The sum represents Picard’s latest estimate of principal lost by all Madoff investors by the time the Ponzi scheme collapsed in December 2008, according to the complaint filed June 24 in federal court in Manhattan. JPMorgan, Madoff’s primary banker, could have stopped the fraud if it had passed on its suspicions to regulators, he said in his suit.
Picard previously sought $5.4 billion in damages, plus $1 billion in transfers and fees from the second-biggest U.S. bank.
JPMorgan “was an active enabler of the Madoff Ponzi scheme,” Picard’s lawyer, David Sheehan, said in a statement. JPMorgan “not only should have known that a fraud was being perpetrated, they did know,” he said.
Picard, who has filed 1,000 suits claiming $90 billion for Madoff investors, first sued JPMorgan in bankruptcy court in December. He alleges the bank ignored signs of fraud as billions of dollars flowed from Madoff’s account at the bank to investors, and didn’t pass on its knowledge that the broker- dealer was underreporting cash and bank loans, and neglecting to disclose assets and liabilities.
In a 2005 report, the Madoff firm should have reported $100 million in securities and only reported $72.2 million. JPMorgan would have known because the $100 million was collateral for a loan it made to the firm, according to the complaint. JPMorgan also “knew” that money flowing through the Madoff account “could not have been linked to a legitimate business purpose, and this fact should have been flagged by both JPMC personnel and its automated monitoring system,” Picard wrote.
“Contrary to the trustee’s allegations, JPMorgan did not know about, or in any way become a party to the fraud orchestrated by Bernard Madoff,” Tasha Pelio, a spokeswoman for the bank, said in an e-mailed comment.
Picard’s latest complaint is “meritless and is based on distortions of both the relevant facts and the governing law,” she said. “At all times, JPMorgan complied fully with all laws and regulations governing bank accounts.”
JPMorgan had asked U.S. District Judge Colleen McMahon in New York to dismiss Picard’s suit, amended in April to add names of JPMorgan bankers who discussed the possibility Madoff was running a Ponzi scheme. JPMorgan said Picard was misusing the law to sue for damages, and “never alleges facts showing that anyone at JPMorgan knew that Madoff was a crook.”
McMahon took the case away from U.S. Bankruptcy Judge Burton Lifland in May, after JPMorgan argued that Picard was hired to liquidate the Madoff firm and has no legal right to mount a class action and claim damages for the Ponzi scheme’s investors. She said she will decide if the trustee is entitled to sue the bank for damages.
Madoff, 73, is serving a 150-year sentence in a North Carolina federal prison.
The case is Picard v. JPMorgan Chase & Co., 1:11-cv-00913, U.S. District Court, Southern District of New York (Manhattan).
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Facebook Claims Zuckerberg E-Mails Disprove Ceglia’s Claim
Facebook Inc. said it is willing to produce more than 175 e-mails between co-founder Mark Zuckerberg and Paul Ceglia, the New York man who claims half of Zuckerberg’s Facebook holdings, only after Ceglia turns over the original contract and e-mails on which he bases his lawsuit.
Facebook and Zuckerberg reiterated June 24 their request that a federal judge in Buffalo, New York, order Ceglia to produce the documents immediately for forensic examination, along with all of Ceglia’s computers. They claim the action is necessary to unmask what they say is a fraud on the court. Facebook contends Ceglia’s e-mails are fabricated and the contract is a forgery.
Both sides agree that Ceglia, 37, hired Zuckerberg, then a freshman at Harvard University, to work on Ceglia’s StreetFax.com project in April 2003. Facebook said it has the genuine e-mails between Zuckerberg and Ceglia, which make no mention of Facebook and show Ceglia making a series of excuses for not paying Zuckerberg money he owed him.
“Defendants have no objection to producing all the e-mails between Zuckerberg and Ceglia (and/or other persons associated with StreetFax) that were captured from Zuckerberg’s Harvard e- mail account,” lawyers for Facebook and Zuckerberg said in the papers June 24. “These indisputably genuine e-mails directly contradict Ceglia’s make-believe narrative and demonstrate that Ceglia’s story is a lie.”
