BofA, JPMorgan, Boeing, Galleon, HealthSouth in Court News

Bank of America Corp. and JPMorgan Chase & Co., along with three other U.S. mortgage servicers, proposed paying $5 billion to settle a probe of their foreclosure practices by state and federal officials, two people familiar with the matter said.

The proposal made by banks yesterday during settlement talks in Washington came after state attorneys general and federal officials offered revised settlement terms and a proposal for banks to fund principal writedowns for homeowners.

The probe by all 50 states was triggered by claims of faulty foreclosure practices after the housing collapse, which state officials said may violate their laws. The original settlement proposal offered by states and federal agencies drew criticism from banks and Republican attorneys general opposed to a deal that would reduce principal amounts for borrowers.

In a new proposal, officials called for a fund, administered by state and federal officials, that would in part pay for principal writedowns, said Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller. Miller, a Democrat, is leading the negotiations for the states. Attorneys general haven’t made a proposal for a monetary payment by the banks, he said.

State and federal officials have been negotiating with the mortgage servicers, which also include Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc. Miller has said the five companies service 59 percent of U.S. home loans.

Rick Simon, a spokesman for Charlotte, North Carolina-based Bank of America, didn’t return a call seeking comment after regular business hours yesterday. Teri Schrettenbrunner of San Francisco-based Wells Fargo and Mark Rodgers, a spokesman for New York-based Citigroup, didn’t return e-mails seeking comment.

Gina Proia, a spokeswoman for Detroit-based Ally Financial, and New York-based JPMorgan Chase spokesman Thomas Kelly, declined to comment.

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Lindsey Manufacturing Executives Guilty in Bribery Case

Two executives with a California maker of emergency electricity towers were found guilty yesterday of paying bribes including a Ferrari to officials at a Mexican state-owned utility to obtain orders.

The jury returned guilty verdicts on all counts of conspiracy and violating the Foreign Corrupt Practices Act against Keith Lindsey, 66, the president of closely held Lindsey Manufacturing Co., and Steve Lee, 60, the company’s chief financial officer, said Thom Mrozek, a spokesman for U.S. Attorney Andre Birotte Jr. in Los Angeles.

Prosecutors argued during the trial that the two men knew that a 30 percent sales commission they paid Enrique Aguilar, a Mexican representative, was used to cover more than $5 million in bribes to the officials at Comision Federal de Electricidad. Lindsey Manufacturing, based in Azusa, California, retained Aguilar in 2002 after repeatedly failing to legitimately win contracts in previous years, prosecutors said.

“Lindsey Manufacturing is the first company to be tried and convicted on FCPA violations, but it will not be the last,” Assistant Attorney General Lanny A. Breuer said in a statement. “Foreign corruption undermines the rule of law, stifling competition and the health of international markets and American businesses.”

Jan Handzlik, a lawyer representing Lindsey and the company, which was also a defendant, didn’t immediately return a call to his office.

Aguilar, 56, a Mexican citizen who was also indicted, is a fugitive and wasn’t present at the trial.

The case is U.S. v. Aguilar, 10-1031, U.S. District Court, Central District of California (Los Angeles).

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Boeing Whistleblower Firing Decision May Cut Off News Leaks

Two Boeing Co. auditors in 2007 thought they found weaknesses in the security of the firm’s financial reporting data. They complained, setting off a chain of events that may chill whistleblower leaks to news outlets, Bloomberg News’ Ann Woolner and Karen Gullo report.

Nicholas Tides and Matthew Neumann say they told Boeing it might be violating the Sarbanes-Oxley investor-protection law by urging them to say data controls were in place that weren’t. Ignored and then pressured to look the other way, they said, the two spoke with a Seattle Post-Intelligencer reporter who had left messages asking about auditing problems.

“Computer security faults put Boeing at risk,” a subsequent headline said. The airplane maker, already suspecting leaks, investigated and fired the men for unauthorized talking to the news media. They sued, citing Sarbanes-Oxley’s whistleblower protection, and lost. An appeals court said last week that the law doesn’t protect tipping off journalists.

The ruling is now the law in nine western states. It will make hiding company wrongdoing easier, according to Ken Paulson, a former editor of USA Today who is president of the First Amendment Center, which follows free-speech issues.

