BP, Ally Financial, Comcast, Madoff, Actavis, Deutsche Bahn in Court News

U.S. prosecutors are preparing what would be the first criminal charges against BP Plc (BP/) staff after the worst U.S. oil spill last year, the Wall Street Journal reported, citing unidentified people familiar with the matter.

Prosecutors are focusing on whether some BP employees, including several Houston-based engineers and at least one supervisor, provided false information to regulators about the risks linked to the drilling of the Macondo well in the Gulf of Mexico, the Journal said.

Scott Dean, a spokesman for BP in Chicago, and David Nicholas, a London-based spokesman for the company, declined to comment on the report.

The U.S. government and BP are set to start a trial on Feb. 27 that will determine liability for the April 2010 well blast that killed 11 workers and triggered the leak of millions of gallons of crude. BP has agreed to settlements with four of six companies involved and may make a similar arrangement with the U.S. Justice Department, avoiding litigation as President Barack Obama seeks re-election next year, RBC Capital Markets said.

“This increases the onus on all parties to reach a settlement,” said Peter Hutton, an analyst at RBC in London. “That would take the heat off the individuals involved. Obama would like to put this fully to bed before the election.”

The well blowout on the Deepwater Horizon rig led to hundreds of lawsuits against London-based BP. The company spent $17.7 billion last year on its response to the spill and set up a $20 billion compensation fund for victims. Most of the lawsuits have been consolidated in New Orleans under U.S. District Judge Carl Barbier, who will decide who was at fault before ruling on penalties in proceedings that may take years.

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New Suits

Ally Financial Sued by Financial Guaranty Over Soured Loans

Ally Financial Inc. (ALLY) was sued by Financial Guaranty Insurance Co. over soured mortgage loans backing securities sold to investors and insured by Financial Guaranty.

Ally’s Residential Funding unit made “material misrepresentations” about the loans, which were riskier than promised, Financial Guaranty said in two lawsuits filed Dec. 27 in New York State Supreme Court in Manhattan.

“The levels of defaults and losses, and therefore the amount of claims presented to FGIC, have been overwhelming,” the company said in court papers.

The lawsuits involve insurance policies issued by Financial Guaranty in connection with about $1.9 billion in mortgage- backed securities, according to court papers. FGIC Corp. (3360Q), the New York-based holding company for Financial Guaranty, filed for bankruptcy in 2010. Financial Guaranty previously sued Ally units in November.

Gina Proia, a spokeswoman for Detroit-based Ally, said in an e-mail that the transactions are those of its ResCap unit, a separate legal entity, and there is “no merit” to Ally being named in the complaint.

“We believe there are substantial legal and factual defenses related to the FGIC claims against ResCap, and we intend to defend that position aggressively,” she said.

The cases are Financial Guaranty Insurance Co. v. Ally Financial Inc., 653621-2011, and Financial Guaranty Insurance Co. v. Ally Financial, 653623-2011, New York State Supreme Court (Manhattan).

Synthes Accuses Stryker of Raiding California Sales Force

A unit of Synthes Inc. (SYST), the world’s largest maker of bone- related medical devices, accused Stryker Corp. in a lawsuit of raiding its San Francisco sales force and using confidential information from former employees.

Stryker seeks to obtain “an improper competitive advantage” in the industry for medical implants and instruments used in spinal surgery, Synthes USA Sales LLC said in the complaint filed yesterday in federal court in Philadelphia. Synthes also accused three former sales employees of misappropriating trade secrets and breaching their contractual and fiduciary obligations to the company.

The former employees resigned from Synthes from August to early October, according to the complaint. They immediately began working for Stryker, one of the company’s direct competitors, and are soliciting former customers, according to the court filing.

Representatives of Kalamazoo, Michigan-based Stryker didn’t respond to an e-mail and phone message at the company headquarters seeking comment on the lawsuit.

The case is Synthes USA Sales LLC v. Stryker Corp. (SYK), 11- cv-07876, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).

Vulcan Materials Sued by Fund Over Martin Marietta Offer

Vulcan Materials Co.’s board was sued by KBC Asset Management NV over accusations the directors are trying to thwart a hostile takeover bid by Martin Marietta Materials Inc. (MLM)

Martin Marietta announced an all-stock bid for Vulcan Dec. 12 that was valued at more than $4 billion. The offer was made directly to investors after Vulcan, the largest U.S. producer of crushed stone, broke off merger negotiations.

