Wells Fargo, JPMorgan, UBS, SocGen, BP in Court News

(Corrects to add number of defendants accused of misusing confidential information in BP lawsuit.)

Wells Fargo & Co. (WFC) agreed to pay Citigroup Inc. $100 million to settle claims that the San Francisco-based bank improperly won bidding to acquire Wachovia Corp. during the financial crisis.

“We are glad to put this matter behind us, and we look forward to our two institutions working together constructively in the future,” Wells Fargo said Nov. 19 in a joint statement with New York-based Citigroup.

Wells Fargo trumped Citigroup’s $2.16 billion bid for Wachovia’s banking operations in 2008, by paying $12.7 billion for the Charlotte, North Carolina-based lender in a deal that required no guarantees from the Federal Deposit Insurance Corp. The final deal deprived Citigroup of a chance to bolster its business, which later required a $45 billion government bailout.

The takeover battle spawned lawsuits among the companies. The settlement resolves “all claims related to this dispute,” the banks said.

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Lehman U.K. Unit Wins Court Ruling Over $1.5 Billion

Lehman Brothers Holdings Inc.’s former U.K. unit won a court ruling allowing it to keep more than $1.5 billion worth of securities left in the bank’s accounts when it collapsed more than two years ago.

Lehman Brothers International Europe, which is liquidating in London, had asked the U.K. court for direction on whether five other Lehman units owned any of the securities that had been bought and sold to one another in a series of internal transactions.

The case is known as the “Rascals” litigation, for “Regulation and Administration of Safe Custody and Local Settlement,” the name of the bank’s internal process for making accounting entries between LBIE and the affiliates to record repurchase arrangements.

“The standard Rascals process had the effect of transferring that beneficial ownership in the securities to LBIE,” its administrators at PricewaterhouseCoopers LLP said in a statement Nov. 19. “LBIE retained beneficial ownership of the securities thereafter.”

Lehman filed for the U.S.’s biggest bankruptcy in September 2008, roiling financial markets and contributing to the worst economic crisis since the Great Depression. The U.K. unit has been involved in suits with the parent company in the U.S. and affiliates throughout Europe over billions in accounts frozen when the bank collapsed.

The case is In the Matter of Lehman Brothers International (Europe)(In Administration), case no. 7942/2008, High Court of Justice, Chancery Division (London).

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Ex-SocGen Trader Found Guilty of Stealing Secrets

Former Societe Generale SA (GLE) trader Samarth Agrawal was found guilty of stealing trade secrets related to the bank’s high-speed computer trading software.

A federal court jury in New York delivered the verdict on Nov. 19 at the end of a two-week trial. U.S. District Judge Jed S. Rakoff set Agrawal’s sentencing for Feb. 24. He faces a prison term of as long as four years and nine months.

Agrawal testified, under questioning by his own lawyer, Ivan Fisher, that he shared information about Societe Generale’s trading software with a Manhattan hedge fund, Tower Research Capital LLC, where he hoped to create a similar system.

Rakoff, who told lawyers he was “puzzled” by Agrawal’s self-incriminating testimony, said he assumed Fisher was using a “sympathy defense” on his client’s behalf.

Agrawal was convicted of theft of trade secrets and transporting stolen property in interstate commerce.

During the trial, Agrawal told jurors his superiors at Societe General encouraged him to work at home because spending too many nights and weekends in the office would raise “red flags” for company security. For that reason, he said, he printed copies of the computer codes in June 2009 to study at home.

The case is U.S. v. Agrawal, 10-cr-00417, U.S. District Court, Southern District of New York (Manhattan).

Will Ferrell Loses $18 Million Claim Against JPMorgan Unit

A securities arbitration panel rejected an $18 million claim by a group of investors including actors Will Ferrell and Larry David against a unit of JPMorgan Chase & Co., ordering instead that they reimburse the bank for more than $600,000 in legal costs.

