BNP Paribas (BNP) SA was sued by the U.S. over allegations the Paris-based bank aided a grain export fraud scheme involving commodity payment guarantees provided by the Department of Agriculture.
A corporate banker in BNP’s Houston office allegedly helped a scheme that defrauded the Agriculture Department of at least $78 million through deals he made with four U.S. grain exporters, according to a complaint filed yesterday in federal court in Houston.
The banker knew the exporters were secretly controlled by the same foreign businessman who owned the companies importing the shipments into Mexico, the U.S. said in the complaint. The Agriculture Department’s Supplier Credit Guarantee Program prohibits payment guarantees on commodity sales between a U.S. exporter and a foreign-owned importer controlled by the same person or group.
“Because the U.S. exporters and Mexican importers were under common ownership and/or control, which fact defendants knew, none of the commodity sales between these entities were eligible for SCGP payment guarantees,” Assistant U.S. Attorney Michelle Zingaro said in the complaint.
When the Mexican importers defaulted on payments for dozens of grain shipments from 1998 to 2006, BNP and Jovenal “Jerry” M. Cruz, its former trade finance manager, “presented or caused to be presented false or fraudulent claims to the USDA,” Zingaro said in the complaint, which also names Cruz, BNP Paribas North America and BNP Paribas Houston Agency as defendants.
Michele Sicard and Julie Beuter, spokeswomen for BNP Paribas, didn’t return e-mails seeking comment on the U.S. complaint after regular business hours yesterday.
Philip Hilder, Cruz’s attorney, said in a phone interview that the former BNP vice president has entered a plea of not guilty and is awaiting trial in February. Three other people charged in the scheme have pleaded guilty and are awaiting sentencing, according to court records.
The government seeks triple damages, or $234 million, plus penalties of as much as $11,000 for each violation of the False Claims Act.
The case is US v BNP Paribas SA, 4:11-cv-03718, U.S. District Court, Southern District of Texas (Houston).
Hedge Fund 3 Degrees Asked to Shut on Diverted Assets Claim
3 Degrees Asset Management, a hedge fund which helps manage $215 million, was asked by Singapore’s central bank to shutter its operations following allegations that founder Moe Ibrahim diverted assets.
3 Degrees is trying to overturn a decision by the Monetary Authority of Singapore and the finance minister to withdraw its exempt fund manager status effective Nov. 9 and ask it to wind down, according to a lawsuit filed with the Singapore High Court this month. A closed hearing is scheduled for tomorrow.
The MAS probed the Singapore-based manager after one of its funds sued Indonesian-born Agus Anwar in 2008 to recover at least $40 million in debt. Anwar then claimed that Ibrahim diverted $6.7 million from the fund to 3 Degrees, which is wholly owned by Ibrahim. 3 Degrees, which focuses on distressed debt, denied the allegations in its lawsuit.
Even if there was such a transaction, it was neither “illegal or improper,” 3 Degrees said in its court filings. The hedge fund manager said a fine would have been an appropriate punishment.
Ibrahim declined to comment on the lawsuit or the status of 3 Degrees on Oct. 17. The fund has also asked the court to prevent the announcement of the regulator’s decision, according to the lawsuit.
“It is inappropriate for MAS to comment on this matter at this point in time,” the Monetary Authority said in an e-mail yesterday.
Attempts by Bloomberg News to reach Anwar weren’t successful.
The case is 3 Degrees Asset Management Pte v Attorney General and Monetary Authority of Singapore OS874/2011 in the Singapore High Court.
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Home Sale After Bad Foreclosure Isn’t Valid, Court Rules
A Massachusetts man who bought property in a faulty foreclosure sale didn’t have the right to bring a court case over the property because he isn’t the owner, the state’s high court ruled.
The Supreme Judicial Court, which in January found that banks can’t foreclose on a house if they don’t own the mortgage, went one step further in a closely watched case and said a sale after that foreclosure doesn’t transfer the property. Therefore, the buyer couldn’t bring his court action against a previous owner, the court ruled.
The high court upheld a lower-court decision that said Francis J. Bevilacqua III, the buyer of residential property in Haverhill, Massachusetts, never owned it because U.S. Bancorp foreclosed before it got the mortgage. Yesterday’s ruling could have implications in the foreclosure crisis in which banks are accused of clouding home titles through sloppy transferring of mortgages.
“By alleging that U.S. Bank was not the assignee of the mortgage at the time of the purported foreclosure, Bevilacqua is necessarily asserting that the power of sale was not complied with, that the purported sale was invalid, and that his grantor’s title was defective,” the court wrote. “In light of its defective title, the intention of U.S. Bank to transfer the property to Bevilacqua is irrelevant and he cannot have become the owner of the property pursuant to the quitclaim deed.”
