HSBC, RBS, Madoff, Facebook, AT&T, Lehman in Court News

HSBC Holdings Plc (HSBA) settled a lawsuit brought by a group of Taiwanese banks that accused HSBC Bank USA of helping deceased financier Danny Pang’s PEMGroup defraud them of more than $500 million.

The banks involved in the case -- HSBC Bank USA, Hua Nan Commercial Bank, Hua Nan Investment Trust Corp., Cosmos Bank, Entie Commercial Bank (2849), Bank SinoPac and Taichung Commercial Bank (2812) -- said in a filing Nov. 23 in federal court in Los Angeles that they entered into a settlement agreement and asked for the case to be dismissed. Terms of the settlement weren’t disclosed.

The Taiwanese banks accused HSBC Bank USA of lying to investors about how long the bank serviced PEMGroup’s investments and falsely representing that PEMGroup’s previous investment products had performed in conformity with their offering memorandums. Hua Nan Commercial Bank claimed $191 million in losses.

“The parties to the litigation did reach a settlement on mutually agreeable terms,” Alexander Pilmer, a lawyer for the Taiwanese banks, said in an e-mail. He said he couldn’t provide additional information.

Neil Brazil, a spokesman for London-based HSBC, had no immediate comment on the settlement.

The court-appointed receiver for Irvine, California-based Private Equity Management Group Inc. also sued HSBC, alleging the bank helped Pang defraud Taiwanese investors. A judge in 2009 froze the assets of PEMGroup and appointed a receiver after the U.S. Securities and Exchange Commission leveled accusations against Pang and his company.

The SEC accused Pang of lying about his credentials, forging insurance documents and paying existing investors with funds raised from new ones, while claiming the returns came from investments in life insurance policies. Pang committed suicide in September 2009 at the age of 42.

The defrauded Taiwanese investors, including eight financial institutions and about 35 wealthy individuals, had $823 million invested with PEMGroup, the receiver has said.

The case is Hua Nan Commercial Bank v. HSBC Bank USA, 10-8773, U.S. District Court, Central District of California (Los Angeles).

Royal Bank of Scotland to Pay Lehman Brokerage $215 Million

Royal Bank of Scotland Group Plc (RBS) will pay bankrupt Lehman Brothers Holdings Inc. (LEHMQ)’s brokerage $215 million to settle a dispute over swap transactions, according to a court filing.

Lehman Brothers Inc., the brokerage, asked a bankruptcy judge to force Edinburgh-based Royal Bank to pay $345 million, plus interest, for early termination of a 1998 swap agreement. Royal Bank refused, sought to move the case to another court and said Lehman would have to sue to try to get the money.

In an agreement filed Nov. 23 in U.S. Bankruptcy Court in Manhattan, the two sides said they reached “a fair and equitable and reasonable determination” of the closeout of the swap transactions.

The agreement needs a judge’s approval.

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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Trials/Appeals

Madoff Trustee Can Have Jury Trial Against Mets Owners

The trustee liquidating Bernard L. Madoff’s firm can have a jury determine whether he’ll recover allegedly improper transfers of funds from the confidence man to the owners of the New York Mets.

U.S. District Judge Jed Rakoff said in a Nov. 23 ruling that the trustee, New York lawyer Irving Picard, has a right to let a jury instead of Rakoff himself decide the issue when the case goes to trial in Manhattan on March 19.

The judge in September dismissed most of Picard’s $1 billion claim against Sterling Equities Inc. partners Fred Wilpon and Saul Katz, who own the Major League Baseball team. Rakoff didn’t say whether Picard can successfully maintain a “fraudulent-conveyance” claim against them.

“Madoff Securities might well be barred from bringing fraudulent-conveyance claims on the facts of this case; but if it could bring such claims, it would have a right to a jury trial,” Rakoff said in the ruling, referring to Bernard L. Madoff Investment Securities LLC, the confidence man’s firm.

Danielle Sessa Parillo, a Mets spokeswoman, didn’t comment immediately on the ruling.

Picard originally demanded $300 million in profit and $700 million in principal from the Mets partners, saying they turned a blind eye to Madoff’s Ponzi scheme. The partners denied the allegation.

To recover the profit, Picard must prove the Mets owners didn’t give equal value back to Madoff’s firm for money received from their accounts, Rakoff ruled. The judge said Picard can try to reclaim about $386 million, based on bankruptcy claims.

