Ma Sin-chi, a Deutsche Bank AG managing director in Hong Kong, was charged with accepting HK$24.8 million ($3.2 million) in bribes in exchange for advice on the trading of derivative warrants issued by the bank.
Four stock investors were also charged at Hong Kong’s Eastern Magistrates’ Court yesterday with conspiring to offer the bribes to Ma, 37, according to a statement from the city’s Independent Commission Against Corruption.
The five defendants, who were arrested in April last year, didn’t enter pleas and the case was adjourned to April 24 pending further enquiries, according to the statement. Deutsche Bank and the Securities and Futures Commission “rendered full assistance” in the investigation, the ICAC said.
Ma has been suspended from Deutsche Bank since his arrest and the bank’s Hong Kong spokesman Michael West said the case is a personal matter for Ma.
“There is absolutely no suggestion of wrongdoing by Deutsche Bank,” West said.
Ma allegedly accepted the bribes between January 2007 and May 2008, according to the ICAC statement.
Suspended Korean Savings Bank Chairman Found Dead in Seoul
The biggest shareholder of Ace Mutual Savings Bank, a South Korean lender whose operations were suspended last year by the regulator, was found dead yesterday ahead of scheduled questioning by prosecutors.
The body of Kim Hak Heon, chairman of Incheon, South Korea-based Ace Mutual, was discovered in a Seoul hotel room, the city’s Bangbae district police authorities said in a statement posted on their website. Prosecutors had planned to question Kim yesterday regarding allegations of illicit lending and accounting fraud, the police said.
Ace Mutual was one of 16 savings banks shuttered by South Korean regulators last year as developers defaulted on loans amid a slowdown in the real-estate market. South Korean prosecutors last year indicted more than 100 people including shareholders, executives of the savings banks and government and regulatory officials over lax management and oversight as well as misuse of funds.
Kim owned a 56 percent stake in closely held Ace Mutual, according to the bank’s regulatory filing. The lender had total assets of 991.8 billion won ($860 million) as of June, according to Financial Services Commission data.
A woman who answered two calls to the Supreme Prosecutors’ Office of Korea declined to comment or connect the calls to a spokesman and refused to give her name, and there was no response to an e-mail sent by Bloomberg News. A person who answered the phone at Ace Mutual’s headquarters in Seoul also declined to comment and refused to provide her name.
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News Corp. Tells Judge of U.K. Tabloid’s Prison-Guard Bribe
News Corp. for the first time publicly gave details on bribery by a journalist at its now-defunct News of the World, telling a court that a former editor agreed to pay a prison guard to get a story about a child killer.
Matt Nixson, a features editor for five years at the News of the World, told a reporter in a March 7, 2009, e-mail to pay 750 pounds ($1,150) to the guard for details about a man who murdered two girls. Nixson then said to “chuck her some more money later” since she wanted 1,000 pounds, News Corp. said in court papers filed Dec. 13 in London and made public yesterday.
The disclosure is part of the company’s defense in Nixson’s lawsuit claiming he was wrongfully fired from News Corp.’s Sun tabloid, where he last worked, as the company sought to contain a phone-hacking scandal. News Corp. closed the News of the World in July after it was revealed it hacked into the voice mail of a different murdered schoolgirl in 2002.
Nixson “was guilty of gross misconduct, or at any rate, conduct justifying dismissal without notice or pay,” members of the company’s Management and Standards Committee, which is running the investigation, said in the court filing.
Alison Downie of Goodman Derrick LLP in London, Nixson’s lawyer, said in an e-mailed statement that “my client wishes to make it absolutely clear that he neither bribed, nor ever admitted to bribing a prison officer” and will continue to pursue his claims against the company and committee.
Nixson hasn’t been arrested as part of the Metropolitan Police’s probe into journalist bribery of police. At least eight people have been arrested, including a serving police officer on Dec. 21.
Nixson, who was fired in July, knew the bribe was wrong because he told the reporter, Matthew Acton, to arrange the payment “very carefully,” since the company had a “forensic new accountant who doesn’t brook any funny business,” according to the filing. Acton declined to comment when reached by phone.
Nixson also received an e-mail from another News of the World employee about phone hacking and “blagging,” or lying to get personal information for a story, and didn’t “raise an objection,” News Corp. said in the filing.
Daisy Dunlop, a spokeswoman for the New York-based company’s News International unit, declined to comment on the case. Paul Durman, a spokesman for the committee, also declined to comment.