Jeffrey B. Loeb, a lawyer for Bevilacqua, said that while he’s “disappointed” in the ruling, it does pave the way to a solution for third-party buyers: re-foreclosure.
“It reaffirms the concept that a defective foreclosure deed operates as an assignment of the mortgage and if you can trace the ownership of the mortgage, that person would have the right to re-foreclose,” said Loeb of Rich May PC in Boston.
The state high court’s January ruling in the earlier case, U.S. Bank v. Ibanez, didn’t address the status of so-called third-party buyers who purchase property from someone who conducted an invalid foreclosure.
Bevilacqua bought the property in 2006 from U.S. Bancorp, which oversees the mortgage-backed trust containing the loan. The bank isn’t a party to the case.
The case is Bevilacqua v. Rodriguez, 10880, Supreme Judicial Court of Massachusetts (Boston).
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EPA Conduct Voids Greenhouse Gas Rule, Virginia Tells Court
The U.S. Environmental Protection Agency’s ruling that carbon dioxide and other greenhouse gases are pollutants should be thrown out because of the agency’s conduct, Virginia Attorney General Kenneth Cuccinelli said in a court filing.
Virginia, Texas and 13 other states made the allegation in a filing Oct. 17 in their lawsuit challenging the greenhouse gas designation in federal appeals court in Washington. The states, citing an EPA inspector general’s report, claim the agency improperly used data from outside groups without testing its veracity in making its “endangerment finding.”
“This approach foreclosed ‘genuine interchange’ between the agency and the public, the fundamental purpose of the comment process, as the agency failed to make available all the underlying studies and data, preventing the public from providing ‘meaningful commentary,’” Cuccinelli, a Republican, said in the filing.
Enesta Jones, an EPA spokeswoman, declined to comment immediately on the filing.
In 2007, the Supreme Court ruled that the EPA had authority to regulate greenhouse gases, such as carbon dioxide and methane, under the Clean Air Act if the agency declared them a danger to the public. The EPA issued its so-called endangerment finding in December 2009, clearing the way for the agency to regulate emissions from power plants, factories and other sources linked to global climate change.
The case is Coalition for Responsible Regulation Inc. v. Environmental Protection Agency, 09-1322, U.S. Court of Appeals for the District of Columbia (Washington).
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Access Seeks to Dismiss Madoff Trustee Suit, Cites Mets
Access International Advisors Ltd., part of a $185 million lawsuit by the liquidator of Bernard Madoff’s firm, asked a judge to dismiss the case while citing a ruling that favored the owners of the New York Mets.
Trustee Irving Picard last year sued Access International, whose chief executive officer was Thierry Magon de La Villehuchet, demanding money and fees taken from the Ponzi scheme. Picard has no right to undo the transfers after U.S. District Judge Jed Rakoff ruled that the Mets owners’ payments from the Madoff brokerage can’t be taken back, Access said in a court filing Oct. 17.
“The trustee’s avoidance claims are plainly barred against Access,” according to the filing in U.S. Bankruptcy Court in Manhattan. Payments by a stockbroker “are expressly exempted from recovery by the settlement payment safe harbor in the bankruptcy code,” Access said.
Rakoff narrowed by two-thirds the $1 billion demanded by Picard from Mets owners Fred Wilpon and Saul Katz. Access, saying it was “a Bahamian service provider” that received fees from a Guernsey fund, Trotanoy Investment Co. -- the main defendant in the suit -- said Picard also erred in trying to take back “far removed, foreign incidental service fees.”
De La Villehuchet killed himself in 2008 after potentially losing all of the money he invested with Madoff. Access, which managed $3 billion, and its LuxAlpha Sicav unit are defendants in one of Picard’s suits against UBS AG. (UBSN)
Amanda Remus, a Picard spokeswoman, didn’t immediately respond to an e-mail seeking comment on Access’s filing.
Picard’s suit is Picard v. Trotanoy Investment Co., 10- ap-05208, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The district court case is 11-cv-07112, U.S. District Court, Southern District of New York (Manhattan).
Delaware Bankruptcy Capital Status May End With Proposed Law
A bipartisan bill sponsored by leaders of the House Judiciary Committee may strip Delaware of its status as the premier venue for U.S. bankruptcy cases, costing the state’s economy an estimated $100 million a year.
Lamar Smith, the Texas Republican who chairs the Judiciary panel, introduced the bill with Michigan’s John Conyers, its ranking Democrat. The aim is to prevent court-shopping and make companies reorganize at home “to ensure maximum input from all affected stakeholders,” Smith said in a statement. Delaware’s congressional delegation disagreed, citing the Wilmington-based court’s expertise.
