Marvell, FrontPoint, BofA, Apple, Blackstone in Court News

Former Marvell Technology Group Ltd. (MRVL) accountant Stanley Ng was charged with conspiracy by U.S. prosecutors as part of a nationwide probe of insider trading involving so-called expert networking firms.

Ng, 42, provided material non-public information to Winifred Jiau, a former consultant with expert-networking firm Primary Global Research LLC, according to a criminal complaint filed Aug. 5 and made public yesterday in federal court in New York.

Ng was arrested at his home and appeared yesterday before U.S. Magistrate Judge Bernard Zimmerman in San Jose, California, according to a statement by U.S. Attorney Preet Bharara in New York. Ng was released on a $50,000 bond secured by his home in Cupertino, California, and is scheduled to appear Aug. 26 in court in Manhattan. He faces as long as five years in prison if convicted.

Jiau, 43, was convicted in June of one count each of conspiracy and securities fraud for passing earnings and other information about Nvidia Corp. (NVDA) and Marvell to hedge fund managers Noah Freeman, a former SAC Capital Advisors LP portfolio manager, and Samir Barai, founder of New York-based Barai Capital Management LP.

Barai and Freedman have pleaded guilty and are cooperating with prosecutors.

Prosecutors claimed that Ng and Sonny Nguyen, 39, then an employee in Nvidia Corp.’s finance department, were recruited into an “investment club” with Jiau, where they agreed to give her inside information about their companies. Nguyen has pleaded guilty.

Ng was placed on administrative leave by Marvell in January after he refused to cooperate with an internal investigation, according to court records.

The case is U.S. v. Ng, 11-02096, U.S. District Court, Southern District of New York (Manhattan).

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Verdicts/Settlements

Ex-FrontPoint Manager Skowron, SEC Reach Accord in Principle

Ex-FrontPoint Partners LLC hedge fund manager Joseph F. “Chip” Skowron and the U.S. Securities and Exchange Commission agreed in principle to settle a lawsuit, according to court papers.

Skowron, who also charged by federal prosecutors as part of a nationwide insider-trading crackdown, last week agreed to waive his right to be indicted, the government said in a court filing. Defendants regularly take that step when agreeing to plead guilty.

Skowron surrendered in April to Federal Bureau of Investigation agents in New York to face charges of conspiracy, securities fraud and obstruction. Prosecutors accused him of obtaining information from an insider about hepatitis C drug trials enabled Greenwich, Connecticut-based FrontPoint to avoid more than $30 million in losses.

The SEC separately accused Skowron of insider trading in a lawsuit filed the same day of his surrender.

The defendant and the staff of the SEC’s Division of Enforcement have agreed in principle to the terms of a settlement that the division will recommend that the commission accept and that would “fully resolve the SEC’s claims against defendant,” lawyers for the SEC and Skowron said in a court filing dated yesterday.

The government claims Skowron obtained nonpublic information from Yves Benhamou, an expert in hepatitis drugs and former adviser for Human Genome Sciences Inc. who has pleaded guilty in the case.

Skowron, the co-portfolio manager of FrontPoint’s health-care funds, was placed on leave in November after Benhamou was arrested. The funds were closed.

The civil case is Securities and Exchange Commission vs. Benhamou, 10-cv-8266, U.S. District Court, Southern District of New York (Manhattan.)

Swiss, Germany Agree to Settlement in Tax-Evasion Dispute

Switzerland and Germany completed an accord to end a dispute over tax evasion by wealthy Germans holding cross-border accounts with Swiss private banks.

As part of the settlement, Swiss banks will pay 2 billion Swiss francs ($2.8 billion) to the German government to cover the failure by their clients to disclose undeclared money in the past, the Swiss Finance Ministry said yesterday in a statement. That amount will later be reimbursed to the banks from taxes paid by their customers, the ministry said.

The tax treaty comes after Switzerland agreed in March 2009 to meet international standards to avoid being blacklisted as a tax haven by the Organization for Economic Cooperation and Development. Relations between Germany and Switzerland soured early last year when German authorities began an investigation into tax evasion based on purchased CDs of stolen bank data.