Christopher Hall, a partner with DLA Piper LLP who represents Ceglia, didn’t return a voice-mail seeking comment on Facebook’s filing June 24.
Ceglia hasn’t shown the original contract publicly or to representatives of Facebook. The two-page document is in a bank safe-deposit box in Hornell, New York, according to Ceglia’s lawyers.
Ceglia’s lawyers asked the court to order both sides to turn over evidence, including all of Zuckerberg’s documents, e- mails and instant messages relating to Facebook before July 30, 2004. Ceglia also asked the court to order the parties into mediation.
Facebook, which runs the world’s biggest social-networking site, said it opposes Ceglia’s demand for “a massive production of documents” unrelated to the question of whether the contract is genuine.
The case is Ceglia v. Zuckerberg, 1:10-cv-00569, U.S. District Court, Western District of New York (Buffalo).
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Rio Says Claim It Funded PNG Military ‘Completely Unfounded’
Rio Tinto Group, the world’s second-largest mining company, said allegations it helped fund the Papua New Guinean military’s suppression of rebels in Bougainville are “completely unfounded.”
The allegations, aired on Australian television June 25, were in an affidavit Prime Minister Michael Somare wrote when opposition leader in 2001. Somare claimed Rio and its Bougainville Copper Ltd. (BOC) unit played an “active role in military operations during the Bougainville war” which ended 14 years ago, and left an estimated 15,000 people dead, Special Broadcasting Service’s Dateline program reported.
Rio Tinto spokesman Bruce Tobin rejected the allegations in an e-mailed statement June 26.
Somare’s affidavit is part of a class action in the U.S. brought by a group of residents against Rio in 2001, Dateline said. The case remains unresolved, it said.
Bougainville Copper Chief Executive Officer Peter Taylor said the allegations aren’t true, Dateline reported.
Winklevosses Say Facebook May Have Hidden Evidence
Cameron and Tyler Winklevoss, after abandoning an appeal to the U.S. Supreme Court, are still pursuing claims that Facebook Inc. founder Mark Zuckerberg stole the idea for the world’s most popular social-networking site.
A day after the brothers said they won’t ask the nation’s high court to undo a 2008 settlement with Zuckerberg, they asked a federal judge in Boston June 23 to let them determine whether Facebook hid instant messages that might have helped their case.
The Winklevoss twins said in the June 23 court filing they are seeking to find out whether Zuckerberg or Facebook “intentionally or inadvertently suppressed evidence.”
Neel Chatterjee, a lawyer for Facebook, said in an e-mail that “these are old and baseless allegations that have been considered and rejected previously by the courts.”
The brothers were unsuccessful in federal trial and appeals courts in California in their effort to revoke the settlement of their claims in a 2004 lawsuit that Zuckerberg stole the idea for what became the world’s most popular social-networking site. 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 agreement.
Tyler Meade, a lawyer in Berkeley, California, representing the twins, said in the June 23 court filing that he’s relying on a federal rule that allows judges to re-open litigation if important information wasn’t produced. Meade asked a Boston judge to force the previous attorneys for the brothers to grant him access to certain documents, saying that they and Facebook’s lawyers have refused to cooperate.
Meade declined to comment.
The Massachusetts case is ConnectU v. Facebook, 07-10593, U.S. District Court, District of Massachusetts (Boston). The California case is The Facebook Inc. v. ConnectU Inc., 08-16745, U.S. Court of Appeals for the Ninth Circuit (San Francisco).
Sabre Loses Bid to Stop American Airlines From Seeking Order
Sabre Holdings Corp. can’t stop AMR Corp. (AMR)’s American Airlines from seeking a court order barring Sabre from listing the carrier’s fare and flight data below that of rivals in displays for travel agents, a Texas judge said.
