Apple, Amazon, Barry Bonds, Wisconsin Law, Insider Trading in Court News
Zain Fancy, who joined Och-Ziff Capital Management Group LLC (OZM) from Morgan Stanley in 2008, sued two units of the New York-based hedge fund manager in Singapore, claiming they withheld $7.9 million in pay and stock that he was owed.
Och-Ziff Real Estate Singapore Pte, a venture in which Fancy was the founding partner and executive managing director, had no basis for firing him in October and owed him $1 million in wages and $6.9 million worth of stock, according to Fancy’s lawsuit filed with the Singapore High Court. A closed hearing is scheduled for March 25.
Fancy acted in bad faith by not fully disclosing his involvement in a probe by the U.S. Department of Justice and the U.S. Securities and Exchange Commission into alleged corruption at Morgan Stanley, where he had been head of the bank’s real estate business in Asia, according to court papers filed by Och- Ziff.
“Mr. Fancy’s involvement in pending investigations, coupled with other factors unrelated to Och-Ziff, have prevented the parties from raising third-party capital for the venture and rendered the venture unworkable,” Chief Financial Officer Joel Frank said in a filing. “His actions have resulted in a breach of trust.”
Fancy didn’t respond to an e-mail seeking comment. His lawyer Cavinder Bull from Drew & Napier LLC declined to comment as did Och-Ziff spokesman Jonathan Gasthalter. SEC spokesman John Nester and Justice Department spokeswoman Laura Sweeney also declined to comment.
The case is Zain Asif Fancy v. Och-Ziff Real Estate Singapore Anor S787/2010 in the Singapore High Court.
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Apple Claims Amazon.com Improperly Using ‘App Store’ Trademark
Apple, in a complaint filed March 18, accused Amazon.com of trademark infringement and unfair competition and asks for a court order to prevent the company from using the “App Store” name as well as for unspecified damages.
Apple’s App Store offers software downloads, by the company and by third-party developers, for users of its iPhones, iPods and iPads. There have been more than 10 billion downloads through the service since it was started in 2008, Apple said in the complaint.
Amazon.com since January has started to solicit developers for a future mobile software download service, Apple said. Amazon.com has used “Amazon Appstore Developer Portal” and “Amazon Appstore” in connection with this service, according to the complaint.
“We have a long-standing practice of not commenting on pending litigation,” Mary Osako, a spokeswoman for Seattle- based Amazon, said yesterday.
The case is Apple v. Amazon.com, 11-1327, U.S. District Court, Northern District of California.
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Microsoft Seeks to Block Imports of Barnes & Noble’s Nook
Microsoft Corp. (MSFT) yesterday said it filed patent-infringement claims against Barnes & Noble Inc., seeking to block U.S. imports of the Nook e-reader in the latest legal dispute over the Android operating system.
Microsoft said it filed complaints with the U.S. International Trade Commission in Washington and in federal court in Seattle against Barnes & Noble and the Nook’s manufacturers, Foxconn International Holdings Ltd. (2038) and Inventec Co. Ltd. after yearlong licensing talks failed.
The Nook uses Google Inc. (GOOG)’s Android operating system, and is infringing patents “that are essential to the user experience,” Microsoft said in a statement. Microsoft, which makes the rival Windows-based operating system, filed a complaint in October against Motorola Mobility Holdings Inc. over Android-based smartphones.
“The Android platform infringes a number of Microsoft’s patents, and companies manufacturing and shipping Android devices must respect our intellectual property rights,” Horacio Gutierrez, Microsoft’s deputy general counsel for intellectual property and licensing, said in a statement.
Redmond, Washington-based Microsoft has created a patent- licensing program just for Android device manufacturers, Gutierrez said. HTC Corp., which makes phones for both the Android and Windows systems, signed a license with Microsoft last year.
“Their refusals to take licenses leave us no choice but to bring legal action” against New York-based Barnes & Noble, Foxconn and Inventec, he said.
