Foreclosures, JPMorgan, Societe Generale, Facebook, Stanford in Court News

Top legal officers of all 50 states opened a joint investigation into home foreclosures, saying they will probe practices at banks and mortgage companies.

The states will conduct a coordinated inquiry into whether banks and loan servicers used false documents and signatures to justify hundreds of thousands of foreclosures, Minnesota Attorney General Lori Swanson said yesterday in a statement.

“Our multistate group has begun inquiring whether or not individual mortgage servicers have improperly submitted affidavits or other documents in support of foreclosures,” the attorneys said in a statement. “The facts uncovered in our review will dictate the scope of our inquiry.”

The National Association of Attorneys General announced yesterday that 49 states would be participating with Alabama the holdout. Alabama will now join the probe, even though “no violations of Alabama law have been alleged at this time,” Attorney General Troy King said in an e-mailed statement.

Officials in at least 10 states including Florida and Ohio previously announced separate probes into questionable foreclosure tactics.

“We look forward to cooperating with the attorneys general,” Tom Kelly, a spokesman for New York-based JPMorgan Chase, said yesterday in a phone interview.

“We will meet with the attorneys general to discuss the concerns they have expressed,” Rick Simon, a spokesman for Charlotte, North Carolina-based Bank of America, said. “On Friday Bank of America announced we will stop foreclosure sales across all 50 states while we complete our review. We believe this demonstrates appropriate concern and a responsible approach.”

Gina Proia, a spokeswoman for Ally, said “GMAC Mortgage is committed to restoring confidence in the foreclosure process and has been working expeditiously on the review and remediation activities for the affected cases.”

“Where we have received official inquiries from individual states, we are responding accordingly,” Proia said in an e- mailed statement.

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Dimon Calls Foreclosure Costs ‘Incremental,’ Mistakes Unlikely

JPMorgan Chase & Co. probably will pay an “incremental” sum to settle foreclosure investigations and there is almost “no chance” the bank made mistakes in seizing homes, Chief Executive Officer Jamie Dimon said.

“It will cost us some money to go back and make sure it’s done right; it will delay some foreclosures,” Dimon told reporters on a conference call yesterday after posting quarterly results. “But the whole mortgage issue costs us so much money now, to me it will be incremental.”

The lender is in talks with state attorneys general and will correct any errors tied to foreclosures, Dimon said. About 115,000 files are under review, according to the bank’s website. It’s unlikely the New York-based firm made mistakes as it seized homes from borrowers who couldn’t pay, he said.

State law enforcement officials, consumer groups and lawmakers have pressed mortgage firms to follow Bank of America Corp., the biggest U.S. lender, which last week curtailed foreclosures nationwide to check whether faulty documents were used to confiscate homes.

Ally Financial Inc.’s GMAC Mortgage unit is also curbing evictions in all 50 states so the lender can review procedures and court affidavits. Litton Loan Servicing LP, a mortgage- servicing business owned by Goldman Sachs Group Inc., said Oct. 8 it’s halting some foreclosures to review how they’re handled.

“We’ve delayed the foreclosure process in almost all of the states to make sure that we’ve got all of these affidavits done right, and it’s going to take a lot of manpower and a couple of weeks to do it,” said Dimon, 54. “At the end of the day, the underlying substance was accurate. There’s almost no chance that we’ve made a mistake.”

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New Suits

Citigroup Sued for Bias by Women Over Pay, Promotions

Citigroup Inc., the fourth-biggest U.S. bank by deposits, was sued for gender discrimination by current and former employees who claim women are paid less than men and are more likely to lose their jobs.

The lawsuit, filed yesterday in federal court in Manhattan, was brought by five former directors and analysts of the New York-based bank and by one current employee. It seeks class- action, or group, status on behalf of women at job levels from analyst to managing director.

The plaintiffs accuse Citigroup of being an “outdated boys club” and allege “systematic and pervasive discrimination and retaliation” in decisions involving compensation, promotion and termination. They seek unspecified damages.

The bank said yesterday in an e-mailed statement that the five former employees were among 70 men and women in the public finance department who lost their jobs as part of a workforce reduction in 2008.

“They were selected based on legitimate business reasons, not based on their gender, and were selected in the very late rounds of the reduction in force,” Citigroup said. “Many of their allegations are either totally inaccurate or selectively incomplete.”

The case is Bartoletti v. Citigroup, 10-cv-7720, U.S. District Court, Southern District of New York (Manhattan).

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Societe Generale Sued in Singapore for Currency Loss

Two Societe Generale SA Singapore private bankers, making wrong bets on currency values, almost wiped out a client’s $10 million account and for years attempted to hide the losses, the investor claims in a lawsuit.

