HP, Ally, Porsche, MGM, Terra Firma Court News
Hewlett-Packard Co., accusing Oracle Corp. of harassing its new chief executive officer, refused to accept service of a subpoena requiring Leo Apotheker to testify at a trial over SAP AG’s downloading of Oracle software.
SAP, the largest maker of software for business applications, is defending itself against a 2007 lawsuit by Oracle over what SAP has acknowledged were “inappropriate” downloads by a now-defunct software maintenance unit. Oracle will show a videotaped deposition of Apotheker, SAP’s former CEO, today and Oracle CEO Larry Ellison will testify tomorrow, SAP said Nov. 3.
Mylene Mangalindan, a spokeswoman for HP, said in an e- mailed statement that Oracle chose not to include Apotheker as a live trial witness until he was named CEO of HP.
“Oracle had ample opportunity to question Leo during his sworn deposition in October 2008,” Mangalindan said. “Given Leo’s limited knowledge of and role in the matter, Oracle’s last-minute effort to require him to appear live at trial is no more than an effort to harass him and interfere with his duties and responsibilities as HP’s CEO.”
Oracle, in its trial that began this week in federal court in Oakland, California, is seeking billions of dollars in damages from SAP, according to court documents. A lawyer for Oracle told jurors on Nov. 2 that Apotheker “was very involved” with the unit, called TomorrowNow.
“Mr. Apotheker started work for HP on Monday, but it now appears that the HP Board of Directors has decided to keep him away from HP’s headquarters and outside the court’s jurisdiction,” Oracle’s spokeswoman, Deborah Hellinger, said in an e-mail. “We will continue to try to serve him.”
The case is Oracle Corp. v. SAP AG, 07-01658, U.S. District Court, Northern District of California (Oakland).
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Ally Will Keep ResCap, ‘Screwed Up’ Using Robosigners
Ally Financial Inc., the auto and home lender, said the company was “embarrassed” that it used so-called robosigners to fill out foreclosure documents.
“We screwed up,” Chief Executive Officer Michael Carpenter, 63, said yesterday during a conference call on third- quarter earnings for Detroit-based Ally. “We had a robosigner affidavit problem. No question about it. We’re embarrassed about it and we fixed it going forward.”
Any errors will be corrected and the company is “confident that we did not foreclose on anybody inappropriately,” Carpenter said. “It’s up to us to prove that.”
Ally suspended evictions by its GMAC Mortgage unit in 23 states during September after an employee testified that he signed foreclosure documents without ensuring their accuracy. That touched off a nationwide examination of practices at other mortgage firms, with attorneys general from 50 states conducting a joint probe.
Last month Ally extended its review to all 50 states before resuming sales in those cases where it didn’t find errors, according to spokeswoman Gina Proia.
“We’ll be the first to say we screwed up on robosigner affidavits, but we’re not going to say we screwed up on foreclosures,” Carpenter said yesterday.
Ally has reviewed more than 9,500 files and fixed some affidavits, with remaining reviews likely to be completed by the end of the year, Carpenter said.
Ohio Attorney General Richard Cordray sued Ally last month, claiming the lender used fraudulent practices to foreclose on homeowners.
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Judge Dismisses Challenge to Deep-Water Drilling Ban
An oil industry challenge to the Obama administration’s ban on deep-water drilling was rendered irrelevant by new rules that rescinded the moratorium, a U.S. judge said yesterday in dismissing the industry’s claim.
U.S. Interior Secretary Kenneth Salazar imposed the moratorium on drilling in waters deeper than 500 feet on July 12, replacing a 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, as too broad.
Offshore service companies challenged the second moratorium as well, claiming Salazar broke federal statutes by imposing a ban that was harming the economy of the Gulf Coast. Regulators rescinded the second ban Oct. 12 and asked Feldman to scrap the lawsuit as moot. Feldman yesterday agreed with the U.S.
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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Ex-Trader Goffer Seeks Separate Trial in Galleon Case
Former Incremental Capital LLC trader Emanuel Goffer, accused of conspiracy stemming from the Galleon Group LLC insider trading probe, asked a judge to give him a separate trial from his co-defendants, including his brother.
Goffer’s lawyers said the evidence against him is “limited” compared to the “broad” scope of evidence against his five co-defendants, including his brother, Zvi Goffer, who founded Incremental and is a former Galleon trader.
“The government’s evidence against other defendants -- such as Zvi Goffer, who is charged with two conspiracies and eight counts of securities fraud -- will presumably be different and disproportionately larger than the evidence presented by the government against Emanuel Goffer,” his lawyers, Michael Ross and Pery Krinsky, said yesterday in court papers.
