Paul Clement, Wynn Resorts, Lehman, BofA, UBS in Court News
Paul Clement is poised to make a deeper imprint on American law this year than anyone without the title “justice,” Bloomberg News’s Greg Stohr reports.
Clement, the 45-year-old attorney at the forefront of the U.S. Supreme Court challenge to President Barack Obama’s health- care plan, has become the go-to lawyer for conservatives on the country’s highest-profile legal fights.
He is making the Republican case against the Obama administration on illegal immigration, voter-identification laws, gay marriage and recess appointments, as well as health care. In January, he won a high court victory for Texas (BEESTX) Republicans on congressional redistricting.
In the court’s current nine-month term, Clement is arguing seven cases, the most by a private lawyer in a single term since at least the 1970s. His biggest fight is the challenge to the 2010 health-care overhaul, the first time the high court has considered a president’s signature legislative victory during his re-election campaign.
Clement disclaims any ideological agenda. From his downtown Washington office last month, the Wisconsin native described himself as a lawyer driven by the challenge of arguing difficult cases, rather than a desire to reshape the law.
“I’m not going to deny being a Republican, but I don’t think that really dictates what kind of cases I’m interested in taking,” the blue-eyed Clement said, sipping tea in the conference room of his law firm, Bancroft PLLC, as his gold- rimmed glasses slipped down his nose. “I really don’t look at cases through a political lens.”
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N.Y. Woman Charged With Running Brothel Gets Public Defender
Anna Gristina, a New York woman charged with running a brothel that prosecutors said catered to high-net-worth clients, will continue to have a court-provided lawyer and asked to have a second lawyer’s $2.5 million apartment used to secure bail.
Justice Juan Merchan of state Supreme Court in Manhattan ruled yesterday that Gristina can have free legal counsel after Peter Gleason, a lawyer who has also been advising her, said she didn’t have “two nickels to rub together.” The judge said if she is found to have financial resources she will have to repay taxpayers.
Gleason offered to use his Tribeca apartment to guarantee her appearance for trial. She and her family would stay with him, and she has agreed to wear an ankle bracelet, he said. Gristina, the mother of four, has pleaded not guilty.
Prosecutors objected, and Merchan scheduled a March 15 hearing to determine whether such an arrangement would be ethical.
“I don’t believe the law is crystal clear on this matter,” the judge said.
Gleason, who said he is a former police officer, said in an interview outside the courthouse that his apartment is worth about $2.5 million.
In court he asked that Gristina’s bail of $1 million in cash or a $2 million bond be cut, without specifying an amount.
The case is People v. Gristina, 12-00751, New York State Supreme Court (338265L), New York County (Manhattan).
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SNR Denton Hires Former Arizona Attorney General Terry Goddard
Samuel Pearson “Terry” Goddard, a former Arizona attorney general and the Democratic nominee for governor of Arizona in 2010, joined the international law firm SNR Denton US LLP (1159L).
Goddard, 65, served as the state’s attorney general from 2003 to 2011, leading prosecutions for border smuggling, mortgage fraud and consumer protection, SNR Denton said in a statement. He lost the 2010 gubernatorial election to Republican incumbent Jan Brewer. Goddard has been a white-collar criminal prosecutor and was mayor of Phoenix from 1983 to 1990.
He will join SNR Denton’s Phoenix office as senior counsel in its state attorneys general practice, which advises clients on “the challenges of litigation where law, policy and politics converge,” the firm said in the statement.
Goddard, along with Ira William McCollum and Jeff Modisett, ex-attorneys general of Florida and Indiana, respectively, is the third former top state legal official to join SNR Denton in the past year.
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Wynn Sued by Okada Over $800 Million Share Redemption Discount
Japanese billionaire Kazuo Okada is challenging the redemption of his 20 percent stake in Wynn Resorts Ltd. (WYNN) at an $800 million discount, saying Steve Wynn runs the company as his “personal fiefdom.”
Aruze USA, through which Okada invested in Wynn Resorts, disputes that any redemption occurred because Wynn is legally barred from redeeming the securities, lawyers for Okada and the holding company said yesterday in a counterclaim filed in federal court in Las Vegas.