News International is facing about 70 lawsuits filed by victims of phone hacking, as well as separate police probes of phone hacking, computer hacking and bribery. Prime Minister David Cameron also called for judge-led inquiry into the ethics of U.K. newspapers, which was triggered by the scandal.
The case is Nixson v. News Group Newspapers, HQ11X03843, High Court of Justice Queen’s Bench Division.
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Samsung, LG Conspire to Fix Prices, South Korea Regulator Says
Samsung Electronics Co. and LG Electronics Inc., South Korea’s two largest electronics makers, conspired to boost prices for some of their products in their local market, the country’s antitrust regulator said.
The companies will be fined 45 billion won ($39 million) in total for fixing prices of washing machines, flat-screen TVs and laptop computers, the Korea Fair Trade Commission said in an e-mailed statement yesterday.
Officials from Samsung and LG, the two largest makers of the products in South Korea, held meetings in Seoul between 2008 and 2009 to share information and raise prices, the commission said in its statement.
LG will step up efforts not to repeat the practice, Claire Jang, a spokeswoman for the Seoul-based company, said by phone.
Samsung, based in Suwon, South Korea, didn’t have an immediate comment as it hadn’t received official notice of the ruling yet, Chenny Kim, a company spokeswoman in Seoul, said by phone. Samsung will look into the matter when it receives relevant documents from the commission, she said.
CFTC Offered to Settle Lawsuit for $175,000, McCrudden Says
An ex-commodities trader who pleaded guilty to threatening to kill financial regulators, including Commodity Futures Trading Commission Chairman Gary Gensler, said the CFTC offered to settle a civil case against him for a $175,000 fine and a lifetime ban from the industry.
Vincent P. McCrudden, awaiting sentencing in a Queens, New York, jail, told U.S. District Judge Denis R. Hurley in Central Islip, New York, about the offer in a letter made public Jan. 9. Settlement negotiations on Dec. 12 were unsuccessful, according to an order by U.S. Magistrate Judge A. Kathleen Tomlinson, who, according to McCrudden “endorsed” the CFTC’s offer.
McCrudden, 50, pleaded guilty to two counts of transmission of threats to injure before opening arguments were scheduled to begin in his trial on July 18. The charges carry a maximum sentence of 10 years in prison. According to the government, he posted an “execution” list on his company website after the CFTC accused him in the December 2010 lawsuit of illegally starting his Hybrid Fund II LP in 2008 without registering it.
Dennis Holden, a CFTC spokesman, declined to comment on the settlement negotiations.
Hurley is presiding over both the CFTC suit and the criminal case.
The criminal case is U.S. v. McCrudden, 11-cr-61, and the civil case is U.S. Commodity Futures Trading Commission v. McCrudden, 10-cv-5567, U.S. District Court, Eastern District of New York (Central Islip).
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Terra Firma Loses U.K. Court Bid for EMI Valuation Documents
Terra Firma Capital Partners Ltd. failed to force the administrators of EMI Group to hand over documents about the sale of the music group to Citigroup Inc. in a deal that caused Terra Firma to lose about 1.85 billion pounds ($2.8 billion).
Units of Terra Firma, the private equity firm run by Guy Hands, sought the valuation documents from EMI’s administrators at PricewaterhouseCoopers LLP and its advisers because it had “serious concerns about the circumstances surrounding the sale,” Judge Nicholas Warren in London said in a ruling dated Jan. 5.
Warren rejected the application, saying Terra Firma had all the information it needed about the valuation of EMI.
Citigroup seized control of EMI in February after EMI failed to meet its debt obligations. In 2010, Hands sued Citigroup in the U.S., saying it had tricked him into buying the record label.
Terra Firma spokesman Andrew Dowler didn’t return calls to comment.
The case is in the Matter of Maltby Investments Ltd., High Court of Justice Chancery Division.
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J&J Whistle-Blower Jones Says He Was Fired After Payment Probe
A whistle-blower who sued Johnson & Johnson over the marketing of its antipsychotic Risperdal told a jury he was fired after probing company payments to a top pharmacist in Pennsylvania’s government who hid the money.
Allen Jones testified yesterday in state court in Austin, Texas, that he was an investigator in the Pennsylvania Office of Inspector General in 2002 when he looked into an unregistered bank account run by Steven Fiorello, the pharmacist. Fiorello was on a Pennsylvania committee weighing whether to require doctors to give priority to newer, more expensive drugs like Risperdal in state-funded treatment of mental-health patients, Jones said.
