R. Allen Stanford, the onetime Caribbean banking tycoon found guilty of helming a $7 billion investment fraud, was brought down by his own arrogance and greed, jurors said.
Billie Wade, 69, a retired hairdresser who described herself during jury selection in Houston federal court as “the dumbest person in this room,” said Stanford’s attitude made the biggest impression on her, more than any evidence or testimony.
“His arrogance, every day,” she said yesterday after the jury decided that Stanford, 61, must forfeit $330 million in assets in 29 bank accounts seized by the government. The same jury of eight men and four women returned guilty verdicts March 6 on 13 of 14 criminal counts against Stanford.
Stanford was found guilty of lying to investors about the nature and oversight of certificates of deposit issued by Antigua-based Stanford International Bank Ltd. and sold in the U.S. by his Houston-based securities firm, Stanford Group Co.
After a six-week trial, the jury convicted him on four counts of wire fraud and five counts of mail fraud, each of which carries a top sentence of 20 years in prison. He was also convicted of conspiracy and obstructing a U.S. Securities and Exchange Commission probe. He was found not guilty of one wire fraud count. U.S. District Judge David Hittner set June 14 for sentencing. Stanford remains in custody.
“The jury returned unanimous verdicts and we think they speak for themselves,” John Wojciak, the jury foreman, said yesterday after the forfeiture trial. Jurors examined 10 to 12 boxes of evidence, said Wojciak, an environmental engineer. He refused to answer questions from reporters.
The jury yesterday granted total forfeiture on 29 bank accounts in London, Zurich, Geneva and elsewhere that prosecutors said are worth $330 million. The money will go to Stanford’s victims, the U.S. Justice Department said.
“We won’t say it’s what we expected,” Ali Fazel, one of Stanford’s attorneys, said after the forfeiture verdict.
Stanford, who didn’t testify, maintains his innocence. Defense lawyers argued that his organization had had enough assets to honor its commitments until the SEC sued in February 2009 and won a court order freezing his holdings and appointing a receiver to liquidate them.
Robert Scardino, Stanford’s other attorney, said he and Fazel will ask the court to have lawyers review their work to see if they made any mistakes or “missed any issues.”
Fazel said there are many grounds for appeal.
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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Chef Batali Agrees to $5.25 Million Server Tip Suit Accord
Mario Batali, the celebrity TV chef and New York restaurant owner, is often seen with actress Gwyneth Paltrow, taste-testing the culinary delights of Spain in their public television series “On the Road Again.”
Batali took a detour, through his lawyers, to New York federal court in Manhattan, where he was sued and accused of cheating workers of part of their tips, as well as failing to pay overtime and the minimum wage. He and his associate Joseph Bastianich agreed to pay $5.25 million to settle the class- action lawsuit, according to court papers.
Servers at restaurants including Babbo and Del Posto sued in 2010 alleging their employers violated the Fair Labor Standards Act -- in part by pocketing gratuities equal to as much as 5 percent of nightly wine sales.
“Mr. Batali, Mr. Bastianich, and their restaurants unlawfully confiscated a portion of their workers’ hard-earned tips in order to supplement their own profits,” employees said in their complaint.
The settlement agreement, filed March 5, is subject to approval by a federal judge.
The accord in the class-action suit may cover as many as 1,100 employees including servers, waiters and bartenders who work or worked at Babbo, Del Posto, Bar Jamon, Casa Mono, Esca, Lupa, Otto and Tarry Lodge, dating back to 2004, according to court papers.
“The matter has been resolved to the satisfaction of all parties, Rachel M. Bien, one of the employees’ lawyers, said yesterday by e-mail. A. Michael Weber, who represented Batali, declined to comment.
The case is Capsolas v. Pasta Resources Inc., 10-cv-5595, U.S. District Court, Southern District of New York (Manhattan).
Man Who Ran Britain’s Biggest Ponzi Scheme Jailed for 14 Years
A man who admitted running the largest Ponzi scheme in British history, defrauding investors of more than 115 million pounds ($182 million), was sentenced to 14 years and six months in prison, prosecutors said.
