Dow Kim, a former Merrill Lynch & Co. head of trading and investment banking, was sued over $2 million in compensation claimed against the Diamond Lake Investment Group hedge fund venture that he started and dropped.
Namuk Cho, who previously worked as the head of U.S. derivatives trading at UBS AG (UBSN), said Kim promised him $2 million in compensation for his services in 2007, according to the suit filed April 25 in New York state Supreme Court. He said he was terminated in May 2008, days after demanding the money.
Kim, whom the suit cites as making more than $80 million at Merrill from 2005 to 2007, left to start Diamond Lake in 2007. In August 2008, he determined he couldn’t raise enough money, according to a March 31 appeals court decision that reinstated claims against Kim for breach of contract and unpaid wages. In that case, Karl Wachter, who had been hired to serve as a managing director and general counsel of Diamond Lake, sued Kim over compensation.
“Kim specifically promised Cho $2 million as minimum compensation for his 2007 services,” according to the new suit. “Cho insisted that his $2 million minimum compensation be unconditional and not subject to the launch of Kim’s investment funds.”
Cho alleges in the complaint that, in a telephone conversation in August 2007 over the pay, Kim said, “But then it comes out of my pocket!” and added, “You will get your $2 million.”
Attorney Leo V. Leyva, who represents Kim in the Wachter suit, said yesterday in an interview that he hadn’t seen the Cho suit and had no immediate comment.
The case is Cho v. Kim, 651089/2011, New York state Supreme Court (Manhattan).
Ex-Ukraine Prime Minister Tymoshenko Sues RosUkrEnergo
Former Ukrainian prime minister Yulia Tymoshenko, in a U.S. racketeering lawsuit, accused gas trader RosUkrEnergo AG and Ukrainian businessman Dmitry Firtash of conspiring to manipulate an arbitration court ruling that she claims robbed the country of its natural gas supplies.
A Stockholm Arbitration Court ruling last year that Ukraine’s state-run energy company NAK Naftogaz Ukrainy owed RosUkrEnergo 12.1 billion cubic meters of gas deprived the Ukrainian people of fuel that the government had already paid for and allowed Firtash, an owner of the gas trader, to reap billions when the gas was resold on the open market, according to the complaint filed yesterday in federal court in New York.
“The Stockholm arbitration ruling in favor of Firtash’s company has been widely perceived as a means of generating huge sums of cash with which Firtash and his associates could continue to illegally fund the pervasive system of corruption that encompasses every level of government, while at the same time suppressing political dissent through intimidation, racketeering and other violations of fundamental human and political rights,” according to the complaint.
The case seeks to represent all Ukrainian people in a class action and was filed under U.S. racketeering law and the Alien Torts Statute, a law that allows foreigners seeking damages for violations of international human rights laws to sue in U.S. courts. The complaint seeks unspecified compensatory and punitive damages.
No one answered a phone call to RosUkrEnergo after regular business hours yesterday. Representatives of Group DF, where Firtash is executive chairman, didn’t respond to an e-mail sent after regular business hours yesterday.
The case is Tymoshenko v. Firtash, 11-02794, U.S. District Court, Southern District of New York (Manhattan).
Navistar Sues Its Former Auditor Deloitte & Touche
Navistar International Corp. (NAV), a maker of medium- and heavy- duty trucks, accused its former auditor Deloitte & Touche LLP of professional malpractice in a lawsuit seeking $500 million in damages.
Navistar claimed shoddy work by Deloitte & Touche accountants from 2002 to 2005 forced the company to revise its financial statements, according to a 134-page complaint filed yesterday in Illinois state court in Chicago.
“Deloitte lied to Navistar and, on information and belief, to Deloitte’s other audit clients, as to the competency of its audit and accounting services,” the Warrenville, Illinois-based truckmaker alleged in its complaint.
Deloitte & Touche, based in New York, functioned as an auditor, accountant and adviser to Navistar for almost a century, a relationship that ended in April 2006, according to the complaint.
Navistar said in April 2006 that its restatements for 2002 through the third quarter of 2005 were related to warranties and product-development programs at suppliers. It also said it was replacing Deloitte with KPMG LLP. The restatements were made in 2007.
In its complaint yesterday, the truckmaker accused its former auditor of fraud, fraudulent concealment, breach of contract and malpractice relating to the advice and auditing services Deloitte gave Navistar.