“Fewer whistleblowers will share information with the news media,” Paulson said. “There is no faster path to reform or to disclosure of corporate misdeeds than putting that information on the front page of a newspaper.”

The federal appeals court in San Francisco said in its May 3 ruling that the law is clear. Sarbanes-Oxley, enacted in 2002 in the wake of the Enron Corp. and WorldCom Inc. accounting scandals, specifically protects corporate whistleblowers only when they tip off federal authorities, Congress or a supervisor, it said.

“If Congress wanted to protect reports to the media, it could have listed the media as one of the entities to which protected reports may be made,” the court ruled.

The decision was made by a unanimous three-judge panel. Tides and Neumann will ask for a review of the ruling by a larger panel, said John J. Tollefsen, their Seattle attorney.

The appeal case is Tides v. Boeing Co., 10-35238, U.S. Court of Appeals for the Ninth Circuit (San Francisco). The original case is Tides v. Boeing Co., 2:08-cv-01601, U.S. District Court, Western District of Washington (Seattle).

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Ex-Primary Global Consultant Jiau Loses Bid to Dismiss Case

Winifred Jiau, a former consultant with expert-networking firm Primary Global Research LLC, lost a bid to have her insider-trading case dismissed.

Jiau’s lawyer, Joanna Hendon, argued that prosecutors erred when they instructed the federal grand jury that indicted Jiau on charges she passed inside information about Nvidia Corp. and Marvell Technology Group Ltd. to two hedge fund managers. U.S. District Judge Jed Rakoff rejected Jiau’s argument yesterday in Manhattan.

“I agree with the government this is quite extended speculation, really piling inference upon inference,” Rakoff said in a ruling from the bench. “There are deep prudential grounds indicating that speculation should not be the engine that causes a court to move.”

Hendon claimed the indictment was flawed, saying there was no evidence that any “insider” breached a fiduciary duty not to disclose material non-public information. She also said prosecutors failed to prove Jiau engaged in a scheme to defraud “by trick, deceit, chicane or overreaching.”

Assistant Manhattan U.S. Attorney Avi Weitzman told Rakoff the government has evidence Jiau passed inside information obtained from sources at Nvidia and Marvell to Noah Freeman, a Boston hedge-fund manager who pleaded guilty and is cooperating with the U.S., and Samir Barai, founder of Barai Capital Management LP in New York.

Hendon and Weitzman both declined to comment after court.

Jiau faces as long as 25 years in prison if convicted of conspiracy and securities fraud.

The case is U.S. v. Jiau, 11-cr-00161, U.S. District Court, Southern District of New York (Manhattan).

Foreclosures Prompt Cities to Sue Banks Over Mowing, Repairs

Four major U.S. cities that pay for the upkeep of foreclosed properties are trying to recoup the costs of services including lawn mowing, repairs and security by suing banks they claim contributed to their “urban blight.”

A federal judge in Memphis, Tennessee, on May 4 and another in Baltimore on April 22 denied Wells Fargo & Co.’s request to dismiss the predatory-lending lawsuits brought against the bank. A lawsuit by the city of Cleveland against JPMorgan Chase & Co. and Ally Financial Inc. is also pending before an Ohio judge.

In one case, Deutsche Bank AG, described by Los Angeles City Attorney Carmen Trutanich as one of the city’s “major slumlords,” may be found liable for hundreds of millions of dollars, including restitution for current and former tenants, according to a statement by the city.

“We started out looking to sue as many as 16 lenders,” Webb Brewer, a lawyer who represents Memphis, said in a telephone interview. “It’s a tall order to fight all those banks at once. We never alleged that Wells Fargo was alone in employing these practices.”

The cities’ lawsuits invoke various legal theories, and some have targeted the banks as bundlers of mortgages into securities rather than as lenders. The cases brought by Baltimore and Memphis, which will now shift to pre-trial evidence gathering, are similar. They both accuse San Francisco-based Wells Fargo of violating the Fair Housing Act by so-called reverse redlining -- targeting black neighborhoods for predatory lending.

