Citigroup Inc. prevailed at trial against a multibillion-dollar lawsuit by Terra Firma Capital Partners Ltd. and its Chairman Guy Hands, who claimed he was tricked by the bank into overpaying for EMI Group Ltd. in 2007.
A federal jury in Manhattan federal court reached its 8-0 verdict yesterday after less than a day of deliberations and a 2 1/2-week trial. U.S. District Judge Jed Rakoff, who had narrowed the range of possible real damages to $2.2 billion from $8.3 billion and ruled out punitive damages, called the suit “a catfight between two rich companies” on Nov. 1.
Some analysts described the lawsuit as a last-ditch move by Hands to hold on to EMI and said the verdict probably means he will lose control and that Citigroup may break the company into pieces and sell it off. Citigroup provided $4.8 billion in loans to finance the EMI acquisition.
“It’s just a question of time before there’s a covenant breach,” said Claire Enders, chief executive officer of Enders Analysis Ltd., an entertainment-industry research firm based in London. “I find it hard to believe that the Terra Firma partners are really going to face with equanimity the prospect of injecting capital into EMI, basically forever.”
Enders, who called the suit a “desperate” attempt to gain leverage in negotiations with Citigroup to restructure EMI’s finances, said Citigroup is now less likely to consider talking with Hands about EMI.
In the trial, Hands, who testified for parts of four days, claimed that Citigroup banker David Wormsley lied to him during phone calls made the weekend before the auction, leading the private-equity firm to overbid in a deal that lost money for all involved. Citigroup denied the claims.
Ted Wells, a lawyer for the bank, hailed the verdict, saying Wormsley had been put through a “terrible ordeal” and that the case was “a travesty.”
Citigroup claimed that Wormsley never misled Hands. The New York-based bank alleged the suit was an attempt by Hands to shift responsibility for striking a bad bargain for EMI, the 113-year-old music company based in London.
“We are disappointed,” Terra Firma said in a statement after the verdict. “We believe that this was an important action to bring and that we had a responsibility to our investors to bring it.” The firm said it reserves the right to appeal.
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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Singapore Man Charged With Murder of Nomura Employee
A Singapore man was charged with the murder of a Nomura Holdings Inc. employee who died from injuries sustained in the city state last month.
Ang Hoe Meng Jack, 41, is accused of killing Takanori Inada, 30, in an alley in Singapore’s Chinatown, according to a police document. Ang is scheduled to next appear in a Singapore court Nov. 11 and will remain in custody as the investigation continues, the court heard yesterday.
Inada was found lying on the ground with multiple bruises and pronounced dead in hospital on Oct. 23, Singapore police said. Ang faces the death penalty if convicted, police said.
Eiji Miura, Nomura’s Tokyo-based spokesman, said Inada, who was from Japan, was studying in Singapore.
“We extremely regret losing an employee of great promise,” Miura said in an e-mailed statement. “We are watching how the local investigation will progress.”
Ang, a housing broker with PropNex, will have his contract terminated, according to Adam Tan, a spokesman for Singapore’s second-biggest property services firm by number of agents.
“We haven’t had access to him yet,” Ang’s lawyer Zaminder Gill told reporters yesterday. Ang, who hasn’t been allowed bail and didn’t enter a plea, may be brought to the crime scene as part of the investigations, Gill said.
The case is Public Prosecutor v. Ang Hoe Meng Jack, Singapore Subordinate Court, PIC 232/2010.
Mizuho Employee Arrested in U.K. Over Insider Trading
A Mizuho International Plc employee was one of two people arrested as part of an insider-trading probe by the U.K. financial regulator in at least two countries.
Mizuho Securities Co. spokesman Toshimitsu Okano said in a telephone interview yesterday that the bank employee was arrested. The U.K. Financial Services Authority said earlier this week that it arrested a 37-year-old man and a 28-year-old woman in London on suspicion of trading with insider information.
“We understand that the FSA’s investigation relates to actions carried out by the individual in a personal capacity, and that it does not involve any conduct by” Mizuho or any of its other employees, the bank said in an e-mailed statement, which didn’t name the employee.
City of London Police and the FSA also searched two addresses in London and worked with police and prosecutors in Hesse, Germany, to conduct a search there. The FSA is currently prosecuting 11 people for trading with insider information and has convicted six men for the crime since March 2009.
Okano declined to provide further details because the investigation by U.K. authorities is now under way. Mizuho International is the London-based securities and investment banking arm of the Mizuho Financial Group Inc.
FSA spokeswoman Lucy Gaynor declined to comment. The case isn’t related to any ongoing insider-trading investigations, the regulator said.