Jones, 57, said he found a $4,000 check from J&J’s Janssen unit to Harrisburg State Hospital that was sent “to the attention of” Fiorello. The check covered a Fiorello trip to New Orleans to discuss Pennsylvania’s drug guidelines. Another check for $1,766 to the hospital account was sent “in care of” of Fiorello, Jones said. Fiorello controlled the account and didn’t register it with the state, Jones said.
“The account was used to deposit money from drug companies,” Jones said yesterday in the trial’s third day of testimony. “There were real problems here. On many levels, the account was improper.”
Janssen also paid $2,000 directly to Fiorello as an honorarium for his speaking at a company-sponsored event in 2002, Jones said. Jones said he followed the money trail and explored efforts by Janssen to promote, on a state-by-state basis, Texas guidelines favoring drugs like Risperdal. The funds sent to the hospital account helped pay travel expenses for programs related to setting up the Texas guidelines in Pennsylvania, he said.
The state adopted the guidelines that favored Risperdal in 2003, Jones said.
In 2004, Jones filed a whistle-blower lawsuit in Texas, which the state later joined, claiming J&J defrauded the state by overhyping Risperdal and overbilling its Medicaid program by at least $579 million.
J&J denies any wrongdoing in the Texas case.
Fiorello, once the chief pharmacist for Pennsylvania’s public welfare department, was convicted in December 2008 of felony conflict-of-interest charges for taking payments from drug companies, including Janssen and Pfizer Inc. He was sentenced to 18 months of probation and fined $3,000. He also paid more than $27,000 in civil fines after the Pennsylvania Ethics Commission cited him.
Jones said his boss told him to ease off his probe. He said he was told, “Stay away from the drug companies. This is a personnel issue. Stay away from the drug companies, stay away from TMAP.”
Jones said his boss said, “Drug companies write checks to both sides of the aisle. Stay away from it.” His boss told him that “morally and ethically I was correct, but politically, this was dead.”
The case is Texas v. Janssen LP, D-1GV-04-001288, District Court, Travis County, Texas (Austin).
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Stryker Biotech Marketing Put Patients at Risk, U.S. Says
A unit of Stryker Corp., the maker of medical devices, and three former sales managers put patients at risk by marketing an unapproved mixture of products for strengthening human bone growth, a prosecutor said at the start of a federal criminal trial in Boston.
The U.S. has charged Hopkinton, Massachusetts-based Stryker Biotech with misbranding and its sales force with conspiring to defraud surgeons into combining the company’s OP-1 and OP-1 Putty with the bone filler Calstrux. Some patients suffered adverse side effects and required more surgery, the U.S. says.
“That mixture was never studied clinically,” Assistant U.S. Attorney Susan Winkler told the jury in her opening statement yesterday. “They did not know if it worked. They did not know if it was safe, and they marketed it to doctors anyway.”
The U.S. Food and Drug Administration allowed the company to supply its products under a narrow, provisional humanitarian exemption. The company had no FDA approval for mixing in Calstrux, which was later pulled from the market, the U.S. says. Stryker Biotech tracked 63 adverse events in more than 10,000 procedures involving the bone mixture, according to a defense attorney.
A former national sales representative, William Heppner of Illinois, and two regional managers, David Ard of California, and Jeff Whitaker of North Carolina, are accused of wire fraud and conspiracy. If convicted, they could face as long as 20 years in prison.
Prosecutors claim Stryker sales reps promoted “recipes” to surgeons and medical technicians involving mixing the OP-1 products with Calstrux and molding it into “cigars,” “Tootsie Rolls” or “Vienna sausages.” Winkler showed the jury a small jar of OP-1, saying it cost $5,000.
Brien T. O’Connor, Stryker Biotech’s attorney, told jurors the company sought to help surgeons heal patients.
“Surgeons were not tricked,” he said. “They chose to use it because it worked.”
He said the government has conceded there’s no proof the bone mixture caused a small number of reactions logged by hospitals as “adverse events,” including fevers. Seven people required additional surgeries, according to prosecutors.
The case is U.S. v. Stryker Biotech LLC, 09-cr-10330, U.S. District Court, District of Massachusetts (Boston).
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Alliance One Should Lose Appeal Over EU Fines, Court Aide Says
Alliance One International Inc. should lose a challenge at the European Union’s highest court over antitrust fines levied for fixing the prices paid to Spanish growers for tobacco, an adviser to the region’s top court said.
