Manhattan District Attorney Cyrus Vance Jr. must complete key elements of his investigation before he can decide whether to drop the prosecution of Dominique Strauss-Kahn because of lies told by the maid who accused him of sexual assault.
Prosecutors are continuing to investigate, Daniel R. Alonso, chief assistant district attorney, said July 3 in an interview. Once his office has the facts, Vance must decide whether to go before a jury with an accuser who admitted lying to investigators and under oath to a grand jury.
If he doesn’t prosecute, based on weak or contradictory facts turned up in his investigation, he must drop the case and decide whether to charge his key witness with lying to the grand jury that indicted Strauss-Kahn based on her false testimony, defense lawyers and former prosecutors said.
There’s a “strong likelihood” the case will be dismissed at Strauss-Kahn’s next court appearance, on July 18, said Paul Callan, a defense lawyer and ex-Brooklyn, New York, prosecutor.
“They’re just going to want to walk away from this case and forget it ever happened,” said Callan, who represented a woman charged with perjury for falsely accusing a man of raping her at knifepoint in 2005.
The work before prosecutors includes going “word for word” through a phone call recorded the day after the arrest, in which the housekeeper discusses the incident with a friend incarcerated in Arizona, said a person familiar with the matter who declined to be identified because the matter isn’t public.
Strauss-Kahn, 62, the former International Monetary Fund chief, was taken off an Air France flight by Port Authority police at John F. Kennedy International Airport in New York on May 14, the day of the alleged attack at the Sofitel in midtown Manhattan. He was turned over to detectives from the New York police Special Victims Squad the next day.
Considered a front-runner for the French presidency before his arrest, Strauss-Kahn, who has pleaded not guilty, resigned as head of the IMF four days later.
He was released from home confinement July 1 after prosecutors told a judge the case had been hurt by “substantial credibility issues” with the accuser. His $1 million bail and $5 million bond were ordered returned. He is no longer required to remain under armed guard and electronic monitoring.
In a letter filed the same day with the court, prosecutors said the 32-year-old maid admitted lying to the grand jury about her actions immediately after the alleged attack, declaring a friend’s child as her own for two years to boost her tax refund and misrepresenting her income to maintain her housing.
The woman also admitted lying on an asylum application after coming to the U.S. from Guinea in January 2004, prosecutors said.
The case is People v. Strauss-Kahn, 2526/11, New York State Supreme Court, New York County (Manhattan).
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JPMorgan Chase Loses Bid to End Home-Equity Line Cases
JPMorgan Chase & Co. (JPM) lost a bid for dismissal of a lawsuit in which consumers accused the second-biggest U.S. bank of wrongly cutting home-equity lines of credit.
U.S. District Judge Rebecca Pallmeyer in Chicago ruled July 1 that the homeowners could go forward on some of their claims against the lender while dismissing allegations that JPMorgan had engaged in fraudulent practices.
“Plaintiffs’ allegations that defendant reduced or suspended their HELOCs without adequate justification are sufficient to state claims for breach of contract under Minnesota, California, Texas and Delaware law,” Pallmeyer said in a 42-page decision.
The ruling comes in a consolidated class action, or group lawsuit, alleging that the lender had retracted or crimped those lines of credit without any justification for doing so. The bank had sought to dismiss the action in its entirety.
Thomas A. Kelly, a Chicago-based spokesman for the New York-based bank, declined to comment on the ruling.
“We feel this is a really important victory for consumers throughout the country,” plaintiffs’ lawyer Jay Edelson of Chicago said in a telephone interview. “Banks had believed they could act with impunity. We’re seeing that’s not the case.”
Edelson said the next step was to seek class-wide certification. There are thousands of similarly situated potential class members, he said.
The case is In re: JPMorgan Chase Bank Home Equity Line of Credit Litigation, 10cv3647, U.S. District Court, Northern District of Illinois (Chicago).
Bank of America Says $500 Million Lehman Order Was ‘Error’
Bank of America Corp. (BAC), ordered by a judge to return $500 million in deposits to bankrupt Lehman Brothers Holdings Inc. and pay interest, said “the judgment was error” and should have been in the bank’s favor.
