Prosecutors and lawyers for Winifred Jiau, an ex-Primary Global Research LLC consultant accused of passing nonpublic information to hedge fund managers, will present their opening arguments to jurors today, a judge said.
Jiau is charged in a five-count indictment that includes conspiracy, securities fraud and wire fraud, for allegedly passing inside tips about Nvidia Corp. (NVDA) and Marvell Technology Group Ltd. (MRVL) She is the first expert networker to go on trial for insider-trading charges and, if convicted, may face as long as 25 years in prison.
U.S. District Judge Jed Rakoff in Manhattan said the jury, which was selected yesterday, will begin hearing opening statements today. After the jury was dismissed yesterday, Jiau’s lawyer, Joanna Hendon, told Rakoff that she would concede to the jury that her client worked as an expert networker and provided information to hedge fund managers.
Hendon said she would also argue the information that the U.S. said her client passed wasn’t “material,” or information that a reasonable investor would consider important to trade upon or have a bearing upon a company’s stock.
“Sure she got the information, sure she is paid thousands of dollars, it was nonpublic, sometimes, not always,” Hendon told Rakoff. “She was happy to get it to her sources, she is happy to make hedge funds happy, but at the end of the day, the information she had was not material to any trades.”
Jiau’s case is one of several overlapping insider-trading rings stemming from the probe of New York-based hedge fund Galleon Group LLC. Its co-founder, Raj Rajaratnam, was convicted of directing the largest hedge fund insider-trading ring and faces almost 20 years in prison at his July 29 sentencing. His former deputy, Zvi Goffer, is on trial in Manhattan federal court on related charges.
Assistant U.S. attorneys Avi Weitzman and David Leibowitz, who are prosecuting Jiau’s case, have previously argued that she passed inside information obtained from sources at Nvidia and Marvell to Noah Freeman, a Boston hedge-fund manager who pleaded guilty and is cooperating with the U.S., and to Samir Barai, founder of Barai Capital Management LP in New York.
Last month, Barai and Sonny Nguyen, a former analyst with Nvidia, both pleaded guilty to insider trading charges in federal court in New York and implicated Jiau in their schemes.
The case is U.S. v. Jiau, 11-cr-00161, U.S. District Court, Southern District of New York (Manhattan).
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Tiger Asia Asks Hong Kong Court to Dismiss Trading Suit
Tiger Asia Management LLC, the hedge-fund firm led by Bill Hwang, asked a Hong Kong judge to dismiss a regulator’s suit to ban it from trading in the city and to restore alleged insider trading profits to investors.
“It is not appropriate for a civil court to determine what is essentially a criminal offense,” said Charles Sussex, a lawyer for the New York-based hedge fund manager, in Hong Kong’s Court of First Instance yesterday.
Hong Kong’s Securities and Futures Commission alleged Tiger Asia engaged in insider trading, and is seeking a court order to freeze assets valued at HK$38.5 million ($4.9 million) held by Tiger Asia, Hwang and officers Raymond Park and William Tomita. The regulator has asked for an order to ban the fund from trading in Hong Kong securities.
“This is a blatant case of insider dealing that happened on more than one occasion by the same outfit,” said Simon Westbrook, a lawyer for the regulator, known as the SFC. “Unfortunately all of the defendants are based in New York. None of them are within the jurisdiction.”
Tiger Asia and the three officers sold short 93 million shares China Construction Bank Corp. (939), after having been approached to take part in the placement of the bank’s shares in January 2009, SFC said.
In denying wrongdoing in an October letter to clients, Tiger Asia disclosed receiving a subpoena from the U.S. Securities and Exchange Commission for trading records and other documents, and said it was cooperating with the U.S. regulator.
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Sabre Seeks to Raise Antitrust Claims Against American
Sabre Holdings Corp. escalated its fight with American Airlines over the distribution of fares and schedules to travel agents by asking a court for permission to sue the carrier for antitrust violations.
Sabre yesterday filed a motion to intervene as a defendant and file a counterclaim in a lawsuit brought by AMR Corp.’s American in federal court in Fort Worth, Texas. American called the claims “meritless” and added Sabre as a defendant in the case.