The two, along with Ferrell’s wife, Viveca Paulin, and Los Angeles business manager Matt Lichtenberg, filed a complaint against J.P. Morgan Securities with the Financial Industry Regulatory Authority. They said that the brokerage, originally a component of Bear Stearns & Co., made unauthorized investments in “preferred securities,” which the complaint didn’t specify.

A three-member arbitration panel denied the claim “in its entirety” Nov. 12, according to documents released by Finra. The panel told the comedians’ group to pay $600,000 in J.P. Morgan’s legal costs, adding $22,500 “for discovery abuse and failure to comply with the forum’s discovery rules and procedures.” The award documents said the group repeatedly failed to produce required documentation quickly enough.

The documents said Ferrell and the others accused J.P. Morgan of engaging in “unauthorized and unsuitable purchases of unspecified preferred securities with regard to their respective accounts.”

J.P. Morgan declined to comment on the decision. Lichtenberg didn’t respond to a request for comment.

Merck Wins Verdict in Suit Claiming Fosamax Defect

Merck & Co. (MRK)’s Fosamax osteoporosis drug isn’t responsible for a Florida woman’s dental and jaw problems, a New York jury found Nov. 19.

Judith Graves sued Merck in 2006, alleging the company failed to warn doctors and patients that the bone-loss drug was linked to jaw tissue death. Graves said she developed jaw problems requiring multiple surgeries after taking the drug. Merck said her condition was connected to underlying medical conditions.

“The evidence showed the company acted properly and that Fosamax did not cause the plaintiff’s dental and jaw problems,” Mike Brock, Merck’s attorney, said in a statement. “The plaintiff had multiple medical conditions that can cause people to develop jaw and dental problems.”

Merck, based in Whitehouse Station, New Jersey, is facing more than 1,500 claims in federal and state courts alleging Fosamax defects, the company said. With the Nov. 19 decision, Merck has won two of the three cases that have gone to a jury verdict. In the third case, the jury’s $8 million award was reduced to $1.5 million last month.

“We are obviously disappointed as every single treating doctor testified Fosamax caused Mrs. Graves’ osteonecrosis of the jaw,” her lawyer, Tim O’Brien, said in an e-mail. Graves will appeal, he said.

The case is Graves v. Merck & Co., 1:06-cv-05513, U.S. District Court, Southern District of New York (Manhattan).

Kinder Morgan’s Settlement of Buyout Suits Approved

Kinder Morgan Inc., the Houston-based pipeline company taken private in a $22 billion leveraged buyout, won approval of a $200 million settlement of investor lawsuits over the deal.

A state court judge in Topeka, Kansas, concluded Nov. 19 that the agreement resolving shareholders’ complaints about the 2007 buyout was a reasonable resolution of the securities-fraud cases. Investors alleged they were being shortchanged in the offer by a group led by co-founder Richard Kinder to take the company private.

“We’re pleased we were able to achieve such a phenomenal settlement for shareholders,” Randy Baron, a lawyer representing investors, said in an e-mail. Baron said the accord is the largest securities-fraud settlement in the U.S. of suits challenging a buyout. It will provide some investors as much as $2-a-share more for their Kinder Morgan stock, he added.

Kinder’s group agreed to pay $107.50 a share for Kinder Morgan’s stock as part of the buyout. The group also assumed $7 billion in debt, bringing the transaction’s value to $22 billion, the largest-ever pipeline acquisition.

“While the company and the investor group believe that the acquisition of KMI’s public shares was accomplished through a completely open and fair process and denies all allegations of wrongdoing, we believe it is in the best interests of all parties to avoid the expense and uncertainty of continued litigation,” Larry Pierce, Kinder Morgan’s spokesman, said in an e-mail.

The case is In re Kinder Morgan Inc. Shareholders Litigation, Consolidated Cases 06-C-801, Shawnee County, Kansas, District Court, Division 12 (Topeka).

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Lawsuits/Pretrial

Toyota Speed-Up Cases Won’t Be Dismissed, Judge Says

A federal judge tentatively ruled that he will reject most of Toyota Motor Corp. (7203)’s first major legal challenge to class-action lawsuits filed against the automaker by car owners over sudden acceleration.