U.S. Bankruptcy Judge James Peck signed the judgment in May after a November finding that the biggest U.S. bank took Lehman’s deposits in the 2008 financial crisis to offset unrelated derivative obligations, and must return them. He set interest at 9 percent from November 2008 to December 2010. The judge ignored a “controlling New York statute” when he disregarded covenants in the loan agreement that allowed Bank of America to take the deposits, the bank said in a filing July 1 in U.S. District Court in Manhattan.
“The bank exercised its lawful right,” said Bank of America, based in Charlotte, North Carolina, as it asked a district judge to rule in its favor. “The bankruptcy court imposed an unlawful waiver of rights.”
Banks that previously did business with Lehman, the fourth- largest investment bank before its 2008 failure, are fighting the defunct firm’s efforts to claw back money to pay other creditors. Lehman lost an $11 billion lawsuit against Barclays Plc. (BARC) JPMorgan Chase & Co. is trying to get an $8.6 billion Lehman suit dismissed.
Lehman’s lenders, including Bank of America, became “increasingly uneasy” about the investment bank’s financial health in the summer of 2008, Peck wrote in November. Later that year, Bank of America took collateral posted by Lehman to cover overdrafts, using it to offset amounts owed on unrelated derivatives deals, according to the ruling.
The bank didn’t first ask Peck for relief from the bankruptcy law provision that prevents such seizures, called the automatic stay, Peck said.
Under laws governing derivative transactions, “the setoff was permitted without relief from the automatic stay,” Bank of America wrote in its filing.
Separately, Lehman said July 1 that creditors holding claims of more than $100 billion signed their agreement to its latest liquidation plan, almost three years after it failed.
The appeal is Bank of America NA v. Lehman Brothers Holdings Inc. (LEHMQ), 11-cv-03958, U.S. District Court, Southern District of New York (Manhattan).
Ex-Touradji Managers’ Bonus Claims Restored by New York Court
A New York judge reinstated three claims brought by former employees of Touradji Capital Management LP against the commodity hedge-fund firm that were dismissed by a lower court in 2009.
The lower court wrongly dismissed a claim accusing Touradji of unjust enrichment from allegedly withholding 2005 bonuses to the employees and reinvesting it without their permission, New York Supreme Court Justice Richard B. Lowe ruled June 30.
Gentry Beach, a former portfolio manager for Touradji, sued in December 2008, claiming the company failed to pay him bonuses for three years. Former employee Robert Vollero joined the complaint in January 2009, expanding damages over the claims to more than $50 million. Lowe’s ruling is the latest in a volley of pretrial decisions in the case.
“It’s a technical ruling that is of no consequence on the case going forward,” Sean O’Brien, an attorney for Touradji said July 1 in a phone interview. “These are claims which we are confident will ultimately be dismissed.
Lowe also reinstated a claim alleging violation of New York labor laws ruling that the lower court erred in concluding the former Touradji employees compensation wasn’t wages as defined under state laws.
Beach and his colleague argued that their compensation wasn’t completely discretionary and based on their own productivity and not entirely based on Touradji’s financial results, the judge said.
David Greenberger, an attorney for Vollero and Beach, called the ruling ‘‘a positive development.”
Touradji denied the allegations and in 2008 called Beach a disgruntled employee and poor performer.
The case is Beach v. Touradji Capital Management, 603611/08, New York State Supreme Court, New York County (Manhattan).
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BP Withholding Data From U.S. Government 14 Months After Spill
BP Plc, operator of the Macondo well that erupted in the Gulf of Mexico last year, is withholding data from the U.S. government related to how much crude spewed into the sea during the worst-ever U.S. offshore oil spill.
R. Michael Underhill, a U.S. Justice Department attorney, disclosed BP’s failure to turn over the data while questioning former Chief Executive Officer Tony Hayward, according to a transcript of the June 6 deposition obtained by Bloomberg News. Hundreds of lawsuits filed against BP and other companies involved in the catastrophe have been combined in federal court in New Orleans. Magistrate Judge Sally Shushan is overseeing scheduling of depositions.
