Drug-Dealing Ivy Leaguer, AMR-Sabre, Oracle-HP in Court News

Harrison David, one of five Columbia University students arrested on drug charges in December, was sentenced to six months in jail and five years of probation yesterday.

David, 21, of Wrentham, Massachusetts, pleaded guilty on July 19 to selling cocaine to an undercover officer. He was sentenced yesterday by Judge Michael Sonberg in New York state Supreme Court in Manhattan, said Kati Cornell, a spokeswoman for New York City Special Narcotics Prosecutor Bridget Brennan’s office.

Four other students -- Christopher Coles, 21, of Philadelphia; Adam Klein, 21, of Closter, New Jersey; Jose Stephan Perez, 20, of Atlanta; and Michael Wymbs, 22, of New York -- have refused deals to plead guilty to drug-related charges that would have earned them each five years’ probation. They are scheduled to return to court in October.

The five students were arrested in December after a five-month investigation named “Operation Ivy League.” The arrests followed raids on fraternity houses and residences on the university’s Manhattan campus.

Prosecutors said undercover officers spent $11,000 buying drugs including cocaine, marijuana, ecstasy and LSD-laced Altoids mints and Sweetarts candy, with most of the sales taking place in common areas and bedrooms of three fraternities.

Matthew Myers, David’s attorney, and Robert Hornsby, a spokesman for Columbia, didn’t immediately return messages seeking comment on the sentencing.

The case is People v. David, 00038N/2011, New York State Supreme Court, New York County (Manhattan.)


AMR Has Interim Deal with Sabre Over Fare and Flight Information

American Airlines reached an agreement to keep fare and flight data on Sabre Holdings Corp.’s distribution system until a state antitrust lawsuit is resolved.

While no trial date is set, the case could last “well into 2012,” AMR Corp.’s American said in a letter yesterday to travel agents and corporate travel managers. The accord runs until 14 days after the suit is resolved, removing a threat that Sabre would drop American data after an Oct. 1 deadline to reach a new contract.

Yesterday’s extension is the latest development in a broader dispute triggered by American’s push to provide data directly to travel agents rather than through companies such as Sabre. US Airways Group Inc. has sued Sabre in a separate dispute and the U.S. Justice Department is investigating possible antitrust violations involving several flight data distributors.

Sabre is the largest U.S.-based global distributor of fare data and the parent of online travel agent Travelocity.com. The company will continue to negotiate a new contract with American even as the lawsuit progresses, Senior Vice President Chris Kroeger told clients yesterday in a separate letter.

The case is American Airlines Inc. v. Sabre Inc., 67-249214-10, 67th Judicial District Court, Tarrant County, Texas.

Oracle Accuses HP of Fraud in Cross-Complaint Lawsuit

Oracle Corp. accused Hewlett-Packard Co. of fraud and libel, saying a settlement agreement between the two companies over Oracle’s hiring of former HP chief Mark Hurd was unfair. Oracle also claims that HP defamed Oracle with statements that the company bullies customers.

The allegations came in counter claims by Oracle in a pending HP lawsuit against its rival originally filed in June. HP has accused Oracle of moving from partner to “bitter antagonist” by hiring away its chief executive officer and withdrawing support for its database software on HP computers that use the Itanium chip.

In yesterday’s filing in California state court in San Jose, Oracle alleged that HP fraudulently hid that it was planning to hire Chief Executive Officer Leo Apotheker and board chairman Ray Lane, when it forged a settlement agreement with Oracle over its hiring of Hurd.

Oracle, based in Redwood City, California, also alleged that HP has disrupted Oracle’s relationships with its customers.

Oracle seeks to rescind the Hurd settlement agreement, a court order prohibiting HP from making false and misleading statements about Oracle’s business and unspecified damages.

“Rather than focusing on what is right for our joint customers, Oracle is relying on invented excuses to cover up its blatant disregard for its legal obligations,” HP said in an e-mailed statement. “HP is resolved to enforcing Oracle’s commitments to HP and our shared customers and will continue to take actions to protect its customers’ best interests.”

The case is Hewlett-Packard Co. v. Oracle Corp., 111CV203163, California Superior Court, Santa Clara County.

Deutsche Bank, BNP Suits Against Bank of America Dismissed

Bank of America Corp. won dismissal of claims by BNP Paribas Mortgage Corp. and Deutsche Bank AG over hundreds of millions of dollars of losses on asset-backed notes they bought for more than $1.6 billion.

