Credit Suisse Group AG bankers accused of helping Americans cheat on taxes plan to ask the Justice Department to dismiss their indictment amid talks to resolve a U.S.-Swiss dispute over tax evasion and a probe of the bank, according to five people familiar with the matter.
Seven current and former Credit Suisse bankers in Switzerland were indicted July 21 in Alexandria, Virginia, on one charge each of conspiring to defraud the U.S. The bank also has said it is a target of a criminal investigation by the U.S. Justice Department, and that it is cooperating.
Lawyers for six of the bankers and a Swiss trust company owner charged with helping them wrote to Deputy U.S. Attorney General James Cole Nov. 8 to say they wanted to resolve their case as part of a U.S. settlement with the Swiss government, and any accord between the Justice Department and Credit Suisse, the people said. Lawyers for the seven defendants, who have yet to appear in a U.S. court, asked Cole for a meeting, according to the people.
“I kind of doubt the Justice Department’s tax division would be willing to walk away from this indictment and dismiss it,” Larry Campagna, a tax attorney who isn’t involved in the case, said in a telephone interview. “After convicting other bankers and taxpayers, giving a pass to these people is somewhat unlikely.”
“But if I were representing them,” the lawyer added, “I’d probably do the same thing.”
Charles Miller, a Justice Department spokesman, and David Walker, a spokesman for Zurich-based Credit Suisse, declined to comment on the case.
The defendants include Markus Walder, the former head of North America offshore banking at Credit Suisse; Marco Parenti Adami, a senior manager and private banker; and Susanne D. Ruegg Meier, also a senior manager and private banker.
“Credit Suisse is committed to a fully compliant cross-border business,” the bank said after the indictment. “Subject to our Swiss legal obligations and throughout this process we will continue to cooperate with the U.S. authorities in an effort to resolve these matters.”
The case is U.S. v. Adami, 11-cr-00095, U.S. District Court, Eastern District of Virginia (Alexandria).
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N.Y., Delaware Can Intervene in BofA $8.5 Billion Accord
The New York and Delaware attorneys general may participate in litigation over Bank of America Corp.’s proposed $8.5 billion settlement with mortgage investors, a federal judge ruled, rejecting arguments by Bank of New York Mellon Corp., trustee for the mortgage bond trusts.
U.S. District Judge William Pauley in Manhattan, who is overseeing the case, approved requests to intervene by New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden, according to an order filed Nov. 18.
“This action concerns far more than the financial interests of a few sophisticated investors,” the judge wrote. “And the intervention of the state AGs in this action will protect the interests of absent investors.” Bank of New York had argued Biden didn’t have a right to intervene.
Bank of America has agreed to settle with investors in Countrywide Financial Corp. mortgage-backed securities. The deal was reached with an institutional investor group that includes BlackRock Inc. and would apply to investors outside that group.
The case is Bank of New York Mellon v. Walnut Place LLC, 11-cv-05988, U.S. District Court, Southern District of New York (Manhattan).
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Bayer May Have Pitched Birth-Control Pill for Unapproved Use
Units of Bayer AG, Germany’s largest drugmaker, may have sought to market the Yasmin family of birth-control pills for unapproved uses and misled women about the health risks the drug posed, according to company e-mails.
Bayer unit officials discussed promoting the contraceptive known as Yaz, a spinoff of Yasmin, for treatment of all types of premenstrual syndrome, according to company files provided to lawyers for women suing Bayer. U.S. regulators approved Yaz only for the most severe form of PMS. Salespeople for Bayer unit Berlex Laboratories Inc., acquired in the 2006 purchase of Schering AG, received an e-mail that year from a company official citing a Woman’s Day magazine article about Yaz.
“This article is a nice way of using YAZ for PMS treatment instead of just focusing on the specific” class of women battling premenstrual dysphoric disorder, the most severe form of PMS, wrote Matt Sample, a Berlex sales consultant, according to a copy of the e-mail produced as evidence.
The message and other internal company files were disclosed as part of litigation claiming the drug caused blood clots, heart attacks and strokes. Bayer faces more than 10,000 lawsuits over injuries allegedly caused by the contraceptives. Lawyers suing the drugmaker cited Food and Drug Administration reports of at least 50 deaths tied to the pills from 2004 to 2008.
“Bayer’s oral contraceptives have been and continue to be extensively studied worldwide and are safe and effective when used as directed and according to product labeling,” said Rose Talarico, a U.S.-based spokeswoman for the company, in an e-mail. She declined to comment further on the litigation.