BP has said the U.S. government’s estimate of 4.9 million barrels overstated the amount of oil that escaped from the well 40 miles (62 kilometers) off the Louisiana coast during the 87- day spill. The spill began April 20, 2010, with an explosion aboard the Deepwater Horizon drilling rig. BP said in its 2010 annual report that the spill probably was closer to 4 million barrels, of which 850,000 barrels were captured, burned or skimmed off the water.
In the deposition, Hayward said he was too busy overseeing efforts to plug the leaking well to engage in analysis of flow volumes. Hayward resigned from London-based BP in October.
“The bottom line was that I concluded early on that we had very few ways of coming up with any sort of credible flow rate, frankly,” Hayward said, according to the June 6 transcript. “We had no device able to measure flow.”
A voice mail left at BP’s press office in Houston wasn’t returned.
The volume of oil spilled into the Gulf is a key factor in determining the size of any penalties that could be levied against the company for violations of U.S. environmental laws. The catastrophe killed 11 rig workers, injured 17, sank a $365 million vessel and shut thousands of square miles of fishing grounds for months.
The case is 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).
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Sabre Seeks Dismissal of US Airways’ Antitrust Complaint
Sabre Holdings Corp., embroiled in a dispute with airlines over fare and flight data distributed to travel agents, asked a U.S. judge to dismiss an antitrust lawsuit brought by US Airways Group Inc. (LCC)
The suit, filed in April in federal court in New York, doesn’t allege any anticompetitive conduct and fails to define a plausible market, lawyers for Southlake, Texas-based Sabre said in court papers filed June 30. US Airways is using the suit to renegotiate a three-year contract signed in March, Sabre said.
“The antitrust laws are not a vehicle for large corporations to renegotiate the terms of their commercial agreements,” Sabre lawyers wrote. “The new agreement contains nearly identical provisions to the contract US Airways signed in 2006 and operated under for five years without complaint.”
US Airways followed AMR Corp. (AMR)’s American Airlines in suing Sabre, the largest U.S.-based so-called global distribution system, as the carriers seek more control over dissemination and sale of their products. More than 35 percent of US Airways’ annual revenue is booked through Sabre or Sabre-affiliated travel agents, the airline said in April. Sabre collects and shares flight data, and owns travel website Travelocity.com.
“We are still in the process of reviewing Sabre’s recent filing, but would note that Sabre’s anti-competitive and anti- consumer practices are still being investigated by the Department of Justice and are also the subject of other litigation,” Todd Lehmacher , a spokesman for Tempe, Arizona- based US Airways, said July 1 in an e-mail.
The case is U.S. Airways Inc. v. Sabre Holdings Corp., 11- cv-02725, U.S. District Court for the Southern District of New York (Manhattan).
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German Top Judge Questions Settlements Used in Bribery Cases
A top German judge questioned the legality of prosecutors settling criminal investigations involving major corruption cases over the last decade.
Herbert Landau, a judge at the Federal Constitutional Court, said the practice, which includes admitting wrongdoing in return for leniency, may be incompatible with the German Constitution. The constitution requires that all facts are fully investigated in a criminal case regardless of a confession, he said at the NStZ criminal law conference in Frankfurt July 1.
The German constitution “requires that the truth is determined objectively,” Landau said. “Agreeing on the facts by mutual consent of two parties isn’t compatible with” these principles.
German companies that faced corruption probes, including Siemens AG (SIE) and MAN SE (MAN), were able to settle cases with prosecutors, cutting costs and resolving the matter swiftly. Suspects in these probes, mostly company employees, also settled their individual cases, which is part of the agreement with the company.
The German criminal code introduced rules regulating these agreements two years ago to reflect a routine that has been practiced outside of any regulation since the beginning of the 1980s.
The Federal Constitutional Court has the power to strike down laws as unconstitutional. Landau is the judge who is preparing those constitutional cases for the full bench that touch criminal law issues.