The car owners’ lawyers provided sufficient evidence to allow their cases to go forward, U.S. District Judge James V. Selna in Santa Ana, California, said in a tentative ruling posted on his court’s website. Selna heard arguments Nov. 19 over Toyota’s motion to dismiss class-action, or group, lawsuits claiming economic loss linked to sudden acceleration.

“It is true that plaintiffs do not generally allege the precise dollar value of their losses, but that level of specificity is not required at this pleading stage,” Selna wrote in his 63-page ruling. “It is enough that they allege a tangible loss that can be proved or disproved upon discovery.”

Selna said he would issue a final ruling by the U.S. Thanksgiving holiday on Nov. 25.

The economic-loss lawsuits, combined for pretrial filings and rulings before Selna, claim Toyota drove down the value of vehicles by failing to fix or disclose defects that triggered unintended acceleration. Federal suits claiming death or injury caused by such episodes are also combined in the Santa Ana court.

Toyota asked Selna to dismiss the car owners’ claim that the company knew of a defect in the vehicles’ electronic throttle control system and concealed it from consumers. The plaintiffs failed to identify an “actual defect,” the company said in court papers.

Selna said would let this claim go forward. “Plaintiffs’ fraudulent concealment claim pleads particular facts in support of the defect allegations, and that is all that is required at this stage,” he wrote in the tentative ruling.

“These rulings are only tentative and come at a stage of the legal proceedings in which the judge has to accept that what the plaintiffs allege are true,” said Toyota attorney Lisa Gilford in an interview after the hearing. “We are confident that as the facts develop in this case they will show that there are no defects in these Toyota vehicles.”

The burden “is now squarely on plaintiffs’ counsel to prove their allegations, and Toyota is confident that no such proof exists,” Celeste Migliore, a company spokeswoman, said in an e-mailed statement. The claim that Toyota’s electronic throttle control system is defective is “wholly unsubstantiated,” she said.

“If the judge finalizes these tentative rulings they will be a substantial victory for the plaintiffs,” consumer lawyer Steve W. Berman said after the hearing.

The cases are combined as In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices and Products Liability Litigation, 8:10-ml-02151, U.S. District Court, Central District of California (Santa Ana).

FDIC Seeks Lawyer Documents as Suits Loom Against Failed Banks

The Federal Deposit Insurance Corp. has sued one law firm and threatened to sue another to obtain documents lawyers received from executives at five banks that have failed since the onset of the credit crisis.

The FDIC seeks the return of files and records that officers and directors at the five financial institutions copied and gave to private lawyers before their banks collapsed, according to documents in two cases filed in federal court in Atlanta.

The FDIC is also preparing to file negligence and fraud suits against executives of failed banks. The FDIC board has authorized civil suits against more than 80 officers and directors of failed banks, while the bank regulator and the FBI are cooperating on about 50 cases of possible criminal violations involving former and current bank employees and customers.

“We believe the FDIC’s position that we must return these documents, which were shared with us by our clients, is unsupported and unreasonable, and significantly limits our clients’ abilities to defend themselves effectively,” Mark Flanagan, managing partner at McKenna Long & Aldridge LLP, which sued the FDIC on Nov. 17, said in an e-mail. “The resolution of this issue will have a wide ranging impact on the rights of all bank officers and directors and the law firms that represent them.”

McKenna Long’s suit against the FDIC asks the federal court to determine what should be done with the documents. The firm is based in Atlanta.

McKenna Long represents executives from four banks that failed this year: Darby Bank & Trust Co. in Vidalia, Georgia; McIntosh Commercial Bank in Carrollton, Georgia; Northwest Bank & Trust in Acworth, Georgia; and K Bank in Randallstown, Maryland. As part of that representation, the firm says it has received copies of board and committee minutes, commercial loan files, and reports prepared by the bank executives.

