News Corp., Credit Suisse, JPMorgan, BP in Court News
The head of Scotland Yard resigned yesterday, hours after former News of the World editor Rebekah Brooks was arrested as the scandal over phone hacking at the now-defunct News Corp. (NWSA) tabloid widened.
Metropolitan Police Commissioner Paul Stephenson stepped down because of “accusations” about police links to News Corp. (NWS)’s U.K. unit and its hiring of a former journalist at the tabloid as a consultant. Brooks, 43, met with police for questioning yesterday, two days after she stepped down as head of the unit, News International.
The revelations of phone hacking -- including breaking into the voice mail of a murdered schoolgirl -- have already seen News Corp. shutter the 168-year-old News of the World. Brooks, along with News Corp. Chairman Rupert Murdoch, and his son James, deputy chief operating officer, are scheduled to testify at a U.K. Parliamentary committee hearing tomorrow.
“Over the next 24 to 36 hours, her lawyers will be in discussions with the committee about whether it will still be appropriate for her to attend,” David Wilson, a spokesman for Brooks, said in a phone interview yesterday. “She has nothing to hide, and she was very happy to give evidence, but today’s actions have changed the ballpark.”
Brooks voluntarily went to a London police station by appointment yesterday, Wilson said. Police said in an e-mail that the arrest was on suspicion of corruption and conspiring to intercept communications. She was released on bail around midnight, police said.
Brooks was the 10th person, including at least eight with links to News of the World, detained by police in the investigation. She resigned July 15 as chief executive officer of News International, which publishes New York-based News Corp.’s U.K. titles. Brooks edited the News of the World and then the Sun before being promoted to CEO of News International in 2009.
A News Corp. spokeswoman, who declined to be identified, reiterated yesterday the company’s intention to fully cooperate with the police.
Lawyers and lawmakers said Brooks’s arrest casts doubt on her appearance at the hearing in front of the Culture, Media and Sport Committee, the panel investigating phone hacking by the News of the World, which published its last edition July 10. She had agreed last week to attend before resigning.
“This makes me wonder whether this is some ruse to avoid answering questions on Tuesday,” Chris Bryant, an opposition Labour lawmaker, told Sky News yesterday. “I don’t want to over-stress that argument, but it is unusual to be arrested on a Sunday by appointment.”
Niri Shan, a lawyer at Taylor Wessing LLP, said Brooks’s ability to answer questions will be limited.
Last week, the FBI began a probe whether employees tried to hack into the phones of victims of the Sept. 11 terrorist attacks.
“We’re aware of certain allegations pertaining to a possible hacking by News Corp. personnel and we’re looking into those charges,” Jim Margolin, a spokesman for the Federal Bureau of Investigation’s New York office, said in a phone interview July 14.
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Credit Suisse Is a Target of U.S. Private-Banking Tax Probe
Credit Suisse Group AG (CSGN), the second-biggest Swiss bank, is a target of an investigation by the Department of Justice over former cross-border private banking services to U.S. customers.
“Subject to our Swiss legal obligations, we will continue to cooperate with the U.S. authorities in an effort to resolve these matters,” the Zurich-based bank said in an e-mailed statement July 15. The bank, which was informed of the probe July 14, has already been responding to requests for information, including subpoenas, from the Department of Justice, it said.
Four bankers who worked at Credit Suisse were charged with conspiring to help clients in the U.S. evade taxes through secret bank accounts, according to an indictment from earlier this year. In the fall of 2008, when the bank began closing its cross-border business with U.S. clients, it had “thousands” of accounts with $3 billion in assets not declared to the U.S. Internal Revenue Service, according to the indictment.
Credit Suisse said July 15 “it has been reported that the U.S. authorities are conducting a broader industry inquiry.” The Swiss government is in talks with authorities in the U.S. to resolve the issue of untaxed assets held by U.S. citizens in Swiss bank accounts, a government official said last month.
