U.K. Gag Orders, Xinhua Finance, Virginia Health Case, Bawag in Court News
Massey Energy Co. (MEE)’s management believed U.S. government officials, including President Barack Obama, conspired to destroy the coal producer, according to unsealed court records in a case related to a fatal mine accident.
Don Blankenship, Massey’s former chief executive officer, and Chairman Bobby Ray Inman, a retired U.S. Navy admiral, made clear in sworn testimony that they “firmly believed the company was being targeted by the government,” lawyers for Massey investors who are suing the company’s directors said in filings unsealed yesterday in state court in Delaware.
Inman, a former deputy director of the Central Intelligence Agency, “was unequivocal in his assertions” in pre-trial depositions that mine regulators, union officials, plaintiffs lawyers “and President Obama himself harbored a secret agenda to destroy Massey, and that the large numbers of safety violations Massey received were proof of the conspiracy,” according to the lawyers.
The filings were made public yesterday as part of a lawsuit brought by the New Jersey Building Laborers Pension Fund seeking to hold Massey directors liable for the Richmond, Virginia-based company racking up more than $25 million in assessed violations by the U.S. Mine Safety and Health Administration.
The suit accuses Massey’s board of allowing managers to systematically disregard safety regulations, contributing to a blast that killed 29 miners in April 2010 at the Upper Big Branch mine in West Virginia.
Micah Ragland, a Massey spokesman, declined to comment yesterday on the unsealed files in the Delaware case.
Massey agreed in January to be acquired by Alpha Natural Resources Inc. (ANR) for $7.1 billion. Pension fund officials contend Massey’s board agreed to sell the coal company at a fire-sale price because of its poor safety record. They contend Massey officials could have gotten at least another $1.5 billion for the shares.
Delaware Chancery Court Judge Leo Strine is scheduled to hear the investors’ request to block the deal at a May 26 hearing in Wilmington.
The case is New Jersey Building Laborers Pension Fund v. Blankenship, CA5430, Delaware Chancery Court (Wilmington).
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U.K. Gag Orders Spark ‘Battle’ Between Judges, Lawmakers
Members of Britain’s Parliament are pressuring U.K. judges to reveal the identities of celebrities and executives who win court orders barring the media from reporting on their alleged indiscretions.
Lawmakers this month cited legislative “privilege” when, during open sessions of Parliament, they identified former Royal Bank of Scotland Group Plc Chief Executive Officer Fred Goodwin and Ryan Giggs, a soccer player for Manchester United, in relation to injunctions they had won. The lawmakers’ actions suggest a war is brewing between Parliament and the courts over such orders, said London lawyer Niri Shan.
“It’s a farcical situation,” Shan, who heads the media practice at Taylor Wessing LLP, said yesterday in a phone interview. “The judge is saying one thing and people are popping up in Parliament and saying another. It’s a battle between Parliament and the courts.”
So-called super-injunctions typically prevent the media from writing about celebrity infidelities and may bar them from reporting the gag order exists. While lawmakers have taken to the floor of the House of Commons to skirt the rulings, users of Twitter Inc.’s social-networking website have posted names of celebrities protected by the injunctions.
Two senior U.K. judges who last week delivered a report on super-injunctions, questioned whether “it is a very good idea for our lawmakers to be in effect flouting a court order just because they disagree with the order.”
“It is a very serious issue, in my view,” Chief Justice Igor Judge told reporters. “We are following the law as best we understand it.
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Ex-Xinhua Finance Officials Say Not Guilty of Fraud Scheme
Two former board members of Xinhua Finance Inc. accused of taking part in a $50 million insider-trading scheme said they aren’t guilty of defrauding investors and lying to regulators.
Shelly Singhal and Dennis Pelino yesterday made their first appearance in federal court in Washington after being charged May 10 with conspiracy, mail fraud and false statements.
Loretta Fredy Bush, Xinhua Finance’s former chief executive officer, who is also charged in the case, didn’t appear in court because of illness, her lawyer said.
“She is under doctor’s orders not to fly,” Bush’s lawyer, Charles Leeper of Drinker Biddle & Reath LLP in Washington, told U.S. District Judge Royce Lamberth. Leeper said it was unclear when his client, who lives in Hawaii, will be able to appear in court.