U.S. District Judge Robert Sweet, in a decision released yesterday, dismissed claims by BNP Paribas and Deutsche Bank that Charlotte, North Carolina-based Bank of America illegally kept loans and loan payments securing the notes.

The notes were issued by a special-purpose entity known as Ocala Funding LLC, which financed loans originated by Taylor, Bean & Whitaker Mortgage Corp., a mortgage lender that collapsed in 2009. Bank of America served as collateral agent for the loans.

BNP Paribas, a unit of Paris-based BNP Paribas SA, and Frankfurt-based Deutsche Bank filed contract lawsuits against Bank of America in November 2009. In August 2010, they filed related conversion suits. Sweet dismissed some of the contract claims in March. In the decision released yesterday, he threw out the conversion suits entirely.

Sweet gave BNP Paribas and Deutsche Bank 30 days to file new complaints.

Robin Henry, a lawyer for BNP Paribas, didn’t immediately return a voice-mail message seeking comment on the ruling. William McDaniels, Deutsche Bank’s lawyer, had no immediate comment yesterday.

BNP Paribas bought $480.7 million of the notes issued by Ocala Funding, according to Sweet. Deutsche Bank bought $1.2 billion.

The cases are Deutsche Bank v. Bank of America, 10-cv-08299, and BNP Paribas Mortgage Corp. v. Bank of America, 10-cv-08630, U.S. District Court, Southern District of New York (Manhattan).

Microsoft to Withdraw Trade Claims Over Datel Xbox Controllers

Microsoft Corp. said it would withdraw part of its patent-infringement case against Datel Design & Development Ltd. over controllers for the Xbox 360 video-game system.

Datel redesigned its controllers and stopped importing versions known as TurboFire2 Xbox 360 Wireless that were at the heart of a complaint before the U.S. International Trade Commission in Washington, Microsoft said in a filing on Aug. 29 that sought to withdraw the case. The software maker said it will still pursue cash compensation for past infringement through a civil lawsuit lodged against Datel last year.

“Datel’s voluntary exclusion of the accused products from the U.S. market has obviated the need to devote valuable public and private resources” of the ITC, Redmond, Washington-based Microsoft said in the filing.

The controllers made by Staffordshire, England-based Datel can turn single-shot electronic pistols used in games like “Call of Duty” into fully automatic weapons. Closely held Datel filed an antitrust lawsuit in November against Microsoft, claiming the company seeks to monopolize the markets for multiplayer online gaming systems and for accessories not sold directly with the Xbox. Those claims also are proceeding.

The case is In The Matter of Certain Game Controllers, 337-715, U.S. International Trade Commission (Washington). The antitrust case is Datel Holdings Ltd. v. Microsoft Corp., 09cv5535, U.S. District Court for the Northern District of California (San Francisco).

Lehman Wins Approval for Creditors to Vote on Liquidation (1)

Lehman Brothers Holdings Inc. won approval to send its liquidation plan to creditors for a vote as the failed investment bank works to wind down its three-year stay in bankruptcy.

U.S. Bankruptcy Judge James Peck in Manhattan yesterday approved the description of the plan creditors will use to evaluate the proposal and said voting could begin.

Lehman creditors are getting their say after the investment bank filed for bankruptcy in September 2008. Chief Executive Bryan Marsal has said he plans to raise as much as $65 billion to pay claims. Total claims will come to about $360 billion, Harvey Miller, Lehman’s bankruptcy attorney, said at the hearing.

Lehman’s success in getting to this stage in the case “borders on the miraculous,” Peck said. “Heroic efforts have achieved a very important transition point in the case.”

Creditors have until Nov. 4 to vote on the proposal. New York-based Lehman is scheduled to return to court in December to ask Peck to approve the plan, after which it would make distributions to creditors.

Lehman’s proposal is the result of a settlement it reached with two groups of creditors that opposed an earlier plan and were pushing their own ideas for distributing remaining assets.

Separately, Lehman is seeking to force Giants Stadium LLC to produce documents related to its role as partner in an interest-rate swap deal, according to a court filing. Giants Stadium, which financed about half of the construction of the New Meadowlands Stadium with two 40-year auction rate swaps from Lehman, had a $301.8 million claim on bankrupt Lehman and its derivatives unit, according to filings. Lehman said it would file some of the documents under seal to protect confidential information, as the stadium company had requested.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Madoff Trustee Appeals $9 Billion Ruling in HSBC Case

The liquidator of Bernard L. Madoff’s firm appealed a judge’s ruling on his lawsuit against HSBC Holdings Plc that threw out almost $9 billion in damages demanded from HSBC and feeder funds.