“Currently it is difficult to say whether this will lead to a legal case and a fine against Credit Suisse,” Teresa Nielsen, an analyst at Vontobel with a “hold” rating said in a note. “We expect Switzerland and the U.S. to continue negotiations.”
Daniel Saameli, a spokesman for Switzerland’s finance ministry, said the government “acknowledges the developments,” while declining to comment further.
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BP Well Partner Must Take Claims to Arbitration, Judge Rules
BP Plc (BP/) can halt litigation with minority business partner Anadarko Petroleum Corp. (APC) so the companies can arbitrate liability over costs of last year’s oil-well blowout in the Gulf of Mexico, a judge said.
Anadarko sued BP, asking a federal judge in New Orleans to declare it isn’t responsible for damages and cleanup costs created by the worst offshore oil spill in U.S. history. The Woodlands, Texas-based Anadarko, which owned 25 percent of the Macondo well, said BP’s conduct caused the blowout and the spill.
BP asked U.S. District Judge Carl Barbier to stall the lawsuit, contending that a partnership agreement required the companies to first attempt arbitration to resolve disputes. Barbier sent the claim to arbitration July 15.
“Anadarko has not met its burden to overcome the presumption in favor of arbitration,” Barbier said in his ruling. “Accordingly, Anadarko’s claim against BP must be stayed pursuant to the arbitration clause” in the joint operating agreement between the parties, he said.
The July 15 decision “does nothing to diminish our claims,” John Christiansen, Anadarko’s spokesman, said in an e- mail. “It simply addresses the venue in which they may be resolved.”
Scott Dean, a spokesman for London-based BP, declined to comment on Barbier’s order regarding Anadarko.
“Anadarko has blatantly disregarded its responsibilities to the residents of the Gulf Coast by failing to pay its fair share of the costs relating to the accident and resulting spill,” Dean said in an e-mail July 15. “BP remains focused on ensuring that Anadarko lives up to its obligations.”
The case is part of 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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Swiss Banks Said to Be Near Settlement in German Tax Dispute
Swiss banks may initially pay at least 4 billion Swiss francs ($4.9 billion) to settle a dispute over tax evasion by wealthy German clients, two people familiar with the matter said.
The payment would be part of a larger sum covering the failure by customers to disclose undeclared money over the past 10 years, said the people, who declined to be identified because the negotiations between Switzerland and Germany are private and no final agreement has been reached.
The outlay for the past is part of Swiss talks with Germany and the U.K. over a proposed withholding tax on clients with offshore bank accounts. While part, or all, of the amount would later be “reimbursed” to the banks from taxes paid by their clients, according to the Swiss finance ministry, the settlement may trigger outflows by Europeans who question the value of cross-border accounts as secrecy crumbles.
“I expect major withdrawals by clients from Germany and the U.K. as they are disgruntled by the retroactive effect of the agreement,” said Daniel Fischer, the founder of Zurich- based AFP Fischer & Partner, which specializes in banking law. “Clients are so angry that Swiss banks may not be able to recoup the full upfront payment.”
While the size of the initial payment and the formula used to determine back taxes owed by German and British clients haven’t been disclosed, Switzerland has reached a solution on a “political level,” Finance Minister Eveline Widmer-Schlumpf told NZZ am Sonntag on July 3.
The agreement may be announced after the Swiss government’s summer recess, said Mario Tuor, a spokesman for Switzerland’s State Secretariat for International Financial Matters. Germany’s finance ministry declined to comment because the negotiations are still continuing.
UBS AG (UBSN), Switzerland’s largest bank, will analyze the treaty when it’s announced, said spokesman Dominique Gerster.
Julius Baer Group Ltd. (BAER), which agreed in April to pay German authorities 50 million euros ($71 million) to end a separate investigation over undeclared client assets, declined to comment. Marc Dosch, spokesman for Credit Suisse Group AG, Switzerland’s second-biggest bank, also declined to comment.