Xinhua Finance, the first Chinese company listed on the Tokyo stock exchange, provides information products focused on Chinese and international financial markets.
The three are accused of using entities to disguise the sale of shares in Shanghai-based Xinhua Finance from the Securities and Exchange Commission and investors and engage in insider trading, according to an indictment. They are also accused of manipulating the company’s balance sheet to avoid impairment charges.
Singhal and Bush face nine charges. Pelino, who was charged with an additional false statements count, faces 10. Each mail fraud count is punishable by a maximum penalty of 20 years in prison.
Singhal and Pelino will remain free pending trial, Lamberth said yesterday. Both entered pleas of not guilty.
The case is U.S. v. Singhal, 11-cr-00142, U.S. District Court, District of Columbia (Washington).
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‘Pay for Delay’ Drug Deals Should Be Halted, FTC Tells Court
The U.S. Federal Trade Commission urged an appeals court to outlaw certain settlements between brand-drug manufacturers and generic-drug makers over the timing of sales of copycat medicines, saying they harm competition and hurt consumers.
The agency asked the U.S. Court of Appeals in Philadelphia to reverse a lower court’s ruling that accords between Merck & Co.’s Schering-Plough unit and generic manufacturers of K-Dur 20 high blood-pressure medicine didn’t violate antitrust laws.
The FTC is fighting agreements between companies about when generic drugs can be marketed, known as “pay for delay” or “reverse-payment” settlements, saying they cost consumers the equivalent of about $3.5 billion a year in higher prices for pharmaceuticals. These transactions compensate the generic-drug maker in return for dropping challenges to a patent and establish a date when the non-branded version of the drug can be sold, the agency said.
The FTC is pressing the courts and Congress to limit the settlements. Brand- and generic-drug makers say the deals may bring lower-cost copies of medicines to the market sooner than they would otherwise.
The commission filed a court brief May 18 siding with retailers such as CVS Pharmacy Inc., Rite Aid Corp., Safeway Inc. and Walgreen Co. that have challenged the legality of patent settlements between Schering-Plough Corp. and two generic drugmakers for K-Dur 20, a potassium supplement. The U.S. Justice Department also filed a brief the same day seeking to overturn the lower court’s ruling based on antitrust laws.
The case is In re K-Dur Antitrust, 10-02077, 10-02078 and 10-02079, U.S. Court of Appeals for the Third Circuit (Philadelphia).
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Court Questions Its Authority in Virginia Health-Care Cases
The U.S. Court of Appeals in Virginia questioned whether it has the authority to decide the constitutionality of the Obama administration’s health-care overhaul.
The three-judge panel in Richmond said May 23 that the question is whether the Anti-Injunction Act, which generally bars decisions on tax law before taxes are collected, prevents the court from ruling on a challenge to the statute’s requirement that most Americans buy health insurance.
“It’s an interesting twist,” said Kevin Walsh, a law professor at the University of Richmond and a former clerk to Supreme Court Justice Antonin Scalia. “This is an apparent resurrection of an issue the parties once argued about and seemingly put behind them.”
The judges are reviewing one lower-court ruling that upheld the health-care law and another that struck down part of it. On May 10, during back-to-back arguments lasting about two hours, the issue of the court’s jurisdiction was touched on by one of the lawyers then dropped without questions from the court.
The Virginia appeals stem from a challenge to the law by the state of Virginia and another by Liberty University, a Christian school founded in Lynchburg, Virginia, by the late Reverend Jerry Falwell.
In court, the government argued that the legislation is an extension of Congress’s power to tax, as people who fail to buy coverage starting in 2014 would face a penalty to be included on an individual’s tax return.
In the lower court, Justice Department attempts to win dismissal of the cases on the Anti-Injunction Act were rejected. The government didn’t cite the law on appeal.
Tracy Schmaler, a Justice Department spokeswoman, and Brian Gottstein, a spokesman for Virginia Attorney General Ken Cuccinelli, declined to comment.
“We will file our response and see what happens when the court issues its ruling,” said Mathew Staver, dean of Liberty University School of Law.
The Virginia court is the first appeals court to review the health-care law. Two other appeals will be heard next month in Cincinnati and Atlanta.