The case is In Re Yasmin and Yaz (Drospirenone) Marketing, Sales Practices and Product Liability Litigation, 09-md-02100, U.S. District Court for the Southern District of Illinois (East St. Louis).
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Greenberg’s Starr Sues U.S. for $25 Billion on AIG Bailout
Starr International Co. accused the U.S. government in a lawsuit of using the bailout of American International Group Inc. to give funds to AIG’s trading partners in violation of the Constitution.
Starr, which was a major AIG shareholder and is headed by the insurer’s founder, Hank Greenberg, claims the government “destroyed the value of common stock” and took AIG’s property without due process, according to a suit filed yesterday in the U.S. Court of Federal Claims in Washington. Starr seeks $25 billion in damages.
“After obtaining control of AIG, the government used AIG as a vehicle to funnel funds to other institutions and to provide ‘back-door bailouts’ on disparate terms far more favorable to those institutions, including foreign companies,” Starr alleges in its complaint.
Tim Massad, Assistant Secretary for Financial Stability at the U.S. Department of the Treasury, said in an e-mailed that it was reviewing the lawsuit and expects to defend its actions.
“It is important to remember that the government provided assistance to AIG -- and stopped it from collapsing -- in order to prevent a meltdown of the entire global financial system,” Massad said. “Our actions were necessary, legal, and constitutional.”
Leilani Brown, a spokeswoman for Starr, didn’t return calls seeking comment on the filing. Mark Herr, a spokesman for AIG, declined to comment on the lawsuit.
The case is Starr International Co. v. U.S., 11-779, U.S. Court of Federal Claims (Washington).
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Corn-Syrup Makers Misleading Consumers, Sugar Refiners Say
Archer-Daniels-Midland Co. and other high-fructose corn syrup producers are misleading consumers about the true nature of their product, a coalition of sugar processors and refiners claimed in a revised lawsuit.
The corn-syrup producers are falsely marketing their product as “corn sugar” in an advertising campaign to make it more palatable to consumers, according to a Nov. 18 filing in federal court in Los Angeles.
“The only sweetener that may be labeled simply as ‘sugar’ is the natural sucrose found in cane sugar and sugar beet plants,” according to the complaint. “Defendants’ representations equating HFCS with real sugar -- such as ‘sugar is sugar,’ ‘your body can’t tell the difference,’ and ‘nutritionally the same as table sugar’ -- mislead the consuming public.”
United States Sugar Corp., Western Sugar Cooperative, Michigan Sugar Co. and seven other plaintiffs are suing ADM and Minneapolis-based Cargill Inc. They seek a court order halting the ads, plus unspecified money damages.
Corn Products International Inc., based in Westchester, Illinois, is among four other defendants in the suit, which accuses the high-fructose corn syrup producers of trying to rebrand their product after contributing to an increase in obesity in the U.S.
Jessie McKinney, a spokeswoman for Decatur, Illinois-based Archer-Daniels Midland, said she couldn’t immediately comment on the allegations. Lori Fligge, a spokeswoman for Cargill, didn’t immediately respond to a phone message seeking comment.
Aaron Hoffman, a spokesman for Corn Products International, referred questions to the Corn Refiners Association.
“The sugar industry is wrongfully alleging that high fructose corn syrup (a sugar made from corn) causes health issues that do not arise from consuming cane and beet sugar,” CRA President Audrae Erickson said in a statement. “The sugar industry’s views are misleading American consumers.”
The case is Western Sugar Cooperative v. Archer-Daniels Midland Co., 11-cv-3474, U.S. District Court, Central District of California (Los Angeles).
Occupy Wall Street Protesters Sue NYPD Over Citibank Arrests
A bartender and his fiancée involved in an Occupy Wall Street protest sued the New York City Police Department for alleged civil-rights violations stemming from a protest at a Citibank branch last month.
In a complaint filed yesterday in Manhattan federal court, Julio Jose Jimenez-Artunduaga and Heather Carpenter claimed the police violated protesters’ constitutional rights against unlawful detention and arrest and used excessive force after the Oct. 15 demonstration.
Carpenter, 23, a Citibank account holder from Port Jefferson on New York’s Long Island, decided to close her account after being notified that the bank was imposing a $17 monthly fee unless she maintained a balance of $6,000, according to the complaint.
She said in that she and other protesters, including Jimenez-Artunduaga, joined a demonstration inside the branch at 555 LaGuardia Place in Manhattan’s Greenwich Village.
According to the complaint, Carpenter left the branch after closing her account and began filming demonstrators as they interacted with police. An unidentified officer arrested Carpenter, saying, “You were inside with everybody else. You have to come with me,” according to the complaint.
