SJM Holdings, BofA, MBIA, Merrill in Court News

Billionaire Stanley Ho today said he transferred ownership of his stake in Asia’s biggest casino company to family members, ending a dispute for control over a business he spent five decades building.

The tycoon earlier said the transfer of a 31.7 percent stake in Sociedade de Turismo e Diversoes de Macau SA to five of his children and the woman he refers to as his third wife was done without his consent. The stake may have a value of at least $1.63 billion based on today’s stock price of unit SJM Holdings Ltd. (880)

“The big problem has been resolved,” Ho, 89, said in an interview broadcast by Television Broadcasts Ltd. “My families and I are very happy we have made the decision.”

Ho’s comments followed two days of conflicting statements from his lawyer and a public-relations company hired by the family members over whether the shift in ownership of the stake in STDM was done with the founder’s approval. SJM, operator of most of the casinos in the Chinese city of Macau, where gambling revenue is four times that of the Las Vegas Strip, slid as much as 8.8 percent today.

STDM owns 56 percent of Hong Kong-listed SJM, which has a market value of $9.2 billion.

Ho today dismissed the lawyer he had hired to contest the dispute, according to the interview.

“If they can get around the table and resolve this, it’s mission accomplished,” Gordon Oldham, who had said Ho hired him to get his stake back, said in a phone interview today. His law firm, Oldham, Li & Nie, said in a statement it continues to be retained by Ho “to represent his interests” in STDM and SJM.

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BofA Unit Ordered to Halt Foreclosures in Nevada

A Bank of America Corp. unit, ReconTrust Co., was ordered by a Nevada judge to temporarily stop foreclosures in the state that aren’t approved by a court order.

Judge Robert W. Lane in Nye County, Nevada, issued a preliminary ruling that blocks ReconTrust from conducting nonjudicial foreclosures until he holds a hearing Feb. 28 on whether to make the ban permanent, according to a Jan. 20 order provided by the court. The injunction was sought in a Nevada homeowner’s lawsuit against Bank of America and ReconTrust.

Stopping the foreclosures is necessary to prevent the “irreparable injury” that would result from “unlawful” seizure of the plaintiff’s home by ReconTrust, the judge wrote. The ruling applies to any real estate or personal property in Nevada.

In nonjudicial foreclosures, lenders can seize property without a court order. Some states require a court order, others don’t, and in some, including Nevada, both are used, according to RealtyTrac, which collects foreclosure data. Nevada foreclosures are primarily executed out of court, according to RealtyTrac’s website.

Suzanne North, the homeowner suing Bank of America and ReconTrust, said in a telephone interview that she’s “ecstatic” about the ruling. She received a default notice after seeking a loan modification from Bank of America and going through a trial period.

When she received the notice at her Pahrump, Nevada, home, she contacted the bank and learned she didn’t qualify for the modification, she said.

The case is North v. Bank of America Corp. (BAC), CV31506, Fifth Judicial District, Nevada, Nye County.

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MBIA Opposes Expedited Hearing in Appeal of Bank Suit

MBIA Inc. (MBI) said New York’s top court shouldn’t speed up the appeal by banks including Bank of America Corp. and UBS AG (UBSN) of a lower court’s dismissal of their challenge to MBIA’s 2009 restructuring.

The banks asked the court for an expedited hearing last week in their appeal of a Jan. 11 dismissal of the so-called fraudulent conveyance claims, in which they are arguing that the Armonk, New York-based insurer’s split into two units was intended to defraud policyholders.

Robert Giuffra Jr., a lawyer at Sullivan & Cromwell LLP who represents the banks, said his clients need quick resolution in part because the insurer’s financial condition is deteriorating.

“There is no emergency and no need for a preference or an expedited schedule,” Marc Kasowitz, an attorney for MBIA, said in a letter to the Court of Appeals yesterday. “MBIA remains solvent today and continues to pay all of its claims as they come due.”

The banks claim that the split, approved by New York’s insurance department in 2009, transferred $5 billion in cash and securities out of MBIA’s primary operating unit, MBIA Insurance Corp., to another entity, now known as National Public Finance Guarantee Corp., according to the original complaint.

