.S. lenders -- Bank of America, JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. -- $9.8 billion, according to Credit Suisse Group AG. The total could exceed $179 billion for 11 of the largest lenders, according to Chris Gamaitoni of Compass Point Research and Trading LLC, a Washington-based investment bank.

Franklin’s RMBS Investor Clearing House -- “RMBS” stands for “residential mortgage-backed securities” -- is a “brave new venture” that confronts the issue of having “these very diverse, and even diffuse, interests even within a particular securitization structure,” said Jeff Nielsen, of Chicago-based Navigant Consulting Inc., who analyzes MBS litigation.

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J&J Faces Shareholder Fraud Lawsuit Over Motrin Recalls

Johnson & Johnson was sued for fraud over claims it lied to investors about contamination at manufacturing plants and about the repurchase of defective Motrin tablets from store shelves by J&J-hired consultants.

The complaint by shareholder Ronald Monk claims J&J made misleading statements before disclosing contamination at plants in Puerto Rico and Pennsylvania, and the Motrin recall is now under investigation by Congress. Monk’s complaint also cites the April 30 recall of more than 40 types of children’s medicines.

“As a result of the blatant, systemic, and repeated failure of defendants to maintain proper manufacturing practices at their facilities, defendants have been forced to issue over eight separate recalls including dozens of products and hundreds of millions of individual packages,” the complaint alleges.

The lawsuit, filed Sept. 21 in federal court in Newark, New Jersey, comes amid a U.S. criminal investigation of the recalls and a probe by a congressional panel that has scheduled a hearing on J&J for Sept. 30. The company’s lawyers told the House Committee on Oversight and Government Reform in a letter yesterday that U.S. regulators knew its McNeil Consumer Healthcare unit was recalling Motrin caplets last year.

Carol Goodrich, a spokeswoman for New Brunswick, New Jersey-based J&J, declined to comment on the lawsuit.

Company lawyers said that its McNeil unit informed the U.S. Food and Drug Administration it was using a contractor to buy defective Motrin from store shelves, according to a letter obtained by Bloomberg News. Lawmakers investigating J&J and FDA in the matter have dubbed the actions a “phantom recall.”

The case is Monk v. Johnson & Johnson, 10-cv-4841, U.S. District Court, District of New Jersey (Newark).

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Trials/Appeals

U.S. Court Rejects Venezuelan Claim of Immunity to Bond Suit

A U.S. appeals court rejected arguments from the Venezuelan government that it’s immune from having to litigate in an American court an Ohio company’s lawsuit seeking to collect on $100 million in bank notes.

The Cincinnati-based three-judge panel voted 2-1 in favor of upholding a trial judge’s ruling that federal courts can hear the claim, while leaving open the question of where the case should be litigated.

Skye Ventures, based in Columbus, Ohio, acquired the promissory notes in reliance upon an October 2003 memo from the Venezuelan finance ministry’s solicitor general, who said they were valid. The South American nation subsequently said the notes, allegedly issued by state-owned Banco de Desarrrolo Agropecuario, also known as Bandagro, were forgeries and refused to honor them, according to the appeals court.

“This is a huge victory for us after five years of court battles,” Skye Ventures President David J. Richards said in a statement. Venezuela had sought dismissal of the case.

The court’s majority said that while Venezuela would ordinarily be entitled to sovereign immunity, Skye had demanded payment in the U.S. and Venezuela’s refusal “caused a direct effect in the United States,” voiding its immunity claim.

Dissenting, U.S. Circuit Judge Boyce F. Martin said he didn’t believe Venezuela had surrendered its immunity because it had been Skye’s choice to demand payment at an American bank.

The appellate panel returned the case to U.S. District Judge John Holschuh in Columbus to determine whether that court is an inconvenient forum for the Venezuelan government and whether the case should be litigated in the South American nation.

Attorney Jay Kelly Wright of Washington’s Arnold & Porter, argued the case for Venezuela. He didn’t immediately reply to after-hours voice-email and e-mail messages seeking comment.

The case is DFRP LLC v. The Republica Bolivariana de Venezuela, 09-3424 and 09-3725, in the U.S. 6th Circuit Court of Appeals.

Venezuelan Banker Presses Graft Case Against Chavez Allies

Venezuelan banker Eligio Cedeno, whose U.S. lawsuit claims seven of his country’s top officials engaged in extortion and money laundering, asked a federal appeals court to reverse the judge who dismissed his case.

U.S. District Judge Jed Rakoff in Manhattan ruled Aug. 25 that Cedeno’s allegations against senior members of President Hugo Chavez’s government don’t come under the jurisdiction of U.S. courts. Cedeno’s racketeering suit claims he was framed as a conspirator in a money-laundering scheme that pressured him into selling his banks to Chavez allies.

“The racketeering law does extend to our case,” Jerome Marcus, one of Cedeno’s lawyers, said in a telephone interview from Jenkintown, Pennsylvania. “It was a money laundering scheme designed to obtain American dollars out of American bank accounts and to distribute them through an American company using its U.S.-based account.”

Cedeno filed his appeal with the U.S. Court of Appeals in New York Sept. 22.

Michael Diaz Jr., lead counsel for Ruben Idler, one of the defendants, said Cedeno is using the case to avoid extradition to Venezuela.