Mary Ellen Keating, a spokeswoman for Barnes & Noble, declined to comment. The Nook is Barnes & Noble’s best-selling product, and sales of the device last quarter drove the company’s first increase in same-store sales since 2007.
Suits and patent-licensing deals are likely to increase industrywide this year, Gutierrez said in January, as the pace of new device introductions increases. The new products combine so many different components, it’s unlikely any company will own all the intellectual property they use, he said.
The civil case is Microsoft Corp. v. Barnes & Noble Inc. (BKS), 11cv343, U.S. District Court for the Western District of Washington (Seattle).
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Mylan Sues U.S. FDA to Block Ranbaxy’s Sale of Lipitor Copy
Mylan Inc. sued the U.S. Food and Drug Administration, seeking to block India’s Ranbaxy Laboratories Ltd. (RBXY)’s exclusive rights to sell a generic version of Pfizer Inc.’s cholesterol pill Lipitor, the world’s best-selling medicine.
Mylan and other generic-drug makers should be allowed to enter the market as soon as Lipitor’s patent expires in June because of manufacturing violations at two Ranbaxy factories in India, Mylan said in a complaint filed March 18 in federal court in Washington. Ranbaxy, 64 percent owned by Tokyo-based Daiichi Sankyo Co., fell the most in almost two years in Mumbai.
Ranbaxy has said it is entitled to 180 days of marketing exclusivity as a reward for being the first to challenge the Lipitor patents. The drugmaker, based in Gurgaon near New Delhi, reached an agreement with Pfizer in 2008 to sell copies of the medicine beginning Nov. 30. The FDA has yet to clear any of the generic competitors as equivalent to brand-name Lipitor.
“It’s the first time someone is openly challenging Ranbaxy’s exclusivity for Lipitor,” said Bino Pathiparampil, a Mumbai-based analyst at India Infoline Ltd. “It is incrementally negative for sure” for Ranbaxy.
Ranbaxy declined to comment on the lawsuit in an e-mail statement.
The case is Mylan Pharmaceuticals Inc. v. U.S. Food and Drug Administration, 11-566, U.S. District Court for the District of Columbia (Washington).
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Greenberg’s Starr Sues China MediaExpress, Alleging Fraud
Starr International Co., a firm run by former American International Group Inc. (AIG) Chief Executive Officer Maurice “Hank” Greenberg, sued China MediaExpress Holdings Inc. (CCME) and its auditor Deloitte Touche Tohmatsu, saying it was fraudulently induced into investing about $13.5 million.
The suit from Starr Investments Cayman II Inc., filed in U.S. federal court in Delaware on March 18, says Hong Kong-based China MediaExpress misrepresented its business and finances. Chief Executive Officer Zheng Cheng and Chief Financial Officer Jacky Lam were also named in the suit. Lam quit earlier this month.
Greenberg, through Starr International and C.V. Starr & Co., is the third-largest China MediaExpress holder with 4.55 million shares, according to data compiled by Bloomberg. Starr International purchased about 1.5 million shares in October, then valued at about $13.5 million. Shares of China MediaExpress, which says it provides advertising on buses in China, have been halted in the U.S. since March 11 after plunging 48 percent in six weeks. The company said March 14 that Deloitte Touche Tohmatsu resigned.
China MediaExpress didn’t respond to an e-mail message sent to its investor relations department outside regular business hours in Hong Kong. Jake Sokol, a C.V. Starr spokesman, declined to comment.
Barry Bonds Perjury Trial Over Alleged Steroid Use Begins
Home run record holder Barry Bonds’s trial to determine if he committed perjury when he said he never knowingly took steroids began yesterday with jury selection in federal court in San Francisco.
Bonds, 46, who broke Hank Aaron’s record of 755 career home runs in August 2007, faces four counts of perjury and one count of obstruction of justice for telling a grand jury in 2003 that he didn’t knowingly take performance-enhancing drugs. The maximum sentence for each of the counts is 10 years in prison and a $250,000 fine. Bonds, who was first charged in November 2007, has pleaded not guilty.