The move meant MBIA Insurance wouldn’t be able to meet future obligations to holders of financial-guarantee insurance policies, the banks said.

A five-judge appellate panel dismissed the suit in a 3-2 decision. The lawsuit is one of two that banks filed to challenge the split. The second, brought under New York state’s Article 78 statute, which asks the court to review a state administrative decision, has yet to be resolved.

The case is ABN Amro Bank NV v. MBIA Inc., 601475-2009, New York state Supreme Court (Manhattan).

American, Sabre Freeze Lawsuit, Try to Settle Dispute

AMR Corp.’s American Airlines and Sabre Holdings Inc. will seek to resolve a dispute about distributing flight and fare data after a lawsuit filed by the carrier was put on hold.

The freeze in litigation runs until June 1, the companies said Jan. 24 in a statement. A Texas state judge on Jan. 10 barred Southlake, Texas-based Sabre from hindering access to American flight information in computer displays seen by travel agents.

The legal battle highlights growing tension in the industry as American seeks to use its own technology to provide data directly to travel agents instead of going through a global distribution company such as Sabre. The return to pre-Jan. 5 operations as talks continue is good news for both, said James M. Higgins, an analyst at Soleil Securities Corp. in New York.

The two sides agreed to return operations and charges to how they were before Jan. 5, their statement said. Sabre said that day it had ended discounted booking fees for its former parent company, was presenting American data to agents below that of other carriers and would drop the airline’s flight information in August.

The case is American Airlines Inc. v. Travelport Inc., 067-249214-10, Tarrant County, Texas District Court, 67th Judicial District (Fort Worth).

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Greece Demands Siemens Pay Damages in Alleged Graft

Greece said it wants Siemens AG (SIE), Europe’s biggest engineering company, to reimburse the state for the manufacturer’s alleged part in a corruption scandal that embroiled at least two administrations in the country.

Prime Minister George Papandreou told the Justice Ministry to start the process of imposing fines on Munich-based Siemens, according to an e-mailed transcript of a Cabinet meeting yesterday. Papandreou also asked Finance Minister George Papaconstantinou to explore legal avenues for the government to seek damages.

“We are doing and will continue to do everything possible to shine light” on the case, Papandreou said.

A parliamentary committee published a 2,000-page report Jan. 24 alleging that Siemens paid millions of euros in bribes to the then-management of Hellenic Telecommunications Organization SA (HTO) for contracts signed before 2004, as well as to politicians during the governments of Constantinos Simitis, who was prime minister from 1996 until March 2004, and his successor Konstantinos Karamanlis, who was in office until October 2009.

The committee told the German company that the damages to the Greek state amounted to at least 2 billion euros ($2.7 billion), Siemens said yesterday in a statement. The manufacturer said it rejects the allegations.

The probe and a separate investigation by Greek prosecutors of alleged fraud and bribery allegations involving Siemens executives may “have a negative impact” on civil suits and hurt the company’s business in the country, Siemens said.

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Huawei Wins Order Protecting Data in Motorola Suit

Huawei Technologies Co., China’s largest telecommunications-equipment maker, won a court order barring Motorola (MSI) Solutions Inc. from disclosing confidential information about Huawei’s technology to Nokia Siemens Networks, which plans to buy Motorola’s wireless networks business.

U.S. District Judge Sharon Johnson Coleman in Chicago issued a temporary restraining order against disclosures by Motorola, according to a court filing. The judge ordered the company to notify the court within 24 hours of any decision by China’s antitrust authorities to approve the pending $1.2 billion acquisition.

Huawei, based in Shenzhen, China, sued Motorola and Nokia Siemens on Jan. 24, saying Motorola hadn’t provided assurances that it would prevent disclosures on Huawei technology and products to its rival Nokia Siemens. Motorola since 2000 has sold Huawei’s wireless-network products under the Motorola name.

Nick Sweers, a spokesman for Schaumburg, Illinois-based Motorola Solutions, declined to comment on the order. He said Jan. 24 that the lawsuit is without merit.

Motorola Inc. spun off its mobile-devices business this month into a new company, Motorola Mobility Holdings Inc. Motorola Solutions provides communications products and services to businesses and governments. It plans to sell its wireless-networks unit to Nokia Siemens.