Jonathan Gandal, a spokesman for Deloitte, said Navistar’s claims lack merit and that the firm would vigorously defend itself.
The case is Navistar International Corp. v. Deloitte & Touche LLP, 2011L004269, Cook County, Illinois, Circuit Court, Law Division (Chicago).
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Ex-Air France Cargo Executives Charged With Price Fixing
Two former Societe Air France cargo executives were charged with conspiring to fix international freight shipment prices, the U.S. Justice Department said.
Ex-vice presidents Marc Boudier and Jean Charles Foucault face a single charge each of conspiracy to restrain trade in violation of the Sherman Antitrust Act, a crime punishable by as much as 10 years’ imprisonment and a fine of as much as $1 million, prosecutors said yesterday in a statement. The men were indicted by a federal grand jury in Chicago, the government said.
“Boudier and Foucault carried out a conspiracy by fixing and coordinating rates on air cargo shipments to certain U.S. locations and elsewhere,” from August 2004 to February 2006, the Justice Department said.
The indictments are the most recent in a U.S. government probe that has involved charges against 21 airlines and 21 executives.
Societe Air France, based in Roissy, France, is a unit of Paris-based Air France-KLM. (AF)
Attorney information wasn’t immediately available for Boudier, a former executive vice president of Air France Cargo, and Foucault, formerly vice president for sales and marketing of Air France Cargo.
The case is U.S. v. Boudier, U.S. District Court, District of Northern Illinois (Chicago).
Genzyme Sues to Block Zimmer, Anika Arthritic-Knee Treatments
Genzyme Corp., the drugmaker bought by Sanofi-Aventis SA (SAN) this month, sued Zimmer Holdings Inc. (ZMH) and Anika Therapeutics Inc. (ANIK) alleging the companies’ treatments for arthritic knee pain infringe a patent.
Genzyme is seeking to block sales of Anika’s Monovisc drug as well as a treatment made by Seikagaku Corp. (4548) and distributed by Zimmer called Gel-One, according to two patent-infringement lawsuits filed yesterday in federal court in Boston. Genzyme, based in Cambridge, Massachusetts, is also seeking cash compensation.
Genzyme filed the lawsuits the same day it was issued the patent for a method of treating a knee joint with a single injection of hyaluronic acid, which the company markets as Synvisc-One, according to the complaint. Sales of Synvisc-One and of Synvisc, a three-injunction drug, rose 20 percent to $393 million last year, Genzyme said in its annual report.
Synvisc-One was the only single-injection treatment approved by U.S. regulators until Gel-One was approved on March 22, according to the complaint against Warsaw, Indiana-based Zimmer. Tokyo-based Seikagaku was named in the Zimmer lawsuit.
Anika, based in Bedford, Massachusetts, sells Monovisc in Europe, Turkey and Canada, and is seeking approval to sell it in the U.S. Anika has “already begun advertising for field sales representatives,” Genzyme said in that complaint.
Garry Clark, a spokesman for Zimmer, said the company doesn’t comment on pending litigation. Officials with Anika didn’t immediately return messages seeking comment.
Paris-based Sanofi bought Genzyme, the world’s largest maker of medicines for rare genetic disorders, for at least $20.1 billion.
The cases are Genzyme Corp. (GENZ) v. Seikagaku Corp., 11cv10704, and Genzyme Corp. v. Anika Therapeutics Inc., 11cv10705, both U.S. District Court, District of Massachusetts (Boston).
Nancy Kissel Doesn’t Appeal, May Apply for Transfer to U.S.
Nancy Kissel, who was retried in Hong Kong for the murder of her Merrill Lynch & Co. banker husband, didn’t appeal her second conviction and may apply for a transfer to a U.S. prison, her lawyer said yesterday.
“My understanding is that she wishes to make an application to serve her sentence in the United States,” said Kissel’s lawyer Colin Cohen. The 28-day period for Kissel to file an appeal expired on April 23.
Helen Leung, a Correctional Services Department spokeswoman, wrote in an e-mail that privacy concerns prevent the department from saying whether Kissel had filed an application to be transferred.
The Hong Kong and U.S. governments signed an agreement in 1997 allowing the transfer of prisoners between the two jurisdictions. The last successful repatriation of an American prisoner from Hong Kong was in 2008, according to U.S. Justice Department records.