Okada’s shares, which Wynn Resorts last month said it had redeemed at a 30 percent discount because Okada was “unsuitable,” were never subject to the redemption provision in the company’s articles of incorporation, according to the filing. Okada agreed to purchase Wynn Resorts stock before the redemption provision became effective, according to the filing.
“Wynn Resorts, for all its accomplishments, is not a corporation in any ordinary sense,” Okada’s lawyers said. “Rather, Wynn Resorts’ flamboyant chairman, Mr. Wynn, has run Wynn Resorts as a personal fiefdom, packing the board with friends who do his personal bidding, and paying key executives exorbitant amounts for their unwavering fealty.”
Okada’s filing is the latest in an escalating clash between founder and Chief Executive Officer Steve Wynn and Okada, the man who helped bankroll Wynn Resorts starting 12 years ago. Wynn Resorts accused Okada of making improper payments to Philippines gaming officials leading the board to declare Okada and certain affiliates “unsuitable persons” for the company.
Okada accuses Wynn Resorts of breach of contract and its chairman of racketeering, among other allegations. He seeks a court order voiding the redemption of his shares, and unspecified compensatory and punitive damages.
Paul Kranhold, a spokesman for Wynn, didn’t immediately return a call seeking comment on Okada’s filing.
Wynn Resorts forcibly redeemed the stake held by Okada and his Tokyo-based Universal Entertainment Corp. (6425) at a 30 percent discount to its then market price, the casino operator said in a statement last month. Wynn has called for a special meeting of shareholders to remove Okada as a director of Wynn.
Wynn filed its complaint against Okada Feb. 19, alleging that Okada is developing two casinos and three hotels in Manila and that he seeks to lure “high-limit, VIP gamblers” from China in direct competition with Wynn’s casino in Macau. Construction on the Manila Bay casino resort started Jan. 26, Wynn said in its complaint.
The case is Wynn Resorts v. Kazuo Okada, 12-00400, U.S. District Court, District of Nevada (Las Vegas.)
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Ex-Lehman Executive Faces Second Prescription Forgery Charge
Former Lehman Brothers Holdings Inc. (LEHMQ) managing director Bradley H. Jack was arrested a second time for drug prescription forgery, hurting his chance to avoid prosecution on the previous charge through a pretrial diversion program.
Jack, 53, turned himself in and was charged March 9 with second-degree forgery for a November incident in which he forged the date on a prescription for a controlled substance at a CVS pharmacy that was made out to him by a doctor in Fairfield, Connecticut, according to Capt. Sam Arciola of the Westport Police Department. Jack was released on $5,000 bond and has a March 21 court appearance.
In August, Jack, of Westport, was allowed to enter so- called accelerated rehabilitation, a program that is available to people charged with less-serious crimes that might result in prison time. At the August hearing, Superior Court Judge Earl B. Richards III in Bridgeport, Connecticut, said if he avoided arrest for a year, the prosecution would be suspended.
Jack had been arrested in June after he allegedly tried to pass forged prescriptions for 12 pills of the painkiller Oxycontin and nine of Ritalin, a drug used to treat attention deficit disorder, according to Fairfield police. Jack had received treatment for cancer, had had a valid prescription in the past and had no prior criminal record, his attorney, Robert G. Golger, said in court in August.
Golger didn’t immediately return a call seeking comment on the latest arrest.
Jack joined New York-based Lehman in 1984 and ran investment banking from 1996 to 2002, when he became co-chief operating officer with Joseph Gregory. In 2004, he was named to the office of the chairman with the responsibility of overseeing all of the firm’s investment banking relationships.
He decided to retire from New York-based Lehman to pursue work in the nonprofit sector and spend time with his family, Richard Fuld, Lehman’s chief executive officer at the time, said in June 2005. The company went bankrupt in September 2008.
The earlier case is Connecticut v. Jack, F02B-CR11-0258280- S, Connecticut Superior Court, Fairfield County (Bridgeport).
