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Lehman, Nortel, Bank of America, Google in Court News

June 7 (Bloomberg) -- Lehman Brothers Holdings Inc.’s ex-Chief Executive Officer Richard Fuld asked a judge to dismiss a lawsuit accusing him and his colleagues of failing to disclose Repo 105, a financing method allegedly used to conceal billions of dollars of debt, according to court records.

Separately, Ernst & Young LLP, the Lehman auditor, also asked the judge to dismiss the lawsuit in a court filing June 4, saying its work met all applicable professional standards.

The class-action lawsuit, based on a 2,200-page report by Lehman bankruptcy examiner Anton Valukas, was filed April 23 on behalf of retirement funds including the Alameda County Employees’ Retirement Association in Oakland, California, and the Government of Guam Retirement Fund.

The Lehman executives denied in court papers that the investors had lost money on Lehman securities because of misstatements and omissions in offering documents. Lehman’s accounting for Repo 105 transactions conformed to generally accepted accounting principles and was approved by Ernst & Young, they said.

“Plaintiffs’ effort to turn the report into a basis for securities law violations fails,” they said in a filing in federal court in Manhattan.

Jointly asking the judge to dismiss the lawsuit were Fuld, former Lehman chief financial officers Christopher O’Meara, Erin Callan and Ian Lowitt, former President Joseph Gregory, present and past Lehman directors, and underwriters of the bank’s securities.

Lehman filed the biggest U.S. bankruptcy in history in September 2008 with $639 billion in assets. It has said it will spend another five years liquidating to pay unsecured creditors as little as 14.7 cents on the dollar.

The lawsuit is In re Lehman Brothers Equity/Debt Securities Litigation, 08-cv-05523, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.


Former McKinsey Consultant Banki Convicted in Iran Trade Case

Former McKinsey & Co. consultant Mahmoud Reza Banki was convicted by a federal jury in New York of violating the Iran trade embargo and running an unlicensed money-transfer business.

The jury took about four hours to convict Banki of all five charges against him. U.S. District Judge John Keenan in New York, who is presiding over the case, told the panel to return June 7 and he will instruct them on the law regarding a forfeiture. The government will ask that he surrender $3.4 million in illegal proceeds. Banki’s lawyer, Baruch Weiss, declined comment after the verdict.

Banki, a naturalized U.S. citizen born in Iran, was accused of running a “value-transfer” business that essentially moved money to residents of Iran from 2006 to 2009 in violation of the embargo. Banki received about $4.7 million as part of the transfer process and used the money to buy a $2.4 million condominium, invest in securities and pay credit-card bills, the government charged.

“There is an additional thing you’ll have to do, which is the forfeiture of assets,” Keenan told the panel and he advised them not speak to anyone or read about the case until they have concluded their deliberations. “Return to court Monday afternoon and I will charge you on the law regarding forfeiture.”

Prosecutors alleged during the trial that Banki received the wire transfers in a personal Bank of America Corp. account he set up for that purpose. The money came from companies and individuals in Saudi Arabia, Kuwait, Latvia, Slovenia, Russia, Sweden, the Philippines, the U.S. and other countries, prosecutors said.

The case is U.S. v. Banki, 1:10-CR-00008, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

Nortel Disabled Workers Lose Bid to Extend Benefits

A group of about 40 disabled Nortel Networks Corp. workers lost a bid for a hearing at Ontario’s highest court to overturn approval of a settlement with the company that extends their benefits until the end of the year.

The Court of Appeal for Ontario denied June 3 the group’s request for a hearing, without giving a reason.

“It’s definitely a lot of bad news for this group,” Joel Rochon of Rochon Genova LLP, who represents the disabled workers, said in a phone interview June 4. “The pressure is now on the federal government to take appropriate steps to get these bills passed to protect these workers.”

Ontario Superior Court Judge Geoffrey Morawetz approved the C$57 million ($54 million) settlement on March 31 after Nortel removed a provision that allowed pensioners and disabled employees to seek higher standing among creditors if federal bankruptcy rules changed. The judge, who rejected a proposal that included that provision on March 26, said it was unfair to other creditors.

Canada’s opposition parties have introduced proposals to change bankruptcy law so that former employees of companies that seek court protection don’t lose pensions and disability benefits.

Nortel, based in Toronto, was North America’s biggest maker of telecommunications equipment. It has been auctioning its assets since filing for bankruptcy protection in Canada and the U.S. in January 2009.