Goffer Among Five Seeking Dismissal of Insider Case
Former Galleon Group LLC trader Zvi Goffer, who is accused of leading an insider-trading ring, and four co-defendants urged a judge to dismiss the government’s case, citing the inadequacy of the evidence against them.
The men assailed “the government’s convoluted theory” of insider trading in a filing yesterday in U.S. District Court in Manhattan. The “alleged inside tips consist of material information that is already public, or nonpublic information that is not material,” according to the brief.
Joining Goffer were co-defendants Craig Drimal, Emanuel Goffer and Michael Kimelman, all traders, and lawyer Jason Goldfarb. They are among 21 people accused in two overlapping insider-trading cases involving Galleon Group founder Raj Rajaratnam.
Rajaratnam, who denies wrongdoing, was arrested in October 2009 as part of a first wave of charges accusing him and others of trading on leaks from corporate officials, hedge fund traders, and other insiders.
Goffer and his co-defendants were part of a second wave of arrests last November. So far, 12 defendants have pleaded guilty in the two cases.
The case is U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan).
Ex-Hypo Alpe Chief Kulterer Faces Charges in Austria
Hypo Alpe-Adria Bank International AG’s former Chief Executive Officer Wolfgang Kulterer was charged by state prosecutors with misuse of funds in a case that may not be the last one against the banker.
The charge is linked to a 2 million-euro ($2.8 million) loan to Styrian Airways AG, a carrier which later went bankrupt, said Helmut Jamnig, spokesman for the Klagenfurt prosecutors’ office. It’s the result of a wider probe into Kulterer’s tenure and prosecutors are still pursuing “numerous further significant allegations”, Jamnig said in a statement. Kulterer was arrested over the charges on Aug. 13 and remains in custody.
Austria nationalized Hypo Alpe last year to avert the bank’s collapse after bad debts in the Balkans piled up. Kulterer had presided over Hypo’s expansion in the former Yugoslavia, which saw assets grow to more than 30 billion euros in 2006 when he stepped down as CEO and became a non-executive chairman. In 2008, Kulterer pleaded guilty to charges of false accounting at Hypo and was fined 140,000 euros.
Kulterer is also being charged with false testimony to an enquiry commission in Austria’s Province of Carinthia, Jamnig said in the statement. Two others are also being charged with misuse of funds, he said, declining to identify the others.
Kulterer rejects the allegations against him, his lawyer Dieter Boehmdorfer said in a phone interview yesterday.
BHP Buyout Offer Confused Potash Investors, CEO Testifies
BHP Billiton Ltd.’s hostile bid for Potash Corp. of Saskatchewan Inc. has confused the fertilizer producer’s investors “since day one,” the Canadian company’s chief executive officer told a U.S. judge.
CEO Bill Doyle was the first witness in a federal court hearing in Chicago yesterday in which Potash Corp., the world’s largest producer of fertilizer, seeks an order blocking BHP’s $40 billion takeover plan.
The hearing came a day after the Canadian government said BHP’s $130-a-share buyout wouldn’t provide a “net benefit” to Canada and stopped the sale, giving BHP 30 days to appeal. U.S. District Judge David H. Coar in Chicago allowed the hearing to go forward while Melbourne-based BHP seeks to overturn the Canadian decision.
BHP, the world’s biggest mining company, has denied Saskatoon-based Potash Corp.’s allegations that it made misleading public statements about plans to develop a rival potash mine near Jansen, Saskatchewan, and asked Coar to dismiss the case. BHP said it has complied with U.S. disclosure requirements and that investors, not the courts, should resolve the dispute.
Saskatchewan’s provincial government opposes the transaction, saying it would cost the province jobs and tax revenue.
Potash Corp. has suggested that BHP is using the threat of the mine to drive down Potash Corp.’s share price.
“I would say our shareholders have been confused since day one,” about BHP’s intentions, Doyle told Thomas Moloney, an attorney for the Australian company during cross-examination. “I think it’s a smoke screen.”
Andrew Mackenzie, BHP’s chief for the unit that produces diamonds, coal, aluminum and potash, testified that his company was fully behind the project.
Coar said will hear final arguments on Nov. 8.
The case is Potash Corp. of Saskatchewan Inc. v. BHP Billiton Ltd., 10-cv-06024, U.S. District Court, Northern District of Illinois (Chicago).
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Oracle Ex-President Says SAP Ducked $5 Billion in Fees
Phillips, manager of marketing and large-customer relations during more than seven years at Oracle, testified yesterday at the company’s trial over the amount of damages SAP should pay because a now-defunct software-maintenance unit illegally downloaded Oracle’s copyrighted programs.