U.S. District Judge Susan Illston selected a jury yesterday. She told would-be jurors that if chosen they must decide the case based only on the trial evidence though they may have read about the charges against Bonds.
Attorneys for Bonds and federal prosecutors yesterday agreed that 38 of about 100 potential jurors should be dismissed based on their answers to a three-page questionnaire.
The trial was postponed for two years as federal prosecutors appealed a judge’s ruling barring them from using as evidence certain documents they say show that Bonds tested positive for steroid use. They lost the appeal. Government attorneys may call former New York Yankee Jason Giambi and other baseball players to testify that they received steroids from Bonds’s former trainer, according to court documents.
Bonds holds the Major League Baseball career record with 762 home runs and the single-season record with 73 home runs in 2001. He played 22 seasons in the major leagues, the first seven with the Pittsburgh Pirates before moving to the San Francisco Giants in 1993 as a free agent. He won a record seven National League Most Valuable Player awards, including four straight from 2001 through 2004. He hasn’t played since the 2007 season.
The case is U.S. v. Bonds, 07-00732, U.S. District Court, Northern District of California (San Francisco).
Wisconsin Asks Appeals Court to Block Order on Labor Law
Wisconsin’s attorney general asked an appeals court to block a state judge’s order that temporarily halted a law curbing government employee unions’ collective-bargaining power.
State Attorney General J.B. Van Hollen yesterday also asked the Wisconsin Court of Appeals for permission to file an appeal seeking to overturn the ruling by Circuit Court Judge Maryann Sumi.
“Contrary to established case law, the trial court injected itself into the legislative process and enjoined a legislative act,” Van Hollen said in court papers filed yesterday in Madison. “There is absolutely no authority for the broad, overreaching step taken.”
Sumi on March 18 granted a temporary restraining order blocking publication of the measure signed into law by Governor Scott Walker on March 11, after a hearing in Madison, the state’s capital city. Publication gives the law full force and effect.
The legislation championed by Walker, a first-term Republican, requires annual recertification votes for union representation and makes voluntary the payment of union dues. It exempts firefighters and police officers.
Organized labor and Democrats called the bill an attack on workers. Opposition sparked almost four weeks of mass protests at the Capitol.
The case is State of Wisconsin Ex Rel. Ozanne v. Fitzgerald, 11cv1244, Dane County, Wisconsin, Circuit Court (Madison).
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Hilton Stock Purchase Lawful, Rajaratnam’s Lawyer Tells Jury
Raj Rajaratnam’s lawyers sought to use cross-examination of a government witness to show Galleon Group LLC had legitimate reasons to buy Hilton Hotels Corp. stock before its 2007 buyout that didn’t involve inside information.
During defense questioning of Margaret Holloway, a senior credit analyst at Moody’s Investors Service Inc., defense attorney Michael Starr tried to show sophisticated traders knew Hilton was a takeover target months before Rajaratnam was allegedly tipped. Prosecutors claim Galleon, co-founded by Rajaratnam, bought the shares because Deep Shah, a junior analyst at Moody’s, leaked news July 2, 2007, a day before the Blackstone Group LP’s takeover of the chain was made public.
Starr questioned Holloway about analyst reports and media accounts speculating on the likelihood of a buyout beginning four months earlier. He showed her documents filed with regulators stating that New York-based Galleon increased its holdings from 250,000 shares in the quarter ended March 31, 2007, to 475,000 three months later -- prior to the alleged tip.
“This is not a secret document, is it?” Starr asked Holloway about an April 30, 2007, report by Morgan Stanley (MS) saying that private equity investors were “swarming the lodging space.” Holloway replied that it wasn’t.
Rajaratnam, 53, is on trial in the largest crackdown on hedge-fund insider trading in U.S. history. The Sri Lankan-born money manager is accused of making $45 million from tips leaked by corporate insiders and hedge fund traders. The Hilton tip was passed from Shah to Roomy Khan, a former Intel Corp. (INTC) executive and stock trader, who in turn told Rajaratnam, prosecutors said.
