Danielle Chiesi, convicted of insider trading as part of the Galleon Group LLC case, agreed to pay $540,000 to settle related allegations by the U.S. Securities and Exchange Commission.
In addition to her liability for $500,000 in principal and $40,535 in interest, Chiesi agreed not to violate SEC rules prohibiting her from directly or indirectly engaging in fraudulent or deceptive practices including insider trading.
Chiesi, 45, who was an analyst at New Castle Funds LLC, and Mark Kurland, New Castle’s co-founder, both pleaded guilty in connection with a government investigation of hedge-fund insider trading centered on Galleon and its co-founder, Raj Rajaratnam.
The SEC first sued Rajaratnam, Chiesi, Kurland and three other people in October 2009. Her agreement resolves allegations contained in a revised complaint filed last year.
Chiesi’s lawyer, Alan Kaufman, yesterday declined to comment on the agreement. John Nester, a spokesman for the SEC, didn’t immediately respond to a telephone message seeking comment.
On Jan. 19, Chiesi pleaded guilty to three counts of conspiracy, telling U.S. District Judge Richard Holwell she was “deeply ashamed” of what she had done.
Prosecutors have said she should get from 37 to 46 months in prison when she is sentenced on July 20.
The criminal case is U.S. v. Rajaratnam, 09-cr-1184, U.S. District Court, Southern District of New York (Manhattan). The civil case is Securities and Exchange Commission v. Galleon Management LP, 09cv8811, U.S. District Court, Southern District of New York (Manhattan).
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Home Loan Banks Seek to Intervene in BofA Mortgage Accord
Six federal home loan banks sought to join a case in which a New York judge will decide whether to approve an $8.5 billion settlement by Bank of America Corp. (BAC) with Bank of New York Mellon Corp. (BK) over mortgage-securitization trusts.
“The FHLBs have not made decisions whether to oppose the settlement,” the Federal Home Loan Banks of Boston, Chicago, Indianapolis, Pittsburgh, San Francisco and Seattle said in a filing yesterday in New York state court in Manhattan. They are seeking to intervene because “the procedures that BNYM has established for approval of the proposed settlement will not provide them enough information on which to make careful and informed decisions.”
Earlier yesterday, TM1 Investors asked to join in the case and a group of investors operating under the name Walnut Place pursued an earlier bid to intervene. Public pension funds including the Policemen’s Annuity & Benefit Fund of Chicago, the Westmoreland County Employee Retirement System, City of Grand Rapids General Retirement System and City of Grand Rapids Police & Fire Retirement System have also sought to intervene.
BNY Mellon, as trustee of the 530 trusts, filed a petition June 29 seeking approval of the settlement. The agreement requires Bank of America, its Countrywide Financial unit or both to pay $8.5 billion.
Kevin Heine, a spokesman for Bank of New York Mellon, declined to comment. Lawrence Grayson, a spokesman for Bank of America, declined to comment.
The request by the home loan banks comes a day after it was revealed that New York Attorney General Eric Schneiderman is seeking client information from more than 20 companies as part of a state probe of the proposed accord. Schneiderman’s office sent letters dated July 7 to companies including Goldman Sachs Group Inc., BlackRock Inc. (BLK) and TCW Group Inc. regarding their participation in the deal.
New York State Supreme Court Justice Barbara R. Kapnick set a hearing on the settlement for Nov. 17.
The home loan banks said in their filing yesterday that Countrywide and Bank of America face liabilities to repurchase defective loans that are far greater than the amount of the proposed settlement.
“The banks need disclosure to understand why BNYM decided to accept the proposed settlement amount and to decide whether to object to that amount,” they said in court papers.
The case is In the matter of Bank of New York Mellon, 651786/2011, New York state Supreme Court (Manhattan).
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Union Carbide $322 Million Asbestos Verdict Put on Hold
A $322 million jury verdict against Dow Chemical Co. (DOW)’s Union Carbide unit and Chevron Phillips Chemical Co. was put on hold while the Mississippi Supreme Court considers whether the trial judge should be disqualified.