Chan Leong Cheng, a resident of Perth, Western Australia, yesterday sued Societe Generale’s Singapore private bank and the two executives in Singapore’s High Court in a bid to recover $8 million of the losses.

“The defendants’ management of the assets in the account created massive losses,” Chan said in court papers. The bankers “made fraudulent representations to the plaintiff for a long period of time.”

Societe Generale, France’s second-biggest bank, suspended Jenny Liew Marn Leng, an executive director, and her direct supervisor Lilian Ang, after the losses were discovered, Chan said in the court papers. Both bankers had assured Chan for several years the balance in the account was about $8 million and provided statements reflecting that, even though the account had been almost depleted, Chan said.

Vanessa Lee, a Singapore-based spokeswoman at Societe Generale, couldn’t immediately comment on the lawsuit.

Ang intends to defend the claim “vigorously” and will make a counterclaim against Chan, her lawyer Manjit Singh said yesterday. Liew wasn’t immediately available to respond, Singh, whose firm is also representing her, said.

The case is Chan Leong Cheng vs. Societe Generale Bank & Trust Singapore Branch, Liew Marn Leng Jenny and Lilian Ang, S780/2010 in the Singapore High Court.

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SEC Tells U.S. Judge Tourre Lawsuit Should Proceed

The U.S. Securities and Exchange Commission told a judge that its lawsuit against Goldman Sachs Group Inc.’s Fabrice Tourre should proceed because the complaint claims that an unlawful transaction took place in the U.S.

Tourre last month asked a federal judge in Manhattan to dismiss the lawsuit over a Goldman Sachs deal involving collateralized debt obligations because the transaction wasn’t in the U.S. He said the U.S. Supreme Court ruled in June that U.S. securities laws don’t apply to claims of foreign buyers of non-U.S. securities on foreign exchanges.

The agency argues in a court filing yesterday that Tourre, an executive director in the bank’s London office, worked in New York, did business on the deal from New York, and took other steps that give the U.S. court jurisdiction.

While in New York, Goldman Sachs and Tourre “attempted to dispose of, offered to dispose of, and solicited offers to buy securities and enter securities-based swap agreements,” the agency wrote in its 20-page legal brief.

Tourre, the only Goldman Sachs executive sued individually, remains a defendant in the case after the firm agreed to a $550 million settlement in July. In its complaint, the SEC alleged that Goldman Sachs and Tourre misled investors in CDOs linked to subprime mortgages.

The case is SEC v. Goldman Sachs, 10-CV-3229, U.S. District Court, Southern District of New York (Manhattan).

Facebook Claimant Asks Judge to Send Case Back to State Court

The western New York man who claims a 2003 contract with Facebook Inc. founder Mark Zuckerberg entitles him to 84 percent of the company asked a federal judge to send the case back to state court.

A lawyer for Paul Ceglia argued yesterday that the lawsuit against Facebook and Zuckerberg, 26, the company’s chairman and chief executive officer, should be returned to the court in Belmont, New York, where Ceglia filed it in June.

The federal court lacks jurisdiction to hear the suit, James Grable Jr. argued, because Zuckerberg’s legal domicile is his parents’ Dobbs Ferry, New York, home, not in Palo Alto, California, as he claims. U.S. law permits federal courts to hear cases between citizens of different states in which more than $75,000 is at issue.

“He’s got one foot in New York and one foot in California,” Grable told U.S. District Judge Richard Arcara at a hearing in Buffalo, New York.

Zuckerberg claims he started Facebook, the world’s biggest social-networking site, in 2004 as a Harvard University sophomore. He couldn’t have signed away rights to a site he hadn’t yet conceived of, defense lawyers said. They said in court papers that Ceglia’s claim is “preposterous on its face.”

Zuckerberg and Facebook said Ceglia’s request for more information about Zuckerberg’s domicile “is intended solely to burden and harass” them.

Zuckerberg submitted documents to the court that he claims prove he is now a permanent resident of California. These include copies of his California driver’s license, car registration, state tax returns, bills and voter registration. He said his domicile is a rented home in Palo Alto, 10 minutes’ walk from Facebook’s headquarters.

The case is Ceglia v. Zuckerberg, 10-cv-00569, U.S. District Court, Western District of New York (Buffalo).

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Stanford Loses Bid for Lloyd’s Insurance Proceeds

Indicted financier R. Allen Stanford can’t use $100 million in Lloyd’s of London directors and officers insurance coverage to pay lawyers to defend him against criminal charges he ran a $7 billion investment-fraud scheme.