“The exchange offer provides significant bird-in-hand value to Vulcan’s shareholders in light of Vulcan’s poor performance over the recent periods,” Belgium-based KBC, with more than 44,000 Vulcan shares, contends in the complaint.

The lawsuit, filed Dec. 27 in federal court in Birmingham, Alabama, is one of at least four being pursued in three states over the deal. On Dec. 19, Birmingham-based Vulcan sued in the same court asking a judge to block the takeover. Martin Marietta, based in Raleigh, North Carolina, sued Vulcan in Delaware Chancery Court Dec. 12 to try to validate the offer. Martin also sued Vulcan Dec. 12 in Superior Court in Trenton, New Jersey, to the same end.

KBC asks for a jury trial and an order that the board seriously consider the offer, exclusive of self-dealing.

The latest case is KBC Asset Management NV v. Vulcan Materials Co. (VMC) 11-CV-4323, U.S. District Court, Northern District of Alabama, Southern Division (Birmingham).

Ex-NBA Team Official Sues Comcast Over 76ers Finder’s Fee

A Comcast Corp. (CMCSA) unit was sued by former Portland Trailblazers President Bob Whitsitt over a finder’s fee related to the sale of the Philadelphia 76ers basketball team.

Comcast-Spectacor LP refused to pay a $2 million fee to Whitsitt and Thomas Shine, a senior vice president for Reebok International Ltd., after they introduced the company to potential buyers, according to a complaint filed Dec. 27 in federal court in Philadelphia.

“The reasons articulated by defendants for their failure to pay are patently frivolous and irrelevant as they impose conditions for payment that do not exist in the agreement between the parties,” Shine and Whitsitt said in the complaint.

A group led by Joshua Harris, the co-founder of Apollo Global Management LLC (APO), agreed to buy the National Basketball Association team in July for about $280 million. The group, which made the purchase as a personal investment, includes David Blitzer, who helped create the European office of Blackstone Group LP (BX), Art Wrubel and Jason Levien.

In the complaint, Shine claims he introduced Levien and other potential buyers to Comcast-Spectacor Chairman Ed Snider in November and December 2010. Levien was identified as a potential buyer in a written agreement between the company, Shine and Whitsitt in January, according to the complaint.

Ike Richman, a spokesman for Philadelphia-based Comcast- Spectacor, said that the lawsuit is “without merit.”

“We will vigorously defend ourselves in court,” Richman said in an e-mail.

The case is Whitsitt v. Comcast-Spectacor LP, 11-cv-07842, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).

Yankees Co-Owner Steinbrenner Sued for $670,494 in Taxes

New York Yankees co-owner and managing partner Harold Steinbrenner was sued by the U.S. Justice Department over an “erroneous” $670,494 tax refund he received in 2009.

The complaint, filed Dec. 27 in Tampa, Florida, federal court, seeks to reclaim the funds issued to Steinbrenner on Dec. 28, 2009. The refund stemmed from disputes between Steinbrenner and the Internal Revenue Service over the 2001 tax year and audits of the Major League Baseball team’s parent company for 2001 and 2002, according to court papers.

Harold Steinbrenner, known as Hal, is one of the children of George Steinbrenner, the former Yankees owner who died in 2010. George Steinbrenner and the IRS settled the issues raised in the audit in an agreement accepted on March 1, 2007, according to the complaint.

That agreement resulted in adjustments to the tax returns of the beneficiaries of a family trust, including Hal Steinbrenner’s 25 percent share. According to the complaint, Hal Steinbrenner paid his taxes in 2008, and then filed an amended 2001 tax return in 2009 seeking a refund because of a $6.8 million net operating loss carried back from 2002.

The IRS paid the refund -- and then said that the refund claim should have been filed by March 1, 2009, more than five months before Hal Steinbrenner sought the refund.

“Hal Steinbrenner’s representatives had no knowledge of the lawsuit and had received no prior notices regarding this matter from the IRS or any other governmental agency,” Alice McGillion, a family spokeswoman, said in an e-mailed statement.

Grant Williams, a spokesman for the IRS in Washington, declined to comment on the lawsuit.

The case is U.S. v. Steinbrenner, 11-02840, U.S. District Court, Middle District of Florida (Tampa).