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Australian Central Bank Currency Firms Charged With Bribery
The Australian central bank’s note-printing units and six people including former managers have been charged with bribing officials in Malaysia, Indonesia and Vietnam to win currency contracts.
Securency International Pty and Note Printing Australia Ltd. were charged over alleged payments to foreign public officials between 1999 and 2005, the Australian Federal Police said in a statement on its website. The Reserve Bank of Australia, which owns NPA and 50 percent of Securency, said in a statement it condemns corrupt behavior of any kind and no one at the bank has been accused of wrongdoing.
The July 1 arrests are the first under Australia’s decade- old foreign bribery laws and coincided with related bribery charges against two individuals in Malaysia by that nation’s Attorney-General’s Chambers following an investigation by the country’s anti-corruption commission, the AFP said. The RBA said in November last year that it will sell its stake in Securency.
“It’s clearly embarrassing for the Reserve Bank, but I think the market would make a clear distinction” between their monetary policy and note printing functions, said Nigel Stapledon, a former Treasury and Westpac Banking Corp. economist who lectures at the University of New South Wales’ school of business in Sydney. “I don’t think that it’s going to have any material effect on people’s judgment of their performance on monetary policy, which is more critical.”
Australian Assistant Treasurer Bill Shorten, speaking after the announcement, told reporters in Melbourne that he has “full confidence in the Reserve Bank of Australia.”
Governor Glenn Stevens said after the announcement that “the Reserve Bank condemns in the strongest terms corrupt or questionable behavior of any kind.”
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Roberts Court Split Shows New Justices Are Predictable
Republican-appointed justices split with their Democratic colleagues in a dozen cases, including the Wal-Mart Stores Inc. (WMT) class-action fight, as an unprecedented dynamic shaped the U.S. Supreme Court term that ended this week, Bloomberg News’ Greg Stohr reports.
The newest justices fueled the trend, rewarding the men who appointed them with consistent and predictable votes. President Barack Obama’s two choices, Sonia Sotomayor and Elena Kagan, voted in virtual lockstep and usually alongside fellow Democratic appointees Ruth Bader Ginsburg and Stephen Breyer. Former President George W. Bush’s two selections, Chief Justice John Roberts and Justice Samuel Alito, voted together more than any other duo.
“We’re in a different era,” said A.E. Dick Howard, a constitutional law professor at the University of Virginia in Charlottesville. “This is the way the Roberts court is going to be, especially now that we’ve seen enough of Sotomayor and Kagan to see that they agree with each other and the two of them in turn agree with Breyer and Ginsburg.”
The high court closed its term this week with rulings striking down a California ban on the sale of violent video games to minors and part of Arizona’s public-financing system for candidates seeking state office. The court will reconvene in October for a term that could include clashes over Obama’s health-care law and same-sex marriage.
The court has long had its ideological divisions, sometimes so intense that feuding justices barely spoke to each other. Until now, those splits have always crossed party lines. The two most recently retired justices, Republican-appointed John Paul Stevens and David Souter, regularly voted with the court’s liberal wing on social issues including the death penalty and abortion.
With Kagan and Sotomayor now occupying those two seats, the split can be a party-based one as well. The court’s five Republican-appointed justices disagreed with their Democratic- nominated colleagues in 10 cases this term, according to statistics compiled by Scotusblog, a website that tracks the court.
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Washington Mutual Reaches $208.5 Million Class-Action Accord
Washington Mutual Inc. (WAMUQ), the former owner of the biggest U.S. bank to fail, and its former executives, underwriters and auditor reached a $208.5 million settlement of a class-action lawsuit by investors.
The settlement provides for $105 million in payments on behalf of the individual defendants, $85 million from the underwriters, and $18.5 million from Deloitte & Touche LLP, according to a request for preliminary approval filed June 30 in federal court in Seattle by lawyers for the Ontario Teachers’ Pension Plan Board, the lead plaintiff in the case.
