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Madoff, Dell, CA, Transocean, Goldman in Court News

Irving Picard, the trustee liquidating Bernard L. Madoff’s failed investment firm, will collect $7.2 billion from the estate of philanthropist Jeffry Picower, bringing to $9.8 billion the amount collected for victims.

Investors in Madoff’s Ponzi scheme, the largest in U.S. history, claimed losses of principal totaling $20 billion and paper losses -- including fake profits -- of about $65 billion. Picard has filed lawsuits during the past two years seeking the “clawback” of more than $50 billion.

Picower’s estate will pay $5 billion to Picard and $2.2 billion to U.S. authorities to resolve claims that he profited from the fraud, according to separate statements Dec. 17 from Picard and the office of Manhattan U.S. Attorney Preet Bharara. The settlement, for the amount Picard sought, would be the biggest so far. He had already recovered $2.5 billion.

Picower, 67, a billionaire, had a heart attack and drowned in his swimming pool in Palm Beach, Florida, in October 2009.

Picower, his family and related entities, beginning in the 1970s, deposited $619.4 million with Madoff and took out $7.8 billion, according to a forfeiture complaint filed Dec. 17 by Bharara as part of the settlement.

William Zabel, an attorney for Picower’s widow, Barbara, didn’t return calls seeking comment.

The case is Picard v. Picower, 09-1197, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

For more, click here.

Ex-Dell Worker Says He Leaked to Guidepoint Clients

Former Dell Inc. Global Supply Manager Daniel DeVore told a judge last week that he leaked inside information to clients of Guidepoint Global LLC, a consulting and research firm.

DeVore made the comment as part of his Dec. 10 guilty plea in Manhattan federal court in which he admitted leaking tips to clients of Primary Global Research, another research firm.

“I also provided material non-public information to clients of Guidepoint and Vista,” he told U.S. District Judge Jed Rakoff, according to the transcript of his plea.

Guidepoint, a so-called expert-networking firm, acquired Vista Research Inc. from Standard & Poor’s on May 21, 2009, according to a statement on Guidepoint’s website. Calls for comment to a spokesman for New York-based Guidepoint weren’t immediately returned.

On Dec. 16, federal prosecutors arrested a Primary Global sales manager, James Fleishman, and three employees of technology companies who also worked as consultants for Mountain View, California-based PGR in a widening crackdown on insider trading. Prosecutors also announced DeVore’s guilty plea, a transcript of which was made public Dec. 16.

The case is U.S. v. Shimoon, 10-mj-2823, U.S. District Court, Southern District of New York (Manhattan).

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Ex-Jefferies Money Manager Gets Six-Year Term

Joseph Contorinis, the former Jefferies Paragon Fund money manager convicted in an insider-trading scheme that prosecutors said netted more than $7 million in illegal profits, was sentenced to six years in prison.

“This is a crime that does damage to the national economy,” U.S. District Judge Richard Sullivan in New York said Dec. 17 as he sentenced Contorinis. “It’s very important to send a message through the sentence imposed on you.” He also ordered Contorinis to forfeit as much as $13 million.

Contorinis was convicted by a federal jury in Manhattan in October of securities fraud and conspiracy. Jurors found that he illegally traded on inside merger tips supplied by Nicos Stephanou, an investment banker who was the government’s chief witness in the trial.

Stephanou, who was an associate director of mergers and acquisitions at Zurich-based UBS AG, passed along tips to Contorinis from 2004 to 2006, according to testimony at the trial. He was on the UBS team advising Cerberus Capital Management LP, part of the group trying to buy Albertsons Inc. in 2006.

Stephanou pleaded guilty in the case and testified against Contorinis in exchange for leniency. He testified that he told Contorinis and other friends about pending deals, including the acquisition of Albertsons, which was then the second-biggest U.S. grocer.

The case is U.S. v. Contorinis, 09-cr-01083, U.S. District Court, Southern District of New York (Manhattan).

Australia Court Sets Aside James Hardie Director Fines

An Australian appeals court set aside fines and suspensions levied on James Hardie Industries NV former non-executive directors over a misleading statement the company issued regarding compensation for asbestos victims.

The Australian Securities & Investments Commission failed to prove that the directors passed a resolution in 2001 approving the release of a statement to the Australian Stock Exchange, or ASX, claiming the company’s asbestos compensation fund was sufficient to pay all future claims, the New South Wales Supreme Court of Appeal said Dec. 17.

