Liverpool, J&J, Chinese Drywall, UBS in Court News

Judges on both sides of the Atlantic Ocean are moving toward a resolution of the legal dispute blocking the sale of Liverpool soccer club to the owners of baseball’s Boston Red Sox.

With a deadline looming today for repayment of a loan owed by the club’s current owners, a judge in Dallas scheduled a hearing this morning to reconsider his 2-day-old order that temporarily halted the sale of one of the world’s most popular sports teams.

Hours after a judge in London ordered current Liverpool owners Tom Hicks and George Gillett to end their Texas lawsuit, state court Judge Jim Jordan in Dallas said he would hear arguments about whether to continue his injunction.

“This smacks of forum-shopping,” Jordan said during yesterday’s hearing.

The soccer club, a five-time European champion, is off to its worst start in more than 50 years. The team is in 18th place in the 20-club league, putting it at risk of relegation -- at the end of each season, the bottom three teams in the Premier League standings swap places with three teams in the second division of English soccer.

American businessmen Hicks and Gillett went to the Dallas judge to block the forced 300 million pound ($475 million) sale of Liverpool to John W. Henry’s New England Sports Ventures LLC, which controls the Red Sox.

Liverpool’s board has approved the sale. Hicks and Gillett say the offer is too low, and have accused the independent board members of ignoring more attractive bids.

Since their 219 million pound leveraged buyout in 2007, Hicks and Gillett have clashed with each other and have angered Liverpool fans because of rising debt and their failure to build a promised new stadium.

Hicks and Gillett were granted a six-month extension to repay by lenders Royal Bank of Scotland Group Plc and Wells Fargo & Co. (WFC) in April, with the agreement that the club be put up for sale and that independent Chairman Martin Broughton be appointed.

Hicks and Gillett have until today to pay back the 237 million pound loan. The bid from the New England group would repay 200 million pounds of the debt on completion.

Yesterday, RBS won a U.K. court ruling preventing Hicks and Gillett from proceeding with the Texas lawsuit. Justice Christopher Floyd gave the pair until today to end the suit.

The Texas lawsuit by Hicks, 64, and Gillett, 71, seeks $1.6 billion in damages from RBS and independent club board members.

The case is Royal Bank of Scotland Plc v. Hicks; HC10C03206; High Court of Justice, Chancery Division.

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Verdicts/Settlements

J&J Must Pay $257.7 Million Over Risperdal Marketing

Johnson & Johnson (JNJ) must pay $257.7 million to the state of Louisiana for making misleading claims about the safety of the Risperdal antipsychotic drug, a jury concluded.

Jurors in state court in Opelousas, Louisiana, found that J&J officials defrauded the state’s Medicaid system by wrongfully touting Risperdal as superior to competing antipsychotic drugs and minimizing its links to diabetes.

The verdict is the second trial loss in a state lawsuit brought over Risperdal marketing. A West Virginia judge in a non-jury trial last year awarded $3.95 million, finding the company misled doctors about the risks and benefits of Risperdal. New Brunswick, New Jersey-based J&J appealed.

Michael Heinley, a spokesman for J&J’s Ortho-McNeil Janssen Pharmaceuticals unit, said the company is disappointed with the jury’s decision and will appeal.

“We believe the jury was not appropriately instructed on applicable legal standards and that critical and highly relevant evidence was excluded,” he said in an interview.

The jury found 35,542 violations of the state’s Medical Assistance Programs Integrity Law and imposed a penalty of $7,250 for each. The total $257.7 million verdict is the fifth-largest in the U.S. so far in 2010, according to data compiled by Bloomberg.

The state’s case centered on drug safety claims that J&J and Ortho-McNeil Janssen made in November 2003 correspondence to 700,000 doctors. In those letters, J&J touted Risperdal as safer than competing antipsychotics such as Indianapolis-based Eli Lilly & Co. (LLY)’s Zyprexa and London-based AstraZeneca Plc (AZN)’s Seroquel. Risperdal global sales peaked at $4.5 billion in 2007, declining after the company lost patent protection.

The case is Caldwell ex rel. State of Louisiana v. Janssen Pharmaceutical, 04-C-3967, 27th Judicial Court, St. Landry Parish, Louisiana (Opelousas).

Chinese Drywall Home-Repair Deal Wins Court Approval

A federal judge endorsed a plan for a Knauf Group unit to help repair 300 homes damaged by defective drywall, the first step toward a potential settlement of legal claims estimated by plaintiffs at as much as $500 million.

Repairs will begin as soon as next week on dozens of homes in Alabama, Florida, Louisiana and Mississippi, Russ Herman, an attorney for homeowners suing the company, told the court. The program may expand to 3,000 homes if it’s successful.

“We’ve got the first step in the global resolution reporting today,” U.S. District Judge Eldon Fallon said during a hearing yesterday in New Orleans.