The case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan).

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Lawsuits/Pretrial

Netflix Wins Dismissal of Antitrust Case Over Online Rentals

Netflix Inc. (NFLX), the video-streaming and DVD subscription service, won dismissal of a 2009 consumer lawsuit claiming it conspired with Wal-Mart Stores Inc. (WMT) to create a monopoly for online video rentals.

U.S. District Judge Phyllis Hamilton in Oakland, California, ruled Nov. 22 that lawyers for consumers failed to show that a 2005 agreement between the two companies was an attempt to constrain competition for online DVD rentals and sales. She also ruled that the plaintiffs didn’t demonstrate that they personally paid higher prices for video rentals because of the agreement.

Wal-Mart, the world’s largest retailer, reached an agreement to close its online rental business and refer customers to Los Gatos, California-based Netflix, which would promote Wal-Mart’s DVD movie sales. The complaint alleged that enabled Netflix to maintain monopoly power over online rentals and led consumers to pay inflated prices.

Wal-Mart, based in Bentonville, Arkansas, agreed to pay $27.2 million to settle the case, according to court filings. The plaintiffs were seeking as much as $650 million in damages from Netflix, according to court filings. Robert Abrams, an attorney for the plaintiffs, didn’t immediately return a voice- mail message seeking comment about the ruling.

The case is In Re Online DVD Rental Antitrust Litigation, 09-2029, U.S. District Court, Northern District of California (Oakland).

Merck KGaA (MRK) Says Facebook Let Merck & Co. Swipe Its Web Page

German drugmaker Merck KGaA asked a New York judge to force Facebook Inc. to produce information about an alleged takeover of its page on the social networking site by its U.S.-based competitor Merck & Co.

Merck KGaA, based in Darmstadt, Germany, wants the information from Facebook as it considers suing an unspecified defendant for breach of contract or interference with business, according to a filing in state court in New York.

The German company said it made an agreement with Facebook last year for exclusive use of the Web page www.facebook.com/merck. Last month, Merck KGaA saw that the page’s content was related to its U.S. competitor, according to the Nov. 21 filing. The Web page currently refers to Merck & Co. (MRK), the Whitehouse Station, New Jersey-based drugmaker.

Merck KGaA said Facebook “had not been cooperative” in attempts to seek information about the change.

“We took action against Facebook and not against Merck & Co., and we are seeking an answer to why we don’t own a website we owned before,” NSE, a Merck KGaA spokesman, said in an e- mail.

“The action was not brought against Merck & Co. Inc.,” a spokesman for the U.S. company, Ronald Rogers, said in an e- mail. “We’ve begun looking into the matter.”

E-mails to Palo Alto, California-based Facebook’s press department didn’t receive a response.

Merck KGaA said it filed in New York because courts in California, Facebook’s headquarters state, don’t allow pre- action disclosure to identify defendants.

The case is In the matter of the application of Merck KGaA, 11113215-2011, New York State Supreme Court, New York County (Manhattan).

AT&T Runs Low on Options to Get U.S. Approval for T-Mobile

AT&T Inc. (T) may be running out of options to win regulatory approval for its proposed $39 billion takeover of T-Mobile USA, forcing AT&T to choose whether to drop the bid or endure months of litigation with the U.S. government.

The Federal Communications Commission took a step toward opposing the deal Nov. 22, as Chairman Julius Genachowski asked commissioners to send the proposal to an agency judge for a hearing. Agency staff found the merger would significantly diminish competition and lead to job losses, said an official who spoke on the condition of anonymity.

AT&T may also be losing one possible option for addressing the concerns of the Justice Department, which sued in August to block the deal saying it would reduce wireless competition. MetroPCS Communications Inc. (PCS), which has been negotiating to buy assets from AT&T and T-Mobile to become a more viable rival, isn’t interested in customers and spectrum in as many markets as AT&T needs to sell, said two people close to the situation who declined to be identified because the talks are private.

Odds are increasing that Dallas-based AT&T will have a long legal fight if it wants to salvage the deal, said Jeffrey Silva, an analyst at Medley Global Advisors LLC in Washington.

“The FCC and DOJ work hand in hand,” Silva said in a telephone interview. The FCC’s move “shows that AT&T has made no progress in the negotiations with the DOJ.”

AT&T said the FCC’s decision was disappointing and that it was reviewing all options.