U.S. District Judge Nancy Atlas in Houston ruled that Lloyd’s lawyers, during a four-day August trial, proved it was more likely than not that Stanford “knowingly committed acts of money laundering,” involving the use of corporate funds that should have been disclosed to investors and regulators.

“The court does not reach the issue of whether the evidence supports a finding that Stanford personally engaged in criminal conduct,” Atlas said yesterday in her 45-page ruling.

Stanford and three former top executives at Houston-based Stanford Financial Group were indicted in June 2009 for allegedly swindling investors who bought certificates of deposit issued by Antigua-based Stanford International Bank Ltd.

The executives, who deny any wrongdoing, have claimed that without the Lloyd’s proceeds, they can’t afford to pay defense attorneys because their assets were frozen earlier by court order when the U.S. Securities and Exchange Commission sued them in February 2009.

Lloyd’s underwriters, after initially agreeing to honor the policies, denied coverage after former Stanford Group Chief Financial Officer James M. Davis pleaded guilty last year to mail fraud, obstructing the SEC proceeding and conspiracy to commit securities fraud.

Stanford’s criminal trial is scheduled to start on Jan. 24.

The insurance case is Laura Pendergest-Holt v. Certain Underwriters at Lloyd’s of London, 4:09-cv-03712, U.S. District Court, Southern District of Texas (Houston).

The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas).

Washington Mutual Investors Win Class-Action Status

Investors suing Washington Mutual Inc., the former owner of the biggest U.S. bank to fail, won certification as a class- action, or group, case of their suit alleging shoddy lending practices.

Shareholders who lost money on stock purchased from October 2005 to July 2008 can proceed with claims under a single lawsuit, U.S. District Judge Marsha Pechman in Seattle ruled yesterday, according to court documents. The judge appointed the New York-based law firm Bernstein Litowitz Berger & Grossmann LLP to lead the plaintiffs’ case.

The lawsuit consolidates more than 20 cases filed against Washington Mutual that claim the bank secretly lowered lending standards, artificially inflated home-price appraisals and failed to disclose its deteriorating financial condition when the loans began to fail.

John Wolfe, an attorney representing Washington Mutual defendants, didn’t immediately return a voicemail message seeking comment.

The named plaintiffs in the case include Ontario Teachers’ Pension Plan Board, the largest single-profession pension plan in Canada, and four other pension groups, according to court documents. They seek to represent tens of thousands of shareholders who lost money on three types of preferred stock purchased between October 2005 and July 2008 and certain securities offered by the bank in 2006 and 2007.

The case is In re Washington Mutual Inc. Securities, Derivative & ERISA Litigation, 2:08-md-01919, U.S. District Court, Western District of Washington (Seattle).

U.S. Says Drill Ban Suit Irrelevant, Seeks Dismissal

U.S. Interior Secretary Kenneth Salazar’s lawyers asked a federal judge in New Orleans to throw out most of an oil industry lawsuit challenging the legality of a deep-water drilling moratorium that the government has lifted.

U.S. regulators imposed the moratorium on drilling in waters deeper than 500 feet on July 12, to replace an earlier ban struck down by U.S. District Judge Martin Feldman in New Orleans. Feldman threw out the first ban, imposed after the BP Plc oil spill in the Gulf of Mexico, as too broad.

Offshore service companies challenged the second moratorium as well, in a lawsuit pending before Feldman, claiming Salazar had broken federal statutes in imposing a ban that was harming the Gulf Coast’s economy. The U.S. earlier asked Feldman to reject this lawsuit, calling the ban a matter of public policy.

Salazar terminated the deep-water moratorium Oct. 12, six weeks before it was set to expire, saying the industry was meeting milestones for improvements in drilling safety. He said vital oil-spill response capabilities had also become available since BP’s blown-out well was permanently sealed in September.

The case is Ensco Offshore Co. v. Salazar, 2:10-cv-01941, U.S. District Court, Eastern District of Louisiana (New Orleans).

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Bayer Contaminated U.S. Farmers’ Rice Crops, Jury Told

A Bayer AG unit carelessly contaminated U.S. long-grain rice fields with its genetically engineered seed four years ago, causing Texas growers to lose access to European markets, a lawyer told a St. Louis jury.

“Bayer brought its experimental rice to this country from Belgium, even though it was not approved for human consumption here,” attorney Don M. Downing said in his opening statements in the trial. “Bayer was not careful. It escaped. And the farmers were hurt.”

Downing represents the owners of three Texas rice-growing operations. The trial is the seventh against the German company and its Bayer CropScience unit over crop contamination in the southern U.S. Bayer lost the first six trials, for a total of about $54 million in jury awards with one case accounting for 89 percent of the total. The company is challenging the verdicts in appeals and post-trial motions.

