Swiss Accounts, Insider Trading, Mortgages: Compliance
Michael Reiss, 60, of Princeton, pleaded guilty Friday in Manhattan federal court to failing to file reports of foreign bank accounts in 2008 and 2009. Reiss, who faces as long as five years in prison at his sentencing in November, was released on a $200,000 bond.
Reiss had an account at Zurich-based UBS, the largest Swiss bank, starting in 2000 and transferred the assets in that account to another Swiss bank in 2002, prosecutors said in a statement. In 2003, he opened an account at another Swiss bank in the name of Floranova, a sham foundation created to hide his ownership of the assets from the U.S. Internal Revenue Service, prosecutors said. In 2008, the account held $2.59 million.
He will pay a civil penalty of about $1.2 million, his attorney, Paula Junghans, said. Reiss also agreed to pay at least $400,000 in taxes, Assistant U.S. Attorney Daniel Levy said.
Reiss, a Dutch national, isn’t a U.S. citizen. He may face deportation after he’s sentenced, U.S. Magistrate Judge Henry Pitman said. Junghans declined to comment on the case after Friday’s proceeding.
Reiss is a professor at the Cancer Institute of New Jersey at the University of Medicine & Dentistry of New Jersey’s Robert Wood Johnson Medical School in New Brunswick. He researches cancers of the head, neck, lung and esophagus, according to the school’s website.
“At this time it appears the allegations do not involve university or state monies,” UMDNJ said in a statement. “We are doing everything we can to determine that that is in fact the case.”
Prosecutors said Reiss used the services of Beda Singenberger, a Swiss financial adviser who was charged last month with conspiring with more than 60 U.S. taxpayers to hide more than $184 million in offshore accounts.
The Floranova account held assets valued at about $2.6 million as of March 2008, prosecutors said. In November 2008, Reiss transferred the Floranova assets into another undeclared account, prosecutors said.
UBS in 2009 paid $780 million to avoid prosecution on charges that it helped Americans evade taxes and turned over data on 250 secret accounts. It later handed over information on 4,450 more accounts.
The case is U.S. v. Reiss, U.S. District Court, Southern District of New York (Manhattan).
Ex-Mariner Energy Director Admits Giving Merger Tip to Son
H. Clayton Peterson, 65, of Denver, a retired former Arthur Andersen partner who also serves on the boards of Re/Max International Inc. and Lone Pine Resources Inc., pleaded guilty to conspiracy and securities fraud on Friday in Manhattan federal court. His son, Drew, 35, a financial adviser from Denver, also pleaded guilty on Friday to the same charges.
Clayton Peterson, who was appointed to Mariner’s board in March 2006, said he passed information about the planned transaction in April 2010 to his son. Drew Peterson said he bought shares of Mariner stock based on the tip and passed on the information to another unidentified person who also traded on it.
“I knew that my actions were wrong and I deeply regret my conduct,” Clayton Peterson told U.S. District Judge Robert Patterson. “It has ruined my life and my son’s life and I apologize.”
Apache, the largest U.S. independent oil and natural-gas producer by market value, on April 15, 2010, announced that it had agreed to buy Houston-based Mariner Energy for in a deal valued at the time at $2.7 billion in cash and stock to boost production and reserves in deep waters off the Gulf of Mexico. The purchase was completed on Nov. 10.
The U.S. Securities and Exchange Commission on Friday sued both Petersons in federal court in Manhattan, claiming that Drew Peterson, his relatives, friends and clients made more than $5.2 million from trading on the information. Of that amount, $5 million was made by the portfolio manager of an unidentified Denver hedge fund.
Both Petersons face as much as 20 years in prison for securities fraud and five years for conspiracy and were ordered released on $500,000 personal recognizance bonds.
“Clayton Peterson has accepted responsibility for his conduct in this matter, which was an aberration from his otherwise long and distinguished career,” Clayton Peterson’s attorney, Steven Glaser, said in a statement. “Mr. Peterson looks forward to putting this chapter of his life behind him.”
MetLife Says 30 Jurisdictions Are Auditing Unpaid Benefits
MetLife Inc. (MET), the largest U.S. life insurer, said more than 30 U.S. jurisdictions are auditing its practices in a review of whether the industry is holding unclaimed funds owed to policyholders, beneficiaries or states.