The FDIC demanded that McKenna Long “immediately return to the FDIC as receiver all bank records and all copies therof taken from any failed bank,” according to a Nov. 15 letter from James M. Barker, managing counsel for the FDIC, court papers show. The letter said accessing, copying, and removal of the documents violated the Computer Fraud and Abuse Act. The FDIC also said the law firm must return any legal fees that were paid from the banks’ funds.

The cases are FDIC v. Bryan Cave LLP, 10-cv-03666, U.S. District Court, Northern District of Georgia (Atlanta), and McKenna Long & Aldridge LLP v. FDIC, 10-cv-3779.

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UBS, Ex-Private Banking Clients Sue Over Investments

UBS AG (UBSN)’s Singapore unit sued two former private banking clients, saying they failed to pay for investment losses of S$9.3 million ($7.2 million). The couple countersued, accusing UBS of negligence in investment advice.

UBS claims Ng Kok Keong and his wife Yow Sin May placed bets on foreign currencies and failed to pay for a shortfall in their account, according to court papers filed with the Singapore High Court. The trial is scheduled to start Nov. 22.

Ng had limited experience in the financial market and relied on UBS and banker Lily See for advice, according to the couple’s counterclaim.

See belatedly informed Ng and his wife that money in their account had dipped below minimum requirements and failed to close certain trades, causing further losses, the couple claimed in court papers.

Julie Yeo, a Singapore-based spokeswoman at UBS, said the company doesn’t comment on ongoing legal issues. The couple’s lawyer Kelvin Chia also declined to comment. UBS is represented by Cavinder Bull from Drew & Napier LLC.

The case is UBS AG, Singapore Branch v. Ng Kok Keong & Yow Sin May S390/2009 in the Singapore High Court.

Societe Generale Says Ex-Client, Suing Over Losses, Knew Risks

Societe Generale SA’s Singapore unit, sued by a former private banking client for hiding investment losses, said the legally trained businessman made his own decisions and understood the terms of the bank’s agreements.

Chan Leong Cheng “held himself out to be a sophisticated investor who was capable of evaluating the terms, potential financial consequences and risks of foreign currency trading,” the unit of France’s second-biggest bank said in its defense filed with the Singapore High Court Nov. 18.

Chan, a resident of Perth, Western Australia, sued Societe Generale and two of its executives last month in a bid to recover $7.9 million of the losses. Chan claimed Senior Director Liew Marn Leng and her supervisor Lilian Ang made wrong currency bets which almost depleted his $10 million account and for years removed pages from his statements to hide the losses.

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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BP Ordered to Return Items by Singapore Court in Trader Case

BP Plc (BP/)’s former head of fuel oil trading Quek Chin Thean and four other ex-employees won a Singapore court ruling to set aside a search order, ordering the oil company to return all the items it took.

The Singapore court ruling, part of an ongoing trial involving the workers, also ordered a separate hearing on costs and damages to the five people. A sixth person’s application for the so-called Anton Piller Order to be set aside wasn’t granted, according to an e-mailed statement released Nov. 19 by the six former BP oil-trading executives.

“The court’s ruling vindicates their stand that the APOs were taken out for unlawful reasons, and that the plaintiff had failed to disclose material facts to the court when the APOs were obtained in the first place,” they said in the statement.

The London-based oil company sued Quek and five other former employees. Five of them allegedly wrongfully downloaded and misused confidential information, including oil-trading “cheat sheets.” BP accused the group of helping rival Shenzhen Brightoil Group set up a competing business in Singapore. Quek, whose official title was head of residues trading, was fired from BP on July 9.

BP says the latest court order still upholds its request to protect trade secrets. “The orders reflect the court’s recognition of the need in this case to protect BP’s confidential information and to prevent the destruction of evidence, whilst balancing competing interests,” Robert Wine, a spokesman based in London, said in an e-mailed statement.

Quek, Clarence Chang, John Foo and Laura Kuan countersued BP in August for wrongful dismissal and claimed the company withheld money owed to them. The group, including former head of operations Paul John Bradshaw and legal manager Simon Cheong, has denied misusing any of BP’s trade secrets. They were fired after the company said it found evidence of wrongdoing. BP accused five of them, excluding Cheong, of

misusing confidential information.