U.S. District Judge Jed Rakoff in New York ruled July 28 that trustee Irving H. Picard has no right to sue on behalf of customers or the Madoff estate, using common-law claims against parties “who allegedly violated a duty to Madoff Securities’ customers by failing to detect Madoff’s fraud.” The trustee was free to pursue $2 billion in bankruptcy claims, Rakoff ruled.

Picard filed a notice of appeal with the U.S. Court of Appeals in New York and the trial judge, according to court filings Aug. 29.

Much of the $100 billion Picard is seeking from banks such as JPMorgan Chase & Co. involves similar claims to the HSBC case, or other claims being scrutinized by two district judges.

The case is Picard v. HSBC, 1:11-cv-00763, U.S. District Court, Southern District of New York (Manhattan).

Picard Defends $59 Billion RICO Lawsuit against UniCredit (1)

Yesterday, Picard also defended the $59 billion lawsuit against UniCredit SpA and Bank Medici AG founder Sonja Kohn, saying he was well-positioned to sue for racketeering.

UniCredit last month asked a U.S. District Court in New York to dismiss trustee Irving Picard’s “hollow” racketeering claims seeking three times what investors lost in the Ponzi scheme, saying he wasn’t entitled to apply U.S. racketeering law abroad. Picard said he was appointed to litigate “any claims” belonging to the Madoff estate.

“There is no better-positioned litigant to bring these RICO claims,” he said yesterday in a court filing, referring to the Racketeer Influenced and Corrupt Organizations Act.

Picard’s application of U.S. law to foreign companies was also challenged yesterday when Banco Bilbao Vizcaya Argentaria SA asked a judge to dismiss a $45 million suit. U.S. bankruptcy law doesn’t empower Picard to take back money withdrawn from the Ponzi scheme in other countries, the bank said.

Taking the UniCredit case out of bankruptcy court in June, U.S. District Judge Jed Rakoff said he would decide whether Picard can use U.S. racketeering law to sue the Milan-based bank. He said he also will rule on whether Picard “plausibly” alleged the elements of racketeering.

The case against UniCredit and Kohn is Picard v. Kohn, 11-cv-01181, U.S. District Court, Southern District of New York (Manhattan).

The case against Banco Bilbao is Picard v. Banco Bilbao, 10-05351, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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SEC Settles Suit Seeking Bonuses of Ex-Beazer Homes CFO O’Leary

The U.S. Securities and Exchange Commission settled a lawsuit against ex-Beazer Homes USA Inc. Chief Financial Officer James O’Leary over stock-sale profits and bonuses while the company’s accounting statements were out of compliance with federal law.

O’Leary must reimburse the company more than $1.4 million received after Beazer restated financial results for the fiscal year that ended Sept. 30, 2006, according to a statement issued by the SEC. The SEC has accused the homebuilder of falsifying reports to increase income.

O’Leary, who was not personally accused of misconduct, did not admit or deny liability to the single count suit alleging failure to reimburse, according to the statement. The reimbursement was sought under Section 304 of the Sarbanes-Oxley Act.

In March, Chief Executive Officer Ian McCarthy agreed to return $6.5 million in a clawback of compensation he received while the firm doctored financial statements in the midst of the U.S.’s housing crisis, according to the U.S. Securities and Exchange Commission.

Lawrence Iason, a partner with Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer in New York represented Mr. O’Leary. He didn’t immediately return a call seeking comment.

A federal judge must approve the settlement, filed in U.S. District Court in Atlanta.

The case is Securities and Exchange Commission v. O’Leary, U.S. District Court for the Northern District of Georgia (Atlanta).

For the latest verdict and settlement news, click here.


Appeals Court Upholds Novell Copyright on Early Unix System

Novell Inc. owns the copyrights of early versions of the Unix computer operating system, not SCO Group Inc., a federal appeals court ruled, upholding a jury verdict.

The Denver-based court yesterday also affirmed a lower-court ruling that Novell had the right to prevent SCO from terminating a Unix license issued before Novell sold part of its Unix business to SCO in 1995.

“Novell’s board of directors adopted a resolution approving the sale, which specifically mentioned the copyrights were to be retained by Novell,” the judges said in the opinion.

This was the second time the appeals court ruled on this case. In the first appeal it reversed a lower-court ruling in Novell’s favor and sent the case back. After a two-week trial, the jury ruled Novell owned the copyrights. SCO appealed.