Khan has pleaded guilty in the case. Shah remains a fugitive.
The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).
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Deutsche Bank Loses Case Over Swap Sales at German Top Court
Deutsche Bank AG (DBK), Germany’s biggest bank, lost a ruling over an interest-rate swap in the first case concerning sales of the products to companies and local governments heard at the country’s highest civil court.
The bank must pay Ille Papier Service GmbH 541,074 euros ($770,000) plus interest over the swap purchase, Federal Court of Justice Presiding Judge Ulrich Wiechers said in Karlsruhe, Germany, today.
“As an adviser to its customer, the bank must guard the customers’ interest alone,” Wiechers said. “But as a seller of the swap, a loss to the customer works to the banks’ advantage.”
The ruling will influence dozens of disputes Deutsche Bank has with local German governments, community-owned utilities and companies that claim the lender sold swaps without adequately disclosing risks and fees. Cases over swap agreements have spread throughout Europe with similar disputes in Italy, France and England.
Deutsche Bank lawyer Christian Duve said his client needs to analyze the written ruling.
The “number of open disputes over these swaps is limited,” he said. “And the bank has taken adequate risk provisions for this.”
Deutsche Bank, which acted as Ille Paper’s adviser, had the duty to disclose an initial negative market value of about 80,000 euros that covered the lenders profit and costs, because it was a crucial indicator how chances and risks were structured into the product, Wiechers said today.
The case is BGH, XI ZR 33/10.
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Ex-UBS Banker Poteroba Gets 22 Months for Insider Trading
Igor Poteroba, a former UBS AG (UBS) investment banker who pleaded guilty to insider trading, was sentenced to 22 months in prison.
U.S. District Judge Paul A. Crotty in Manhattan also ordered Poteroba to pay a $25,000 fine and to serve three years of supervised release after his prison term. In December, Poteroba, 37, pleaded guilty to one count of conspiracy to commit securities fraud and three counts of securities fraud.
“This activity was done repeatedly, over an extended period of time,” Crotty said before passing sentence.
Poteroba has agreed to forfeit the $465,000 in proceeds from his insider trading. Crotty said he will probably be deported to his native Russia.
Poteroba, who worked in UBS Securities LLC’s Global Healthcare Group in New York, was charged and arrested in March 2010 along with Alexei Koval, a Chicago man who allegedly traded on the information. Poteroba was accused of leaking tips about potential mergers and acquisitions involving six public companies to Koval and a third, unidentified person.
The judge said Poteroba’s 22-month term includes the year he already spent in a federal lockup since his arrest. Poteroba’s lawyers argued that his time already served was an appropriate term. Prosecutors urged Crotty to sentence him to as long as 37 months.
“I made some very bad mistakes and made many bad decisions,” Poteroba told Crotty.
Koval pleaded guilty in January. His sentencing is scheduled for May 24.
The case is U.S. v. Poteroba, 10-mag-00562, U.S. District Court, Southern District of New York (Manhattan).
AIG, Three Others Will Pay $27 Million in Antitrust Suit
American International Group Inc., the bailed-out insurer, is one of four insurance companies that will pay a total of $27 million to resolve a lawsuit claiming they improperly sold excess casualty policies.
AIG, Liberty Mutual Holding Co., Travelers Cos., Inc. and XL Group Plc (XL) agreed to settle the case with buyers of insurance policies sold from 1998 through 2004. Five other insurers agreed to settle a related set of claims over non-excess casualty policies.
“We are pleased to have reached an agreement to resolve this matter,” said company spokesman Mark Herr in an e-mailed statement. “Through this settlement, AIG brings an end to another long-standing lawsuit about events from many years ago.”
Zurich Financial Services AG (ZURN), the largest Swiss insurer, and Arthur J. Gallagher & Co., an insurance broker, previously settled the case pending in federal court in Trenton, New Jersey. Zurich, based in the Swiss city of the same name, agreed to pay $121.8 million to clients and $30 million in attorneys’ fees. Gallagher, based in Itasca, Illinois, agreed to pay $28 million to clients and $8.9 million in attorneys’ fees.