The audits may lead to more payments to beneficiaries, administrative penalties or changes in procedures, New York- based MetLife said Friday in its quarterly filing with the U.S. Securities and Exchange Commission.
“The company is not currently able to estimate the reasonably possible amount of any such additional payments or the reasonably possible cost of any such changes in procedures, but it is possible that such costs may be substantial,” MetLife said.
State regulators are intensifying a probe into unpaid benefits after Florida Insurance Commissioner Kevin McCarty said in May that insurers may be keeping at least $1 billion in unclaimed funds. MetLife and No. 2 Prudential Financial Inc. are among nine firms subpoenaed in June as part of New York Attorney General Eric Schneiderman’s probe, a person familiar with the matter has said.
American International Group Inc. (AIG), the insurer majority owned by the U.S. Treasury Department, added $100 million to reserves for death claims at its life insurance unit in the second quarter, according to a regulatory filing Aug. 4. The company has changed its claims process to use information, including data from the Social Security Administration, to determine when insured people die.
“Our practices in that area are currently, and have been, completely consistent with all the applicable legal requirements and all of the historical industry standards,” Jay Wintrob, chief executive officer of the SunAmerica life unit, said Friday on a call with analysts.
AIG has received regulators’ inquiries into claims settlement practices, the New York-based company said in the filing.
BofA’s ReconTrust Sued Over Washington Foreclosure Actions
Bank of America Corp. (BAC)’s ReconTrust unit failed to conduct foreclosures as a neutral third party as required by law, Washington state Attorney General Rob McKenna said in a lawsuit.
ReconTrust, which acted as a trustee handling foreclosures, had a duty to act in good faith to borrowers as well as lenders, McKenna said Friday at a press conference announcing the suit. ReconTrust also concealed or misrepresented the actual owner of the debt when handling foreclosures, according to the complaint filed in state court in Seattle.
The lawsuit follows an investigation of Washington trustees’ foreclosure practices, including faulty documentation. McKenna said the lawsuit was filed because ReconTrust didn’t take corrective actions to change its ways.
“They have left us with no choice,” McKenna said. “We will have the full attention of ReconTrust and its owner, Bank of America, and they will be more interested in sitting down and making things right.”
Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, didn’t immediately return a call for comment on the lawsuit.
The state is seeking civil penalties of $2,000 a violation and the complaint alleges thousands of violations, McKenna said. The lawsuit also is seeking restitution for homeowners who unfairly lost their properties.
The case is Washington v. ReconTrust Co., 11-26867-5, Superior Court, King County, Washington (Seattle).
WaMu Bank Failure Won’t Result in Criminal Charges, U.S. Says
Washington Mutual Bank’s failure, the biggest in U.S. history, won’t result in criminal charges against its former executives, U.S. Attorney Jenny A. Durkan in Seattle said.
A federal investigation of the bank’s collapse included hundreds of interviews and a review of millions of documents concerning its operations, Durkan and the Justice Department said Aug. 5 in an e-mailed statement.
“The evidence does not meet the exacting standards for criminal charges in connection with the bank’s failure,” according to the statement.
The bank, the operating unit of Washington Mutual Inc. (WAMUQ), was seized by regulators on Sept. 25, 2008, and sold to JPMorgan Chase & Co. (JPM) for $1.9 billion. The bank had more than 2,200 branches and $188 billion in deposits. The following day, the parent company filed for bankruptcy.
Former U.S. Attorney Jeffrey Sullivan in Seattle, citing “intense public interest” in the bank’s failure, said in October 2008 that his office had created a task force working with investigators from the Federal Bureau of Investigation, the Federal Deposit Insurance Corp., the Securities and Exchange Commission and the Internal Revenue Service to investigate its collapse.
Andrew C. Irgens, a lawyer representing Washington Mutual Inc. in its bankruptcy case, didn’t immediately return a call and e-mail seeking comment after regular business hours.
Federal prosecutors continue to cooperate with the FDIC in a lawsuit against three former Washington Mutual executives, according to the statement.
