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Rajaratnam, BofA, Credit Suisse, AstraZeneca in Court News

Ex-McKinsey & Co. director Anil Kumar told a jury that Galleon Group LLC co-founder Raj Rajaratnam secretly hired him as a consultant in 2003 for $500,000 to be paid into a Swiss bank account, in violation of McKinsey rules.

Kumar, testifying yesterday at Rajaratnam’s insider-trading trial in New York, said the hedge-fund billionaire pulled him aside after a 2003 charity event and offered to pay Kumar to contact him every four to six weeks.

Kumar declined at first, saying McKinsey didn’t permit outside consulting work.

“If you could get someone on the outside to accept it, then McKinsey doesn’t have to know about it,” Rajaratnam replied, according to Kumar.

Kumar said he found a friend in Europe, whom he didn’t identify, who agreed to sign a consulting agreement with Galleon for $500,000 a year. That entity, called Pecos Trading Co., had a bank account in Switzerland, he said.

Rajaratnam, 53, is the central figure in the largest crackdown on hedge-fund insider trading in U.S. history. The Sri Lankan-born money manager is accused of making $45 million from confidential information leaked by corporate insiders and hedge fund traders. His trial started March 8.

Kumar pleaded guilty to leaking tips to Rajaratnam about Advanced Micro Devices Inc. deals, including its acquisition of ATI Technologies Inc. in 2006. He also admitted telling Rajaratnam about a deal in which AMD was getting an investment from Mubadala Development Co., an Abu Dhabi government investor.

Prosecutors yesterday introduced the first three wiretap recordings of Rajaratnam, in which the hedge fund co-founder could be heard giggling, asking about the stock market and questioning a friend about a public company.

The recordings were just “snippets” of Rajaratnam talking with two friends and two Galleon traders, said defense attorney Terence Lyman.

The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).

For more, click here and here.

Roche Drug Caused ‘Tragedy’ for Actor, Brian Dennehy Says

Roche Holding AG’s Accutane acne drug, blamed for destroying James Marshall’s colon, created a “tragedy” by cutting short the entertainer’s career, actor Brian Dennehy said.

Dennehy, who testified yesterday in the New Jersey trial of Marshall’s lawsuit against Roche, said the 44-year-old actor and musician was headed toward stardom before inflammatory bowel disease linked to the drug sidelined his career. Marshall played U.S. Marine Louden Downey in the 1992 movie “A Few Good Men.”

“This is an unbelievable tragedy,” Dennehy said in an interview outside the Atlantic City, New Jersey, courthouse. “It amazes me that something like this could have happened and could have had such a long-range effect on a career that should have topped.”

About 16 million people have taken Accutane, once Roche’s second-biggest-selling drug, since it went on the market in 1982, according to plaintiffs’ lawyers. Basel, Switzerland-based Roche, the world’s biggest maker of cancer drugs, pulled its brand-name version of Accutane off the market in 2009 after juries awarded millions of dollars in damages to former users over bowel-disease claims. Roche, which has lost all seven cases that have gone to trial, contends it didn’t pull the drug for safety reasons.

Marshall, a New Jersey native who now lives in Thousand Oaks, California, is seeking at least $11 million in damages for his Accutane-related injuries, including emergency surgery to remove his colon. Jurors are hearing claims by Marshall and two other ex-Accutane users that the drug destroyed their intestinal systems.

The latest New Jersey case is Greenblatt v. Hoffmann-LaRoche Inc., ATL-l-1246-06, New Jersey Superior Court, Atlantic County (Atlantic City).

For more, click here.

U.S. Appeals for Delay in 30-Day Order on Drill Permits

U.S. offshore regulators asked a New Orleans appellate court to postpone a judge’s March 19 deadline for them to act on certain Gulf of Mexico drilling permits delayed by the Obama Administration’s drilling ban.

The Interior Department had asked U.S. District Judge Martin Feldman, also of New Orleans, to delay his own order so that the U.S. Court of Appeals would have time to review it. When Feldman didn’t respond to that request, the U.S. turned to the appellate court.

“The 30-day deadline is a clear abuse of discretion,” lawyers for the agency said in their filing yesterday at the New Orleans appeals court. Meeting Feldman’s deadline would require the agency to act “nearly as quickly as it did prior to the Deepwater Horizon disaster, even though the enormously negative consequences of inadequate containment planning in that incident unquestionably altered the landscape for consideration of such applications,” they said.

U.S. offshore regulators said they may deny the seven Gulf of Mexico drilling permits Feldman singled out for quick action if they are forced to act by the judge’s deadlines. Feldman ordered government action by March 19 on five permits and by March 31 on two additional permits.

The Obama Administration suspended all drilling in waters deeper than 500 feet in May in response to the worst offshore oil spill in U.S. history. More than 4.1 million barrels of crude leaked into the Gulf after the Deepwater Horizon exploded and sank while drilling a subsea well for BP Plc off the Louisiana coast in April.

