Oct. 29 (Bloomberg) -- Lions Gate Entertainment Corp. sued billionaire Carl Icahn over the Metro-Goldwyn-Mayer Inc. studio deal in federal court in New York, alleging the financier was “secretly plotting” to merge the studios.
In the lawsuit, Vancouver-based Lions Gate, the studio whose films include “Crash” and “Precious,” alleges that Icahn realized by June that Lions Gate was in advanced negotiations with two unidentified studios. Aware that the deals might dilute his stake in Lions Gate, Icahn “took drastic and improper action,” the studio said.
Icahn, 74, the studio’s largest shareholder, undermined any proposed transactions by making false and misleading statements, Lions Gate said. He told the investing public that such a deal would be a “financial debacle” and issued press releases vowing to challenge any transaction and sue any entity that interfered with his tender offer, the studio said.
“Icahn opposed a merger with MGM not because it was bad for Lions Gate shareholders, but because it was good -- so good, in fact, that he wanted to postpone it until he could buy as much of both companies as he could and thus extract for himself as much of the value stemming from the merger as possible,” Lions Gate said in the complaint, filed yesterday in U.S. District Court in New York.
Susan Gordon, a spokeswoman for Icahn, said yesterday he wasn’t immediately available for comment. Susie Arons, a spokeswoman for MGM, didn’t return a voice-mail message left after business hours yesterday.
Lions Gate seeks to rescind the purchases of all of its shares acquired by Icahn. Lions Gate also asked the judge to bar Icahn from buying more of its shares and to grant the studio unspecified damages caused by his alleged interference in its proposed deals.
The case is Lions Gate Entertainment Corp., v. Carl Icahn, 10-CV-8169, filed in the Southern District of New York (Manhattan).
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Wilbur Ross’s Mortgage Company Faces Servicing Suits
Billionaire Wilbur Ross’s American Home Mortgage Servicing Inc., facing lawsuits by attorneys general in two states, was sued by a homeowner who accused the firm of using tactics that lead to improper foreclosures.
The lawsuit, filed Oct. 25 in federal court in Dallas, seeks class-action status on behalf of homeowners with mortgages serviced by American Home going back to 2006. American Home’s “illegal, unfair and deceptive business practices victimize borrowers” across the U.S., according to the complaint.
American Home “routinely and systematically assesses unwarranted fees against consumers, resulting in premature default that often gives rise to unfair and improper foreclosure proceedings,” according to the complaint.
Banks and loan servicers are under scrutiny for their foreclosure practices following accusations they relied on faulty documentation to foreclose on people’s homes. Attorneys general in all 50 states have launched a coordinated investigation into the issue.
The complaint in Dallas, filed by Kay VanHauen of Sanger, Texas, follows lawsuits by Greg Abbott, the state’s attorney general, and Ohio Attorney General Richard Cordray. They separately sued American Home, based in Coppell, Texas, for alleged violations of consumer protection laws.
“While a lawsuit on occasion may identify a legitimate servicing error, most of which are isolated and none of which to our knowledge indicate any systematic process flaws or patterns or unlawful behavior, we believe the majority of them are without merit,” Philippa Brown, a spokeswoman for American Home, said yesterday in a phone interview.
American Home is facing similar allegations in other lawsuits.
The cases are Kay VanHauen v. American Home Mortgage Servicing Inc., 10-02146, U.S. District Court, Northern District of Texas (Dallas); State of Texas v. American Home Mortgage Servicing Inc., 2010-3307, District Court of El Paso County, Texas; State of Ohio v. American Home Mortgage Servicing Inc., 09-708888, Court of Common Pleas, Cuyahoga County, Ohio; Michael Landi v. American Home Mortgage Servicing Inc., 10-00921, U.S. District Court, District of Maryland (Baltimore); Kenneth Coplin v. American Home Mortgage Servicing Inc., 3:10-cv-01096, U.S. District Court, Southern District of California (San Diego).
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Bank of America Sued Over Loan-Modification Practices
Bank of America Corp., the largest U.S. bank by assets, was sued by a Florida borrower who accused the bank of violating the federal government’s home-loan modification program to boost its earnings.
The bank told customer-service representatives to mislead homeowners who ask about loan modifications, ignored completed modifications and failed to credit payments, Shari Goldman said Oct. 27 in a complaint filed in U.S. District Court in West Palm Beach, Florida.
Goldman, who cited unidentified former bank employees in the complaint as the source of her information, asked the court to grant her suit class-action, or group, status.
“Bank of America has serially strung out, delayed, and otherwise hindered the modification processes that it contractually undertook to facilitate when it accepted billions of dollars from the United States,” Goldman said in her complaint.