“The times of illicit accounts in Switzerland are now over for good,” Klaus-Peter Flosbach, the financial-policy spokesman in parliament for Chancellor Angela Merkel’s bloc, said in a statement. “The agreement will lead to more tax fairness and strengthen the income basis of federal, state and municipal governments.”

While the agreement protects bank clients’ privacy, it also ensures the “implementation of legitimate tax claims,” the Swiss Finance Ministry said.

The settlement may trigger outflows by Europeans who question the value of cross-border accounts as Swiss banking secrecy crumbles. Switzerland’s commitment to tax compliance is putting pressure on the country’s banks as western European clients repatriate their wealth, Boston Consulting Group said in a May 31 report.

Going forward, Swiss banks will levy a 26.375 percent withholding tax on interest, dividends and capital gains earned by Germans with offshore accounts, yesterday’s statement said. Revenue generated will go to the German treasury while client identities remain secret.

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Bank of America Wins $5.2 Million Judgment Against Builder

Bank of America Corp. won a $5.2 million judgment against Irish developer Garrett Kelleher and his Shelbourne Development Group Inc. for defaulting on a loan for the planned 150-floor Chicago Spire condominium tower.

U.S. District Judge Amy St. Eve in Chicago ruled in favor of the Charlotte, North Carolina-based lender, awarding damages plus daily interest of about $153 through Aug. 5, the date of the judgment. St. Eve also awarded the bank about $117,343 in credit-card payments and $26 a day in interest.

“There is no genuine dispute as to the material facts that Shelbourne defaulted on its obligations under the loan agreement and credit card agreement and that Kelleher personally guaranteed payments of any and all debts,” St. Eve wrote.

Bank of America sued Shelbourne and Kelleher, in his role as chairman, in 2009 claiming the builder failed to show that it had obtained an irrevocable commitment for a construction loan from a lender or lending syndicate, leading the bank to declare a default.

Shelbourne officials didn’t immediately return a phone call seeking comment on the judgment.

The case is Bank of America NA v. Shelbourne Development Group Inc. 09-cv-4963, U.S. District Court, Northern District of Illinois (Chicago).

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New Suits

Blackstone, Emdeon Sued by Investor Over $3 Billion Buyout

A unit of Blackstone Group LP (BX), seeking to acquire Emdeon Inc. in a $3 billion buyout, was sued by a shareholder of the software maker claiming the offer undervalues the company.

John Kowalczyk, an Emdeon investor, sued the Nashville, Tennessee-based company and Blackstone, arguing that the proposed transaction shortchanges shareholders, in a lawsuit filed yesterday in Delaware Chancery Court. Kowalczyk seeks to represent outside shareholders as a group.

“The timing of the proposed transaction has been engineered to take advantage of a recent decline in the trading price of Emdeon’s shares,” and will result in shareholders being cashed out “below the company’s true value.”

Amanda Woodhead, a spokeswoman for Emdeon, and Peter Rose, a Blackstone spokesman, didn’t return phone calls and e-mails seeking comment.

The case is Kowalczyk v. Black, CA6773, Delaware Chancery Court (Wilmington).

New York Law School Sued for Inflating Job, Pay Statistics

New York Law School was sued by former students who accused the school of inflating statistics on graduates’ jobs and pay.

The lawsuit, filed yesterday in New York, and a second suit filed in Michigan against Thomas M. Cooley Law School, claim the schools knowingly inflated employment and salary statistics to recruit and retain students. The complaints were filed by three New York law graduates and four Cooley graduates seeking to represent all current and former students at both schools.

“We believe the practice of inflating employment statistics and salary information is endemic among law schools,” David Anziska, an attorney for the students with New York-based Kurzon Strauss LLP, said yesterday in a statement. “We hope these suits bring systematic change in the way legal education is marketed by making transparency and accuracy the rule, not the exception.”

Cooley sued Kurzon Strauss and four anonymous bloggers in separate complaints last month claiming they defamed the school through Web postings. Cooley, based in Lansing, Michigan, accused the law firm of false statements on websites to “incite” readers and “troll” for plaintiffs for a purported class-action lawsuit.