Judge Don Cosby in Fort Worth ruled June 23 that Sabre can’t stop American from requesting an injunction. He rejected Sabre’s argument that federal law preempts the Texas state court’s authority to keep it from giving preference to other airlines’ information.
The Texas court case is part of a broader dispute spurred by American’s push to provide data directly to travel agents rather than going through a company such as Sabre, which compiles the information from airlines and distributes it to travel agents. Some airlines want to use their own technology to customize offerings for travelers and boost revenue.
American has filed antitrust claims against Sabre, the largest U.S.-based so-called global distribution system, and against Travelport Ltd. US Airways Group Inc. has sued Sabre to block alleged anticompetitive actions. The U.S. Justice Department said in May it was investigating possible antitrust violations by such data distributors.
Nancy St. Pierre, a Sabre spokeswoman, said the June 23 ruling is “one step in the process.”
“Really our goal is to get a new distribution agreement with American,” she said in a phone interview.
Ryan Mikolasik, a spokesman for American, said in an e-mail that the company was pleased with the ruling.
The case is American Airlines Inc. v. Sabre Inc., 67- 249214-10, 67th Judicial District Court, Tarrant County, Texas.
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Deutsche Telekom Faces Criminal Fraud Complaint Over Data
The complaint was filed at the beginning of June, a spokesman for German law firm Wilms & Schaub Rechtsanwaltsgesellschaft mbH said. The complaint was filed on behalf of clients that Wilms & Schaub declined to identify. The filing asks prosecutors to investigate whether Deutsche Telekom managers fraudulently withheld information about the cost of directory data.
“Deutsche Telekom for years overcharged its competitors in the directory and phone book market claiming unsubstantiated costs,” the Wilms & Schaub spokesman said. “Deutsche Telekom declines to calculate the fees in a way that takes into account the actual costs of providing the data.”
As Germany’s former phone monopoly, Deutsche Telekom is required to share directory data with competitors. Since the opening of the telecommunication market in the 1990s, the company has been involved in about 60 lawsuits over the price Deutsche Telekom charges for subscriber data, Wilms & Schaub said.
The damages may total almost 800 million euros ($1.1 billion), based on the amounts sought in civil suits, according to Wilms & Schaub, which represents Deutsche Telekom competitors in these cases.
Mark Nierwetberg, a spokesman for Bonn-based Deutsche Telekom, said he couldn’t immediately comment.
Friedrich Apostel, a spokesman for Bonn prosecutors, said his office had received the complaint and will review the allegations. Apostel also declined to disclose who filed the complaint.
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Rajaratnam Request for Acquittal Should Be Denied, U.S. Says
Raj Rajaratnam’s request to be acquitted, after he was found guilty at trial in the largest insider-trading prosecution in a generation, should be denied, U.S. prosecutors said.
“The evidence against Rajaratnam at trial was overwhelming,” Justice Department lawyers said in a filing June 23 in federal court in Manhattan. “The jury heard devastating evidence of Rajaratnam orchestrating numerous insider-trading crimes and instructing others how to cover them up in his own voice in multiple recorded conversations.”
Rajaratnam, 54, was found guilty May 11 of all 14 counts against him. The Galleon Group LLC co-founder faces as long as 19 1/2 years in prison. His lawyers last month asked the judge to set aside the verdict, saying the evidence against him was non-existent or so meager that no reasonable jury could have found him guilty beyond a reasonable doubt.
John Dowd, a lawyer for Rajaratnam, didn’t return a call to his office seeking comment after regular business hours.
The case is U.S. v. Rajaratnam, 09-01184, U.S. District Court, Southern District of New York (Manhattan).
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NYSE, Deutsche Boerse Settle Shareholder Suits Over Buyout
NYSE Euronext and Deutsche Boerse AG (DB1) settled shareholder lawsuits challenging the $9.53 billion buyout of the parent company of the New York Stock Exchange by offering earlier this month to pay $910 million in dividends, court papers show.
