Bank of America Corp., JPMorgan Chase & Co. (JPM) and three other banks agreed to pay $25 million to New York to resolve some monetary claims over the use of a mortgage database after reaching a $25 billion national settlement over foreclosure practices.
New York Attorney General Eric Schneiderman sued Bank of America, JPMorgan and Wells Fargo & Co. (WFC) in February over their use of the mortgage registry known as MERS, accusing the lenders of deceiving homeowners and conducting improper foreclosures.
The agreement with the three banks, as well as Citigroup Inc. (C) and Ally Financial Inc. (ALLY), was filed yesterday in federal court in Washington. The five lenders agreed in February to a $25 billion settlement with 49 states and the federal government to resolve claims of abusive foreclosure practices. That settlement requires a federal judge’s approval.
Bank of America, JPMorgan, Wells Fargo and Citigroup each agreed to pay $5.9 million to New York, according to the court filing. Ally agreed to pay $1.25 million. Ally and Citigroup aren’t named in New York’s MERS lawsuit. The nationwide foreclosure settlement preserves claims raised against the banks in the New York case and any similar claims that may be asserted against Citigroup and Ally, according to the court filing.
Danny Kanner, a spokesman for Schneiderman, said in a phone interview that the agreement resolves some monetary claims against the banks. The core claims of the lawsuit will proceed, he said.
“We intend to aggressively litigate this case to finally prohibit the widespread illegal and deceptive practices of the banks set forth in our complaint,” Kanner said in an e-mailed statement.
Thomas Kelly, a spokesman for New York-based JPMorgan, and Gina Proia, a spokeswoman for Detroit-based Ally, declined to comment on the settlement. Mark Rodgers, a spokesman for New York-based Citigroup, also declined to comment.
Representative of the other two lenders didn’t immediately respond to e-mails seeking comment.
The agreement precludes New York from seeking penalties of $5,000 for each violation in exchange for the $25 million, according to Kanner. The state will continue to pursue damages incurred by New York homeowners as a result of the banks’ use of the MERS system, he said. The state will also seek court-ordered changes to it.
The national foreclosure settlement case is U.S. v. Bank of America Corp. (BAC), 12-00361, U.S. District Court, District of Columbia (Washington). The New York case is People of the State of New York v. JPMorgan Chase & Co. 2768-2012, New York State Supreme Court (Brooklyn).
Mets Owners to Call Sandy Koufax, Morgenthau at Madoff Trial
Hall of Fame pitcher Sandy Koufax and former Manhattan District Attorney Robert Morgenthau will be called as witnesses in a trial of whether the owners of the New York Mets can keep $303 million they withdrew from Bernard Madoff’s Ponzi scheme.
The trustee liquidating Madoff’s firm claims the owners, Fred Wilpon and Saul Katz, blinded themselves to evidence of Madoff’s fraud and shouldn’t be allowed to keep the principal they withdrew before the fraud became public in 2008. Wilpon and Katz intend to use Koufax and Morgenthau to show the jury they were unaware Madoff was a con man, they said in court papers filed March 12.
“Mr. Koufax will testify about how he came to open his account and the positive things Mr. Wilpon told him about investing with Madoff Securities,” according to the filing. “It strains credulity to think that Mr. Wilpon would expose his oldest and closest friend to potential financial ruin -- for no benefit to Mr. Wilpon himself -- if he subjectively believed that Madoff Securities might be operating a Ponzi scheme.”
Koufax and Morgenthau were named on a list of 12 witnesses, including Wilpon and Katz themselves, who the owners plan to call at the trial. The disclosures came in a flurry of court papers filed March 12 and yesterday, giving a preview of the evidence both sides expect to present in the trial scheduled to begin March 19 in Manhattan federal court.
The trustee, New York lawyer Irving Picard, sued Wilpon and Katz in 2010, along with dozens of family members, trusts and related businesses, trying to get $1 billion in profits and principal they withdrew from their Madoff accounts. In a series of rulings, U.S. District Judge Jed Rakoff has limited the amount Picard may claim.
