Bank of America Corp.’s proposed $8.5 billion settlement over mortgage-securitization trusts is being probed by New York Attorney General Eric Schneiderman, who is seeking client information from more than 20 companies, Bloomberg News’ Karen Freifeld reports.
Schneiderman’s office sent letters dated July 7 to the companies, including Goldman Sachs Group Inc. (GS), BlackRock Inc. (BLK) and TCW Group Inc., regarding their participation in Bank of America’s proposed deal. He is asking for the information by tomorrow.
The information was requested in connection with an investigation by the office “into certain matters related to securitization of residential mortgages,” according to the letters.
Investment managers were asked to identify clients affiliated with New York state government entities and public authorities, as well as nonprofit or charitable corporations that invested in the 530 residential mortgage-securitization trusts established from 2004 to 2008, according to copies of the letters obtained by Bloomberg News. The letters also request the total par amount and current market value of all securities issued by the trusts covered in the settlement agreement for each client that meets the criteria.
Bank of New York Mellon Corp., as trustee of the 530 trusts, filed a petition June 29 in New York state Supreme Court in Manhattan seeking approval of the settlement. Investors have claimed that units of Countrywide Financial Corp. failed to honor contracts saying they needed to repurchase loans that never matched their promised quality. Charlotte, North Carolina-based Bank of America acquired Countrywide in 2008.
The settlement was supported by a group of 22 bondholders, including Goldman Sachs and BlackRock, both based in New York, and Societe Generale SA’s TCW.
New York State Supreme Court Justice Barbara R. Kapnick in Manhattan set a hearing on the settlement for Nov. 17.
Walnut Place LLC and a group of public pension funds have sought to intervene in the deal. Bank of New York Mellon, as a trustee and a party to the deal, has conflicts of interest “that raise serious doubts about its motives in negotiating the settlement,” Walnut Place said in a court filing. Bank of New York Mellon negotiated an indemnity from Bank of America that protects the trustee from potential liabilities in excess of earlier agreements, Walnut Place said.
“It defies all reason and common sense to suggest that 22 separate institutions -- each of which independently evaluated and chose to support the settlement -- would set aside their own financial interests to benefit Bank of America,” the investors said in their filing.
“Equally implausible is the suggestion that the institutional investors who act as fiduciary investment advisers would abandon the interests of their pension fund, mutual fund and individual investor clients in favor of Bank of America’s,” the investors said.
Lawrence Grayson, a spokesman for Bank of America, and Kevin Heine, a spokesman for Bank of New York Mellon, declined to comment.
Lauren Passalacqua, a spokeswoman for Schneiderman, declined to comment yesterday. BlackRock spokeswoman Bobbie Collins and Ed Canaday, a Goldman Sachs spokesman, declined to immediately comment. Peter Viles, a spokesman for TCW Group, also declined to comment.
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EBay Says Win in Delaware Craigslist Case Bars New Claims
EBay Inc. (EBAY) shouldn’t have to face fraud and negligence claims by Craigslist Inc. in California because a similar case it won in Delaware upheld its minority investment rights in the online classified-ad provider, a company lawyer said.
The Delaware court’s ruling last year, which supported EBay’s right to compete with Craigslist, precludes Craigslist from proceeding with an unfair competition and fraud lawsuit in California that seeks to strip EBay of its Craigslist shares, EBay attorney Michael Rhodes told a state court judge yesterday in San Francisco.
The Delaware court threw out Craigslist’s poison-pill plan, which EBay alleged was an attempt to punish the online auctioneer for starting a competing, online classified-ad service.
“They want you to undo what we just got” in Delaware, Rhodes told Superior Court Judge Richard Kramer.
The day after losing the case in September, Craigslist amended its 2008 California lawsuit, which had been put on hold, to revive claims it lost in the earlier case, he said.
Jason Yurasek, Craigslist’s attorney, said the Delaware case was about issues of corporate governance that the judge recognized as separate from claims in the California case. Both companies agreed years ago that any dispute over EBay’s investment should be resolved in state court in San Francisco, he said. Craigslist says the California case is about whether EBay lied about its intent to compete with Craigslist and try to increase its holding and take the company over, he said.