After offshore companies and regional business and political leaders sued in June, Feldman threw out the government’s moratorium as overly broad and punitive to the Gulf Coast economy.

The case is Ensco Offshore Co. v. Salazar, 2:10-cv-01941, U.S. District Court, Eastern District of Louisiana (New Orleans).

For more, click here.

For the latest trial and appeals news, click here.

New Suits

BofA-Led Lender Group Bilked of $130 Million, U.S. Says

The U.S. accused a California couple of defrauding an eight-bank lending group led by Bank of America Corp. of about $130 million by exaggerating the financial status of their decorating business.

Thomas Chia Fu, 61, and his wife, Cheri L. Shyu, 48, were arrested at their Newport Coast home by federal authorities, according to an e-mailed statement yesterday by U.S. Attorney Andre Birotte Jr. in Los Angeles. They were indicted on nine counts of bank fraud and face as long as 30 years in prison if convicted, prosecutors said in the statement.

The couple imported home-decorating items from China and obtained a $130 million revolving line of credit from the banks, according to the indictment. They borrowed against the credit line by exaggerating the in-transit inventory and accounts receivable for their company, Anaheim, California-based Galleria USA Inc., according to the filing.

“Had Bank of America and other banks known the true facts, they would not have continued the revolving line of credit and loaned additional funds,” according to the filing.

Dave Wiechert, a lawyer for Shyu, and Steve Katzman, a lawyer for Fu, didn’t immediately return calls seeking comment.

The case is U.S. v. Fu, U.S. District Court, Central District of California.

Drydocks World Sued in Singapore for Failing to Pay Suppliers

Two Singapore units of Drydocks World LLC, the ship repair unit of state-owned Dubai World, which is attempting to restructure $24.9 billion of debt, were sued in Singapore’s High Court for not paying suppliers.

Drydocks World Singapore Pte and Labroy Shipbuilding & Engineering Pte, failed to pay S$6 million ($4.7 million) for goods sold and delivered between May and December, according to four complaints filed with the Singapore High Court. The cases had their first closed hearing March 9.

Drydocks refused repeated requests to pay Beng Hui Marine Electrical Pte, Hoe Seng Huat Pte and Z-Power Automation Pte, according to the lawsuits of the Singapore-based suppliers.

The Dubai state-owned company hasn’t filed a defense to the lawsuits. Drydocks’s lawyer Arthur Yap of Tan Kok Quan Partnership declined to comment. Sumaya Tahlak, a Dubai-based Drydocks spokeswoman, didn’t return four calls to her mobile phone and didn’t respond to an e-mail seeking comment.

The cases are Beng Hui Marine Electrical Pte v Labroy Shipbuilding & Engineering Pte S18/2011, Beng Hui Marine Electrical Pte v Drydocks World-Singapore Pte S19/2011, Hoe Seng Huat Pte v Drydocks World-Singapore Pte S20/2011 and Z-Power Automation Pte v Labroy Shipbuilding & Engineering Pte S21/2011 in the Singapore High Court.

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


Blavatnik Seeks to Dismiss Accusations in Lyondell Case

Billionaire Len Blavatnik is seeking to dismiss half of the accusations made in a lawsuit claiming that he and board members benefited from the $22 billion merger of Lyondell Chemical Co. and Basell AF SCA that drove it into bankruptcy.

U.S. Bankruptcy Judge Robert Gerber in Manhattan held a hearing yesterday on whether the claims should be dismissed. Allegations of fraud against creditors and claims that require judges to interpret foreign law are among those being challenged, according to court filings.

Creditors claim the buyout enriched advisers by about $1 billion and profited management, including Blavatnik, while leaving Lyondell with too much debt. Assets transferred in the merger left Lyondell insolvent and thus defrauded creditors, according to the complaint. The company’s 2009 bankruptcy was a “direct consequence of the merger,” creditors alleged.

Summonses filed in Manhattan in August listed Blavatnik, chairman of Access Industries, and 41 other people and companies that allegedly played a role in Lyondell’s takeover by Luxembourg-based Basell.

The bankruptcy case is In re Lyondell Chemical Co., 09-10023, and the adversary case is Official Committee of Unsecured Creditors v. Citibank NA, 09-01375, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

For more, click here.

For the latest lawsuits news, click here.


Credit Suisse to Pay $70 Million to Settle Subprime Suit

Credit Suisse Group AG, Switzerland’s second-biggest bank, agreed to pay $70 million to settle a lawsuit by investors claiming the bank misstated its subprime asset losses.

The settlement, filed in federal court in Manhattan yesterday, must be approved by a judge before it can take effect.

In July, U.S. District Judge Victor Marrero in Manhattan threw out claims by the Louisiana Municipal Employees Retirement System against Zurich-based Credit Suisse, ruling they were barred by the Supreme Court’s decision in Morrison v. National Australia Bank. In that case, the high court held that U.S. securities laws don’t apply to claims of foreign buyers of non-U.S. stocks on foreign exchanges.