Kautilya Nandan Pruthi pleaded guilty to defrauding about 800 investors during a three-year period until November 2008.
His associates, John Anderson and Kenneth Peacock, were found guilty yesterday for their part in the fraud and each jailed for 18 months, the Press Association reported.
The trio defrauded investors by offering monthly returns of as much as 13 percent. The scheme was marketed as a fund investing in high-interest loans to distressed trading companies involved in importing and exporting goods.
Pruthi spent the proceeds on London property, a Jaguar XKR, three Bentleys, two Ferraris, a Lamborghini, two Mercedes, a Rolls-Royce, a Volkswagen and a motorcycle, according to the City of London Police, which investigated the case after it was referred to them by the Financial Services Authority in 2009.
Pruthi, Peacock and Anderson were ordered to pay the FSA 115 million pounds in 2010 for unlawfully accepting deposits while operating as Business Consulting International. The regulator said it would return any money it receives to investors.
The prosecution service had no information on the men’s lawyers to contact for comment on the verdict.
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Capital One Financial Sued Over Mortgage-Backed Securities
Capital One Financial Corp. (COF) was sued by Landesbank Baden- Wuerttemberg, Germany’s biggest state-owned lender, over alleged fraud involving $168 million worth of residential mortgage- backed securities.
The securities were purchased by Stuttgart-based LBBW and are being held by the bank or were sold at a loss, according to documents filed yesterday in New York State Supreme Court in Manhattan.
‘‘The offering materials issued by defendants for the offerings contained material misrepresentations and omissions regarding the legal validity of assignments of the mortgage loans to trusts formed to hold the pooled loans,” LBBW said in the documents.
Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.
Julie Rakes, a spokeswoman for McLean, Virginia-based Capital One, declined to comment on the lawsuit because she hadn’t seen it.
The case is Landesbank Baden-Wurttemberg v. Capital One Financial Corp., 650713/2012, New York State Supreme Court (Manhattan).
Encore Capital Units Sued by West Virginia Over Practices
West Virginia sued two units of debt buyer Encore Capital Group Inc. (ECPG), claiming the firms used false affidavits in lawsuits and took part in fraudulent debt-collection practices.
State Attorney General Darrell McGraw said in a statement he sued Midland Funding LLC and sister company Midland Credit Management, both part of San Diego-based Encore Capital. The suit, filed yesterday in state court in Charleston, alleges that the two firms robo-signed affidavits when obtaining default judgments against West Virginia consumers.
“Many consumers are frightened or unaware of their rights when they are sued and fail to respond to these groundless lawsuits, leaving them subject to judgments on debts that cannot be proved,” McGraw said in the statement.
“Encore is confident in the integrity and accuracy of its collections processes and in the validity of the data supporting the underlying debts it owns,” the company said in a statement. “The Midland defendants feel strongly that the allegations in the West Virginia suit inaccurately portray both Midland’s practices and the applicable legal standards.”
The state wants the court to force the companies to repay money they got from West Virginia consumers and $5,000 to the state for every violation of its consumer-protection law. It also wants to halt the companies from making collections in the state until the case is resolved.
The case is State of West Virginia v. Midland Funding LLC, 12C-4-33, Circuit Court of Kanawha County, West Virginia (Charleston).
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‘Anonymous’ Hacker Sabu Worked Around the Clock to Aid U.S.
Hector Xavier Monsegur, a hacker and member of Anonymous, Internet Feds and LulzSec, began working “around the clock” to aid the U.S. immediately after he was arrested in June, prosecutors told a judge in August.
Monsegur, who pleaded guilty Aug. 15, began cooperating with U.S. authorities, including Federal Bureau of Investigation agents, after he was arrested June 7, Assistant U.S. Attorney James Pastore told U.S. District Judge Loretta Preska at an Aug. 5 court hearing, an unsealed transcript shows.
