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Blagojevich, UBS, Goldman, HSBC, BP, Aetna in Court News

Former Illinois Governor Rod Blagojevich’s 14-year prison sentence should send the message that the public and judges are fed up with the state’s history of corruption, said the U.S. Attorney who prosecuted the case.

Prosecutors had asked James B. Zagel in Chicago to lock up Blagojevich for 15 to 20 years, arguing it would deter future wrongdoing in a state where four of the nine most recent governors have been convicted for crimes committed before, during or after they held office. The twice-elected Democrat’s predecessor, Republican George Ryan, is serving a 6 1/2 year federal prison sentence after being convicted by a jury in the same courthouse in 2006.

“It is profoundly sad that we are here for the second time in five years to discuss the conviction and sentencing of a governor of Illinois,” U.S. Attorney Patrick Fitzgerald said at a press conference yesterday after Zagel sentenced Blagojevich. “This has to stop. To put it very, very simply: we don’t want to be back here again.”

Blagojevich’s case began three years ago and featured two separate trials over allegations that he sought to trade official acts for campaign cash and other favors, including his attempted sale of the U.S. Senate seat Barack Obama gave up when he was elected president.

Blagojevich led the fifth-most populous American state from January 2003 until his impeachment and removal from office in January 2009. He was arrested a month earlier for what Chicago Fitzgerald then called “a political corruption crime spree.”

The ex-governor, 54, was found guilty on 17 counts in a trial that ended in June. A previous jury had deadlocked on 23 of the 24 counts it considered, finding the ex-governor guilty of lying to federal agents. Prosecutors dropped three counts before the retrial.

“I accept the people’s verdict,” Blagojevich told the judge before he was sentenced. “They’ve found me guilty. All I can say is I’ve never wanted to hurt anyone.”

Attorneys for Blagojevich argued for leniency and mercy, telling the judge it would be unfair to make their client pay for the acts of those who came before him.

In court yesterday, Blagojevich choked with emotion as he made a 20-minute statement and apologized to “the people of Illinois,” and to his family.

The case is U.S. v. Blagojevich, 08-cr-888, U.S. District Court, Northern District of Illinois (Chicago).

For more, click here.

New Suits

Ex-UBS Client Zavieh Indicted for Hiding Accounts From IRS

A former UBS AG client, Amir Zavieh, was indicted by a federal grand jury on a charge that he defrauded the U.S. by hiding assets from the U.S. Internal Revenue Service.

Zavieh, a San Francisco resident, conspired with five others, according to an indictment in Fort Lauderdale, Florida. They included former UBS bankers Renzo Gadola, who was sentenced last month to five years probation, and Martin Lack, who was indicted Aug. 2 and is considered a fugitive.

Zavieh opened an undeclared account with UBS in 1989 and transferred it in 2008 to a smaller Swiss cantonal bank after Gadola said his records could be given to the IRS, according to an indictment returned Dec. 6 and filed with the court yesterday. UBS, the largest Swiss bank, handed over more than 4,700 secret accounts in 2009 to resolve U.S. criminal and civil cases.

“At some point IF they come after me, I will fight it tooth and nail,” Zavieh said in a June 2010 e-mail to Gadola quoted in the indictment. “What is also interesting or perhaps appalling is that the laws of a country and perhaps its tradition is being broken to save a bank’s ass for selling out its own clients who have been trusting and feeding them for years!”

Zavieh’s attorney, Robert Bockelman, didn’t immediately return a call seeking comment on the indictment.

The case is USA v. Zavieh, 11-cr-60287, U.S. District Court, Southern District of Florida (Fort Lauderdale).

For more, click here.

Rajat Gupta Lawsuit Dismissal Opposed by Goldman Investor

Goldman Sachs Group Inc. investor James Mercer, in a lawsuit against former board member Rajat Gupta in which the bank is a “nominal plaintiff,” filed court papers opposing a motion by the defendant to dismiss the case.

