Barclays Plc deliberately designed structured notes that would have a much higher risk of default than their triple-A rating suggested, lawyers for a San Marino bank told a London judge yesterday.
Cassa di Risparmio della Repubblica di San Marino SpA, or CRSM, is suing Barclays in London for 92 million euros ($120.5 million), alleging fraudulent misrepresentation over the sale of collateralized debt obligations. Barclays denies the allegations.
The CDO had been rated AAA, CRSM lawyer George Leggatt told the court yesterday, suggesting that the risk of a default on the bonds and causing CRSM to lose money was “a fraction of 1 percent.” The real probability of default was “of a completely different order -- 25 percent or more,” he said.
While Barclays did nothing wrong by creating the product, selling it based on a credit rating it knew didn’t properly reflect the risk of the investment “crossed the line into misrepresentation and potentially deceit,” Leggatt said.
Barclays lawyer Andrew Baker said that neither the credit rating nor the 25 percent default risk mentioned by the San Marino bank reflected what Barclays thought “would actually happen to investors’ money.” Comparing the two “is to compare the incomparable.”
CRSM’s case is “without merit,” Barclays said in a separate e-mailed statement. “There is no factual basis for any of the claims and the fraud allegations against Barclays and its employees are strenuously denied,” the bank said.
The case is Cassa di Risparmio della Repubblica di San Marino SpA v. Barclays Bank Plc, Case No. 08-757, High Court of Justice, Queen’s Bench Division. The case is scheduled to last for the rest of the year.
SocGen Asks Court to Overturn $10.5 Million Severance Verdict
Societe Generale SA asked a U.K. appeals court to overturn a lower court’s decision that an 8 million-euro ($10.5 million) severance package it offered to a former banker was too low.
The bank didn’t “appropriately” word a November 2007 letter firing Raphael Geys, a former managing director of European fixed-income sales at Societe Generale, a court ruled in March. The Paris-based lender told appellate judges yesterday that Geys should have known his job was terminated when the letter was sent because he had received a severance payment.
“The employee does not need to know about the termination for it to be effective,” Ian Gatt, a lawyer for the French bank, told the U.K. Court of Appeal at a hearing. “Once Mr. Geys knew a payment-in-lieu-of-notice was made, he knew the contract was over.”
Geys won the judgment in March that under his contract’s terms he was owed more than the amount offered. Judge George Legatt said in his ruling the parties should negotiate a settlement on the amount. Geys argued he was entitled to more than 12.5 million euros under his contract.
The bank may have saved itself about 2.5 million euros had it worded the November 2007 letter firing Geys appropriately, Legatt said. The judge said the company didn’t properly end Geys’s contract until months later, meaning Societe Generale owed him a year-end bonus.
The case is Raphael Geys v. Societe Generale, claim no. HC08C02683, High Court of Justice, Chancery Division (London).
Railroad-Worker Injury Clash Draws U.S. Supreme Court Review
The U.S. Supreme Court agreed to consider tightening the standards for lawsuits by railroad-industry workers who blame their company for injuries they suffered on the job.
The justices yesterday said they will hear a CSX Corp. unit’s bid to overturn a $184,250 award to a locomotive engineer who says the company is responsible for a hand injury he suffered during a day at the helm of a train.
The case centers on the test for determining whether a railroad’s negligence was the cause of an employee’s injury. In the CSX case, the federal judge overseeing the case told the Benton, Illinois, jury that the railroad was responsible if its negligence “played a part - no matter how small - in bringing about the injury.”
CSX contends workers should have to meet the more demanding standard, known as proximate cause, that applies in other types of personal-injury suits.
In upholding the award, a federal appeals court in Chicago said the Federal Employers’ Liability Act, which governs railroad-industry suits, lets workers recover damages without meeting the proximate cause test.
McBride’s injury occurred at the end of a day he spent training to deliver rail cars from one location to another near Evansville, Indiana. He says the process was made more difficult because he had to use wide-body locomotives, which had a different type of brake than smaller engines.
At trial, McBride testified that near the end of the day he put his hand on the brake and felt intense pain. He says he later underwent two surgeries and physical therapy.
The case is CSX Transportation v. McBride, 10-235, U.S. Supreme Court (Washington).
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Dow, Sasol Sued by Greenpeace Over Espionage Claims
Dow Chemical Co. and Sasol North America Inc. were sued for espionage by a unit of Greenpeace International, the nonprofit environmental advocacy group, which alleges the chemical companies illegally searched its trash, hacked into its computers, and tapped its phones.
