Barclays, Bank of America, Morgan Keegan in Court News

Barclays Plc (BARC), after defeating an $11 billion lawsuit by Lehman Brothers Holdings Inc., seeks to dismiss the defunct firm’s remaining claim for $500 million in allegedly unpaid bonuses.

Lehman asked U.S. Bankruptcy Judge James Peck in May to order the U.K. bank to pay the rest of the $2 billion in bonuses it agreed to when it bought Lehman’s North American business in 2008. Barclays, which contended the $2 billion was an estimate of both bonuses and severance payments, said it paid everything assented to in the purchase agreement, according to a court filing yesterday.

The bonuses were due to Lehman employees whom Barclays took on with the purchase, the former investment bank said. The annual bonuses for the 2008 fiscal year should have paid in full by March 15, 2009, Lehman said in a May filing. Instead, the employees received $1.5 billion, it said.

According to Barclays, its obligation was to pay 100 percent of “bonus pool amounts accrued” by Lehman employees it took on with the purchase for the year 2008. Lehman said in court last year that the amount accrued and payable was from $700 million to $1.3 billion, or less than the $1.5 billion it now complains was insufficient, Barclays said in the filing.

“Thus, LBHI has admitted that Barclays paid bonuses in an amount that exceeded the amount required” by the sale contract, it said.

Kimberly Macleod, a Lehman spokeswoman, didn’t return a voice-mail message seeking comment after regular business hours yesterday.

The main case is In re Lehman Brothers Holdings Inc. (LEHMQ), 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan). Lehman’s lawsuit against Barclays is Lehman v. Barclays, 09-01731, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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Costco Women’s Bias Suit May Be Imperiled by Wal-Mart Decision

Costco Wholesale Corp. may be able to block women accusing it of gender bias from suing as a group because of the U.S. Supreme Court’s decision in a discrimination suit against Wal- Mart Stores Inc., Bloomberg News’ Margaret Cronin Fisk and Karen Gullo report.

The women sued Costco in 2004, accusing the largest U.S. warehouse-club chain of limiting promotions of female employees to assistant general manager and general manager by failing to post such job openings. They won the right to sue as a group in a class action in 2007. Costco’s appeal of that order was put on hold while the Supreme Court considered Dukes v. Wal-Mart.

Parts of the Costco decision conflict with the Supreme Court’s June 20 ruling barring women suing Wal-Mart from pursuing their claims in a nationwide class action, according to legal experts. Michael Harper, a professor at Boston University School of Law, predicted the U.S. Court of Appeals in San Francisco will send the Costco case back to the trial judge for reconsideration.

“Bottom line: Under Dukes, a class cannot be certified for this case as framed,” Harper said of the 2007 order granting the Costco workers class status. “If I were Costco, I would be feeling pretty good about this decision.”

The Supreme Court said lawyers for women suing Bentonville, Arkansas-based Wal-Mart failed to point to a common corporate policy that led to gender discrimination at thousands of its U.S. stores. Lawyers for the women said they will reframe their legal arguments and, if necessary, pursue smaller group or individual suits.

The lawsuit against Costco features “the same lawyers using the same theories, but more importantly, the same experts to conjure up this guilt by statistical evidence,” Joel Benoliel, spokesman for Issaquah, Washington-based Costco, said yesterday in a phone interview.

“I think that our case will be dismissed by the Ninth Circuit for exactly the same reasons,” Benoliel said, referring to the San Francisco appeals court. “The case is fatally flawed and has been from the beginning.”

Harper said the appeals court is unlikely to reject or approve the 2007 decision granting the Costco women class-action status, which makes litigation less costly for plaintiffs and gives them more leverage in settlement talks.

“More likely they’ll remand it,” sending it back to the trial court, he said.

The Costco women should still be able to sue as a group, said Brad Seligman, a lead attorney for plaintiffs in both suits. Costco is a “much narrower case,” covering two types of managers who were affected by decisions made above the store level, Seligman said.

Dukes involved as many as 1.5 million current and former workers at Wal-Mart and Sam’s Club stores in the U.S. The potential class in Costco is less than 1,000 women, he said.

“We candidly conceded in Dukes that it could be unmanageable to do individual damages hearings for every class member,” Seligman said in an interview. Costco is “much smaller and much more manageable of a case,” he said.