Madoff, 73, pleaded guilty in 2009 to orchestrating what prosecutors called the biggest Ponzi scheme in history, and is serving a 150-year sentence in a federal prison in North Carolina.
The case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan).
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Ex-GE Manager Not Guilty of Murder, His Lawyer Tells Jury
Hemy Neuman isn’t guilty of premeditated murder because he was legally insane when he shot to death the husband of a co-worker, a defense lawyer told jurors as a trial neared an end.
“Hemy Neuman on Nov. 18, 2010, did not have the mental capacity to distinguish right from wrong,” defense attorney Bob Rubin said yesterday in his closing arguments in Decatur, Georgia. “In fact, he thought he was doing the right thing.”
Prosecutors waived their right to make their arguments first. They will try later to convince the jury that Neuman, 49, was legally sane when he shot to death Russell “Rusty” Sneiderman, 36.
The defense hasn’t denied that Neuman intercepted and killed Sneiderman in front of the Dunwoody Prep preschool, where he had dropped off his 2-year-old son.
Sneiderman’s wife, Andrea, 35, worked with Neuman at GE Energy in Atlanta. The couple had an emotional personal relationship that may not have included sex, according to trial testimony.
Andrea Sneiderman worked for Neuman in software systems support at the company, where he was an engineer overseeing 5,000 people, according to evidence in court. She isn’t charged with a crime.
The defense testimony was disputed by Pamela Crawford, a forensic psychologist, and William Brickhouse, a psychiatrist who’s the DeKalb County Jail mental health director.
Both testified that Neuman isn’t bipolar, depressed or legally insane. Someone who is psychotic can’t plan and perform a killing as Neuman did, Crawford said.
Neuman faces life in prison without parole if convicted of murder or life without parole or parole after 30 years if convicted of murder while mentally ill.
The case is State v. Neuman, 11CR1364-5, Georgia Superior Court, DeKalb County (Decatur).
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Banks Sued By North Carolina Official Over Mortgage Registry
Bank of America Corp. and Wells Fargo & Co. were among companies sued by a North Carolina county official over allegedly forged mortgage documents and the use of a mortgage database under attack by states and counties.
The companies named in the lawsuit filed forged mortgage-related documents, misled homeowners and impaired property rights, according to a complaint filed yesterday by Jeff Thigpen, the Guilford County Register of Deeds. The county includes Greensboro.
“Our office uncovered an abundance of falsified, forged and fraudulently executed mortgage documents,” Thigpen said in a statement. “But our investigation only found the tip of the iceberg. We need the banks to clean up their mess.”
Banks and Mortgage Electronic Registration Systems Inc. have been sued by attorneys general in Massachusetts and New York over the MERS database. Delaware sued the company without filing claims against banks. Texas counties, meanwhile, are also pursuing claims against MERS.
Shirley Norton, a spokeswoman for Bank of America, and Vickee Adams, a spokeswoman for Wells Fargo, declined to comment about the complaint. The lawsuit also names JPMorgan Chase & Co., Bank of New York Mellon Corp. and others as defendants. Thomas Kelly, a spokesman for JPMorgan, and Kevin Heine, a spokesman for BNY Mellon, declined to comment.
Janis Smith, a spokeswoman for Merscorp Holdings Inc., said in a statement that the complaint contains “a lot of political rhetoric” and “misconstrues” the role of MERS.
The case is Guilford County ex rel. v. Lender Processing Services, 12-CVS-4531, General Court of Justice, Superior Court Division, Guilford County.
Daniel Och Sued by Ex-Employee Achache Over 2009 Termination
Daniel Och, founder of Och-Ziff Capital Management Group LLC (OZM), was sued by a former employee, Arnaud Achache, who accused Och of forcing him out to boost his own interest in the company.
Achache, a citizen of France who lives in Beverly Hills, California, filed the complaint March 9 in New York State Supreme Court in Manhattan, seeking more than $50 million in actual damages and more than $100 million in punitive damages.
Achache said he joined Och-Ziff in about July 2003 from Societe Generale SA (GLE) and became a non-managing member of the firm’s operating groups in January 2005, when he received a 1 percent ownership interest. Achache said he was terminated as a limited partner in March 2009.