Bank of America, based in Charlotte, North Carolina, in July 2008 acquired Countrywide Financial Corp. for $2.5 billion to become the largest U.S. servicer of home loans. Countrywide’s name became synonymous with the boom in mortgage loans to borrowers with poor credit as its revenue quadrupled between 2001 and 2006.
Shirley Norton, a Bank of America spokeswoman, said she couldn’t comment on the complaint because the bank hadn’t seen it. The bank, she said, has completed more than 85,000 modifications under the government program, known as Home Affordable Modification Program, or HAMP. It also approved more than 614,000 “proprietary” modifications completed outside of the program, she said.
“Bank of America has left thousands of borrowers in a state of limbo -- often worse off than they were before they sought a modification from Bank of America,” Goldman said.
The case is Shari Goldman v. Bank of America NA, 10-81264, U.S. District Court, Southern District of Florida (West Palm Beach).
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Clarient, GE Sued by Investor Over $580 Million Buyout
Clarient Co., a provider of cancer diagnostic equipment and services, was sued by a shareholder seeking more money in a planned $580 million cash buyout by General Electric Co.
General Electric announced Oct. 22 that it would pay $5 for each common share and $20 for each preferred share of Aliso Viejo, California-based Clarient to expand into tailored diagnostic tests. The deal fails to maximize shareholder value, shareholder Bette R. Grayson Kurzweil said Oct. 27 in a complaint in Delaware Chancery Court in Wilmington.
“To the detriment of Clarient’s shareholders, the merger agreement’s terms substantially favor GE and are calculated to unreasonably dissuade potential suitors from making competing offers,” lawyers for Kurzweil, the trustee under the will of Bernard Rosenman, said in the complaint.
“We intend to defend against these litigation matters vigorously,” Matt Clawson, a Clarient spokesman, said in an e-mailed statement. “We are confident that Clarient and its board of directors complied with their fiduciary duties to the stockholders.”
Aleisia Gibson, a spokeswoman for Fairfield, Connecticut-based GE, declined to comment.
The complaint names both Clarient and General Electric as defendants. Kurzweil is seeking a court order barring the purchase and unspecified damages.
The case is Kurzweil v. Clarient Inc., CA5932, Delaware Chancery Court (Wilmington).
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Wells Fargo Emerges as Target, Role Model in Foreclosure Probe
Wells Fargo & Co. has become both a target of U.S. states investigating bank foreclosure practices and an example of how the mess might be cleaned up, as attorneys general from across the country begin to meet with lenders.
Ohio’s attorney general yesterday criticized the bank’s plan to submit supplemental affidavits to courts in about 55,000 foreclosure proceedings after it found some statements “did not strictly adhere to the required procedures.” At the same time, Arizona’s attorney general held up Wells Fargo’s Oct. 6 agreement on loan modification procedures as a model remedy for a 50-state foreclosure probe.
“These people think they can play by a different set of rules,” Ohio Attorney General Richard Cordray said in an interview yesterday on Bloomberg Television’s “InBusiness with Margaret Brennan.” “It’s not just individuals who signed flawed affidavits. It’s a business model designed on fraud.”
Attorneys general in all 50 states started a probe into foreclosure practices after court documents surfaced showing employees signed papers without ensuring their accuracy. Bank of America Corp., JPMorgan Chase & Co. and Ally Financial Inc. suspended some foreclosure sales or evictions, pending reviews. Wells Fargo said in a statement Oct. 27 that it doesn’t intend to stop foreclosure sales.
Teri Schrettenbrunner, a spokeswoman for San Francisco-based Wells Fargo, said in an e-mail yesterday that none of the paperwork problems have led to foreclosures that shouldn’t have otherwise occurred and the problems aren’t related to the quality of loan data.
“We have chosen to submit supplemental affidavits out of an abundance of caution,” she said. “We intend to be responsive to General Cordray’s inquiries and look forward to addressing his concerns.”
Any resolution of the investigation should address consumer complaints about loan modification, Arizona Attorney General Terry Goddard said in an interview Oct. 27. Homeowners seeking modifications have complained that they weren’t offered revised payments, wound up with the same or higher payments, or were foreclosed on during the process.
“What I’m most angry about is the simultaneous modifications and foreclosures,” he said. “We need to look for a stipulated judgment in all 50 states, that if someone is in modification, they can’t be foreclosed.”
Goddard, a member of the executive committee, said he has been pushing in meetings with the other attorneys general for revisions in loan-modification procedures, pointing to the agreement with Wells Fargo as a possible guide.
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Roomy Khan, Witness in Galleon Case, Settles With SEC
Roomy Khan, a cooperating witness and defendant in the government’s insider trading case against Galleon Group co-founder Raj Rajaratnam, settled a related civil lawsuit brought by the U.S. Securities and Exchange Commission.