Union Carbide claims Circuit Court Judge Eddie Bowen, who presided in the Raleigh, Mississippi, trial over a former oil worker’s claim he was sickened by asbestos, should have bowed out of the case because the judge’s father suffered from asbestosis, a disease caused by the mineral.
Union Carbide said the companies were denied a fair trial. Bowen might be biased, the company said in its petition to the state high court, citing his father’s illness, “improper comments on the evidence,” and rulings during the trial.
The May 4 award is the largest ever made to a single asbestos case plaintiff, according to data compiled by Bloomberg. A state punitive-damages cap would erase at least $260 million.
The Mississippi court stopped proceedings in the case in an order signed by Chief Justice William L. Waller Jr. The ruling means the award won’t be enforced until the allegations are resolved.
“If there’s a disqualification, you would have to retry it with a different judge,” said Carl Tobias, a University of Richmond law professor in Virginia. “That’s the way most courts would handle it.” The state Supreme Court might reject the motion to disqualify the judge, he said..
The plaintiff, Thomas Brown, developed asbestosis after being exposed to the toxic fibers while mixing drilling mud on oil rigs in the Gulf of Mexico. He said Union Carbide and Chevron Phillips Chemical knew asbestos is toxic and didn’t warn him. Brown is on oxygen 24 hours a day, said his attorney, D. Allen Hossley.
The jury verdict included $300 million in punitive damages, awarded equally against Union Carbide and Chevron Phillips Chemical. Mississippi law would limit the punitive award to $40 million, or $20 million per defendant.
The case is Brown v. Phillips Co., 2006-196, Circuit Court, Smith County, Mississippi (Raleigh).
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Armor Holdings to Pay $16 Million to Settle Bribery Claims
Armor Holdings Inc., the military-truck maker now a subsidiary of BAE Systems Plc (BA/), agreed to pay $16 million to resolve U.S. claims it bribed a United Nations official to win contracts connected to peacekeeping missions.
The company will pay $10.3 million to resolve criminal allegations and $5.7 million to settle related civil claims, the Justice Department and Securities and Exchange Commission said in separate statements yesterday. The violations of the Foreign Corrupt Practices Act, which began as early as 2001, took place before BAE bought the company in 2007, prosecutors said.
In 2001 and 2003, Armor employees set up sham consulting contracts to funnel bribes to a UN procurement official in exchange for information about competitors’ bids to provide body armor for peacekeeping troops, according to the complaint. Armor won about $6 million in contracts through the corrupt payments for a profit of about $1 million, the Justice Department said.
“Armor and BAE Systems have cooperated extensively with the government since this conduct was first reported in April 2007,” BAE spokesman Brian Roehrkasse said in a statement. As a result of Armor’s “disclosure, cooperation, and extensive remediation, the DOJ and SEC have entered into settlements that close the matter without any FCPA prosecution or litigation.”
The criminal probe by the Justice Department was settled with a non-prosecution agreement that cited the company’s cooperation and internal investigation in the case. In settling the SEC claims, Armor didn’t admit or deny the allegations.
The Justice Department said Richard Bistrong, who worked in Armor’s international sales unit, and another unidentified executive arranged for the UN agent to receive more than $200,000 in commissions for the 2001 and 2003 contracts. Bistrong pleaded guilty last year to bribing UN and Dutch officials to win body armor and pepper-spray contracts.
Brady Toensing, Bistrong’s lawyer, declined to comment.
The SEC case is Securities and Exchange Commission v. Armor Holdings Inc., 1:11-cv-01271, U.S. District Court, District of Columbia (Washington).
ThyssenKrupp Wins $225 Million Cartel-Fine Cut, Otis Loses
ThyssenKrupp AG (TKA) won a court appeal to slice 159.9 million euros ($225 million) off a 479.7 million-euro antitrust fine for carving up the markets for elevators and escalators.
