JPMorgan Chase & Co., Bernard Madoff’s “primary banker,” was sued for $6.4 billion by the trustee liquidating the imprisoned con man’s former firm.
Irving H. Picard, the lawyer appointed as trustee by a New York bankruptcy court, said in a statement that he sued JPMorgan yesterday over claims the bank aided and abetted Madoff’s fraud. Picard said his suit seeks $1 billion in fees and $5.4 billion in damages.
“JPMorgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff,” David J. Sheehan,’’ counsel to Picard, said in the statement. “JPMC was at the very center of that fraud, and thoroughly complicit in it.”
Any money recovered from JPMorgan will be returned to Madoff’s victims on a pro rata basis, said Picard, who has so far recovered about $1.5 billion for Madoff creditors.
“The complaint filed today by the trustee for the Madoff estate blatantly distorts both the facts and the law in an attempt to grab headlines,” JPMorgan, the second-biggest U.S. bank, said in a statement. “JPMorgan did not know about or in any way assist in the fraud orchestrated by Bernard Madoff.”
JPMorgan, based in New York, said it has assisted Picard in his investigation of Madoff’s firm and called his claims “irresponsible and over-reaching.”
The lawsuit was filed under seal in U.S. Bankruptcy Court in Manhattan, according to Picard’s statement.
JPMorgan “has designated virtually all of their information as confidential,” Picard said. “We intend to move to have the complaint made public as soon as possible.”
The suit is the second-biggest filed by Picard in the Madoff bankruptcy, after a $7.2 billion claim he filed against investor Jeffry Picower in May 2009. Picower died in October 2009.
The case is Picard v. JPMorgan Chase & Co., 10-ap-4932, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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Gundlach’s DoubleLine Trust Faces New Lawsuit by TCW
A trust created by DoubleLine Capital LP’s Jeffrey Gundlach was sued by TCW Group Inc., which already sued its former investment chief after he brought more than half of its fixed-income professionals to his new firm.
DoubleLine Funds Trust was started to market DoubleLine Capital’s mutual funds and to “generate fees and profit for Gundlach and the money management firm he had formed,” TCW said in a new complaint filed Nov. 1 in state court in Los Angeles. TCW provided a copy of the complaint to Bloomberg News.
TCW, a Los Angeles-based money management firm, accuses the trust and its trustees of misappropriation of trade secrets and unfair competition, among other allegations, and seeks unspecified damages.
“Jeffrey Gundlach and his co-conspirators built a business based on the wholesale theft of huge amounts of TCW’s proprietary data and analytical systems, and that business includes DoubleLine Funds Trust,” Steve Madison, a lawyer for TCW, said yesterday in an e-mailed statement. “When DoubleLine Funds was launched last spring, TCW notified the funds and their trustees of TCW’s intent to name the trust as a defendant.”
TCW, a unit of Societe Generale, in January accused Gundlach and several former employees who joined DoubleLine of breach of fiduciary duty, unfair competition and misappropriation of confidential information and demanded more than $200 million in damages.
“TCW has made false claims against DoubleLine for 11 months,” Lew Phelps, a spokesman for DoubleLine, said yesterday. “Their case is going not at all well. This latest legal action by TCW is redundant and meaningless.”
The case is Trust Company of the West v. DoubleLine Funds Trust, BC450413, Los Angeles County Superior Court.
Hypercom Sued Over $485 Million VeriFone Bid
Hypercom Corp., the maker of electronic-payment software being acquired by VeriFone Systems Inc. for $485 million, was sued in Delaware Chancery Court by an investor who contends the shares are undervalued in the deal.
The companies said in a Nov. 17 statement that Hypercom shareholders will receive 0.23 share of VeriFone stock for each of their shares, or about $7.32 a share -- a 19 percent premium at the time.
“The offer price reflects an inadequate premium to the trading price of the company’s common stock given that Hypercom continues to have record revenue growth,” said shareholder Chad Small in a complaint filed yesterday in Wilmington.
San Jose, California-based VeriFone, with $844.7 million in revenue for fiscal 2009, said it’s buying Hypercom, based in Scottsdale, Arizona, to help expand in European markets. Hypercom reported $406.9 million in 2009 sales.
Small asks a judge to grant the lawsuit class or group status, on behalf of outside shareholders, and to halt the transaction as structured, according to court papers.
Hypercom spokesman Pete Schuddekopf didn’t immediately return voice and e-mail messages seeking comment on the lawsuit.
The case is Small v. Hypercom, CA6031, Delaware Chancery Court (Wilmington).