American acted illegally in trying to force agents to use its proprietary technology to access all of the airline’s data, Sabre said yesterday in a statement. In doing so, American is trying to “eliminate” global distribution systems like Sabre, the Southlake, Texas-based company said.
Sabre, the biggest U.S. global distribution system, and Fort Worth-based American have been disputing the control and dissemination of data consumers use to book flights through travel agents. The U.S. Justice Department said May 20 that it was investigating possible antitrust violations by Sabre and other GDS companies.
American, through a variety of means, “seeks to destroy the ability of travel agents, corporate travel purchasers, and the traveling public to make apple-to-apple price comparisons,” Sabre said in the proposed complaint.
The case is American Airlines Inc. v. Travelport Ltd., 11-cv-244, U.S. District Court, Northern District of Texas (Fort Worth).
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Ex-Countrywide Chief Asks Judge to Dismiss Allstate Suit
Ronald P. Fischetti, a New York attorney representing Mozilo, urged U.S. District Judge Alvin K. Hellerstein in Manhattan to throw out the insurer’s claims that Mozilo was the “architect” of a scheme to abandon underwriting at Countrywide, according to a court document filed yesterday.
Allstate, based in Northbrook, Illinois, claimed in the Dec. 27 lawsuit that Countrywide misrepresented $700 million in residential mortgage-backed securities the insurer purchased. Mozilo held no position at Countrywide subsidiaries that sold mortgage-backed securities, said nothing about the securities and didn’t read the documents that offered them, Fischetti said.
“These conceded facts control the outcome as to Mr. Mozilo,” Fischetti said. “Nothing in aiding and abetting or control person law permits a plaintiff to sue a defendant over sales” of mortgage-backed securities “when he had nothing to do with them.”
Mozilo, 72, agreed last year to pay $67.5 million to settle a U.S. Securities and Exchange Commission lawsuit accusing him of misleading investors. The U.S. Justice Department ended a criminal probe of Mozilo that started in 2008 and won’t bring charges, a person familiar with the investigation said in February.
The case is Allstate Insurance Co. v. Countrywide Financial Corp., 10-cv-9591, U.S. District Court, Southern District of New York (Manhattan).
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Anadarko Liable by Law for Gulf Oil Spill, U.S. Lawyers Say
Anadarko Petroleum Corp. (APC) is liable under federal oil pollution laws for environmental damage caused by the April 2010 blowout of the Macondo well and the Gulf of Mexico oil spill that followed, the U.S. government said.
Anadarko, which owned 25 percent of the BP Plc (BP/) well, asked a federal judge in New Orleans to dismiss it from a lawsuit brought by the Justice Department claiming violations of environmental laws in the largest offshore oil spill in U.S. history. The U.S. has also sued BP and others involved in the well.
The government asked U.S. District Judge Carl Barbier to deny Anadarko’s motion to dismiss the case and find as a matter of law that the Woodlands, Texas-based company is liable. Anadarko and its Anadarko E&P Co. unit are liable under the Oil Pollution Act and the Clean Water Act, the U.S. said in a filing late yesterday.
“Liability under OPA and CWA is so straightforward here that the court -- rather than dismissing the complaint -- should enter summary judgment in favor of the United States,” the Justice Department said in the filing.
John Christiansen, an Anadarko spokesman, said the company is reviewing the filing.
The case is U.S. v. BP Exploration & Production Inc., 10-04536, U.S. District Court, Eastern District of Louisiana (New Orleans), combined in In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).
UBS Unit’s Madoff Fund Ties Weren’t Disclosed in E&Y Report
The 2008 report didn’t mention Bernard L. Madoff Investment Securities LLC in a list of custodians the Zurich-based bank used, according to a copy obtained by Bloomberg News. An agreement existed between UBS Luxembourg SA and Madoff’s firm which allowed the Ponzi scheme operator to be sub-custodian for LuxAlpha Sicav-American Selection, Jean Guill, the Luxembourg finance regulator’s director general, said in an interview.