The EU’s Court of Justice should uphold a fine of 1.8 million euros ($2.3 million) levied on Alliance One and its subsidiary Standard Commercial Tobacco Co. by the European Commission for their liability concerning another unit’s involvement in the cartel, said Advocate General Juliane Kokott in a non-binding opinion yesterday. The court follows this advice, at least in part, most of the time.
The European Commission, the 27-nation EU’s antitrust regulator, in October 2004 fined five companies a total of 20 million euros for price-fixing and production-sharing between 1996 and 2001 in the Spanish tobacco-processing market. Alliance One lost an earlier challenge against the fine.
A call to Alliance One in Morrisville, North Carolina, wasn’t returned outside business hours.
The case is C-14/11, Alliance One International and Others v Commission, at the European Union Court of Justice.
Foreign Bribery Defendants May Fight More as Prosecutors Falter
Executives facing trial in U.S. courts over accusations of bribing foreign officials may be encouraged to fight charges as prosecutors regroup after two courtroom setbacks and await a verdict in their largest overseas corruption probe targeting individuals, Bloomberg News’ Edvard Pettersson reports.
One of two cases hailed by the government as milestones in its enforcement of the Foreign Corrupt Practices Act was dismissed last year by a judge who said the jury verdict convicting two men at an electricity tower company of bribing Mexican officials was tainted by prosecutor misconduct in “a sloppy, incomplete and notably over-zealous investigation.”
In the first prosecution under the FCPA based on a sting operation, a judge declared a mistrial for four of 22 defendants accused of participating in a fake $15 million weapons deal involving Gabon. A separate trial is under way for a second group of defendants.
The 2011 outcomes will make individual defendants in FCPA cases more confident in contesting charges, in particular because they may face long prison terms under the plea deals the Justice Department offers, even as corporations continue to self-report and settle, said Philip Urofsky, a former FCPA prosecutor who now defends cases at Shearman & Sterling LLP.
“If a defendant is able to finance a significant defense, they can really put the government to the test,” Urofsky said in a phone interview.
In a crackdown on overseas bribery that started during the Bush administration, the government settled 57 cases against companies from 2005 through 2011 without trial, reaping $4.1 billion for the U.S. treasury, according to Justice Department data. A push to prosecute more individual defendants during the same period has produced mixed results, with some beating charges outright and others getting less punishment than prosecutors sought.
Of the 93 people charged over the past seven years, including 43 in 2009 alone, 41 pleaded guilty and six were convicted at trial, according to Shearman & Sterling data. Four defendants are fugitives, one was exonerated and three had their cases dismissed. Of the remainder, 38 either have a trial date scheduled or are awaiting one. The 31 defendants who’ve been sentenced got an average of 2 years and 2 months in prison.
The Gabon case is U.S. v. Goncalves, 09-cr-00335, U.S. District Court, District of Columbia (Washington).
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Lilly’s Zyprexa Pact With Health Providers Wins Approval
Eli Lilly & Co. won approval of a $4.5 million settlement with five union health funds and an insurer that alleged improper marketing of its best-selling medication Zyprexa raised their costs.
U.S. District Judge Jack Weinstein in Brooklyn, New York, approved the settlement at a hearing yesterday. The so-called third-party payers claimed Indianapolis-based Eli Lilly’s marketing of Zyprexa, a schizophrenia treatment, caused them to pay more for the drug than what it was worth. A plaintiffs’ expert had estimated damages in the case as high as $7.7 billion, according to a 2010 appeals-court decision.
The U.S. appeals court in New York in September 2010 reversed Weinstein’s 2008 ruling that granted class-action status to third-party payers, forcing them to carry on with the litigation individually. The appeals court found that the link between marketing Zyprexa to doctors and the injury claimed by the payers was “attenuated.”
“It appears to be fair and reasonable,” Weinstein said about the settlement yesterday. “The class members of the previously certified class have been adequately consulted and protected.”
“This settlement represents a positive outcome for Eli Lilly, and allows us to return our focus to the patients and health-care professionals who rely on our medications,” Eli Lilly spokeswoman Keri McGrath Happe said in an e-mail.
The case is In re Zyprexa Products Liability Litigation, 04-md-1596, U.S. District Court, Eastern District of New York (Brooklyn).
