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BP Subpoenas, Moratorium Vote, Pilot Law: Compliance

Aug. 2 (Bloomberg) -- U.S. Justice Department attorneys conducting a criminal probe of the BP Plc well explosion in the Gulf of Mexico have recommended that a grand jury be convened and BP managers subpoenaed to determine if any laws were broken, a person familiar with the investigation said.

The subpoenas also would target employees of rig operator Transocean Ltd., said the person, who was briefed by the attorneys and asked not to be identified. London-based BP is the majority owner of the well that exploded on April 20, killing 11 workers and triggering the worst oil spill in U.S. history.

Offshore drilling regulators from the Interior Department agency formerly known as the Minerals Management Service would be summoned to testify about the process under which BP received permits to drill the well about 40 miles (64 kilometers) off the Louisiana coast, and whether any improper relationships existed between agency employees and the company, the person said.

Senior Justice Department officials still have to approve a grand jury, which would be a special panel or one that sits regularly. The recommendations were made by department attorneys in Washington and New Orleans, the person said.

The government has been reviewing whether there were violations of the Clean Water Act, which carries civil and criminal penalties, and the Oil Pollution Act of 1990, which can be used to hold companies liable for cleanup costs.

Also under review is whether there were violations of the Migratory Bird Treaty Act and Endangered Species Act, which provide penalties for injuries to wildlife, and other criminal laws.

For more, click here.

Compliance Policy

Congress to Vote on Obama Ban on Deep-Water Drilling

Lawmakers were set to vote July 30 on a proposal to overturn President Barack Obama’s suspension of deep-water drilling as the House debates legislation toughening rules for companies producing oil and natural gas offshore.

An amendment that would end the Obama administration’s moratorium on exploration was among nine to be debated before the House voted on an overhaul of drilling rules in the aftermath of BP Plc’s Gulf of Mexico oil spill. The bill would scrap the Minerals Management Service, the Interior Department agency responsible for energy production on federal leases, and replace it with agencies to ensure that energy-fee collection is separate from environmental protection and safety decisions.

The drilling ban in water deeper than 500 feet was imposed to provide time for an investigation of the spill, the worst in U.S. history. Gulf Coast lawmakers and industry officials say the ban will cost jobs and make the U.S. more dependent on oil imports. Republicans and some Democrats have also questioned the overall spill-response legislation, which would increase costs on energy producers.

The administration has said the pause in drilling is needed until it’s determined that companies can operate safely and contain and clean up accidents.

To read more, click here.

U.S. Senate Clears Measure to Increase Pilot Training

The U.S. Senate cleared and sent to President Barack Obama legislation that would increase by sixfold the minimum experience pilots need to work at airlines in response to a commuter-plane crash.

The requirement that pilots have 1,500 hours of flight time, surpassing the current 250-hour minimum, was sought by pilot unions and relatives of victims in a deadly February 2009 crash near Buffalo, New York. The House passed the bill July 29.

The National Transportation Safety Board said this year that Captain Marvin Renslow of Pinnacle Airlines Corp.’s Colgan unit caused his plane to crash near Buffalo, killing 50 people, by incorrectly responding to a stall warning in the cockpit. He died along with all passengers, crew and a person on the ground.

“We are taking long overdue action,” said Senator Byron Dorgan, a North Dakota Democrat, in a statement. “The flying public can truly expect one high level of safety in our skies.”

The pilot-safety bill also extends through September the law authorizing financing for the FAA. Without action by Aug. 1, taxes that support the agency would expire. While the FAA authorization in the measure would be temporary, the safety provisions would be permanent.

Accounting Body Proposes Common Rule for Insurers

The international body that sets accounting rules used in more than 110 countries including Britain, Japan and Germany said insurance companies should standardize bookkeeping to give investors better data.

The proposed change would require, for the first time, a single standard that insurers in all jurisdictions could apply consistently to their contracts, according to a July 30 statement from the International Accounting Standards Board in London.