Khan, a former Intel Corp. executive, will pay $1.9 million including interest to settle the case, according to an agreement filed Oct. 27 in federal court in Manhattan. Khan pleaded guilty in the criminal insider trading case and is cooperating with the government in a bid for leniency.
Rajaratnam is the central figure in two overlapping prosecutions in which 21 people have been charged, with 12 of them pleading guilty. He was arrested in October 2009, accused of earning millions of dollars from stock trades made with inside information from corporate officials and hedge fund executives.
Rajaratnam’s lawyers are seeking to show that U.S. agents lied or misled a federal judge and then illegally recorded Rajaratnam’s communications. The recordings are the centerpiece of the biggest insider-trading prosecution in history.
Prosecutors argue their best evidence comes from Khan, which they used to obtain her cooperation in the criminal case.
Khan’s lawyer, David Wikstrom, didn’t immediately return a call seeking comment after regular business hours yesterday. John Nester, an SEC spokesman, declined to comment.
The civil case is SEC v. Galleon, 09-cv-08811, U.S. District Court, Southern District of New York (Manhattan). The criminal case is U.S. v. Rajaratnam, 09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).
Tiger Asia Gets SEC Subpoena After Hong Kong Probe
Tiger Asia Management LLC, the New York-based hedge-fund firm led by Bill Hwang, received a subpoena from the U.S. Securities and Exchange Commission, following allegations of insider trading from Hong Kong’s securities regulator.
The SEC has requested trading records and other documents, Tiger Asia told investors in a letter dated Oct. 12. The firm said it assumes the subpoena was prompted by the probe in Hong Kong, according to the letter, a copy of which was obtained by Bloomberg News.
The Hong Kong Securities and Futures Commission in August of last year applied for a High Court injunction to freeze some Tiger Asia assets, saying the firm had engaged in insider dealing and market manipulation involving China Construction Bank Corp. shares. In April, the Hong Kong regulator sought to ban Tiger Asia from trading there, the first time it appealed to a court for such a prohibition.
Tiger Asia told clients it’s cooperating with the SEC. The firm denies any wrongdoing and continues to fight the injunction sought by the Hong Kong regulator, according to the letter. Its trading in Hong Kong isn’t affected, the firm wrote.
Shawn Pattison, a spokesman for the hedge fund, declined to comment, as did John Nester, a spokesman for the SEC in Washington.
Hong Kong-based SFC spokesman Jonathan Li declined to say whether the regulator’s investigation into Tiger Asia continues. Two legal actions by the SFC against the fund, for a freeze of their assets and to ban them from trading in Hong Kong, are ongoing, Li said. He declined to comment on the extent of the SFC’s cooperation with the U.S. regulator.
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BHP Wins Order Sealing Part of Revamped Potash Suit
BHP Billiton Ltd. won an interim court order sealing parts of a revised complaint Potash Corp. of Saskatchewan Inc. plans to file in an effort to block a $40 billion hostile takeover.
U.S. District Judge Charles Norgle in Chicago yesterday imposed a temporary blackout on seven paragraphs of the revised complaint, giving BHP until the close of business on Nov. 1 to explain why they should remain under seal. Potash Corp. has three days to respond. A preliminary injunction hearing is set for Nov. 4.
“What’s the harm?” Norgle asked Potash Corp. lawyer Lee Ann Russo during a hearing yesterday. Russo and Michele Odorizzi, a lawyer for BHP, earlier told the judge that BHP was dropping a demand to redact 48 paragraphs. The company sought to shield what it called in court papers “highly confidential and sensitive business information.”
Potash Corp., the world’s biggest fertilizer maker, sued Melbourne-based BHP on Sept. 22, accusing the world’s largest mining company of making misleading public statements to drive down Potash Corp.’s share value before the Aug. 17 bid.
BHP denied the allegations. Both sides have been engaged in the pre-trial exchange of evidence -- some of which is subject to seal -- in preparation for the hearing next week.
This week, Saskatoon-based Potash Corp., citing evidence gleaned during the disclosure process, asked U.S. District Judge David H. Coar for permission to file the revised complaint with confidential portions blacked out. Coar rejected the sealing request yesterday.
The case is Potash Corp. of Saskatchewan v. BHP Billiton, 10-06024, U.S. District Court, Northern District of Illinois (Chicago).
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Toyota Knew of Sudden Acceleration, Lawyers Claim
Toyota Motor Corp. technicians confirmed that vehicles were unexpectedly accelerating and the company bought back the vehicles, had customers sign confidentiality agreements and didn’t disclose the problems to regulators, plaintiffs’ lawyers said in court documents.
