Foreclosure Probe, Madoff, Siga, Mattel in Court News

The 50 state attorneys general probing U.S. foreclosure practices will first settle with the five largest loan servicers, including Bank of America Corp. and JPMorgan Chase & Co., Iowa Attorney General Tom Miller said.

No settlements have been reached yet, Miller said in a telephone interview yesterday. The other three are Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc., said Miller, the leader of the 50-state investigation. The five have 59 percent of the market, Miller said.

“What we’re looking at is five separate agreements with the five largest servicers,” Miller said. “We’re still a ways away” from reaching agreements, he said. “We’re working very hard to figure out what should be in the settlement.”

All 50 U.S. states are investigating whether banks and loan servicers used false documents and signatures to justify hundreds of thousands of foreclosures. The probe, announced Oct. 13, came after JPMorgan and Ally Financial’s GMAC mortgage unit said they would stop repossessions in 23 states where courts supervise home seizures, and Bank of America, the largest U.S. lender, froze foreclosures nationwide.

Tom Kelly, a spokesman for JPMorgan in New York, declined to comment. Shannon Bell, a spokeswoman for New York-based Citigroup, declined to comment. Gina Proia of Detroit-based Ally declined to comment. Shirley Norton, a spokeswoman for Charlotte, North Carolina-based Bank of America, declined to immediately comment.

Teri Schrettenbrunner, a spokeswoman for San Francisco- based Wells Fargo, declined to comment, saying it was premature since no agreement has been reached.

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Lawsuits/Pre-trial

Ex-Madoff Aide Bonventre Seeks Dismissal of Criminal Charges

Daniel Bonventre, the former operations chief for Bernard Madoff, asked a U.S. judge to dismiss criminal charges against him after prosecutors began seizing assets including money he set aside to pay his lawyer.

Bonventre is among five former Madoff aides who face federal charges for helping their boss run a multibillion-dollar Ponzi scheme. In a court filing yesterday, Bonventre asked a judge to dismiss the case because prosecutors are interfering with his constitutional right to counsel by seizing assets. The seizure followed four requests that he cooperate in the U.S. probe.

Andrew Frisch, Bonventre’s lawyer, wrote in a filing yesterday in Manhattan federal court that the seizure of funds appears designed “to pressure” him and other defendants “to cooperate” in the Madoff investigation. Bonventre was arrested in February.

Bonventre denies wrongdoing. Madoff, 72, is serving a 150- year sentence in federal prison in North Carolina after admitting he ran the largest Ponzi scheme in history.

The case is U.S. v. O’Hara, 10-cr-00228, U.S. District Court, Southern District of New York (Manhattan).

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Ex-Madoff Aide Bongiorno Again Seeks Release From Jail

Annette Bongiorno, another of those accused of helping Bernard Madoff run a multibillion-dollar Ponzi scheme, asked a judge to release her from jail, citing the seizure of her bank accounts by U.S. authorities.

Bongiorno has been in a federal lockup since a judge ruled last month that she has access to millions of dollars that may help her flee.

In papers filed yesterday in federal court in Manhattan, Bongiorno’s lawyers said prosecutors late last week began taking control of most of the bank accounts belonging to her and her husband. Citing these “changed circumstances,” the lawyers requested that the judge set Bongiorno’s bail at $2.5 million, which she would be able to post.

“These accounts represent a significant part of the defendant and her husband’s liquid assets,” the lawyers, Maurice Sercarz, Roland Riopelle and Diane Ferrone, said in the filing.

Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara in New York, declined to comment. Bongiorno, 62, is now in a federal prison in Oklahoma City, awaiting transfer to New York.

On Nov. 24, U.S. District Judge Laura Swain set bail for Bongiorno at $5 million, provided that it was guaranteed by five other people. The judge revoked bail on Dec. 21, saying Bongiorno might flee. Bongiorno, who has homes in Florida and Long Island, New York, was then jailed in Florida.

Bongiorno is accused of conspiracy and securities fraud for, prosecutors say, aiding Madoff in his decades-long fraud. She began working for him in 1968 after graduating from high school. She oversaw about 200 accounts at Bernard L. Madoff Investment Securities LLC, Madoff’s financial advisory firm, according to prosecutors.

Madoff, 72, is serving a 150-year sentence in a North Carolina federal prison after admitting he ran the largest Ponzi scheme in history. At the time of his arrest in 2008, client account statements reflect about $65 billion in nonexistent investments. Investors lost about $20 billion in principal.

The case is U.S. v. Bongiorno, 10-cr-228, U.S. District Court, Southern District of New York (Manhattan).

Deutsche Telekom CEO Obermann Escapes Charges in Bribery Probe

Deutsche Telekom AG Chief Executive Officer Rene Obermann escaped charges by German prosecutors over bribery allegations at company units in Hungary and the Republic of Macedonia.