Michigan-born Kissel was sentenced to life in prison in March after being convicted for murdering her husband, Robert, on the night of Nov. 2, 2003. Prosecutors said she drugged her husband, a distressed assets specialist at Merrill, with a milkshake before bludgeoning his skull with a lead ornament and hiding his body in a rolled-up carpet.
At her sentencing, Kissel lawyer Edward Fitzgerald had asked Judge Andrew Macrae to write a letter to Kissel’s parole board about his client’s poor health and psychological distress. Cohen declined to comment on when the board may review Kissel’s case.
Kissel, 47, has already served more than six years in a Hong Kong prison.
Drug Marketing Limits May Be Voided by U.S. Supreme Court
U.S. Supreme Court justices signaled that they may overturn a Vermont law that would limit the ability of drugmakers to use prescription data to market to individual doctors.
The case, argued yesterday before the high court, pits speech rights against privacy interests. Several justices questioned whether the law effectively protected the privacy of doctors, saying the measure would allow use of the information for other purposes.
Chief Justice John Roberts and Justices Anthony Kennedy and Antonin Scalia all said the law was aimed at promoting lower- cost generic drugs by undermining “detailing,” the brand-name industry practice of one-on-one marketing to doctors.
“What you’re saying is that the state can prohibit the most efficient sort of speech,” Kennedy told the state’s lawyer.
The Pharmaceutical Research and Manufacturers of America, which represents the drug industry, is banding together with data-mining companies including IMS Health Inc. to challenge the measure.
The data-mining companies typically buy information from pharmacies delineating physicians’ prescriptions. They sell the information to drug companies, which in turn use the information to pitch their products to doctors who have been prescribing something else.
Vermont is one of three New England states that restrict the use of prescription records for marketing, and similar legislation has been introduced in two dozen other states, according to Vermont’s appeal.
The 2nd U.S. Circuit Court of Appeals in New York struck down the Vermont law in a 2-1 ruling. The majority said the measure violates the First Amendment because it restricts the speech rights of data miners without directly advancing legitimate state interests.
The Obama administration is joining Vermont in defending the measure. The state’s lawyer, Bridget Asay, told the justices that drug companies “do not have a right to demand access to information about the doctor’s prescribing practices without his consent.”
Several news organizations, including Bloomberg LP, the parent of Bloomberg News, are urging the court to overturn the law. They say a ruling upholding the law might jeopardize news gathering.
None of the justices directly came to the law’s defense yesterday, although several asked whether states could take other steps to protect physician privacy. Justice Sonia Sotomayor asked whether a state could adopt an “opt out” rule so that doctors could prevent their information from being used by marketers. Thomas Goldstein, the lawyer representing the challengers to the law, said states could.
The justices will likely rule by the end of June in the case, Sorrell v. IMS Health, 10-779.
BankAtlantic Wins Reversal in Shareholder Stock-Fraud Case
BankAtlantic Bancorp Inc. (BBX) won a judge’s reversal of a jury verdict that awarded shareholders $2.41 a share in damages based on alleged stock-fraud.
The jury last year in federal court in Miami found that bank officials ignored lending guidelines in approving land- development loans and then misrepresented problems with those deals in public statements.
“Even if a defrauded plaintiff sells his shares at a lower price after the truth of the fraud is revealed to the market,” the loss “may reflect not the earlier misrepresentation, but changed economic circumstances,” among other things, U.S. District Judge Ursula Ungaro said in a 112-page opinion April 25, citing previous rulings.
Evidence to the contrary “was insufficient” to support the verdict, the judge wrote. The plaintiffs also “did not produce sufficient evidence to support an award of damages in any amount,” Ungaro said.
“We are extremely surprised by the judge’s ruling and respectfully disagree,” Mark Arisohn, an attorney for the plaintiffs, said in a statement. “As the court mentioned in its decision, this issue will be resolved on appeal.”
BankAtlantic traded at more than $44 in January 2005. The Fort Lauderdale, Florida-based bank suffered a series of losses in the wake of an economic decline triggered by the collapse of the U.S. subprime-mortgage market in 2007.
“BankAtlantic lost money and Bancorp’s stock price declined largely because of the collapse of the Florida real estate market, a risk that was fully disclosed,” BankAtlantic Chairman and Chief Executive Officer Alan B. Levan said in a statement yesterday.