In testimony about acceleration defects before Congress, Toyota didn’t disclose that its own employees had replicated instances of sudden unexplained acceleration not caused by pedals or mats, according to documents filed yesterday in federal court in Santa Ana, California. The company also didn’t report the customer agreements to the National Highway Traffic Safety Administration, the plaintiffs’ lawyers said.
Toyota, the world’s largest carmaker, faces more than 300 lawsuits in state and federal court over alleged sudden acceleration of its vehicles.
Steven Curtis, a spokesman for Toyota’s U.S. sales arm in Torrance, California, said yesterday in an e-mail that no technicians for the company or field specialists confirmed unintended acceleration in vehicles. He said the plaintiffs’ lawyers are referring to service technicians employed by dealerships, which are independent businesses.
The case is In re Toyota Motor Corp. Unintended Acceleration Litigation, 10-MDL-2151, U.S. District Court, Central District of California (Santa Ana).
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Wells Fargo Foreclosure on Bankrupt Homeowner Halted
Tandala Mims was allowed to keep her two-family brick home in Bronx, New York, after Wells Fargo Bank NA’s bid for foreclosure was rejected by a bankruptcy judge who said the bank’s paperwork was “questionable.”
U.S. Bankruptcy Judge Martin Glenn in Manhattan ruled Oct. 27 that Wells Fargo can’t bypass the automatic shield against legal claims triggered by Mims’s filing for personal bankruptcy in July. Wells Fargo couldn’t document how it acquired the rights to Mims’s mortgage, which originated with another lender, the judge said.
Wells Fargo’s worksheet tracking defaults on the loan went back to April 1, and was “questionable given it only recently acquired interest” in the mortgage, Glenn said.
Wells Fargo, the biggest U.S. home lender, has proceeded with home seizures while rivals including Bank of America Corp. and JPMorgan Chase & Co. delay theirs amid a 50-state probe into whether banks and loan servicers used false documents and signatures to justify hundreds of thousands of foreclosures.
The San Francisco-based bank said yesterday it will file supplemental foreclosure affidavits to courts in about 55,000 proceedings after finding some lapses in its paperwork.
Teri Schrettenbrunner, a spokeswoman for Wells Fargo, had no immediate comment yesterday on Mims’s case.
The case is In re Tandala Mims, 10-14030, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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Richard Fuld to Get $10 Million From Lehman Insurers
Richard Fuld, Lehman Brothers Holdings Inc.’s former chief executive officer, will get $10 million from the defunct firm’s insurers to settle a lawsuit by the Booth Foundation Inc., according to a court filing.
Fuld, who was paid $34.4 million in 2007, was asked to leave Lehman at the end of 2008 after the biggest bankruptcy filing in U.S. history. The Booth Foundation accused Fuld of “failure to supervise claims arising out of alleged activities of certain Lehman brokers” who sold Lehman-issued notes to the foundation, Lehman said in an Oct. 27 filing in U.S. Bankruptcy Court in Manhattan.
The settlement payment, which needs a judge’s permission, would equal about 5 percent of Lehman’s total insurance policies from before its bankruptcy to cover directors and officers, Lehman said.
In June, Fuld asked a judge to dismiss a lawsuit accusing him and his colleagues of failing to disclose repurchase transactions known as Repo 105s, which hid billion of dollars in debt from Lehman investors, according to bankruptcy examiner Anton Valukas.
Lehman’s former CEO didn’t know what the Repo 105 transactions were, his lawyer, Patricia Hynes of Allen & Overy LP in New York, has said. She didn’t return a call seeking comment on the Booth settlement.
The Booth lawsuit is Booth Foundation Inc. v. Richard S. Fuld Jr., 10-2521, U.S. District Court, Southern District of New York (Manhattan).
The repo lawsuit is In re Lehman Brothers Equity/Debt Securities Litigation, 08-cv-05523, U.S. District Court, Southern District of New York (Manhattan).
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On the Docket
Eurostar Ruling Over Siemens Train Contract Due Today
London High Court Justice Geoffrey Vos, the judge hearing the case brought by French trainmaker Alstom SA against Eurostar Group Ltd. over plans to buy a new fleet of trains from Siemens AG., said yesterday that he planned to give his ruling at 2:30 p.m. today.
Vos said the result may be “price sensitive.” Alstom is suing Eurostar seeking an order halting the deal until a full trial can take place.
Eurostar lawyer Michael Bowser said at the hearing yesterday the company will postpone completing the agreement until after Vos’s judgment. The deal was to close on Oct. 26.
A hearing on the case, Alstom Transport v. Eurostar International Ltd., began on Oct. 25.
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