“This dispute was not over when he ruled,” Yurasek said, citing comments by the Delaware judge that whether his ruling was the “proverbial stone in Craigslist’s sling that will slay the giant EBay” remained to be seen.
Kramer said he would rule today on what effect, if any, the Delaware ruling has on the California lawsuit, filed by closely held Craigslist over claims that EBay used confidential information obtained during negotiations about its minority stake to start a competing classified service.
The case is Craigslist v. EBay, 475276, Superior Court of California (San Francisco).
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Toyota Wins Dismissal of 26 of 33 Claims in Investor Lawsuit
Toyota Motor Corp. (7203) won dismissal of 26 of 33 claims in a stockholder lawsuit over alleged sudden unintended-acceleration problems leading to a 20 percent drop in the carmaker’s shares in January and February of last year.
The suit raised claims under Japanese securities law, over which the U.S. court didn’t have original jurisdiction, U.S. District Judge Dale Fischer in Los Angeles ruled in an 11-page memorandum dated July 7. Those claims involve investors who purchased their stock on foreign exchanges, Fischer said.
Respect for foreign law “would be completely subverted if foreign claims were allowed to be piggybacked into virtually every American securities fraud case,” the judge wrote.
The investors, led by the Maryland State Retirement and Pension System, said in their complaint that internal documents show the Toyota City, Japan-based company, Asia’s largest carmaker, deliberately hid the acceleration problems and knew about defects as early as 2000.
“We are pleased that the court has granted Toyota’s motion to dismiss most of the claims in the federal securities case,” Celeste Migliore, a Toyota spokeswoman, said in an e-mail. The company believes it’s important that the judge rejected the shareholders “attempted end-run around” a Supreme Court decision to pursue claims under Japanese law, she said.
The judge allowed the case to proceed on seven of the 33 misrepresentations Toyota is alleged to have made to investors about the sudden-acceleration problems.
“We respect the judge’s decision, but we plan to move forward and collect significant damages,” David Paulson, a spokesman for Maryland Attorney General Douglas F. Gansler, who represents the retirement system, said in a telephone interview.
The case is In re Toyota Motor Corp. (TM) Securities Litigation, 10-00922, U.S. District Court, Central District of California (Los Angeles)
LuxAlpha Seeks to Move Madoff Suit to U.S. District Court
Access International Advisors LLC’s LuxAlpha Sicav asked a U.S. district judge to review a lawsuit by the liquidator of Bernard Madoff’s firm, saying it was joining in a similar request by UBS AG. (UBSN)
UBS last week was joined by Access International, the heir of its late Chief Executive Officer Thierry Magon de La Villehuchet and Groupement Financier Ltd.
Trustee Irving Picard sued UBS twice, demanding $2.6 billion and alleging the Zurich-based bank aided Madoff’s fraud by setting up so-called feeder funds such as LuxAlpha that put money with the con man. U.S. District Judge Colleen McMahon, who is handling Picard’s $19 billion suit against JPMorgan Chase & Co. (JPM), said the UBS case is related and she will review it if the bank keeps to the schedule already set for JPMorgan.
The LuxAlpha funds, named in the UBS suits, said they should be included too.
“It is certainly within the interests of judicial efficiency to keep these complex cases before the same court,” they said in a court filing July 11.
The UBS case is Picard v. UBS AG, 10-ap-4285, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Viacom Must Face Suit Over Nickelodeon Deal With Marriott
Viacom Inc. (VIAB), the owner of cable networks, must face a lawsuit accusing it of violating its contract with Family Suites Resort LLC by licensing the Nickelodeon brand to Marriott International Inc. (MAR)
New York Supreme Court Judge Barbara A. Kapnick in Manhattan denied Viacom’s request to dismiss the suit, in which Family Suites accuses Viacom of improperly entering a “Nickelodeon Getaway” branding deal with Marriott for hotels in Florida.
The lawsuit, seeking as much as $180 million in damages, is based on breach-of-contract and fraud claims, as well as claims for legal expenses. Kapnick dismissed the fraud claim, ruling it duplicates the contract claim. The first and third claims of the complaint -- the breach-of-contract and legal-expenses claims -- are “severed and continued,” Kapnick ruled.
