Morgan Stanley Managing Director Kamal Ahmed is “cooperating” with the bank’s investigation of allegations raised in a U.S. court filing that an employee helped pass information in the Galleon Group LLC hedge fund insider trading scandal, Ahmed’s lawyer said.
Douglas Tween, a lawyer at Baker & McKenzie LLP in New York who represents Ahmed, said yesterday in a phone interview that he is “confident that when the investigation is completed, and all the facts are gathered, it will be shown that he did nothing illegal or unethical.”
Raj Rajaratnam, the founder of Galleon Group, is charged with five counts of conspiracy to commit securities fraud and nine counts of securities fraud. He’s the central figure in an insider-trading probe in which more than 20 people have been criminally charged. Rajaratnam has pleaded not guilty and is scheduled to go to trial Feb. 28.
Prosecutors filed a superseding indictment dated Jan. 20 against Rajaratnam that added a new securities-fraud count and provided additional details about stocks he is alleged to have traded illegally. A Morgan Stanley banker, whose name was redacted in the court filing, was accused of passing information on Advanced Micro Devices Inc.’s purchase of ATI Technologies Inc.
“In or about May 2006, [redacted], a banker with Morgan Stanley, provided [redacted] with information regarding AMD’s acquisition of ATI,” according to the letter, signed by Assistant U.S. Attorney Jonathan Streeter. “[Redacted] provided this information to Rajaratnam.”
The case is U.S. v. Rajaratnam, 1:09-cr-1184, U.S. District Court, Southern District of New York Manhattan).
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Bear Stearns Bid to Get Securities Suit Tossed Denied by Judge
Bear Stearns Cos. once the world’s fifth-largest investment bank, lost a bid to dismiss a federal securities lawsuit when a judge ruled there is sufficient reason to take parts of the consolidated case to trial.
An investor originally sued the New York-based firm in November 2007 alleging mismanagement, in part for buying risky subprime mortgage loans for collateralized debt obligations, according to court papers. Other lawsuits followed.
“The incantation of fraud-by-hindsight will not defeat an allegation of misrepresentations and omissions that were misleading and false at the time they were made,” wrote U.S. District Judge Robert W. Sweet in a 398-page opinion Jan.19.
JPMorgan Chase & Co. bought Bear Stearns in March 2008, with the firm on the brink of collapse.
In his opinion, Sweet refused to dismiss a case alleging misstatements by Bear Stearns and auditor Deloitte & Touche, and agreed to dismiss a so-called derivative suit seeking damages for the company and a suit filed by former Bear Stearns employees over a stock ownership plan.
“It is important to recognize that in ruling on the defendants’ motions to dismiss, the court was required to assume that the allegations in plaintiffs’ complaint were true,” and “Deloitte believes that the claims asserted against it are meritless,” said company spokesman Jonathan Gandal in an e-mailed message.
“We believe that the Bear Stearns-related security law claims that survived the motion to dismiss are entirely without merit and we intend to seek their dismissal at an appropriate juncture,” said JPMorgan Chase spokeswoman Jennifer Zuccarelli in a telephone interview.
The combined case is In Re: Bear Stearns Cos. securities, Derivative, and ERISA Litigation, 09-MDL-1963, U.S. District Court for the Southern District of New York (Manhattan).
HP Can Proceed With Hurd Departure Investigation, Judge Rules
A federal judge allowed a probe of Mark Hurd’s departure from Hewlett-Packard Co. to go forward, overriding Hurd’s objection to the investigation based on claims he deserves to see documents HP’s board refuses to share.
U.S. District Judge James Ware, in San Jose, California, canceled a hearing on the matter scheduled for yesterday, finding “good cause” to let the company investigation go forward while halting the lawsuit that prompted it for 45 days. The suit alleges that directors at the largest maker of computers wasted company money by awarding Hurd as much as $53 million in severance when he resigned as chief executive officer in August.
Hurd quit after the Palo Alto, California-based company found that he violated business conduct standards in trying to conceal a personal relationship with a contractor.
Ware scheduled a new hearing in March, requiring an “update on the investigation” beforehand, according to his Jan. 20 order.
Ware’s order doesn’t say whether Hurd was able to see the documents he seeks. The new probe would be conducted by a committee of directors who joined HP after Hurd’s departure and by lawyers not involved in the shareholder litigation, according to a case-management statement filed Jan. 14.
Mylene Mangalindan, an HP spokeswoman, declined to comment on the judge’s ruling yesterday. Glenn Bunting, a spokesman for Hurd, didn’t immediately return calls and e-mails seeking comment after business hours.
The case is Levine v. Andreessen, 10-03608, U.S. District Court, Northern District of California (San Jose).
Khodorkovsky May Face Third Trial, Prosecutors Say
Mikhail Khodorkovsky, the jailed former head of Yukos Oil Co., may face a third trial in Russia if an investigation unearths further evidence against him, prosecutors said.
Russian law enforcement agencies are hunting for 18 “accomplices” of Khodorkovsky and his former business partner, Platon Lebedev, prosecutors Valery Lakhtin and Gulchekhra Ibragimova said in an interview published in the Komsomolskaya Pravda newspaper yesterday.
Khodorkovsky, once Russia’s richest man and a critic of Prime Minister Vladimir Putin, last month was sentenced to another six years beyond his eight-year prison term for fraud. He was found guilty of money laundering and of embezzling in a ruling that will keep him in jail until 2017.
The tycoon’s defense team declined to immediately comment when contacted by Bloomberg News.
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BOC Hong Kong Manager Warned Lehman Product Buyers, Court Told
A BOC Hong Kong (Holdings) Ltd. manager facing criminal charges for selling structured products linked to Lehman Brothers Holdings Inc. warned customers they could lose their money, her lawyer said.