“The defendants, acting by and through Och for his direct benefit, and to the detriment of plaintiffs, terminated Achache as a limited partner of the Operating Group Entities in violation of the Agreements of Limited Partnership, for the sole purpose of gaining for himself a larger equity interest in breach of his fiduciary duties,” according to the complaint.
Jonathan Gasthalter, a spokesman for New York-based Och-Ziff, declined to comment on the lawsuit yesterday in a phone interview.
The case is Achache v. Och, 650737/2012, New York State Supreme Court, New York County (Manhattan).
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MBF Clearing Sued by CFTC, Accused of Not Segregating Funds
MBF Clearing Corp. was sued by the Commodity Futures Trading Commission and accused of failing to properly segregate customer accounts from its own and of violating the Commodity Exchange Act.
MBF employees from September 2008 to March 2010 deposited $30 million to $60 million in customer funds into a U.S. government money market fund at JPMorgan Chase & Co. without properly segregating them, the CFTC alleged March 12 in a complaint in federal court in New York.
The funds weren’t properly titled, and redemption provisions didn’t comply with CFTC regulations, the agency said. Nor was there proper documentation for the account, it said. MBF also allegedly failed to obtain customer segregation acknowledgement letters on two accounts holding funds for foreign customers from February 2007 to April 2010.
The CFTC asked for a court order barring MBF’s “unlawful acts and practices” and unspecified civil penalties.
Mark B. Fisher, MBF’s president and founder, said in an interview that the firm “invested customer segregated money in a U.S. government money market fund in the strongest bank in the world, JPMorgan.”
The CFTC’s complaint acknowledges that MBF was informed by JPMorgan on actual account statements that the account was described as a “Commodity Customer Segregated Bank Account,” Fisher said.
“What the complaint fails to say is that MBF Clearing Corp. had placed its customer funds into the JPMorgan government money market account two days after Lehman Brothers filed for bankruptcy for the sole purpose of protecting its customers’ funds by depositing them in the safest bank in the world and in the most secure investments, namely U.S. government securities,” Fisher said.
Lehman Brothers Holdings Inc. filed the largest bankruptcy in U.S. history on Sept. 15, 2008.
As soon as MBF was notified the JPMorgan account might not qualify for segregation, the firm “moved all of the customer funds out of this account and reported what had occurred to its designated self-regulatory agency, the CME Group Inc.,” Fisher said.
“Not a nickel of customer money was lost,” Fisher said. “We are disappointed that the CFTC has chosen to address this matter through an enforcement proceeding.”
The case is CFTC v. MBF Clearing Corp., 12-cv-1830, U.S. District Court, Southern District of New York (Manhattan).
AstraZeneca Sues FDA Over Generic Seroquel Warning Denial
AstraZeneca Plc (AZN) sued the U.S. Food and Drug Administration, seeking to overturn the regulator’s denial of a request that generic copies of its Seroquel antipsychotic come with warnings about high blood sugar and suicidal tendencies.
AstraZeneca is seeking an injunction barring the FDA from approving copies of Seroquel until Dec. 2, when exclusivity expires on clinical trial data that show a link between Seroquel and hyperglycemia, or until a federal court has a “meaningful opportunity to review imminent FDA action,” the London-based company said in a statement yesterday.
The FDA on March 7 denied two so-called Citizen Petitions filed by the U.K. drugmaker on Sept. 9 that asked the regulator to withhold final marketing approval for generic versions of Seroquel, also known as quetiapine fumarate, that omit mentioning the risks, AstraZeneca said.
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Rebekah Brooks, Husband Said to Be Arrested in Hacking Probe
Rebekah Brooks, the former chief executive officer of News Corp. (NWSA)’s U.K. publishing unit, was arrested a second time by London police as the year-old phone-hacking probe turned to a possible cover up, according to a person familiar with the situation.