The couple seeks unspecified damages and lawyers’ fees. Their attorney, Ron Kuby, and the Manhattan District Attorney’s office said the charges were dropped.
Paul Browne, Deputy Commissioner for Public Information for the New York Police Department, disputed the account of the incident described by the plaintiffs in their lawsuit.
“Both individuals were observed early on disrupting business inside the bank, and then slipping outside as arrests were under way, claiming falsely they were not engaged in the disruption,” he said in an e-mailed statement. “While still inside the bank, they were told to leave by bank personnel and did not. In fact, the males can be seen on a separate YouTube video videotaping, and at one point going behind the bank’s customer service desk to do so,” he said.
Kate O’Brien Ahlers, a spokeswoman for the New York City Law Department said, “We will review the plaintiffs’ papers after the city is served with the complaint.”
The case is Carpenter v. New York City Police Department, 11-cv-8414, U.S. District Court, Southern District of New York (Manhattan).
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Gates May Face Questions on Novell Monopoly Claims in Utah
Microsoft Corp. Chairman Bill Gates may face cross-examination about alleged monopolistic behavior 17 years ago when he testifies in a Novell Inc. lawsuit accusing the world’s largest software maker of undermining the WordPerfect program.
The suit is a byproduct of the U.S. government’s landmark antitrust case against Microsoft that settled more than eight years ago. In that case, the Redmond, Washington-based company was declared an illegal monopolist.
Novell said in its 2004 complaint that Microsoft unfairly restricted competition by its word-processing program. Gates targeted its products by name, Novell’s lawyers alleged, adding that the Microsoft chairman said his company’s software couldn’t compete without the benefit of anticompetitive conduct.
In May, the U.S. Court of Appeals in Richmond, Virginia, revived the case, which had been dismissed by a lower court judge. The appeals court ruled Novell, which briefly owned WordPerfect in the mid-1990s, didn’t cede its rights when it transferred claims related to its personal computer operating system products to Caldera Inc. in 1996.
The appeals court ruling sent the case back to U.S. District Judge J. Frederick Motz in Baltimore, who had originally tossed it out. Motz is conducting the trial in Salt Lake City federal court, where the original lawsuit was filed. Gates was called to the witness stand yesterday.
Novell, which was bought by Seattle-based Attachmate Corp. in April, has argued that WordPerfect’s share of the word-processing market fell to less than 10 percent in 1996 from almost 50 percent in 1990.
Its value dropped from $1.2 billion in May 1994 to $170 million in 1996 when it was sold to Ottawa-based Corel Corp., said Novell, which is seeking three times its losses in the lawsuit. The company settled separate antitrust claims against Microsoft for $536 million in 2004.
Microsoft, which called Gates to testify in the company’s defense, has denied Novell’s arguments that it maintained an operating system monopoly by, in part, withdrawing programming support so as to hobble Novell’s WordPerfect and Quattro Pro programs for Microsoft’s Windows 95 operating system.
The case is Novell Inc. v. Microsoft Corp., 04-01045, U.S. District Court, District of Utah (Salt Lake City).
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Ex-Madoff Trader David Kugel Pleads Guilty to Bank Fraud
David Kugel, a former trader at convicted confidence man Bernard Madoff’s investment firm, admitted to bank fraud in federal court in Manhattan.
Kugel pleaded guilty to six criminal counts pursuant to a cooperation agreement with the government at a hearing yesterday before U.S. District Judge Laura Taylor Swain. Swain said that Kugel, 66, faces as long as 85 years in prison and fines of $11.75 million.
Kugel was a supervisory trader in the proprietary trading operation of Bernhard L. Madoff Investment Securities LLC, according to a letter this month from prosecutors to the judge. He was accused of conspiracy to commit securities fraud going back to the early 1970s by helping create fake trades to deceive customers.
Kugel said yesterday that he conspired with Joann Crupi and Annette Bongiorno, two former Madoff employees, to falsify trading records and information. He said his conspiracy with Bongiorno to create fake trading records for Madoff customers dated back “to the early 1970s” and continued until the firm’s collapse in December 2008.
Bongiorno, who recruited investors and helped run Madoff’s investment advisory office, and Crupi, a keypunch operator, were charged last November by the U.S. in the Madoff probe. Both women have denied the charges against them.
Madoff, who pleaded guilty to fraud charges, is serving 150 years in prison for the largest Ponzi scheme in U.S. history. Investors lost about $20 billion in principal, the U.S. trustee liquidating the securities business has said.