The case was inspired by a 2004 regulatory probe by Eliot Spitzer, then the New York attorney general, of a conspiracy by brokers and insurers to stifle competition.
The company used fake quotes to steer clients to favored insurers in exchange for hidden fees, Spitzer said in his suit. Marsh & McLennan Cos. settled with him in 2005 by agreeing to pay $850 million to customers across the U.S. Some 70,000 clients, including more than 90 percent of the largest, accepted the compensation.
The case is In Re Insurance Brokerage Antitrust Litigation, 04-5184, U.S. District Court, District of New Jersey (Trenton).
Fed Will Release Bank Loan Data as Top Court Rejects Appeal
The justices yesterday left intact a court order that gives the Fed five days to release the records, sought by Bloomberg News’s parent company, Bloomberg LP. The Clearing House Association LLC, a group of the nation’s largest commercial banks, had asked the Supreme Court to intervene.
“The board will fully comply with the court’s decision and is preparing to make the information available,” said David Skidmore, a spokesman for the Fed.
The order marks the first time a court has forced the Fed to reveal the names of banks that borrowed from its oldest lending program, the 98-year-old discount window. The disclosures, together with details of six bailout programs released by the central bank in December under a congressional mandate, would give taxpayers insight into the Fed’s unprecedented $3.5 trillion effort to stem the 2008 financial panic.
“I can’t recall that the Fed was ever sued and forced to release information” in its 98-year history, said Allan H. Meltzer, the author of three books on the U.S. central bank and a professor at Carnegie Mellon University in Pittsburgh.
Under the trial judge’s order, the Fed must reveal 231 pages of documents related to borrowers in April and May 2008, along with loan amounts. News Corp. (NWSA)’s Fox News is pressing a bid for 6,186 pages of similar information on loans made from August 2007 to November 2008.
The records were originally requested under FOIA, which allows citizens access to government papers, by the late Bloomberg News reporter Mark Pittman.
The cases are Clearing House Association v. Bloomberg, 10-543, and Clearing House Association v. Fox News Network, 10-660.
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NAB Agrees to Settle A$309 Million Dispute Over Taxes
National Australia Bank Ltd. (NAB), the nation’s biggest lender to companies, agreed to settle a A$309 million ($311 million) dispute with the country’s tax office, saying it won a A$142 million reduction.
The agreement was reached as a four-week trial was scheduled to begin in Sydney Federal Court March 20. The bank didn’t admit liability and will get a refund from the tax office, National Australia Bank said in a statement yesterday.
The lender claimed interest on capital instruments, known as exchangeable capital units, or ExCaps, is tax-deductible. The Australian Tax Office disagreed and issued six amended assessments against the bank in December 2008 and May 2005, seeking to recoup the deductions.
“This removes the need for potentially long and costly legal proceedings,” National Australia Bank Chief Financial Officer Mark Joiner said yesterday in a statement issued to the Australian Stock Exchange.
The Australian Tax Office ruled the interest payments weren’t tax deductible because the money was considered capital.
National Australia paid A$309 million and sued to recover the money.
The case is National Australia Bank Ltd. V. Commissioner of Taxation. NSD 1297/2009. Federal Court of Australia (Sydney)
Mets Say Madoff Trustee Made Charges to Force Settlement
The New York Mets owners said the trustee liquidating the business of convicted fraudster Bernard L. Madoff concocted allegations against them to force a settlement.
Irving Picard, seeking $1 billion in Ponzi scheme profits and principal from the baseball team’s owner, Sterling Equities Inc., sued in New York, accusing the team and the owners of participating in Madoff’s fraud and ignoring “red flags.”
Asking a judge to dismiss Picard’s suit, the Sterling partners said March 20 in court papers that they weren’t professional investors and saw no warning signs. Fred Wilpon, the Mets chairman, and Saul Katz, the ball club’s president, described Picard’s accusations as a “work of fiction.”