The government alleges Emanuel Goffer, who is charged with one count of conspiracy and two counts of securities fraud, participated in only one conspiracy, while his co-defendants are accused of participating in two separate schemes. His five co- defendants are charged with eight counts of securities fraud. All six have pleaded not guilty.
The disparity exposes “Emanuel Goffer to a serious risk of unfair prejudice,” the lawyers said, and “strongly favors severance of Emanuel Goffer’s trial.”
Goffer was among seven people indicted in January for trading on inside tips obtained from lawyers at Ropes & Gray LLP and elsewhere. One of the seven, David Plate, pleaded guilty on July 16 and agreed to cooperate with prosecutors.
They are among 21 people who were charged in two overlapping insider trading cases involving Galleon Group founder Raj Rajaratnam in a case brought by prosecutors in the office of Manhattan U.S. Attorney Preet Bharara.
Twelve have pleaded guilty. Most have agreed to cooperate with prosecutors and testify against others.
The case is U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan).
Porsche Likely to Win Appeal Over 2009 Meeting, Court Says
Porsche SE, the maker of the 911 sports car, is likely to win an appeals case over a shareholder meeting during its failed bid to take over Volkswagen AG, a German judge said in a preliminary assessment of the case.
Minority investors may not win their bid to invalidate shareholder votes over directors’ approval of an “unconscionably” high salary for Chief Executive Officer Wendelin Wiedeking and other officials, Presiding Judge Eberhard Stilz said at a hearing at the Stuttgart Higher Regional Court.
“It’s important to stress that it is not our task to rule on whether the compensation was illicit or whether the bid to take over Volkswagen was handled in line with the law,” Stilz said yesterday. “We only have to judge whether the shareholders’ decisions were taken wrongfully, and that only indirectly touches these issues.”
The failed bid led to Wiedeking’s ouster in 2009, regulatory probes, and lawsuits in U.S. and Germany. Volkswagen agreed to join with Stuttgart-based Porsche in August 2009 after the sports-carmaker’s debt tripled to more than 10 billion euros ($14 billion) following the failed bid. Porsche in fiscal 2008 paid 143.5 million euros to its management board.
Shareholders have wide discretion when deciding whether to discharge directors and executives from liability over their actions, Stilz said. The court may still change its view after hearing the parties’ arguments, according to the judge. The court scheduled a ruling for Nov. 17.
“If this court grants a carte blanche to Porsche over these issues, it would be a catastrophic signal, also in terms of the competition of financial markets,” said Martin Weidemann, a lawyer for the plaintiffs. “It will also be an issue what courts in this country can offer investors.”
Porsche considers the claims unfounded, company spokesman Albrecht Bamler said in an interview Nov. 2.
The case is OLG Stuttgart, 20 U 2/10.
Airgas Asks Appeals Court to Toss Meeting-Date Ruling
Airgas Inc., seeking to fend off a $5.5 billion takeover by Air Products & Chemicals Inc., told Delaware’s Supreme Court that a ruling shortening the date for its annual meeting “radically reduces” the power of directors.
Delaware Chancery Court Judge William B. Chandler III erred in finding the meeting-date change didn’t wrongfully shorten the terms of Airgas directors on the staggered board, a lawyer for the gas supplier told the court yesterday. The decision may allow Air Products to improperly gain control of the rival industrial gas supplier at the January meeting, the lawyer argued.
Should the court uphold Chandler’s ruling, it would “fundamentally diminish the ability of boards to do what they think is the right thing for shareholders,” Theodore N. Mirvis, one of Airgas’s lawyers, said during the hourlong argument.
A lawyer for Air Products, Gary Bornstein, countered that overturning Chandler’s ruling would leave boards with “an inflexible rule” on when annual meetings could be held.
Officials of Radnor, Pennsylvania-based Airgas have repeatedly rejected Allentown, Pennsylvania-based Air Products’ $65.50-a-share bid as too low. Air Products is the second- biggest U.S. industrial-gases producer behind Praxair Inc.
The case is Airgas Inc. v. Air Products & Chemicals Inc., 649-2010, Delaware Supreme Court (Dover).
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MGM Files for Bankruptcy, Rejecting Lions Gate, Icahn Bid
Metro-Goldwyn-Mayer Inc., distributor of the James Bond and Rocky movies, filed for bankruptcy in Manhattan federal court after rejecting a takeover bid by Lions Gate Entertainment Corp. and billionaire Carl Icahn.
The Los Angeles-based studio, which foundered after piling on debt to go private, filed a Chapter 11 petition yesterday in U.S. Bankruptcy Court. It has creditor support for a so-called pre-packaged plan to extinguish about $4 billion of debt and install managers from Spyglass Entertainment Group Inc., the producers of “The Sixth Sense.” Like Tribune Co. and the former Chrysler LLC, 86-year-old MGM filed for bankruptcy after a leveraged buyout.