“As of October 2007, the bank used mainly a network of 16 correspondent banks” which typically also acted as sub-custodians for investment funds, according to the so-called long form report signed in January 2008 by Ernst & Young, UBS Luxembourg’s auditor. The report doesn’t mention Madoff’s firm on a “complete list of correspondent banks” used by UBS for investment funds in its care, including several funds that were found to be tied to Madoff after his arrest in December 2008.
UBS and its local units are defendants in more than 100 lawsuits in Luxembourg filed by investors who lost millions of dollars through the funds, for which it acted as custodian, charged with overseeing and managing deposits and payments to investors. Irving H. Picard, trustee liquidating Madoff’s business, sued the bank last year in U.S. Bankruptcy Court in New York seeking at least $2.5 billion. He claims UBS “actively assisted” in the Ponzi scheme by sponsoring and administrating international feeder funds that invested with Madoff.
Ernst & Young declined to comment.
UBS said it maintains its position that the LuxAlpha fund was created at the request of wealthy clients who wanted a fund that allowed them to continue investing with Madoff and that was made clear to the investors, their advisers and the regulator.
“UBS does not have responsibility to these shareholders for the unfortunate results of the Madoff scandal,” Dominique Gerster, a bank spokesman, said in an e-mail.
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Amerindo’s Vilar, Tanaka Sue Munder Capital for $15 Million
Alberto Vilar and Gary Tanaka, the technology investors convicted in 2008 of a scheme to defraud their Amerindo Investment Advisors Inc. clients, sued Munder Capital Management and two former directors of the Amerindo Technology Fund for $15 million.
Vilar and Tanaka, in a filing May 31 in state court in Manhattan, claim funds belonging to Amerindo were fraudulently transferred. The two-page document, which was filed on behalf of themselves and Amerindo, doesn’t include details of the alleged fraudulent transaction.
After Vilar and Tanaka, Amerindo’s founders, were arrested in 2005, the firm’s board hired Munder Capital to oversee the fund. In addition to Munder Capital, the suit names as defendants John Rutledge and Charles Parker, who were independent directors of the Amerindo Technology Fund, a $103 million mutual fund.
Vilar, 70, was sentenced to nine years in prison and Tanaka, 67, to five years. Prosecutors claimed the men stole $40 million from investors. Vilar, an opera fan and philanthropist, and Tanaka, who owned thoroughbred race horses, are serving their terms in federal prison.
Rutledge didn’t immediately return an e-mail seeking comment. Parker couldn’t be immediately located. Eric Starkman, an outside spokesman for Birmingham, Michigan-based Munder Capital, didn’t immediately return a phone message seeking comment.
David Burger, the lawyer who signed the summons with notice filed yesterday, had no immediate comment on the nature of the dispute.
The case is Vilar v. Rutledge, 651494/2011, New York State Supreme Court, New York Co. (Manhattan).
Ex-Egypt Bank Chairman Omar Held on Sex Charges in New York
The former chairman of Egypt’s Bank of Alexandria was held overnight at New York’s Riker’s Island jail complex after being arraigned in Manhattan on charges of sexually abusing a maid at the Pierre Hotel in New York.
Manhattan judge Gerald Lebovits around midnight June 1 set bail for Mahmoud Abdel Salam Omar, chairman of El-Mex Salines, at $50,000 bond or $25,000 cash, according to the Manhattan District Attorney’s office. Omar also was ordered to surrender his travel documents, prosecutors said.
Omar, 72, was taken overnight to Riker’s Island, New York City’s main jail complex, located off the shore of northern Queens opposite LaGuardia Airport, Sharman Stein, a spokeswoman for the New York City Department of Correction, said in an interview. He can post bail there, she said. Riker’s is where Dominique Strauss-Kahn, the former International Monetary Fund chief, was locked up last month on charges of sexual assault and attempted rape against a Midtown Manhattan hotel maid.
Unlike Strauss-Kahn, Omar is accused of “groping or molestation which, although serious, doesn’t carry with it the same penalties under the law,” Fred Sosinky, a New York defense attorney who isn’t involved in the case, said in an interview.