A spokeswoman for Linden, Utah-based SCO, Chantell Ferrin, didn’t immediately reply to messages seeking comment.

The case is SCO Group v. Novell, 10-4122. U.S. Court of Appeals for the 10th Circuit (Denver).

Barry Bonds to Be Sentenced Dec. 16 for Obstructing Justice

Barry Bonds, Major League Baseball’s home-run record holder, is scheduled to be sentenced Dec. 16 on his conviction for obstructing a U.S. probe of steroid use by professional athletes, according to a court filing yesterday.

The former San Francisco Giants left fielder lost his bid on Aug. 26 to overturn his conviction for obstruction of justice. U.S. District Judge Susan Illston in San Francisco said Bonds repeatedly provided “nonresponsive answers” to questions about whether his trainer ever provided him with injectable substances.

Jurors were unable to agree in April on whether Bonds, 47, lied when he told a grand jury in 2003 that he didn’t knowingly take steroids, didn’t take human growth hormone and didn’t receive injections from the trainer, Greg Anderson. A mistrial was declared on those counts.

Prosecutors haven’t said whether they plan to retry Bonds on perjury charges. Bonds faces a maximum of 10 years in prison on the obstruction conviction.

Bonds broke Hank Aaron’s record of 755 career home runs in August 2007. He was indicted in November of that year for allegedly lying to the grand jury.

Bonds’s attorneys said at trial that he truthfully testified that he received performance-enhancing substances from Anderson without knowing what they were because the drugs were new at the time and Anderson told him one was flaxseed oil.

The case is U.S. v. Bonds, 07-00732, U.S. District Court, Northern District of California (San Francisco).

Canadian Trading Firm Appeals $13 Million FSA Market-Abuse Fine

The chief executive officer of Swift Trade Inc., a defunct Canadian trading firm, appealed an 8 million-pound ($13 million) U.K. fine for market abuse, saying a court will review evidence in the case.

The Financial Service Authority’s allegations against the Toronto-based company, which was dissolved in December, have been referred to the Upper Tribunal, former Swift Trade CEO Peter Beck said in a statement.

Swift Trade is accused of “layering,” in which multiple buy orders for shares are submitted and withdrawn to manipulate the price of a security. The company last week failed in a legal bid to prevent the U.K. regulator from publishing details of its investigation in a notice about the penalty.

The FSA may publish the notice this week, Judge Wyn Williams said at last week’s hearing. Joseph Eyre, a spokesman for the FSA in London, declined to comment.

Swift Trade also faces a regulatory probe in Canada. The Ontario Securities Commission said in March the company failed to establish proper controls and supervision, adequately monitor its clients’ trading, and produce accurate trading records.

Swift Trade will contest the allegations in a Canadian tribunal next year, the company said in a statement.

For the latest trial and appeals news, click here.

New Suits

U.S. Bancorp Sues BofA’s Countrywide Over Mortgage Pool

A U.S. Bancorp unit asked a New York court to force Bank of America Corp.’s Countrywide Financial unit to repurchase more than 4,000 loans in a mortgage pool to repair breaches of contract related to improper underwriting.

The unit, U.S. Bank National Association, sued Countrywide Aug. 29 in state court in New York, saying the lender agreed when it sold the pool in 2005 that it would repurchase all the loans within 90 days of receiving notice of a material breach. U.S. Bank is trustee for HarborView Mortgage Loan Trust 2005-10, which held the pool. The pool’s original value was $1.75 billion, the bank said in court papers.

“Soon after being sold to the trust, Countrywide’s loans began to become delinquent and default at a startling rate,” U.S. Bank said in its complaint. “During the time period in which Countrywide originated the loans, it completely ignored its underwriting guidelines.”

U.S. Bank asked the court to find that, as a result of a breach of its seller representation, Countrywide must repurchase all the loans. Or the court can order Countrywide to repurchase all defective loans, U.S. Bank said.

“U.S. Bank filed the lawsuit as trustee for HarborView,” Thomas Joyce, a company spokesman, said. “We filed the lawsuit on behalf of the investors in the trust, at the direction of the investors in the trust.”

“We are reviewing the complaint and do not have any comment at this point,” Lawrence Grayson, a Bank of America spokesman, said yesterday. Charlotte, North Carolina-based Bank of America, which was also sued, acquired Countrywide in 2008.

The case is U.S. Bank National Association v. Countrywide Home Loans Inc., 652388/2011, New York State Supreme Court, New York County (Manhattan).

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

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