Oracle claims SAP downloaded the software to avoid paying licensing fees and to steal Oracle customers. Phillips said if Oracle were negotiating with SAP over fees, the company would seek at least $5 billion for software from companies it had acquired whose customers SAP unit TomorrowNow would be interested in obtaining.
“We compete fiercely but we don’t take each other’s software,” Phillips said.
Oracle, the second-largest maker of software for business applications behind SAP, sued its competitor in 2007. It seeks at least $2.3 billion in damages for what a former SAP unit acknowledges were fraudulent downloads of software that infringed Oracle copyrights.
Former SAP executive Shai Agassi, testifying after Phillips, said the Walldorf, Germany-based company had concerns about the legality of TomorrowNow’s operations and knew Oracle might sue.
“There’s always a risk Oracle would sue,” he said. Agassi said he led the evaluation of the TomorrowNow acquisition, while the “the sales effort” and a program called “Safe Passage” were managed by Leo Apotheker, then an SAP executive. Safe Passage was a program to lure customers from Oracle acquisitions including PeopleSoft Inc. and J.D. Edwards & Co. by providing software support.
The case is Oracle Corp. v. SAP AG, 07-01658, U.S. District Court, Northern District of California (Oakland).
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Ex-Societe Generale Programmer Trial Won’t Be Closed
The trial of Samarth Agrawal, the former Societe Generale SA trader accused of stealing the bank’s computer code for high- frequency trading, will remain open to the public after a judge rejected prosecutors’ bid to seal it.
Prosecutors in New York asked U.S. District Judge Jed Rakoff to close portions of the trial to the public when high- frequency trading is discussed to protect the bank’s trade secrets. The U.S. also asked that some of the transcript be sealed when such testimony was discussed.
Agrawal was charged by federal prosecutors in April with theft of trade secrets. The government said Agrawal, hired by Societe Generale in New York in March 2007 to work as a quantitative analyst in the high-frequency trading group, made copies of one part of the code he had been given access to and another part he wasn’t allowed to have.
“My recollection of the constitutional protections include an open court,” Rakoff said at a hearing yesterday. “That protection cannot be overcome because it makes it more difficult for the government to prove its case.”
Assistant Manhattan U.S. Attorney Daniel Levy told Rakoff the government sought to seal the courtroom during parts of the trial to prevent the public disclosure of proprietary Societe Generale computer codes.
Ensuring that no secrets were accidentally disclosed, “could cause some logistical headaches,” Levy said. “This very much hamstrings the government’s ability to prove their case.”
Levy told the judge that Agrawal was believed to have printed out between 500 to 1,000 pages from Societe Generale’s computers. Rakoff interrupted, saying, “The jury, I am sure, has no interest in seeing 500 pages of a logarithm code.”
The judge said prosecutors can renew their request to close the courtroom if they determine potential trade secrets might be disclosed. He told lawyers to prepare to deliver opening statements to the jury as early as Nov. 8.
Agrawal’s lawyer, Ivan Fisher, told the judge that the defense had no intention of revealing details of any codes that are part of the government’s case. “They are not in any part of our defense strategy” Fisher said.
Rakoff said that if Fisher did disclose any trade secrets, “he would run the risk of some unfortunate consequence, like jail, like disbarment, or even worse, getting a tongue-lashing from me.”
Agrawal, who faces as long as 10 years in prison if convicted, pleaded not guilty to the charges. Agrawal was promoted to trader in April 2009, according to the government. Before he resigned last November, he deleted a computer folder on his personal network drive that contained the code, prosecutors said.
Prosecutors have said the code Agrawal is accused of stealing cost millions of dollars to develop and generated millions of dollars in revenue for Paris-based Societe Generale.
The case is U.S. v. Agrawal, 10-CR-417, U.S. District Court, Southern District of New York (Manhattan).
Brunei Prince Fights to Keep Sex Statues Out of New York Trial
A Brunei prince’s lawyers said details about his multiple wives and statues of him having sex shouldn’t be presented to a New York jury when his lawsuit against his former legal advisers goes to court next week.
Prince Jefri Bolkiah, the younger brother of the Sultan of Brunei, accused the advisers in a 2007 New York lawsuit of engineering a scheme to control his assets and cheat him out of millions of dollars.
Jefri asked a state court judge in Manhattan to exclude evidence that he says could be prejudicial, including photos of “erotic statues” that were once stored on the prince’s 28-acre estate on Long Island east of New York City, according to court papers.
The statues were sculpted by artist J. Seward Johnson and depict Jefri having sex, said Mark Cymrot, a lawyer for one of the defendants in the lawsuit.
The case is Casa De Meadows Inc. v. Faith F. Zaman, 601685- 2007, New York State Supreme Court (Manhattan).