Cooley said in a July 14 statement that its job placement rates are reported annually to the American Bar Association and the National Association for Law Placement nine months after graduations based on the results of surveys and are consistent with all 201 ABA accredited law schools.

Yesterday’s complaints, which seek unspecified damages, claim that law schools, including New York Law and Cooley, misrepresent graduates’ employment prospects by misclassifying graduates who have only secured part-time or temporary jobs as “fully” employed, according to Kurzon’s statement.

James Thelen, Cooley’s associate dean for legal affairs and general counsel, wasn’t immediately available for comment on the complaint. A spokesperson at New York Law School wasn’t immediately available for comment.

The cases are Gomez-Jimenez v. New York Law School, Supreme Court of the State of New York, County of New York; MacDonald Jr. v. Thomas M. Cooley Law School, 11-00831, U.S. District Court, Western District of Michigan.

SEC Sues Stifel for Fraud Over Wisconsin Schools’ CDO Losses

The U.S. Securities and Exchange Commission sued broker Stifel, Nicolaus & Co. for fraud for selling five Wisconsin school districts $200 million of notes tied to collateralized debt obligations.

Stifel and David Noack, a former executive, masked the risks as it persuaded the Wisconsin schools to make the investments, which later plunged in value and were bought largely with borrowed money, the SEC said.

The Wisconsin schools made the investments in 2006 in a program sold by Stifel to help fund future retiree benefits. The SEC alleges that the firm misled officials about the risks, saying it would take “15 Enrons” for the investments to fail.

“Stifel and Noack abused their longstanding relationships of trust with the school districts by fraudulently peddling these inappropriate products to them,” Elaine Greenberg, head of the SEC’s municipal enforcement division, said in a statement. “They were clearly aware that the school districts could ill afford to bear the risk of catastrophic loss if these investments failed.”

Jeff Kalinowski, an attorney for Stifel, and Ron Kane, an attorney for Noack, didn’t immediately return calls seeking comment on the SEC suit. Sarah Anderson, a spokeswoman for Stifel, didn’t immediately return a phone call seeking comment.

U.K. Police Arrest 12th Person in News Corp. Hacking Probe

British police investigating the extent of phone hacking at News Corp. (NWS)’s defunct News of the World tabloid arrested a 61-year-old man in London.

The man -- the 12th person detained in the case -- was arrested by appointment on suspicion of unlawful interception of communications, Metropolitan Police said in a statement yesterday. Sky News reported the man is former News of the World assistant editor Greg Miskiw.

Public outcry over the hacking scandal, including claims journalists accessed the voice mail of a murdered schoolgirl, led News Corp. (NWSA) to close the News of the World and end its 7.8 billion pound ($12.6 billion) bid to buy the 61 percent of British Sky Broadcasting Group Plc it doesn’t already own.

At least nine of the 12 people arrested in probes of phone hacking and possible bribes to police have ties to the News of the World, including former editor Rebekah Brooks, who resigned on July 15 as chief executive officer of News Corp.’s U.K. unit News International. Andy Coulson, another former editor of the tabloid, was arrested in July, six months after resigning in January as Prime Minister David Cameron’s press chief.

Nick Davies, a reporter for the Guardian newspaper, in July 2009 gave a parliamentary committee a document, signed by Miskiw, that he said was a contract between the paper and “Paul Williams.” Davies said that was an alias of Glenn Mulcaire, the private investigator jailed in 2007 along with royal reporter Clive Goodman for hacking mobile phones.

A number for Miskiw couldn’t be immediately located in London or in Delray Beach, Florida, where he registered a business with the state Secretary of State.

News Corp. Chairman Rupert Murdoch and his son James told U.K. lawmakers last month they didn’t know about the hacking and blamed it on people they trusted to run the paper.

The criminal probe is running parallel to dozens of civil lawsuits against News Corp.’s U.K. unit filed by politicians, celebrities and athletes. A group of so-called test cases is scheduled to go to trial in January.