“We are not satisfied that the non-executive director appellants voted in favor of the draft ASX announcement resolution,” Chief Justice James Spigelman wrote on behalf of the appeals panel. “We do not think ASIC discharged its burden of proof.”

ASIC is reviewing the judgment and will decide later whether to ask the High Court to consider an appeal, the commission said in a statement.

The commission should have called Allens Arthur Robinson lawyer David Robb, who had advised the James Hardie board, to support its case that the directors approved the statement, the appeals court said.

“The failure to call Mr. Robb in our view significantly undermines the cogency of ASIC’s case,” Spigelman said.

James Hardie said in a statement to the Australian Stock Exchange that it’s reviewing the judgment and doesn’t plan to comment further.

The case is Australian Securities Investment Commission v. James Hardie Industries NV. 2009/00298426. New South Wales Supreme Court of Appeal (Sydney).

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Nigeria Withdraws Charges Against Cheney, Halliburton

Nigeria withdrew corruption charges against former U.S. Vice President Dick Cheney and companies including Halliburton Co. after the company agreed to pay a fine and repatriate funds, a spokesman for the Economic and Financial Crimes Commission said.

“The charges against Dick Cheney and all the others were dropped today,” Femi Babafemi said in a telephone interview in Abuja, the capital on Dec. 17.

Halliburton, where Cheney was chief executive officer until 2000, offered to pay $120 million in fines and repatriate an additional $130 million to Nigeria, he said. A person who answered a call to Halliburton’s Houston office said no one was available to comment.

Nigerian prosecutors filed charges on Dec. 8 for alleged bribery against Cheney; Albert “Jack” Stanley, ex-chairman of KBR Inc., a former unit of Halliburton; current CEO William Utt and Halliburton CEO David Lesar, according to court documents. Companies charged include Technip SA of France, Snamprogetti SpA, a unit of Eni SpA, KBR and JGC Corp. of Japan.

Nigeria, Africa’s biggest crude-oil producer, alleges that the companies, which were part of group known as TSKJ, paid $180 million in bribes to Nigerian officials between 1994 and 2004 to win a $6 billion liquefied natural gas plant contract.

Di Giovanni Gianni, a spokesman for Eni, said by e-mail Dec. 17 that the company has no comment. Gabriela Segura, a KBR spokeswoman, and a spokesman for Technip didn’t respond to e-mails seeking comment.

KBR agreed in February 2009 to pay a $402 million fine in the U.S. after admitting it bribed Nigerian officials. Halliburton paid $177 million to settle allegations by the U.S. Securities and Exchange Commission without admitting wrongdoing.

Eni, Technip and JGC are in talks with Nigerian prosecutors to settle the corruption charges, the country’s anti-graft agency said on Dec. 7.

The case is Federal Republic of Nigeria v. Halliburton and others, CV/435/10, High Court of Justice, Abuja Judicial Division (Abuja).

For the latest verdict and settlement news, click here.

New Suits

Bank of America Sued by States Over Loan Modifications

Bank of America Corp. was sued by Arizona and Nevada over home-loan modification programs intended to keep homeowners who borrowed from its Countrywide mortgage unit out of foreclosure.

Instead of working to modify loans on a timely basis, Bank of America proceeded with foreclosures while borrowers’ requests for modifications were pending, a violation of a 2009 agreement with Arizona to help borrowers facing the loss of their homes, Terry Goddard, the state’s attorney general, said Dec. 17 in a statement.

“We are disappointed that the suit was filed at this time,” Dan Frahm, a Bank of America spokesman, said in an e-mail, referring to the Arizona suit. “We and other major servicers are currently engaged in multistate discussions led by Attorney General Miller in Iowa to try to address foreclosure related issues more comprehensively.”

All 50 U.S. states are investigating whether banks and loan servicers used false documents and signatures to justify hundreds of thousands of foreclosures. The probe, announced Oct. 13, came after JPMorgan Chase & Co. and Ally Financial Inc.’s GMAC mortgage unit said they would stop repossessions in 23 states where courts supervise home seizures, and Bank of America, the largest U.S. lender, froze foreclosures nationwide.

The bank is accused in the Arizona and Nevada lawsuits filed Dec. 17 of misleading consumers about requirements for the modification program and how long it would take for requests to be decided. The bank provided inaccurate and deceptive reasons for denying modification requests, according to the suits.

The Arizona case is Arizona v. Bank of America, CV2010-33580, Maricopa County Superior Court (Phoenix). The Nevada case is Nevada v. Bank of America, Eighth Judicial District Court, Clark County (Las Vegas).

