R. Allen Stanford’s jury, a day after finding the Texas financier guilty of leading a $7 billion international fraud, will continue hearing evidence on federal prosecutors’ request that he forfeit $300 million in assets.
The jury of eight men and four women yesterday convicted Stanford on 13 of 14 charges including four wire fraud counts and five mail fraud counts carrying maximum penalties of 20 years in prison. No sentencing date has been set.
The panel acquitted him of the claim he used interstate wire communications to buy $9,000 in Super Bowl tickets for the chief of the Antiguan regulatory authority responsible for monitoring his Stanford International Bank Ltd.
“We are disappointed in the outcome,” co-lead defense counsel Ali Fazel said after the verdict. “We expect to appeal.”
The founder of Houston-based Stanford Financial Group denied federal government allegations he’d lied to investors about the nature and oversight of the certificates of deposit issued by the bank and sold in U.S. by his securities firm, Stanford Group Co.
The forfeiture trial, which continues today, began about 2 1/2 hours after the jury rendered its verdict. Prosecutors want the panel to decide how much money Stanford must give up now that they’ve said he is guilty.
The funds, now on deposit in the U.K., Switzerland, Canada and Antigua, belong to Stanford bank depositors, Justice Department lawyer Andrew Warren told the jury at the outset of the second proceeding yesterday.
“It includes the SocGen slush fund about which you’ve heard a lot about already,” Warren said, referring to money at a Swiss unit of Paris-based Societe Generale SA. “Every single dollar the U.S. is seeking is CD depositors’ money that stems from Mr. Stanford’s crimes and belongs to the victims of his fraud.”
Fazel responded that the government can’t prove that every dollar in every Stanford account spanning more than 20 years is subject to seizure as a product of fraud.
“That’s just not the case,” he told the jury. “I respect your verdict. It is what it is. The question is whether all the money -- including money in his children’s accounts -- is the result of ill-gotten gains, and we maintain it is not.”
The criminal case is U.S. v. Stanford, 09-cr-00342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank Ltd., 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).
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U.S. Urges Approval of Morgan Stanley Deal Without Admission
Morgan Stanley agreed in September to pay $4.8 million to settle a U.S. antitrust case over a 2006 derivative contract with Brooklyn, New York-based KeySpan, a deal which the Justice Department said probably led to higher electricity prices in New York City.
Antitrust lawyers from the Justice Department yesterday filed court papers in Manhattan urging U.S. District Judge William Pauley to accept the settlement. The U.S. says Pauley should accept the deal even though Morgan Stanley didn’t admit wrongdoing. A not-for-profit group and a regulatory board urged the judge to reject the deal for that reason.
“The government routinely enters into antitrust consent decrees explicitly disclaiming admissions or findings of liability,” Justice Department lawyers wrote.
“To insist on more is to impose substantial resource costs on government antitrust enforcement; to risk the possibility of litigation resulting in no relief at all; to contravene a century of congressional and judicial policy; and to establish a precedent that could impede enforcement of the antitrust laws in the future,” the Justice Department wrote.
Mary Claire Delaney, a spokeswoman for Morgan Stanley, declined to comment on the submissions.
In their public submissions challenging the accord, AARP and the Public Service Commission cited a ruling by U.S. District Judge Jed Rakoff in Manhattan in an unrelated lawsuit against Citigroup Inc. (C) by the Securities and Exchange Commission. Rakoff refused to accept a settlement in that case without some acknowledgment of wrongdoing.
AARP argued in comments submitted on Dec. 8 and attached to the U.S. court papers that the settlement should be rejected because it provides no benefit to customers, because there’s no proof the settlement will serve as a deterrent, and because there’s no finding of wrongdoing by Morgan Stanley.
The case is U.S. v. Morgan Stanley, 11-6875, U.S. District Court, Southern District of New York (Manhattan).
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Lorillard Told by Jury to Pay $25 Million to Smoker’s Widow
The jury awarded the full amount that Dorothy Alexander’s attorney had sought as punishment for her husband’s death.
“What could a corporation hope for after 50 years of lies causing death, suffering, disease?” the lawyer, Alex Alvarez, asked the jury. “They need to think twice before putting profits before people.”
Ed Cheffy, an attorney for Greensboro, North Carolina-based Lorillard, argued that his client shouldn’t be forced to pay punitive damages because cigarettes aren’t illegal.
“Lorillard complies with all of the laws and all of the regulations that govern the manufacture, marketing and sale of cigarettes,” he told the jury.