Carol DeMatteo, a spokeswoman for Nokia Siemens Networks, didn’t immediately respond to a message seeking comment.

The case is Huawei Technologies Co. v. Motorola Inc., 1:11-00497, U.S. District Court, Northern District of Illinois (Chicago).

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New Suits

SEC Accused of Negligence in Bernard Madoff Ponzi Lawsuit

The U.S. Securities and Exchange Commission was sued by victims of Bernard L. Madoff’s Ponzi scheme who alleged negligence on the part of the agency.

The lawsuit filed yesterday in Manhattan federal court by nine investors in Bernard L. Madoff Investment Securities LLC follows similar suits assailing the SEC, which failed to detect Madoff’s multibillion-dollar fraud until he turned himself in.

“The SEC must be held accountable and responsible for its own negligent actions and inactions that directly and proximately caused the loss of billions of investor funds,” the complaint says.

Kevin Callahan, a spokesman for the SEC, didn’t return a call.

The case is Applestein v. U.S., 11-cv-521, U.S. District Court, Southern District of New York (Manhattan).

Former First Centennial Officers, Directors Sued By FDIC

Former officers and directors of First Centennial Bank were sued for negligence by the Federal Deposit Insurance Corp., which said it had to pay $163 million to depositors after the bank failed in January 2009.

The Redlands, California-based bank fueled its growth from 2003 through 2007 by issuing “risky” acquisition, development and construction loans in commercial real estate, the FDIC said in a complaint filed Jan. 14 in Los Angeles federal court. The loans, for “non-diverse projects” in a concentrated geographical area, left the bank vulnerable to a downturn, the FDIC said.

“The FDIC’s claims are unfounded, unfair and based solely on hindsight,” lawyers Dan Marmalefsky and Mark McDonald, representing the 14 officers and directors, said in an e-mailed statement. “Just as the FDIC and numerous sophisticated market participants failed accurately to forecast the extent of the housing crash, so too were the directors and officers of 1st Centennial unable to predict the unprecedented plunge in housing prices in the Inland Empire that led to the Bank’s failure.”

The case is FDIC v. James R. Appleton, 11-476, U.S. District Court, Central District of California (Los Angeles).

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Commerzbank Sued By Catholic Charity Over Investment Advice

Commerzbank AG (CBK), Germany’s second-biggest lender, was sued by Catholic charity Caritas, which claimed it was improperly advised when investing pension-plan money in an asset-backed securities fund.

The suit was filed at the Frankfurt Regional Court and seeks about 277,000 euros ($376,250) in damages, Stefan Ahrendt, a manager at the Frankfurt Caritas chapter, said in an interview yesterday. The charity was looking for a place to invest money for an employee semi-retirement plan, he said.

“It was totally clear that we wanted a very safe investment, and Commerzbank told us to put it in an ABS fund,” Ahrendt said. “They made it look as if it was at the same risk level as a bond fund. That really was an outrage.”

The value of ABS securities is derived from a pool of underlying assets via a process called securitization. Bundling numerous types of loans and asset-backed obligations, including subprime mortgages, into ABS contributed to the U.S. housing bubble that peaked in 2006.

The collapse of that bubble helped spark almost $2 trillion of losses at financial firms, many of which needed bailouts, according to data compiled by Bloomberg.

Commerzbank won’t comment because the case is pending, Monika Arens, a spokeswoman for the lender, said. Court spokesman Arne Hasse confirmed the suit was filed.

The case is LG Frankfurt, 3-07 O 230/10.

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Trials/Appeals

U.K. Banks Fight $7.1 Billion Payment-Protection Rules

The British Bankers’ Association asked a court to prevent the U.K.’s finance regulator from imposing rules on how consumer complaints over payment-protection insurance should be treated.

Implementing the measures and handling complaints may cost the banking industry as much as 4.5 billion pounds ($7.1 billion), the BBA told Judge Duncan Ouseley at a court hearing in London yesterday. It would also cause around 35 insurance intermediary firms to fail, said David Pannick, a lawyer for the association.