The Metropolitan Police said they arrested five men and a 43-year-old woman in a probe to investigate a potential conspiracy to pervert the course of justice, without identifying the suspects. Brooks’s husband Charlie, a former racehorse trainer, was also arrested, the person said, declining to be identified because the matter is confidential. Police also detained Mark Hanna, who headed security for the News International unit, according to a spokeswoman for the company.
The probe into the phone-hacking scandal at Rupert Murdoch’s News of the World tabloid has continued to expand to add an investigation into bribes to public officials and police. More than 20 people have been arrested as part of Operation Weeting, the phone-hacking investigation, and at least 10 have been questioned since the beginning of the year in the bribery probe. The police service said for the first time that it consulted with prosecutors before making yesterday’s arrests.
Police can hold a suspect without filing charges for as long as 36 hours. Perverting the course of justice carries a maximum sentence of life imprisonment, according to the Crown Prosecution Service’s website.
The CPS didn’t return a call and the MPS declined to comment beyond the statement. David Wilson, a spokesman for the 43-year-old Brooks, declined to immediately comment and her attorney, Stephen Parkinson, didn’t immediately return a call.
Also arrested yesterday in the early morning raids between 5 a.m. and 7 a.m. London time were a 46-year-old man in West London, a 38-year-old man in Hertfordshire and a 48-year-old man at an office address in East London. All were arrested as part of Operation Weeting and a number of addresses are being searched, the police said.
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Ex-Lehman Executive Jack’s $35 Million Estate Faces Tax Auction
The $35 million estate of Bradley H. Jack, the former Lehman Brothers Holdings Inc. managing director who was arrested twice for allegedly forging drug prescriptions, may be sold at a municipal auction after he failed to pay property taxes since July.
Jack owes $271,923 on his 20-acre (8-hectare), waterfront compound in Fairfield, Connecticut, according to town tax collector Stanley Gorzelany. It’s the town’s biggest overdue tax bill on a residence.
“He is the most delinquent taxpayer,” Gorzelany said in a telephone interview.
Jack, 53, turned himself in and was charged March 9 with second-degree forgery for a November incident at a CVS pharmacy in which he faked the date on a doctor’s prescription for a controlled substance, according to Captain Sam Arciola of the Westport Police Department. Jack was released on $5,000 bond and has a March 21 court appearance.
In June, Jack was arrested 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, Fairfield police said.
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 yesterday seeking comment on the tax sale.
Jack joined New York-based Lehman in 1984 and ran investment banking from 1996 to 2002, when he became co-chief operating officer. He decided to retire from New York-based Lehman to pursue work in the nonprofit sector and spend time with his family in June 2005.
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Citizens Bank, Customers Seek Mediation in Overdraft Suit
Citizens Bank of Pennsylvania and plaintiffs in a lawsuit challenging overdraft fees asked for a delay in proceedings while they pursue private mediation, according to a court filing.
“The parties have agreed to engage in private mediation in an effort to resolve this case without further litigation,” the Pittsburgh-based bank and the customers said yesterday in a filing in federal court in Miami. They agreed to suspend court filings on whether to certify the case as a class-action, or group, lawsuit. A mediation session is scheduled for April 17, according to the filing.
At least 30 banks have cases before U.S. District Judge James Lawrence King in Miami. The customers say the banks reorder debit-card transactions in their computers to maximize overdraft fees.
JPMorgan Chase & Co., the biggest U.S. bank by assets, has reached a preliminary agreement to pay $110 million to settle litigation. Bank of America Corp., the second-biggest U.S. bank by assets, agreed last year to pay $410 million without admitting liability.
Union Bank NA agreed to a $35 million settlement with customers in November. An Associated Banc-Corp. (ASBC) unit, Associated Bank, agreed in November to pay $13 million.
The case is In re Checking Account Overdraft Litigation, 09-md-02036, U.S. District Court, Southern District of Florida (Miami).
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AU Optronics, Two Executives Found Guilty of Price Fixing
AU Optronics Corp. (2409) and two of its executives were found guilty yesterday of fixing prices for screens used in computers and televisions. Two other company officials were found not guilty by a federal jury in San Francisco.