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Shell Bribes Among ‘Culture of Corruption,’ Panalpina Admits
Bribes paid on behalf of Royal Dutch Shell Plc’s Nigerian unit came from “a culture of corruption” that Panalpina World Transport Holding Ltd., a Swiss freight forwarder, admitted in a U.S. court yesterday.
Panalpina, Shell and five oil services companies agreed to pay $236.5 million to settle probes by the U.S. Justice Department and Securities and Exchange Commission. Panalpina, which admitted to bribing government officials in seven nations, will pay $81.5 million, and Shell will pay $48.1 million.
Prosecutors agreed to defer prosecution of five companies, including Panalpina and Shell. Panalpina said it paid at least $49 million in bribes to government officials in Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia and Turkmenistan. The bribes from 2002 to 2007 let its clients avoid the customs process, pass off phony documents or smuggle contraband including medicines and explosives, Panalpina said.
“Prior to 2007 a culture of corruption within Panalpina emanated from senior level management in Switzerland who tolerated bribery as business as usual,” the company said in a 34-page statement filed in federal court in Houston. “Dozens of employees throughout the Panalpina organization were involved in various schemes to pay bribes to foreign officials.”
The company said Shell’s Nigerian employees “specifically requested Panalpina Nigeria to provide false invoices with line items to mask the nature of the bribes.” Shell wanted to “hide the nature of the payments to avoid suspicion if anyone audited the invoices,” Panalpina said.
Shell separately admitted paying $2 million to Nigerian subcontractors on its deepwater Bonga Project. Shell knew some money would go as bribes to Nigerian officials to circumvent the customs process and give the company “an improper advantage,” according to its admission in federal court in Houston.
Prosecutors charged Shell’s Nigerian subsidiary with conspiring to violate the anti-bribery and books and records provisions of the FCPA. The Justice Department will defer prosecution for three years as long as the company makes required reforms.
“Panalpina acknowledged and accepted responsibility for misconduct, investigated and identified the nature and extent of the misconduct,” and undertook a global remediation program, said a court filing by Panalpina and prosecutors.
The company replaced most of its top leaders, as well as U.S. managers implicated in improper conduct, ended its Nigerian business in 2007, and changed its operations in high-risk countries, according to the filing.
“The settlement of these claims marks the closing of an extremely burdensome chapter in Panalpina’s history and the end of a very demanding three-year effort to address and eliminate serious concerns,” Chief Executive Officer Monika Ribar said in a statement yesterday.
The company also settled a lawsuit with the SEC.
The other companies that settled with the U.S. were Transocean Ltd., Tidewater Marine International Inc., Pride International Inc., GlobalSantaFe Corp. and Noble Corp. GlobalSantaFe merged with Transocean in 2007. Transocean is the world’s largest offshore drilling contractor. Tidewater is the world’s biggest offshore energy support-services company.
Pride International will pay $56.1 million, Transocean will pay $20.6 million, Tidewater will pay $15.7 million, Noble will pay $8.1 million and GlobalSantaFe will pay $5.9 million, authorities said.
The cases are SEC v. Noble Corp., 10-cv-4336; SEC v. Panalpina Inc., 10-cv-4334; SEC v. Pride International, 10-cv- 4335, U.S. District Court, Southern District of Texas (Houston); and SEC v. Transocean Inc., 10-cv-1891, U.S. District Court for the District of Columbia (Washington).
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On the Docket
Oracle’s Ellison to Testify Nov. 8 at SAP Trial
Oracle Chief Executive Officer Larry Ellison, who has said the new head of rival Hewlett-Packard Co. oversaw “industrial espionage” while he was at SAP AG, will testify Nov. 8 at a trial between Oracle and SAP, a lawyer said in court.
Geoffrey Howard, an Oracle attorney, told U.S. District Judge Phyllis Hamilton in Oakland, California, that is his best estimate for when he will call Ellison as a witness. Hamilton asked about high-profile witnesses to make arrangements for potential media interest.
Ellison said in an Oct. 26 statement that Oracle plans to produce evidence that Hewlett-Packard Co. CEO Leo Apotheker was involved in an effort to steal Oracle software while at SAP.
HP says Apotheker had a limited role in the SAP software maintenance unit where the downloads took place, and claims Ellison is seeking to harass him.
Oracle, based in Redwood City, California, the second- largest maker of software for business applications behind SAP, sued its competitor in 2007. It seeks at least $2.3 billion in damages for what a former SAP unit acknowledges were fraudulent downloads of Oracle software that infringed Oracle copyrights.
The case is Oracle Corp. v. SAP AG, 07-01658, U.S. District Court, Northern District of California (Oakland).
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