Infineon Sued for Damages by Qimonda Administrator (Update1)
The suit asserts Infineon made a filing mistake when transferring its memory business to a shell company that was to become Qimonda. The administrator, Michael Jaffe, seeks a judgment that Infineon needs to refund the difference between Qimonda’s assets and its capital at the time insolvency proceedings began, Infineon said in an e-mailed statement yesterday.
“Infineon regards the action as without merit,” the company said. “The contribution of the memory business to Qimonda was carried out in compliance with all requirements. Infineon intends to defend itself vigorously against this action through all stages of the proceedings.”
Qimonda filed for insolvency in 2009 after being hurt by sliding memory-chip prices. Infineon completed an initial public offering of Qimonda in August 2006 to reduce its dependence on businesses with volatile demand and prices. Infineon was itself a unit of Siemens AG, Europe’s largest engineering company, until an IPO in March 2000.
Munich Regional Court spokesman Tobias Pichlmaier confirmed the suit was filed yesterday. Sebastian Brunner, a spokesman for Jaffe didn’t immediately return a call seeking comment.
The case is LG Muenchen, 3 O 22476/10.
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Massey’s Blankenship Must Face Mine Widows’ Lawsuits
Massey Energy Co. Chief Executive Officer Don Blankenship must face two lawsuits holding him personally responsible for a West Virginia mine explosion that killed 29 people, a judge ruled.
The widows of William Griffith and Ronald Maynor, who were killed in the April 5 blast at Massey’s Performance Coal unit, claim the Richmond, Virginia-based company and Blankenship were responsible for violations of federal and state safety regulations that led to the explosion. The CEO was “willfully negligent” in his direction of the company subsidiaries operating the mine, they said in separate complaints.
Blankenship asked to be dismissed from the lawsuits, contending they failed to state a valid claim. West Virginia Circuit Court Judge William Thompson denied the motion in a Nov. 24 order. He didn’t rule on the merits of the widows’ claims.
“Plaintiff’s complaint provides fair notice to defendant Blankenship of the plaintiff’s claim made against him, one that states a valid claim under West Virginia law,” Thompson wrote in his order in the Maynor case. He entered an identical decision in the Griffith suit.
The explosion at Performance Coal’s Upper Big Branch operation in Montcoal, West Virginia, the worst U.S. mine disaster in 40 years, set off federal and state investigations into its cause.
The lawsuits were filed by Marlene Griffith, the widow of William Griffith, 54, who had worked at the mine since 1992, and Helen Maynor, widow of Ronald Maynor, 31, who started there in 2006.
The claims against the Massey CEO are “a judicial lynching of Don Blankenship,” his lawyer, Thomas Flaherty, said at an Oct. 20 hearing on the motion to dismiss the lawsuits.
Flaherty and Jeff Gillenwater, Massey spokesman, didn’t return calls yesterday for comment.
The cases are Griffith v. Performance Coal Co., 10-C-91, and Maynor v. Performance Coal Co., 10-C-122, Circuit Court, Boone County, West Virginia (Madison).
Ensco Asks Judge to Reinstate Claim Over Drilling Ban
Ensco Offshore Co. asked a judge to revive its challenge to the Obama administration’s deep-water oil drilling rules, claiming regulators are preventing rigs from returning to work even after lifting a ban in October.
“None of the work that was being done by the 33 rigs suspended when the initial moratorium was issued has been allowed to resume, no permits for previously suspended activities have been issued, and there are no indications that defendants will unfreeze the permit process in the near future,” Ensco said in a Nov. 30 court filing.
Ensco asked U.S. District Judge Martin Feldman of New Orleans to reinstate dismissed claims and enjoin the government from enforcing the drilling moratorium “by any means.” Ensco also asked the judge to require regulators to act within 30 days on all pending applications for permits to drill in waters deeper than 500 feet.
The Obama administration initially banned deep-water drilling in May, after the Deepwater Horizon rig exploded while drilling for BP Plc off the Louisiana coast. Interior Secretary Kenneth Salazar said regulators needed time to study improvements to drilling safety and spill containment after the worst offshore oil spill in U.S. history.
Ensco lawyer George Fowler didn’t immediately respond to requests for comment. Kendra Barkoff, Salazar’s spokeswoman, declined to comment.
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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U.S. May Appeal Sugar Beet Crop Destruction Order
The U.S. may appeal a court order requiring the destruction of sugar beet crops engineered to be resistant to Monsanto Co.’s herbicide Roundup, according to a court filing.