The case is In re Nortel Networks Corp., M38748, Court of Appeal for Ontario (Toronto).

For more, click here.

Ernst & Young Wins 71% Cut to Fines in Equitable Case

Ernst & Young LLP won a 71 percent reduction to fines and costs in a U.K. disciplinary case over its audits before the near collapse of Equitable Life Assurance Society more than a decade ago.

An accounting appeal panel on June 2 reduced to 2.9 million pounds ($4.25 million) earlier fines and costs totaling 9.95 million pounds after “overturning all findings related to objectivity and independence” of Ernst & Young’s work, the firm said June 4 in a statement from London.

“Any lessons from our audit of Equitable have long been learned and embedded in our audit systems and procedures,” Ernst & Young said in the statement. “The relevant individuals at Ernst & Young have retired from the firm in the last ten years.”

The disciplinary action and related civil lawsuits followed Equitable’s near collapse in 2000, when Britain’s highest court ruled that a plan to cut payments to some policyholders was unlawful. The ruling left the London-based company with a 1.5 billion-pound hole in its accounts and forced it to reduce payouts to about 750,000 customers.

The accounting profession’s Joint Disciplinary Scheme conducted a two-year probe of Ernst & Young’s audits of Equitable from 1990 to 2000, and fined the company for allegedly failing to properly warn Equitable customers.

For more, click here.

For the latest verdict and settlement news, click here.

Legal Reviews

Google to Hand Over Wi-Fi Data to European Regulators

Google Inc., owner of the world’s most popular search engine, will begin turning over to European regulators data it mistakenly collected from unsecured Wi-Fi networks.

The data will be handed over to authorities in Germany, France and Spain, Google said June 3 in an e-mailed statement.

The countries started probes into Google’s data-gathering practices after the company said last month its cars used to photograph roadsides for its Street View mapping service inadvertently recorded information from Wi-Fi networks. Prosecutors in the German city of Hamburg opened a criminal investigation, and authorities in Italy, Canada and the Czech Republic also began inquiries.

Street View allows Google users to click on maps to see photographs of roadsides. Mountain View, California-based Google said May 17 that it deleted data gathered from Wi-Fi networks in Ireland and was aiming to do the same in other countries. A district judge in Oregon last week issued a restraining order to stop Google from destroying data collected in the state and to turn over copies of the information.


Taiwan International to Appeal Court Ruling on Management Row

Taiwan International Securities Corp. said it will appeal a court ruling against the company in a lawsuit over management control.

Taipei District Court ruled in favor of China Development Financial Holding Corp., Taiwan International Securities said in a stock exchange filing June 4. The brokerage said it “regrets” the ruling. Simon Dzeng, a spokesman for China Development, couldn’t be reached for comment when called at his office in Taipei after business hours.

Taiwan International’s management is in dispute after rival groups of shareholders claimed a majority on the board following an annual stockholders’ meeting June 30 last year, the Central News Agency reported June 4, without saying where it got the information.

The existing management and China Development both claimed to have won the board elections, the news agency said. China Development filed a lawsuit over the dispute, the Taipei-based news organization said.

The purchase of a stake in Taiwan International by Taipei-based China Development, owner of Taiwan’s largest venture capital company, was among cases being investigated by Taiwanese officials as part of a probe into mergers and acquisitions by financial companies during the administration of former President Chen Shui-bian, the government said in January 2009.

For the latest trial and appeals news, click here.

New Suits

Bank of America Employees in 5 States Sue Lender for Overtime

Bank of America Corp. fails to pay overtime to employees, violating laws in at least five states, according to a lawsuit filed in federal court in Kansas City, Kansas.

The complaint, filed June 4, consolidates a dozen separate employee lawsuits filed against the biggest U.S. bank by assets in California, Florida, Texas, Washington and Kansas.

“BOA’s policy and practice is to deny earned wages, including overtime pay, to its non-exempt hourly employees at its retail branch and call center facilities throughout the country,” the workers said in their 44-page filing.

The federal Judicial Panel on Multidistrict Litigation in April ordered the cases to be aggregated in Kansas City. The Charlotte, North Carolina-based bank had asked the panel to combine the matters for pretrial proceedings in California, where workers’ wage cases were brought in the U.S. courthouses at Santa Ana and Los Angeles.