The agreement to pay the dividends helped to resolve suits in Delaware and New York alleging the all-stock deal provided too little for investors, according to a filing in Delaware Chancery Court. The payout totals about 620 million euros, equal to 2 euros a Deutsche Boerse share or $1.37 a NYSE share, company officials said June 7.
“We are pleased with the result here, because this dividend will give shareholders a quantifiable and immediate payment,” Mark Lebovitch, a New York-based lawyer for NYSE shareholders, said June 23 in an e-mailed statement.
Deutsche Boerse agreed to buy NYSE Euronext (NYX), owner of the New York Stock Exchange and the Liffe derivatives market, for $9.53 billion in February. IntercontinentalExchange Inc. (ICE) and Nasdaq OMX Group Inc. (NDAQ) dropped a competing bid last month after the U.S. Justice Department threatened an antitrust lawsuit.
“The settlement allows us to avoid the expense and distractions litigating would have presented to our company and our shareholders,” Rich Adamonis, a spokesman for New York- based NYSE Euronext, said in an e-mailed statement. “Our sole focus remains on our upcoming shareowner vote, and working toward the successful conclusion of the merger.”
Tim Lynch, a spokesman for Frankfurt-based Deutsche Boerse, declined to comment.
The exchanges agreed to pay the dividends and settle the suit to win support for the deal in a vote next month. Deutsche Boerse needs 75 percent of shareholders to approve its purchase of NYSE Euronext by July 13.
Investors can opt to “terminate the settlement” if the exchanges decide against paying the dividends, according to court papers.
NYSE Euronext investors sued in Delaware in February, calling Deutsche Boerse’s offer “grossly inadequate.” The shareholders alleged the bid valued NYSE Euronext at less than targets in similar deals, such as London Stock Exchange Group Plc’s purchase of Canada’s TMX Group Inc.
Officials of both exchanges acknowledged the lawsuits “were a factor” in the decision to pay the dividends, lawyers for NYSE Euronext investors said in court papers. The suits also helped persuade NYSE officials to give investors an opportunity to have the value of their shares appraised, according to the June 17 filing.
Delaware Chancery Court Judge Leo Strine must decide whether to give the accord final approval. He hasn’t yet set a hearing date on the matter. If the settlement is approved, investors’ lawyers will file papers to dismiss the New York suits, court filings show.
The case is In re NYSE Euronext Shareholders Litigation, CA No. 6220, Delaware Chancery Court (Wilmington).
U.S. Seeks Life Sentence for Ex-Taylor Bean Chairman Farkas
Lee Farkas, the ex-chairman of Taylor, Bean & Whitaker Mortgage Corp., should be sentenced to life in prison for leading a $3 billion fraud involving fake mortgage assets, U.S. prosecutors told a judge in Virginia.
In a filing in Alexandria made public June 24, prosecutors asked U.S. District Judge Leonie Brinkema to order Farkas to prison for 385 years or “a period of years that would ensure that Farkas will remain in prison for life.” Farkas, 58, is to be sentenced June 30.
A federal jury convicted Farkas in April of 14 counts of conspiracy and bank, wire and securities fraud after a two-week trial. Prosecutors said Farkas orchestrated one of the largest and longest-running bank frauds in the U.S., which duped some of the country’s largest financial institutions, targeted the federal bank bailout program and contributed to the failures of Taylor Bean and Montgomery, Alabama-based Colonial Bank.
“Farkas fueled his lifestyle of ostentatious wealth by ripping off banks and attempting to steal from the government, all with little to no regard for the consequences to TBW’s or Colonial Bank’s employees, thousands of whom lost their jobs when TBW and Colonial Bank closed, or to the shareholders of Colonial BancGroup,” prosecutors said in the filing.
William Cummings, a lawyer for Farkas, in a filing June 24 urged Brinkema to send Farkas to prison for no more than 15 years.
