BNP Paribas SA and Groupe Credit Agricole are confronting three former bond traders at a Paris criminal trial on claims the men orchestrated deals in the 1990s to inflate bond prices and pocket the profits.
The traders, who worked for what are now units of the banks, are accused by Paris prosecutors of abuse of trust and fraud after a nearly 12-year probe found as much as 200 million French francs ($34 million) was siphoned into overseas funds for their use.
An investigation found the men “deliberately hid what was being done from superiors,” Judge Agnes Quantin said in opening the four-day trial Nov. 8.
The trial spotlights the practices of bond traders a decade before Jerome Kerviel’s unauthorized derivatives trading cost France’s second-largest bank, Societe Generale SA, 4.9 billion euros. Testimony at times echoed Kerviel’s June trial, with two traders asserting they followed “normal” practices while the banks said they had no idea what was happening.
“Mr. Kerviel was just one man,” Claude Bendel, a lawyer for the Credit Agricole units, said yesterday. While the affairs are “very closely related,” he said, “here we are in the presence of a gang -- no one acted alone.”
Defendants Ariel Cheminaud, 46, Noureddine Benameur, 49, and Olivier Moulines, 49, deny the charges, and claim they never collaborated or benefited on the trades. The men face as much as 375,000 euros in fines and five years in jail if convicted.
“These transactions were perfectly normal,” Cheminaud, a broker for CPRI, part of Credit Agricole since 2000, said in testimony Nov. 8.
The men traded illiquid bonds, selling them at a slightly higher price to intermediaries in the U.K. that were acting for offshore accounts, according to the investigation. Those offshore groups, which the men allegedly controlled, then sold the bonds back to the traders for even more, producing profits that were hidden in the offshore funds.
“These intermediaries were useless,” BNP Paribas lawyer Arnaud de la Cotardiere said. They were “a fake way to send the profits abroad.”
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HP’s Apotheker, Like Carmen Sandiego, Focus at Trial
The hottest new game at the Oracle Corp.-SAP AG infringement trial has become “Where in the World is Leo Apotheker?”
Oracle lawyers want to put the former SAP chief executive officer on the stand in federal court in Oakland, California, to testify about the conduct of a now-defunct SAP unit that illegally downloaded Oracle’s copyrighted software. Apotheker, a 22-year SAP veteran, was on the software maker’s executive board when it bought TomorrowNow in 2005, and he oversaw the unit’s sales, according to court documents and trial testimony.
Apotheker, who resigned from SAP in February, was hired by Hewlett-Packard Co. in September and was to start as CEO on Nov. 1. HP has refused to accept papers seeking to call Apotheker to the stand, and Oracle attorneys have said they can’t find him.
“We are trying real hard to find him and he’s trying real hard not to let us find him,” David Boies, Oracle’s lead attorney at the trial, said Nov. 8. “We’ve got to find him, and we’ve got to find him in California.”
Apotheker gave an interview to the Nikkei business daily on Nov. 5, published in Japanese a day later, that said he was in Tokyo.
Redwood City, California-based Oracle, which has a video of sworn testimony that Apotheker gave its lawyers in 2008, says it’s important for the jury in Oakland to hear live testimony from him. Oracle claims Apotheker, 57, “was at the center of the infringement” and “personally approved” the activities of the Bryan, Texas-based TomorrowNow software maintenance unit, Boies said in a news conference outside the courthouse in Oakland.
Oracle, the second-largest maker of software for business applications behind Walldorf, Germany-based SAP, is seeking damages of as much as $2 billion in the trial.
HP said Nov. 3 that Apotheker had limited knowledge of TomorrowNow. Oracle is trying to harass him and interfere with his new role at HP, said Mylene Mangalindan, a spokeswoman for the Palo Alto, California-based company, in an e-mailed statement on Nov. 3.
The case is Oracle Corp. v. SAP AG, 07-01658, U.S. District Court, Northern District of California (Oakland).
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Ex-Leipzig Utility Manager Tried Over Deal With UBS
The former head of a German municipal utility must stand trial over alleged bribes connected to collateralized debt obligation transactions with UBS AG and other banks, a court ruled.
