A day after a jury heard recordings of Galleon Group LLC co-founder Raj Rajaratnam thanking Danielle Chiesi for a stock tip, a government agent testified about Rajaratnam’s phone calls, trading dates and stock profits.
Prosecutors in Manhattan federal court yesterday presented charts prepared by FBI Special Agent James Barnacle Jr. connecting phone records, wiretaps, e-mails, share prices and Galleon stock-trading records in an attempt to prove Rajaratnam used confidential information to pick stocks. The U.S. said it expects to rest its criminal case against Rajaratnam today.
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. He has denied wrongdoing and says his trades were based on legitimate research.
U.S. District Judge Richard Holwell granted a defense request to bar prosecutors from offering as evidence videotapes of ex-Intel Corp. executive Roomy Khan faxing him documents in 1997 and 1998.
Holwell said the videotapes would have been unfair to Rajaratnam and had “diminished probative value.” Prosecutors wanted to use them to support a claim that Khan leaked inside tips to Rajaratnam in 2006 and 2007. Holwell said prosecutors may use other evidence to prove that charge.
Khan, who pleaded guilty, has been cooperating with prosecutors. She won’t testify at the trial, prosecutors have said.
The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).
For more, click here.
Ex-Taylor Bean President Says Ex-Chairman Ran Conspiracy
The former president of Taylor, Bean & Whitaker Mortgage Corp., Raymond Bowman, said ex-Chairman Lee Farkas ordered data sent to Colonial Bank for nonexistent loans in an effort to cover up the company’s growing deficits.
Bowman, 45, testifying in federal court in Alexandria, Virginia, yesterday for the government, said Farkas in 2003 explained that the sale of “dummy” loans, known as Plan B, were necessary to prevent Taylor Bean from going out of business.
“I told him I didn’t think it was a good idea,” said Bowman, who pleaded guilty last month to conspiracy and making false statements. Bowman said he thought the plan was unethical and “possibly illegal.”
Farkas, 58, is charged with orchestrating a $1.9 billion fraud scheme involving fake mortgage assets that duped some of the country’s largest financial institutions, targeted the U.S. bank bailout program and contributed to the failure of Montgomery, Alabama-based Colonial Bank.
Bowman is one of six people who have admitted to the conspiracy and are scheduled to testify against Farkas, who might spend the rest of his life in prison if convicted on 14 counts of wire, bank and securities fraud.
The case is U.S. v. Farkas, 10-cr-00200, U.S. District Court, Eastern District of Virginia (Alexandria).
Ferrari, Yacht Payoffs Alleged at Foreign-Bribes Trial
Lindsey Manufacturing Co. President Keith Lindsey and Chief Financial Officer Steve Lee are charged with violating the U.S. Foreign Corrupt Practices Act by using a Mexican intermediary to pay off the officials, including buying one of them a $1.8 million yacht and a $300,000 Ferrari.
Prosecutors said the closely held Azusa, California-based company, which is also a defendant, paid Enrique Aguilar, an independent Mexican sales representative and his company inflated commissions to cover more than $5 million in bribes and obtain orders from Comision Federal de Electricidad, a power company.
“They knew that in order to get business with CFE, they had to pay bribes,” Assistant U.S. Attorney Douglas Miller said yesterday in his opening statement in Los Angeles federal court. One of the Mexican officials could pick up the Ferrari at the Beverly Hills dealer in 2007 “without signing a single piece of paper,” Miller said.
Enrique Aguilar’s wife, Angela Aguilar, was arrested last year in Houston and charged with money laundering for setting up a U.S. brokerage account through which the payments were made. She is being tried with the Lindsey executives. Her husband was also charged. A Mexican citizen, he isn’t in the U.S.
“The implication that the contracts were riddled with corruption and stimulated by bribes is belied by the facts,” Handzlik said. “Major purchases were stimulated by a need for a vital product.”
Handzlik said that Enrique Aguilar’s business represented other companies as well, and that Lindsey Manufacturing had no control over what happened with the fees they paid for his services, which were comingled with fees he received from his other clients.
The case is U.S. v. Aguilar, 10-1031, U.S. District Court, Central District of California (Los Angeles).
For more, click here.
For the latest trial and appeals news, click here.
Madoff Feeder Fund Fairfield Sues Abu Dhabi for $300 Million
Fairfield Sentry Ltd., a feeder fund that invested in the Ponzi scheme of Bernard L. Madoff, sued the Abu Dhabi Investment Authority to try to recover $300 million in redemption payments.