The case is Ellis v. Costco Wholesale Corp. (COST), 04-03341, U.S. District Court, Northern District of California (San Francisco). The Wal-Mart case is Wal-Mart Stores v. Dukes, 10-00277, U.S. Supreme Court (Washington).

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States Discuss Proposal to End Tobacco Company Payment Fight

State attorneys general are considering a proposal to end a fight with tobacco companies over $7.1 billion in payments their states claim under a 1998 settlement.

The accord with 46 states required the companies to pay $206 billion to resolve any liability in health-care cost lawsuits. The fight over $7.1 billion in payments under the 13- year-old accord stemmed partly from company claims that market share erosion reduced the amounts they’re required to pay.

“There is a proposed agreement,” Nanci Gonder, a spokeswoman for Missouri Attorney General Chris Koster, said yesterday in an e-mail. Gonder declined to provide any details.

Resolving disputed and withheld payments for 2003 through 2010 may boost profit and spur share repurchases by Altria Group Inc. (MO) and Reynolds American Inc. (RAI), according to Christopher Growe, an analyst at Stifel Nicholas & Co. in St. Louis. A settlement may take the form of a credit against future payments, he said.

Altria, which has maintained control of about 50 percent of U.S. cigarette sales since 2003, may recoup about $2 billion it has disputed or withheld in annual payments, Growe said in a note yesterday to clients.

For second-biggest Reynolds, which has lost market share, the refund may approach $3.5 billion, he said. He rates both stocks as “hold.”

The 1998 Master Settlement Agreement between the states and cigarette makers called on states to pass laws requiring non- signing manufacturers to make payments into 25-year escrow funds comparable to the payments they would have had to make if they’d signed the deal.

Altria declined to comment, said David Sutton, a spokesman for the Richmond, Virginia-based company, as did Jane Seccombe, a spokeswoman for Reynolds and Robert Bannon, a Lorillard spokesman.

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Transocean Will Fight Norwegian Tax-Evasion Claim

Transocean Ltd. (RIG), the world’s largest offshore driller, said it will contest charges by Norwegian authorities that it evaded taxes on 10 billion kroner ($1.8 billion) of revenue.

“Transocean rejects all of the accusations and intends to fully clear its name in court,” the Vernier, Switzerland-based company said yesterday in an e-mailed statement. “Transocean believes the indictments are without merit and plans to vigorously contest them.”

Transocean Inc. and Transocean Offshore Deepwater Drilling Inc. are being charged with gross tax fraud and breach of the Accounting Act, Oekokrim, the National Authority for Investigation and Prosecution of Economic and Environmental Crime, said in a statement yesterday. The company may face a tax claim of as much as 5 billion kroner, including interest, said Morten Eriksen, senior public prosecutor at the agency.

“This is definitely the biggest criminal case and I’m assuming the biggest tax case” in Norwegian history, Eriksen said in a telephone interview. Two advisers who worked for the rig company’s Norway unit are also being charged with tax evasion, the government said.

The charges relate to events from 2000 to 2002 regarding tax dispositions in connection with the sale in 1997 and 2001 of 12 rigs by Transocean AS/ASA to affiliates in the Cayman Islands, according to the Oslo-based agency. Transocean’s Norwegian units have since been shut.

“The indictment is based on an inadequate comprehension of the facts,” Erling Lyngtveit, Transocean’s defense counsel, said in the statement. It’s based on “peculiar and original interpretations of Norwegian and international tax legislation. We believe we have a strong case.”

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Police Charge Teen With Hacking U.K. Organized Crime Agency

Ryan Cleary, the 19-year-old U.K. resident arrested June 21 on suspicion of participating in an online hacking scheme, was charged in London with attacking the site for Britain’s Serious Organised Crime Agency.

Cleary is accused of conspiring with others “to conduct unauthorized modification of computers” and launching so-called denial of service attacks against the websites for SOCA and two U.K. music-industry trade groups, Metropolitan Police said yesterday in a statement. He is scheduled to appear today at City of Westminster Magistrates Court.

The charges follow five months after the arrests of five males, including three teenagers, as part of a U.K. police probe of cyber-attacks related to WikiLeaks, the anti-secrecy group that published U.S. military documents and diplomatic communications on its website.