From 1998 to 2000, Dow, Sasol and two public relations firms conspired to infiltrate and steal confidential information in order to thwart Greenpeace Inc.’s environmental campaigns, according to a complaint filed yesterday in federal court in Washington. Greenpeace said the spying included breaking into locked trash bins outside its Washington headquarters and infiltrating meetings and electronic communications.
“These unacceptable and underhanded tactics interfered with valuable work we were undertaking to protect public health and expose environmental crimes,” Greenpeace USA Executive Director Phil Radford said in a statement.
Greenpeace, during the time the group claims the companies were spying upon it, was criticizing Dow for using chlorine in its manufacturing process. Greenpeace also was examining Dow’s sales of products containing genetically modified organisms, according to the complaint.
The case is Greenpeace Inc. v. The Dow Chemical Company, 10-cv-02037, U.S. District Court, District of Columbia (Washington).
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AXA Sues ING Over $1.5 Billion Mexican Insurance Company Sale
A unit of French insurer AXA sued an ING Group company over the $1.5 billion sale of a Mexican insurance company in 2008.
The suit, filed in New York state Supreme Court, claims AXA Mediterranean Holding SA discovered after the deal was completed in July 2008 that ING Insurance International BV had made false representations and warranties about the Mexican insurer’s financial statements and condition. AXA said it suffered “millions of dollars of out-of-pocket damages” as a result.
The case is AXA Mediterranean Holdings SA v. ING Insurance International BV, 652110/2010, New York State Supreme Court, New York County (Manhattan).
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Foxconn Singapore Sues Creative Technology for $500,576
Foxconn Technology Group’s Singapore unit sued Creative Technology Ltd. for failing to pay $500,576 for supplies and services that Foxconn, the world’s biggest contract manufacturer of electronics, said it provided.
Foxconn Singapore Pte said Creative, the maker of the Zen music player and Ziio tablet computer, repeatedly failed to make payment and didn’t give any “substantive” reason for its refusal, according to a Sept. 8 lawsuit filed with the Singapore High Court. A hearing is scheduled for Dec. 3.
Foxconn isn’t entitled to any payments because there are no contracts with either Foxconn or its flagship Hon Hai Precision Industry Co., Creative claimed in court papers.
Foxconn refused Creative’s request for a discount on the fees, according to court papers. Foxconn, controlled by Taiwan’s richest man, Terry Gou, in September cut its long-term growth target by 50 percent after raising wages and accelerating factory relocation plans in China.
Edmund Ding, a spokesman for Taipei-based Hon Hai, declined to immediately comment on the lawsuit. Creative spokeswoman Wynne Leong couldn’t be reached for comment.
The case is Foxconn Singapore Pte v Creative Technology Ltd. S614/2010 in the Singapore High Court.
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Broadcom Says It Assists With Insider-Trading Probe (Update2)
Broadcom Corp., the biggest maker of chips for television set-top boxes, said it is cooperating with a U.S. investigation into allegations that Don Ching Trang Chu provided inside information about the chipmaker to hedge funds.
Chu was arrested Nov. 24 on charges he arranged the sharing of information on publicly traded companies, including Broadcom, to clients of the consulting firm, Primary Global Research LLC, where he worked. Sources of the information included two unidentified Broadcom employees, according to the complaint.
“We have been in contact with the government and are cooperating fully,” Bill Blanning, a Broadcom spokesman, said in an e-mailed statement. “We can confirm that the employees referred to in the complaint are not executive officers.”
He declined to name either of the employees.
Chu communicated with Richard Choo-Beng Lee, a former partner at hedge fund Spherix Capital LLC, about his contacts at Broadcom, the government said in its complaint. One, a director- level employee in charge of greater China, had been with the chipmaker for 10 years and was in a position to see the company’s “numbers,” according to the complaint.
The case is U.S. v. Chu, 10-Mag-2625, U.S. District Court, Southern District of New York (Manhattan).
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Nigeria Frees Halliburton, Panalpina Officials on Bail
Nigeria freed on bail 23 officials from companies including Halliburton Co. and a former subsidiary of Panalpina Welttransport Holding AG after they were arrested last week in connection with a bribery scandal.
Those freed included 11 people from Panalpina, 10 from Halliburton and one each from Saipem SpA and Technip SA, Femi Babafemi, spokesman for the Economic and Financial Crimes Commission, said by phone yesterday from Abuja, the capital.
“They’ve all been granted administrative bail and will be required to report to our office tomorrow,” Babafemi said. Their travel documents have been withheld as investigations continue, he said.