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Lawsuits/Pretrial

Madoff Son Must Face Trustee Suit in Bankruptcy Court

Bernard Madoff’s son Andrew must submit to a bankruptcy judge’s decision to permit a $198 million lawsuit to go forward because he sought that court’s protection when he filed a claim against his father’s estate, a federal judge said.

U.S. District Judge William Pauley in Manhattan last week declined to hear an appeal of the September decision in favor of Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC, in his claim against Madoff family members including Andrew Madoff and the estate of Mark Madoff, who committed suicide in December 2010. Pauley’s written opinion was filed yesterday in U.S. Bankruptcy Court in Manhattan.

“Because Mark and Andrew invoked the aid of the bankruptcy court by offering a proof of claim and demanding its allowance, they must abide by the consequences of that procedure,” Pauley said in his Dec. 22 decision, citing a U.S. Supreme Court (1000L) ruling that also described limits to the power of bankruptcy judges. “There is no basis for them to insist that the issue be resolved” by a higher court, Pauley said.

Martin Flumenbaum, a lawyer for Andrew Madoff and Mark Madoff’s estate, said Pauley’s decision to return the case to bankruptcy court “is a procedural issue and has no bearing on the merits of the dispute.”

Picard’s lawsuit is “wholly without merit,” Flumenbaum said in an e-mail yesterday. “Mark and Andrew Madoff had no prior knowledge of Bernard Madoff’s crimes and contacted the U.S. Department of Justice and the SEC immediately after their father told them he had defrauded his investment advisory clients.”

The case is Picard v. Estate of Mark Madoff, 11-Misc-379, U.S. District Court, Southern District of New York (Manhattan).

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Trial/Appeal

Allen Stanford Loses Bid to Delay His Fraud Trial in January

R. Allen Stanford lost his bid for more time to prepare to face charges he led a $7 billion investment fraud scheme. Jury selection will begin in Houston federal court on Jan. 23.

“This case needs to be tried,” U.S. District Judge David Hittner said in an eight-page ruling yesterday. “This trial will decide not just whether Stanford is guilty of the criminal charges, but also whether hundreds of millions of dollars of investor funds currently frozen may be forfeited and returned to his alleged victims.”

Hittner ruled Dec. 22 that Stanford has sufficiently recovered from a head injury suffered in a jailhouse assault and an addiction to anxiety medications prescribed to him by prison doctors after the attack.

The judge delayed Stanford’s original trial date last January and ordered him into a prison rehabilitation program after finding Stanford’s medical conditions had made him incompetent to understand the proceedings or assist his defense team.

“Our ability to defend our client has been consistently limited by matters the court is well aware of,” Ali Fazel, Stanford’s lead lawyer, said in an e-mailed statement yesterday about the ruling. “We are now reviewing our options.”

Stanford, 61, has been detained as a flight risk since his June 2009 indictment on charges he defrauded investors of more than $7 billion through allegedly bogus certificates of deposit at his Antiguan bank. The former financier has denied all wrongdoing.

Stanford’s attorneys had asked to delay the trial until late April to give them more time to review millions of pages of company documents with Stanford. They argued they’d had only a few days to review documents with Stanford while he was clear- headed. They said they needed to search beyond the limited set of papers the government has identified as critical to the case.

The criminal case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09cv298, U.S. District Court, Northern District of Texas (Dallas).

CDR Financial’s Rubin Can’t Delay Trial for Dying Wife

CDR Financial Products Inc.’s David Rubin, who says his wife is in the final stages of terminal cancer, lost a bid to postpone his trial on bid-rigging charges, which is scheduled to begin next week in New York.

A federal appeals court in Manhattan declined Rubin’s request that it order U.S. District Judge Victor Marrero to grant the trial delay.

“While the circumstances here might well warrant an adjournment of the trial, we cannot say that the experienced trial judge’s refusal to grant a continuance constitutes an exceptional circumstance amounting to a judicial usurpation of power or a clear abuse of discretion,” a three-judge panel of the court said in a one-paragraph order on Dec. 23.

The trial, which is scheduled to start with jury selection Jan. 3, is expected to take two months. Gail Rubin, David Rubin’s wife of 26 years and the mother of his seven children, is in the final stages of pancreatic cancer in California, where they live, his lawyers said in papers filed with the appeals court. Rubin claims his wife’s illness and concerns for his children will make it impossible for him to adequately participate in his defense.