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BNY Sued by Ohio For Fraud Over Foreign-Currency Trades
BNY Mellon, which has been sued by several states and the U.S. over pricing practices in foreign-exchange transactions, was accused of “systematically overcharging” two pension funds, according to a statement yesterday from Attorney General Mike DeWine.
The bank “exploited the volatility of the foreign currency market to their advantage at the expense of Ohio pensioners and their families,” DeWine said.
The Ohio complaint follows similar lawsuits filed by a federal prosecutor in Manhattan and by attorneys general in Florida, New York, and Virginia over foreign-currency trades done on behalf of clients. Preet Bharara, the U.S. attorney in Manhattan, said the bank defrauded clients of more than $1.5 billion through its so-called standing instruction service, according to an amended complaint filed last month.
The Ohio suit “recycles baseless allegations from other lawsuits brought elsewhere,” Kevin Heine, a spokesman for Bank of New York spokesman, said in an e-mailed statement. “We are right on the facts and the law.”
The Ohio pension funds -- the Ohio Police & Fire Pension Fund and the School Employees Retirement System of Ohio -- seek to recover more than $16 million in losses, according to the attorney general.
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BofA, MERS Seek to Dismiss Texas Counties’ Mortgage Suit
Mortgage Electronic Registration Systems Inc. and Bank of America Corp. asked a court to dismiss a lawsuit brought by Texas counties accusing MERS of filing false claims in property records.
The counties allege Merscorp Inc.’s MERS was established by lenders including Bank of America to avoid paying filing fees as well as to ease mortgage transfers. The Texas Legislature approved of MERS’s appearance as a mortgagee in filings in county land records, the defendants said in a filing March 9 in federal court in Dallas.
“No false, fraudulent or otherwise wrongful activity occurred by filing security instruments naming MERS as beneficiary or mortgagee,” MERS and the bank said in their motion to dismiss. “There is no duty to record assignments, or other documents, since Texas’s property recording system is permissive not mandatory.”
MERS tracks servicing rights and ownership interests in mortgage loans on its registry, allowing banks to buy and sell loans without recording transfers with counties. Dallas County claimed that this system has cost it as much as $100 million in unpaid fees. The county initially sued in September, alleging that MERS cheated it out of uncollected filing fees.
Dallas County District Attorney Craig Watkins revised the lawsuit Oct. 31 as a class action, or group case, seeking to represent all other Texas counties in which a deed of trust has been filed identifying MERS as a beneficiary.
“Contrary to the defendants’ contentions, the legislature has not approved MERS’ appearance as the ‘mortgagee’ in the filings in the real property records of Texas counties,” Watkins said in an e-mail yesterday. “Rather, the legislature simply approved MERS acting on behalf of lenders in conducting non-judicial foreclosures.”
The case is Dallas County v. Merscorp Inc., 11-cv-02733, U.S. District Court, Northern District of Texas (Dallas).
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Toyota Can’t Require Arbitration in Acceleration Lawsuit
Toyota Motor Corp. (7203) can’t force named plaintiffs seeking group status for a lawsuit over alleged losses from unintended sudden acceleration to arbitrate their claims rather than proceed to trial next year.
“Toyota waived any right it may have had to compel arbitration of 15 of the 20 class representatives’ claims,” U.S. District Judge James Selna in Santa Ana, California, said yesterday. For the other five, “Toyota, as a non-signatory, may not enforce the arbitration agreements found in the plaintiffs’ purchase and lease agreements with Toyota dealers.”
Selna on Feb. 24 had tentatively denied the carmaker’s request to force the plaintiffs to arbitrate their claims. The judge yesterday reiterated his decision that by failing to assert its right to compel arbitration until now, the carmaker encouraged the plaintiffs to pursue their current costly and time consuming litigation strategy.
“Toyota acted in a manner inconsistent with any right to compel arbitration,” the judge said. “The resulting prejudice to the class representatives leads the court to find that Toyota waived any right to compel arbitration of the claims asserted by the 15 plaintiffs.”
Selna has been presiding over the consolidated litigation since 2010. He has scheduled three trials for next year that will serve as bellwether cases to be used by the court and lawyers for both sides to test evidence and liability theories before moving on to other trials and a decision by Selna as to whether to approve a class-action status for the plaintiffs.