Prosecutors said executives of the Taiwan-based company met with competitors secretly in hotel rooms and karaoke bars from 2001 to 2006 to set liquid crystal display prices in response to an oversupply that pushed down prices by 40 percent.
Company president H.B. Chen was found guilty along with Hui Hsiung, who was executive vice president during the alleged conspiracy. The jury also said the amount of gain from all conspirators in the case was more than $500 million.
L.J. Chen, a director of the company’s desktop display group, and Hubert Lee, a senior manager for the group, were found not guilty. The judge declared a mistrial on the fifth company executive, Steven Leung, who was also a senior manager of the group.
AU Optronics is the only LCD maker charged with price-fixing by the U.S. to take its case to trial. Since 2008, rivals including LG Display Co. (034220), Chunghwa Picture Tubes (2475), Chi Mei Optoelectronics Corp. and Sharp Corp. (6753) agreed to plead guilty and pay more than $860 million in fines.
Dennis Riordan, an attorney who represents AU Optronics and its U.S. unit, which was also found guilty yesterday, said the defense will file motions for acquittal and a new trial. A fine for the company, which would come at sentencing after those motions are ruled on, may total as much as $1 billion, he said. All five executives still work for the company, Riordan said.
“The magnitude of the possible fine, $1 billion, may shock a lot of people. AUO has only provisioned for about one third of that,” said Jamie Yeh, who rates the stock underweight at Barclays Bank Plc in Taipei. “The fact that they lost the case was expected” and may account for the share’s decline being less than the daily limit.
“At every step, our lawyers and accountants have discussed the appropriate provisions,” AU Optronics Chief Financial Officer Andy Yang said yesterday. He declined to say how much has already been provisioned or whether that figure will increase after yesterday’s verdict.
“This case is just beginning,” Riordan said in an interview after the verdict. “The most important question it raises, which the jury didn’t get, is does the Sherman Act apply to conduct that takes place on foreign soil?”
Peter Huston, a Justice Department attorney, declined to comment after the verdict.
The case is U.S. v. Lin, 3:09-cr-00110, U.S. District Court, Northern District of California (San Francisco).
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Goldman Sachs to Pay $7 Million Over CFTC Trading-Account Claims
Goldman Sachs Group Inc. (GS) agreed to pay $7 million to resolve regulatory claims it failed to properly supervise commodities trading accounts, the U.S. Commodity Futures Trading Commission said.
The regulator accused the New York-based firm’s Goldman Sachs Execution & Clearing LP unit of failing to supervise subaccounts managed from 2007 to 2009 by a broker-dealer that engaged in “questionable conduct,” the CFTC said in a statement yesterday. Goldman Sachs agreed to disgorge $1.5 million in fees and commissions it had collected from the broker and pay a $5.5 million civil penalty, the agency said.
“When registrants become aware of questionable activity, they must not simply rely on assurances from interested parties and their representatives, but instead must diligently investigate,” David Meister, the CFTC’s enforcement chief, said in a statement. “As this case indicates, the Commission will hold registrants accountable if they fail in this regard.”
Michael DuVally, a spokesman at Goldman Sachs in New York, declined to comment on the settlement. The company resolved the claims without admitting or denying wrongdoing, the CFTC said.
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Credit Suisse Banker Fined Over Bond Offering ‘Charades’
A Credit Suisse Group AG (CSGN) banker in London, Nicholas Kyprios, was fined 210,000 pounds ($330,000) for disclosing confidential client information to a fund manager in what regulators called a “guessing game.”
Kyprios, head of European credit sales at the bank, indicated to the manager that the bank’s client Liberty Global Inc. was close to issuing bonds to finance its acquisition of German cable company UnityMedia GmbH, after the manager told Kyprios he didn’t want information he couldn’t act on, the Financial Services Authority said in a statement yesterday.
Credit Suisse was working for Liberty on the takeover and also served as lead book runner for the 2.5 billion-euro ($3.3 billion) bond issue to partly finance the deal. In response to questions during a November 2009 call about who was issuing the bonds, Kyprios told the manager they could “play this game” and “you’re going to be my charades partner.” Kyprios ruled out possible issuers and signaled confirmation when the manager, who the FSA didn’t identify, guessed UnityMedia.