“By sharply reducing MGM’s debt load and providing access to new capital, the proposed plan of reorganization achieves these goals” of improving the company’s prospects, said Co- Chief Executive Officer Stephen Cooper, who led Enron Corp. through its bankruptcy.
Losers in the bankruptcy may include the 2005 buyout group, which retains most of MGM’s existing stock. Tokyo-based Sony Corp. has a 14 percent stake; the Texas-based private equity firm TPG Capital, run by David Bonderman, has 23 percent; Providence Equity Partners Inc. has 34 percent; Comcast Corp. has 21 percent, and Credit Suisse Group AG affiliate DLJ Merchant Banking Partners, has 8 percent, according to a court filing.
In a competing bid, Lions Gate, based in Vancouver, offered about $1.7 billion in stock and debt to MGM creditors, representing a 55 percent stake in the combined company.
To win more MGM creditors, Icahn, who is Lions Gate’s largest shareholder and owns about 10 percent of MGM’s debt, offered 53 cents on the dollar for senior MGM loans, or about 18 percent more than the 45 cents the debt fetched in the market before Lions Gate’s Oct. 12 bid.
Icahn, who separately mounted a hostile takeover of Lions Gate, was sued by the company on Oct. 29 for allegedly “plotting” a merger of Lions Gate with MGM that would boost the value of his holdings in the two companies. He denied the allegations.
Yesterday, Icahn said in an e-mailed statement he reached an agreement with Metro-Goldwyn-Mayer Inc. and the lender subcommittee to support MGM in its prepackaged bankruptcy. He will have to right to elect a director to MGM’s board after the bankruptcy, according to his statement.
“I am pleased that we were able to obtain an agreement to make changes to the MGM prepackaged plan that allows me to support it and enables the company to avoid a potentially costly and disruptive bankruptcy process,” he said.
The case is In re Metro-Goldwyn-Mayer Studios Inc., 10-15774, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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Terra Firma, Citigroup Jury to Resume EMI Case Deliberations
Jurors in Terra Firma Capital Partners Ltd.’s $2.2 billion fraud case against Citigroup Inc. are scheduled to begin their first full day of deliberations this morning.
The eight New Yorkers on the federal court jury, at the end of a 2 1/2-week trial yesterday, retired to a wood-paneled jury room for about 20 minutes, elected a foreman and went home.
When they reassemble today, the jurors will decide whether Terra Firma and its chairman, Guy Hands, were tricked in the 2007 purchase of EMI Group Ltd., as they claim, or made a bad bargain, as Citigroup claims.
The jurors began deliberations after lawyers for both sides made closing arguments in the case yesterday.
Terra Firma’s lead lawyer, David Boies, argued that Citigroup’s David Wormsley lied to Hands in a series of phone calls the weekend before the May 2007 auction of EMI.
Wormsley told Hands that Cerberus Capital Management LP planned to submit a bid for EMI, Boies said. In reality, Cerberus had decided to withdraw from the auction, leaving Terra Firma without competition. As a result, Terra Firma claims, it was tricked into overpaying for the 113-year-old music company.
“David Wormsley never lied to Guy Hands,” Ted Wells, the lead lawyer for New York-based Citigroup, said in his closing argument. “He never told Guy Hands that Cerberus was going to bid 262. He never said it.”
The case is Terra Firma Investments (GP) 2 Ltd. v. Citigroup, 09-cv-10459, U.S. District Court, Southern District of New York (Manhattan).
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Mazda Seatbelt Case May Divide U.S. Supreme Court Justices
Hearing arguments yesterday in Washington, several justices signaled they would vote to limit lawsuits against automakers while others suggested they would allow more accident victims to go to court.
Toyota Motor Corp., facing more than 300 lawsuits over alleged unintended acceleration, could have an especially big stake in the outcome. The auto industry is asking the court to reinforce a 2000 decision that said federal law shields automakers from state law claims that manufacturers didn’t move quickly enough to install air bags in the years before they became mandatory in new cars.
The court might deadlock 4-4 because Elena Kagan, the newest justice, has disqualified herself. As the Obama administration’s solicitor general earlier this year, she urged the court to take the case. A tie vote would leave intact a lower court victory for the automakers without setting a national precedent.
The case is Williamson v. Mazda Motor of America, 08-1314, U.S. Supreme Court (Washington).
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Judge Reserves Ruling on Kissel Retrial Halt Request
A Hong Kong judge yesterday reserved judgment on Nancy Kissel’s request for a ruling that she can’t get a fair retrial for the 2003 killing of her Merrill Lynch & Co. banker husband.
Judge Andrew Macrae said he hoped to issue his decision by the end of this month on Kissel’s application for a permanent stay of proceedings. He ordered the media not to report on the details of the hearing on its first day on Nov. 1.