Omar was arrested May 30 after a 44-year-old female housekeeper alleged he attacked her the day before, according to a police spokesman.
Officers were called to the hotel in Midtown Manhattan after she informed security of an alleged incident when she went to Omar’s room after he requested tissues.
Omar is scheduled to next appear in court June 3, possibly to see if a grand jury votes for indictment and a new lawyer, according to prosecutors. The attorney who represented him last night, Elizabeth Beal, didn’t immediately return a call for comment.
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Goffer Evidence Is ‘Overwhelming,’ Prosecutor Tells Jurors
The “overwhelming” evidence against ex-Galleon Group LLC trader Zvi Goffer includes “devastating” wiretapped telephone calls in which he’s heard sharing illegal tips, a prosecutor told jurors at the close of the insider-trading case.
Assistant U.S. Attorney Richard Tarlowe yesterday urged jurors in Manhattan federal court to convict Goffer, his brother Emanuel and accused accomplice Michael Kimelman, as closing arguments began.
“You heard the defendant’s own voice,” Tarlowe said, citing captured calls at the heart of the government’s case. There are “plenty of devastating calls,” he said.
The three defendants, who co-founded Incremental Capital LLC after Zvi Goffer was fired from Galleon, are accused of trading on illegal tips that came from attorneys then working at the law firm Ropes & Gray LLP. The tips were about transactions involving 3Com Corp., Axcan Pharma Inc. and other stocks, according to prosecutors.
A defense lawyer, William Barzee, told the jury in his closing that the government twisted “innocent facts” to support its case.
Goffer’s ex-boss, Raj Rajaratnam, was found guilty May 11 of insider trading. He faces as long as 19 1/2 years in prison when he’s sentenced on July 29.
The case is U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan).
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U.S., Health-Care Law Foe Battle Over Congressional Power
The second of at least three appeals courts that will consider whether Congress can compel Americans to buy insurance listened to the Obama administration’s top litigator spar with an attorney for a faith-based legal advocacy group opposed to the health-care reform law.
The three-judge panel in Cincinnati’s federal courthouse listened to and questioned acting U.S. Solicitor General Neal Katyal and Robert Muise, a lawyer for the Thomas More Law Center, about the limits of congressional power.
“This is the outer reaches of Congress’s authority to regulate under the commerce clause,” Muise told the court yesterday as he argued for reversal of last year’s lower-court ruling throwing out his group’s challenge to the Patient Protection and Affordable Care Act.
The legislation, signed into law by President Barack Obama, a Democrat, in March 2010, is intended to create the first near-universal U.S. health-care coverage program by barring insurers from rejecting those who are already sick and from imposing life-time limits on costs.
It also requires almost every American resident to have health insurance starting in 2014 or pay a tax penalty, a mandate that opponents of the act including Muise have argued exceeds the regulatory power allotted to Congress under the Constitution.
The Cincinnati panel is the second of three U.S. appellate courts that will consider the merits of the dispute over a five-week span. A U.S. appeals court in Richmond on May 10 heard argument on appeals of two conflicting rulings. Another panel in Atlanta is set to hear the government’s appeal of a federal judge’s Jan. 31 decision to find the entire act invalid.
Muise called the legislative action a “power grab” without precedent adding, “This court should not create it.”
“Congress is regulating the insurance market, something everyone thinks is constitutional,” Katyal countered.
The Cincinnati case is Thomas More Law Center v. Obama, 10-2388, U.S. Court of Appeals for the Sixth Circuit (Cincinnati).
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German Online-Bet Ban Legal, Top Administrative Court Says
Germany’s online-betting ban was upheld by the nation’s top administrative court, which said the rules are in line with constitutional and European Union law.
The rules are necessary to combat the dangers associated with unregulated gaming over the internet, Germany’s Federal Administrative Court, based in Leipzig, said in an e-mailed statement yesterday. The ban is also in line with EU law because it targets all forms of betting regardless of who offers them, according to the judges.