The European Union’s General Court cut the fine for ThyssenKrupp and several of its units, saying the EU antitrust regulator wrongly cited repeated infringements by the companies as a reason for increasing the penalties. The Luxembourg-based court upheld fines against United Technologies Corp. (UTX)’s Otis unit, Finland’s Kone Oyj (KNEBV) and Schindler Holding AG. (SCHN)
The European Commission penalized five companies 992.3 million euros in February 2007 for their roles in the elevator cartel. Appeals by ThyssenKrupp and its units, whose overall fine was the biggest in the cartel, made up about half of the cases before the court. Otis was fined 224.9 million euros, Kone 142.1 million euros and Schindler 143.7 million euros.
The elevator companies were accused of setting prices in Belgium, Germany, Luxembourg and the Netherlands between at least 1995 and 2004. They rigged contract bids, allocated projects to each other and shared confidential information, the commission said.
Schindler said it would appeal the ruling. Kone said in a statement it would study the judgment before deciding on further steps, adding that its penalty was recognized as a cost in the first quarter of 2007.
ThyssenKrupp said in an e-mail that it welcomed the court’s decision. The Essen, Germany-based company declined to comment further until it has studied the ruling.
Spokespeople for Otis declined to immediately comment. Mitsubishi Elevator Europe BV was fined 1.8 million euros in the cartel. It didn’t appeal.
The cases are T-138/07, Schindler v. European Commission; T-141/07, General Technic-Otis v. Commission; T-142/07, General Technic v. Commission; T-145/07, Otis and Others v. Commission; T-146/07, United Technologies v. Commission; T-147/07, T-144/07, T-148/07, T-149/07, T-150/07, T-154/07, ThyssenKrupp and Others v. Commission, T-151/07, Kone and Others v. Commission.
Eni Wins EU Cartel Fine Cut; Unipetrol Has Penalty Canceled
The EU General Court in Luxembourg yesterday said the European Commission wrongly increased Eni’s fine based on findings of repeated violations. The court upheld fines against Dow Chemical Co., the largest U.S. chemical maker, and Royal Dutch Shell Plc (RDSA) in the case involving a cartel fixing the prices of ingredients in rubber used in tires and shoes.
The commission, the 27-nation EU’s antitrust regulator in November 2006 fined five companies 519 million euros for rigging prices of synthetic rubber in a cartel that lasted from at least 1996 to 2002. Bayer AG (BAYN) escaped a fine after it tipped off the EU about the cartel.
Unipetrol, which is controlled by Polish oil company PKN Orlen SA, and Poland’s Trade-Stomil Sp z o.o. had their fines of 17.5 million euros and 3.8 million euros, respectively, annulled. The court said the commission based the two companies’ fines on insufficient evidence.
Eni declined to comment.
Shell said in a statement that it is studying the judgment.
“As a matter of policy, we do not provide any further comments since we or the commission may decide to appeal,” Dow said in an e-mailed statement.
The cases are T-38/07, Shell Petroleum v. Commission; T-39/07, ENI v. Commission; T-42/07, Dow Chemical v. Commission; T-44/07, Kaucuk v. Commission; T-45/07, Unipetrol v. Commission; T-53/07, Trade-Stomil v. Commission; T-59/07, Polimeri Europa v. Commission.
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Ameron Sued by Shareholder Over National Oilwell Offer
Directors of Pasadena, California-based Ameron, which makes pipe systems, have a duty to get the best price, plaintiff Alan Kahn said in a Delaware Chancery Court complaint made public yesterday in Wilmington. National Oilwell bid $85 a share. Analysts have suggested they may be worth more than $100 each, Kahn said.
Ameron directors “have failed to take adequate measures” to protect shareholders’ investments and “embarked on a process that avoided competitive bidding,” Kahn said.
National Oilwell, based in Houston, said July 5 it would buy Ameron to gain access to its fiberglass-pipe business.