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Fund Manager Can’t Argue Regulator Corruption at Trial
A former hedge-fund manager charged with threatening to kill U.S. regulators can’t argue at his trial set to begin this week that his alleged targets were corrupt, a judge ruled.
Even if officials at the regulatory agencies were corrupt, “it does not justify a threat, if in fact one was made, to kill any one of these individuals,” U.S. District Judge Denis R. Hurley said at a hearing July 15 in Central Islip, New York.
Vincent P. McCrudden, 50, is accused of threatening the lives of 47 current and former officials, including Securities and Exchange Commission Chairwoman Mary L. Schapiro and Commodity Futures Trading Commission Chairman Gary Gensler.
McCrudden, who was also a commodities trader, has been held without bail since he was arrested Jan. 13 returning from Singapore. He is charged with threatening the regulators, including those at the National Futures Association and the Financial Industry Regulatory Authority Inc., in profanity- filled e-mails and, after the CFTC sued him in December, in Web postings.
McCrudden has said he’s being persecuted for fighting back against unfair regulatory actions that destroyed his career.
His trial is set to begin with opening statements today.
Prosecutors Christopher C. Caffarone and James McMahon sought to preclude evidence of alleged corruption at the agencies or of vendettas against McCrudden by their employees, saying there was no connection between the crimes he’s charged with and “the vague beliefs of unidentified members of an undefined group.”
McCrudden’s lawyer, Bruce A. Barket, said in a court filing that the information would put his client’s comments in the context of an ongoing public debate about the financial- regulation system.
The government charged that, after the CFTC accused McCrudden in the lawsuit of illegally starting his Hybrid Fund II LP in 2008 without registering it, he posted an “execution” list on his company website.
“Go buy a gun, and let’s get to work in taking back our country from these criminals,” he wrote on the site. “I will be the first one to lead by example.”
The criminal case is U.S. v. McCrudden, 11-cr-61, U.S. District Court, Eastern District of New York (Central Islip).
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Rabobank Sues OppenheimerFunds Over $1.8 Billion in Loans
Rabobank, Credit Agricole Corporate & Investment Bank and four other lenders sued OppenheimerFunds Inc. in New York state court to rescind $1.8 billion in loans to a special-purpose entity.
The plaintiffs said the entity created by OppenheimerFunds invested in the Abacus collateralized debt obligation and other securities allegedly in violation of diversification and performance criteria in their lending agreements, according to a complaint filed in Manhattan.
OppenheimerFunds caused its Harbourview Asset Management Corp., which managed the entity, to issue notices to lenders in 2006 and 2007 that falsely certified that loan conditions were being met, the complaint says.
Samuel Wang, a spokesman for OppenheimerFunds, didn’t return a voice-mail message left after hours. OppenheimerFunds is a unit of Springfield, Massachusetts-based Massachusetts Mutual Life Insurance Co.
The case is TSL (USA) v. OppenheimerFunds, 651938/2011, Supreme Court, New York (Manhattan).
Apollo’s Trilegiant Unit Sued Over Charges for Consumer Clubs
Apollo Global Management LLC’s Trilegiant unit was sued by an Arizona man over claims it conspired to defraud consumers with charges for product loyalty services and membership clubs.
Juan M. Restrepo said in a complaint in federal court in Tucson, Arizona, that he was unaware that Trilegiant charged $10.99 to his Chase MasterCard account each month from May 2007 through to May 2011. Restrepo noticed the monthly charges in April and claims he never authorized the charges, according to the complaint filed July 13.
“The charges were virtually unnoticeable because it was embedded in all other ordinary charges that normally escape close scrutiny of the ordinary consumer,” according to the complaint, which seeks to represent other customers in a class action, or group lawsuit. Chase Bank USA is also a defendant in the case.
The companies are accused in the lawsuit of racketeering, violating electronic communications privacy laws, violating unfair trade laws and unjustly enriching themselves. Restrepo is seeking a court order barring the companies from continuing the alleged scheme plus unspecified damages.
Mike Bush, a spokesman for Trilegiant, didn’t return a call seeking comment after regular business hours July 14.