“The Internet ban follows the legitimate goal to target the special risks associated with unlimited access to gaming via with the Internet,” the court said. The rules “aim to protect juveniles and those persons who have a strong inclination to gaming or who may develop it.”
The EU’s top court ruled last year that Germany’s betting monopoly, which only allows publicly owned companies to offer most sports betting, violates European laws because it’s not coherent. The German court yesterday said since the online ban also applies to bets on horse races and offers by government-owned sports-betting monopolies, it’s in line with EU rules. Germany has faced criticism for allowing private horse betting while outlawing other forms of sport bets.
Bwin e.K., the German affiliate of Bwin, said it will file a constitutional complaint over yesterday’s ruling.
“Online gaming is a market reality in Germany,” the company said in a statement, and the current German ban hasn’t changed that.
The case is BVerwG 8 C 5.10.
Johnson & Johnson Hid Antibiotic Levaquin Risk, Lawyer Says
A Johnson & Johnson (JNJ) unit knew its antibiotic Levaquin increased the risk of tendon damage in the elderly and failed to properly warn patients or doctors, a lawyer said yesterday at the start of a trial in Minnesota.
Calvin Christensen, 84, who said he ruptured the Achilles tendon in his right foot after taking the drug while hospitalized with pneumonia, sued the company and its Ortho-McNeil Pharmaceutical unit in 2007. The companies downplayed the risks of Levaquin to boost the drug’s sales, Christensen’s lawyer, Saul Lewis, said in his opening statement.
“Johnson & Johnson hid the risk from doctors and the public,” Saul told the Minneapolis jury yesterday. “They sold $15 billion worth of Levaquin in the U.S.”
Christensen’s case is the second of more than 2,500 pending claims in U.S. courts to go to trial over allegations that Levaquin caused tendon damage in patients and that the company failed to adequately disclose the risk. J&J and Ortho-McNeil lost the first trial when a separate Minneapolis jury awarded $1.8 million to an 84-year-old man who ruptured both Achilles tendons.
The companies deny any failure to warn. The Levaquin label “has included warnings about tendonitis and tendon ruptures,” since it was first approved by the FDA in 1996, Bill Foster, a J&J spokesman, said in an e-mail.
“Additionally, the evidence will show that the plaintiff’s prescribing physician was aware of the risks of Levaquin, including the risk of tendon rupture in elderly patients,” he said.
The lawsuit is Christensen v. Johnson & Johnson, 07-03960, combined for trial in In re Levaquin Products Liability Litigation, 08-md-01943, U.S. District Court, District of Minnesota (Minneapolis).
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SEC’s Top Foreign Bribery Lawyer Said to Join Simpson Thacher
Cheryl Scarboro, head of the U.S. Securities and Exchange Commission’s foreign bribery investigations, is leaving the agency to join law firm Simpson Thacher & Bartlett LLP, a person with knowledge of the matter said.
Scarboro, who joined the SEC as an enforcement attorney in 1992, was appointed in January 2010 to lead an enforcement unit focused on the Foreign Corrupt Practices Act, which prohibits U.S. companies from bribing officials to win or maintain business. She will become a partner in Simpson Thacher’s Washington office, the person said, speaking on condition of anonymity because the matter isn’t public.
A phone call and e-mail to Simpson Thacher’s media contact weren’t immediately returned. A phone call to Scarboro wasn’t returned.
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Former Chicago Mayor Richard Daley Joins Katten Muchin
Former six-term Chicago Mayor Richard M. Daley joined Katten Muchin Rosenman LLP, the law firm that helped negotiate a deal to lease the city’s parking meters.
Daley, 69, will serve as counsel at Katten and won’t participate in any work involving the city or any of its affiliated agencies, the firm said yesterday in a statement.
Daley was mayor of the third-largest U.S. city for 22 years beginning in 1989, following in the footsteps of his father Richard J. Daley, who was mayor from 1955 to 1976. Under the younger Daley’s leadership, Chicago lured Boeing Corp. (BA) and United Continental Holdings Inc. corporate headquarters to the city and built Millennium Park.
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