For more, click here.

CA Should Pay Fees in Lawsuit, Ex-CEO Wang Says

CA Inc.’s former Chief Executive officer Charles B. Wang sued the company he founded for about $1 million in legal fees paid to experts in a case where the software maker seeks to recover $1 billion Wang allegedly stole.

CA, formerly known as Computer Associates Inc., is required under its bylaws to pay fees for former employees involved in litigation connected to their work, lawyers for Wang said in the complaint filed Dec. 16 in Delaware Chancery Court.

Wang claims the company owes him more than $700,000 for retaining experts in a consolidated lawsuit filed on behalf of the company in federal court in New York. The New York suit, filed in 2005, accuses former and current CA officers and directors of accounting fraud. In September, CA, after conducting an internal investigation, successfully petitioned the judge to allow the company to realign itself as a plaintiff in the case and seek damages against Wang.

“In direct contravention of its obligations under its bylaws -- and despite its unyielding efforts to prosecute claims against Mr. Wang seeking recovery in excess of $1 billion -- CA has to this date refused to pay these expert fees,” lawyers for Wang said in the Delaware complaint.

Sanjay Kumar, who succeeded Wang as CEO in 2000, was convicted in 2006 of leading a $2.2 billion fraud at the company. Kumar, who is serving a 12-year prison sentence, blamed the fraud on Wang. Kumar claimed Wang directed a practice of inflating revenue, known as the “35-day month” in which the company backdated quarterly sales contracts.

Wang was never charged with wrongdoing by federal prosecutors who investigated the fraud.

CA spokeswoman Jennifer Hallahan didn’t return a phone call seeking comment on Wang’s lawsuit.

The case is Charles B. Wang v. CA Inc., CA6078, Delaware Chancery Court (Wilmington).

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


Flextronics’ Shimoon Loses Bid for Bail in U.S. Trading Probe

Walter Shimoon, the ex-manager at Flextronics International Ltd. arrested Dec. 16 in an insider-trading probe, is scheduled to make a formal request for bail on Dec. 20 after a federal prosecutor said there is a danger he will flee if freed.

Shimoon, whose former employer supplies cameras and battery chargers for Apple Inc. devices, made his first court appearance Dec. 17 in the San Diego federal courthouse and his lawyer sought to post a bond allowing his release. Assistant U.S. Attorney Marietta Geckos objected, saying there’s a “serious risk of flight.”

“This was a massive fraud involving more than $10 million” that “caused incredible damage to Apple,” Geckos told U.S. Magistrate Judge Bernard G. Skomal.

Shimoon, 39, was one of three technology firm employees arrested Dec. 16 on charges of wire fraud and conspiracy for allegedly giving inside information about their companies to clients of Primary Global Research LLC, a consulting company that provides experts to investors. A fourth person arrested, James Fleishman, was an account representative at Mountain View, California-based Primary Global.

According to the criminal complaint unsealed Dec. 17, U.S. investigators made consensual and wiretap recordings of an unidentified expert-networking firm’s phones, the land lines of an unidentified hedge fund and the mobile phones of two of the defendants, Shimoon and Mark Anthony Longoria, of Advanced Micro Devices Inc.

Shimoon, Longoria and Manosha Karunatilaka, who was employed at chipmaker Taiwan Semiconductor Manufacturing Co., were charged with wire fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud, prosecutors said.

Shimoon didn’t enter a plea Dec. 17. Fleishman appeared in federal court in San Jose, California, Dec. 16 and was released on $700,000 bail. Longoria was granted $50,000 bail and freed by a federal magistrate in Austin, Texas. Karunatilaka got bail of $300,000 in Boston federal court, his lawyer, Brad Bailey, said.

Shimoon has been fired, Singapore-based Flextronics said.

“Flextronics has a practice of fully cooperating with regulatory inquiries and has clear policies prohibiting the release of confidential information about the company and its business partners,” Renee Brotherton, a spokeswoman for the company, said Dec. 17 in a statement.

The case is U.S. v. Shimoon, 10-02823, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

U.S. Judge Orders Transocean to Turn Over Records

Transocean Ltd.., the owner of the Deepwater Horizon oil rig that exploded and sank in the Gulf of Mexico in April, must turn over safety records to the U.S. government, a federal judge ruled Dec. 17.

U.S. District Judge Carl Barbier in New Orleans directed the Vernier, Switzerland-based firm to turn over records pertaining to any other rigs or vessels it had in the gulf on the accident date.