Tom Kelly, a spokesman for JPMorgan Chase & Co. (JPM), declined to comment. New York-based JPMorgan is the parent of Chase Bank USA.
The case is Restrepo v. Chase Bank USA NA, 11-cv-00423, U.S. District Court, District of Arizona (Tucson).
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UBS Data Disclosure on 255 U.S. Clients Was Legal, Court Says
UBS AG’s disclosure of account data on 255 clients to the U.S. authorities, ordered by the Swiss financial regulator in 2009, was “lawful,” the Swiss Federal Supreme Court ruled.
The Swiss Financial Market Supervisory Authority, or Finma, “proceeded on the assumption that if this data hadn’t been disclosed, the U.S. Department of Justice would have filed an indictment against UBS, which would arguably have caused the bank’s ruin and consequently have had serious repercussions for the Swiss economy,” the Lausanne-based court said July 15 in an e-mailed statement.
The court reversed a ruling in January 2010 by the Federal Administrative Court, which handled a complaint from UBS clients. The administrative court ruled that the regulator exceeded its authority in telling UBS, Switzerland’s biggest bank, to hand over data to the U.S. as part of a deferred prosecution agreement. The Department of Justice accused UBS of conspiring to defraud the U.S. by helping Americans hide accounts from the Internal Revenue Service.
While the emergency-action provisions in the Swiss Banking Act don’t provide “sufficient legal grounds for encroaching on banking secrecy,” government authorities, including Finma, may take steps to “avert serious imminent risks” even in the absence of a specific legal foundation, the court said.
Airport Body Scanners Improperly Adopted by U.S., Court Says
Airport body scanners using advanced imaging technology were improperly adopted by the U.S. as a primary passenger- screening tool, a federal appeals court ruled, while allowing their use to continue.
The U.S. Transportation Security Administration should have sought public comment before deciding that the scanners, first deployed in 2007, would be used “everywhere for primary screening,” the court said July 15.
“Due to the obvious need for the TSA to continue its airport security operations without interruption, we remand the rule to the TSA but do not vacate it,” the court said in its ruling.
By the end of 2010, the TSA was operating 486 scanners in 78 airports with plans to add 500 more scanners by the end of this year, according to the court.
Greg Soule, a spokesman for the TSA, didn’t return a phone message seeking comment.
The case is Electronic Privacy Information Center v. U.S. Department of Homeland Security, 10-1157, U.S. Court of Appeals for the District of Columbia (Washington).
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Wells Fargo $125 Million Settlement Makes Docket Most Popular
Wells Fargo & Co. (WFC), which agreed July 6 to pay $125 million to settle accusations by investors that the bank misled them about the risks of mortgage-backed securities it sold, had the most-read litigation docket on the Bloomberg Law system last week.
The plaintiffs in the consolidated group case, or class action, include the General Retirement System of Detroit, New Orleans Employees’ Retirement System and other public pensions, according to the proposed settlement filed in federal court in San Jose, California.
Wells Fargo, the largest U.S. home lender, and several investment banks that underwrote the securities were sued in 2009 over alleged violations of securities laws in connection with sales of $36 billion in mortgage pass-through certificates in 2005 and 2006.
The bank and the underwriters deny wrongdoing, according to the proposed accord, which is subject to a judge’s approval.
“The proposed settlement agreement is a negotiated resolution as to all named defendants and is intended to avoid the distraction and expense of litigation,” Ancel Martinez, a Wells Fargo spokesman, said in a telephone interview.
The bank still faces claims in state courts in California, Illinois and Indiana filed by individual investors and federal home loan banks seeking to rescind billions of dollars of mortgage-backed securities purchases.
“It’s a very favorable outcome and will be significant for investors,” David Stickney, a lawyer for the plaintiffs, said in a phone interview.
The case is In re Wells Fargo Mortgage-Backed Certificates Litigation, 09-1376, U.S. District Court, Northern District of California (San Jose).
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