Michigan-born Kissel, 46, won a retrial when Hong Kong’s top court overturned her 2005 conviction for murdering her husband Robert. The mother of three is serving a life sentence in prison and could be freed if her application for a stay is successful.
Hong Kong’s Court of Final Appeal said in February that Kissel’s conviction was flawed because the judge wrongly allowed hearsay evidence and prosecutors improperly questioned her during the trial. Jurors heard in the three-month trial that she drugged her husband with a milkshake, bludgeoned him to death and hid his body in a carpet.
The case is Nancy Ann Kissel and HKSAR, HCCC55/2010, Hong Kong Court of First Instance.
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Ex-Amway Unit to Pay $155 Million in Suit, Lawyers Say
Quixtar Inc., a former subsidiary of Amway Corp., and two law firms representing three independent business owners who sued the company, reached a settlement worth as much as $155 million, attorneys in the case said.
The settlement, filed yesterday in federal court in San Francisco, resolves a lawsuit alleging that Quixtar ran a fraudulent pyramid scheme inducing people to invest in products to sell and making false promises that they could earn big profits, according to court filings.
The settlement includes $55 million in cash, $21 million in product refunds, price reductions and other compensation, according to the filing.
Boies, Schiller & Flexner LLP, a law firm for the business owners, said yesterday in an e-mailed statement that the settlement is valued at $155 million.
Quixtar, which didn’t admit wrongdoing, has gone by the name Amway since 2008, according to Amway’s website. Amway, based in Ada, Michigan, distributes home-care products through members who earn money from the sales and by recruiting other sellers.
The case is Pokorny v. Quixtar, 07-00201, U.S. District Court, Northern District of California (San Francisco).
Allied Irish Banker Wins Bonus Case; Lender Faces More Claims
Allied Irish Banks Plc, which is facing majority state control, will have to pay a 160,000-euro bonus ($224,000) to an employee of its capital-markets unit after losing a court case.
The Dublin-based lender withheld the payment, due on John Foy’s 2008 performance, since February 2009 after the bank scrapped discretionary bonuses in the wake of the government guarantee of the country’s financial system the previous September. Edmund Holohan, master of the High Court, ruled against the bank in a summary judgment yesterday.
A lawyer for Foy told the court he is acting “for a number of employees” with similar cases, after Holohan asked if this was “the tip of the iceberg.” As many as 90 employees in Allied Irish’s capital markets division have issued similar legal proceedings against Allied Irish in the courts, according to a person familiar with the situation.
An Allied Irish lawyer said the bank was not denying that the bonus payment was due and owing. Allied Irish spokeswoman Catherine Burke was not immediately available to comment.
The bank’s executive chairman David Hodgkinson said on Nov. 1 said that it’s “highly likely” that the government will own a significant majority stake in AIB following a share sale starting by the end of the month. The state controls an 18.7 percent stake in the bank.
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Bernard Madoff’s Criminal Defense Lawyer Switching Firms
Ira Lee Sorkin, the head of Dickstein Shapiro LLP’s securities litigation, regulatory, and compliance white-collar criminal defense and investigation practices said yesterday that he is leaving the firm along with five other lawyers to join Roseland, NJ-based Lowenstein Sandler PC.
Sorkin, who represented convicted Ponzi fraudster Bernard Madoff, said he will be accompanied by partner Donald A. Corbett, and four associates: Nicole De Bello, Elliott Stein, Daniel Roque and Bradley Brown.
“It was an opportunity we couldn’t pass up,” Sorkin said of the reason for the move.
U.S. Sues Chicago Attorney to Halt Phony Tax Shelters
John E. Rogers, a Chicago attorney formerly affiliated with the law firm Seyfarth Shaw LLP, was sued by the U.S. Justice Department for allegedly promoting phony tax shelters.
Rogers, 69, designed distressed asset debt and distressed asset trust tax shelters for his clients, allowing them to claim, though not sustain, losses on Brazilian debt resulting in more than $370 million in improper deductions, the Justice Department said yesterday in a statement.
Rogers was forced to resign from the firm in 2008, according to the statement. The government’s complaint, filed Nov. 2 in federal court in Chicago, seeks a court order barring the promotion of tax schemes it called “abusive.”
“It is particularly disturbing when a lawyer, who is supposed to help clients comply with the law, instead helps them break it,” Acting Assistant Attorney General John A. DiCicco said in the statement.
Rogers, now the principal of the Chicago firm of Rogers & Associates, didn’t immediately respond to a voice-mail message seeking comment.
The case is U.S. v. John E. Rogers, 10-cv-07068, U.S. District Court, Northern District of Illinois (Chicago).
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