Rubin, the founder of Beverly Hills, California-based CDR, and two other employees were charged along with the company as part of an investigation into bid- and auction-rigging in the municipal bond market. Rubin, the firm’s former chief financial officer, took kickbacks for running sham auctions for the investments, prosecutors said. All pleaded not guilty.

The case is U.S. v. Rubin, 1:09-cr-01058, U.S. District Court, Southern District of New York (Manhattan).

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Verdicts/Settlements

Actavis to Pay $84 Million to End Medicaid Drug-Pricing Suit

Two units of Actavis Group Hf (ACT) will pay $84 million to settle a lawsuit over drug pricing, Texas officials said, less than half the amount an Austin jury said the company should pay.

The state accused Actavis Mid-Atlantic LLC and Actavis Elizabeth LLC, subsidiaries of the Iceland-based company’s U.S. division, of inflating billings to the Texas Medicaid program by falsely reporting drug prices. The state court jury in February ordered the units to pay the state $170 million.

The settlement resolves that litigation, Texas Attorney General Greg Abbott said yesterday in a statement. The settlement includes a $29.2 million recovery for the state’s general fund, Abbott said.

“Actavis denies any and all wrongdoing, and denies that it has any liability relating to the Texas judgment,” the company and the state said in the settlement agreement. The parties reached a settlement “to avoid the delay, uncertainty, inconvenience and expense of continuing the litigation.”

The lawsuit is one of multiple claims by Texas and other states alleging that pharmaceutical companies inflated Medicaid billings for drugs through inaccurate price reporting.

“Actavis is pleased to have resolved this matter and looks forward to providing continued access to our products to the more than 3 million Texans who rely on Medicaid for their medical coverage,” Doug Boothe, chief executive officer of Actavis Inc., the company’s U.S. unit based in Morristown, New Jersey, said yesterday in an e-mail.

The case is State of Texas ex. Rel. Ven-A-Care of the Florida Keys Inc., D-1-GV-08-1566, District Court of Travis County, Texas (Austin).

Deutsche Bahn Can Sell Assets Without Parliamentary Consent

Deutsche Bahn AG, Germany’s state-owned railway, doesn’t need lawmakers’ approval to sell assets, the country’s top constitutional court ruled.

The constitution doesn’t require parliament to clear such a transaction, the Federal Constitutional Court in Karlsruhe, Germany, said in an e-mailed statement yesterday. The judges rejected the suit, brought by an opposition political party, because its claim could “under no perceivable aspect” be considered valid.

Parliament “has done its part by passing legislation” governing the railway, the judges said. “Additional rights to participate in Deutsche Bahn’s business decisions would gravely impair the company to take actions according to a market economy rationale, which the constitution wants it to do.”

Germany changed its constitution to allow privatization of its railway system in the 1990s. Plans to have Deutsche Bahn sell shares to the public were postponed in 2008 in the wake of the financial crisis that froze credit markets. The government has said it may sell assets as an alternative to an initial public offering.

The suit, over Deutsche Bahn’s 2007 sale of a real-estate unit, was filed after a six-month deadline and needed to be rejected for that reason also, the court said.

The case is BVerfG 2 BvE 3/08.

AIG’s $450 Million Workers’ Compensation Settlement Is Approved

A $450 million settlement by American International Group Inc. (AIG) to resolve claims that it cheated a workers’ compensation program was granted final approval by a federal judge.

U.S. District Judge Robert Gettleman in Chicago said the settlement is “fair, reasonable and adequate,” according to an order filed Dec. 21. He said the ruling won’t take effect until he issues a written opinion.

AIG was accused of underreporting the premiums it collected on workers’ compensation policies to reduce payments to an industry fund.

The settlement reached in January is less than a third of what Liberty Mutual Holding Co. requested. Preliminary approval was granted in July. Safeco Insurance Co. of America and other insurers sued in April 2009. Liberty Mutual, an intervening plaintiff, filed objections to approval of the settlement in October.

“Liberty Mutual is disappointed -- but not surprised -- with the judge’s order approving the settlement,” John Cusolito, a spokesman for the Boston-based insurer, said in an e-mail. “Liberty Mutual will review the judge’s final written order, and anticipates an appeal.”

The case is Safeco Insurance Co. v. American International Group, 09-cv-02026, U.S. District Court, Northern District of Illinois (Chicago).

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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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