The U.S. Justice Department said it is seeking the Solicitor General’s permission to appeal a Dec. 1 order by a San Francisco federal judge in a lawsuit brought by organic farmers and a food safety group. U.S. District Judge Jeffrey White found that “plaintiffs have made a strong showing that they and the environment are likely to suffer irreparable harm if this court does not issue an injunction.” He put his order on hold to allow an appeal to be filed by Dec. 7.
The use of seeds engineered to resist St. Louis-based Monsanto’s weed killer was deregulated by the Bush administration’s U.S. Agriculture Department five years ago, according to court filings. Today more than 90 percent of the U.S. sugar beet crop comes from the genetically engineered seeds.
The case is Center for Food Safety v. Schafer, 3:08- cv-0484, U.S. District Court, Northern District of California (San Francisco).
Deutsche Post May Lose Bid to Block Belgian Post Aid
Deutsche Post AG should lose its bid to block 297.5 million euros ($391 million) in state aid to Belgium’s La Poste SA, an adviser to the European Union’s top court said.
A ruling in favor of Deutsche Post last year “should be canceled” and the challenge “be declared inadmissible,” Advocate General Niilo Jaeaeskinen of the EU’s Court of Justice said in a non-binding opinion yesterday. The Luxembourg-based court follows such advice in a majority of cases.
Belgium appealed after Deutsche Post, the world’s biggest transporter of air and sea freight by volume, won a lower-court ruling to annul EU backing for the aid. The February 2009 ruling triggered an in-depth review by the European Commission, the 27 nation EU’s antitrust regulator, into all state aid received by Belgium’s state-controlled postal service.
The case is one of the hurdles La Poste has to clear before it can proceed with a planned initial public offering. CVC Capital Partners Ltd., which owns almost 50 percent of La Poste, in June hired JPMorgan Chase & Co. and Nomura Holdings Inc. to advise on a possible stock sale.
Deutsche Post sued the commission in November 2003 after the regulator approved the capital injection by the Belgian government. A ruling by the court usually follows within six months after an opinion.
Deutsche Post must study the reasoning of the advocate general before it can comment, Uwe Bensien, a spokesman for the company, said by telephone.
The case is C-148/09 P, Belgium v Deutsche Post and Others.
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Ex-UBS Municipal-Bond Banker Charged in Bid-Rig Probe
A former co-head of UBS AG’s municipal-derivatives group was arrested on a fraud charge connected to a nationwide bid- rigging probe of contracts used by states and local governments to invest municipal-bond proceeds.
Peter Ghavami, a Belgian national living in Moscow, was charged with one count of wire fraud in U.S. District Court in Manhattan after being arrested Dec. 1 at a New York airport. Ghavami worked at UBS from 1999 until 2007, according to records filed with the Financial Industry Regulatory Authority. He ran a sham auction of a municipal investment contract in exchange for a $100,000 kickback, according to a federal complaint.
“Pernicious fraud schemes like the one alleged in this complaint undermine the public’s confidence and trust in the municipal bond and derivatives markets,” Christine Varney, the head of the Justice Department’s antitrust division, said yesterday in a statement posted on its website.
The conspiracy included more than 200 deals involving state agencies, local governments and nonprofits across the country, according to documents filed in federal court.
At his arraignment yesterday, Ghavami didn’t enter a plea and is being held, according to Alisa Finelli, a Justice Department spokeswoman. She said he is due back in court Jan. 3.
James Mitchell, a lawyer with Stillman, Friedman & Shechtman representing Ghavami, didn’t return a call to his office after regular business hours seeking comment.
Kelly Smith, a UBS spokeswoman in New York, declined to comment.
Perelman Owes Ex-Wife Barkin’s Company $4.3 Million
Billionaire Ronald Perelman must pay $4.3 million to his ex-wife Ellen Barkin’s Applehead Pictures LLC after reneging on an agreement to invest in the film production company, a New York appeals court ruled.
Barkin, an actress who starred in “Palindromes” (2004) and “The Big Easy” (1987), founded New York-based Applehead Pictures with her brother George Barkin in November 2005. The decision by the Appellate Division, First Department affirmed a trial court’s January ruling on the 2007 suit.
Perelman, the chairman of cosmetics maker Revlon Inc., agreed to make capital contributions to Applehead Pictures in 2006 and 2007, totaling $3.4 million, according to the decision. Perelman didn’t approve of Barkin’s acting career, and they agreed the company would let her continue working in film, the decision said. The couple married in 2000 and entered into a separation agreement and divorce in February 2006.