In the lawsuit, Mercer alleged Gupta disclosed confidential bank information to Galleon Group LLC co-founder Raj Rajaratnam, the hedge-fund manager who was later convicted of insider trading. Gupta has been charged by federal prosecutors in connection with the Rajaratnam probe.

“Gupta did not provide confidential information about the Goldman Sachs Group Inc. to Raj Rajaratnam without purpose,” Mercer said in the filing yesterday in Manhattan federal court. “He did it for pecuniary gain.”

Gary Naftalis, Gupta’s lawyer, declined to comment on the filing.

In March, the U.S. Securities and Exchange Commission started administrative proceedings against Gupta over claims of securities fraud. Mercer sued in June, seeking to recover short-swing profits generated by Galleon trades in Goldman Sachs stock. Short-swing profits are profits made by an insider on the purchase and sale, within six months, of company stock.

Mercer claimed that Gupta, who as a Goldman Sachs director is considered a company insider, should be deemed the legal beneficiary of the Galleon trades. Gupta was alleged by the SEC to have given Rajaratnam tips about Goldman Sachs’s quarterly financial results before they were made public.

In seeking to dismiss Mercer’s suit in November, Gupta said, “the complaint’s allegations are all about tipping and not about trading by Mr. Gupta. The complaint fails to allege a purchase or sale by Mr. Gupta of even a single share of Goldman Sachs stock.”

Mercer countered yesterday that Gupta, by owning Goldman Sachs shares, benefited from Rajaratnam’s trades.

Andrea Raphael, a spokeswoman for New York-based Goldman Sachs, didn’t return a call seeking comment on the filing.

Rajaratnam was convicted on insider-trading charges and is serving an 11-year prison sentence in Ayer, Massachusetts.

The case is Mercer v. Gupta, 11-3828, U.S. District Court, Southern District of New York (Manhattan).

HSBC Sued Over Alleged False Submissions to Court in Hong Kong

HSBC Holdings Plc was sued by a Hong Kong businessman who alleged the bank made false representations to the city’s Court of Appeal to win a decision over the sale of a commercial property in 1987.

HSBC made false submissions to the court to wrongfully procure a judgment, Gurdas Choithramani said in a writ filed yesterday. Gurdas said at a press conference that he is seeking damages for losses in the “hundreds of millions of dollars.”

Esquire Electronics Ltd., the now defunct company owned by Gurdas and his brother, lost an attempt in 2007 to appeal a ruling that HSBC didn’t breach its duty or employ economic duress and undue influence in requiring Esquire to sell a commercial building in Hong Kong’s Kowloon district.

Gareth Hewett, a spokesman for HSBC in Hong Kong, said the bank will vigorously defend the case and declined to comment further.

Gurdas didn’t take any questions at the press conference.

The case is Gurdas S Choithramani and The Hongkong and Shanghai Banking Corporation Ltd., HCA2073/2011, Hong Kong Court of First Instance.

Michigan Blue Cross Accused by Aetna of Hospital Rate Scheme

Blue Cross Blue Shield of Michigan, the state’s biggest health insurer, was sued by Aetna Inc. over an alleged anticompetitive scheme that forces rivals to pay more for hospital services.

“Stated simply, Blue Cross has entered into exclusionary contracts with hospitals under which it agreed to pay hospitals more money if the hospitals increased the rates they demanded to treat patients covered by its competitors’ health plans,” Aetna said in a complaint filed Dec. 6 in federal court in Detroit.

Aetna said that, starting in 2005, it made an “enormous” investment to expand its business in Michigan, including acquiring HMS Healthcare for about $390 million. Hartford, Connecticut-based Aetna accuses Blue Cross Blue Shield of Michigan of violating U.S. antitrust law and it seeks three times the amount of damages it sustained.

Blue Cross Blue Shield of Michigan in August lost a bid to dismiss a joint U.S.-state lawsuit accusing it of driving up competitors’ costs through preferential pricing contracts with hospitals. In some cases, hospitals charged rivals 30 percent to 40 percent more than Blue Cross, the U.S. Justice Department has said.