“It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the U.S. economy desperately needs both,” Larry Solomon, an AT&T spokesman, said in a statement.

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Litigation Departments

Mistrial Declared in Murder Case of Ex-Prosecutor Bergrin

A mistrial was declared in the trial of Paul Bergrin, a former federal prosecutor and defense attorney for rappers and U.S. soldiers, who was charged with conspiring to murder an informant in a drug case.

U.S. District Judge William Martini on Nov. 23 ended the six-week trial in federal court in Newark, New Jersey, after jurors said they were deadlocked in their sixth day of deliberations. The jurors told Martini they exhaustively reviewed the evidence and were unable to reach a unanimous verdict.

“It’s clear to me that they’re hopelessly deadlocked and that further deliberations would not be fruitful,” Martini said before dismissing the jury.

Prosecutors said Bergrin directed the 2004 shooting of Kemo Deshawn McCray, 30, of Newark, to avoid being identified as a cocaine supplier to a drug gang. Bergrin, a former Essex County, New Jersey, prosecutor and assistant U.S. attorney, represented himself in court. He denied wrongdoing, assailing prosecution witnesses as liars seeking leniency in their own cases.

Bergrin, who faced life in prison if convicted, remains in custody. Martini set a retrial for Jan. 4. Before then, he will consider a motion by Bergrin and his court-appointed attorney, Lawrence Lustberg, to dismiss the case before it goes to a new jury.

The case is U.S. v. Bergrin, 09-cr-369, U.S. District Court, District of New Jersey (Newark).

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Lehman Paid $37.2 Million in Bankruptcy Fees in October

Lehman Brothers Holdings Inc., which has spent almost $1.5 billion on fees while in bankruptcy, paid $37.2 million to lawyers and managers in October, according to a regulatory filing.

Restructuring firm Alvarez & Marsal LLC, whose co-founder Bryan Marsal runs the defunct investment bank, has charged $487.6 million in fees for 37 1/2 months’ management work, including about $9.3 million last month, according to documents filed Nov. 22 with the U.S. Securities and Exchange Commission. Weil, Gotshal & Manges LLP, based in New York, whose fees total $358.6 million so far for acting as Lehman’s lead bankruptcy law firm, collected $15.3 million in October.

“They just might be worth it, if they get the plan confirmed next month,” said Stephen Lubben, a bankruptcy law professor at Seton Hall University in Newark, New Jersey, who writes about Lehman on a blog, Credit Slips.

Marsal, who bills Lehman hourly, has said he will start distributing some cash to the defunct firm’s creditors by next year, more than three years after the September 2008 bankruptcy filing. A court hearing on his $65 billion liquidation plan is set for Dec. 6, as banks and hedge funds file objections.

“A rather complicated confirmation hearing now seems inevitable,” Lubben said.

Kimberly Macleod, a Lehman spokeswoman, declined to comment on the fees.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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Court News

Judges Propose Texas Congressional Maps, Replacing Perry’s

Interim Texas congressional district maps were proposed by a panel of U.S. judges in San Antonio to replace voter boundaries approved by Governor Rick Perry that the U.S. Justice Department said were designed to keep Latinos out of office.

U.S. District Judge Orlando Garcia, who is presiding over the panel in San Antonio, made the maps public Nov. 22 and set deadline for today for comments and objections.

Separate three-judge panels held hearings in Washington and San Antonio on challenges to Texas’s electoral maps. The Washington court on Nov. 8 refused to allow the Perry-approved maps to be used in next elections, saying the court needed time to explore allegations that they discriminated against Hispanics.

“The State of Texas used an improper standard or methodology to determine which districts afford minority voters the ability to elect their preferred candidates of choice,” the panel in Washington ruled.

To avoid a delay in the state’s March primaries, the San Antonio judges created interim maps they said would more fairly reflect the distribution of the state’s population. They pushed back the opening of the Texas candidacy filing period to Nov. 28 from Nov. 12 to give candidates time to study the new districts.

Texas gained four congressional seats after adding almost 4.3 million new residents since 2000, with almost 65 percent of the growth coming from Hispanics, according to the 2010 U.S. census.

The Texas case is Perez v. Perry, 5:11-cv-00360, U.S. District Court, Western District of Texas (San Antonio). The Washington case is Texas v. U.S., 1:11-cv-1303, U.S. District Court, District of Columbia (Washington).

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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