The lawsuit consolidates more than 20 cases claiming the bank secretly lowered lending standards, artificially inflated home-price appraisals and failed to disclose its deteriorating financial condition when the loans began to fail.
Washington Mutual, based in Seattle, filed for bankruptcy on Sept. 26, 2008, the day after its banking unit was taken over by regulators and sold to JPMorgan Chase & Co. for $1.9 billion. It was the biggest bank to fail in U.S. history, with more than 2,200 branches and $188 billion in deposits.
The case is In re Washington Mutual Inc. Securities, Derivative & ERISA Litigation, 2:08-md-01919, U.S. District Court, Western District of Washington (Seattle).
Bayer Will Pay $750 Million to Settle Gene-Modified Rice Suits
A Bayer AG (BAYN) unit agreed to a $750 million settlement resolving claims with about 11,000 U.S. farmers who said a strain of the company’s genetically modified rice tainted crops and ruined their export value.
The settlement, announced July 1, ends scores of lawsuits filed against the Bayer CropScience unit of the Leverkusen, Germany-based company by farmers in Texas, Louisiana, Missouri, Arkansas and Mississippi.
The U.S. Agriculture Department said in August 2006 that trace amounts of the company’s experimental LibertyLink strain were found in U.S. long-grain rice. Within four days, declining rice futures cost U.S. growers about $150 million, according to a complaint filed by the farmers. News of the contamination caused futures prices to fall about 14 percent.
“From the outset of this litigation, we made it clear to Bayer that the company needed to step up and take responsibility for damaging American rice farmers with its unapproved rice seeds,” Adam Levitt, a plaintiffs’ lawyer, said July 1 in a statement. “This excellent settlement goes a long way toward achieving that goal.”
Bayer confirmed the settlement in its own press statement minutes later.
“Although Bayer CropScience believes it acted responsibly in the handling of its biotech rice, the company considers it important to resolve the litigation so that it can move forward focused on its fundamental mission of providing innovative solutions to modern agriculture,” Greg Coffey, a spokesman for the company, said in the statement.
The accord is contingent upon the participation of growers representing at least 85 percent of the U.S. long-grain rice acreage planted between 2006 and 2009, the company and plaintiffs’ lawyers said separately.
The federal case is In re Genetically Modified Rice Litigation, 06-md-01811, U.S. District Court, Eastern District of Missouri (St. Louis).
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OZ Minerals’ $64 Million Settlement Wins Court Approval
An Australian judge approved OZ Minerals Ltd. (OZL)’s agreement to pay A$60 million ($64 million) to settle two shareholder lawsuits that claimed the company failed to properly disclose refinancing plans and debt levels in 2008.
OZ Minerals didn’t admit any wrongdoing as part of the settlement, the Melbourne-based company said in a stock exchange filing July 1.
“Any settlement involves a compromise” and shareholders won’t recoup all their losses, Federal Court Judge Arthur Emmett said at a hearing in Sydney on June 29.
The copper and gold producer will pay the settlement to about 9,100 shareholders. Shares of Oz Minerals plunged 79 percent in the second half of 2008, wiping out $6.5 billion of market value, as it struggled to refinance debt amid a global credit squeeze and declining metal prices. The company sold most of its assets to China Minmetals Group to repay the debt.
Slater & Gordon Ltd. (SGH) and Maurice Blackburn Lawyers filed separate lawsuits on behalf of shareholders who claimed to have been misled. Slater & Gordon said it represented about 7,500 shareholders while Maurice Blackburn represented about 1,600.
OZ Minerals, formed in 2008 through the merger of Oxiana Ltd. and Zinifex Ltd., agreed in May to pay A$19.2 million, along with A$1.8 million in legal fees, to settle the Slater & Gordon suit.
The company agreed to pay A$35.9 million with A$3.1 million in legal fees to settle the Maurice Blackburn suit, which was financed by IMF (Australia) Ltd., a Sydney-based company that funds class-action lawsuits.
The case is Between Anthony Scott and Oz Minerals Ltd. NSD1433/2010. Federal Court of Australia (Sydney).
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