The case is U.S. v. Kugel, 10-228, U.S. District Court, Southern District of New York (Manhattan.)
Cybex Defective-Product Verdict Affirmed, Amount Reduced.
Cybex International Inc., a fitness-equipment maker, lost an appellate court decision upholding a defective-product verdict and said it will appeal.
A New York state court reduced the judgment by about 31 percent to about $44 million, Cybex said in statement yesterday.
“Contrary to the contention of Cybex on its appeal, we conclude that a fair interpretation of the evidence supports the jury’s verdict that Cybex was negligent and that its negligence was a substantial factor in causing plaintiff’s injuries,” the panel wrote in the Nov. 18 opinion.
Natalie Barnhard, a Cheektowaga, New York, assistant physical therapist, sued Cybex after an exercise machine tipped over and fell on top of her, leaving her a quadriplegic.
“Cybex strongly believes that it was not at fault in the accident that is the basis of the plaintiff’s claims and that this case was wrongly decided as to liability,” Chief Executive Officer John Aglialoro said in the statement. “While the company appreciates the decision of the court to reduce the judgment, we believe that the amount of damages represented by the reduced judgment continues to be overstated.”
Michael Law, the plaintiffs’ attorney from Phillips Lytle LLP, said the firm will talk to its client about whether to accept the reduced award or seek a new trial on damages.
The case is Barnhard v. Cybex, CA 11-00893, Supreme Court of the State of New York, Appellate Division, Fourth Judicial Department (Rochester).
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NBA Players Drop One Lawsuit, Focus on Minnesota Antitrust Suit
New York Knicks forward Carmelo Anthony and other professional basketball players dismissed their antitrust lawsuit against the National Basketball Association in Oakland, California, to join a Minnesota case.
David Boies, an attorney representing players in their legal filings against the NBA, told reporters at his office in New York that the Minnesota case may move faster.
“The point is to expedite this and move this along,” Boies said yesterday. “The likelihood is that we’d get a faster result in Minnesota than California.”
The players allege that the league’s lockout is an illegal group boycott that violates federal antitrust law, according to the complaint.
“We assume that Mr. Boies was not happy with either the reassignment of the case from Oakland to San Francisco or the fact that the new judge scheduled the first conference for March 2012,” said Rick Buchanan, NBA executive vice president and general counsel.
NBA players on Nov. 14 dissolved their union, a first for the group, to allow for antitrust lawsuits against the league after negotiations over a new labor agreement collapsed. The sides were negotiating over how to split money from a league that had about $4.3 billion in revenue last season. The NBA season was to start Nov. 1.
The Minnesota case is Anthony v. NBA, 11-03352, U.S. District Court, District of Minnesota (Minneapolis).
Gupta Seeks to Depose Goldman Executives, Galleon Traders
Ex-Goldman Sachs Group Inc. Director Rajat Gupta, set for trial next year on insider-trading charges, told a judge in a related civil case that he wants to question the bank’s executives and Galleon Group LLC former traders.
U.S. District Judge Jed Rakoff in Manhattan, who is presiding over the cases, last week ordered Gupta, the Securities and Exchange Commission and lawyers for Galleon co-founder Raj Rajaratnam to identify witnesses they want to depose in the SEC’s lawsuit. The lists were made public yesterday.
Gupta’s list includes Goldman Sachs Chief Executive Officer Lloyd Blankfein, Chief Financial Officer David Viniar, President Gary Cohn, Managing Director David Loeb and John Bryan or another director. Also on the list is Caryn Eisenberg, the former assistant to Rajaratnam; ex-Galleon trader Michael Cardillo; and James McNerney, presiding director of Procter & Gamble Co.
“The witnesses we list are believed to have information relevant to this action,” wrote Gary Naftalis, the lawyer for Gupta, in a letter to the judge.
Michael DuVally, a spokesman for Goldman Sachs, declined to comment.
Rajaratnam was sentenced to 11 years in prison after he was convicted of insider trading earlier this year.
The cases are U.S. v. Gupta, 11-cr-00907, and SEC v. Gupta, 11-cv-07566, U.S. District Court, Southern District of New York (Manhattan).
Raytheon Loses Bid to Dismiss $1 Billion FAA Contract Case
Raytheon Co. lost its attempt to dismiss a lawsuit accusing the company of bid-rigging to secure an almost $1 billion contract from the U.S. Federal Aviation Administration.