The cases are Liberty University v. Geithner, 10-02347, and Commonwealth of Virginia v. Sebelius, 11-01057 and 11-01058, U.S. Circuit Court of Appeals for the Fourth Circuit (Richmond).
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MGA Seeks $339 Million in Damages, Fees From Mattel for Bratz
Bratz doll maker MGA Entertainment Inc. asked a judge to triple the $88.4 million in damages it won from Mattel Inc. (MAT) and to award it attorney fees and costs in the seven-year fight over rights to the dolls.
In a proposed order filed May 23 in federal court in Santa Ana, California, MGA asked U.S. District Judge David Carter to award it $177 million in punitive damages, $129.7 million in attorneys fees, and $32.4 million in costs. The company also asked the judge to award it $4.3 million in restitution from Mattel based on unfair competition claims.
Carter, in an order May 23, postponed a hearing scheduled for yesterday until today for arguments on MGA’s requests as well as on Mattel’s motion to throw out the April 21 jury verdict holding it liable for misappropriating MGA’s trade secrets.
Closely held MGA, based in Van Nuys, California, said in a May 6 fee request that Barbie-doll maker Mattel set out to destroy most of the value of its business and succeeded.
Mattel has asked Carter to reject the request for legal costs, saying its copyright-infringement claims were “objectively reasonable.” El Segundo, California-based Mattel also said MGA wasn’t entitled to an additional $177 million in punitive damages for trade-secret misappropriation claims.
“At issue in this case is, at most, a sneak peek at 26 toys displayed at six toy fairs over a six-year period,” Mattel said in a May 13 response to MGA’s request for damages. “No one died. No towns were lost. MGA suffered no actual injury and did not even claim at trial that it did.”
Lisa Marie Bongiovanni, a Mattel spokeswoman, didn’t return a call seeking comment. The amount of attorneys fees MGA is seeking hadn’t been disclosed in previous public filings, which were redacted.
The jury agreed with MGA that Mattel stole its trade secrets when Mattel’s employees gained access to MGA’s showrooms at toy fairs using phony business cards. The jurors awarded MGA $3.4 million for each of the 26 instances in which they found that Mattel had misappropriated a trade secret.
The case is Bryant v. Mattel, 04-09049, U.S. District Court, Central District of California (Santa Ana).
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UBS Banker Poteroba’s Friend Koval Sentenced to 26 Months
Alexei Koval, who admitted that he conspired with former UBS AG (UBSN) investment banker Igor Poteroba to make $1.4 million in a four-year insider-trading scheme, was sentenced to 26 months in prison.
Koval, 37, who worked at Northern Trust as a pricing manager before his arrest in March 2010, was sentenced yesterday in Manhattan federal court after pleading guilty in January to conspiracy and securities fraud.
Poteroba, who was an investment banker in the health-care group at UBS Securities LLC before his arrest, was sentenced to 22 months behind bars in March after pleading guilty to insider trading. He admitted that he tipped friends to potential mergers. Poteroba, 37, is at the same detention center as Koval, according to records of the U.S. Bureau of Prisons.
Prosecutors said Poteroba leaked to Koval tips on UBS Healthcare client mergers and acquisitions under consideration, and that Koval passed the tips to a third person. The ring used code such as “frequent flier miles” and references to a Macy’s Inc. wedding registry and made at least $870,000 from the illegal trades, prosecutors said.
Koval said in his guilty plea that he paid for tips. Prosecutors claimed the leaks were connected to transactions involving Guilford Pharmaceuticals Inc., Molecular Devices Corp., PharmaNet Development Group Inc., ViaCell Inc., Millennium Pharmaceuticals Inc. and Indevus Pharmaceuticals Inc.
The case is U.S. v. Koval, 10-CR-443, U.S. District Court, Southern District of New York (Manhattan).
N.J. UBS Client Gets Three Years Probation for Evading Taxes
Former UBS AG client Harry Abrahamsen avoided prison when he was sentenced to three years probation for concealing more than $1 million in Swiss bank accounts, federal prosecutors said.
Abrahamsen, who pleaded guilty last year to charges that he failed to file required Reports of Foreign Bank or Financial Accounts, or FBARs, from 1999 to 2007, was sentenced yesterday in federal court in Newark, New Jersey, U.S. Attorney Paul J. Fishman said in an e-mailed statement. The probation includes 12 months of home confinement.