Celeste Migliore, a spokeswoman for Torrance, California- based Toyota Motor Sales USA, said by e-mail that the company is reviewing its options after the ruling.
The cases are combined as In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices and Products Liability Litigation, 8:10-ml-02151, U.S. District Court, Central District of California (Santa Ana).
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UBS, Deutsche Bank Fight U.K. Over Taxes on 2003 Bonus Plans
UBS AG (UBSN) and Deutsche Bank AG (DBK) said they don’t owe taxes over a 2003 compensation plan U.K. authorities argue was designed to avoid millions of pounds in taxes and national insurance contributions on employee bonuses.
The two banks appealed separate rulings that found them liable for income and payroll taxes for bonuses paid to bankers in shares through an offshore trust, in a four-year-old dispute with U.K. revenue officials. UBS owes 49.6 million pounds ($77.5 million) on total bonus payments of 92 million pounds into the plan, according to documents disclosed yesterday after Bloomberg petitioned the court for their release.
The case “concerns a disagreement over the interpretation of highly technical tax legislation and dates back to a one-off compensation plan for 2003,” UBS spokesman Richard Morton said in an e-mailed statement.
The U.K. government is taking “decisive and swift action” to tackle tax avoidance, Chancellor of the Exchequer George Osborne told Parliament this month after authorities closed two tax loopholes that had been used by Barclays Plc. (BARC) Legislators are seeking a tougher approach to companies that hire lawyers and accountants to cut tax bills.
The banks and HMRC declined to provide court documents to reporters at a trial that ended last month. Both sides released papers outlining their arguments yesterday after Bloomberg News petitioned the court.
UBS and Deutsche Bank said in the court documents that they didn’t have to pay income tax on the shares because they were “restricted securities” that weren’t eligible for contributions. Both plans involved setting up offshore vehicles that issued securities to employees. The vehicles, which are no longer used, invested in the shares of UBS and Deutsche Bank.
“This was a one-off arrangement from eight years ago and hasn’t been repeated,” said Adrian Cox, spokesman for Frankfurt-based Deutsche Bank. “We believe it met all the requirements at the times.”
HMRC lawyer Nikky Fadero said the department wouldn’t comment until the judges released a decision.
A week-long trial at the Upper Tribunal in London ended on Feb. 28. There is no schedule for a ruling.
Industry Attacks Mandate for Fuel Additives Made From Plants
An oil and gas industry trade association asked a federal appeals court to review a U.S. Environmental Protection Agency regulation governing fuel additives including biological materials.
The group, the American Petroleum Institute, is seeking to overturn an EPA standard mandating the purchase of fuels formulated in part from biological materials including switchgrass, wood chips and agricultural waste.
The rule “forces refiners to purchase credits for cellulosic fuels that do not exist,” the association Director of Downstream and Industry Operations Bob Greco said yesterday in a statement. The rule “is effectively a tax on manufacturers of gasoline that could ultimately burden consumers.”
First passed in 2007, the regulation required refiners to buy 250 million gallons of biofuel annually. Production failed to reach that level and the agency reduced the target to 6.6 million for 2011, and 8.65 million for this year.
The Biotechnology Industry Organization backed the measure in a letter to EPA Administrator Lisa Jackson last month, stating the renewable-fuel standard was first developed in 2005 during the administration of President George W. Bush to drive the continued development of the nation’s biofuels industry.
The standard “provides industry and investors with the confidence of knowing that if they can produce advanced and cellulosic biofuels, the RFS will ensure market access,” James Greenwood, president of the Washington-based group, told Jackson.
Wyn Hornbuckle, a spokesman for the U.S. Justice Department, declined to comment on the legal challenge. The petition was filed March 9 with the Washington-based U.S. Court of Appeals.
The case is American Petroleum Institute v. U.S. Environmental Protection Agency, 12-1139, U.S. Circuit Court for the District of Columbia Circuit (Washington).
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J&J Said to Face Demand to Raise Risperdal Settlement Offer
Johnson & Johnson (JNJ) faces a U.S. government demand to raise its offer by $800 million from an initial proposal to settle a federal civil investigation into marketing of the antipsychotic Risperdal, according to three people familiar with the matter.
