The liquidator of Bernard L. Madoff’s firm sued Lion Global Investors Ltd. and at least six other companies to recover at least $172.8 million they allegedly received from investments made with the con man by Fairfield Sentry Ltd.
Irving Picard, the trustee overseeing the liquidation of Bernard L. Madoff Investment Securities LLC, claims Fairfield, a so-called feeder fund to the Madoff company, transferred “customer property” to Lion Global, a Singapore-based asset management company; Quilvest Finance Ltd., a unit of Luxembourg- based investor Quilvest SA; and five other entities, according to filings in U.S. Bankruptcy Court in Manhattan.
Seven complaints filed yesterday seek at least $172.8 million for investors in Madoff’s Ponzi scheme. Picard demanded $11.5 million from First Gulf Bank PJSC, the United Arab Emirates lender owned by Abu Dhabi’s ruling family. Picard said he has the authority to take back the transfers as he works to recover money for Madoff customers.
The trustee last month lost the right to claim almost $9 billion in damages from HSBC Holdings Plc and feeder funds after a ruling by U.S. District Judge Jed Rakoff, who said Picard was free to pursue bankruptcy claims. Madoff is serving a 150-year sentence in a prison in North Carolina.
Picard is seeking at least $50.6 million from Lion Global, according to the filing. Lion Global’s lawyers are looking into the lawsuit, Mae Wong, a spokeswoman for the Singapore firm, said today.
Lion Global, through its joint venture with Fairfield Greenwich Group, had sold about $45 million of the feeder fund to investors, according to a December 2008 Singapore regulatory filing.
A call to Quilvest USA in New York seeking comment on the lawsuit after regular business hours wasn’t returned. A call to First Gulf Bank wasn’t answered after regular business hours.
The case is Picard v. Lion Global, 11-2540, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Former News of the World Reporter Said to Be Arrested
James Desborough, a former Hollywood reporter for the now- shuttered News of the World newspaper, was arrested by London police investigating phone-hacking, according to a person familiar with the probe.
Desborough, 38, is the 13th person detained since police renewed a probe this year to determine if the practice extended beyond a former royal reporter and a private investigator who were jailed in 2007 for intercepting voice mails. Desborough started at the tabloid in 2005 and began a role as an editor in the U.S. in April 2009, according to the person, who didn’t want to be identified because they weren’t authorized to discuss the matter publicly.
London’s Metropolitan Police said in an e-mailed statement that they arrested a 38-year-old man, who they declined to identify, by appointment yesterday “on suspicion of conspiring to unlawfully intercept voice mails.” A separate statement said the man was later released on bail.
Public outcry over the hacking scandal, including claims journalists accessed the voice mail of a murdered schoolgirl for stories, led News Corp. (NWSA) to close the News of the World and end its 7.8 billion-pound ($12.9 billion) bid to buy the 61 percent of British Sky Broadcasting Group Plc it doesn’t already own.
“We are fully cooperating with the police investigation and we are unable to comment further on matters due to ongoing police investigations,” News International, the New York-based company’s U.K. newspapers unit, said in an e-mailed statement.
Efforts to find contact details for Desborough or a lawyer representing him were unsuccessful.
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Mulcaire, Investigator Jailed for Hacking, Sues News Corp.
Glenn Mulcaire, the private investigator jailed in 2007 for intercepting voice-mail messages left for model Elle Macpherson and members of the British royal family while working for News Corp.’s News of the World tabloid, sued the company.
The lawsuit against News Group Newspapers Ltd., which publishes the Sun newspaper and formerly the News of the World, was filed at a London court Aug. 17. Mulcaire is a key figure in the phone-hacking scandal that prompted the closure of the 168- year-old tabloid last month after revelations that journalists had hacked the phone of a murdered schoolgirl.
The details of Mulcaire’s case aren’t publicly available under British law until News Group files a response to the court acknowledging the suit.
News Corp. Chief Executive Officer Rupert Murdoch and his son James told U.K. lawmakers last month they didn’t know if the company was still paying legal fees for Mulcaire. The company said the next day they would immediately terminate “any arrangement” to pay Mulcaire’s bills.
Mulcaire’s lawyer, Sarah Webb, didn’t immediately respond to a request for comment. A spokeswoman for News Corp.’s U.K. unit said the lawsuit had been received.