After a monthlong trial, the jury decided last week that Dorothy Alexander was entitled to $20 million in compensatory damages for the loss of her husband, Coleman Alexander, who died of lung cancer in 1995.
The jury reduced Lorillard’s responsibility for his death by 20 percent, for a final award of $16 million.
“Lorillard is disappointed with the jury’s decision, and the company plans to appeal,” said Gregg Perry, a company spokesman.
The case is Alexander v. Lorillard Tobacco Co., 07-46830- ca-10, 11th Judicial Circuit Court of Florida (Miami).
Gulf Spill Victims Say BP Settlement May Delay Compensation
BP Plc’s (BP/) settlement with victims of its 2010 oil spill creates confusion and may delay compensation, participants in the claims process that the new agreement will replace said.
Keith Overton, president of Tradewinds Island Resorts in St. Pete Beach, Florida, said he’s more uncertain than before as to when he will be paid. He reached a settlement with the Gulf Coast Claims Facility run by Washington attorney Kenneth Feinberg in November.
BP appealed the payment, a process allowed for awards of more than $500,000.
“How does my claim factor into this new settlement?” Overton said in an interview. “I don’t even know.”
The estimated $7.8 billion settlement BP and plaintiffs’ lawyers reached March 2 shuts Feinberg’s fund, which paid $6.1 billion to 225,000 claimants over 18 months.
While Feinberg has been accused of being slow and miserly in making payments, some participants in the facility said they believed he lived up to a pledge made in July 2010 to be quicker and more generous in compensating spill victims than a court.
There are more than 10,000 final payment offers still outstanding from the facility that will now fall under the new compensation program. Claimants can accept 60 percent of the final offer as an interim payment without yielding their rights to sue.
They can then accept the offer of a new settlement, minus the payment already made. Or they can take the remaining 40 percent from the offer from the original claims facility, Steve Herman, liaison counsel for the plaintiffs, said in an e-mail.
In accepting a final payment, claimants agree to waive their rights to sue BP or other companies involved in the spill.
The new agreement will draw on the same $20 billion fund BP set up that the facility has used to compensate individuals and businesses for economic losses.
A court-supervised “transitional claims process” for economic losses will continue to operate as a new settlement system is set up, according to a BP press release.
Feinberg said the settlement was “good news,” in a statement released March 3. “It avoids a lengthy complex trial and uncertain appeals,” he said.
Unsatisfied plaintiffs can also opt out of the settlement agreement BP and the attorneys reached last week and continue to pursue litigation.
The case is re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).
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UPM-Kymmene Wins $7.6 Million Reduction of Bag-Cartel Fine
UPM-Kymmene Oyj (UPM1V), Europe’s second-biggest papermaker, won a 5.8 million-euro ($7.6 million) reduction of a European Union antitrust fine for unlawfully fixing prices with competitors in an industrial bags cartel.
The EU’s General Court cut to 50.7 million euros a penalty imposed in 2005, the biggest fine among 16 companies punished for colluding on prices of plastic bags used for industrial products.
The UPM-Kymmene fine was reduced because it couldn’t be held liable for the cartel before October 1995, according to the ruling by the Luxembourg-based EU court yesterday.
Fines on FLSmidth & Co. and its FLS Plast unit were also reduced to 14.5 million euros from 15.3 million euros. The court rejected arguments that they weren’t liable to pay part of the penalty imposed on their unit Trioplast Wittenheim SA.
“The fine decreased as the court estimated the duration of the infraction shorter than in the original decision,” Petri Meurman, senior group legal counsel for Helsinki-based UPM- Kymmene, said yesterday by phone. He declined to comment on a possible appeal.
Decisions by the EU General Court can be appealed to the EU Court of Justice, the region’s highest tribunal. FLSmidth, based in Copenhagen, said it will study the decision in detail before deciding whether to challenge decisions concerning its liability.
British Polythene Industries (BPI) Plc, based in Greenock, Scotland, escaped a fine because it was the first to provide the commission with “decisive evidence” about the cartel, the EU said at the time.
The cases are T-53/06, T-64/06 and T-65/06.
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Takeda Hid Actos Adverse Effects From Regulators, Suit Says
A U.S. unit of Takeda Pharmaceutical Co. failed to give accurate reports to regulators about hundreds of congestive heart failure cases associated with its diabetes drug Actos, a whistle-blower claimed in a lawsuit.
The company failed to classify “non-hospitalized or non- fatal” congestive heart failure cases as serious from late 2007 to January 2010, former Takeda medical reviewer Helen Ge said in the complaint in federal court in Boston. Takeda, like other drugmakers, is required to update the U.S. Food and Drug Administration’s Adverse Event Reporting System.