Shirley Norton, a San Francisco-based spokeswoman for the bank, said the company would defend itself vigorously in court.

“Bank of America has comprehensive policies, practices and training for both managers and associates designed to ensure full compliance with all federal and state wage and hours laws,” she said in an e-mail.

Current and former tellers and other hourly workers who were employed by the bank within the last three years claim the lender violated either the federal Fair Labor Standards Act or state wage and hour laws.

Instead of paying overtime when employees worked more than 40 hours in a week, the plaintiffs said, the bank gave them compensatory time off or told them not to record more than 40 hours worked and -- in some instances -- modified the tellers’ recorded hours by eliminating incurred overtime.

The plaintiffs are seeking back pay, attorney fees and other related damages.

Plaintiffs’ lawyer Brendan Donelon said he planned to ask U.S. District Judge John Lungstrum for national class-action, or group, status later this year.

If granted, the workers’ claims could be worth more than $100 million and as many as 180,000 employees at the bank’s branches and call centers across the country could gain the option to either opt in or opt out of the lawsuit, he said in a phone interview.

The case is In re: Bank of America Wage and Hour Employment Litigation, 10MD2138, U.S. District Court for Kansas (Kansas City).

For the latest new suits news, click here. For copies of recent civil complaints, click here.

Litigation Departments

Tuohey Joins Brown Rudnick’s Washington Office

White-collar litigator Mark H. Tuohey III joined Brown Rudnick as a partner in its Washington litigation department, the firm said June 3 in a statement. Tuohey was formerly at Vinson & Elkins.

Tuohey is a former federal prosecutor with more than 30 years of experience, including in complex civil and criminal investigations, internal corporate investigations and compliance programs. He represents corporations, their officers and directors, and individuals in civil and white-collar criminal litigation, internal corporate investigations, and congressional investigations, the firm said.

For the latest litigation department news, click here.

Court News

Kagan Documents From Work in Clinton White House Are Released

The William J. Clinton Presidential Library released voluminous material relating to the White House service of Elena Kagan, setting the stage for contentious scrutiny of the U.S. Supreme Court nominee’s record.

The initial batch of memos and e-mail from Kagan’s four years as a White House aide to Clinton was distributed by the National Archives and includes 46,500 pages of a 160,000-page collection.

Kagan worked for the former president from 1995 to 1999, a period when the administration sparred with a Republican-led Congress over such matters as gun control, private property rights and a national tobacco settlement.

President Barack Obama nominated Kagan, 50, on May 10 to replace retiring Justice John Paul Stevens on the nine-member high court. A former dean of Harvard Law School, she is now U.S. solicitor general, the Obama administration’s chief courtroom lawyer.

With no judicial record of Kagan’s to examine, lawmakers and outside groups plan to closely study memos and e-mails she wrote while a White House associate counsel in 1995 and 1996 and a deputy assistant for domestic policy from 1997 to 1999.

The National Archives plans to release all of the files before the Senate Judiciary Committee begins Kagan’s confirmation hearings on June 28. Senator Jeff Sessions of Alabama, the panel’s ranking Republican, has said he would seek to delay the hearings if there isn’t enough time to review all the records.

White House counsel Bob Bauer told Sessions in a letter June 1 that Obama doesn’t intend to claim executive privilege to bar release of any documents. Bauer said Clinton has a right to refuse release of some documents for confidentiality reasons. If the former president tries to keep them secret, the Obama White House will try to work out a “satisfactory accommodation” with the committee, Bauer said.

Court Filings

Texas Rangers Bankruptcy Lawsuit Tops Bloomberg Chart

The bankruptcy docket of the Texas Rangers Baseball Partners was the most-read litigation docket on the Bloomberg Law system last week.

Texas Rangers filed for bankruptcy on May 24 to complete a sale to a group led by Chuck Greenberg and team President Nolan Ryan, who once pitched for the Rangers.

Law week, the U.S. government named baseball player Alex Rodriguez to a three-member committee representing Texas Rangers creditors during the team’s bankruptcy case.

Rodriguez, a former Rangers shortstop who now plays third base for the New York Yankees, holds the largest unsecured claim against his old team. He is owed $24.9 million in deferred compensation, according to court documents.

The case is In re Texas Rangers Baseball Partners, 10-43400, U.S. Bankruptcy Court, Northern District of Texas (Fort Worth).

To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at

To contact the editor responsible for this story: David E. Rovella at

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