Credit Suisse “deeply regrets” that one of its employees has been sanctioned by the FSA, the Zurich-based bank said in a statement. It “fully supports the FSA’s actions to ensure information is properly controlled and has reinforced the FSA’s decision by imposing its own financial penalty” on Kyprios.
When questioned by the regulator, Kyprios told them the conversations were “banter” that didn’t disclose any actionable information. He was fined for improper market conduct and received the FSA’s standard 30 percent discount on the fine for settling early.
Kyprios, who still works at the bank, didn’t immediately respond to an e-mail request for comment.
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Takeda Actos Judge Names Lead Attorneys in Cancer Suits
The judge overseeing lawsuits alleging Takeda Pharmaceutical Co. (4502)’s Actos diabetes medicine causes cancer appointed 19 plaintiffs’ lawyers to manage litigation involving U.S. claims.
Takeda, Asia’s biggest drugmaker, may face as many as 10,000 claims that Actos causes bladder cancer after U.S. regulators found last year the drug was linked to the disease. Federal lawsuits against the drugmaker were consolidated before U.S. District Judge Rebecca Doherty in Lafayette, Louisiana, in December. The first hearing on the cases is set for March 22, according to court filings.
“The court has determined to effect the selection of lead counsel, liaison counsel and plaintiffs’ executive and steering committees before the March 22nd-23rd status conference,” Doherty said in a March 12 note posted on the court’s website.
The lawsuits claim patients who use Actos, a prescription drug approved to treat type 2 diabetes, face increased risks of developing bladder cancer. The plaintiffs also claim that Takeda and co-defendant Eli Lilly & Co., based in Indianapolis, withheld information about the risk and failed to provide adequate warnings.
“Given that litigation is pending, we can’t comment,” Jocelyn Gerst, a U.S.-based spokeswoman for Takeda, said in a telephone interview about the selection of the plaintiffs’ group.
Doherty named attorneys Richard Arsenault and Paul Pennock as lead plaintiffs’ counsel in the case and also appointed them to the executive committee, along with lawyers Mark Robinson and Hunter Shkolnik.
Arsenault, a products-liability lawyer based in Alexandria, Louisiana, served as one of the leading lawyers in consolidated cases filed against Merck & Co. (MRK) over its Vioxx painkiller that resulted in a $4.85 billion settlement in November 2007.
Pennock, a New York-based attorney, was one of the lawyers leading the consolidated suits against AstraZeneca Plc over its Seroquel antipsychotic drug. The London-based drugmaker agreed last year to pay a total of about $350 million to resolve patients’ claims that the drug caused diabetes.
The Los Angeles-based Robinson, who has won multimillion-dollar jury awards against carmakers such as Ford Motor Co., is a co-lead counsel in sudden-acceleration lawsuits against Toyota Motor Corp. (7203)
Shkolnik, based in New York City, served as a member of the plaintiffs’ steering committee in lawsuits against Medtronic Inc. (MDT) over flawed heart defibrillators. The cases later settled for more than $114 million.
The lawsuits are consolidated in In Re: Actos Products Liability Litigation, 11-2299, U.S. District Court, Western District of Louisiana (Lafayette).
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Judicial Picks Will Get Senate Vote as Reid Decries Holdup
“Republicans have prevented the Senate from doing its constitutional duty,” Reid of Nevada said on the Senate floor March 12. He said Republicans are holding up “consensus nominees,” including some approved unanimously by the Senate Judiciary Committee.
Reid’s decision follows failed talks with Senate Minority Leader Mitch McConnell, a Kentucky Republican, over a slate of nominees to put forward for a vote. The Senate this year has confirmed seven federal judges.
Twenty-two judicial nominees are pending before the Senate, and Reid is forcing votes on all of the 17 district court judges on that list.
Nine of the lower-court nominees were approved last year by voice vote in the Judiciary Committee. Of those approved by the panel this year, all but two cleared the committee with only one “no” vote.
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