Monsegur, who used the nickname Sabu and is described as an “influential member” of all three groups, pleaded guilty Aug. 15 to staging cyber attacks against the websites of the governments of Algeria, Yemen and Zimbabwe, according to a criminal information unsealed March 6. He also admitted conducting a hack attack upon Tribune Co. (TRB) and News Corp. (NWSA)’s Fox television, prosecutors said.
“Since literally the day he was arrested, the defendant has been cooperating with the government proactively,” Pastore told Preska at the hearing, a transcript made available yesterday shows. “The defendant has literally worked around the clock with federal agents. He has been staying up sometimes all night engaging in conversations with co-conspirators that are helping the government to build cases against those co- conspirators.”
Manhattan U.S. Attorney Preet Bharara’s office revealed Monsegur’s role as a cooperator this week as it announced the arrest of five other men linked to Anonymous and off-shoot groups in the underground hacking movement.
The case is U.S. v. Monsegur, 11-cr-666, U.S. District Court, Southern District of New York (Manhattan).
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Goldman Sachs, Bank of America Overstock File to Be Unsealed
Goldman Sachs Group Inc. (GS) and Bank of America Corp. documents that were deemed confidential in a lawsuit filed against them by Overstock.com Inc. (OSTK) must be made public, a state court judge in San Francisco ruled.
The case involves a 2007 lawsuit by Overstock, an online retailer, claiming that the banks manipulated its stock from 2005 to 2007, causing its shares to fall. State Court Judge John Munter dismissed the case on Jan. 10, ruling that the conduct took place outside of California. Overstock appealed and asked Munter to make public those documents he put under seal.
Munter granted Overstock’s request to make public a large chunk of documents, ruling Goldman Sachs and Bank of America’s Merrill Lynch & Co. “failed to demonstrate an overriding interest that overcomes the right of public access to the records.” He said the transactions are at least four years old, and much of the material was discussed at a Jan. 5 hearing.
David Wells, a spokesman for New York-based Goldman Sachs, declined to comment on the ruling.
Bill Halldin, a spokesman for Charlotte, North Carolina- based Bank of America, said in an e-mailed statement that the bank is reviewing the decision.
“Our primary goal has been to ensure that the confidentiality of sensitive client information be protected,” Halldin said.
Overstock Chief Executive Officer Patrick Byrne was “thrilled” with the judge’s ruling, he said in a statement.
“I could not imagine that a post-2008 public would be denied access to this evidence, which displays in living color the flaws in our capital markets and in the regulatory structure that governs them,” he said.
The case is Overstock.com v. Morgan Stanley, CGC-07-460147, Superior Court of California, San Francisco.
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Mercedes Dealer Among Potential Jacoby & Meyers Investors
Three directors of a small New York bank, including one who also sells new and used Mercedes-Benzes, want to be the first nonlawyer investors in Jacoby & Meyers, the discount law firm with storefront offices across the U.S.
Jacoby & Meyers, saying it needs capital to expand into communities with working-class and immigrant families, asked federal judges in New York, New Jersey and Connecticut to throw out state laws barring nonlawyers from owning interests in law firms. A judge in New York yesterday dismissed the suit there. One in Trenton, New Jersey, let that case proceed March 7.
In a court filing in January, Jacoby & Meyers identified its potential investors as Anthony Costa, Philip Guarnieri and Michael Ostrow. The three are directors of ES Bancshares Inc. (ESBS), the holding company for Empire State Bank, according to regulatory filings.
Jacoby & Meyers is seeking to sue on behalf of other law firms in the three states.
Costa and Guarnieri didn’t reply to phone messages left at the bank. Ostrow, president of Mercedes-Benz of Wappingers Falls, New York, declined to comment on his potential investment.
In all three states, Jacoby & Myers is seeking to invalidate laws barring nonlawyers from sharing fees or joining partnerships and corporations that practice law.
U.S. District Judge Lewis Kaplan in New York yesterday granted a request to dismiss the suit by New York Attorney General Eric Schneiderman.
He ruled on technical grounds, saying several provisions of state law bar nonlawyer investments and it made no sense to rule on just the one Jacoby & Meyers attacked. Kaplan said the issue might best be decided by legislatures and professional associations.