Gary Wagner, chief financial officer for Ameron, didn’t immediately return a call seeking comment on the lawsuit.
The case is Kahn v. Ameron, CA6660, Delaware Chancery Court (Wilmington).
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Barclays Seeks to Delay $2 Billion Lehman Brokerage Payment
Barclays Plc (BARC), ordered to return $2 billion in margin assets to bankrupt Lehman Brothers Holdings Inc. (LEHMQ)’s brokerage, asked a judge to allow it to appeal the judgment without making any payments in the meantime.
The trustee liquidating the remnants of the brokerage, James Giddens, would hold off paying London-based Barclays the $1 billion he owes the U.K. bank, according to a court filing July 12 made jointly by Barclays and the brokerage.
U.S. Bankruptcy Judge James Peck in New York ruled last month that Barclays must give back the margin assets it claimed it was using to back trading positions taken on when it bought Lehman’s North American businesses in the 2008 credit crisis. He set interest at 5 percent of the assets from September 2008 until he signs his final order on the case, which he hasn’t done.
The dispute, arising from Barclays’s September 2008 purchase of bankrupt Lehman’s businesses and subsequent profit on them, led to a bankruptcy court trial in 2010 with more than 30 days of testimony. The trial pitted the third-biggest U.K. bank against two defunct parts of what was once the fourth- largest U.S. investment bank.
The Lehman parent lost a bid to recoup an alleged $11 billion “windfall profit” made by Barclays, and the brokerage had its demands cut from $7 billion.
Instead of having Barclays post a bond while it appeals, Giddens agreed to let it to put collateral in a bank account “from time to time.” A $1 billion bond from a “reputable” bonding agency, presuming one could be obtained, might cost $10 million, Barclays said in the filing.
The case is SIPC v. Lehman Brothers Inc., 08-ap-1420, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
U.S. Tapped 104 Users of Primary Global Conference Lines
U.S. investigators received permission in 2009 to wiretap 104 callers to two conference lines used by Primary Global Research LLC, a so-called expert networking firm, according to a court filing.
U.S. District Judge Kevin Duffy in Manhattan signed an order in October 2009 permitting investigators to listen in on the lines, which included Primary Global customers, four employees and five consultants, according the court filing submitted July 12 by James Fleishman, a former sales manager at the firm.
Fleishman, who is scheduled to be tried on two counts of conspiracy next month, submitted the order and related papers in support of his motion to block the government from introducing evidence from the wiretaps.
Primary Global is at the center of a nationwide probe of insider trading at hedge funds, technology companies, banks and consulting firms. Winifred Jiau, a former Primary Global consultant, was convicted of securities fraud and conspiracy June 20 in Manhattan federal court.
Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, declined to comment.
The case is U.S. v. Fleishman, 11-CR-32, U.S. District Court, Southern District of New York (Manhattan).
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Alstom Executives Lose Bid to Challenge U.K. Search Warrants
Executives at Alstom SA (ALO)’s U.K. unit lost their bid to challenge fraud prosecutors over their arrest and searches of their homes as part of a probe into claims the company paid 81 million pounds ($129 million) in bribes.
Stephen Burgin, president of the French company’s U.K. unit, and Robert Purcell, its finance director, can’t argue that the Serious Fraud Office didn’t have enough reason to suspect them of a crime, a London court ruled. The judgment means prosecutors can use evidence seized at the executives’ homes last year.
“The challenge to the validity of the arrest warrants is not reasonably arguable,” the court said.
Prosecutors suspect that from 2004 to 2010 Alstom, through its Alstom Network U.K. Ltd. unit, gave money to companies that acted as “bogus consultants” to bribe overseas officials for contracts, according to court papers. A lawyer for the SFO, James Eadie, said at a hearing in April that Alstom Network acted as “a conduit” to pass money through, and paid “nine times as much commission in the Middle East and Africa compared to Europe, and eight times for Asia.”