The cases are People of the State of California and the City of Los Angeles v. Deutsche Bank National Trust Co., 11-460878, Superior Court of California, Los Angeles County (Los Angeles); Mayor and City Council of Baltimore v. Wells Fargo Bank NA, 08-00062, U.S. District Court for the District of Maryland (Baltimore); City of Memphis v. Wells Fargo, 09-cv-02857, Western District of Tennessee (Memphis); U.S. v. Deutsche Bank AG, 11-02976, U.S. District Court for the Southern District of New York (Manhattan); City of Cleveland v. JPMorgan Chase Bank NA, 08-668608, Ohio Court of Common Pleas, Cuyahoga County (Cleveland); City of Cleveland v. Ameriquest Mortgage Securities Inc., 08-00139, U.S. District Court for the Northern District of Ohio (Cleveland); City of Birmingham v. Citigroup Inc., 09-00467, U.S. District Court for the Northern District of Alabama (Birmingham); and City of Buffalo v. ABN AMRO Mortgage Group Inc., 08-02200, New York State Supreme Court, Erie County (Buffalo).

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Ex-Galleon Trader Wants Jury to Hear He Rejected U.S. Plea

Former Galleon Group LLC trader Michael Kimelman said he wants jurors at his upcoming insider-trading trial to hear that he rejected a plea deal with the U.S. in order to prove he is innocent.

Kimelman is scheduled for trial on May 16 with fellow former traders Zvi Goffer and his brother, Emanuel Goffer, who are accused of being part of one of three rings that are the target of a nationwide U.S. probe of insider trading at hedge funds. All three have pleaded not guilty.

A lawyer for Kimelman, in papers filed May 9 in federal court in New York, said his client wants jurors to know that he rejected a plea offer even though accepting it would have meant he wouldn’t have to serve any time in prison. The government’s offer to allow him to plead guilty to conspiracy “was still available last week,” according to the filing.

“Mr. Kimelman rejected this non-jail offer, electing instead to adhere to his position that he is innocent of any criminal conduct, despite the possibility that if convicted at trial, he could be sentenced to a period of imprisonment,” his lawyer, Michael Sommer, said in the filing.

U.S. District Judge Richard Sullivan, who is presiding over the case, has yet to rule on Kimelman’s request. Ellen Davis, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, whose office is prosecuting the case, declined to comment.

Prosecutors filed a superseding indictment in April in which Goffer, his brother and Kimelman are charged with conspiracy and securities fraud. Prosecutors said the Goffer ring of the Galleon-related cases traded on stock tips that came from lawyers at Ropes & Gray in New York and from Gautham Shankar, another former trader.

The case is U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan).

U.S. Must Act on Six Drilling Permits, Federal Judge Rules

The U.S. “unlawfully and improperly delayed” permits for deep-water drilling after the BP Plc Gulf of Mexico oil spill last year, a federal judge ruled.

U.S. District Judge Martin Feldman in New Orleans yesterday ordered offshore energy regulators to act within 30 days on six pending permit applications filed by companies that have contracts with Ensco Offshore Co., the Louisiana drilling company leading the legal challenge to the government’s offshore drilling bans.

Federal law “establishes a non-discretionary duty on the Department of Interior to act, favorably or unfavorably, on drilling permit applications within a reasonable time,” Feldman said in a written order. Ensco was harmed by “the government’s failure to act on pending permit applications contemplating the use of Ensco’s rigs,” he said.

The Obama administration suspended all drilling in waters deeper than 500 feet last 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 off the Louisiana coast in April.

“We’re reviewing the judge’s ruling,” Wyn Hornbuckle, a spokesman for the U.S. Justice Department, said in an e-mail. He declined to comment further “at this time.”

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

Safra National Bank of New York Sued by Madoff Trustee

Safra National Bank of New York was sued for at least $111.7 million by Irving Picard, the trustee liquidating Bernard Madoff’s defunct investment firm.

Picard seeks to recover transfers made to Safra from so-called feeder funds that invested with Madoff, according to a complaint filed May 9 in U.S. Bankruptcy Court in Manhattan.

Safra “knew or should have known of numerous irregularities concerning investing” through Madoff given its background and its own investments with the convicted Ponzi-scheme operator, Picard said in the complaint.

Picard has filed hundreds of lawsuits to recover money for victims of Madoff’s fraud. Madoff pleaded guilty to masterminding the biggest Ponzi scheme in history and is serving a 150-year sentence in a federal prison in North Carolina.