“These events were not properly identified or reported in the FDA’s safety database,” Ge claimed in the complaint, filed in June 2010 and recently unsealed. “Takeda’s motivation to fraudulently report and under-report the serious adverse events was driven by an economic desire to falsely enhance Actos’s safety profile and to increase sales,” Ge said.
The case against Takeda Pharmaceuticals North America Inc., filed by Ge on the government’s behalf, became public after the U.S. Justice Department declined to join it on Feb. 22. Twenty- four U.S. states also declined to join Ge’s complaint, said one of her attorneys, Michael L. Baum.
“Takeda complies with all laws and regulations regarding the reporting of adverse events,” Hisashi Tokinoya, a company spokesman based in Tokyo, said in an e-mailed response today, declining to comment on specific allegations because the lawsuits are pending.
Ge sued under the federal False Claims Act and similar state statutes, and seeks to recover damages on behalf of governments. She would be entitled to between 15 percent and 30 percent of any recovery.
The case is U.S. ex rel. Helen Ge v. Takeda Pharmaceutical Co. (4502), 10-cv-11043, U.S. District Court, District of Massachusetts (Boston).
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Ex-Porsche CFO Haerter Charged With Loan Fraud Over Options
Former Porsche SE (PAH3) Chief Financial Officer Holger Haerter was one of three managers charged over statements made to a bank when the holding company refinanced a 10 billion-euro ($13.2 billion) loan in 2009.
The men are accused of understating Porsche’s liquidity needs by 1.4 billion euros if all purchase options the company held on Volkswagen AG (VOW3) shares had been exercised, Stuttgart prosecutors said in an e-mailed statement yesterday, without disclosing any names. Haerter will fight the charges, his attorney, Anne Wehnert, said in an e-mailed statement.
Along with the criminal investigation, investors in the U.S. and Germany are suing Porsche, accusing the company of misleading them about plans to take control of Volkswagen. A planned combination of the companies was called off last year because of legal uncertainties related to the litigation.
“The risk to the merger will increase because the normal shareholder won’t want to pay too much and the funds will use this to their advantage to seek a significantly higher settlement,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg- Essen.
The managers also withheld some information about put options tied to VW shares that Porsche sold, the Stuttgart prosecutors said yesterday.
“An economy university professor specializing in options trading confirmed after a thorough review of the facts, that the prosecutors’ method regarding the alleged liquidity need isn’t viable, so the statements given to the bank were correct,” said Wehnert, Haerter’s attorney. The bank didn’t say it hadn’t been adequately informed, she said.
The charges reflect “the position of the state prosecutor,” Frank Gaube, a Porsche spokesman, said in a telephone interview. “This is not a court ruling and until there is a ruling there is a presumption of innocence.”
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Hackers Charged in Crackdown on LulzSec, Anonymous Groups
The U.S. charged six alleged members of Anonymous, LulzSec and other hacking groups with trying to break into computers used by News Corp. (NWSA)’s Fox Broadcasting and security firm HBGary Inc. and by governments including Yemen.
Ryan Ackroyd, Jake Davis, Darren Martyn and Donncha O’Cearrbhail were charged in an indictment unsealed yesterday in Manhattan federal court, the Office of U.S. Attorney Preet Bharara said in a statement. Jeremy Hammond was arrested in Chicago and accused of crimes related to the hack of Strategic Forecasting Inc., or Stratfor.
Hector Xavier Monsegur, an “influential member” of Anonymous, Internet Feds and LulzSec, pleaded guilty in August to conspiracy to engage in computer hacking, prosecutors said. Monsegur, known as “Sabu,” was accused of attacking the websites of the governments of Algeria, Yemen and Zimbabwe. He also helped try to hack Tribune Co. and Fox, prosecutors said.
The hackers arrested are among the de facto leadership of Anonymous, the self-professed hacker-activist group, and LulzSec, or Lulz Security, an affiliated group, according to Barrett Brown, an informal Anonymous spokesman, whose apartment in Dallas was raided this morning. Monsegur continued to work with Anonymous until last week, Brown said. Monsegur’s plea was only made public yesterday.
Monsegur agreed to cooperate with the U.S. investigation, according to a transcript of his August plea hearing. U.S. District Judge Loretta Preska told Monsegur that he could face a sentence of 122 1/2 years in prison, according to the transcript.