“The primary issue presented is whether two separately executed agreements -- a marital separation agreement and a business operating agreement -- can be deemed to be one integrated contract,” Justice Eugene Nardelli wrote in the unanimous opinion. “We hold in the negative.”
The court rejected Perelman’s argument that Barkin’s alleged breaches of the separation agreement relieved him of his obligations in the business agreement.
“This is an unfortunate decision,” Christine Taylor, a spokeswoman for Perelman, said in an e-mail. “We still maintain Ms. Barkin should not be entitled to any additional money beyond the enormous settlement she received five years ago. She said Perelman had ‘‘moved on’’ and left it to his attorneys to handle the ‘‘still-pending claims against Ms. Barkin and others based on their misconduct in managing and controlling Applehead Pictures.’’
Perelman had countersued in New York state Supreme Court, alleging Barkin misappropriated Applehead funds to finance personal expenses.
New York attorney Jacob Buchdahl, who represents Applehead, said his clients were ‘‘thrilled’’ with the appeals court decision. The $4.3 million award includes more than $900,000 in interest.
The case is Applehead Pictures LLC v. Ronald O. Perelman, 602606/2007, New York Supreme Court, New York County (Manhattan).
Tyco Ex-CEO Kozlowski Can’t Get Benefits, Court Says
Ex-Tyco International Ltd. Chief Executive Officer L. Dennis Kozlowski, imprisoned for stealing from the company, can’t collect tens of millions of dollars in benefits he claims Tyco owes him, a judge said.
U.S. District Judge Thomas P. Griesa in New York ruled Nov. 1 that Kozlowski’s 2005 state-court conviction on 22 criminal counts shows that he was disloyal to Tyco and isn’t entitled to any pay he claims he earned from September 1995 to June 2002, when he was forced out.
‘‘Kozlowski’s multiple breaches of his fiduciary duty over several years clearly demonstrate his faithless service,” Griesa wrote. “Kozlowski must therefore forfeit all compensation and benefits, deferred or otherwise, earned during his period of disloyalty.”
The ruling comes in a suit Tyco filed against Kozlowski in 2002. Griesa ruled in favor of several Tyco claims before trial, while dismissing all of Kozlowski’s counterclaims for pay and benefits after 1995.
As of October 2008, the value of Kozlowski’s retirement account was $75.9 million, according to court papers in the suit.
Kozlowski and former Chief Financial Officer Mark Swartz were convicted in 2005 of securities fraud, grand larceny and falsifying business records. A jury in New York State Supreme Court found they stole about $137 million from Tyco through unauthorized bonuses and the abuse of company loans.
Kozlowski was sentenced to a prison term of eight years and four months to 25 years.
The case is Tyco v. Kozlowski, 02-cv-07317, U.S. District Court, Southern District of New York (Manhattan).
RBS Cleared by U.K. FSA in Probe of Taxpayer Bailout
The Royal Bank of Scotland Group Plc and former executives, including ex-Chief Executive Officer Fred Goodwin, were cleared by U.K. regulators in a report that faulted the bank for “a series of bad decisions” before the financial crisis.
The U.K. Financial Services Authority said it won’t take any enforcement action and has closed the probe into conduct by RBS executives, the acquisition of ABN Amro Holding NV in 2007 and a 2008 rights offering, the regulator said in a statement yesterday. The FSA didn’t publish the contents of the review.
“The review confirmed that RBS made a series of bad decisions in the years immediately before the financial crisis,” the FSA said. “The review concluded that these bad decisions were not the result of a lack of integrity by any individual and we did not identify any instances of fraud or dishonest activity.”
“It is unacceptable to suggest that the behavior of the management in this iconic U.K. bank did not ‘lack integrity’ when they brought RBS to its knees,” Rob MacGregor, a national officer at Unite, said in an e-mailed statement. “By failing to bring any formal charges against the RBS executives they have allowed some of the biggest villains of the financial crisis to go on enjoying their millionaire lifestyles.”
Michael Strachan, a spokesman for the bank, said it welcomed the conclusion of the review.
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On the Docket
OMV CEO Trial on Alleged Insider Trading to Take Place Jan. 27
The trial of OMV AG Chief Executive Officer Wolfgang Ruttenstorfer on alleged insider trading will take place Jan. 27.
The trial at the Vienna Criminal Court is scheduled for one day, Thomas Vecsey, a spokesman for the Vienna prosecutor, said in a telephone interview yesterday.
Ruttenstorfer, 60, was charged on Nov. 17. He denies any wrongdoing.
To contact the editor responsible for this story: David E. Rovella at email@example.com.