The cases, part of coordinated litigation over allegedly defective drywall, had been intended as a bellwether to help determine property damage issues in cases against other manufacturers and importers, including Chicago-based USG Corp. (USG) More than 1.1 million sheets of harmful Chinese drywall were used in Louisiana rebuilding projects after hurricanes Katrina and Rita struck in 2005, state Attorney General Buddy Caldwell said in January.

The case is In re Chinese-Manufactured Drywall Products Liability Litigation, 2:09-md-02047, U.S. District Court, Eastern District of Louisiana (New Orleans).

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CA’s Richards Gets Sentence Cut to Time Served for Scheme

Stephen Richards, the former top sales executive at CA Inc. (CA) who was given a seven-year prison term after pleading guilty to securities fraud at the software company, was resentenced to time served.

U.S. District Judge I. Leo Glasser in Brooklyn, New York, resentenced Richards at a hearing today after an appeals panel reversed his original punishment. Richards, 45, participated in the hearing by phone from prison in Taft, California, which he entered on Feb. 27, 2007.

“The time that he served is sufficient given all that has transpired since sentence was imposed,” Glasser said.

The U.S. appeals court in Manhattan reversed Richards’s seven-year sentence in an Aug. 12 ruling. He and former CA Inc. Chief Executive Officer Sanjay Kumar pleaded guilty in 2006 to inflating revenue by backdating sales contracts as part of a $2.2 billion fraud. CA, based in Islandia, New York, was known as Computer Associates International Inc. when Kumar ran the company.

Richards told Glasser by phone how much his family means to him. “I will never again place them in a situation where they pay the price for my stupidity,” he said.

The appeals court affirmed Kumar’s and Richards’s convictions. It upheld Kumar’s 12-year sentence and reversed Richards’s sentence.

The appeals court said Glasser failed to give Richards credit for accepting responsibility for his crimes. It said Kumar wasn’t entitled to a similar credit because his statement during his guilty plea and his objections to the facts of the case in the probation department’s sentencing report showed he didn’t accept full responsibility.

The case is U.S. v. Kumar, 04-CR-846, U.S. District Court, Eastern District of New York (Brooklyn).

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Medtronic to Pay $268 Million, End Heart-Wires Suits

Medtronic Inc. (MDT) the world’s biggest maker of heart devices, agreed to pay $268 million to settle lawsuits over claims that fractured wires in a line of its cardiac defibrillators caused at least 13 deaths.

Medtronic said it is resolving claims that wires connecting implantable Sprint Fidelis defibrillators to patients’ hearts were defective. The Minneapolis-based company halted sales of the so-called defibrillator leads in October 2007 after they were linked to users’ deaths.

“Both the plaintiffs and Medtronic realized this was the best resolution for people injured by these wires,” Hunter Shkolnik, a New York-based lawyer for injured defibrillator users, said yesterday in a telephone interview.

“Medtronic is pleased we were able to negotiate terms that were mutually agreeable to the parties,” Christopher Garland, a company spokesman, said in a telephone interview. The settlement covers about 8,100 cases, or “virtually all” U.S. claims, Garland said.

The settlement resolves cases in both federal and state courts.

The consolidated case involving yesterday’s heart-wire settlement is In Re Medtronic Inc. Sprint Fidelis Leads Products Liability Litigation, 08-1905, U.S. District Court, District of Minnesota (Minneapolis).

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Deutsche Telekom Loses Challenge to EU Monopoly Fine

Deutsche Telekom AG (DTE), Europe’s biggest phone company, lost an appeal against a 12.6 million-euro ($17.8 million) antitrust fine.

The European Union’s competition regulator was right to fine the phone company for abusing its dominant market position in Germany, the EU’s highest court said yesterday.

The Brussels-based European Commission accused Deutsche Telekom in May 2003 of overcharging competitors for access to its local phone network. The regulator said so-called margin squeeze by the Bonn-based operator deterred other companies from entering the market. Deutsche Telekom, which appealed two months later, agreed to cut its fees in 2004.

The change in the fees system means the “consequences of the judgment are quite limited,” Andreas Middel, a Deutsche Telekom spokesman, said in a phone interview from Berlin.

The case is C-280/08 P Deutsche Telekom v. Commission.

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New Suits

U.S. Sues Nine Companies, Seeks $1 Billion for Cleanup

The U.S. sued nine companies, including Kimberly-Clark Corp. (KMB) and NCR Corp. (NCR), and two city agencies to force a clean-up of toxic chemicals from the Lower Fox River and Green Bay in Wisconsin at a cost of $1 billion.

The lawsuit stems from contamination by polychlorinated biphenyls, a banned carcinogen, in sediment, banks and shoreline during production of “carbonless” copy paper from the mid-1950s until 1971, the Justice Department said in a statement. Wisconsin joined the suit, which was filed after the companies balked at taking responsibility, according to the statement.