Mulcaire and News Group are defendants in dozens of civil lawsuits filed by individuals who claim their voice mails were accessed. London’s Metropolitan Police are examining Mulcaire’s notebooks and contacting possible victims.
The case is Glenn Michael Mulcaire v. News Group Newspapers Ltd., 11-2867, High Court of Justice, Chancery Division (London).
Exxon Sues Interior Department Over Canceled Gulf Leases
Exxon Mobil Corp. (XOM) sued the U.S. Interior Department, asking a judge to set aside the agency’s decision to cancel offshore leases that may yield “billions of barrels of oil.”
The department overstepped its authority in a ruling on Gulf of Mexico leases for the so-called Julia Unit, Exxon Mobil said in a complaint filed Aug. 12 in federal court in Lake Charles, Louisiana. Statoil ASA (STL), a partner of Exxon Mobil’s in the Julia fields, filed a similar lawsuit in the same court on Aug. 15.
“The Interior decision is arbitrary, capricious, an abuse of discretion, or otherwise contrary to law,” and “deprives Exxon Mobil of property without due process of law,” the Irving, Texas-based company said in its complaint.
Exxon Mobil, the world’s largest publicly traded oil company, said federal regulations allow oil producers to suspend production in their fields, partly “to facilitate proper development of a lease.” Because of drilling complexity, Exxon Mobil said, it asked for a suspension for Julia in 2008.
The Interior Department denied the request in 2009, stating that the company “had not demonstrated a commitment to production,” according to court papers. Unsuccessful appeals followed.
The Interior Department is reviewing the Exxon Mobil complaint, Melissa Schwartz, spokeswoman for the department’s Bureau of Ocean Energy Management, Regulation and Enforcement, said in an e-mailed statement.
“Our priority remains the safe development of the nation’s offshore energy resources, which is why we continue to approve extensions that meet regulatory standards,” Schwartz said.
President Barack Obama stopped deep-water oil and natural- gas drilling early last year after a BP Plc (BP/) well blew out off the Louisiana coast, claiming 11 lives and causing the largest U.S. oil spill. Interior Secretary Ken Salazar lifted the ban in October.
Exxon alleges that the Interior Department canceled the Julia leases to gain new leases and make more money.
If the agency’s decision stands, Exxon Mobil and Statoil will “lose the enormous value of those leases and their hundreds of millions of dollars in investments,” Statoil said in its complaint.
The case is Exxon Mobil Corp. v. Salazar, 11CV1474, U.S. District Court, Western District of Louisiana (Lake Charles).
Vitro Units Sued by Bond Trustee Over $1.35 Billion in Notes
Units of Vitro SAB, the Mexican glassmaker that defaulted in 2009, were sued by a bondholder trustee seeking to recover $1.35 billion owed under notes issued by the company.
Vitro and its subsidiaries are engaged in a “a multi-year scheme” to avoid paying bondholders, Wilmington Trust NA, the trustee under two series of notes issued by Vitro and guaranteed by the units, said in a complaint filed Aug. 17 in New York state court in Manhattan.
Vitro in 2009 defaulted on $1.5 billion in debt, including $1.2 billion of bonds, after the recession cut demand for construction and auto glass. Bondholders have been fighting the company’s debt-restructuring efforts in the U.S. and Mexico.
Roberto Riva Palacio, a Vitro spokesman, declined to comment about the lawsuit because the company hadn’t been notified. Company officials “will continue to maintain our openness to dialogue” with creditors, he said in an e-mail.
The case is Wilmington Trust NA v. Vitro Automotriz, 652303-2011, New York State Supreme Court (Manhattan).
Bank of Moscow Ex-CEO Claims $4.8 Million for Contract Breach
Bank of Moscow’s former Chief Executive Officer Andrei Borodin is suing the lender for breach of his labor contract, seeking more than 140 million rubles ($4.8 million), his lawyer said.
Borodin, who headed the bank before a takeover by VTB Group, Russia’s second-largest lender, is claiming unpaid salary plus interest, Mikhail Dolomanov said yesterday by phone. A hearing at Moscow’s Meshchansky Court is scheduled for Sept. 5, he said.
Bank of Moscow was granted a record bailout of 395 billion rubles ($14 billion) as bad debt uncovered after its acquisition by VTB threatened to topple Russia’s fifth-biggest lender. Russia has issued an international arrest warrant for Borodin on suspicion of abusing his authority in connection with a 12.8 billion-ruble corporate loan granted in 2009. He denies any wrongdoing.