“When someone has a specific medical problem, they go to a specialist,” Representative John Carney, a Democrat, said by e- mail. “Delaware’s courts are our nation’s bankruptcy specialists.” The state’s two U.S. senators, Democrats Thomas Carper and Chris Coons, also oppose the bill.
Under the measure, a corporation may file for Chapter 11 reorganization only in the federal district where its principal place of business or assets are located.
The Chapter 11 Bankruptcy Venue Reform Act of 2011 would thus rule out most of the 90 public companies that since 2006 have sought protection from creditors in U.S. Bankruptcy Court in Wilmington, Delaware, where they are incorporated.
The bill has support from non-Delaware lawmakers seeking “to show they are looking after the interests of their constituents who are attorneys active in the political process and generous with their checkbooks,” said Neal Colton, a bankruptcy attorney at Cozen O’Connor in Philadelphia.
Though no companion Senate bill has been introduced, Colton said he considers the House bill “a very serious piece of legislation.”
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RBS Seeks to ‘Strike’ Lehman’s $345 Million Payment Demand
Royal Bank of Scotland Group Plc (RBS) asked a bankruptcy judge to reject a $345 million payment demand by Lehman Brothers Holdings Inc. (LEHMQ)’s brokerage, saying the defunct firm didn’t comply with bankruptcy rules when it made the request.
Lehman Brothers Inc. asked the judge to force Royal Bank to pay the money, plus interest, for early termination of a 1998 swap agreement. Royal Bank refused, saying that even if bankruptcy law bars it from claiming the money against amounts owed, it has a security interest in the funds.
“The LBI trustee’s failure to comply with the bankruptcy and local rules deprives RBS NV of the procedural protections it is entitled to,” the bank said in a filing in U.S. Bankruptcy Court in Manhattan Oct. 17 referring to the former ABN Amro bank it now owns. The judge should sign an order “striking” the demand, it said.
Brokerage trustee James Giddens, who is seeking money to pay customers, has been demanding the funds from RBS at least since June. RBS has resisted, including an attempt to move the case out of bankruptcy court.
According to RBS, Giddens asked for judgment without identifying each claim the judge should rule on, and didn’t set up a conference before asking the judge to compel payment, among other things.
Jake Sargent, a spokesman for Giddens, didn’t respond to an e-mail seeking comment on the RBS filing.
The Lehman brokerage, which is being liquidated separately from its bankrupt parent, went into liquidation four days after the Lehman parent filed the largest bankruptcy in U.S. history on Sept. 15, 2008.
The brokerage bankruptcy case is Securities Investor Protection Corp. v. Lehman Brothers Inc., 08-01420, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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Ex-News Corp. (NWSA) Editor Sues Hacking Committee Over Contract
News Corp.’s British publishing unit faces two lawsuits over the July firing of a tabloid editor at the behest of the board-appointed committee probing phone-hacking and other illegal tactics by the company’s journalists.
Matt Nixson, who was a features editor at the Sun newspaper and formerly worked at the News of the World, where the scandal started, filed a complaint for unfair dismissal last month at the Employment Tribunal in London, his lawyer Gerald Shamash said. Nixson then sued the company again on Oct. 14 at the Royal Courts of Justice, alleging the company breached his contract by dismissing him without explanation, the lawyer said.
“Several months later, we still do not know why” he was fired, Shamash said yesterday in a telephone interview. “They maintain they cannot tell us. We have asked the police and they’ve said he’s of no interest to them.”
Nixson is at least the fifth former employee to sue the New York-based company since the phone-hacking scandal erupted in July and the first to name members of its Management & Standards Committee as defendants. The MSC was formed in July to deal with police and political investigations into charges that News Corp. reporters used illegal tactics to acquire information for stories, forcing the company to close the News of the World.
Simon Greenberg, Will Lewis and Jeffrey Palker, the members of the MSC, are named in Nixson’s lawsuit, along with commercial lawyer Anthony Grabiner, a member of the U.K. Parliament’s House of Lords who was hired as an independent overseer of the committee. The committee’s decision that Nixson should be dismissed “induced” the contract breach, Shamash said.
News International spokeswoman Daisy Dunlop declined to comment on the cases yesterday, as did Paul Durman, a spokesman for the MSC.
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Chiesi’s New Prison Home More Camp Cupcake Than ‘Chained Heat’
Danielle Chiesi won’t need her pearls and stiletto heels for a while. For the next 30 months, it’ll be khakis and work boots, Bloomberg News’ Katherine Burton reports.
Chiesi, the 45-year-old femme fatale analyst who pleaded guilty to securities fraud in the biggest U.S. insider-trading case on record, was set to arrive yesterday at Federal Prison Camp Alderson in West Virginia. She’ll be serving time for passing illegal stock tips to hedge-fund manager Raj Rajaratnam, who was sentenced last week to 11 years in federal prison.