U.S. District Judge Peter Sheridan in Trenton denied the state’s dismissal bid and asked the state Supreme Court to decide if the investment is permissible.
The New York case is Jacoby & Meyers v. Presiding Justices, 11-cv-3387, U.S. District Court, Southern District of New York (Manhattan). The New Jersey case is Jacoby & Meyers v. Justices of the Supreme Court, 11-cv-2866, U.S. District Court, District of New Jersey (Trenton). The Connecticut case is Jacoby & Meyers v. Judges of the Connecticut Superior Court, 11-cv-817, U.S. District Court, District of Connecticut (New Haven).
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Wynn Ordered to Produce Two Pages in Okada Dispute Over Gift
Wynn Resorts Ltd. (WYNN) was ordered by a judge to produce two more pages of documents for Kazuo Okada, the casino operator’s director whose 20 percent stake in the company Wynn forcibly redeemed alleging he was “unsuitable.”
Nevada State Judge Elizabeth Gonzalez at a hearing yesterday in Las Vegas refused to order Wynn to produce additional papers from before the company went public or documents regarding an amended stockholder agreement that resulted from Chief Executive Officer Steve Wynn’s divorce.
Okada sought a court order that, as a director, he is entitled to inspect Wynn’s books and records regarding its HK$1 billion ($129 million) pledge last year to the University of Macau. At a Feb. 9 hearing, Gonzalez said she would order Wynn to produce the documents if at a further hearing she found that Okada’s request was “reasonable” and that Wynn had refused to provide them.
“To ask Wynn officials to go through warehouses for every record from 2000 to 2002 was unreasonable,” Kirk Lenhard, a lawyer for Wynn, said at yesterday’s hearing. Wynn said in a court filing that it has already provided Okada with more than 900 pages of the requested documents.
Okada, a billionaire, held the largest single stake in Wynn through his Tokyo-based Universal Entertainment Corp. (6425) He brought the case in January, claiming the company hadn’t provided information he requested about the University of Macau pledge, or about the use of $120 million he invested in 2002 and the amended stockholders agreement.
The stock redemption and Wynn’s announcement March 7 that it will seek to remove Okada as a director escalated a clash between Steve Wynn, the company’s founder, and Okada, who helped bankroll Wynn Resorts starting 12 years ago.
Wynn’s lawyers said in a court filing March 7 that the company has produced all non-privileged documents that could “reasonably relate” to Okada’s responsibilities as a director. Were the judge to issue an order for Wynn to produce more documents, the lawyers asked that she delay the order for 60 days because Okada may no longer be a director then.
Wynn called March 7 for a special shareholders meeting to vote on ejecting Okada as a director following a Feb. 18 decision by the board that Okada and certain affiliates are “unsuitable persons,” according to a company statement.
The shareholder vote is set to take place in late April or early May, Wynn said in the court filing.
The case is Okada v. Wynn Resorts, A-12-654522, Clark County, Nevada, District Court (Las Vegas).
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Martha Stewart Living Says Macy’s (M) Accord Allows Penney Deal [bn:WBTKR=MSLO:US]
The Macy’s accord places no restrictions on Martha Stewart Living’s ability to design and sell a broad range of exempt products and “clearly permits” the J.C. Penney deal, Martha Stewart Living said in documents filed March 7 in New York State Supreme Court.
“While MSLO-designed goods are sold in approximately 600 Macy’s stores, they also are sold in over 6,000 other retail outlets,” Martha Stewart Living said in the papers. “Macy’s simply has no exclusive right to MSLO’s creativity or design concepts, now or in the future.”
Macy’s, based in Cincinnati, sued in January to stop New York-based Martha Stewart Living from executing the agreement announced in December with J.C. Penney. Macy’s said it has the exclusive right to sell Martha Stewart-branded products in certain categories.
The case is Macy’s Inc. v. Martha Stewart Living Omnimedia Inc., 650197/2012, New York state Supreme Court (Manhattan).