Bank of Moscow has conducted an investigation to determine whether Borodin’s contract complied with Russian law, and the findings have been sent to the Interior Ministry’s investigative committee, the lender said in an e-mailed statement yesterday.
Funds from the loan ended up in the personal account of Yelena Baturina, wife of ousted Moscow Mayor Yury Luzhkov, the Interior Ministry said Feb. 17 after police raided Baturina’s company, ZAO Inteco. The Moscow government held a controlling stake in Bank of Moscow that was acquired by state-run VTB.
Gennady Terebkov, a spokesman for Inteco, said April 6 that he doesn’t expect a criminal case to be opened against Baturina because she hasn’t done anything wrong. The loan to Baturina is being repaid on schedule, Dolomanov said last month.
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Ex-Lehman Brothers Managing Director Gets Pretrial Diversion
Former Lehman Brothers Holdings Inc. (LEHMQ) managing director Bradley H. Jack, who was arrested in June for prescription forgery, got court approval to enter a pretrial diversion program.
Superior Court Judge Earl B. Richards III in Bridgeport, Connecticut, approved Jack’s request to enter so-called accelerated rehabilitation, a program that is available to people charged with less-serious crimes that might result in prison time. People charged with more serious felonies, those with prior convictions and those who previously have used diversion programs aren’t eligible.
Jack, 52, of Westport, Connecticut, was arrested on June 24 after he allegedly tried to pass forged prescriptions for 12 pills of the painkiller Oxycontin and nine of Ritalin, a drug used to treat attention deficit disorder, according to Fairfield, Connecticut, police. Jack has received treatment for cancer, has had a valid prescription in the past, and has no prior criminal record, his attorney, Robert G. Golger, said in court.
“It’s regrettable, but he’s a man of good character,” Golger told the judge.
Jack is charged with second-degree forgery and attempting to obtain a controlled substance through forgery or alteration of a prescription or a written order. The forgery charge, the more serious, is punishable by as many as five years in prison and a $5,000 fine. Jack hasn’t entered a plea.
The case is Connecticut v. Jack, F02B-CR11-0258280-S, Connecticut Superior Court, Fairfield County (Bridgeport).
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TCW Chief Says Gundlach Fired Because Firm Was ‘Threatened’
TCW Group Inc. Chief Executive Officer Marc Stern said he fired Jeffrey Gundlach in December 2009 because Gundlach was plotting to take TCW’s clients and portfolios to his own firm.
Stern testified yesterday in the trial that pits Gundlach and three other former TCW executives against the asset- management firm. Stern said he made the decision to fire Gundlach, TCW’s chief investment officer and head of its fixed- income group, because the company was being “threatened” and “in the process of being destroyed.”
“He was the most important portfolio manager at the firm, managing 60 percent of the assets,” Stern told the jury in California state court in Los Angeles.
TCW, based in Los Angeles, fired Gundlach, 51, in December 2009 and sued him the following month after more than half of its fixed-income professionals joined his new firm. TCW, a unit of Paris-based Societe Generale SA, seeks $375 million in damages, claiming Gundlach stole its trade secrets, including client portfolio data, to start DoubleLine Capital LP.
Gundlach, who had worked at TCW for 25 years and who was named Morningstar’s Fixed Income Manager of the Year in 2006, countersued, saying TCW fired him to avoid having to pay management and performance fees for the distressed-asset funds his group managed and that went “through the roof.” Gundlach seeks about $500 million.
Stern told the jurors that he had no intention of getting rid of Gundlach in the summer of 2009, after Stern had been asked to return to day-to-day management of TCW. Gundlach and other group managers at TCW had opposed the return of Stern, who had retired as president in 2005, and had wanted instead a management committee to be put in charge.
“It would be like cutting off your right arm,” Stern said under questioning by TCW lawyer John Quinn. “He was the most important person at the firm.”
Gundlach’s fixed-income group managed more than half of TCW’s $110 billion assets under management. He has denied that he wanted to leave TCW and testified that he only started to make plans to set up his own company, including registering a shell company in Delaware and looking for office space, in late 2009 because he was afraid he was getting fired.