In its bankruptcy case in Wilmington, Delaware, WaMu is seeking approval for a reorganization plan that would pay creditors more than $7 billion. Shareholders have asked U.S. Bankruptcy Judge Mary Walrath to reject the reorganization plan for a second time because they would get nothing.
The FDIC case is FDIC v. Killinger, 11-00459, U.S. District Court, Western District of Washington (Seattle). The bankruptcy case is In re Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Swatch Among Watchmakers Probed by EU Regulators Over Parts
Swatch Group AG (UHR), the world’s biggest watchmaker, is among timepiece manufacturers being probed by European Union antitrust regulators over allegations they refused to supply spare parts to independent watch menders.
The European Commission said on Friday it will investigate a 2004 complaint by the European Confederation of Watch & Clock Repairers’ Associations, or CEAHR, after an EU court ruled that regulators were wrong to dismiss the group’s objections.
The probe “concerns almost the entire watch industry,” Swatch said in a statement. “We are confident regarding the outcome of this investigation.”
The start of EU formal antitrust proceedings “means that the commission will investigate the case as a matter of priority,” regulators said in an e-mailed statement. Companies risk fines of as much as 10 percent of global yearly revenue if they are found guilty of violating EU competition rules.
Cie. Financiere Richemont SA, the maker of Cartier watches, supported EU regulators in the court case defending their prior decision not to begin an investigation. Alan Grieve, a spokesman for Richemont, declined to comment.
Olivier Labesse, a spokesman for LVMH, and Virginie Chevailler, a spokeswoman for Rolex, declined to comment on the probe. A spokesman for Patek Philippe wasn’t immediately available. CEAHR didn’t immediately respond to an e-mail seeking comment.
Lear Corp. (LEA) Says EU Asked for Information in Antitrust Probe
Lear Corp. said European Union antitrust regulators asked it for information as part of a probe into possible collusion between suppliers of electric and electronic car parts.
Terrence Larkin, the company’s general counsel, said it received a “supplemental request for information” and the company was cooperating with authorities. EU officials visited the company’s Paris offices in February 2010, he said on a conference call Aug. 4.
Southfield, Michigan-based Lear isn’t involved in similar investigations in the U.S. or Japan, he said.
IRS Won’t Impose Retroactive Ticket Tax on Airlines, Fliers
The Internal Revenue Service won’t collect retroactive taxes for airline tickets purchased during a lapse in the government’s taxing authority, agency spokesman Frank Keith said.
President Barack Obama signed legislation Friday that ends a partial shutdown of the Federal Aviation Administration and reinstates the taxes retroactively to July 23, the day after they expired. Most airlines had raised fares by the amount of the taxes, but were not authorized to collect the taxes. Getting the money now would be tough, Keith said.
The levies, including a 7.5 percent fare tax on domestic flights, generate about $28.6 million a day for the U.S. government. The IRS decision means that the airlines will be able to keep the revenue they generated by raising fares.
Because the law makes the taxes retroactive to July 23, no taxpayers who flew during the shutdown and purchased their airline tickets before that will be owed refunds, Keith said. Before Congress broke an impasse over extending the taxes, the IRS asked airlines to refund the tax payments to fliers.
The four top tax legislators in Congress had written to the IRS, asking the agency not to retroactively collect the taxes.
The FAA’s authority to levy the 7.5 percent tax, as well as other aviation taxes, lapsed on July 22. Had Congress not acted, the total forgone taxes would have reached $1.3 billion by Sept. 7, when Congress is scheduled to return from its summer recess.
The Senate voted Friday to end the shutdown and reinstate the FAA’s taxing authority through Sept. 16. That action followed the House’s July 20 passage of the bill, which reinstates the taxes as of July 23. Enactment of the legislation was delayed because of disagreements between the House and Senate over issues unrelated to the taxes.
Wells Fargo Agrees to Settle Wachovia Case for $590 Million
Wells Fargo & Co. (WFC), the biggest U.S. home lender, said it reached a $590 million settlement in principle with plaintiffs who claimed in a lawsuit that Wachovia Corp. misled investors.
The accord, subject to court approval, is reflected in the bank’s financial statements and “will not have a material adverse effect on Wells Fargo’s consolidated financial position,” according to a regulatory filing Friday by the San Francisco-based company. Wells Fargo acquired Wachovia in 2008.