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Criminal Libor Probe of Banks Is Under Way, U.S. Tells Judge
A criminal investigation into suspected manipulation of benchmark interest rates is being conducted by the U.S. government, the Justice Department said in a letter to a federal judge.
The Feb. 27 letter to U.S. District Judge Naomi Reice Buchwald in Manhattan was made public yesterday and is the first public acknowledgment by the Justice Department of the criminal investigation of benchmark lending rates such as the London interbank offered rate, known as Libor.
Buchwald cited the letter at a March 1 hearing in which she denied a request for documents related to the investigation by investors suing Credit Suisse Group AG (CSGN), Bank of America Corp. and other companies over claims they artificially suppressed Libor.
“The Department of Justice is conducting a criminal investigation into alleged manipulation of certain benchmark interest rates,” including those for “several currencies” on the Libor exchange, according to the letter signed by lawyers from the fraud section of the Justice Department’s criminal division and its antitrust division.
Bill Halldin, a Bank of America spokesman, declined to comment on the letter. Steven Vames, a Credit Suisse spokesman, didn’t immediately return an e-mail seeking comment yesterday after regular business hours.
Regulators worldwide are investigating whether banks attempted to manipulate Libor and the Tokyo and euro interbank offered rates, known as Tibor and Euribor.
Buchwald is presiding over multidistrict litigation involving 21 class-action, or group, lawsuits against banks accused of conspiring to artificially suppress Libor by understating their borrowing costs to the British Bankers’ Association.
In a Feb. 17 letter to Buchwald, the defendant banks objected to the plaintiffs’ demand for documents already given the Justice Department.
“Plaintiffs have demanded discovery to help them draft their consolidated complaints,” said lawyers for Bank of America, Credit Suisse, Barclays Bank Plc (BARC), HSBC Holdings Plc (HSBA), JPMorgan Chase & Co. (JPM), Lloyds Banking Group Plc (LLOY), Norinchukin Bank (NORZ) and Royal Bank of Canada. The Justice Department letter doesn’t identify the banks that received subpoenas.
The banks said turning over such evidence to plaintiffs would impose a “substantial burden” because they are already complying with requests from “U.S. and foreign government authorities.”
Buchwald denied the investors’ request for documents in a ruling from the bench on March 1.
“To me, it is simply too much to have them piggyback on the government’s investigation at this stage,” Buchwald said.
The case is In re: LIBOR-Based Financial Instruments Antitrust Litigation, 11-MD-2262, Southern District of New York (Manhattan).
Wal-Mart Asks Judge to Reject Texas Class-Action Bias Suit
Wal-Mart Stores Inc. (WMT) asked a federal judge in Dallas to reject a proposed class-action lawsuit in which women allege that the world’s largest retailer discriminated against Texas female workers over pay and promotions.
The company said the claims are barred by the statute of limitations. “The time for asserting class allegations on these claims has passed,” it said yesterday in court papers.
The case also can’t be pursued as a class-action matter because there is little in common among the claims made by the plaintiffs, it said.
“The complaint does not allege any facts that would establish a class-wide policy of discrimination,” Wal-Mart said.
Some of the women who sued allege denial of promotion opportunities but not pay differences, the company said. Others allege pay discrimination but not promotion differences, it said.
“Some advanced quickly within Wal-Mart while others apparently never pursued managerial advancement,” it said.
The suit was filed in October on behalf of women working in Texas Wal-Mart and Sam’s Club stores from Dec. 26, 1998, until at least June 2004.
It came in response to a U.S. Supreme Court ruling in June that barred treatment of gender-bias claims against Wal-Mart as a national class action.
“They claim that this is exactly the same case as the one the Supreme Court looked at, and that’s completely wrong,” Hal K. Gillespie, an attorney for the women, said yesterday of the company’s motion. “It’s evident this is very different.”
“We have a Supreme Court case that supports us, not them,” he said.
“Walmart has strong policies against discrimination; many years ago Walmart established these policies to help ensure women are paid and promoted fairly,” Greg Rossiter, a company spokesman, said in an e-mailed statement. “The claims by the women bringing this case don’t match the positive experience that so many other women have had at Walmart.”
The case is Odle v. Wal-Mart Stores Inc., 3:11-cv-02954, U.S. District Court, Northern District of Texas (Dallas).
Defendants in 400 Madoff Trustee Suits Seek New Judge
Defendants in more than 400 lawsuits related to the collapse of Bernard L. Madoff’s Ponzi scheme have sought to move their cases from bankruptcy court to district court, most asking U.S. District Judge Jed Rakoff to assess demands for return of money by the Madoff trustee.