Farmers in five states claim Bayer negligently contaminated the U.S. long-grain rice crop with its genetically modified LibertyLink seed, leading to export restrictions, bans on two kinds of high-yield seeds and a plunge in prices.

The company faces claims in state and federal courts from more than 6,000 farmers.

The Texas farmers are seeking damages of about $400,000, plus unspecified punitive damages . A jury of six men and three women was chosen yesterday to hear the case before U.S. District Judge Catherine Perry.

Bayer, based in Leverkusen, Germany, denies negligence and disputes the damages claims, contending that rice sales rebounded after an initial drop.

“There’s no question that it had some impact on the rice market, prices did go down,” Mark Ferguson, the company’s trial attorney, said in his opening statement. “But we will find that the losses were minimal and short-lived.”

The case is In Re Genetically Modified Rice Litigation, 06- md-1811, U.S. District Court, Eastern District of Missouri (St. Louis).

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BAA Court Loss Will Force Sale of Stansted, One Other Airport

BAA Ltd., the owner of London’s Heathrow airport, was ordered to sell two U.K. airports after an appeals court rejected its claim of regulatory bias during a probe of the industry.

The Court of Appeal reinstated the Competition Commission’s March 2009 decision forcing BAA to sell Stansted near London and either the Glasgow or Edinburgh airports. BAA, owned by Madrid- based Ferrovial SA, already sold London Gatwick under pressure from the regulator.

“The ruling should put an end to the back-and-forth over the ownership of the key U.K. airports, bring certainty to the market and inject some much needed competition into the sector,” said Frances Murphy, a lawyer who leads the antitrust practice at Jones Day LLP in London and isn’t involved in the case.

BAA, which was originally ordered to sell the airports by spring 2011, had initial success in fighting the forced sales, when an appeals tribunal in December 2009 accepted its argument that an adviser for the regulator didn’t remove himself soon enough in the investigation when a conflict of interest arose. Yesterday’s judgment overturned that finding.

BAA argued that the adviser, Peter Moizer, had caused “unconscious bias” at an early stage in the probe because he was linked to a group that considered buying some of BAA’s assets. The court yesterday held that the potential for bias arose much later.

The lower court “was wrong to find apparent bias” before a critical stage of the antitrust review in December 2008, about three months before the regulator’s investigation ended, Judge Maurice Kay of the London-based court said in the ruling.

BAA said in a statement it will seek permission to appeal the case to the Supreme Court because yesterday’s ruling confirmed there was possible bias during part of the investigation.

Competition Commission spokesman Rory Taylor said the regulator was “pleased” with the court ruling and that the agency had already taken steps to avoid future potential conflicts of interest.

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Two Norwegian Day Traders Are Convicted of Market Manipulation

Two Norwegian day traders were ordered to pay as much as 243,000 kroner ($41,700) after being convicted of market manipulation by an Oslo court.

Peder Veiby must pay as much as 243,000 kroner ($41,700), while Svend Egil Larsen must pay a penalty that can’t exceed 156,442 kroner, according to court documents. Veiby participated in 42 instances of market abuse and Larsen 30 between November 2007 and April 2008, the court said.

“We are going to appeal this,” Veiby’s lawyer, Anders Brosveet, said in a phone interview. “We will appeal within the 14-day time limit, and then there will be an appeal procedure.”

Larsen’s lawyer, Halldor Christen Tjoflaat, said his client will also appeal. “It’s very hard for us to understand the judgment,” he said.

Both men also received suspended jail sentences.

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Litigation Departments

Four Charged With Murder of Malaysian Millionaire

Malaysian authorities charged a lawyer and three other people with the murders of missing cosmetics millionaire Sosilawati Lawiya and three associates, according to a lawyer for one of the defendants.

Lawyer N. Pathmanabhan, 41, and three others were charged yesterday in a magistrate’s court in Banting, Selangor, with the murders of 47-year-old Sosilawati and three others, Ravi Nekoo, Pathmanabhan’s lawyer, said by telephone. The defendants didn’t enter a plea as this was a preliminary stage, he said.

“We have to wait for the prosecution to inform the magistrate’s court whether all the documents are ready, and if all the documents are ready the matter will then be transferred to the High Court,” said Nekoo. The defendants would decide their next course of action once the case is transferred to the High Court, he said, adding a hearing is scheduled for Dec. 16.

Sosilawati, her attorney, her driver, and a bank officer disappeared Aug. 30 after telling family and friends that they were going to Banting to discuss a land deal, the New Straits Times reported on Sept. 13. Their bodies were burnt and their ashes thrown into a river near a poultry farm, the Times reported without saying where it got the information.

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

To contact the editor responsible for this story: David E. Rovella at

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