Transocean lawyer Richard Hymel had opposed the request, calling it “a fishing expedition” for records that were “irrelevant” to the incident. The company has already produced safety records for the Deepwater Horizon, the attorney said.

“Don’t they have pretty broad authority?” Barbier replied, referring to the joint U.S. Coast Guard - Bureau of Ocean Energy Management, Regulation and Enforcement panel request. The U.S. sued to obtain the records on Nov. 23.

“Information contained in the requested documents will help the joint board of investigation identify gaps in existing laws” as well as tighten international standards “to prevent the occurrence of similar casualties in the future,” U.S. Attorney Jim Letten of New Orleans said when the suit was filed.

The U.S. wants to learn if problems leading to the Deepwater Horizon explosion are isolated or systemic, Justice Department attorney Sharon D. Smith told the judge Dec. 17.

The case is U.S. vs. Transocean Holdings LLC, 2:10-cv-04397, U.S. District Court, Eastern District of Louisiana (New Orleans).

For more, click here.

Michigan Blue Cross Seeks Antitrust Suit Dismissal

Blue Cross Blue Shield of Michigan asked a federal court to throw out an antitrust suit brought by the U.S. and the state of Michigan that accused it of driving up competitors’ costs.

The health-care insurer, in papers filed with U.S. District Judge Denise Page Hood in Detroit Dec. 17, argued that the federal and state governments hadn’t shown its practices cause harm. It also said the court should refrain from hearing the case because of its “disruptive effect on state policy.”

“This case attacks Blue Cross’s efforts to ensure that it is obtaining the best possible prices from hospitals -- prices at least as good as, and hopefully better than, others,” it said in the filing, adding that nothing in antitrust law bars its practices.

Blue Cross Blue Shield Michigan is the largest insurer in the state, with about 4 million customers. About 90 percent of the company’s business is with large group plans, insuring companies directly or providing administrative services, according to the company.

The Justice Department’s Oct. 18 complaint said the nonprofit insurer negotiated contracts with 70 of the state’s 131 general acute-care hospitals that led to higher prices for its competitors.

The case is U.S. v. Blue Cross Blue Shield of Michigan, 10cv14155, U.S. District Court, Eastern District of Michigan (Detroit).

For the latest lawsuits news, click here.


Lehman Disputes JPMorgan’s Defense Against Claim for Billions

Lehman Brothers Holdings Inc., which seeks billions of dollars from JPMorgan Chase & Co., said the bank and Chairman James Dimon helped cause its collapse and can’t hide behind laws that protect lenders.

JPMorgan forced Lehman to give guarantees that stripped the firm of working capital in the 2008 financial crisis, Lehman said Dec. 15 while asking a U.S. bankruptcy judge to let its lawsuit proceed. JPMorgan should return $8.6 billion in cash and pay tens of billions more in damages, Lehman said.

JPMorgan’s defense hinges on so-called safe harbor laws, which allow clearing banks to take collateral from securities dealers without getting sued if they fail. Lehman says the laws protected New York-based JPMorgan only when it cleared trades for Lehman’s failing brokerage. JPMorgan wasn’t a clearing bank for the parent company, so the guarantees can be reversed, Lehman said.

The U.S. Bankruptcy Code doesn’t shelter “guarantees entered into for less than reasonably equivalent value when the debtor was insolvent or undercapitalized,” Lehman said in its filing in Manhattan. Under the code, debtors can undo some asset transfers completed shortly before a bankruptcy filing.

The bank says the guarantees can’t be reversed. Safe-harbor laws “present an insurmountable legal obstacle to Lehman’s lawsuit,” JPMorgan told U.S. Bankruptcy Judge James M. Peck in court papers while twice asking him to dismiss the suit.

The adversary case is Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank NA, 10-03266, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

For more, click here.

For the latest trial and appeals news, click here.

Court Filings

Former Goldman Programmer’s Criminal Docket Most Read

Former Goldman Sachs Group Inc. computer programmer Sergey Aleynikov’s criminal docket was the most-read litigation docket on the Bloomberg Law system last week.

Aleynikov was found guilty of two counts of stealing the firm’s trade secrets by appropriating part of a high-frequency computer source code on Dec. 10.

Aleynikov went on trial Nov. 29 in federal court in New York on charges of violating the Economic Espionage Act and the Interstate Transportation of Stolen Property Act. He faces as long as 10 years in prison on the espionage charge and five years for the interstate transportation charge at sentencing on March 18.

The case is U.S. v. Aleynikov, 1:10-cr-00096, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

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