The investigation of Obermann and two other suspects was closed because it turned up no evidence of wrongdoing, Friedrich Apostel, the spokesman for Bonn prosecutors, said in an e-mailed statement yesterday. A probe into a further five suspects will continue, he said.

The case centers on alleged bribery payments at central and eastern European units of Deutsche Telekom, Europe’s biggest phone company. Bonn prosecutors opened their own investigation after they were asked by the U.S. Securities and Exchange Commission for assistance in its probe into the matter. Obermann’s home was searched Aug. 31.

Deutsche Telekom has said that an independent investigation initiated by Hungarian unit Magyar Telekom’s audit committee revealed that sham contracts, worth about 32 million euros ($43 million), may have been used by Montenegrin and Macedonian units in 2005.

Insider Trading Suspect Jiau Must Stay in Jail, Judge Says

Winifred Jiau, the former Primary Global Research LLC expert networking consultant arrested last week in a federal insider trading probe, must remain in custody, a U.S. magistrate judge in San Francisco said.

Jiau, arrested Dec. 28 in Fremont, California, was accused of selling data on Nvidia Corp. and Marvell Technology Group Ltd., makers of computer components, to portfolio managers at three unidentified hedge funds through Primary Global, according to a filing in Manhattan federal court. The hedge funds paid Jiau $200,000 through the networking firm, prosecutors said.

U.S. Magistrate Judge Bernard Zimmerman in San Francisco agreed with the government at a hearing yesterday that there’s a risk Jiau will try to flee if released.

A different magistrate judge initially granted Jiau $250,000 bail on Dec. 30 and ordered her to give up her U.S. and Taiwan passports and submit to electronic monitoring. Later in the day, the magistrate changed his mind after the friend who was supposed to provide collateral for Jiau’s bond failed to appear. Jiau was ordered to spend the weekend in custody.

Jiau faces one count each of conspiracy to commit securities fraud and securities fraud and, under sentencing guidelines, she may be sent to prison for 57 to 63 months if convicted, according to Assistant U.S. Attorney Wilson Leung.

The case is U.S. v. Jiau, 10-2900, U.S. District Court, Southern District of New York (Manhattan).

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Trials/Appeals

Siga Sought Assurances on Merger, Ex-PharmAthene Chief Says

Siga Technologies Inc. officials sought assurances in January 2006 that PharmAthene Inc. was willing to merge, PharmAthene’s former chief executive officer testified in a trial over rights to a drug that could be used to treat smallpox outbreaks from a terrorist attack.

PharmAthene, based in Annapolis, Maryland, sued New York- based Siga in 2006, asking a Delaware Chancery Court judge to affirm a purported licensing agreement for PharmAthene to make the drug, known as ST-246. Siga contends there is no license.

The companies reached an agreement on “major business terms for a license,” David Wright, PharmAthene’s ex-CEO, testified yesterday at the start of the trial in Wilmington, Delaware. “We were to have either a license agreement or we were to have a merger.”

Siga said in October that the U.S. Health and Human Services Department selected it for a $500 million contract to produce 1.7 million treatments of its smallpox antiviral drug to protect against a possible terrorist attack. The contract may generate as much as $2.8 billion, according to court filings. Federal officials are investigating whether Siga qualifies for the contract.

In a January 2006 meeting, Siga’s then-Chairman Donald Drapkin asked for “assurance from the PharmAthene board that the company wanted to do a merger and wouldn’t back out,” Wright said. Wright said he gave those assurances to Drapkin, who also was an executive at the time with Ronald Perelman’s holding company, MacAndrews & Forbes Holdings Inc.

“He guaranteed it -- that we would either have a merger or a license to the product,” Wright said. “This was also the meeting where he promised that if we got the stock price over $5 together he would buy me a Bentley convertible. I never got that either.”

Andre Bouchard, a lawyer representing Siga, denied in an earlier brief to Judge Donald Parsons that Drapkin “orally guaranteed PharmAthene a license.”

“PharmAthene agreed only to negotiate a potential collaboration,” Bouchard wrote. Siga’s lawyers said the term sheet for their accord bore the heading “non-binding.”

The case is PharmAthene Inc. v. Siga Technologies Inc., CA2627, Delaware Chancery Court (Wilmington).

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Oil Groups Challenge Rule Allowing 15% Ethanol in Fuel

Oil industry groups asked an appeals court to overturn the U.S. Environmental Protection Agency’s October decision allowing the sale of gasoline with 15 percent ethanol.

The National Petrochemical & Refiners Association and two other oil industry groups yesterday asked the federal appeals court in Washington to review whether the EPA’s allowing so- called E-15 fuels violates the Clean Air Act. Last month, automakers filed a separate challenge to the rule with the appeals court.