An estimated $300 million in cleaning has been completed and further dredging to remove PCBs may cost $550 million, the department said in the statement. Restoring natural resources may cost $400 million, according to the statement. The area is home for 270,000 people, the Environmental Protection Agency said in a statement.

Cameron Smith, an NCR spokesman, said the company has been “consistently complying” with clean-up of the Fox River. He said the company is reviewing the lawsuit.

Georgia-Pacific Consumer Products LP, which was added to the case, in a separate agreement settled with the U.S., accepting responsibility for some clean-up near its paper mill on the Fox River in Green Bay.

The company will pay $7 million to reimburse a portion of the government’s costs, according to the Justice Department.

Defendants in the lawsuit are NCR, Kimberly Clark, Appleton Papers Inc., CBC Coating Inc., the city of Appleton, Menasha Corp., Neenah-Menasha Sewerage Commission, NewPage Wisconsin Systems Inc., P.H. Glatfelter Co., U.S. Paper Mills Corp. and WTM I Co.

Palm Beach Firm Sued by SEC Over Petters Investments

Palm Beach Capital Management LP was sued by the U.S. Securities and Exchange Commission for allegedly funneling investor money to Thomas Petters’s $3.5 billion Ponzi scheme.

The firm, Palm Beach Capital Management LLC and principals Bruce Prevost and David Harrold were accused of deceiving investors in a lawsuit filed by the regulator yesterday in federal court in Minneapolis.

“Of the approximately $3.65 billion invested in the Petters Ponzi scheme at the time of its collapse, the Palm Beach funds accounted for more than $1 billion,” according to the complaint. The SEC seeks a court order directing the defendants to disgorge any ill-gotten gain from their venture.

Petters, who led Minnetonka, Minnesota-based Petters Group Worldwide LLC, was sentenced last year to 50 years in prison after his fraud conviction. Prosecutors said he conned investors into underwriting fake purchase orders for consumer goods and used the money to support a lavish lifestyle.

Prevost and Harrold used money from investors to buy more than 2,000 promissory notes from Petters, the SEC said. When the notes came due, rather than redeem them, the defendants exchanged them for new notes purportedly backed by different collateral, while concealing the swap agreements from investors, according to the complaint.

Harrold’s attorney, Mitchell Herr, a Miami-based attorney in New York’s Holland & Knight LLP, and Prevost’s lawyer, Michael Band, each declined to comment on the allegations.

The case is U.S. Securities and Exchange Commission v. Prevost, 10cv4235, U.S. District Court for Minnesota (Minneapolis).

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Lawsuits/Pretrial

Florida Subpoenas Records of Foreclosure Companies

Lender Processing Services Inc., which provides foreclosure services, was subpoenaed by the Florida attorney general as part of an investigation into possible foreclosure-document fraud.

Attorney General Bill McCollum told the Jacksonville, Florida-based company and affiliate Docx LLC to provide documents related to any contracts with four Florida law firms under investigation, as well as other documents.

Lender Processing Services has produced numerous documents in foreclosure cases that appear to be fabricated, according to McCollum. The documents, called mortgage assignments, are produced to give financial institutions the right to sue to foreclose, his office said.

Michelle Kersch, a spokeswoman for Lender Processing Services, said yesterday she hadn’t reviewed the subpoena.

“We were made aware based on their website several months ago that they had an inquiry open for LPS,” she said, referring to the attorney general’s office. “As we’ve always said in the past, we will continue to cooperate fully with the inquiry that they’ve made and we look forward to having the opportunity to help them understand our business.”

McCollum’s subpoena of the company comes as his probe of the four law firms proceeded following split decisions by two judges on his office’s subpoenas.

Judge Eileen O’Connor in Fort Lauderdale refused a request by one of the law firms -- the Law Offices of David J. Stern -- to quash a subpoena from the attorney general, according to a court order dated Oct. 13. O’Connor didn’t give a reason for her ruling.

Judge Jack Cox in West Palm Beach, Florida, denied the state’s request that he reconsider an earlier order blocking a subpoena sent to law firm Shapiro & Fishman LLP, according to an order dated yesterday.

“Our attorneys are discussing and weighing our options,” Ryan Wiggins, a spokeswoman for McCollum, said in an e-mail.

In his subpoena to Docx, McCollum demanded any documentation that allowed employee Linda Green to sign documents on behalf of vice presidents of Wells Fargo & Co., American Home Mortgage Servicing Inc. and Mortgage Electronic Registration Systems Inc., the national mortgage electronic record-keeping system.

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Drug Executives May Be FDA Targets for Off-Label Promotion

Drugmaker executives whose companies promote unauthorized uses of their medicines may be targeted by U.S. regulators for misdemeanor prosecutions, Food and Drug Administration Deputy Chief for Litigation Eric Blumberg said.