In addition to SOCA, Cleary was charged with hacking the sites for the British Phonographic Industry and the International Federation of the Phonographic Industry last year.

Adrian Strain, a spokesman for the IFPI, one of the trade groups, confirmed it reported a denial of service attack that was then investigated. He declined to comment further.

A spokeswoman for SOCA declined to comment.

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New Suits

Bank of America Sued for Foreclosure-Sale Taxes in Michigan

Bank of America Corp. (BAC), Wells Fargo & Co. (WFC) and mortgage servicers were sued by a Michigan county official who claimed they failed to pay millions of dollars in transfer taxes on foreclosure sales.

The banks and other defendants were part of an effort to “inappropriately” claim state and county tax exemptions on “improperly filed deeds,” Curtis Hertel Jr., Ingham County register of deeds, said yesterday in a lawsuit in state court in Lansing, the capital city.

Hertel also sued Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corp. (FMCC) and two law firms that handle foreclosures.

“We didn’t specify damages, but I believe it’s in the millions for the county and tens of millions for the state,” Hertel said today in a telephone interview. “We intend to fight for it.”

The county claims that the banks would transfer ownership of a note to Fannie Mae or Freddie Mac to avoid transfer taxes in foreclosures, Hertel said.

“Fannie and Freddie would foreclose and claim the exemption” on transfer taxes allowed for government entities, he said.

“At this point, we’re reviewing the complaint,” Jason Menke, a spokesman for San Francisco-based Wells Fargo, said in an e-mail. “Until that review is complete, it would be premature for us to provide comment on this issue.”

Rick Simon, a spokesman for Charlotte-North Carolina-based Bank of America spokesman, said in an e-mail that “the bank has not had an opportunity to review this complaint as we have not been served yet.”

The case is Hertel v. Bank of America N.A., 11-687-CZ, Circuit Court, Ingham County, Michigan (Lansing).

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Trials/Appeals

Gabon Bribery Defendants Caught ‘Red-Handed,’ U.S. Tells Jury

Four security-industry executives knew they were breaking the law when they agreed to make payments to a Gabonese government minister, prosecutors said at the close of the biggest U.S. trial of individuals for bribing foreign officials.

The four men, on trial in federal court in Washington, are part of a 22-defendant kickback conspiracy case resulting from a sting operation and a fake $15 million weapons deal. Prosecutors showed jurors about a dozen video clips yesterday while making their closing arguments in the case.

“The evidence is irrefutable,” Laura Perkins, a U.S. Justice Department trial attorney, told the jury. “The defendants were caught red-handed committing these crimes on audio and videotape.”

Prosecutors allege the men sought to provide guns, grenades and uniforms for the presidential guard of Gabon in violation of the Foreign Corrupt Practices Act. The defendants -- John Wier III, Andrew Bigelow, Lee Tolleson and Pankesh Patel -- have denied any wrongdoing.

Defense lawyers have accused the government of engineering the conspiracy and breaking Federal Bureau of Investigation rules about handling informants. They will make closing arguments to the jury today. Jurors may begin deliberating next week.

The charges stem from a three-year investigation involving an informant who pleaded guilty in an earlier bribery case, recorded telephone calls and videotaped meetings with FBI agents posing as representatives of Gabon, sub-Saharan Africa’s fifth- biggest oil producer.

The government said the defendants agreed to pay $3 million in kickbacks for the business, half of which they were told would be paid to the country’s defense minister.

The case is U.S. v. Goncalves, 09-cr-00335, U.S. District Court, District of Columbia (Washington).

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Verdicts/Settlement

Viacom, Time Warner Tell Judge They’re Seeking Settlement

Viacom Inc. (VIA/B) and Time Warner Cable Inc. (TWC) told a judge that they’re trying to settle litigation over broadcast rights on portable electronic devices including Apple Inc. (AAPL)’s iPad.

The two companies, which sued each other in Manhattan federal court in April, told U.S. District Judge Leonard B. Sand that they’ve reached a so-called standstill agreement “in an attempt to resolve this and other litigation and potential litigation.” Their lawsuits are now on hold, they said in court papers filed yesterday.