The case is Picard v. Safra National Bank of New York, 11-01885, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Goldman Sachs Cuts Estimate of Possible Legal Losses by 21%

Goldman Sachs Group Inc., the fifth-biggest U.S. bank by assets, cut its estimated losses from legal claims by 21 percent in the first quarter.

The bank’s “reasonably possible” losses from lawsuits dropped to $2.7 billion as of March 31 from $3.4 billion at the end of 2010, according to its quarterly filing yesterday with the Securities and Exchange Commission.

The estimate, the second of its kind disclosed by the firm, is at the “upper end” of losses in matters where the risk is “more than remote but less than likely,” New York-based Goldman Sachs said in the filing.

Banks started releasing estimates of possible losses after the SEC told corporate finance chiefs in October that they should disclose such costs “when there is at least a reasonable possibility” that they may be incurred, even if the risk is too low to require reserves. Bank of America Corp., the biggest U.S. lender, has said legal and regulatory matters may cost $150 million to $1.6 billion beyond what it has reserved.

Staff at the Commodity Futures Trading Commission advised Goldman Sachs Execution & Clearing LP, known as GSEC, that they intend to recommend legal action against the unit related to its role as clearing broker for a broker-dealer, the company disclosed in yesterday’s filing.

The CFTC staff alleges that GSEC “knew or should have known” that the client’s sub-accounts maintained at GSEC were accounts belonging to customers of the broker-dealer and not the broker-dealer’s own accounts, according to the filing.

The filing also included a reference to subpoenas that Goldman Sachs and certain affiliates received from regulators regarding sales of collateralized debt obligations, including the firm’s Abacus 2007-AC1 deal. The company’s last quarterly filing, its annual report on March 1, disclosed that it received requests for information, omitting mention of the subpoenas.

In July, Goldman Sachs paid $550 million to settle a lawsuit filed by the SEC that accused the firm of misleading investors in the Abacus CDO. A U.S. Senate subcommittee report on the financial crisis that used Goldman Sachs as a case study accused the firm of misleading investors about some CDOs. The report was referred to the Justice Department and the SEC.

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BTA Bank Can Continue $4 Billion Ablyazov Case, Judge Rules

BTA Bank, the bailed-out Kazakh lender seeking to recover assets for international creditors, can continue its $4 billion fraud lawsuit against ousted Chairman Mukhtar Ablyazov, a U.K. judge ruled.

Judge Nigel Teare in Bristol, England, yesterday rejected Ablyazov’s claim that the case is a veiled attempt by Kazakhstan President Nursultan Nazarbayev to eliminate political rivals. Nazarbayev was re-elected last month with 95.5 percent of the vote, adding five more years to his two-decade rule.

“If the consequence of that case succeeding is that the president of Kazakhstan is assisted in eliminating Mr. Ablyazov as a political opponent,” then it is a “natural consequence” of the lawsuit, Teare said in the judgment.

BTA, whose creditors include Royal Bank of Scotland Group Plc, Barclays Plc and Morgan Stanley, claims Ablyazov conspired to siphon money from the bank through a series of fake loans and share sales before fleeing from Kazakhstan to London. The Almaty-based lender was nationalized in February 2009 and later defaulted on $12 billion of debt.

“Ablyazov maintains that the bank was nationalized purely for political reasons, as the bank was sound at the time,” his spokesman, Locksley Ryan of London-based RLF Partnership Ltd., said yesterday in a phone interview.

BTA last year issued 10-year “recovery notes” to creditors for about $5 billion of bad loans as part of its debt restructuring. The lender will share with creditors, on a 50-50 basis, recoveries from impaired assets, including damages from the U.K. lawsuits.

Other creditors that stand to benefit from the case include Wells Fargo & Co., Bank of America Corp., Standard Chartered Plc, Commerzbank AG, HSBC Holdings Plc, Credit Suisse Group AG and New York-based Goldman Sachs Group Inc., which in July 2009 quit as BTA’s restructuring adviser.

BTA in December won a U.K. appeals court ruling forcing Ablyazov to place his assets, estimated at $5 billion, into receivership. The bank said Ablyazov didn’t disclose all his business deals, including ownership in a Moscow skyscraper project.

Ablyazov’s lawyers claim BTA’s takeover was motivated by their client’s membership in the “democratic opposition” to Nazarbayev. Similar conspiracy claims were dismissed by Teare in February.

