Ohio sued Ally Financial Inc., claiming the lender used fraudulent practices in foreclosing on home mortgages, Richard Cordray, the state’s attorney general, said.
The state’s suit alleges that Ally’s GMAC mortgage unit violated state consumer law and committed fraud by filing false affidavits in foreclosure proceedings, Cordray said at a news conference yesterday in Cleveland. The state will seek penalties of as much as $25,000 for each violation, he said.
While Ohio residents “were fighting to save their homes, this loan servicer benefitted financially from the dire circumstances,” Cordray said. “The law requires that foreclosures as well as home sales be handled properly.”
Cordray is one of at least seven state attorneys general in the U.S. probing whether lenders used false documents and signatures to justify hundreds of thousands of foreclosures. Ally, JPMorgan Chase & Co. and Bank of America Corp. have suspended foreclosures or evictions in 23 states where courts have jurisdiction over home seizures.
Cordray said he would also ask JPMorgan and Bank of America to stop foreclosures and sent letters to Wells Fargo & Co. and Citibank Inc. seeking a meeting to discuss affidavit procedures.
Gina Proia, a spokeswoman for Ally, declined to comment.
Alberto-Culver Sued by Fund Over Unilever Offer
Alberto-Culver directors are obligated to get the highest price for the stock, attorneys for the Laborers Local 235 Benefits Fund said in a lawsuit filed Oct. 5 in Delaware Chancery Court in Wilmington.
“The process leading up to the board’s decision to agree to the proposed transaction was severely flawed, and not in any way designed to elicit the most economically favorable transaction for Alberto-Culver’s shareholders,” John Kairis, a lawyer for the fund, wrote in the complaint.
Unilever, the maker of Dove soap, agreed to pay $37.50 a share in cash for Alberto-Culver, based in Melrose Park, Illinois. That’s about 19 percent more than the Sept. 24 closing price. The companies agreed to a $125 million fee if the deal is terminated.
Dan Stone, a spokesman for Alberto-Culver, said the company hadn’t seen the complaint and he couldn’t immediately comment.
The case is Laborers Local 235 Benefits Fund v. Lavin, CA5873, Delaware Chancery Court (Wilmington).
Petters Group Trustee Sues Firm for $105 Million
The bankruptcy trustee for Petters Group Worldwide LLC, whose founder was convicted of fraud last year, sued a Minneapolis investment firm seeking to recoup at least $105 million for creditors.
The lawsuit, filed at the U.S. Bankruptcy Court in Minneapolis Oct. 5, alleges that Arrowhead Capital Management LLC and affiliated funds could be liable for as much as $5.1 billion transferred to them over more than 10 years.
Thomas Petters was convicted by a federal jury in St. Paul, Minnesota, last year for leading a $3.5 billion Ponzi scheme and sentenced to 50 years in prison in April. Arrowhead and its affiliates received money from Petters that had come from other investors, the trustee said.
“Defendants knew or should have known that they were benefiting from fraudulent activity or, at a minimum, failed to exercise reasonable due diligence with respect to Petters” and its affiliates, according to the complaint filed by Douglas Kelley, the trustee.
Arrowhead founder James Fry didn’t return a call seeking comment.
The Arrowhead lawsuit is the largest so far stemming from the Petters bankruptcy. The trustee yesterday also sued a Houston investment firm, Ark Royal Capital LLC, seeking to recoup $1.2 million for the estate.
The bankruptcy case is In re Petters Co., 08-45257, and the lawsuit is Kelley v. Metro I LLC, 10-04328, U.S. Bankruptcy Court, District of Minnesota (Minneapolis).
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Airgas Would Have Weighed Bid of $70 a Share, CEO Says
Airgas Inc.’s chief executive officer testified that he would have considered a $5.9 billion buyout bid from Air Products & Chemicals Inc. last month after shareholders voted to knock three incumbent directors off the gas company’s board.
Airgas’ CEO Peter McCausland said one of his company’s bankers was approached by an Air Products lawyer after the Sept. 15 vote and said the maker of industrial gasses might be ready to pay as much as $69 per share for its smaller rival. Airgas has rebuffed Air Products’ $5.5 billion purchase offer.
If “Air Products made a $70 bid and did the things I wanted, I’d recommend” the offer to the board, McCausland testified in the trial of Air Products’ lawsuit over Airgas’ refusal to accept its bid. At $70 per share, the offer would have been worth $5.9 billion as of Sept. 15.
Air Products, the second-biggest U.S. industrial-gases producer behind Praxair Inc., sued Radnor, Pennsylvania-based Airgas on Feb. 4 to force consideration of the bid.