In its suit, New York-based Time Warner Cable, the second- largest cable television operator in the U.S., sought a ruling that its contract with Viacom allows it to deliver Viacom’s programming to customers’ iPads and other devices. Time Warner Cable, also based in New York, provides video, high-speed data and telephone services to more than 14 million subscribers, according to its website.

In a separate suit, Viacom asked for damages and an order blocking Time Warner Cable from distributing its programming, including Black Entertainment Television, Comedy Central, CMT, MTV, Nickelodeon, Spike and VH1, via broadband without its permission.

Time Warner Cable released a computer application for the iPad on March 15 that allows customers to stream Viacom’s copyrighted entertainment programs directly to iPad tablets.

Viacom spokeswoman Kelly McAndrew declined to comment on the status of negotiations between the companies. Time Warner Cable spokeswoman Maureen Huff also declined to comment.

The cases are Time Warner Cable Inc. v. Viacom International, 11-cv-002376, and Viacom International Inc. v. Time Warner Cable Inc., 11-cv-02387, U.S. District Court, Southern District of New York (Manhattan).

Winklevoss Twins Drop Supreme Court Appeal Over Facebook Case

Cameron and Tyler Winklevoss, former Harvard University classmates of Facebook Inc. founder Mark Zuckerberg, said they won’t ask the U.S. Supreme Court to undo a settlement of their claims that Zuckerberg stole the idea for the world’s most popular social-networking site.

The Winklevoss twins said last month they would appeal a lower-court ruling that left the 2008 accord intact. Their lawyers said in a filing yesterday at the U.S. Court of Appeals in San Francisco that “after careful consideration, they have determined that they will not file a petition” with the nation’s highest court.

The brothers lost a bid in May to get a full appeals court review. They argued that a three-judge panel erred in April when it dismissed their claims that the settlement should be voided because it was procured through fraud.

They alleged that Palo Alto, California-based Facebook didn’t disclose an accurate valuation of its shares before they agreed to the $65 million cash and stock settlement. The appeals court ruled that the accord barred future lawsuits and was “quite favorable” to the twins.

Andrew Noyes, a spokesman for Facebook, said “We’ve considered this case closed for a long time, and we’re pleased to see the other party now agrees.”

The case is The Facebook Inc. v. ConnectU Inc., 08-16745, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

Morgan Keegan to Pay $200 Million in SEC Settlement

Two Regions Financial Corp. (RF) Morgan Keegan units agreed to pay $200 million to settle claims by federal, state and industry regulators related to subprime mortgage-backed securities.

The accord resolves claims brought last year by the U.S. Securities and Exchange Commission, Financial Industry Regulatory Authority and state regulators, the SEC said yesterday in a statement. Regulators last year said the firm misled clients about asset values and risks of bond funds that caused investor losses during the mortgage crisis.

“The falsification of fund values misrepresented critical information exactly when investors needed it most -- when the subprime mortgage meltdown was impacting the funds,” said Robert Khuzami, the SEC’s enforcement chief, in the statement. “Such misconduct does grievous harm to investors.”

Tata Steel Wins $130 Million Settlement in Teesside Suit

Tata Steel Ltd. (TATA), which shut and sold part of its Teesside Cast Products unit after four of its largest customers halted orders, said it received $130 million as settlement from the violators of the 10-year contract.

An arbitration tribunal ruled the buyers unlawfully terminated the agreements, Mumbai-based Tata Steel said yesterday in a statement to the Bombay Stock Exchange.

Tata Steel Europe lost about 150 million pounds ($242 million) running Teesside in northeastern England after the buyers, accounting for about 80 percent of its business, didn’t honor the 2009 contract. Italy’s Marcegaglia SpA, South Korea’s Dongkuk Steel Mill Co., Luxembourg-based Ternium SA and Swiss- Italian steelmaker Duferco Participations Holding Ltd. walked away from taking deliveries of slab steel, which they process into other steel products.

The company mothballed some of Teesside’s operations in February last year. A year later, Thailand’s largest steel producer Sahaviriya Steel Industries Public Co. agreed to buy the unit for $469 million. The deal includes the sale of coke ovens, power generation facilities and the Redcar Blast Furnace.