The case is JSC BTA Bank v. Mukhtar Ablyazov, [2011] EWHC 1136 (Comm), Royal Courts of Justice (London).

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Health-Care Plan Constitutional, U.S. Tells Appeals Court

The Obama administration’s health-care overhaul is a constitutional scheme to regulate the medical and insurance services market, a U.S. lawyer told the first federal appeals court to hear arguments challenging the plan.

At the heart of the debate before a three-judge panel in Richmond, Virginia, yesterday was the question of whether requiring most Americans to buy health insurance is, as a lower-court judge ruled, like ordering them to buy broccoli or a Cadillac. Acting Solicitor General Neal Katyal said no, arguing Congress has broad power to regulate the health-care market.

“Congress is not asking people to buy something they otherwise would not buy,” Katyal said, adding that being an active participant in the health-care market is an “almost universal feature of our existence.”

So far, trial-court decisions on the health plan have broken along party lines, with judges appointed by Republican presidents ruling against it and Democratic-appointed judges ruling in favor. Two of the randomly assigned judges in the cases, James Wynn Jr. and Andre Davis, were named by President Barack Obama. Former President Bill Clinton, also a Democrat, appointed the third, Diana Gribbon Motz.

The cases are Liberty University v. Geithner, 10-02347, and Virginia v. Sebelius, 11-01057 and 11-01058, 4th U.S. Circuit Court of Appeals (Richmond).

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Tax-Shelter Lawyers Acted in Bad Faith, Prosecutor Argues

The former head of the Chicago office of the defunct law firm Jenkens & Gilchrist and others accused of marketing phony tax shelters acted in “bad faith” by providing letters saying the investments would probably survive tax authorities’ challenges, a prosecutor told jurors.

Paul Daugerdas and four co-defendants “cannot possibly claim that they were acting in good faith” with the letters, which were a “total farce,” Nanette Davis, a Justice Department attorney, told jurors yesterday in closing arguments at their trial in federal court in Manhattan.

Charles Sklarsky, a lawyer for Daugerdas, attacked the credibility of the government’s cooperating witnesses during his closing argument by saying they have a “motive to fabricate.” Sklarsky said his client is a “good man” who is being punished for using aggressive strategies.

“He’s a lawyer who pushed the law, who took aggressive positions that the IRS didn’t like,” Sklarsky said, referring to the U.S. Internal Revenue Service. “There’s no question about that. But just because the IRS doesn’t like the positions you take doesn’t make you a criminal.”

Daugerdas is one of seven people indicted in June 2009 on charges of conspiracy and tax evasion for selling phony tax shelters from 1994 to 2004. Prosecutors said the defendants used the shelters to generate more than $7.32 billion in fraudulent tax losses for at least 931 wealthy individuals.

Two of the seven people indicted in June 2009, Erwin Mayer and Robert Greisman, pleaded guilty and are cooperating with the government. Three others connected to the case are cooperating, including two who pleaded guilty.

Jenkens & Gilchrist avoided prosecution in March 2007 by admitting it developed and marketed tax shelters that generated more than $1 billion in phony losses, and agreed to pay $81.6 million to clients who sued over its tax-shelter advice.

Jenkens shut down after reaching the agreement, which didn’t apply to lawyers at the Dallas-based firm, and blamed its demise on attorneys in its office in Chicago, which was run by Daugerdas.

The case is U.S. v. Daugerdas, 1:09-cr-00581, U.S. District Court, Southern District of New York (Manhattan).

Ex-HealthSouth Chief Scrushy Wins Reversal on Two Counts

Richard Scrushy, the former chief executive officer of HealthSouth Corp., yesterday won the reversal of two convictions from his 2006 criminal trial, while the U.S. appeals court affirmed four other counts.

The three-judge panel upheld the “honest-services” convictions of Scrushy and former Alabama Governor Don Siegelman. The U.S. Supreme Court ordered the re-examination last year after finding, in a separate case involving Enron, that depriving citizens and shareholders of honest services was illegal only if bribery or kickbacks were involved.

The appellate court, however, overturned convictions on two counts relating to the former CEO’s alleged self-dealing with the ex-governor’s help.

“This was a step in the right direction,” Scrushy’s lawyer, Bruce Rogow, said in a telephone interview. Rogow said he will ask the Supreme Court to examine yesterday’s decision also. “We think there can be a giant step if the Supreme Court accepts review.”