MTV Networks, a unit of Viacom and a defendant in the suit, “has not shown conclusively that its interpretation of the agreement is the only reasonable one,” Kapnick wrote, referring to the breach-of-contract claim and denying Viacom’s motion to dismiss it.
The judge ordered New York-based Viacom to respond to the remaining claims within 20 days of her July 7 order.
David Bittler, a spokesman for Nickelodeon, didn’t immediately return phone and e-mail messages seeking comment after regular business hours July 11.
The case is Family Suites Resort LLC v. Viacom International Inc., 650489/2010, Supreme Court of the State of New York, New York County (Manhattan).
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Tetragon Financial Shareholder Sues Directors Over Fees
A Tetragon Financial Group Ltd. (TFG) shareholder sued a group of company officers and directors, the firm’s investment manager and Polygon Investment Partners LLP, an investment firm, claiming “an ongoing abusive scheme” by the directors to profit at Tetragon’s expense.
Daniel Silverstein sued on behalf of the company, which is based on Guernsey in the Channel Islands, on July 11 in Manhattan federal court.
The defendants “have awarded the investment manager (and themselves) $205 million in performance fees even though TFG’s investments have failed to make up their prior losses since the third quarter of 2008,” Silverstein claimed in the complaint.
“TFG and its board of directors believe that the action is factually and legally without merit and intend to seek to have the action dismissed as quickly as possible,” Tetragon said in a statement.
The investor claims unspecified damages and seeks a court order requiring the board to end the alleged diversion of assets to the defendants.
The case is Silverstein v. Knief, 11-CV-4776, U.S. District Court, Southern District of New York (Manhattan).
Immucor Shareholder Sues to Block TPG’s $1.97 Billion Buyout
An Immucor Inc. shareholder sued to block a $1.97 billion takeover of the company by private-equity firm TPG Capital, calling the offer “woefully inadequate” in a Georgia state-court complaint.
The offer of $27 a share for Immucor, the leading maker of tests to screen blood before transfusions, is 30 percent more than the closing price on July 1, the last trading day before the deal was announced July 5. Norcross, Georgia-based Immucor said that it may seek higher bids through Aug. 15.
In a lawsuit filed yesterday in Fulton County Superior Court in Atlanta, shareholder Hilary Kramer said the stock had been trading at “depressed levels” when Fort Worth, Texas-based TPG made the offer.
Kramer, who is seeking to proceed on behalf of all Immucor shareholders, said the stock price had been driven down in part by federal antitrust investigations.
The U.S. Justice Department closed a criminal probe into blood reagent pricing without filing charges, Immucor and Johnson & Johnson, the No. 2 blood-screening company, said in filings in January and November.
The case is Kramer v. Immucor Inc., 2011-cv-203124, Superior Court of Fulton County, Georgia (Atlanta).
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Madoff Trustee’s First Payments to Customers Approved by Judge
The first payments to customers of con man Bernard Madoff out of funds collected by a trustee for his firm won approval from a bankruptcy judge, more than 2 1/2 years after the Ponzi scheme collapsed.
Trustee Irving Picard said in May he would initially pay $272 million to customers with approved claims, out of a $2.6 billion fund set up for Madoff investors. Yesterday’s order approving the payouts was issued by U.S. Bankruptcy Judge Burton Lifland in Manhattan.
Picard, who has filed more than 1,000 suits seeking money for Madoff investors, said May 4 that he had recovered $7.6 billion. In June, he estimated the principal lost by all Madoff investors was $19 billion. He and his law firm, Baker & Hostetler LLP, have collected about $179 million in fees for their efforts.
Because of court challenges, most of the money recovered isn’t available to put in the customer fund or distribute, Picard said in May. Investors are challenging his share of a $5 billion settlement with the estate of Jeffry Picower.
Picard’s lawsuits have targeted banks as well as individuals who invested large sums with Madoff. JPMorgan Chase & Co., sued for $19 billion for allegedly assisting the fraud, and HSBC Holdings Plc, sued together with so-called feeder funds for $9 billion, have challenged the trustee’s right to make such fraud claims, or sue on behalf of customers.
