Pfizer, AngioDynamics, Ally, Yukos in Court News

Pfizer Inc., the world’s largest drug company, should have the bankruptcy of its Quigley unit dismissed, lawyers for the U.S. Trustee said. That bankruptcy has protected Pfizer from claims for asbestos-related health problems since 2004.

While the bankruptcy has been pending, creditors with alleged asbestos-related health problems have been unable to sue New York-based Pfizer, and many have died, wrote lawyers for the U.S. Trustee, an arm of the Justice Department that oversees bankruptcy. A hearing to decide the U.S. Trustee’s request is set for Jan. 13, according to court papers filed Dec. 23.

“The harm in delaying the inevitable dismissal of this case is to the individuals who have filed asbestos claims against the Debtor and Pfizer,” lawyers for acting U.S. Trustee Tracy Hope Davis wrote in court papers. “For some of those individuals, time may be of the essence.”

A judge in September denied Quigley Company Inc. permission to exit bankruptcy under its fourth proposed Chapter 11 plan. U.S. Bankruptcy Judge Stuart M. Bernstein found the world’s largest drug company manipulated the bankruptcy process to benefit itself. Bernstein said the plan was filed in “bad faith” by Pfizer and cited testimony that asbestos claims directed at Quigley could total $4.45 billion over the next 42 years.

Pfizer spokesman Christopher Loder said the company is prepared to contribute additional funds to Quigley’s plan to satisfy the court’s concerns, and will discuss fair compensation of asbestos claims at the Jan. 13 hearing.

“It’s important to note that in 30 years of asbestos litigation, Pfizer has never been found to be derivatively liable for Quigley’s liabilities,” Loder said in an e-mailed statement.

Pfizer reported in its third-quarter report in November a $701 million charge for asbestos litigation for Quigley. In a report filed Nov. 12 with the U.S. Securities and Exchange Commission, Pfizer said it was filing an appeal of the Quigley ruling to “preserve its right to address certain legal issues raised in the court’s opinion.”

An ad-hoc committee representing 43,100 individual asbestos claimants in Quigley’s bankruptcy had also asked in October that a judge end the case, and also end the injunction that has shielded Pfizer from lawsuits since 2004.

“Quigley and Pfizer have enjoyed an exceedingly valuable reprieve from defending asbestos claims in the tort system for that entire time, and accordingly have, at numerous junctures throughout this case, been content to let the bankruptcy proceedings languish,” lawyers for the committee wrote.

Pfizer said in court papers requesting an appeal that it was working with Quigley to come up with a plan that took into account some of the points in Bernstein’s ruling. Pfizer challenged Bernstein’s statement that Pfizer should put an amount of money into a trust that is equal to the alleged value of present and future claims against the drugmaker.

The bankruptcy court “erred by precluding Pfizer from introducing evidence that Pfizer does not have any liability for Quigley’s conduct in making or selling asbestos-containing products,” lawyers for Pfizer wrote.

Quigley, founded in 1916, made three products containing asbestos from the 1940s to the 1970s. Pfizer bought the company in 1968.

The case is In re Quigley Co., 04-15739, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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New Suits

Apple Apps Give Information to Advertisers, Suit Says

Apple Inc. was sued over claims that applications for the company’s iPhone and iPad transmit users’ personal information to advertising networks without customers’ consent.

The complaint, which seeks class-action, or group, status, was filed on Dec. 23 in federal court in San Jose, California. The suit claims Cupertino, California-based Apple’s iPhones and iPads are encoded with identifying devices that allow advertising networks to track what applications users download, how frequently they’re used and for how long.

“Some apps are also selling additional information to ad networks, including users’ location, age, gender, income, ethnicity, sexual orientation and political views,” according to the suit.

The suit, filed on behalf of Jonathan Lalo of Los Angeles County, identifies applications such as Pandora, Paper Toss, the Weather Channel and Dictionary.com, and names them as defendants along with Apple. Lalo is represented by Scott A. Kamber and Avi Kreitenberg of KamberLaw LLC in New York.

Apple iPhones and iPads are set with a Unique Device Identifier, or UDID, which can’t be blocked by users, according to the complaint. Apple claims it reviews all applications on its App Store and doesn’t allow them to transmit user data without customer permission, according to the complaint.

The lawsuit, claiming the transmission of personal information is a violation of federal computer fraud and privacy laws, seeks class-action status for Apple customers who downloaded an application on their iPhone or iPad between Dec. 1, 2008, and last week.

Amy Bessette, a spokeswoman for Apple, didn’t immediately return a phone call or e-mail seeking comment.

The case is Lalo v. Apple, 10-5878, U.S. District Court, Northern District of California (San Jose).

Verdicts/Settlements

AngioDynamics Settles Patent Lawsuit Against Vascular Solutions

AngioDynamics Inc., a maker of devices to treat blood- vessel diseases, agreed to settle its patent fight with Vascular Solutions Inc. over a varicose vein treatment, court records show.

Terms weren’t disclosed in the Dec. 21 joint court filing announcing the settlement of all claims and counterclaims. The case was dismissed Dec. 23 by U.S. District Judge Donovan Frank in St. Paul, Minnesota, at the two companies’ request.