Fairfield Sentry, citing a $3.2 billion lawsuit against it by Madoff trustee Irving Picard, has been filing so-called clawback actions aimed at recouping money. Funds it received from the jailed confidence man were passed on to its own shareholders as redemption payments, it said in an April 1 bankruptcy court filing.
“Unless redemption payments paid to shareholders are recovered for the funds’ estate, the funds will be unable to satisfy their liabilities and claims,” it said in the filing.
The Abu Dhabi sovereign wealth fund is due to respond to the lawsuit in May, according to court records.
Fairfield Sentry is being liquidated in the British Virgin Islands and has a U.S. proceeding to protect its U.S. assets.
Euart Glendinning, a spokesman for the investment authority, didn’t immediately respond to e-mails seeking comment outside of regular business hours in the United Arab Emirates.
The case is Fairfield Sentry Ltd. v. Abu Dhabi Investment Authority, 11-01719, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
For the latest new suits news, click here. For copies of recent civil complaints, click here.
Securities Corp. Can Join Madoff Trustee JPMorgan Suit
The Securities Investor Protection Corp., which initiated the liquidation of Bernard L. Madoff’s money-management firm, can be heard in trustee Irving Picard’s $6.4 billion suit against JPMorgan Chase & Co. (JPM), a judge ruled.
JPMorgan, which is contesting Picard’s allegation that it aided in Madoff’s $20 billion Ponzi scheme, said in a letter to U.S. District Judge Colleen McMahon that SIPC’s filing of arguments in the case wasn’t contemplated by existing agreements between the parties and was done without informing JPMorgan. The New York-based bank, which is trying to move the case to U.S. District Court from U.S. Bankruptcy Court, said it may object to SIPC’s participation in the case.
A note on the docket April 4 said, “SIPC can be heard.”
The case is Picard v. JPMorgan Chase & Co., 11-cv-00913, U.S. District Court, Southern District of New York (Manhattan).
Mark Hurd Appeals Letter Release to Delaware Supreme Court
Mark Hurd appealed a judge’s decision that Hewlett-Packard Co. (HPQ) must release most of a letter about the ex-chairman’s involvement with contractor Jodie Fisher, the relationship that led to his departure from the company.
Delaware Chancery Court Judge Donald Parsons Jr. on March 17 ordered that a redacted, public version of the letter be filed within 10 days, and the pending appeal delayed that release. Parsons on March 28 modified his earlier order, saying that Hewlett-Packard should release the letter on the 10th day following the filing of a notice of appeal unless he or the Delaware Supreme Court issues a stay.
The state high court yesterday ordered Hurd’s lawyers to submit their opening brief on the appeal by May 19. It will consider the case later, according to an electronic court filing.
The letter, sent by lawyer Gloria Allred on Fisher’s behalf, is part of a case filed by HP shareholder Ernesto Espinoza seeking access to company books and records. The letter contains accusations of sexual harassment and details of Hurd’s alleged advances toward Fisher and her rejection of them, according to Parsons’s ruling.
Hurd, now co-president of software maker Oracle Corp. (ORCL), resigned from Palo Alto, California-based HP in August after a company investigation determined he violated its standards of business conduct. HP said it didn’t find that Hurd had violated the company’s sexual-harassment policy.
“We have no comment” on the latest appeal, a Hewlett- Packard spokeswoman, Mylene Mangalindan, said yesterday in an e- mailed message.
The Chancery case is Espinoza v. Hewlett-Packard Co., CA6000, Delaware Chancery Court (Wilmington). The appeal is Hurd v. Espinoza, 167, 2001, Delaware Supreme Court (Dover).
For more, click here.
BP, Spill Partners Seek Smaller Civil Fine for Gulf Spill
The Obama administration in December sued BP and other companies involved in the worst offshore oil spill in U.S. history, seeking a civil penalty based on the more than 4.1 million barrels of oil it said spilled into the gulf after the Deepwater Horizon rig blew up off the Louisiana coast in April 2010, killing 11 people. The gusher was capped July 15 and permanently sealed Sept. 19.
BP said in a filing April 4 in federal court in New Orleans that the government should assess a fine based on the days the well was in violation of the Clean Water Act, an alternative to the government’s method.
In its complaint, the U.S. said it will seek civil penalties of $1,000 for each barrel of oil spilled, or in the case of negligence or willful misconduct, as much as $4,300 a barrel from the companies involved, as provided under the law. London-based BP has denied acting in a way that would trigger the higher per-barrel fine. The company didn’t specify what the penalty would be under its calculation.
Anadarko Petroleum Corp. (APC) and MOEX Offshore 2007 LLC, BP’s partners in the well, filed papers April 4 denying that they acted with negligence or willful misconduct and repeating their position that BP should pay the full cost of the spill. Anadarko holds a 25 percent stake in the well, and MOEX, a unit of Mitsui & Co., holds 10 percent.