“It was a correct ruling on the law and a significant victory for the Venezuelan authorities who have asked the U.S. for the extradition of Cedeno,” he said in a statement after Rakoff’s decision.

The case is Cedeno v. Intech Group Inc., 09-cv-09716, U.S. District Court, Southern District of New York (Manhattan).

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AstraZeneca Appeals EU Ruling Over Abuse of Patent Position

AstraZeneca Plc appealed to the European Union’s highest court over a decision that it flouted antitrust rules to keep generic competitors off the market.

AstraZeneca is seeking to overturn a lower EU court’s ruling that said it “abused its dominant position” by hindering the marketing of generic copies of its Prilosec heartburn medicine.

The U.K.’s second-largest drugmaker is challenging the decision “on several grounds,” including whether there was an abuse of its market power, the London-based company said in an e-mailed statement yesterday.

AstraZeneca, its bigger U.K. rival GlaxoSmithKline Plc and Sanofi-Aventis SA are among companies the Brussels-based European Commission has queried as part of an antitrust probe into tactics to keep copies of their medicines off the market.

The case is C-457/10 P Pending Case, AstraZeneca v Commission.

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BP Ex-Commodities Head Quek Says Firm Had ‘Atmosphere of Fear’

BP Plc’s former head of commodities trading Quek Chin Thean, who is accused by the oil company of misusing confidential information and helping a rival, told a Singapore court he backed up the data because there was an “atmosphere of fear” at the firm.

BP had been “conducting oppressive and disproportionate investigative proceedings against its employees and ex- employees,” Quek, 41, said in papers filed in the Singapore High Court Sept. 22. “It was this general atmosphere of fear in the BP Group that prompted me to back up my working e-mails and documents as a precaution.”

The London-based oil company sued Quek and five other former employees, claiming they wrongfully downloaded and misused confidential information, including oil-trading “cheat sheets.” BP accused the group of helping rival Shenzhen Brightoil Group set up a competing business in Singapore. Quek was fired on July 9.

Quek, Clarence Chang, John Foo and Laura Kuan countersued BP last month for wrongful dismissal and claimed the company wrongfully withheld money owed to them. The group, including former head of operations Paul John Bradshaw and legal manager Simon Cheong, has denied misusing any of BP’s trade secrets.

Lau Lu Ching, a Singapore-based BP spokeswoman, declined to comment when telephoned by Bloomberg News.

The case is BP Singapore Pte v. Quek Chin Thean & Ors S482/2010 in the Singapore High Court.

KFC Executive Denies He Is Favoring Grilled Products

The president of Yum! Brands Inc.’s Kentucky Fried Chicken unit told a judge he’s being wrongly accused of favoring grilled products over crispy fare, and said franchisees are trying to dominate advertising choices.

Roger Eaton, who earlier supervised restaurant operations in the South Pacific, said he took over the U.S. job in 2008, and is trying to facilitate improvements for the chain.

Grilled chicken “is a very important part of KFC’s future” but crispy fried chicken “is the most popular” and the cornerstone of the company’s business, Eaton told Delaware Chancery Court Judge Leo Strine Jr. in the fourth day of a non- jury trial in Wilmington.

The KFC National Council and Advertising Cooperative Inc., the designer of marketing programs for the world’s most-popular chicken restaurant chain, sued KFC in January contending that Eaton is slighting the original product and the ads he favors are “lopsided towards grilled chicken.”

The council has 17 board members, 13 from franchisees. Strine is being asked to decide whether KFC “has the sole authority” to direct advertising, and whether the council can “modify or suggest changes” to KFC proposals, according to court papers.

The case “is not about grilled versus fried,” it’s about control, and if the council prevailed, it would be “disastrous” for the brand, Eaton said.

He said the council “is trying to take control of marketing and advertising,” which would affect KFC’s accountability to franchisees, suppliers, consumers and Yum shareholders.

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

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Corporate Secret, Trademark Lawsuits Soared in U.K. Last Year

Lawsuits to shield corporate secrets more than quadrupled in London last year and trademark cases rose 20 percent as more companies sought to protect intellectual property during the economic slowdown.

Disputes over trade secrets at the High Court increased from 23 two years ago to 95 last year, while intellectual- property cases overall rose 37 percent, the U.K. Ministry of Justice said yesterday. Patent cases rose 17 percent.

Intellectual-property lawsuits doubled during the past five years to account for 16 percent of all cases, the ministry report said. Last year, cases included Diageo Plc’s lawsuit against grocer J Sainsbury Plc over the Pimm’s drink label and Pernod Ricard SA’s case against Absolute Radio to protect the Absolut vodka trademark.

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Litigation Departments

U.K. Law Firm Revenue Increases ‘Modest’ 5%, Deloitte Says

Britain’s 100 biggest law firms increased their quarterly revenue by an average of 5 percent amid continued “uncertainty” about the economy, according to a survey.

The “modest” boost was due to higher rates and more billable hours over the three-month period that ended July 31, compared with a year earlier, accounting firm Deloitte LLP said in a statement. The U.K.’s 10 biggest firms, including the top- five “Magic Circle” firms led by Clifford Chance LLP, had smaller average increases of 3.7 percent, Deloitte said.

Clifford Chance regained its spot as the highest-grossing

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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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