The EPA on Oct. 13 granted a request from ethanol producers, including Decatur, Illinois-based Archer Daniels Midland Co., to increase concentrations of the corn-based fuel additive in gasoline for vehicles made for 2007 and later. The previous limit was 10 percent.

“One of the major things that concerns us is consumer satisfaction and consumer safety,” Charles Drevna, president of the petrochemical association, said yesterday in an interview. “We shouldn’t even be talking about this until every engine can use this.”

The groups joining the petition are the International Liquid Terminals Association and the Western States Petroleum Association.

Wyn Hornbuckle, a spokesman for the U.S. Justice Department, declined to comment, citing the pending litigation.

The case is National Petrochemical & Refiners Association v. U.S. Environmental Protection Agency, 11-1002, U.S. Court of Appeals for the District of Columbia (Washington).

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Verdicts/Settlement

Mattel Can’t Pursue Claims Against Later Bratz Dolls

Mattel Inc. can’t pursue copyright-infringement claims against MGA Entertainment Inc.’s Bratz dolls other than the first four, introduced in 2001, and two later models, a federal judge said.

U.S. District Judge David O. Carter, in a Dec. 27 order, granted a request by closely held MGA to preclude Mattel from seeking infringement damages “against all subsequent generation Bratz dolls with the exception of Ooh La La Cloe and Formal Funk Dana.” Carter allowed Mattel to proceed with most of its trade- secret theft claims at a trial scheduled to start Jan. 11.

MGA asked the judge Jan. 1 to reconsider his decision on the trade-secret theft claims. Those claims are valued at $1.1 billion, MGA said, citing a report by Mattel’s expert on damages. MGA said the remaining copyright claims are valued at no more than $28 million. The trade-secret theft claims should be preempted by copyright law, MGA said.

“If MGA did not copy original elements either because those elements were not original or because they were ideas and not protectable expression, then MGA did not use any Mattel trade secret, even assuming Mattel had one,” the Van Nuys, California-based company said.

An MGA spokeswoman, Susan Hale, declined to comment on the case. Representatives of El Segundo, California-based Mattel didn’t immediately respond to requests for comment.

The case is Bryant v. Mattel, 04-09049, U.S. District Court, Central District of California (Santa Ana).

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Litigation Departments

Supreme Court Litigator Thomas Goldstein to Switch Firms

Supreme Court litigator, Thomas Goldstein, who was the co- leader of Akin Gump Strauss, Hauer & Feld’s litigation management committee and founder of the SCOTUSblog, has left Washington-based Akin Gump to return to his old firm, the legal blog Above the Law reported yesterday.

Goldstein joined Akin Gump four and a half years ago from the firm he founded, Goldstein & Howe, now Howe & Russell, Above the Law reported. He’s leaving because of client conflicts, according to the blog. The firm, also based in Washington, will become Goldstein, Howe, & Russell, Above the Law reported.

SCOTUSblog, a Supreme Court blog founded by Goldstein and sponsored by Akin Gump, will continue, Goldstein told Above the Law. He said he’s still discussing with Akin Gump about how that will work.

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Court News

N.J. Justice to Step Down; Christie Leaving Seat Open

New Jersey Supreme Court Justice Roberto Rivera-Soto, who said he wouldn’t render any rulings amid a standoff over an empty seat on the court, decided not to seek reappointment when his term expires in September.

Governor Chris Christie, a first-term Republican, said in a statement that he won’t name a replacement for Rivera-Soto until the Senate schedules a hearing to consider Anne Murray Patterson, his nominee to fill an existing vacancy on the court.

Christie and Democratic lawmakers have clashed over the governor’s May decision to nominate Patterson, a Republican attorney, and oust sitting Justice John Wallace, a Democrat and the panel’s only black member. The move marked the first time a governor denied a sitting member tenure. Justices in New Jersey serve an initial seven-year term followed by tenure until they reach the maximum retirement age of 70.

Democratic Senate President Stephen Sweeney has refused to authorize confirmation hearings on the nomination of Patterson. The court has functioned with a stand-in appointed by Chief Justice Stuart Rabner.

Rivera-Soto, 57, was nominated to the court by Democratic Governor James McGreevey and began his term in September 2004. He is the first Hispanic American to serve on the panel. In December, Rivera-Soto wrote in a decision that he would abstain from future rulings because he believed Rabner’s move to have a temporary justice issue rulings was unconstitutional.

Christie, the first Republican elected New Jersey governor since 1997, accused the court of “legislating from the bench” when he announced his decision not to reappoint Wallace. He declined to say which of Wallace’s decisions he opposed.

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Mexico Supreme Court Names Juan Silva as New Chief Justice

Mexico’s Supreme Court voted to name Juan Silva as its chief justice in a televised Mexico City session yesterday. Silva will head the nation’s top judicial body until the end of 2014.

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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