Apple Accused in Suit of E-Book Price-Fixing With Publishers

Apple Inc. (AAPL), in connection with last year’s introduction of the iPad, colluded with News Corp.’s HarperCollins Publishers unit and four other publishers to fix prices of electronic books, according to a lawsuit.

Apple, threatened by Amazon.com Inc. (AMZN)’s Kindle e-book reader and its potential to distribute other digital media, agreed with the publishers on or before January 2010 to announce a so-called agency model to “force the e-book sales model to be entirely restructured,” according to the complaint filed Aug. 9 in federal court in Oakland, California.

The traditional “brick-and-mortar” publishers agreed to the price-fixing because they were threatened by Amazon’s “pro-consumer” e-book titles priced at $9.99, according to the suit.

“Fortunately for the publishers, they had a co-conspirator as terrified as they were over Amazon’s popularity and pricing structure, and that was Apple,” Steve Berman, an attorney representing consumers in the case, said in an e-mailed statement.

“We intend to prove that Apple needed a way to neutralize Amazon’s Kindle before its popularity could challenge the upcoming introduction of the iPad, a device Apple intended to compete as an e-reader,” Berman said in the statement. Berman seeks to represent all e-book consumers in the complaint.

A representative of Apple didn’t return phone and e-mail messages seeking comment Aug. 9. Tina Andreadis, a HarperCollins spokeswoman, also didn’t return a call seeking comment Aug. 9.

The other publishers named as defendants in the suit are Hachette Livre SA’s Hachette Book Group unit, U.K.-based MacMillan Publishers Ltd., Pearson Plc (PSON)’s Penguin Group and CBS Corp.’s Simon & Schuster.

The case is Petru v. Apple Inc., 11-03892, U.S. District Court, Northern District of California (Oakland).

BayernLB Sues Hypo Alpe-Adria Worker Trust

Bayerische Landesbank, Germany’s second-biggest state-owned lender, sued a former shareholder of Hypo Alpe-Adria Bank International AG seeking damages related to the 2007 takeover of the Austrian lender.

BayernLB bought a majority stake in Hypo Alpe for 1.63 billion euros ($2.3 billion) to get access to Balkan markets. It is now suing the trust that sold it a 3 percent stake that was held on behalf of Hypo Alpe employees.

“BayernLB has repeatedly said it would evaluate damage claims against parties, including the sellers, related to its acquisition of Hypo Alpe-Adria shares,” the Munich-based lender said in an e-mailed statement yesterday. “Those evaluations are now completed regarding the Hypo Alpe Adria Employee Trust and there was no reason to wait with filing a lawsuit against them.”

Other former shareholders that sold shares to BayernLB are the Austrian province of Carinthia, insurer Grazer Wechselseitige Versicherung AG and a fund managed by investor Tilo Berlin.

Klaus Gernot Jernej and Bernd Peck, the two Hypo Alpe employees who have led the trust since last year according to Austria’s company register, didn’t answer calls during normal office hours in Klagenfurt, where the Austrian bank is based. The trust was previously run by former Hypo Alpe chiefs Wolfgang Kulterer and Berlin. Kulterer was cleared earlier this year on charges he misused bank funds.

BayernLB raised its stake to 67 percent before Hypo Alpe was nationalized in 2009. The German lender reported a 2009 loss due in part to 3.3 billion euros of writedowns on its Hypo Alpe investment.

BayernLB didn’t give the legal reasons for its damage claim against the trust. Austrian magazine Format said the bank is arguing the trust failed to disclose that part of Hypo Alpe’s capital didn’t qualify for regulatory purposes.

Hypo Alpe said in its annual report it may also sue former managers over the same issue. Format also said BayernLB is suing for a reversal of the purchase deal.

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Lawsuit/Pretrial

Compania Internacional Financiera Denies Claims in SEC Suit

Compania Internacional Financiera SA denied claims by the U.S. Securities and Exchange Commission that the firm profited from insider trading in Arch Chemicals Inc. shares.