As part of the case, Airgas is asking Chandler to invalidate a bylaw approved Sept. 15 by shareholders that added three Air Products nominees to the Airgas board. The bylaw would also move Airgas’s annual meeting to January from April at the earliest.
Moving up the annual meeting will unfairly allow Air Products to try to knock more Airgas nominees off the board and take control, according to Airgas executives. Chandler has agreed to decide both issues in the nonjury trial.
The case is Air Products & Chemicals Inc. v. Airgas Inc., 5249, Delaware Chancery Court (Wilmington).
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BGC Sues 8 Ex-Mint Brokers for Joining Rivals
BGC Partners Inc., an inter-dealer brokerage, is suing to prevent eight brokers who worked for a London-based firm it acquired from leaving to work for rivals.
The two sides have agreed the eight men won’t begin working for firms including BGC rival GFI Group Inc. for at least another two weeks, when another hearing in the case is scheduled, lawyers for BGC and the brokers said at a court hearing yesterday in London. New York-based BGC added more than 100 brokers in August by acquiring Mint Partners and Mint Equities, where the eight defendants worked.
“As a small number of brokers failed to honor the transference of their contracts during this transition, BGC is determined to protect its business interest against contractual interference and unlawful conduct,” BGC spokesman Robert Hubbell said in a statement yesterday.
The brokers -- Andrew Goddard, Simon Johnson, Alan Moutrie, Garry Johnson, Ray White, Carl Racey, Warren Mueller, and Stephen Johnson -- were sued by BGC in September, according to court papers. In March, a London judge ruled that BGC and two of its executives unlawfully conspired to hire Tullett Prebon Plc staff.
James Corrish, a lawyer representing four of the defendants, declined to comment on the case or on who is advising the others.
The case is BGC Brokers LP v. Johnson & ors, case no. HQ10X03696, High Court of Justice, Queen’s Bench Division (London).
Kerviel Says He Feels ‘Crushed’ by SocGen Verdict
Jerome Kerviel said he feels “crushed by the weight of the punishment,” in his first interview after being sentenced to three years in jail and ordered to repay Societe Generale SA for its 4.9 billion-euro ($6.8 billion) trading loss.
Judge Dominique Pauthe held Kerviel solely responsible for the loss Oct. 5, saying he deceived the bank in amassing 50 billion euros in futures positions. He found Kerviel guilty on all three counts: breach of trust, forging documents and computer hacking.
“I have the feeling like they want to make me pay for all,” Kerviel told Europe1 radio yesterday. The former trader will remain free pending appeal. Meanwhile, he said he’ll continue working as a computer consultant, a profession he got into after being fired from France’s second largest bank in 2008.
The trading loss, announced Jan. 24, 2008, prompted Societe Generale’s then-chief executive officer Daniel Bouton to describe Kerviel as a “terrorist.” The court rejected defense arguments that his superiors knew of his actions and that the bank’s decision to unwind the bets over three days of falling markets caused the loss.
The bank indicated it is open to negotiations on the restitution Kerviel was ordered to pay.
“We are a responsible bank and have no desire to drive a man into debt for so many years,” Caroline Guillaumin, a spokeswoman for Societe Generale, said in an interview yesterday with France Info radio. The bank is “totally open” to finding “a solution reasonable to all parties.”
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Wells Fargo Resolves Mortgage Claims by Eight States
Wells Fargo & Co. agreed to pay $24 million to eight states and make more than $772 million in loan modifications to resolve allegations that companies it acquired deceptively marketed adjustable rate mortgage loans.
The states claimed Wachovia Corp., which bought World Savings Inc. and was then acquired by Wells Fargo’s home mortgage unit in 2009, left consumers with massive debt by failing to give proper warning of the effect “pick-a-payment” adjustable rate mortgages could have. The low payment options often didn’t cover monthly interest, leading to defaults and foreclosures, the states said.
“In many cases, those who seek out these ‘minimum payment’ option mortgages are the very people who have the most limited financial resources,” New Jersey Attorney General Paula T. Dow said in a statement. “Signing them up for loan terms that sound attractive without warning them of the potential pitfalls is wrong.”
Wells Fargo will forgive interest and late fees for eligible delinquent borrowers, the states said. Loan modifications will be offered to 8,715 borrowers, Arizona Attorney General Terry Goddard said in a statement yesterday. The total economic value of these modifications, including reduced interest rates, term extensions and forgiveness of principal is more than $772 million, Goddard said.