Cheung Kwai-kwai took her customers through sales leaflets for the products, including the part showing that they weren’t principal protected, her lawyer Peter Duncan said in his closing submission yesterday in Hong Kong District Court.
Cheung, 48, pleaded not guilty to seven counts of fraudulently or recklessly inducing customers, including retirees and investors who hadn’t completed primary school, to invest a total of about $770,164 in minibonds and Constellation notes, between 2005 and 2008. Judge Garry Tallentire said yesterday the verdict would be delivered on Feb. 18.
Cheung made statements to customers that the structured products were safe, principal-protected, and failed to disclose that the risk level designated by the bank was “high,” Senior public prosecutor Jonathan Man said yesterday.
Angel Yip, a spokeswoman for BOC Hong Kong didn’t respond to an e-mailed request for comment yesterday. It was one of 16 banks that agreed to a settlement to buy back the products for at least 60 cents on the dollar.
The case is Hong Kong SAR v. Cheung Kwai Kwai, DCCC526/2010, in Hong Kong District Court.
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Singapore Criticizes Fund Managers’ ‘Window Dressing’
The Monetary Authority of Singapore said it won’t tolerate “window dressing” by fund managers in its response to an appeal against the civil stock-rigging lawsuit it won last year against Pheim Asset Management Sdn.
“Any other decision would encourage and embolden professional market players to flout the rules and undermine the integrity of the market,” the central bank said in documents filed at the Singapore High Court on Jan. 21, arguing that the appeal by Pheim and its Chief Executive Officer Tan Chong Koay should be dismissed.
Pheim and Tan, 61, have denied rigging the stock and said they’re “value” investors. They bought almost 90 percent of the traded shares of United Envirotech Ltd. from Dec. 29 to Dec. 31, 2004. The shares rose 17 percent over the three trading days and helped raise the net asset value of the fund’s accounts, triggering bonuses of S$50,790 ($39,560) and a management fee of S$115. The trial is scheduled to start the week of March 14.
Justice Lai Siu Chiu in her Sept. 17 ruling said Pheim and Tan had sought to boost their reputation instead of seeking monetary gains in rigging the stock. The MAS, which had sought a fine of S$1 million each, said in its January filing the S$250,000 penalty imposed was “amply justified.”
Cavinder Bull from Drew & Napier LLC is acting for the monetary authority and Vinodh Coomaraswamy is representing Tan and Pheim.
The case is Tan Chong Koay v Monetary Authority of Singapore, CA186/2010 in the Singapore High Court.
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SEC Settles Foreign Bribe Case With Ex-Innospec Chief
The former chief executive officer of Innospec Inc., Paul W. Jennings, agreed to settle foreign bribery allegations brought by the U.S. Securities and Exchange Commission.
Jennings agreed to pay about $229,000 in penalties to resolve claims that he bribed Iraqi and Indonesian officials to win contracts for the company’s specialty chemicals, the SEC said in a statement. The agency filed a civil complaint yesterday against Jennings in federal court in Washington.
The SEC claimed that Jennings “actively participated in bribery schemes” in Iraq and Indonesia since 2004. The agency said that from 2000 to 2008 Innospec Inc. paid more than $6 million in bribes in exchange for about $177 million in revenue, which generated $60 million in profit.
Jennings’s attorney, Jay Holtmeier, didn’t immediately return a telephone message seeking comment.
Innospec spokesman Brian Watt declined to comment on Jennings’s settlement, saying the company resolved its matter with authorities last year.
The case is U.S. Securities and Exchange Commission v. Jennings, 11-cv-00144, U.S. District Court, District of Columbia (Washington).
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JPMorgan Wins at U.S. High Court in Credit-Card Case
The U.S. Supreme Court, ruling in favor of a JPMorgan Chase & Co. unit, shielded banks from some lawsuits by consumers whose rates were increased after they went into default.
The justices yesterday unanimously said that a since- changed Federal Reserve Board regulation let Chase Bank USA raise James A. McCoy’s interest rates without notifying him. Chase’s cardholder agreement said the company could impose higher rates in the event of a default.
In siding with Chase, the court said it was deferring to the Fed’s interpretation of the rule, known as Regulation Z. Although the Fed changed the regulation in 2009 to require notification to defaulting customers, the Obama administration argued that companies before then didn’t have to provide notice.
“Because the interpretation the board presents in its brief is consistent with the regulatory text, we need look no further in deciding this case,” Justice Sonia Sotomayor wrote for the court.
The U.S. Court of Appeals in San Francisco ruled against Chase in a decision that led to similar suits being filed in California against other banks.
Regulation Z implements a consumer-protection provision in the U.S. Truth in Lending Act.
The case is Chase Bank v. McCoy, 09-329, U.S. Supreme Court (Washington).
Worker Retaliation Suits Backed by U.S. Supreme Court
The U.S. Supreme Court bolstered the ability of employees to sue for retaliation, ruling in favor of a man who was fired after his fiancée complained about alleged sex discrimination at the same company.
The justices yesterday unanimously said that Title VII, the federal law that covers gender and racial discrimination in the workplace, protects third parties from retaliation in addition to the person pressing the original complaint.
The anti-retaliation provision in Title VII is “worded broadly,” Justice Antonin Scalia wrote for the court. “We think it obvious that a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiancé would be fired,” he wrote.
The ruling lets Eric L. Thompson press ahead with a lawsuit against his former employer, North American Stainless LP. Thompson was fired in 2003, three weeks after the company learned that his fiancée, Miriam Regalado, had filed a complaint with the Equal Employment Opportunity Commission and claimed she had suffered discrimination by her supervisor.
A federal appeals court had barred the suit from going forward. The Obama administration backed Thompson in the case.
The case is Thompson v. North American Stainless, 09-291, U.S. Supreme Court New York).
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