Rolls-Royce Reaches Engine Settlement With Qantas

Rolls-Royce Group Plc (RR/), the world’s second-largest aircraft- engine maker, reached a settlement with Qantas Airways Ltd. (QAN) over the disruption to its fleet after a mid-air engine failure last year.

The settlement’s “profit and loss impact” in the fiscal year ending this month is A$95 million ($101 million), Qantas said in a statement yesterday. The terms of the agreement are confidential, and Qantas will drop legal proceedings, the Sydney-based airline said.

Rolls-Royce’s total costs from the incident were 56 million pounds ($90 million) in 2010, “with some small additional costs in 2011,” Rolls-Royce said in an e-mailed statement yesterday.

“The whole industry will breathe a sigh of relief,” Sandy Morris, an analyst in London at Royal Bank of Scotland Group Plc, said by e-mail. “Qantas starting court proceedings was an unusual and troubling step.”

The settlement may help ease concerns that the engine failure would damage the company’s reputation. Rolls-Royce is pushing to catch up on supplying engines for Airbus SAS’s A380 following the engine explosion last November, which forced Rolls-Royce to divert engines from new customers to existing customers, Tom Williams, Airbus’s head of programs, said in an interview at the Paris Air Show.

The blowout was caused by the failure of a “specific component in the turbine,” London-based Rolls-Royce said in November. That failure caused an oil fire on the A380, which led to the release of a turbine disc.

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Litigation Departments

Icahn Can’t Sanction Law Firm for Blockbuster Insider Claim

Billionaire Carl Icahn lost his fight to punish McMillan Law Firm APC for its work on a lawsuit alleging insider trading in Blockbuster Inc. (BLOAQ) securities, a bankruptcy judge ruled.

McMillan won’t have to pay attorney fees Icahn paid to reply to allegations that he had inside information while investing in Blockbuster, U.S. Bankruptcy Judge Burton Lifland said yesterday in Manhattan. Icahn sought sanctions against the law firm, which represented Blockbuster creditor Lyme Regis Partners LLC in a lawsuit during the movie-rental chain’s bankruptcy. Lifland dismissed the suit in March.

“I find that despite the many flaws in Lyme Regis’s complaint, sanctions are not applicable,” Lifland said yesterday in denying Icahn’s motion. “Lyme Regis’s position was supported somewhat by case law.”

“Merely by filing motion, defendants have achieved the punitive results they are seeking -- Mr. McMillan’s former malpractice insurance carrier has doubled his rates for renewal,” lawyers for the firm and partner Scott A. McMillan wrote in court papers.

The case is In re Blockbuster, 10-14997, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The adversary case is 10-05524.

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Fourth Rothstein Associate Pleads Guilty in Investment Scam

A fourth associate of convicted fraudster Scott Rothstein admitted to his role in a $1.2 billion investment scheme involving fake lawsuit settlements.

William Corte, 38, pleaded guilty to conspiracy to commit wire fraud yesterday in Fort Lauderdale, Florida, federal court before U.S. District Judge William Dimitrouleas.

Prosecutors say Corte and Curtis Renie, 38, worked for Rothstein’s law firm as technology specialists and set up a fake TD Bank website showing Rothstein had $1.1 billion in a trust account. Renie pleaded guilty last week. Rothstein used the site to convince potential investors their investments would be safe, prosecutors said.

“The investors, relying on this information, ended up investing in excess of $35 million,” Assistant U.S. Attorney Lawrence LaVecchio told the judge.

Corte’s attorney, Alvin Entin, said that while his client didn’t know the website was being used in an investment scheme, prosecutors would be able to prove he was part of the conspiracy. Sentencing is set for Sept. 8.

Rothstein pleaded guilty last year to five counts of racketeering, money laundering and wire fraud, admitting he sold investors interests in bogus settlements in sexual-harassment and whistle-blower suits. He was sentenced to 50 years in prison.

Two other men, an attorney at Rothstein’s firm, Howard Kusnick, 59, and a friend, Stephen Caputi, 53, pleaded guilty this month to conspiracy to commit wire fraud for their roles in the scheme.

The cases are U.S. v. Renie, 11-60123; U.S. v. Kusnick, 11-60125; and U.S. v. Caputi, 11-60124; U.S. District Court, Southern District of Florida (Fort Lauderdale).

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To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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