The case is In re BankAtlantic Bancorp Inc. Securities Litigation, 07-cv-61542, U.S. District Court, Southern District of Florida (Miami).
U.S. Must Protect Offshore Drilling Environment, Groups Say
Environmentalists urged a New Orleans appellate court to require U.S. offshore drilling regulators to enforce safeguards for wildlife and water quality that they claim were routinely ignored before last year’s BP Plc (BP/) oil spill.
Lawyers representing the Sierra Club, the Gulf Restoration Network, the Center for Biological Diversity and other activist groups yesterday asked the court to force the Interior Department to rescind several deep-water drilling permits regulators approved last April, just before and after the worst offshore oil spill in U.S. history.
The activists complain that the relationship between the oil industry and its regulators has been too cozy, resulting in lax oversight and environmental damage. They claim that five specific drilling permits were awarded last April without completion of the full environmental-impact assessments required by law.
“What the agency did was rubber-stamp the plans,” Monica Reimer, an attorney for Earthjustice, said during yesterday’s hearing at the 5th U.S. Circuit Court of Appeals in New Orleans. “We believe they need to be reopened, and that those plans must come before the court after the agency has done a complete environmental assessment.”
The activist groups sued Interior Secretary Kenneth Salazar and his agency seeking multiple changes to U.S. drilling regulations following the Deepwater Horizon disaster last April. The rig exploded while drilling a BP well off the Louisiana coast, killing 11 workers. The subsea gusher spewed more than 4.1 million gallons of crude into the Gulf of Mexico.
Much of the Gulf’s fisheries were closed, wildlife was injured or killed, and hundreds of miles of shoreline was fouled by the drifting oil.
A three-judge appellate panel consolidated the environmental policy challenges into two groups and heard arguments on them in back-to-back sessions yesterday.
The lead cases are Gulf Restoration Network v. Salazar, 10- 60411, and Center for Biological Diversity v. Salazar, 10-60417, both in the 5th U.S. Circuit Court of Appeals (New Orleans).
Rajaratnam Jurors Hear Tapes, Weigh Insider-Trading Elements
Jurors in the Raj Rajaratnam insider-trading trial are doing precisely what a federal prosecutor urged them to: listening to wiretaps of the defendant’s phone calls.
Yesterday, the panel asked to rehear nine recordings, including one of Rajaratnam talking with former McKinsey & Co. partner Anil Kumar. Kumar pleaded guilty in the case and told the jury how he tipped Rajaratnam to news about clients. In the call, recorded March 24, 2008, Kumar discussed a possible transaction between Fujitsu Ltd. and Lenovo Group Ltd.
“They are very, very far in discussion,” Kumar could be heard saying as jurors sat in silence in the jury box in Manhattan federal court.
Rajaratnam, 53, was arrested in October 2009 in the largest crackdown on hedge-fund insider trading in U.S. history. Prosecutors say he gained $63.8 million from tips leaked by corporate insiders and hedge-fund traders about stocks including Goldman Sachs Group Inc. (GS), Intel Corp. (INTC) and Clearwire Corp. Rajaratnam, who says he based the trades on research, faces as long as 20 years in prison on some counts.
In another call replayed yesterday, Rajaratnam and his brother Rengan are heard discussing whether another McKinsey employee might become a source of inside tips. The jurors listened to Raj Rajaratnam, co-founder of Galleon Group LLC, chatting with his friend Rajiv Goel, who was an executive at Intel before he pleaded guilty and testified for prosecutors.
Jurors also reheard a recording of Rajaratnam talking to Krish Panu, a director of PeopleSupport Inc., about a transaction involving the company; a conversation between Kumar and Rajaratnam about a possible role for Kumar in a firm co- founded by Rajaratnam; and Rajaratnam talking with a Galleon trader about the stock market’s performance on Sept. 12, 2008.
The jurors, who began deliberating April 25, didn’t explain why they wanted to hear the calls. More than 40 such recordings were played at trial.
Leading the jury’s discussions is a 56-year-old man who has worked for two years as a graphic artist for Apple Inc. (AAPL) A native of Manhattan’s Lower East Side, the juror, who was selected as foreman, has lived in the Bronx for about a decade. He’s one of three men on the 12-person jury.