Scrushy is serving six years and 10 months in a federal prison in Beaumont, Texas, for bribery after a Montgomery, Alabama, jury convicted him in 2006 of giving Siegelman a $500,000 campaign contribution in exchange for a seat on a state hospital regulatory board. He was acquitted in 2005 on criminal charges of directing an accounting fraud.

Laura Sweeney, a spokeswoman for the U.S. Justice Department, didn’t immediately reply to a voice-mail message seeking comment on the decision.

The appeals court also sustained Siegelman’s conviction on four counts.

The case is U.S. v. Siegelman, 07-13163-B, 11th U.S. Circuit Court of Appeals (Atlanta). The lower-court case is U.S. v. Scrushy, 05-cr-119, U.S. District Court, Middle District of Alabama (Montgomery).

Rajaratnam Jury Dismissed for Day Without Reaching Verdict

Jurors in the insider-trading case of Galleon Group LLC co-founder Raj Rajaratnam ended their 11th day of deliberations yesterday without reaching a verdict, sending a note or indicating which way they are leaning.

The jury began deliberations April 25 and had to restart the process on May 4, when a juror was replaced for medical reasons. The panel will return today to Manhattan federal court to continue weighing evidence. The trial began March 8.

Rajaratnam, 53, is on trial as part of the largest crackdown on hedge-fund insider trading in U.S. history. Prosecutors said he gained $63.8 million from tips leaked by corporate insiders and hedge-fund traders about stocks including Goldman Sachs Group Inc., Intel Corp. and Clearwire Corp.

Rajaratnam, who said he based the trades on research, faces as long as 20 years in prison if convicted of the most serious counts.

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

U.K. Court Rejects Notification Requirements for Reporters

Max Mosley, the former Formula One president, lost a court bid to force journalists to contact people before publishing potentially embarrassing details of their private lives. The case involved a story in a News Corp. newspaper that said he had taken part in a Nazi-themed sex party without contacting him for comment.

In 2008 Mosley won a 60,000-pound ($98,000) award against News Corp.’s News of the World for publishing, without contacting him for comment, a story that said Mosley took part in a Nazi-themed “orgy,” along with a video. His case precipitated a surge in requests for so-called super-injunctions sought by celebrities to block press reports about their sex lives.

That award -- a record by the High Court in London for a breach of privacy claim -- was “an adequate remedy” that averted the “chilling effect” a prior-notification requirement could have on the media, the European Court of Human Rights ruled yesterday.

The decision is a victory for News of the World, the U.K.’s largest Sunday newspaper, which is facing lawsuits over tapping into the voice mails of celebrities and politicians. News Corp. apologized and offered settlements to some of the more than 20 people suing over the four-year-old scandal.

“Serious investigative journalism always involves consulting the subject,” Mosley said in a telephone interview yesterday, disputing the court’s statement that requiring reporters to contact the subjects of a story would interfere with investigative reporting.

Mosley has maintained the party had no Nazi overtones and the U.K. court agreed in its July 2008 decision that there was no evidence any Nazi theme was intended. He has filed lawsuits in 21 different countries, mainly in an effort to force websites to remove the video, he said in January at a hearing in Strasbourg. Mosley said he is considering an appeal of the U.K. ruling.

Daisy Dunlop, a spokeswoman for New York-based News Corp.’s News International unit, declined to comment on the ruling.

Separately, U.K. Culture Secretary Jeremy Hunt said yesterday he plans to expand regulation of all media amid controversy over the use of the Internet to override super-injunctions used by prominent people to prevent adverse publicity.

Celebrities who won court orders blocking British newspapers from publishing stories about their private lives are finding their legal protection invalidated after an anonymous user of Twitter Inc. posted a series of messages May 8 making allegations detailing the activities they sought to keep out of the public eye.

Hunt said he plans to start a public consultation next week on the contents of a new bill on communications regulation with a view to bringing in the legislation next year. That might entail bringing Web-based media into line with laws governing newspapers and broadcasters.

At the same time, Justice Secretary Kenneth Clark is awaiting the results of an inquiry by a senior judge before deciding how to proceed with reforming privacy laws.

The European Court of Human Rights case is: Mosley v. the United Kingdom, no. 48009/08.

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