“A fundamental review of insurance accounting was long overdue, with current practice resulting in financial information that is impenetrable to all but the most expert of users,” IASB Chairman David Tweedie said in the statement.

BP’s Inglis Says Rush to Judgment Over Oil Spill Is Mistake

Andy Inglis, BP Plc’s head of exploration and production, cautioned against pinning the blame for the Gulf of Mexico oil spill squarely on one company.

A joint U.S. Coast Guard-Interior Department investigative panel is probing BP and its partners, Anadarko Petroleum Corp. and Mitsui Oil Exploration Co. BP’s “independent investigation” is being led by Mark Bly, head of safety and operations, who plans to issue an interim report in August, Inglis said.

London-based BP is being investigated by U.S. authorities, including the Securities and Exchange Commission, Presidential Commission, the U.S. Congress and some other agencies, the company said earlier this week. The U.S. government panel also designated Transocean Ltd., Halliburton Co., Cameron International Corp. and some other companies as parties of interest in its investigation.

“Many in the external world have rushed to judgment, hoping to pin the blame on one company or one decision,” Inglis said in a presentation posted on BP’s website. “Unfortunately, this is much more complex. I firmly believe that such a rush to judgment will benefit no one.”

Aer Lingus Welcomes Decision on Dublin Airport Pricing

Aer Lingus Group Plc said it welcomed the Commission for Aviation Regulation’s decision confirming that there is no requirement for differential pricing between Terminal 1 and Terminal 2 at Dublin Airport.

Aer Lingus will proceed with the transfer of its operations from Terminal 1 to Terminal 2, the carrier said.

Portugal May Regularly Release Bank Tests, Negocios Says

The Bank of Portugal, the country’s central bank, is considering “regularly” releasing results of stress tests carried out on banks every six months, Jornal de Negocios reported, citing an unidentified official at the Bank of Portugal.

The tests carried out by the Bank of Portugal are “more complete” than the European stress tests, the Portuguese newspaper said.

Compliance Action

Home Bancshares Buys Lenders as 2010 Failures Reach 108

Home Bancshares Inc., the Arkansas bank with $3 billion in assets, purchased two seized lenders and regulators closed three others as this year’s failures climbed to 108.

Home Bancshares acquired about $415 million in deposits and 13 branches in its third and fourth purchases of failed Florida banks this year, according to statements posted to the Federal Deposit Insurance Corp.’s website. Banks in Georgia, Washington and Oregon were also closed. The five failures cost the FDIC’s deposit-insurance fund $334.7 million.

“This is a terrific opportunistic acquisition which allows us to further expand our current Florida footprint,” C. Randall Sims, chief executive officer of Home BancShares, said in a statement.

Regulators may close the most banks this year since 1992 as souring residential and commercial mortgages impair capital levels. The FDIC included 775 banks with $431 billion in assets on the confidential list of problem lenders as of March 31, an increase from 702 banks with $402.8 billion at the end of the fourth quarter. FDIC Chairman Sheila Bair has said 2010 failures will surpass last year’s total of 140.

Northwest Airlines to Pay Fine in Price-Fixing Case

Northwest Airlines LLC agreed to plead guilty and pay a $38 million fine for fixing prices in the air-cargo market, the U.S. Justice Department said.

Northwest Airlines Cargo, which is no longer operating, conspired to fix air-cargo rates in the U.S. and overseas from July 2004 through February 2006, the Justice Department said in a July 30 statement. Northwest Airlines is now part of Delta Air Lines Inc.

The plea agreement is subject to approval by a federal court in Washington, D.C.

Northwest Airlines Cargo earned more than $80 million from air cargo services between the U.S. and Japan during the time covered by the plea agreement, the Justice Department said.

The agreement is part of a Justice Department investigation of price-fixing in global air-cargo shipments that has netted more than $1.6 billion in fines. Sixteen airlines have pleaded guilty or agreed to plead guilty and four executives have been sentenced to prison.