“The whole point of the financial transactions forming the basis for the charges against Mr. Farkas was not to enrich himself but to keep TBW a viable company so that the hard working people who had helped him build TBW from nothing would continue to have good, stable, well paying jobs,” Cummings said in the filing.
The case is U.S. v. Farkas, 10-cr-00200, U.S. District Court, Eastern District of Virginia (Alexandria).
Conrad Black Must Go Back to Prison Judge in Chicago Rules
Conrad Black, the former Hollinger International Inc. chairman and chief executive officer, faces more than a year’s prison time after being resentenced for mail fraud and obstructing justice, the surviving convictions from his 2007 trial.
The new sentence of 3 1/2 years was imposed June 24 by U.S. District Judge Amy J. St. Eve in Chicago. Black will get credit for 29 months already served, a Justice Department spokesman, Randall Samborn, said. He was in federal prison from March 2008 to July 2010 before winning a reversal of two convictions and being freed on bail.
Black’s wife, Barbara Amiel, appeared to faint when the sentenced was passed and was helped from the courtroom.
It was the second time that Black, 66, faced punishment at federal courthouse for his role in what prosecutors called the theft of $6.1 million from the Chicago-based publishing company. A federal appeals court last year threw out two of three mail fraud convictions after the Supreme Court told it to consider whether they conformed to a recent high court decision.
“I have always tried to take success like a gentleman and disappointment like a man,” Black told St. Eve before she imposed the sentence.
“I accept that a reasonable person could conclude that I am guilty,” he said, adding he also believed the same reasonable person could conclude he had been “adequately punished.”
Black’s lawyers argued that he showed respect for the law and did good work in prison by tutoring inmates at the low- security Coleman Federal Correctional Institution in Florida.
His attorney Carolyn Gurland called his efforts “nothing less than extraordinary.”
A prosecutor countered that Black is “a corporate CEO who stole from the company and obstructed justice,” and that Black still stands convicted of two crimes.
The case is U.S. v. Black, 05-cr-00727, U.S. District Court, Northern District of Illinois (Chicago).
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Former Egyptian Bank Chief Pleads Guilty to Sex Abuse Count
The former chairman of Egypt’s Bank of Alexandria pleaded guilty to a misdemeanor charge that he sexually abused a maid at a Manhattan hotel in exchange for a sentence of five days of community service at a soup kitchen.
Mahmoud Abdel Salam Omar, charged with sexually assaulting an employee of the Pierre Hotel, pleaded guilty June 24 in New York state court to sexual abuse in the third degree, a class b misdemeanor. Earlier June 24, the victim sued him for $5 million in Manhattan federal court.
The victim alleged Omar groped her in his room on May 29 after asking her to bring him tissues. Police originally charged Omar with sexual abuse in the first degree, sexual abuse in the third degree and forcible touching. He faced as long as seven years in prison if convicted of the most serious charge.
Omar, head of El-Mex Salines, was free on bail after having been confined at Rikers Island, New York City’s main jail complex.
Police were called to the Pierre after the maid told security that he groped her when she went to his room. Omar “wrapped his arms tightly around the informant’s body and while holding the informant, kissed the informant’s neck and lips,” Detective Efrain Curet said in a criminal complaint.
Omar grabbed the maid a second time and groped her, according to the complaint.
Omar was arrested May 30. The Pierre, where room rates start at $776 a night according to its website, is part of the Taj Group of Hotels. The hotel had said it is cooperating with police. It suspended a supervisor who stopped the maid from immediately filing a complaint, the New York Daily News reported.
In the hearing in criminal court, Assistant District Attorney Nicole Blumberg told Judge Rita Mella that prosecutors agreed to the plea deal after carefully reviewing the evidence, including interviews with more than 20 witnesses, a person who witnessed the exchange said. Blumberg said the victim was told of the plea deal and is satisfied with it, the person said.
Omar has performed five days of community service at a soup kitchen, his attorney Lori Cohen said after the hearing. He pleaded guilty because he wants to get back to his wife who just had surgery, she said.
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