Investors had accused Wachovia of making misleading disclosures relating to the sale of securities between 2006 and 2008, according to the complaint. The statements related to the quality of assets linked to the mortgage portfolio of Golden West Financial, a California home lender it had acquired.
“Wells Fargo agreed to this settlement in order to avoid the distraction, risk and expense of on-going litigation,” Mary Eshet, a spokeswoman for the bank, said in an e-mailed statement. “The settlement agreement does not constitute an admission of Wells Fargo of liability or any violation of law by Wachovia.”
Accounting firm KPMG LLP, which did auditing work for Wachovia and was also listed as a defendant, reached a $37 million settlement, according to a statement released Friday from law firms representing the plaintiffs. “We’ve agreed to settle to avoid the cost of litigation and to put this matter behind us,” George Ledwith, a KPMG spokesman, said in a phone interview.
“We believe that these settlements reflect an outstanding result for bond and preferred-security purchasers who were damaged as a result of false and misleading offering materials,” the attorneys representing investors wrote in their joint statement.
Wells Fargo purchased Wachovia for $12.7 billion in 2008, after surging mortgage defaults brought the Charlotte, North Carolina-based lender to the verge of collapse. Wells Fargo picked up $117.3 billion in Pick-a-Pay loans as part of the deal. More than half of those were found to be credit-impaired, according to the complaint.
The plaintiffs include the Southeastern Pennsylvania Transportation Authority, which manages public transport in Philadelphia and surrounding counties, the Orange County Employees Retirement System in California and the Louisiana Sheriffs’ Pension and Relief Fund, a pension plan for sheriffs and their families in Louisiana.
Amaranth Suit Against JPMorgan Chase Dismissed by Judge
Amaranth Advisors LLC, the commodities fund that collapsed in 2006, can’t proceed with a lawsuit claiming JPMorgan Chase & Co. executives helped cause its demise by sabotaging a bailout by Citadel Investment Group LLC, a judge ruled.
The hedge fund, which lost $2 billion in September 2006 on natural gas futures and derivatives bets that went awry, can’t press its claim that JPMorgan officials interfered with its Citadel deal by casting aspersions on Amaranth’s financial condition, New York Supreme Court Judge O. Peter Sherwood concluded.
Amaranth officials can’t prove two JPMorgan executives’ statements were the reason Citadel officials decided to cancel the bailout effort, Sherwood said in a nine-page ruling Friday.
“We disagree with the court’s conclusion and plan to appeal,” J.B. Heaton, a Chicago-based lawyer for Amaranth, said in a telephone interview. Jennifer Zuccarelli, a JPMorgan spokeswoman, didn’t immediately return a call for comment on Sherwood’s ruling.
Amaranth officials alleged in the 2007 suit that JPMorgan sought to force it into default on a margin call to obtain collateral Amaranth had posted with the bank. Amaranth tried to stave off its collapse by unloading its bets to other hedge funds, including Citadel and Goldman Sachs Group Inc. (GS), according to court filings.
Fund officials allege Steve Black and Bill Winters, two JPMorgan officials warned Citadel offices that “Amaranth is not as solvent as they are telling you they are,” according to Sherwood’s decision.
Amaranth executives alleged those statements amounted to interference with an oral agreement the fund’s officials reached with Citadel, court filings show.
An appeals court threw out the rest of Amaranth’s claims in the suit in 2009. The court sent the case back to Sherwood to consider the so-called “tortuous interference claim.”
Citadel “conducted its own research in connection with the proposed transaction with the fund and evidence of the tenuousness of the fund’s financial condition was readily available,” the judge said in Friday’s ruling.
The case is Amaranth LLC v. JPMorgan Chase & Co., 603756/2007, New York state Supreme Court, New York County (Manhattan).
Two Telecommunications Execs Convicted by Miami Jury, DOJ Says
Joel Esquenazi and Carlos Rodriguez, former executives of Terra Telecommunications Corp., have been convicted by a federal jury on all counts for their roles in a plan to pay bribes to Haitian government officials at Telecommunications D’Haiti S.A.M, the U.S. Justice Department said in an e-mailed statement.
To contact the editor responsible for this report: Michael Hytha at firstname.lastname@example.org.
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