BP admitted legal responsibility for damage caused by the spilled oil and set aside $20 billion to compensate injured parties and pay cleanup and restoration costs.
The case is U.S. vs. BP Exploration & Production Inc., 2:10-cv-4536, U.S. District Court, Eastern District of Louisiana (New Orleans).
For more, click here.
For the latest lawsuits news, click here.
HSBC Client Said to Plead Guilty to Hiding Bank Accounts
A New Jersey businessman accused of conspiring with five bankers at HSBC Holdings Plc (HSBA) to hide his Indian bank accounts from U.S. tax authorities is scheduled to plead guilty next week, according to court records and a person familiar with the matter.
Vaibhav Dahake, of Somerset, New Jersey, will have a plea agreement hearing on April 11 in federal court in Trenton, New Jersey, court records show. He was indicted Jan. 26 on charges of conspiring with bankers of “one of the largest international banks in the world,” which has headquarters in England.
London-based HSBC, Europe’s largest bank by market value, is the bank, according to the person, who requested anonymity because the U.S. Justice Department hasn’t identified the conspirators.
Dahake was the first taxpayer charged in a crackdown focusing on whether HSBC helped clients with Indian accounts hide assets from the U.S. Internal Revenue Service. He’s accused of conspiring with two bankers in New York, one in Fremont, California, and two in Thane, India. He faces as long as five years in prison.
“HSBC does not condone tax evasion and fully supports the U.S. efforts to promote appropriate payment of taxes by U.S. taxpayers,” Juanita Gutierrez, a company spokeswoman, said in an e-mail.
Dahake’s attorney Lawrence Horn declined to comment. Rebekah Carmichael, a spokeswoman for U.S. Attorney Paul Fishman, declined to comment.
The case is U.S. v. Dahake, 11-cr-42, U.S. District Court, District of New Jersey (Trenton).
For more, click here.
Wells Fargo to Pay $11.2 Million in SEC Settlement
Wells Fargo & Co. (WFC), the biggest U.S. home lender, agreed to pay $11.2 million to settle regulatory claims that Wachovia Capital Markets improperly sold two collateralized debt obligations tied to home mortgages.
The Wachovia unit, acquired by Wells Fargo during the financial crisis, charged “undisclosed excessive markups” while selling stakes in a CDO to the Zuni Indian tribe and an individual investor as housing markets began collapsing, the U.S. Securities and Exchange Commission said yesterday in a statement. Wachovia also falsely claimed it acquired assets for a CDO “on an arm’s-length basis,” the SEC said.
“Wachovia caused significant losses to the Zuni Indians and other investors by violating basic investor-protection rules -- don’t charge secret excessive markups, and don’t use stale prices,” SEC Enforcement Director Robert Khuzami said in the statement.
Wells Fargo’s securities unit didn’t admit or deny wrongdoing in agreeing to settle the regulator’s claims, according to the SEC’s statement. The violations occurred in 2006 and 2007, the SEC said.
“The settlement relates to actions taken by Wachovia in 2007 in the early days of the credit crisis,” Mary Eshet, a Wells Fargo spokeswoman, said in an e-mailed statement. “The issues presented here were complex, and Wells Fargo is pleased to have resolved this matter with the SEC.”
For more, click here.
Verizon Pays $93.5 Million to U.S. to End Overcharging Case
Verizon Communications Inc. (VZ), the second-largest U.S. phone company, paid the U.S. $93.5 million to resolve allegations it overcharged the U.S. General Services Administration.
The U.S. Justice Department and the GSA, which supports federal agencies with products and communications, found that New York-based Verizon submitted false claims for reimbursement of property taxes, common-carrier recovery charges and unallowable surcharges, according to a government statement.
“Corporations that contract to provide services to federal, state and local governments must play by the rules,” Assistant Attorney General Tony West said in the statement.
The whistle-blower lawsuit was filed on behalf of the government by Stephen M. Shea and 2Probe LLC, according to the statement.
“Verizon cooperated closely with the government throughout the process,” Peter Lucht, a Verizon spokesman, said in an interview. “It was in the best interest of all parties to settle the matter. The government and Verizon disagreed on whether certain fees could be charged under the contract, so their settlement concludes the efforts by both parties to resolve the dispute amicably.”
The case is U.S. v. Verizon Communications Inc., 07-cv-111, U.S. District Court, District of Columbia (Washington).
For the latest verdict and settlement news, click here.
To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at email@example.com.
To contact the editor responsible for this story: Michael Hytha at firstname.lastname@example.org.