Australia Regulator Switch May Accelerate Trading Prosecutions

The Australian Securities and Investments Commission said its takeover of financial-markets supervision should result in faster prosecutions in cases of manipulation and insider trading.

ASIC takes up the new role next week after Australia’s Senate voted in March to hand oversight of real-time trading on domestic licensed markets to ASIC from ASX Ltd., the national stock exchange operator.

ASIC will now be responsible for both supervision and enforcement of the laws against misconduct on Australia’s financial markets.

ASIC lost at least three high-profile court cases last year, including one against Jodee Rich over the collapse of telecommunications carrier One.Tel Ltd., of which he was managing director. It also lost a case against Andrew Forrest, the billionaire founder of Fortescue Metals Group Ltd., whom it accused of misleading investors over iron-ore project accords with China.

Vietnam’s 19 Insurers Fined for Colluding to Increase Fees

Vietnam Competition Council fined 19 insurance companies including Bao Viet Holdings, the country’s biggest listed insurer, for colluding to increase insurance fees for motor vehicles, according to a statement on the Ministry of Trade and Industry website.

The companies accounted for 99.79 percent of the country’s market share in motor vehicle insurance in 2008 when 15 insurers signed a motor vehicle insurance agreement that four joined later that year, Vietnam Competition Authority, a ministry agency said in the statement.

Each company has to pay 0.025 percent of 2007 total revenue in fines and 100 million dong ($5,237) in settlement fees, according to the statement. The insurers have to pay more than 2 billion dong in fines, Dau Tu newspaper reported without saying where it got the information.

The insurers, which include PetroVietnam Insurance Joint-Stock Co., Agriculture Bank Insurance Joint-Stock Co. and Bao Minh Insurance Corp., can submit complaints about the fines within 30 days, the statement said.

Google Won’t Face ‘Formal’ Data-Gathering Probe in Hong Kong

Google Inc. won’t face a “formal investigation” in Hong Kong for collecting data from unsecured wireless networks for its Street View service, the privacy commissioner said.

The data didn’t contain any “meaningful” details on individuals and Google had no intention of compiling personal information, the Hong Kong commissioner said in a statement. Google has been asked to delete the data.

Google, owner of the world’s most popular search engine, has faced reviews by authorities in the U.S. and around the world after it said in May it mistakenly gathered information from networks while capturing images for its mapping service. The U.K. Information Commissioner’s Office said this week it’s satisfied Google didn’t record “significant” private details over the networks.

Ex-New Century Managers to Pay $1.5 Million Over Firm Collapse

Three former New Century Financial Corp. executives agreed to pay more than $1.5 million to settle U.S. regulatory claims that they failed to disclose risk in the firm’s subprime-mortgage business before it collapsed in 2007.

Brad Morrice, the company’s former chief executive officer, will return $464,354 in ill-gotten profits plus $76,991 in interest and pay a $250,000 fine, the Securities and Exchange Commission said in a July 30 statement posted on its website. Patti Dodge, the ex-finance chief, will pay $550,000, and David Kenneally, the former controller, will pay $182,500.

The SEC accused the executives in December of failing to disclose increases in early mortgage defaults, loan buybacks and pending repurchase agreements. New Century was the No. 2 subprime lender when it filed for bankruptcy in April 2007, a failure that foretold the credit market freeze that led to the worst economic crisis since the Great Depression.

Josh Epstein, a spokesman for Morrice at law firm Proskauer Rose in New York, didn’t immediately return a phone call seeking comment. Dodge’s attorney, Terry Bird, and Kenneally’s lawyer, John Vandevelde, also didn’t immediately return phone calls.


Barnes & Noble Files Lawsuits Against Alcatel, Xerox

Barnes & Noble Inc., which makes the Nook electronic reader and sells books from its website, sued Xerox Corp. and Alcatel-Lucent SA over demands the bookseller pay royalties for patents.