Picard’s calculation that the Sterling partners and companies made $300 million in false profit from the Ponzi scheme ignored their Madoff accounts that had net losses, Sterling said in a filing in U.S. Bankruptcy Court in New York. After losses, Sterling’s fake profit was about $150 million over 25 years, according to the filing.
“Let us be very clear: We did not know that Madoff was engaged in a fraud,” Katz and Wilpon said March 20 in a statement. “There were no red flags and we received no warnings.”
The Mets said in January that they are seeking to sell as much as 25 percent of the Major League Baseball team to raise money to settle a Madoff-related lawsuit. Picard’s suit, filed in December, was kept under seal until last month.
Picard revised the suit on March 18 to add a claim that Sterling and Madoff disguised a $54 million loan from Madoff as an investment by his wife, Ruth Madoff, to help Sterling purchase the Mets’ broadcast rights from Cablevision Systems Corp. in 2004.
The amended complaint showed the “deep dependency” of Sterling businesses on the Madoff fraud “and certain knowledge of indicia of fraud” by the Sterling partners, David Sheehan, Picard’s lawyer, said in a statement.
The case is Picard v. Katz, 10:05287, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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NFL Owners Say Court Lacks Right to Bar Lockout of Players
National Football League owners voiced opposition to a bid by 10 NFL players for an order blocking a lockout during collective bargaining, saying the federal court lacks jurisdiction over the dispute.
Only the National Labor Relations Board has the authority to resolve the fight, the 32-team league said yesterday in papers submitted to U.S. District Judge Susan Richard Nelson in St. Paul, Minnesota.
“The jurisdictional bar applies as long as this case ‘involves or grows out of’ a labor dispute, a test that is clearly satisfied here,” according the owners argued.
Quarterbacks Tom Brady, Peyton Manning and Drew Brees led the group that sued the league on March 11 after negotiations to craft a new contract collapsed and the National Football League Players Association said it no longer would function as a union. League policies violate U.S. antitrust laws, the players said.
Owners declared a lockout hours later, shutting down the most-watched and wealthiest U.S. sport at midnight.
During the lockout, players won’t be paid, and teams can’t practice, sign new players or make trades. The NFL draft of college players is still scheduled to begin April 28.
The case is Brady v. NFL, 0:11-639, U.S. District Court, District of Minnesota (St. Paul).
Law Firm News
Bernstein Litowitz Tops 2010 Class-Action Settlements List
Bernstein Litowitz Berger & Grossmann LLP recovered more money in class-action settlements of investor lawsuits in 2010 than any other law firm, according to a study that found 17 firms recouped more than $100 million each.
Bernstein Litowitz represented the lead or co-lead plaintiff in 16 lawsuits that settled last year totaling about $1 billion, according to the study released yesterday by RiskMetrics Group’s Institutional Shareholder Services unit, which tracks shareholder complaints.
San Diego-based Robbins Geller Rudman & Dowd, which topped the 2009 list, fell to second with $740.8 million followed by Labaton Sucharow in New York in third place with $576.4 million. Hargrove Pierson & Brown in Boca Raton, Florida, and Marcus & Auerbach in Jenkintown, Pennsylvania, round out the top five with $549.3 million each, according to the study. Robbins Geller, which represents investors in suits filed against Goldman Sachs Group Inc. (GS) and Citigroup Inc. (C), was also the most- active firm by number of settlements with 31 deals.
Cunningham Bounds, based in Mobile, Alabama, also posted the highest average settlement amount among the top 50 law firms ranked in the study, averaging $83.5 million in its three cases. The firm served as co-lead counsel for bondholders in settlements with UBS AG (UBSN), HealthSouth Corp. (HLS) and Ernst & Young LLP over the health-care services provider’s demise.
New York-based RiskMetrics is a unit of MSCI Inc. (MSCI), which develops investment indexes and analytics.
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