Blumberg didn’t offer a timetable for the agency to take such actions during remarks Oct. 13 at a Washington conference. He cited Pfizer Inc. (PFE), the world’s largest drugmaker, for violations of a federal law that bars manufacturers from promoting drugs for uses other than those approved by the agency, a practice called off-label marketing.

Pfizer, based in New York, struck the largest off-label promotion settlement to date in September 2009, agreeing to pay $2.3 billion for unauthorized marketing of its recalled painkiller Bextra and three other drugs. Pfizer acquired Bextra when it purchased Pharmacia Corp. in 2003. The settlement only involved sales practices and not the safety of the drug.

“It’s clear we’re not getting the job done with large, monetary settlements,” Blumberg said. “Unless the government shows more resolve to criminally charge individuals at all levels in the company, we cannot expect to make progress in deterring off-label promotion.”

“Over the past several years, we have invested substantial resources in order to create a compliance program that consists of mandatory training for every one of our employees, proactive monitoring and surveillance, and strict enforcement of all federal and state health-care laws,” said Pfizer spokesman Ray Kerins. He didn’t directly address Blumberg’s remarks.

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UBS Won’t Take Legal Action Against Former Executives

UBS AG (UBSN) defended its decision not to take any legal action against former executives and board members, saying Switzerland’s biggest bank “learnt the lessons” from the credit crisis and a dispute with U.S. tax authorities.

“With our decision to refrain from legal proceedings, we do not want to gloss over the mistakes made by UBS or absolve those involved of their corporate responsibility,” Chairman Kaspar Villiger, 69, said in a statement yesterday. “We have learnt the lessons of the past and the new management is now placing UBS’s focus on sustainable success. It is important that we can now concentrate on the future.”

Shareholder groups Deminor, Actares and Euroshareholders sent a letter last month to Villiger, urging him to file charges against former executives after shareholders at the annual meeting in April refused to approve actions of the management and board of directors for 2007. UBS yesterday published a 76-page report summarizing what went wrong and why the bank doesn’t want to pursue any legal action.

The Swiss government propped up UBS in October 2008 after the bank had amassed the biggest writedowns and losses from the credit crisis among European lenders at the time. Four months later, Switzerland had to hand over data on about 300 UBS clients to the U.S. authorities in an unprecedented move to avoid a criminal indictment of the bank on charges that it helped Americans evade taxes. UBS later agreed to pass along information on as many as 4,450 more accounts.

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BP Employee Savings Suits Sent to Texas Federal Court

Lawsuits by workers claiming BP Plc’s (BP/) North American unit mismanaged their retirement savings plan will be sent to the Texas federal court already handling investor claims prompted by the Gulf of Mexico oil spill.

The employees asked that the suits be combined in Chicago, where the retirement plan is administered. BP said the cases, brought under the federal Employee Retirement Income Security Act, or ERISA, belong in Houston because the claims are similar to those in other investor suits.

In the suits, filed as class actions on behalf of all U.S. employees participating in the company’s retirement savings plan, workers claim losses of more than $1 billion from the stock plunge after the April 20 spill. BP’s pre-spill safety record made the London-based company a risky investment, the employees say.

“Certainly, there are differences between the securities actions and the ERISA actions,” the Judicial Panel on Multidistrict Litigation said yesterday. “Notwithstanding those differences, there is significant overlap between the ERISA and securities actions warranting their concentration in a single docket.” U.S. District Judge Keith P. Ellison will oversee the lawsuits.

The lawsuits are In Re BP Plc Securities Litigation, 10-md-2185, U.S. District Court, Southern District of Texas (Houston), and In Re BP Securities, Derivative and Employment Retirement Income Security (ERISA) Litigation.

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Litigation Departments

Nomura Hires Tung as Asia Ex-Japan General Counsel, Memo Says

Nomura Holdings Inc. (8604), Japan’s largest brokerage, named Wanda Chang Tung to succeed Clifford Levy as its top lawyer in Asia outside Japan, according to a company memo seen by Bloomberg.

Tung, who had led Lehman Brothers Holdings Inc.’s legal department in Asia outside Japan, starts work in Hong Kong on Oct. 18, according to the memo.

Levy, 47, will become a senior adviser to the regional management team, after having “played a critical role” in the integration of the brokerage with Lehman’s businesses in Asia, Philip Lynch, the regional chief executive officer, wrote in the memo.

Sunny Tucker, a Hong Kong-based spokesman for Nomura, confirmed the memo’s content and declined to comment further.

Tung will head Nomura’s legal and compliance division in the region, overseeing lawyers in corporate, transactions and compliance departments. Before Lehman, she was assistant general counsel in Asia at JPMorgan Chase & Co. (JPM)

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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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