AngioDynamics, based in Latham, New York, sued in July 2009, claiming Minneapolis-based Vascular Solutions’ Vari-Lase product infringed two patents related to equipment and methods of treating varicose veins with internal lasers. As part of the settlement, the companies agreed that both patents are valid and enforceable, according to the court filing.

AngioDynamics wouldn’t comment on the settlement, saying the terms are confidential.

The case is AngioDynamics Inc. v. Vascular Solutions Inc., 100-3601, U.S. District Court for the District of Minnesota (St. Paul).

SEC Says Alcatel-Lucent Settles Bribery Charges for $137 Million

Alcatel-Lucent SA agreed to pay $137 million to resolve U.S. criminal and civil probes into allegations that it paid bribes in Costa Rica, Taiwan and Kenya.

Prosecutors yesterday charged Paris-based Alcatel-Lucent with violating the internal controls and books and records provisions of the Foreign Corrupt Practices Act. The Justice Department will defer prosecution and drop the case after three years if the company improves its compliance program as promised.

Alcatel-Lucent, the world’s biggest supplier of fixed-line phone networks, will pay a $92 million criminal penalty. Three subsidiaries will plead guilty to anti-bribery provisions of the FCPA, according to the Justice Department. The company also will pay $45 million to settle civil charges filed by the U.S. Securities and Exchange Commission.

“Alcatel and its subsidiaries failed to detect or investigate numerous red flags suggesting their employees were directing sham consultants to provide gifts and payments to foreign government officials to illegally win business,” Robert Khuzami, SEC enforcement director, said in a statement.

Three subsidiaries -- Alcatel-Lucent France SA, Alcatel- Lucent Trade International AG and Alcatel Centroamerica SA -- will plead guilty, according to the deferred-prosecution agreement filed yesterday in federal court in Miami.

The conduct involved the worldwide sales practices of Alcatel SA before its 2006 merger with Lucent Technologies Inc.

Alcatel “pursued many of its business opportunities around the world through the use of third-party agents and consultants,” according to a statement of facts admitted by the company in deferred-prosecution agreement.

“This business model was shown to be prone to corruption, as consultants were repeatedly used as conduits for bribe payments to foreign officials (and business executives of private customers) to obtain or retain business in many countries,” the company admitted.

A decentralized corporate structure also permitted corruption, as “the local employees were more interested in obtaining business than ensuring that business was won ethically and legally,” the company admitted.

In a related case, two former Alcatel executives, Christian Sapsizian and Edgar Valverde Acosta, were criminally charged with FCPA violations. Sapsizian pleaded guilty in 2007 and is serving a 30-month prison term. Valverde, who was president of Alcatel de Costa Rica, is considered a fugitive.

The company outlined the basic terms of the agreement announced yesterday in a February regulatory filing. The company said in February that it would no longer conduct business through sales and marketing agents and consultants.

The case is U.S. v. Alcatel-Lucent SA, 10cr20907, U.S. District Court, Southern District of Florida (Miami).

Ally Financial Reports $462 Million Settlement With Fannie Mae

Ally Financial Inc., the auto and home lender majority- owned by the U.S. government, agreed to pay $462 million to settle repurchase demands from Fannie Mae linked to $292 billion in home loans.

Ally, formerly known as GMAC Inc., said the deal covers loans serviced by GMAC Mortgage unit for Fannie Mae before June 30 and mortgage-backed securities purchased by the Washington- based loan-funding firm. The accord was reached on behalf of Ally’s Residential Capital unit and subsidiaries, the Detroit- based company said yesterday in a statement.

Chief Executive Officer Michael Carpenter is seeking to resolve claims tied to faulty mortgages as he prepares Ally for a public offering to repay U.S. bailout funds. Mortgage lenders typically promise to buy back loans sold to investors or cover losses if information about the borrowers or property later proves to be incorrect.

“At the start of 2010, we set a goal to substantially reduce risk in our mortgage operation,” Carpenter, 63, said in the statement. “We have successfully completed a series of steps toward that objective and are largely complete.”

The government took an almost 80 percent stake in Fannie Mae after it seized the firm in 2008.

Ally had settled buyback claims with six counterparties, the largest being government-owned finance company Freddie Mac, according to a November presentation. It agreed in May to make a one-time payment to Freddie Mac, without disclosing the amount.

Ally increased reserves for buybacks to $1.1 billion in the third quarter, from $855 million in the prior period. The original unpaid principal on loans involved in the Fannie Mae settlement announced yesterday was $292 billion, a figure that narrowed to $84 billion, Ally said.

Chris Katopis, executive director of the Association of Mortgage Investors, said his members are worried the Ally settlement might be too low.

The deal “may set a harmful precedent for mortgage investors and the public,” Katopis said in an interview. The Washington-based trade association represents state pension funds and other investors in mortgage-backed securities.

The agreement “modestly” exceeds prior reserves, Ally said. ResCap and Fannie Mae also reached an accord regarding ResCap’s payment of mortgage-insurance proceeds where coverage is rescinded or canceled.