Alderson, nestled in the foothills of the Allegheny Mountains, ranks among the cushiest federal prisons. It’s more college campus than “Chained Heat,” the 1983 exploitation film about women in jail.
The red brick, Georgian Revival buildings of Camp Cupcake, as former inmates call Alderson, were modeled after Bucknell University in Lewisburg, Pennsylvania. There are no fences, barbed wire or guard towers. For the 1,166 prisoners, tedium is a bigger threat than violence.
Even so, for educated professionals like Chiesi who are used to calling the shots, the prison experience can be devastating, said Herbert Hoelter, head of the nonprofit National Center on Institutions and Alternatives in Baltimore.
“Every decision is made for you -- when you work, when you eat -- it doesn’t vary,” he said. “You feel useless,” added Hoelter, who provided pre-incarceration counseling to white- collar criminals Michael Milken and Ivan Boesky.
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Barclays Loses Appeal in FSA Probe of Miner’s Share Fraud
Barclays Plc (BARC) failed to convince a London court to hold Britain’s financial regulator liable for losses suffered when a gold-mining company accused of fraud had its assets at the bank frozen.
Judges at the U.K.’s Court of Appeal yesterday refused to grant an order saying the Financial Services Authority should pay for all losses resulting from an injunction freezing the Barclays accounts of Sinaloa Gold Plc. (S6G)
The U.K.’s second-largest bank had argued the FSA should pay for all costs resulting from its enforcement actions, not just the expense of finding and freezing the assets. Judge Nicholas Patten disagreed, saying in a written verdict this type of order would be “a kind of blank cheque.”
The FSA is investigating Sinaloa, which explores for gold in Mexico, and trading company PH Capital Invest over the alleged sale of “worthless” shares in a boiler-room fraud, according to the appeal court judgment.
In December 2010, the FSA won an order prohibiting the sale of Sinaloa stock and freezing assets with a value of as much as 858,267 pounds ($1.3 million).
The FSA and Barclays didn’t immediately respond to requests for comment.
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U.S. Justice Department Said to Bring in Lawyer for AT&T Trial
The U.S. Justice Department is bringing in an outside trial lawyer for its lawsuit against AT&T Inc. (T)’s acquisition of T- Mobile USA Inc., according to two people familiar with the matter.
The department’s antitrust division is hiring Los Angeles- based lawyer Glenn Pomerantz, a partner at Munger, Tolles & Olson LLP, to bolster its trial team and work with the division’s chief litigator, Assistant U.S. Attorney General Joseph Wayland, said the people, who declined to be identified because the process of getting Pomerantz on board isn’t final.
Enlisting Pomerantz in the case shows that the Justice Department is preparing for trial and not in the process of negotiating a settlement, said Bert Foer, president of the American Antitrust Institute in Washington.
“This is going to be a very large case that requires additional resources,” Foer said.
Gina Talamona, a spokeswoman for the Justice Department, declined to comment on the move. Pomerantz didn’t immediately respond to e-mails and phone calls seeking comment, while AT&T spokesman Michael Balmoris declined to comment.
Pomerantz, who works primarily with media and entertainment companies, according to a biography posted on the Munger, Tolles & Olson website, was sought out for his antitrust litigation experience, one of the people said. He will support Wayland, who will lead the trial team, another person said.
The second hearing in the case is scheduled Oct. 24 before U.S. District Judge Ellen S. Huvelle in Washington.
The case is U.S. v. AT&T Inc., 11-cv-01560, U.S. District Court, District of Columbia (Washington).
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Sheppard Mullin Hires IP Litigator From Fish & Richardson
Sheppard Mullin Richter & Hampton LLP hired Nagendra “Nick” Setty, an intellectual-property litigator for about 20 years, from Fish & Richardson PC.
Setty will serve as co-chair of Los Angeles-based Sheppard Mullin’s 70-attorney intellectual-property practice group, according to a statement issued yesterday by the firm.
Setty was the managing principal at Fish & Richardson’s Atlanta office before joining Sheppard Mullin, an AmLaw 100 firm that specializes in corporate litigation, according to the statement.
“Nick is an extremely experienced, high-profile patent litigator,” Guy N. Halgren, Sheppard Mullin’s chairman, said in the statement. “He brings a sophisticated patent litigation practice to our Palo Alto and San Francisco offices and strengthens our global IP capabilities.”
Setty has served as lead counsel in more than 120 IP cases in the past 20 years. Some of his clients included Bank of America Corp. (BAC), Cisco Systems Inc., LG Electronics Inc., Samsung Electronics Co. and Siemens AG.
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