Stern testified that his “single most important concern” when he returned to TCW in June 2009 was whether Gundlach was committed to staying at the company. Gundlach was an at-will employee without a signed contract in 2009 and had been in talks with a rival asset manager earlier that year, Stern said.
Stern is expected to continue his testimony when the trial resumes Aug. 24. He hasn’t yet been cross-examined by DoubleLine’s lawyers.
The case is Trust Co. of the West v. Gundlach, BC429385, California Superior Court, Los Angeles County.
Teva Faces Second Trial Over Hepatitis Cases Linked to Drug
Teva Pharmaceutical Industries Ltd. (TEVA), the world’s biggest generic-drug maker, sold the anesthetic propofol in a way that led some patients to develop hepatitis C, a lawyer said at the start of a second trial over the allegations.
Robert Eglet, a lawyer for three Las Vegas residents who claim they were diagnosed with hepatitis after receiving propofol from tainted vials during colonoscopies, told jurors in opening statements yesterday that officials of Teva, along with drug distributors Baxter International Inc. (BAX) and McKesson Corp. (MCK), knew sales of large vials of the drug could help spread blood- borne diseases.
The companies “made billions of dollars in profits at the expense of patient safety,” Eglet said in Nevada state court in Las Vegas. The trial of the first case against Teva and Baxter last year resulted in a verdict of more than $500 million against the drugmakers.
Teva faces almost 300 lawsuits stemming from a hepatitis C outbreak three years ago in southern Nevada, the Petach Tikva, Israel-based company said in a regulatory filing last month. Nevada health officials blamed the reuse of propofol vials for infecting patients with the incurable liver disease.
Teva manufactures the drug and San Francisco-based McKesson is its current U.S. distributor. Baxter, based in Deerfield, Illinois, sold the drug for Teva until 2009, according to court filings.
In the case that began yesterday, Anne Arnold, Richard Sacks and Anthony Devito contend Teva’s 50-milliliter propofol containers aren’t designed as single-use vials and the drugmaker didn’t properly warn doctors about the dangers of “double dipping” into the anesthetic.
“We are confident that if the jury gets to hear all of the evidence, they will correctly determine that the drug-product defendants were in no way responsible for the tragic hepatitis outbreak that occurred in Las Vegas,” Denise Bradley, a U.S. spokeswoman for Teva, said Aug. 12 in an e-mailed statement.
Deborah Spak, a spokeswoman for Baxter, said Aug. 11 the company declined to comment on the suit because Teva accepted liability for all of the cases stemming from the 2008 hepatitis outbreak involving propofol. Megan Hawkins, a spokeswoman for McKesson, said Aug. 12 that the company doesn’t comment on pending litigation.
The case is Sacks v. Endoscopy Center of Southern Nevada LLC, 08A572315, District Court for Clark County, Nevada (Las Vegas).
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Deutsche Bank Faces Breuer Trial in Kirch Litigation Legacy
Leo Kirch’s death a month ago hasn’t laid to rest his legal fight with Deutsche Bank AG (DBK) and its former chief, Rolf Breuer. The man Kirch blamed for the downfall of his media group faces claims he lied to judges in a trial that began yesterday and was adjourned only shortly after.
The Munich trial, whose start was delayed an hour because a stand-in lay judge arrived late, was paused after Breuer’s defense asked for more time to review the bench’s composition. A resumption of the trial isn’t expected before the end of October, the court said in a statement.
“It turned out that we wouldn’t be able to hold hearings for another seven weeks,” said Presiding Judge Anton Winkler. “We decided to restart the trial with newly chosen lay judges in due course.” In some criminal cases in Germany, lay judges hear cases together with professional judges.
The trial is part of a nine-year fight over comments Breuer made to Bloomberg TV in 2002 about how creditworthy Kirch’s media group was. Kirch, once one of Germany’s biggest media tycoons, claimed Breuer’s remarks precipitated the company’s bankruptcy and filed claims totaling at least 3.3 billion euros ($4.8 billion). These suits continue in spite of Kirch’s death.
Deutsche Bank, while not a party in the criminal case, could see its image affected by the trial in which its former chief executive officer faces charges of attempted fraud, said Stephan Holzinger, a litigation media adviser.
The bank and Breuer, who both rejected a 775 million-euro settlement over the civil litigation proposed by a judge in March, deny any wrongdoing. Sven Thomas, Breuer’s lawyer, told reporters before the trial started that he is expecting an acquittal. Prosecutors claim Breuer lied to judges in 2003 to avoid losing a civil damages lawsuit Kirch brought.