The former officials at Panalpina, a Swiss freight forwarding company, were arrested last week over an alleged payment of $240 million in bribes to officials in Nigeria and other countries. The Halliburton, Saipem and Technip officials were arrested in connection with $180 million in bribes allegedly paid to win a $6 billion liquefied natural-gas contract.
Nigeria charged a former aide of President Olusegun Obasanjo with six counts of money-laundering on Oct. 13 in connection with the alleged payment of bribes by companies including former Halliburton unit KBR Inc.
KBR and Halliburton agreed to pay $579 million in February 2009 for bribery payments that stretched from 1994 to 2004. Technip took a charge of 245 million euros ($342 million) related to its stake in the Nigerian group, TSJK, and discussed “resolution of all potential claims” with the U.S. Justice Department and the Securities and Exchange Commission, the Paris-based company said on Feb. 12.
Panalpina, Royal Dutch Shell Plc and five oil services companies agreed to pay $236.5 million to resolve a U.S. probe of overseas bribery, the Justice Department said on Nov. 4. The bribes were paid to expedite the import of goods and equipment, avoid customs duties on imported goods, extend drilling contracts and lower tax assessments, according to the Securities and Exchange Commission.
Vietnam Arrests Company Chairman in Securities-Fraud Case
Vietnam arrested a pharmaceutical company executive in connection with securities fraud, the first such case since the country’s stock exchange opened a decade ago.
Criminal proceedings against Le Van Dung, chairman of Vien Dong Pharma Joint-Stock Co., for “stock-price manipulation” commenced on Nov. 24, the company said in a statement dated Nov. 26 that was posted yesterday on the Ho Chi Minh City Stock Exchange website. Dung was arrested on Nov. 26, the company said in a Nov. 27 statement on its website.
“It’s the first time fraud in securities trading has led to the arrest of a company official and caused the police to file a criminal case,” Nguyen Son, the head of market development at the State Securities Commission, said in a phone interview.
Dung was suspended as chairman and general director of Vien Dong on Nov. 25, according to the company’s statement, which didn’t give details on the nature of the alleged stock-price manipulation. Tran Thanh Hoa has been appointed as chairwoman to replace Dung, while Dao Xuan Huong has been appointed as general director, the statement said.
Vi Le Hang, Vien Dong’s deputy general director in charge of communications, wasn’t in her office when called for comment.
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Alberto-Culver Agrees to Settle Lawsuit Over Unilever
Alberto-Culver Co., the maker of VO5 and Tresemme hair-care products, agreed to settle shareholder lawsuits that claimed Unilever’s planned $3.7 billion takeover isn’t favorable to investors.
The settlement covers four shareholder complaints filed in Delaware Chancery Court. As part of the deal, the company agreed to alter features of its agreement with Unilever including lowering any termination fee by $25 million. The company also agreed to share the same confidential information provided to Unilever to any other potential bidder, according to papers filed yesterday in the Wilmington courthouse.
“This settlement removes the barriers to any potential acquirer who wants to put forth a superior bid,” Stuart Grant, an attorney for the shareholders, said yesterday in an e-mailed statement.
Unilever, the maker of Dove soap, announced in September that it would pay $37.50 a share in cash for Melrose Park, Illinois-based Alberto-Culver. The deal is Unilever’s largest in a decade. Unilever’s Chief Executive Officer Paul Polman is expanding in home and personal-care products as part of a plan to double total sales.
Dan Stone, a spokesman for Alberto-Culver, didn’t immediately return a phone message seeking comment on the settlement.
Lawyers for Alberto-Culver said in court papers that the company agreed to the settlement to “avoid the costs, disruption and distraction of further litigation.” The company denies any wrongdoing.
The case is Laborers Local 235 Benefits Fund v. Lavin, CA5873, Delaware Chancery Court (Wilmington).
EBay Wins Round Against Tiffany as High Court Rejects Appeal
The U.S. Supreme Court refused to revive Tiffany & Co.’s bid to hold EBay Inc. accountable for sales of counterfeit goods on its auction website.
The justices yesterday left intact a ruling that said New York-based Tiffany couldn’t use federal trademark law to sue EBay, the most-visited U.S. e-commerce site.
Tiffany, the world’s second-largest luxury jewelry retailer, argued unsuccessfully that EBay knew enough about the widespread sale of knockoffs to warrant being held liable for contributing to trademark infringement. EBay, based in San Jose, California, countered that it had taken extensive anti-fraud measures, spending $20 million a year on “safe trading” programs.
In September, a federal trial judge in New York tossed out a false advertising claim Tiffany was pressing as part of the same suit.
The case is Tiffany v. EBay, 10-300.
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