A District of Columbia Superior Court judge yesterday said the case filed by Washington Consulting Group Inc. against Raytheon, Raytheon Technical Services Co. LLC and one of its employees can proceed. Raytheon had argued that the allegations weren’t specific enough and that the plaintiff hadn’t first filed its challenge with the FAA.
“The FAA has no expertise or special competence in adjudicating matters of state law, and plaintiff, as a subcontractor, had no right -- much less a duty -- to challenge the FAA award,” Judge Franklin Burgess said in his ruling.
Washington Consulting, based in Bethesda, Maryland, seeks more than $1 billion in damages.
Washington Consulting claims Raytheon and its employee Charles E. Keegan, who was allegedly having an affair with a high-ranking FAA official, conspired with the agency to ensure that his employer would win a 10-year contract in 2008 to train air-traffic controllers, according to court records.
Jon Kasle, a spokesman for Waltham, Massachusetts-based Raytheon, said he couldn’t immediately comment on the decision.
The case is Washington Consulting Group Inc. v. Raytheon Technical Services Co. LLC, 10-00296, Superior Court of the District of Columbia (Washington).
Steven J. Baum PC, New York Foreclosure Firm, to Shut Down
Steven J. Baum PC, one of the largest law firms specializing in home foreclosures in New York state, is shutting down after losing business from Fannie Mae and Freddie Mac.
The Baum firm notified government entities, including the New York State Department of Labor, that it planned mass job cuts, it said in an e-mailed statement yesterday. Earl Wells, a firm spokesman, confirmed that it’s closing.
This month, Fannie Mae and Freddie Mac, the mortgage-finance companies operating under U.S. conservatorship, dropped Steven J. Baum PC from their lists of law firms eligible to handle foreclosures. Home-loan servicers including Bank of America Corp. and Ally Financial Inc. also stopped using the firm, which last month agreed to pay the U.S. $2 million and change its practices to resolve a probe of faulty foreclosure filings.
“Disrupting the livelihoods of so many dedicated and hardworking people is extremely painful, but the loss of so much business left us no choice but to file these notices,” Steven J. Baum, who owns the firm, said in the statement.
Baum wouldn’t comment further, Wells said.
The firm has about 67 full- and part-time employees at its headquarters in Amherst, New York, just north of Buffalo, and 22 full- and part-time employees at its Westbury, New York, office on Long Island, according to the statement.
The agreement with the U.S. government concluded an investigation into whether the firm filed misleading pleadings, affidavits and mortgage assignments in courts, according to a statement by U.S. Attorney Preet Bharara in Manhattan. The settlement didn’t constitute a finding of wrongdoing.
Steven J. Baum PC has attracted lawsuits and fines for its actions during the housing crisis. It has been accused of overcharging, filing false documents and representing parties on both sides of a mortgage transfer.
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Ted Stevens Prosecutors Shouldn’t Face Charges, Counsel Says
Prosecutors’ misconduct in the failed corruption case against late Alaska Republican Senator Ted Stevens doesn’t warrant criminal contempt charges, a lawyer appointed to investigate the matter reported.
Special counsel Henry F. Schuelke III didn’t recommend bringing charges for criminal contempt because the evidence was insufficient to prove “beyond a reasonable doubt” that the prosecutors violated a “clear and unequivocal” court ruling, U.S. District Judge Emmet G. Sullivan wrote in an order yesterday that summarized the findings of Schuelke’s unreleased report.
Even so, Schuelke’s report outlined “concealment and misconduct that was previously unknown and almost certainly would never have been revealed,” wrote Sullivan, who oversaw the trial and appointed Schuelke. Prosecutors systematically concealed “significant exculpatory evidence” that would have weakened the credibility of key government witnesses in the 2009 political corruption case, he said.
Sullivan said he intends to make the 500-page report public after the Justice Department and Stevens’s attorneys have had a chance to review it. He set aside the verdict against Stevens in April 2009 and ordered an investigation into whether prosecutors’ conduct, which he said was the worst he had seen in 25 years on the bench, was criminal.
The Justice Department abandoned the case after Attorney General Eric Holder discovered that the prosecutors had withheld evidence that would have helped Stevens contest charges he omitted $250,000 worth of gifts on his financial disclosure reports.
The Justice Department is reviewing the order, spokeswoman Laura Sweeney said.
Those investigated included William Welch II, chief of the Justice Department’s public integrity section; Brenda Morris, the principal deputy director; and four other members of the trial team. The section prosecutes public officials and government employees for corruption.
Stevens, who represented Alaska for four decades in the U.S. Senate, died in August 2010 in the crash of a small plane in the state, along with four other people.
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