The case is Aetna v. Blue Cross Blue Shield of Michigan, 11-15346, U.S. District Court, Eastern District of Michigan (Detroit.)

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


BP Asks Judge to Reject U.S. Bid to Revoke Alaska Probation

BP Plc asked a federal judge to reject a U.S. request that the U.K.-based energy company have its probation revoked for a spill in Alaska’s Prudhoe Bay, as closing arguments concluded.

BP pleaded guilty in 2007 to violating the Clean Water Act by spilling 200,000 gallons of oil from its Prudhoe Bay field into water on Alaska’s North Slope in 2006. It paid a $12 million fine and $8 million for restitution and community service, and was put on three years’ probation.

The government asked U.S. District Judge Ralph Beistline in Anchorage to revoke the probation, contending BP violated the agreement when it spilled about 13,500 gallons of oil near Prudhoe Bay in November 2009. The company didn’t do anything to warrant such action, BP lawyer Jeff Feldman said in closing arguments at the hearing yesterday.

The government has been attacking BP “with the perfect wisdom of 20-20 hindsight,” Feldman said. “BP conformed to industry standards.”

The U.S. sought to revoke probation just before it ended in 2010. Prosecutors may seek more money from the company if the judge agrees the terms of the probation were violated. BP has asked that the court reject the U.S. request and end probation completely.

Beistline didn’t indicate yesterday when he would decide.

The case is U.S. v. BP Exploration (Alaska) Inc., 3:07-cr-00125, U.S. District Court, District of Alaska (Anchorage).

For more, click here.

Citic Pacific Says It Didn’t Know Currency Exposure Impact

Citic Pacific Ltd.’s officers didn’t know the implications of the company’s currency exposure when they failed to disclose potential losses, a lawyer for the steelmaker and property developer told a Hong Kong court.

“In contracts of this complexity, how can you decide within two days that you’re going to sustain huge losses that would require a report to the stock exchange,” said Collingwood Thompson at a hearing Dec. 6 where Citic Pacific is fighting a ruling that police should have access to some of its documents.

Hong Kong’s Department of Justice said in March it suspects Citic Pacific defrauded four banks before Oct. 20, 2008, when it sought financing without disclosing losses on currency bets. The company had said in a stock exchange filing on Sept. 12 that year that its directors weren’t aware of any material adverse change in the group’s financial position.

Court of Appeal judges Michael Hartmann, Susan Kwan and Jonathan Harris yesterday denied a Department of Justice request to provide evidence from the banks that they were misled about Citic Pacific’s finances.

In an Oct. 20 filing in 2008, the company said its bet the Australian dollar would fall against its U.S. counterpart could result in losses of as much as HK$15.5 billion ($2 billion). The company learned of the exposure on Sept. 7, it said. The Sept. 12 filing cited information current until Sept. 9.

Justice Department lawyer Charlotte Draycott said yesterday that any responsible director would have been monitoring the relevant exchange rates on a daily basis.

“It’s completely unrealistic to say the people in charge of this company, the board of directors, were not fully aware of what was happening,” she told the court.

The case is Citic Pacific Ltd. and Secretary of Justice, Commissioner of Police, CACV60/2011 in Hong Kong’s Court of Appeal.

For more, click here.

Andy Coulson Asks Court to Make News Corp. Pay Legal Bills

Andy Coulson, the ex-tabloid editor who resigned in January as U.K. Prime Minister David Cameron’s press chief, told a judge that News Corp. must pay his legal bills in a case over phone hacking.

Coulson, who edited News Corp.’s News of the World before going into government, was arrested in July as police investigated the extent of hacking into celebrities’ voice mails by reporters at the tabloid under his watch. He sued the company on Sept. 22 over claims it breached his severance agreement by refusing to pay his legal costs.

Coulson, who resigned as editor in 2007, has a “binding contract” requiring the company’s News International unit to “pay reasonable legal costs and expenses after termination” in any proceedings related to his time as editor, his lawyer James Laddie said yesterday at a London trial. News International argued the deal doesn’t cover criminal cases and that, even if it did, it wouldn’t cover costs related to an investigation.