The six other states covered settlement are Colorado, Florida, Illinois, Nevada, Texas and Washington.
San Francisco-based Wells Fargo said yesterday that the $24 million payment will be used to help the states with customer outreach and to prevent or mitigate the impacts of foreclosures in their communities.
“In light of the unprecedented changes in our economy, Wells Fargo will continue to work with leaders across the nation to help stabilize communities,” Mike Held, co-president of Wells Fargo Home Mortgage, said yesterday in a statement.
Ex-Jefferies Money Manager Guilty of Insider Trading
Joseph Contorinis, a former money manager for the Jefferies Paragon Fund, was convicted in an insider trading scheme that prosecutors say netted more than $7 million in illegal profits.
A federal jury in Manhattan yesterday convicted Contorinis, 46, of seven counts of securities fraud and one count of conspiracy to commit securities fraud. Prosecutors claimed Contorinis illegally traded on inside merger tips supplied by Nicos Stephanou, an investment banker who was the government’s chief witness in the trial.
“Today’s guilty verdict sends yet another strong message of deterrence to anyone who is thinking about gaming the system like Joseph Contorinis did,” Preet Bharara, U.S. Attorney for Manhattan, said in a statement.
Contorinis faces as long as 20 years in prison on the securities fraud counts and five years on the conspiracy count when he’s sentenced Feb. 4. The jury, which delivered the verdict on its second day of deliberations, also acquitted Contorinis on two securities fraud counts.
Mark Pomerantz, a lawyer for Contorinis, didn’t return a phone message seeking comment on the verdict.
The case is U.S. v. Contorinis, 09-CR-1083, U.S. District Court, Southern District of New York (Manhattan).
New York City Pension Fund Settles Apple Class Action
Apple Inc. has agreed to pay $16.5 million to settle a class action suit by the New York City Employees’ Retirement System that the company improperly backdated stock options between 2001 and 2006, the city said in a statement.
Apple will return $14 million to shareholders and contribute a total of $2.5 million to corporate governance programs at various U.S. universities, including Harvard, Yale and Columbia, the city Comptroller’s office and Law Department said in a statement.
Administrative and attorneys’ fees of $4 million will be paid separately by Apple, the statement said, bringing the total value of the settlement over $20 million.
“This settlement is an excellent example of shareholder advocacy and compensates shareholders for systemic options backdating at the company,” Corporation Counsel Michael A. Cardozo, the city’s chief legal officer and counsel to the city’s pension funds, said in the statement. “We are happy to have reached an accord with Apple after four years of litigation.”
Steve Dowling, a spokesman for Apple, had no immediate comment.
The city will seek preliminary approval of the settlement in U.S. District Court for the Northern District of California tomorrow, the statement said.
Those eligible for distributions from the settlement fund purchased Apple common stock at a price in excess of $65.71 between Aug. 24, 2001, and June 29, 2006, the statement said.
Ambac to Withdraw $6 Billion in Claims Against Lehman
Ambac Financial Group Inc. agreed to withdraw more than $6 billion in claims against bankrupt Lehman Brothers Holdings Inc. in a proposed settlement of disputes between the two companies over derivatives transactions, according to a court filing.
The claims, filed in September 2009, were based on Lehman’s “purported breach of obligations” related to residential mortgage-backed securities deals with Ambac, Lehman said in an Oct. 5 filing in U.S. Bankruptcy Court in New York. Settling with Ambac, Lehman would release the insurer from demands for unspecified payments and from liabilities under derivatives transactions insured by Ambac, it said.
Ambac, the second-largest bond insurer before the onset of the credit crisis, lost its AAA credit ratings in 2008 after a surge in losses on securities backed by mortgages. In March, it started “rehabilitation proceedings” in a Wisconsin court that bars Lehman from suing the company over the claims or insured derivatives deals, according to the filing.
Even if it could sue, “the cash payout received in the rehabilitation proceedings would likely be only a fraction of the face amount of any claim the debtors may ultimately acquire,” Lehman said.
Lehman’s proposed settlement, which needs a judge’s approval, comes up for a hearing on Oct. 20.
The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Novartis Wins Trial Over Jaw Injury Blamed on Drugs
A New Jersey jury ruled that Novartis AG, the Swiss drugmaker, provided adequate warnings about the risk of its bone-strengthening medicines, rejecting a lawsuit by a woman who claimed the drugs destroyed her jaw.
Jane Bessemer, 73, sued Novartis after developing jawbone damage while taking Aredia and Zometa to slow bone loss as she battled breast cancer. Jurors in state court in New Brunswick, New Jersey, ruled that Novartis provided adequate warning to Bessemer’s physician of jaw problems from Aredia and Zometa.