The case is BP Singapore Pte v. Quek Chin Thean & Ors S482/2010 in the Singapore High Court.

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New Suits

Citigroup Sued in N.Y. for ‘Accelerated’ Foreclosures

Citigroup Inc. was accused of using fraudulent paperwork to process “accelerated” mortgage foreclosures in a lawsuit filed in federal court in New York.

“Motivated by speed and profits rather than obligatory attention to detail, Citi failed to record necessary documents to legally foreclose,” borrower Brian Costigan said in his complaint seeking class-action status on behalf of others who had home loans with the New York-based bank.

The complaint includes claims for breach of contract, breach of good faith and fair dealing, and fraud against Citigroup and its mortgage unit, Citimortgage Inc.

Costigan said Citigroup employees submitted fraudulent affidavits that allegedly proved Citi’s control of a mortgage and “outsourced tasks” to outsiders without adequate oversight. He said the bank used “robo signers’ and didn’t verify amounts borrowed and determine which institutions had a right to foreclose.

Mark Rodgers, a spokesman for Citigroup, didn’t return a voice-mail message left at his office after business hours seeking comment.

The case is Brian Costigan v. Citigroup, 10-CV-8776, U.S. District Court, Southern District of New York (Manhattan).

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Trials/Appeals

Oracle Rests SAP Case Without Apotheker Evidence

Oracle Corp. (ORCL) rested its copyright infringement damages case against SAP AG (SAP) without showing jurors the full videotaped deposition of former SAP Chief Executive Officer Leo Apotheker, who is now Hewlett-Packard Co. (HPQ)’s CEO.

Safra Catz, Oracle’s co-president, testified Nov. 19 in the portion of the trial in which the Redwood City, California-based company sought to rebut SAP’s assertions that it should pay no more than about $40 million in damages. Oracle is seeking at least $1.7 billion.

Closing arguments are scheduled to begin Nov. 22, after which the jury will begin deliberations.

Oracle attorney David Boies previously said testimony from Apotheker was important to the case because he was ‘‘at the center of” the conduct by an SAP unit that illegally downloaded Oracle software.

Apotheker’s testimony by video “didn’t add anything,” Boies said in an interview outside the courtroom. The deposition was taken in 2008 and Apotheker testified about matters that were “superseded” by agreements SAP made not to contest liability for the unit’s infringement or that SAP contributed to the infringement.

Oracle showed a short excerpt of Apotheker’s video during opening arguments, which can’t be considered as evidence by the jury.

Oracle was unable to serve Apotheker with a subpoena to testify at the trial.

The case is Oracle Corp. v. SAP AG, 07-01658, U.S. District Court, Northern District of California (Oakland).

Kissel Loses Bid to Halt Retrial for Husband’s Murder

Nancy Kissel, charged with the 2003 murder of her Merrill Lynch & Co. (BAC) banker husband, will be retried, a Hong Kong judge ruled, rejecting her application for the proceedings to be halted.

Judge Andrew Macrae told the media not to report the details of his ruling. He previously ordered the media not to report on the details of her application for a stay.

Michigan-born Kissel, serving a life sentence in prison, would have been released had her application been successful. Prosecutors charged her again with murder in March after Hong Kong’s top court overturned her 2005 conviction. The 46-year-old mother of three’s retrial is set to begin on Jan. 10.

Kissel’s defense lawyer Derek Chan declined to comment.

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 2005 trial. Jurors heard in the three-month trial that she drugged her husband Robert 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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Court Filings

Ambac Financial Group Most Popular Docket on Bloomberg

Ambac Financial Group Inc., the New York-based holding company for the Wisconsin insurer, had the most-read litigation docket on the Bloomberg Law system last week.

The holding company’s Chapter 11 bankruptcy case is In re Ambac Financial Group Inc., 10-15973, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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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