“ResCap does not expect this exposure to be material,” Ally said.

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Trials/Appeals

Stanford’s Lawyers Say They Need Two Years to Prepare for Trial

Lawyers for R. Allen Stanford, the Texas financier accused of a $7 billion Ponzi scheme, asked to delay a trial set to begin Jan. 24 for at least two years so they can prepare their defense.

Stanford’s trial preparation suffered during the first nine months of this year because his previous lawyer “focused on attempting to obtain funds from the insurance provider” more than on the financier’s defense, the lawyers, Ali Fazel and Richard Scardino, said Dec. 23 in a court filing. “During this period of time, the accused determined that little progress was made toward actual trial preparation.”

Fazel and Scardino were appointed as Stanford’s attorneys in October, after U.S. District Judge David Hittner in Houston declared the former billionaire indigent. They told Hittner in October that they would try to be ready for a January trial, which was then about 90 days away.

In requesting a delay last week, the lawyers said they won’t have enough time to properly analyze more than 5 million documents and dozens of potential witnesses before the current trial date.

Stanford, 60, has been detained as a flight risk since June 2009 on charges he swindled investors through the sale of bogus certificates of deposit by Antigua-based Stanford International Bank Ltd. His lawyers also have asked that Stanford be released on bond, claiming he is too heavily medicated in prison to participate in his defense.

Stanford was ranked by Forbes magazine as one of the world’s richest men in 2008, with an estimated net worth of more than $2 billion including a fleet of jets, yachts and a private Caribbean island. All of his corporate and personal assets were frozen by court order when the U.S. Securities and Exchange Commission accused him of running a “massive” Ponzi scheme in February 2009.

The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-00298, U.S. District Court, Northern District of Texas (Dallas).

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Overseas Litigation

Khodorkovsky Guilty Verdict Worries Russian Court Watchers

A Moscow judge found Mikhail Khodorkovsky, the jailed former head of Yukos Oil Co., guilty of embezzling crude in a new trial that has heightened European and U.S. concerns about the rule of law in Russia.

Khodorkovsky and his former business partner Platon Lebedev, already serving eight-year sentences for fraud and tax evasion under a 2005 conviction, may be sentenced this week or after Jan. 10 when Russia’s New Year holidays end, their lawyers said. The men face six more years in prison, the defense team says.

“The trial was a charade of justice, the charges were absolutely false, but I fear the sentencing will be very real,” Vadim Klyuvgant, the lead defense lawyer, said yesterday in a statement. The defense team plans to appeal the decision, he told reporters outside the courtroom. “There isn’t the slightest doubt that there was pressure on the court.”

Khodorkovsky, 47, was due for release in October 2011. Once Russia’s richest man, Khodorkovsky has called the charges retribution for political opposition to Prime Minister Vladimir Putin, who was president at the time of his 2003 arrest and as Yukos, once Russia’s largest oil exporter, was bankrupted amidst about $30 billion of tax claims and sold off in pieces. Putin has denied any involvement.

U.S., German and U.K. officials said the trial undermines confidence in Russia’s commitment to a fair legal climate for business.

The case “raises serious questions about selective prosecution -- and about the rule of law being overshadowed by political consideration,” U.S. Secretary of State Hillary Clinton said in a statement yesterday. The U.S. will monitor the case and others that hurt “Russia’s reputation for fulfilling its international human-rights obligations and improving its investment climate,” she said.

The European Union said it was following the proceedings “very closely.”

“The circumstances of the trial are highly worrying and a step back on the country’s way towards modernization,” German Foreign Minister Guido Westerwelle said in a statement.

Richard Ottaway, chairman of the U.K. parliament’s Foreign Affairs Select Committee, said in a statement that the outcome “has serious implications for the confidence of overseas investors and on British investment in Russia.”

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Sudan Referendum Commission Rejects Constitutional Lawsuit

The commission organizing Southern Sudan’s Jan. 9 independence referendum rejected a lawsuit seeking to halt the vote on the grounds that the committee violated the law, a spokesman said.

“The procedures were all correct, and all done within the provisions of the law,” commission spokesman George Maker said yesterday in a telephone interview from Khartoum, the capital. The commission issued its response to the lawsuit yesterday, he said.

Sudan’s Constitutional Court has the power to issue a final decision on the referendum process, he said. The vote is the centerpiece of a 2005 peace agreement that ended a 21-year civil war between the north and the oil-producing south. About 2 million people died in the conflict and 4 million fled their homes.

President Umar al-Bashir’s government in Khartoum has urged voters in the south to choose to remain part of Sudan.

Any delay in the referendum risks “a return to instability and violence,” Southern Sudan President Salva Kiir said in September at the United Nations in New York.

The lawsuit was brought by “a group of Sudanese citizens,” Maker said. “I believe it is politically motivated.”

It said the commission violated the schedule provided by the referendum law, passed by the national assembly in December last year, and that two ethnic groups were not allowed to register for the vote, he said.

Both tribes were allowed to register, Maker said.

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To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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