Abrahamsen’s daughter Lucille Abrahamsen Jackson, 42, was sentenced to one year of probation May 23 for a similar offense.
Abrahamsen, of Oradell, New Jersey, and his daughter are among more than two dozen former UBS clients who pleaded guilty to tax crimes. Zurich-based UBS avoided U.S. prosecution in February 2009 by paying $780 million, turning over the names of U.S. account holders and saying it helped Americans hide assets from the Internal Revenue Service.
Jackson, who pleaded guilty in November, said her father set up a Swiss bank account in her name in 1992 to evade U.S. taxes. The account’s value reached $759,376 in 2003. Abrahamsen admitted opening one UBS account in 1992 and a second in 2000 and funding them with about $1.3 million in false and inflated expenses from his printing business, SJT Imaging Inc.
In addition to probation, U.S. District Judge Dennis Cavanaugh ordered Abrahamsen to pay back more than $600,000 in taxes, interest and penalties. As part of his guilty plea, Abrahamsen also agreed to pay an FBAR penalty of more than $300,000, according to Fishman’s statement.
The case is USA v. Harry Abrahamsen, U.S. District Court, District of New Jersey (Newark).
Ex-Bawag CEO Elsner’s Jailing on Losses Fair, Court Says
Bawag PSK’s former Chief Executive Officer Helmut Elsner’s imprisonment while awaiting trial on 1.7 billion euros ($2.4 billion) in losses at the Austrian bank didn’t violate human rights laws.
Elsner’s detention throughout the criminal proceedings because he was deemed a flight risk, even while having heart surgery, was “reasonable,” the European Court of Human Rights ruled yesterday.
“Without a doubt there had been a reasonable suspicion that Mr. Elsner had committed criminal offenses,” the Strasbourg, France-based court said in an e-mailed statement. “The mere fact that following his operation Mr. Elsner had been in intense medical care had not as such eliminated all risk of him absconding.”
The 76-year-old former banker was sentenced to 7 1/2 years in jail in December for his role in the losses in the late 1990s, according to the court ruling. The losses, mostly run up with wrong-way bets on the Japanese yen, weren’t uncovered until U.S. futures broker Refco Inc., a Bawag affiliate, collapsed in 2005. The discovery eventually forced Bawag’s sale to private equity firm Cerberus Capital Management LP in 2007.
While Karl Bernhauser, one of Elsner’s lawyers in Vienna, said there wouldn’t be an appeal, Juergen Stephan Mertens, his lawyer dealing with the human rights case, said he was considering an appeal and a new case, which may focus on other aspects of the trial.
The European Court of Human Rights cases are Elsner v. Austria, 15710/07, 31805/07, 36230/07, 40937/07 17239/08 and 41402/08.
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Chicago Lawyer Daugerdas Found Guilty in Tax Shelter Trial
Paul Daugerdas, a former lawyer at the defunct law firm Jenkens & Gilchrist, and three others were convicted of a 10- year tax shelter scheme that generated more than $1 billion in phony losses.
A federal jury in New York reached the verdict yesterday following a 10-week trial of Daugerdas and his co-defendants, Denis Field, the former chief executive officer at accounting firm BDO Seidman LLP; Donna Guerin, a Jenkens & Gilchrist lawyer; and Robert Craig Brubaker and David Parse, two certified public accountants who formerly worked as client advisers at a Deutsche Bank AG (DBK) unit called Alex.Brown.
Field, Guerin and Parse were found guilty of tax evasion and other charges. Brubaker was acquitted of all nine counts including mail fraud, conspiracy and obstruction. The jury began deliberations on May 12.
Daugerdas, the former head of Jenkins & Gilchrist’s Chicago office, was convicted on more than 20 counts, including conspiracy, multiple counts of tax evasion and attempting to impede the Internal Revenue Service. U.S. District Judge William Pauley allowed the defendants to remain free pending their sentencing on Oct. 14.
After court, Daugerdas’s lawyer, Chris Gair, said, “We’ll be filing appeal and post trial motion papers and look forward to sentencing.” Daugerdas declined to comment as he left court.
The case is: U.S. v. Daugerdas, 09-CR-581, Southern District of New York (Manhattan).
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