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U.S. Said to Prepare Apple Lawsuit Over E-Book Price-Fixing
The U.S. Justice Department told Apple Inc. (AAPL) and five publishers that it’s preparing to sue them for allegedly fixing the prices of electronic books, according to a person familiar with the matter.
Some of the companies are in talks with the Justice Department to reach a settlement to avoid a court battle, according to the person, who wasn’t authorized to speak about the discussions publicly and declined to be identified.
The publishers involved in the case are Lagardere SCA (MMB)’s Hachette Book Group, News Corp.’s HarperCollins Publishers, Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH, CBS Corp. (CBS)’s Simon & Schuster and Pearson Plc (PSON)’s Penguin Group (USA), the person said.
The Justice Department is looking into how Cupertino, California-based Apple changed the way publishers charged for e- books in early 2010 when it was getting ready to introduce its first iPad, the person said. European antitrust regulators also have said they’re probing whether Apple’s pricing deals with publishers restrict competition.
Sharis Pozen, the acting chief of the antitrust division of the Justice Department, told Congress in December the division was probing the possibility of anticompetitive practices in the e-book industry.
Gina Talamona, a Justice Department spokeswoman, Kristin Huguet, an Apple spokeswoman, Adam Rothberg, a spokesman for Simon & Schuster, Sophie Cottrell, a spokeswoman for Lagarde’s Hachette Book Group, Erica Glass, a spokeswomen for Pearson’s Penguin Group USA and Erin Crum, a spokeswoman for HarperCollins, all declined to comment.
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Continental Appeals Manslaughter Conviction Over Concorde
Continental Airlines Inc. asked an appeals court near Paris to overturn its manslaughter conviction for the deaths of 113 people in the crash of Air France’s Concorde supersonic jet almost 12 years ago.
Now part of United Continental Holdings Inc. (UAL), the world’s largest airline, Continental and a maintenance engineer dispute their December 2010 convictions and plan to show the court new evidence the deaths weren’t their fault during the hearings, due to run through May.
“Neither the company nor its employees were responsible for the Concorde accident,” Continental said in an e-mailed statement. “To blame the crash on a small strip of metal from another aircraft is absurd.”
The Concorde crashed soon after take-off on July 25, 2000, when a fireball was ignited after the jet ran over a metal strip that fell from a prior Continental flight, investigators said. The probe found the strip tore one of the plane’s tires and sent debris into its fuel tanks. Continental has disputed that scenario, telling the court the fire began before the jet hit the strip. The airline said it will present new evidence to the Versailles appeals court to support its claim.
“The court was mistaken” in holding Continental liable, the carrier’s lawyer, Olivier Metzner, said before yesterday’s hearing began. “The plane was already on fire when it hit this metal strip -- the accident was unavoidable,” he said, calling the Concorde a plane of “extreme fragility.”
Prosecutors also appealed the 2010 verdict by the lower court, meaning four men who were cleared must again face manslaughter charges. One of them, a former official at France’s civil aviation authority named Claude Frantzen, filed a constitutional challenge arguing they can’t appeal a verdict that followed the trial prosecutor’s recommendations.
The court must consider the matter “immediately,” said his lawyer, Daniel Soulez-Lariviere, defending the constitutional question as “a serious one.”
The judges said they will rule on the challenge at the next hearing, scheduled for March 13.
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Hong Kong Has Shortfall in Number of Judges, Morning Post Says
Hong Kong faces a shortage of judges and magistrates, and almost a quarter of posts in these positions have been vacant since last June, the South China Morning Post reported, citing Judiciary Administrator Emma Lau as saying in a Legislative Council panel March 7.
Forty-five of the city’s 189 vacancies for judges and magistrates remain unfilled, the newspaper reported. The average waiting time for civil cases rose to 117 days in 2011 from 89 days in 2010, the Post said, citing the judiciary’s annual report.
Lawmaker Audrey Eu said the shortage “deals a blow to the very foundation” of the rule of law and quality of the judiciary, the Morning Post said.
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