The Justice Department is demanding that J&J pay about $1.8 billion to resolve the civil claims by the U.S. and some states, the people said. The company raised its offer to settle the civil investigation to $1.3 billion by March 8, and negotiations on a final amount are continuing, one person said.
The demand came after the Justice Department and states decided that a $1 billion settlement that had been negotiated by the U.S. Attorney’s Office in Philadelphia in late December wasn’t adequate, according to the people, who weren’t authorized to speak on the matter.
A $158 million settlement between J&J and the Texas attorney general during a trial over Risperdal marketing in that state increased the demands by other states and the Justice Department, one of the people said. Several states wanted more money because of the Texas agreement, the person said.
The U.S. government has been investigating Risperdal sales practices since 2004, including allegations the company marketed the drug for unapproved uses, J&J has said in Securities and Exchange Commission filings. The company said it has been in negotiations with the U.S. to settle the investigation.
A J&J spokeswoman, Carol Goodrich, declined to comment.
The Justice Department expects to announce an accord in May, said one person. The department typically announces civil and criminal resolutions at the same time in corporate cases.
The number of states that will join the final agreement remains in flux, one person said. Each state can decide whether to join the federal government’s settlement or pursue its own case.
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Foreclosure Settlement With Banks Filed in Federal Court
The $25 billion agreement with five banks to end federal and state probes into abusive foreclosure practices was filed in U.S. court in Washington, capping negotiations over the lenders’ liability for conduct after the housing bust.
The agreement subjects the lenders to monitoring by officials plus penalties of as much as $1 million for each violation, the U.S. Justice Department said. The consent judgments will be in effect for 3 1/2 years, according to the settlement terms.
The Justice Department yesterday filed in federal court the proposed settlements along with a civil complaint against Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM) and three other banks. The agreement needs approval from a federal judge.
In what the U.S. called the largest federal-state civil settlement in the nation’s history, the banks have committed $20 billion in relief for borrowers plus payments of $5 billion to states and the federal government. About $1.5 billion will go toward payments to those who lost homes in foreclosure between Jan. 1, 2008, and Dec. 31, 2011, the Justice Department said.
The deal comes more than a year after attorneys general from all 50 states announced a probe into foreclosure practices following disclosures that banks were using faulty documents to seize homes.
The nation’s five largest mortgage servicers -- Bank of America, JPMorgan, Wells Fargo & Co. (WFC), Citigroup Inc. (C) and Ally Financial Inc. -- negotiated the settlement with federal agencies, including the Justice Department, and 49 states. Oklahoma reached a separate agreement and didn’t sign the federal settlement.
Pension funds and other investors in mortgage-backed securities condemned the settlement, saying it could cost retirees and other “innocent parties” billions of dollars by rewriting the contractual terms of their investments, potentially lowering their value.
“It is unfair to settle claims against the robosigners with other people’s funds,” the Association of Mortgage Investors said in a written statement. “While we request that it not be done, at a minimum we request that a meaningful cap be placed on the dollar amount of the settlement satisfied by innocent parties. Restitution should come from those who are settling these claims, and lien priority must be respected.”
The case is U.S. V. Bank of America Corp., 12-00361, U.S. District Court, District of Columbia (Washington).
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PG&E Reaches $70 Million Accord With San Bruno Over Blast
PG&E Corp. (PCG) reached a $70 million settlement with the city of San Bruno, California, over a 2010 pipeline explosion that killed eight people, the largest natural-gas disaster in U.S. history.
The settlement will support efforts to recover from the blast, which destroyed 38 homes and damaged another 70, city spokesman Sam Singer said yesterday in an e-mail.
The California Public Utility Commission said in January that San Francisco-based PG&E’s violations of state and federal safety laws led to the explosion.
PG&E, owner of California’s largest utility, confirmed the settlement in a regulatory filing, saying it will contribute $70 million to a not-for-profit entity set up to benefit the city. The company’s Pacific Gas & Electric Co. unit won’t seek to recover the money through insurance or customer rates, PG&E said.
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