The SEC, in a lawsuit filed July 15 in Manhattan federal court, said Compania Internacional Financiera and two other firms -- Coudree Capital Gestion SA and Chartwell Asset Management Services -- made millions of dollars by buying Arch Chemical shares in the days before a July 11 announcement that Basel, Switzerland-based Lonza Group Ltd. (LONN) planned to buy the specialty chemicals maker for $1.2 billion.

Compania Internacional Financiera and Coudree Capital Gestion, in a response filed yesterday, admitted they bought shares of Arch Chemical in the days leading up to the announcement, and began selling the shares on or about that day, making about $7.3 million in trading profits.

The companies “deny that their purchases of the securities of Arch Chemicals Inc. were ‘suspicious,’” their lawyers said in the filing.

Chartwell, a Geneva-based investment adviser, also denied violating the law in a court filing Aug. 9.

The case is U.S. Securities and Exchange Commission vs. Compania Internacional Financiera SA, 11-cv-04904, U.S. District Court, Southern District of New York (Manhattan.)

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Merck Must Defend Securities-Fraud Claims Over Vioxx

Merck & Co. (MRK) must defend a lawsuit claiming it violated securities laws by downplaying the cardiovascular risks of its Vioxx painkiller before the company pulled the drug from the market in 2004, a judge ruled.

Merck, the second-biggest U.S. drugmaker, withdrew Vioxx after a study showed it doubled the risk of heart attacks and strokes. Investors adequately stated a case that Merck misrepresented the drug’s safety profile, said U.S. District Judge Stanley Chesler in Newark, New Jersey.

Investors also can pursue claims that Merck misled them about a 2000 study, known as Vigor, which reported that the medicine caused five times more heart attacks than another painkiller, naproxen, Chesler ruled. Merck said one explanation was that naproxen protected the heart.

The judge ruled that investors “plausibly suggest that Merck had no reasonable basis for its public characterization of the Vigor results as ‘likely’ due to naproxen’s cardioprotective quality,” according to Chesler’s Aug. 8 decision.

Merck, based in Whitehouse Station, New Jersey, faces potential legal costs of at least $7.7 billion related to Vioxx, including $4.85 billion to settle thousands of lawsuits claiming injuries. It also set aside $1.9 billion for legal costs. Last October, Merck said it set aside $950 million to resolve a criminal probe.

“Merck continues to believe that this lawsuit is without merit, and will continue to defend itself vigorously against these claims,” Ronald Rogers, a spokesman for the company, said yesterday in a phone interview.

The case is Merck & Co., Securities, Derivative & ‘ERISA’ Litigation, MDL-1658, U.S. District Court, District of New Jersey (Newark).

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Litigation Departments

Merck Vioxx Lawyers Get More Fees After Filing Objections

Some plaintiff lawyers involved in Merck & Co.’s $4.85 billion Vioxx settlement were given more in fees by a judge after they objected to their original awards, court papers show.

U.S. District Judge Eldon Fallon in New Orleans, who is overseeing the remaining litigation over Merck’s withdrawn painkiller, awarded Aug. 9 at least $3 million to attorneys who had complained that colleagues were hogging the lion’s share of more than $315 million in fees spawned by the accord.

“Although this allocation process seems tedious and time-consuming, the court finds the process was necessary to achieve a reasoned and appropriate result,” Fallon said in his 132-page ruling.

Merck won 11 of 16 Vioxx lawsuits that went to trial in both state and federal courts before agreeing in November 2007 to settle almost 50,000 claims of users who blamed the drug for heart attacks and strokes. Lawyers who worked on a consolidation of Vioxx cases were entitled to split $315.3 million in fees for their work on those suits.

Vioxx suits filed in federal courts across the U.S. were consolidated before Fallon for pre-trial evidence gathering and so-called “bellwether trials,” which were designed to help resolve issues in the cases.

A court-appointed committee of Vioxx lawyers made fee recommendations and that generated objections from 18 law firms, Fallon said. All but four of the objecting firms later agreed to a special master’s recommendation on how the fees should be split, the judge noted in his decision.

The case is Vioxx Products Liability Litigation, MDL-1657, U.S. District Court, Eastern District of Louisiana (New Orleans).

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To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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