Two U.S. District Court judges in Manhattan are reviewing Picard’s right to sue banks and investors for damages.
The main case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-ap-1789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
EBay May Be Liable in L’Oreal Trademark Suit, EU Court Says
EBay Inc. may be held liable for trademark breaches on its auction site if it has knowledge of the infringing data, the European Union’s highest court said in a dispute involving cosmetics maker L’Oreal SA. (OR)
The EU Court of Justice in Luxembourg ruled yesterday that national courts can order an online marketplace like EBay to stop infringements if it “played an active role” that would “give it knowledge of or control over the data relating to the offers for sale.”
“EBay isn’t doing enough,” said Dominic Batchelor, a partner with Ashurst LLP in London. “It’s going to be up to member states to work out on a case-by-case basis what is the right sort of remedy.”
The EU court was called in at the request of U.K. judges, who sought guidance in 2009 after a local tribunal found EBay wasn’t liable for trademark breaches by users. A French court ordered the two companies into mediation in 2009 after saying EBay’s efforts to block sales of counterfeits showed its good-faith, and in 2008 a Belgian case rejected similar claims by L’Oreal, the world’s largest cosmetics company.
“The judgment provides some clarity on certain issues, and ensures that all brands can be traded online in Europe,” said Stefan Krawczyk, EBay’s European government-relations director. “A lot of cases will still have to be assessed by the national courts. We’ve moved on -- we fulfill most of these conditions now anyways.”
The EU court decision “is in line with the position L’Oreal has taken for several years and is applicable in courts throughout the European Union,” said Laurence Balmayer, a L’Oreal spokeswoman. “National courts must be able to order companies operating Internet marketplaces to take measures to prevent the sales” of fakes, products outside their original packaging, not-for-sale items and goods imported without the rights-owner’s consent.
The case is C-324/09, L’Oreal SA, Lancome parfums et beaute & Cie SNC, Laboratoire Garnier & Cie, L’Oreal (UK) Limited v. EBay International AG, eBay Europe SARL, eBay (UK) Limited.
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Philip Morris Wins Wrongful Dismissal Lawsuit in Singapore
Philip Morris International Ltd. won a lawsuit in Singapore against a former employee who claimed she was wrongly fired after raising questions about alleged unlawful marketing activities.
Chan Miu Yin sued the Singapore unit of the world’s largest publicly traded tobacco company, accusing Philip Morris of trying to “silence her as she had highlighted several unlawful activities” the firm was allegedly involved in, according to a Singapore High Court ruling made publicly available yesterday.
“I found the claim to be inescapably and fundamentally flawed,” assistant registrar Shaun Leong said in his decision, calling Chan’s claims “frivolous, vexatious and an abuse of proceedings.”
“We are satisfied with the ruling of the High Court, which concluded that there was no wrongdoing by Philip Morris Singapore Pte. Ltd.,” Anne Edwards, a company spokeswoman, said in an e-mailed statement.
The case is Chan Miu Yin v Philip Morris Singapore Pte S152/2011 in the Singapore High Court.
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Labaton Sucharow Hires Former SEC Attorney Jordan Thomas
Labaton Sucharow LLP hired former U.S. Securities and Exchange Commission attorney Jordan A. Thomas to start the New York-based law firm’s whistle-blower representation practice.
Thomas was assistant director and assistant chief litigation counsel in the SEC’s Division of Enforcement for the past eight years and helped to develop the agency’s whistle-blower program, Labaton said yesterday in a statement. Thomas will head Labaton’s practice focused exclusively on representing individuals who report fraud to the SEC.
“After working on the whistle-blower and cooperation initiatives, I have come to believe that these new partnerships between government and private individuals will revolutionize the enforcement of the federal securities laws,” Thomas said in the statement.
The SEC’s whistle-blower program, part of the agency’s rulemaking under the Dodd-Frank Act, will let corporate tipsters collect as much as 30 percent of penalties when they report financial wrongdoing. The program expands a bounty system that was previously limited to insider-trading cases.
Labaton’s whistle-blower practice will include an in-house team of investigators, financial analysts and forensic accountants with federal and state law enforcement experience, the firm said.
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