“There is not anything in this record to show that Novartis deliberately concealed anything,” Joe Hollingsworth, a company attorney, said in his closing argument yesterday.
Bessemer’s suit was the second product-liability case to go to trial over the bone-strengthening treatments, which had 2009 sales of $1.5 billion, according to Novartis’ annual report. Both drugs are still on the market. Last year, a Montana jury ordered Basel, Switzerland-based Novartis to pay $3.2 million in damages to a woman who blamed the drug for damaging her jaw.
Bessemer, who testified at a trial that began Sept. 23, said the drugs contributed to her condition, known as osteonecrosis. She declined comment after the verdict. Her attorney, Robert Germany, said he was disappointed with the jury’s ruling.
Novartis, which has its U.S. headquarters in East Hanover, New Jersey, faces about 550 lawsuits over the drugs, consolidated before a federal judge in Tennessee. About 150 more cases are in state court in New Brunswick, according to Germany.
The case is Bessemer v. Novartis Pharmaceuticals Corp., MID-L-1835-08-MT, Superior Court of New Jersey, Law Division, Middlesex County (New Brunswick).
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Landry’s Lawsuits Are Settled, Company Is Sold
Fertitta, Landry’s majority shareholder, eventually offered $24.50 a share. In one case, after negotiations, the takeover price increased by $65 million, according to court papers. To resolve a second case, investors will share in a $14.5 million fund.
“This is a settlement that it’s a pleasure to review,” Delaware Chancery Court Judge J. Travis Laster said yesterday at a hearing in Wilmington. He awarded the shareholders’ lawyers about $12.2 million in legal fees and expenses, calling the amount “reasonable and well-earned.”
Although he wanted to buy the company “as cheap as possible,” plaintiffs’ lawyer Stuart M. Grant told the judge, “Fertitta is a key element to the success of this business.”
The company started in 1980 in Katy, Texas, and operates restaurants including the Rainforest Café and Saltgrass brands and Golden Nugget Hotel and Casino, according to its website.
The settlement fund, expected to come from insurance proceeds, will be distributed to eligible shareholders who file claims, court papers show.
The consolidated case is Louisiana Municipal Police Employees’ Retirement System v. Tilman J. Fertitta, CA4339, Delaware Chancery Court (Wilmington).
Father-Son Hotel Developers Convicted of Tax Crimes
A federal jury in Florida convicted a father and son of hiding a $33 million hotel sale from U.S. tax authorities while living a lavish lifestyle.
Mauricio Cohen Assor, 77, and Leon Cohen Levy, 46, were convicted yesterday of conspiring to defraud the Internal Revenue Service and filing false tax returns. The men, who built hotels under the “Flatotel” brand, testified they were innocent. Both men face as long as 11 years in prison.
Prosecutors said the Cohens used offshore companies, friends and family posing as owners, and forged documents to cheat the IRS. They said the Cohens should have declared income from their use of mansions and luxury cars. Michael Pasano, their defense lawyer, said prosecutors gave an “Alice in Wonderland” case built on flawed theories and lying witnesses.
The case is U.S. v. Assor, 10-cr-60159, U.S. District Court, Southern District of Florida (Fort Lauderdale).
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Skadden Adds Lawyers in Asia as Disputes Increase
Skadden, Arps, Slate, Meagher & Flom LLP, the top-ranked legal adviser on mergers and acquisitions, said it is moving two lawyers to Hong Kong to deal with an increase in cross-border disputes and regulatory probes.
Frances Kao, a partner, has moved from Chicago and Kam Nijar, an associate, will move from London, bringing the New York-based law firm’s Asian litigation and arbitration practice to five lawyers, according to Paul Mitchard, who set up the team last year.
A new U.S. law giving financial incentives to people who reveal securities violations, or whistleblowers, may result in more investigations involving Asian companies, said Kao, who has advised U.S.-listed Chinese companies in securities and product- liability lawsuits.
The U.K.’s Bribery Act, which comes into effect in April, will subject Asian companies doing business in the U.K. to the country’s anti-corruption rules, said Mitchard.
Associate Calvin Chan will relocate from Hong Kong to be Skadden’s first disputes lawyers based in Singapore.
Other American law firms building disputes teams in Asia include Los Angeles-based Gibson Dunn & Crutcher LLP and Kobre & Kim LLP.
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To contact the editor responsible for this story: David E. Rovella at email@example.com.