Madoff trustee Irving Picard has filed more than 1,050 lawsuits to try to recoup money he alleges was stolen from the con man’s other customers, according to a bankruptcy court filing in Manhattan yesterday. Rakoff’s handling of Picard’s $1 billion lawsuit against the New York Mets owners, which the judge cut to $386 million, spurred defendants in more than 30 other cases to ask Rakoff to assess their liabilities too, court documents show.
The number of suits awaiting attention from Rakoff and other district judges was published as part of a notice to defendants that Rakoff set an April 2 deadline for requests to take more Madoff suits. Mets owners Fred Wilpon and Saul Katz are due to go to trial on March 19 in Rakoff’s Manhattan court.
Bank defendants in Picard’s bankruptcy court suits, including JPMorgan Chase & Co., have asked district judges to decide whether Picard, a New York lawyer, has the right to sue them, and for how much. They say that Picard is straining the limits of the law as he tries to grab back money for victims of Madoff’s fraud. Some of them have won initial victories.
The Madoff trustee currently is appealing district court decisions that knocked out about $30 billion of his claims against banks. Rakoff also disallowed most of a $59 billion suit that was based on racketeering law.
The Mets case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan).
Houston’s Home County Joins Texas Lawsuit Seeking MERS Damages
Harris County Texas, which includes the city of Houston, won a bid to join a group lawsuit seeking damages from the Mortgage Electronic Registration Systems Inc., Bank of America Corp. and Stewart Title Co.
U.S. District Judge Reed C. O’Connor allowed Harris and nearby Brazoria County (66583MF) to enter the case that could result in payouts of as much as $10 billion for all Texas counties, according to court papers filed by the plaintiffs.
The counties accuse MERS, which runs an electronic registry of mortgages, and members of the mortgage-banking industry including Bank of America of filing false lien claims in the real property records of Texas counties. The suit also alleges the defendants failed “to record subsequent assignments of mortgage loans and pay the attendant filing fees.”
MERS, a unit of Reston, Virginia-based Merscorp Inc., has said it complies with Texas’s recording statutes and regulations.
Dallas sued in state court in September and the defendants won a change of the case to federal court in October. The U.S. Judicial Panel on Multidistrict Litigation in February denied an attempt by the defendants to join the case with a lawsuit brought against Merscorp by homeowners in Arizona.
The case is Dallas County, Texas, v. Merscorp Inc., 3:11- cv-02733-O, U.S. District Court (1100L), Northern District of Texas (Dallas).
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On The Docket
Toyota First Trial Scheduled in California Acceleration Case
The first Toyota Motor Corp. (7203) sudden-unintended acceleration trial in California, involving the death of a woman whose 2006 Toyota Camry hit a telephone pole, will get under way in November in Los Angeles.
California Superior Court Judge Anthony Mohr, who oversees the coordinated state court cases in Los Angeles, said in an order March 6 that jury time-qualification will begin between Nov. 1 and Nov. 30 and that the trial will begin after Jan. 1, with the specific date to be determined.
The so-called bellwether trial involved the claims by the family of Noriko Uno, who died in 2009 when, they allege, her Camry unintentionally accelerated and struck a telephone pole. Lawyers for the plaintiffs estimate that the trial will take about 40 days, according to the judge’s order.
Simultaneously with the wrongful death case, the judge will hear evidence for the lawsuit by the Orange County District Attorney who sued Toyota in 2010, alleging the carmaker endangered the public by knowingly selling defective vehicles. Witnesses who testified in the Uno case will testify if needed in the D.A.’s case without the jury present, the judge said.
The judge also selected two other bellwether cases, one proposed by the plaintiffs, as was the Uno case, and one proposed by Toyota.
“Toyota looks forward to defending these cases, and we remain confident that the evidence will confirm what millions of Toyota drivers prove every day: that they can depend upon their vehicles to provide safe, reliable transportation,” Celeste Migliore, a spokeswoman for Torrance, California-based Toyota Motor Sales USA, said in a statement.
U.S. District Judge James V. Selna in Santa Ana, California, who oversees the coordinated federal lawsuits against Toyota over unintended-sudden acceleration, in October scheduled the first of three trials in his court for Feb. 19, 2013.
Toyota, the world’s second-largest automaker, recalled at least 8 million U.S. vehicles starting in 2009, after claims of defects and incidents involving sudden unintended acceleration. The recalls set off hundreds of economic-loss suits and claims of injuries and deaths.
The cases are Toyota Motor Cases, JCCP 4621, California Superior Court, Los Angeles County (Central Civil West.)
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