The U.S. subsidiary of Alcatel says the Nook violates seven of its patents, New York-based Barnes & Noble said in a lawsuit filed July 29. Xerox says that violates four its patents, the book seller said in a separate court filing July 29. Neither claim is valid, Barnes & Noble said in its lawsuit. It asked the court to rule in its favor.

“We filed the declaratory judgment actions to make clear, as outlined in the complaints, that we are not infringing any valid Xerox and Alcatel-Lucent patents,” Barnes & Noble spokeswoman Mary Ellen Keating said in an e-mail. “We cannot further comment on pending litigation.”

Mary Ward, a spokeswoman for Alcatel-Lucent, declined to comment in an e-mail. A Xerox spokeswoman didn’t respond to an e-mail asking for comment.

The cases are LLC v. Xerox Corp., 1:10-cv-05758, and Barnes & Noble Inc. v. Alcatel-Lucent USA Inc., 1:10-cv-05759, both in U.S. District Court, Southern District of New York.

KV Pharmaceutical Sues Perrigo Over Gynazole Patent

KV Pharmaceutical Co. sued generic-drug maker Perrigo Co., alleging patent infringement with plans to make low-cost copies of the drug Gynazole used to treat female yeast infections.

KV asked a federal judge in Delaware to rule that Perrigo’s sale of its version of the medicinal cream would violate U.S. patent laws, and to issue an injunction to stop Perrigo from marketing the drug until the patent expires in 2017.

“Plaintiffs will be irreparably harmed” without court intervention, KV contends in court papers filed July 29, which also seek attorney fees.

Daniel Willard, a Perrigo spokesman, didn’t immediately return voice and e-mail messages seeking comment on the lawsuit.

The case is KV Pharmaceutical Co. v. Perrigo Israel Pharmaceuticals Ltd., 10CV641, U.S. District Court, District of Delaware (Wilmington).


Ron Kirk Discusses Labor Complaint Against Guatemala

U.S. Trade Representative Ron Kirk speaks with Bloomberg’s Peter Cook discussing the enforcement of trade agreements to protect U.S. workers, including filing a July 30 complaint against Guatemala over its lack of labor protections.

To see the video, click here.

Comings and Goings

SEC Said to Name Federal Prosecutor Martens Chief Litigator

The Securities and Exchange Commission named a U.S. prosecutor its top litigator as the agency prepares for legal fights with billionaire Raj Rajaratnam and Countrywide Financial Corp. co-founder Angelo Mozilo.

Matthew Martens, an assistant U.S. attorney in North Carolina, agreed to be chief litigation counsel, said two people familiar with the matter who declined to be indentified before the SEC’s announcement. Martens will replace Luis Mejia, who stepped down in December to join the law firm DLA Piper.

Martens was part of a team of government lawyers who reached a $50 million settlement in 2009 with Beazer Homes USA Inc. over allegations that the Atlanta-based company committed mortgage fraud.

SEC spokesman John Nester declined to comment. A phone message left for Martens at his office wasn’t immediately returned.

BP Hires Former FEMA Head Witt to Advise on Gulf of Mexico

BP Plc said in an e-mailed statement it hired Witt Associates and firm Chief Executive Officer James Lee Witt, former director of the Federal Emergency Management Agency, to support its work to restore Gulf Coast communities in the wake of the oil and natural-gas spill in the Gulf of Mexico.

Irish Finance Ministry to Appoint Ann Nolan as Banking Head

Irish Finance Minister Brian Lenihan will tap Ann Nolan as head of banking policy as the government continues its efforts to aid lenders.

Nolan will lead the financial services division at the ministry, a spokesman said July 30 in Dublin. The appointment will be announced next week and Nolan will replace Kevin Cardiff, who was appointed secretary general of the ministry earlier this year.

To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at

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

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