Alstom said in a statement that the allegations being investigated are seven years old and haven’t resulted in any decision against the company by any court. It said neither the judge who issued the search warrants, nor the court ruling yesterday, reviewed the SFO’s underlying claims.
“The company continues to stand by its managers,” Alstom said in the statement. “It has never wavered in its support and has no reason to believe that they will not be fully vindicated during the course of the on-going investigation.”
Burgin and Purcell’s lawyer, Shaul Brazil, declined to comment.
The cases are Burgin v. Commissioner of Police of the Metropolis, 10/6227; and Burgin v. Director of the Serious Fraud Office, 10/5723, High Court of Justice, Administrative Court (London).
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EBay Must Face Craigslist Lawsuit in California, Judge Says
EBay Inc. (EBAY) must face Craigslist Inc.’s fraud claims after a judge in San Francisco decided that a Delaware lawsuit EBay won against the online classified company didn’t rule out the case.
Superior Court Judge Richard Kramer said yesterday that the judge who presided over the Delaware case and ruled last year in favor of EBay by throwing out closely held Craigslist’s anti- takeover plan meant for the California lawsuit to proceed. EBay, a minority investor in Craigslist, had argued that the Delaware case dealt with the “totality” of its relationship with Craigslist.
“He makes no legal conclusion as to whether EBay is liable for the various claims in the California case,” Kramer said at a hearing yesterday. “He said clearly he is leaving it to me to resolve the California claims.”
Craigslist, based in San Francisco, claims in the California case, originally filed in 2008, that the world’s largest Web auctioneer stole confidential information to start a competing online ad site when the two companies were in negotiations about EBay purchasing a stake in Craigslist. The lawsuit alleges breach of contract, breach of fiduciary duty, negligent misrepresentation and violation of California securities laws.
“eBay is considering its options for appeal,” Michelle Fang, associate general counsel for the company, said in an e- mailed statement. “This litigation is still in its early stages. In its decision today, the court did not address the actual merits of the case, and we remain confident that we will ultimately prevail.”
Susan MacTavish Best, a spokeswoman for Craigslist, didn’t immediately return an e-mail seeking comment.
The case is Craigslist v. EBay, 475276, Superior Court of California (San Francisco).
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SAP Asks Court to Cut Oracle’s $1.3 Billion Damage Award
SAP AG (SAP), the business-software maker ordered by a jury to pay $1.3 billion to Oracle Corp. (ORCL), told a judge the verdict was based on speculation about Oracle’s losses and should be cut to no more than $408 million.
A lawyer for SAP, Greg Lanier, said at a hearing yesterday in federal court in Oakland, California, that during a trial last year Oracle overstated its losses from copyright infringement by an SAP unit. SAP asked U.S. District Judge Phyllis Hamilton to reduce the damage award or order a new trial because sustaining the verdict would be a miscarriage of justice.
“I have not decided what I am going to do,” the judge said. She later cautioned lawyers on both sides not to read too much into an earlier ruling denying an SAP motion for summary judgment, or a decision in its favor without trial. “I didn’t say Oracle was entitled to such damages. It is still up to Oracle to present non-speculative evidence of damages.”
Oracle, based in Redwood City, California, won a lawsuit in November accusing SAP’s U.S.-based TomorrowNow software- maintenance unit of making hundreds of thousands of illegal downloads and several thousand copies of Oracle’s software to avoid paying licensing fees and to steal customers. The jury award was the largest ever for copyright infringement.
Oracle maintained at trial that its damages should represent the value of a hypothetical license that the unit would have had to pay for the software it infringed.
Such a license would never have existed between two fierce competitors, so the damage award should have been based on profits Oracle lost and SAP gained as a result of the infringement, Walldorf, Germany-based SAP said in court filings. That number is from $28 million to $407.8 million, SAP said in the filings.
The case is Oracle Corp. v. SAP AG, 07-01658, U.S. District Court, Northern District of California (Oakland).
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