London’s Metropolitan Police arrested Coulson on suspicion of conspiring to hack into mobile-phone messages and in conjunction with a probe of police bribery. He is free on bail until March 2012, as is former News International Chief Executive Officer Rebekah Brooks, who had also edited the paper and was arrested the same month. Neither have been charged with a crime.

Christopher Jeans, a lawyer for News International, said the agreement only covered legal costs for the occupational hazards of being an editor, such as libel lawsuits.

“What is not envisioned is criminal conduct by him personally,” Jeans said. “It cannot be the case that anything in the contract anticipates unlawful payments to the police or unlawful interception of phone messages.”

The case is: A Coulson v. News Group Newspapers Ltd., case no. 11-3525, High Court of Justice, Queen’s Bench Division (London).

For more, click here.

For the latest lawsuits news, click here.


Raj Rajaratnam Appeals Record $92.8 Million SEC Penalty

Raj Rajaratnam, the former hedge fund manager serving 11 years in prison for insider trading, appealed the record $92.8 million penalty imposed by the U.S. Securities and Exchange Commission in its civil case against him.

Rajaratnam notified a federal court in Manhattan yesterday that he’s asking a federal appeals court to review the decision imposing the fine, which was entered by U.S. District Judge Jed Rakoff on Nov. 8.

Rajaratnam, 54, had argued that he shouldn’t have to pay a civil penalty in the SEC case because the judge in the criminal case ordered him to pay a $10 million fine and forfeit $53.8 million.

A co-founder of Galleon Group LLC, Rajaratnam reported to Federal Medical Center Devens in Ayer, Massachusetts, on Dec. 5 to begin his prison sentence. He was convicted by a federal jury in May of 14 counts of conspiracy and securities fraud for trading on inside information.

The SEC penalty is the largest ever assessed against a person in an insider trading case, Robert Khuzami, the SEC’s director of enforcement, has said.

The case is SEC v. Rajaratnam, 09-cv-8811, U.S. District Court, Southern District of New York (Manhattan).

Gribkowsky Made Surprise Request for F-1 Fees, Witness Says

Gerhard Gribkowsky, a former Bayerische Landesbank’s management board member, made a last minute request for extra fees in the 2005 sale of the lender’s stake in the Formula One racing series, a witness said at Gribkowsky’s fraud trial.

Gribkowsky, who was responsible for the lender’s investment in the series, sought two extra payments as a “surprise and at the last minute” during the 840 million-euro ($1.1 billion) sale of BayernLB’s 47 percent Formula One stake to CVC Capital Partners Ltd., Alexandra Irrgang, who worked on BayernLB’s team overseeing the stake, told a court in Munich yesterday.

Gribkowsky is being tried on charges he received $44 million in bribes to facilitate the sale. Formula One Chief Executive Officer Bernie Ecclestone, who is also being investigated, had wanted Munich-based BayernLB to sell the stake to private equity firm CVC, prosecutors said in the indictment.

Gribkowsky, the lender’s former chief risk officer, told BayernLB’s management board that a failure to agree to the payments might be a deal breaker.

The bank thought “the CVC offer was too good to be true and we expected problems to surface at some point,” she said.

BayernLB’s management board didn’t inform the lender’s supervisory board about the “high fees included in the sales agreement,” Kurt Faltlhauser, the former supervisory board head, told the court last month.

While BayernLB held the Formula One stake, “Ecclestone wore us down in an extreme manner,” Irrgang said.

Ecclestone testified last month that he believed he had no “alternative” to making payments to Gribkowsky as he feared that the banker might disclose information to U.K. tax authorities about the Bambino trust controlled by his then wife that might be “very expensive” for him as he would have to provide evidence that he wasn’t in control of the trust.

The Bambino trust has told the court the $25 million transactions -- payments to four racing teams -- went to compensate valid claims and were legitimate, Gribkowsky’s lawyer Rainer Bruessow has said, adding that the allegations will collapse.