The criminal trial is the result of Kirch’s attempt to draw attention away from his own responsibility for the failure of his enterprise, Christian Streckert, a Deutsche Bank spokesman, said Aug. 17. Breuer has said his televised remarks were based on media reports, not internal bank analysis.
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China Minmetals, Sinosteel Price-Fixing Lawsuit Revived
China Minmetals Corp., China’s biggest state-owned metals trader, and Sinosteel Corp. must face claims they conspired to fix the price of magnesite sold in the U.S., a federal appeals court ruled.
The U.S. Court of Appeals in Philadelphia reversed Aug. 17 a lower-court decision dismissing the lawsuit. The lower court erred in ruling that it lacked jurisdiction to decide the dispute based on a federal statute, the appeals panel said, remanding the case for further proceedings.
Animal Science Products Inc. and Resco Products Inc., U.S. buyers of magnesite, sued 17 Chinese companies in 2005 claiming they conspired since at least April 2000 to fix the price of the metal exported and sold in the U.S. Magnesite is mined from magnesium deposits and used to melt steel, clean wastewater and make cement, the appeals court said.
The appeals case involves only the China Minmetals and Sinosteel defendants, who had argued that the dispute should be arbitrated in China, according to court papers. Sinosteel is China’s biggest iron-ore trader.
Jonathan S. Caplan, an attorney for Sinosteel, didn’t return a phone call and e-mail seeking comment on the appeals court ruling. Shepard Goldfein, an attorney for China Minmetals, wasn’t immediately available for comment.
The case is Animal Science Products Inc. v. China Minmetals Corp., 10-2288, 3rd U.S. Circuit Court of Appeals (Philadelphia).
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Californians Can’t Claim Billed Costs in Injury Lawsuits
Californians suing over personal injuries can only seek damages for actual, rather than billed, medical expenses, the state’s high court said yesterday.
Allowing plaintiffs to recover billed medical costs rather than the lower fees from negotiated rates between health providers and insurers could have cost insurance companies billions of dollars and driven up insurance rates for consumers, Allstate Insurance Co. said in court filing in the case. The company wasn’t a party in the case.
“This is one of the biggest issues to hit California consumers in years, and few people were aware” of the case, said Robert Tyson, an attorney for Hamilton Meats & Provisions Inc., the defendant in the lawsuit decided yesterday. “Rates for insurance were going to go up if the court had ruled the other way.”
Rebecca Howell sued Hamilton Meats after she was seriously injured in a car accident with a company driver. A trial court reduced her damages to the amount actually paid by her medical care providers.
A state appeals court in San Diego reversed the ruling, saying it violated a legal rule that disallows reducing damages for compensation a plaintiff has received from sources other than the defendant. Hamilton Meats appealed and insurance groups and companies including Allstate sought reversal of the appeals court ruling.
“The ruling drastically rewrites a century of California law that says plaintiffs can recover the reasonable value of their damages,” Gary Sims, an attorney for Howell, said in a phone interview.
The case was sent back to the appeals court for further proceedings.
The case is Howell v. Hamilton Meats, S179115, California Supreme Court (San Francisco).
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Davis Polk Hires Former Federal Trade Commission Economist
Davis Polk & Wardwell LLP said Howard A. Shelanski, a former deputy director at the Federal Trade Commission, joined the law firm’s Washington office to strengthen its antitrust and regulatory business.
Shelanski, 47, was a law professor at the University of California at Berkeley from 1997 to 2009, where he co-directed the Berkeley Center for Law and Technology from 2000 to 2008, Davis Polk said in a statement.
He also served as chief economist at the Federal Communications Commission from 1999 to 2000, and from 1998 to 1999 was a senior economist to the President’s Council of Economic Advisers, Davis Polk said. He was deputy director of the FTC’s Bureau of Economics from 2009 until this year, where he was responsible for the antitrust portfolio.
Shelanski has also practiced law in Washington and served as a law clerk to U.S. Supreme Court Justice Antonin Scalia, Davis Polk said. He earned his law degree and his doctorate in economics at Berkeley and his bachelor’s degree at Haverford College outside Philadelphia.
Shelanski will continue to teach at Georgetown University’s Law Center.
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