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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Ex-Galleon Trader Craig Drimal Pleads Guilty to Fraud
Craig Drimal, a former trader at Galleon Group LLC charged with insider trading in a federal investigation of the New York hedge fund, pleaded guilty to conspiracy and five counts of securities fraud.
Drimal, 54, said yesterday in federal court in New York that he and others at Galleon traded on inside information obtained from lawyers working on transactions involving 3Com Corp. and Axcan Pharma Inc. in 2007. Drimal said the information was obtained from Arthur Cutillo and Brien Santarlas, lawyers at Boston-based Ropes & Gray LLP.
“At the time I did these trades, I believed my conduct was illegal and wrong, and I deeply regret these actions which caused so much pain to my family and friends,” Drimal told U.S. District Judge Richard Sullivan.
Drimal and co-defendants faced trial next month for allegedly taking part in what prosecutors said was one of three insider-trading rings tied to Galleon. The jury in the trial of the fund’s co-founder, Raj Rajaratnam, began deliberating April 25.
Drimal is the 21st person to plead guilty in overlapping schemes. The Galleon probe became a nationwide investigation implicating other hedge funds, banks, technology companies and so-called expert-networking consulting firms.
Drimal was accused in a new indictment filed April 7 of conspiracy and five counts of securities fraud. Drimal, along with four other accused traders pleaded not guilty April 19 to the new federal charges.
Sullivan handed Drimal a setback on April 20 when he lost a bid to suppress phone conversations secretly recorded by the Federal Bureau of Investigation.
The case is U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan).
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Amazon.com Seeks Dismissal of Apple Lawsuit Over ‘App Store’
Amazon.com Inc. (AMZN), responding to a trademark lawsuit by Apple Inc. over its use of the words “App Store,” said the term is generic and denied that the iPhone maker has exclusive rights to the phrase.
Amazon, the world’s largest online retailer, said it isn’t required to obtain a license or authorization to use “App Store” because the term is “unprotectable” and won’t be confused or unfairly compete with Apple’s App Store service, according to an April 25 filing in federal court in Oakland, California. Amazon’s Appstore offering downloads of software for Android devices opened March 22. App is short for application.
“Based on their common meaning, the words ‘app store’ together denote a store for apps, such as the app stores operated by Amazon and Apple,” Amazon said in the filing.
Apple’s lawsuit, filed March 18, should be thrown out and a court order confirming Amazon’s right to use the words should be issued, Seattle-based Amazon said.
Kristin Huguet, an Apple spokeswoman, didn’t immediately return a voice-mail message seeking comment.
Apple’s App Store, started in 2008, offers downloads of programs from the company and third-party developers to users of iPhones, iPod media players and iPad tablet computers.
Apple, based in Cupertino, California, applied to register App Store as a trademark in the U.S., and the U.S. Patent and Trademark Office approved the application, Apple said in the lawsuit.
The case is Apple Inc. v. Amazon.com Inc., 11-1327, U.S. District Court, Northern District of California (Oakland).
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Chinese Drywall Cases Partially Settled by Supplier InEx
Interior/Exterior Building Supply Ltd. of Louisiana agreed to pay $8 million cash and assign $72 million in insurance rights to resolve claims by thousands of U.S. property owners whose homes were ruined by defective Chinese drywall.
Terms of the proposed settlement were set out in papers filed yesterday in federal court in New Orleans, where thousands of claims over corrosive drywall made in China have been consolidated before U.S. District Judge Eldon Fallon.
“This is the first Chinese drywall settlement with a major supplier, Interior/Exterior, and a number of its insurers,” Russ Herman, liaison counsel in the multidistrict litigation, said in a statement.
InEx’s primary insurers, Arch Insurance Co. and Liberty Mutual Fire Insurance Co., each agreed to pay $4 million cash toward the claims. InEx assigned claimants its rights to pursue an additional $72 million in excess insurance coverage from North River Insurance Co., according to the court papers.
If Fallon approves the deal, claimants will be divided into two categories. Louisiana property owners will form one class; all other U.S. homeowners will form the other. InEx assigned the rights to the excess insurance to the non-Louisiana class, according to court papers.
The case is In re Chinese-Manufactured Drywall Products Liability Litigation, 2:09-md-02047, U.S. District Court, Eastern District of Louisiana (New Orleans).
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To contact the editor responsible for this report: Michael Hytha at email@example.com.