Klaus Heininger, the former managing director of KWL- Kommunale Wasserwerke Leipzig GmbH, will be tried starting Nov. 26 on charges of accepting bribes, breach of trust, falsifying financial statements and tax evasion, the Leipzig Regional Court said in an e-mailed statement yesterday. Two other suspects, charged with bribing Heininger, will also be defendants in the case.
“Heininger allegedly accepted considerable monetary advantages in order to close highly risky agreements in the name of KWL, which may have led to a default risk of 280 million euros ($384 million),” the court said.
KWL in February filed a suit in Leipzig, Germany, against UBS, Landesbank Baden-Wuerttemberg and Depfa Bank Plc to invalidate the CDO transactions in which KWL assumed guarantees for unsecured loans. The utility claims that the transactions were closed without proper authorization.
Uwe Freyschmidt, Heininger’s lawyer, didn’t reply to a call and an e-mail seeking comment. KWL spokesman Jochen Endle declined to comment. UBS and the other banks aren’t accused of wrongdoing in the criminal case.
UBS sued KWL in January in London over the issue. The London High Court of Justice ruled Oct. 15 that it can hear the UBS suit because the transactions fall under English law.
Heininger, who was fired last year and arrested in February, may have evaded 1.6 million euros in taxes because he didn’t declare the alleged bribes as income, the court said.
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Foreclosure Probe on ‘Fast Track,’ Iowa’s Miller Says
The investigation by attorneys general in 50 U.S. states into banks’ foreclosure practices is on “a fast track” and any resolution might involve multiple settlements, Iowa Attorney General Tom Miller told Bloomberg News’ Margaret Cronin Fisk.
“We’d like to resolve this sooner rather than later,” Miller, who is leading the attorneys general task force, said in an interview. “We want to move quickly if we can, but not so quickly that we don’t do it right.”
A global settlement of the task force investigation is unlikely, said Miller, 66, who also leads a separate foreclosure prevention group of state attorneys general. “It would be one bank at a time.” Miller, who was first elected attorney general in 1978 and whose successes include $809 million from two earlier settlements over home loans, didn’t speculate on when or how this investigation might be resolved.
All 50 states on Oct. 13 announced the coordinated inquiry into whether banks and loan servicers used false documents and signatures to justify hundreds of thousands of foreclosures. The probe came after JPMorgan Chase & Co. and Ally Financial Inc.’s GMAC mortgage unit said they would stop repossessions in 23 states where courts supervise home seizures and Bank of America Corp. froze foreclosures nationwide.
At least 19 states, including Iowa and Texas, are conducting separate investigations to determine whether state laws were broken. Some began investigations months before the coordinated nationwide probe was announced.
States have asked lenders to halt foreclosures, requested documents and sought better home-loan modification procedures. Ohio’s attorney general sued, accusing Ally Financial of consumer fraud.
Some lenders have acknowledged that employees may have completed court affidavits without confirming their accuracy. In December, a GMAC employee said in a deposition in a foreclosure case in West Palm Beach, Florida, that his team of 13 people signed about 10,000 documents a month without verifying the accuracy of the information in them.
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Judge Tells ESun to Mediate Casino Dispute With Investors
A Hong Kong judge told an eSun Holdings Ltd. unit and its partners in a Macau, China, casino project including Oaktree Capital Management LP and Silver Point Capital LP to settle their dispute through mediation.
Any unreasonable refusal to try to settle would result in a reduced award at the end of a trial, High Court Judge A.T. Reyes said at a hearing yesterday on petitions by each partner for the other to be ordered to drop their interest in the project.
ESun unit East Asia Satellite Television (Holdings) Ltd. and New Cotai LLC, owned by Oaktree, Silver Point and former Las Vegas Sands Corp. executive David Friedman, announced plans for a $4 billion casino complex in 2007. East Asia and New Cotai are now suing each other for hindering the development of the project.
“Instead of the parties sitting at a table arguing, you have someone come in who tries to help the parties perhaps see it from a different perspective,” said Charles Allen, an accredited mediator based in Hong Kong.
Parties who don’t make a reasonable effort to resolve disputes in mediation when directed to do so can have legal costs deducted from any award, according to the court’s rules, he said.
Friedman declined to comment after yesterday’s hearing, citing the ongoing litigation.
David Goh, a lawyer for eSun, said the company is discussing the prospect of mediation with its legal advisers and declined to comment further.
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