CVC had no knowledge of any payment to Gribkowsky, the company has said.

For the latest trial and appeals news, click here.


Ex-Ahold Official Gets 46 Months in Prison for Securities Fraud

Mark Kaiser, the ex-marketing chief of Koninklijke Ahold NV’s former U.S. Foodservice unit, was sentenced to three years and 10 months in prison for securities fraud.

“The details are of serious fraud involving many different aspects and activities involving hundreds of millions of dollars,” U.S. District Judge Thomas Griesa said in court yesterday in Manhattan before imposing the sentence. “I really feel that I must impose a sentence which gives due regard for the extent of that criminal conduct.”

Kaiser pleaded guilty in August to one count of conspiracy to commit securities fraud in connection with a scheme to inflate U.S. Foodservice’s financial results by about $800 million from 2000 to 2003 by booking promotional rebates as income. The higher profit earned Kaiser and others “substantial year-end bonuses,” the prosecutors said.

The federal sentencing guidelines in his plea agreement called for prison time from 46 months to 57 months. Dan Brown, Kaiser’s lawyer, asked the judge to issue a probationary sentence.

“I hope you will agree the past bad decisions that bring me before you today are in my past,” Kaiser told the judge yesterday.

Kaiser was convicted in 2006. After that trial, Griesa sentenced him to seven years in prison.

In 2010, the U.S. Court of Appeals in New York threw out his conviction and ordered a new trial because the lower-court judge had allowed some improper evidence to come into the case. Kaiser entered his plea on Aug. 15.

The case is U.S. v. Kaiser, 04-cr-00733, U.S. District Court, Southern District of New York (Manhattan).

Ex-Marvell Accountant Ng Pleads Guilty in Insider Probe

Stanley Ng, a former Marvell Technology Group Ltd. accountant, pleaded guilty to his role in an insider-trading scheme involving so-called expert networking firms.

Ng admitted yesterday passing information about Marvell’s earnings in 2007 and 2008 to two members of an “investment club” that prosecutors said was set up to trade illegal stock tips. The government said Ng was recruited into the group by Winifred Jiau, a former consultant with expert-networking firm Primary Global Research LLC who was convicted in June.

“I provided material, nonpublic information to Winifred Jiau and Sonny Nguyen about Marvell’s quarterly financial results before those results were made public,” Ng told U.S. District Judge Jed S. Rakoff in Manhattan. “In exchange I received similar stock tips from my co-conspirators.”

Ng was hired by Marvell in 2002 to be the company’s Securities and Exchange Commission reporting manager, the government said. He had access to company financial records and regulatory filings before they became public, according to prosecutors.

Ng remains free on a $50,000 bond secured by his home in Cupertino, California. He’s scheduled to be sentenced April 9.

The case is U.S. v. Ng, 11-02096, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

Interclick Investors File Settlement Plan Over Yahoo Buyout

Investors in Interclick Inc., a provider of marketing advice based on consumers’ online behavior, filed a tentative settlement of lawsuits over a planned $270 million buyout by Yahoo! Inc.

Yahoo on Nov. 1 agreed to acquire New York-based Interclick for $9 a share, a 22 percent premium at the time. Some shareholders sued Interclick directors in Delaware Chancery Court and state court in New York, saying the price was too low.

“As part of the settlement, all of the defendants deny all allegations of wrongdoing,” according to a Dec. 5 report to the U.S. Securities and Exchange Commission.

The parties signed a memorandum of understanding Dec. 4 to settle the cases in exchange for “certain supplemental disclosures” about the buyout process, according to court papers. The accord requires approval from a Delaware judge.

“The settlement will not affect the amount of consideration to be paid” in the deal, Yahoo told the SEC.

The lead Delaware case is Whaley v. Brauser and Interclick Inc., CA7038-VCG, Delaware Chancery Court (Wilmington).

For the latest verdict and settlement news, click here.

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