The settlement filed yesterday would resolve claims against Credit Suisse by all purchasers of its American Depositary shares on the New York Stock Exchange and U.S. residents who bought the bank’s stock on the Swiss Stock Exchange from Feb. 15, 2007, to April 14, 2008.

The case is Cornwell v. Credit Suisse Group, 08-cv-3758, U.S. District Court, Southern District of New York (Manhattan).

AstraZeneca to Pay $68.5 Million to States Over Seroquel

AstraZeneca Plc agreed to pay $68.5 million to 37 U.S. states and the District of Columbia to resolve allegations that the company deceptively marketed its anti-psychotic drug Seroquel.

The settlement is separate from a $520 million agreement London-based AstraZeneca reached with the U.S. last year over the marketing of Seroquel, said Tony Jewell, a company spokesman. AstraZeneca doesn’t admit wrongdoing and the settlement doesn’t resolve lawsuits brought by about seven states, including South Carolina and Mississippi, Jewell said in an interview yesterday.

“While we deny the allegations, AstraZeneca believes it is important to bring these matters to a close and move forward with our business of providing medicines to patients,” Jewell said. The company intends to “vigorously defend ourselves” in the remaining lawsuits, he said.

The U.S. and states claimed that AstraZeneca marketed Seroquel for uses that weren’t approved by the U.S. Food and Drug Administration. AstraZeneca promoted Seroquel, approved for schizophrenia and bipolar disorder, for dementia, depression and anxiety in violation of federal drug rules, according to the states.

While doctors can prescribe medicines for other diagnoses, companies aren’t allowed to market drugs beyond approved uses.

The office of New Jersey Attorney General Paula Dow announced the settlement. In addition to paying the $68.5 million, AstraZeneca officials agreed to ban financial incentives tied to off-label marketing, instruct salespeople not to market Seroquel to doctors who are unlikely to prescribe it for an approved use, and post payments to doctors on a website, according to the statement.

The New Jersey lawsuit is Dow v. AstraZeneca, MER-C-24-11, Superior Court, Mercer County, New Jersey.

For more, click here.

Macau Casino Magnate Stanley Ho Says Family Dispute Resolved

Billionaire Stanley Ho’s dispute with some family members over ownership of their gambling business has been fully resolved and he has withdrawn his lawsuit, according to an e-mailed statement from his office.

A settlement agreement was executed on March 8 among all branches of Ho’s family on the basis of “mutual understanding and mutual accommodation,” according to the e-mail received March 9 and confirmed by Ho’s secretary, Janet Wong.

“We have agreed that we shall work together and continue to develop the gambling business in Macau founded by Dr. Ho and operated by the Ho family to enable it to flourish,” Ho and his family wrote in the statement.

The 89-year-old Ho, who built his casino business with a four-decade monopoly in Macau, was embroiled in a family feud over a stake that is worth at least HK$11.7 billion ($1.5 billion). A writ filed Feb. 16 in Hong Kong’s High Court by law firm Oldham, Li & Nie accused Ho’s daughters Pansy Ho and Daisy Ho of seizing his holding in Sociedade de Turismo e Diversoes de Macau SA, or STDM. Ho said March 9 he had withdrawn the writ.

The Ho family members agreed to discharge their duties to the family companies, closely held STDM and publicly traded SJM Holdings Ltd., according to the March 9 statement. The dispute was resolved “amicably,” the family said in the statement.

Wong, Ho’s secretary, declined to comment on the contents of the settlement and Crystal Chan, an external spokeswoman for the family’s Lanceford Co. at Brunswick Group, said she couldn’t immediately provide further information. Ho’s lawyer, Gordon Oldham, didn’t return a voice-mail message left after regular business hours.

The case was Ho v. Ho Chiu King, HCA268/2011, High Court of Hong Kong.

For more, click here.

For the latest verdict and settlement news, click here.

Court News

Berlusconi Passes Italian Justice Overhaul as Trial Looms

Prime Minister Silvio Berlusconi’s government passed an overhaul of Italy’s justice system aimed at making judges more independent from prosecutors, whom he has accused of trying to destroy him politically.

The measure seeks to separate the career paths of prosecutors and judges, who will be overseen by different governing bodies, Justice Minister Angelino Alfano said at a news conference in Rome. Berlusconi, currently a defendant in four criminal trials, has said that judges, who often begin their careers as prosecutors, are too influenced by them.

The measure isn’t linked to his current legal problems, Berlusconi said. Had it been approved 20 years ago, “we would have avoided the prosecutors’ meddling in politics, including the current attempt by them to put an end to this government,” he told reporters after the Cabinet approved the measure.

Berlusconi has also pledged measures to shorten the length of trials and clamp down on the use of wiretaps. Newspapers have been filled with details of parties with young women that have been leaked from a probe alleging he paid an underage prostitute for sex. The premier, 74, is also accused of abuse of power to cover his tracks in the case, for which he stands trial on April 6 in Milan.

For more, click here.

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