The BBA is seeking to prevent the Financial Services Authority from imposing the guidelines because they are “an unlawful means of requiring firms to implement a scheme under which they will be liable to make compensation payments,” the BBA said in court papers.

“The potential impact therefore of the FSA’s decision that we are challenging is very substantial indeed,” Pannick said. “Our concern is that we are now being held to different, more onerous standards.”

U.K. antitrust regulators also cracked down on the product, banning banks from selling most types of PPI at the same time they sell the loans it insures.

PPI is used to cover payments on credit cards and mortgages in case of illness or unemployment. Customers who bought PPI rarely compared prices and terms, and usually weren’t aware they could have purchased insurance from other companies, the U.K.’s Competition Commission has said.

“We strongly believe that the package of new complaint-handling measures” is a “sensible and fair solution” for consumers and the industry, the FSA said in a statement. The agency is “vigorously contesting the BBA’s challenge.”

The FSA issued its new guidelines in August and clarified them in November after the BBA asked for a court review. Firms reject almost half the PPI complaints they received, and “some reject nearly all,” the FSA said in August.

The FSA will present arguments later at the hearing, which is scheduled to last four days.

Air Products Saw Airgas Proxy Win as ‘Impossible Task’

Air Products & Chemicals Inc. (APD), pressing a $5.9 billion takeover of Airgas Inc. (ARG), avoided a special vote on the buyout because company officials saw no chance of winning, an Air Products executive said.

Getting the required 67 percent of Airgas shareholders’ votes to remove board members opposing the deal looked to be “an impossible task,” Paul Huck, Air Products’s chief financial officer, told Delaware Chancery Court Judge William B. Chandler III at a hearing on Airgas’s takeover defense.

“We decided getting 67 percent wasn’t a viable option,” Huck said yesterday. Air Products, an industrial-gas provider, is asking Chandler to knock out Airgas’s so-called poison-pill takeover defense to clear the way for the $70-per-share offer for the packaged gas company.

Airgas’s poison-pill defense is designed to make hostile takeovers of the industrial gas distributor prohibitively expensive. Airgas officials have used the defense to help fend off Allentown, Pennsylvania-based Air Products’ offers. Airgas directors have said the company is worth at least $78 a share.

Air Products, which has been pursuing Radnor, Pennsylvania-based Airgas more than a year, raised its bid on Dec. 9 from $65.50 and called it the “best and final offer.” Airgas rejected that offer in late December.

Air Products officials raised their bid for Airgas after the Delaware Supreme Court ruled the packaged-gas company’s shareholders couldn’t force Airgas to hold its next annual meeting in January.

The case is Air Products and Chemicals Inc. v. Airgas Inc., CA5249, Delaware Chancery Court (Wilmington).

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Verdicts/Settlement

Merrill Pays $10 Million to End Claims on Client Orders

Bank of American Corp.’s Merrill Lynch unit paid $10 million to settle U.S. regulatory claims that it fraudulently misused clients’ securities orders to make trades with the firm’s own money.

The firm also charged some institutional and wealthy customers undisclosed trading fees between 2002 and 2007, the U.S. Securities and Exchange Commission said in a statement yesterday announcing the settlement.

The SEC found that Merrill operated a proprietary trading desk from 2003 to 2005 on the firm’s main equity-trading floor in New York, where market makers received and executed customer orders. While Merrill told clients their order information would be used on a need-to-know basis, proprietary traders got information and used it to place trades on Merrill’s behalf after executing the customer orders, according to the statement.

“The conduct here was clearly inappropriate,” Scott Friestad, the SEC attorney who oversaw its case, said in the statement. “Investors have the right to expect that their brokers won’t misuse their order information.”

Merrill didn’t admit or deny wrongdoing in agreeing to settle the civil complaint. Merrill was acquired by Charlotte, North Carolina-based Bank of America in January 2009.

“Merrill Lynch adopted a number of policy changes to ensure separation of proprietary and other trading and to address the SEC’s concerns,” said Bill Halldin, a spokesman for Bank of America. “Merrill Lynch also voluntarily implemented enhanced training and supervision to improve the principal trading processes at the firm.”

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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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