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CVS Caremark to Pay $5 Million to Settle FTC Investigation
CVS Caremark Corp., the largest U.S. provider of prescription drugs, will pay $5 million to settle claims it misrepresented certain Medicare drug prices, ending a two-year antitrust and consumer protection probe by the U.S. Federal Trade Commission.
The FTC said it decided to close its investigation “after a thorough and comprehensive review of the other consumer protection and competition issues in this matter,” and won’t take any further action “at this time,” according to a letter addressed to CVS Caremark’s lawyer.
The FTC began investigating the business practices of the company in 2009 after CVS bought Caremark for $27.2 billion, the largest acquisition ever by a drugstore. The merger sparked complaints from consumer groups, independent pharmacists and lawmakers, prompting the FTC to take a second look at the combination of the pharmacy chain and pharmacy-benefits manager. A 24-state task force also conducted a review.
The settlement, which requires CVS to reimburse consumers who overpaid for certain prescription drugs, also bars CVS Caremark from making deceptive claims with regard to Medicare Part D drug prices, the FTC said yesterday in an e-mailed statement.
“At the conclusion of this comprehensive investigation, the FTC made no allegations of antitrust law violations or anti-competitive behavior associated with any of our business practices, products or service offerings,” Douglas A. Sgarro, executive vice president and chief legal officer of CVS Caremark, said in a statement posted to PR Newswire. CVS Caremark “cooperated fully” with the FTC’s investigation, he said.
From 2007 to at least November, 2008, CVS Caremark’s RxAmerica subsidiary posted prices for Medicare Part D prescription drugs available at CVS and Walgreens pharmacies that were lower than the actual prices in stores, the FTC said in the statement. The deceptive prices caused many consumers to chose RxAmerica plans and pay “significantly more than they expected for their drugs,” the FTC said.
“This settlement puts money back in the pockets of older Americans who struggle to pay for their medications,” FTC Chairman Jon Leibowitz said in the statement. “With the cost of health care on the rise, the FTC is especially focused on protecting consumers from any deceptive claims that would cause them to pay more than they should.”
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Walgreen, Par Accused of Plot to Overcharge for Generic Drugs
Walgreen Co., the biggest U.S. drugstore chain, and generic drugmaker Par Pharmaceutical Cos. were accused in a lawsuit of swapping prescription-drug tablets for more expensive capsules to boost profits.
“Walgreen’s and Par engaged in at least two widespread schemes to overcharge insurance companies, self-insured employers and union health and welfare funds,” the United Food & Commercial Workers Unions & Employers Midwest Health Benefits Fund said in a complaint filed Jan. 11 in federal court in Chicago.
The drugs involved included generic versions of Zantac and Prozac, according to the complaint. The fund and other third-party payers paid millions of dollars more for the capsules than they would have for the correctly prescribed tablets, said the fund, which is seeking to sue on behalf of all third-party payers in the U.S. from 2001 to 2006.
The companies’ actions violated federal racketeering laws, according to the complaint. The fund is asking for unspecified cash damages.
Vivika Panagiotakakos, a spokeswoman for Deerfield, Illinois-based Walgreen, declined to comment on the filing.
The media relations department of Woodcliff Lake, New Jersey-based Par didn’t reply to an e-mailed request for comment on the suit after regular business hours yesterday.
The case is United Food and Commercial Workers Unions and Employers Midwest Health Benefits Fund v. Walgreen Co., 12-cv-00204, U.S. District Court, Northern District of Illinois (Chicago).
Barclays’s Absa Sues Nedbank for $95 Million Over Trading Losses
Absa Group Ltd., the South African bank controlled by Barclays Plc, sued the country’s fourth-largest bank, Nedbank Group Ltd., for 773 million rand ($95 million) in trading losses.
Absa has “issued a summons against Nedbank in relation to the events surrounding the trading of single-stock futures over the shares of Pinnacle Point Holdings, and subsequent defaults,” Marthinus Van Rensburg, the head of Johannesburg-based Absa’s legal team, said in an e-mailed statement yesterday. The lender “cannot comment further in relation to this matter, which is now the subject of legal proceedings,” he said.
A Nedbank unit, Syfrets, had to buy shares in a South African leisure and property company called Acc-Ross in 2007 when it traded the single-stock futures in the company on behalf of clients of South African stock broker, Cortex Securities. The holding in Acc-Ross, which was renamed Pinnacle Point Group Ltd. in 2008, increased beyond 35 percent, which by law should have forced Nedbank to make an offer to minority shareholders. Pinnacle Point shares declined more than 90 percent after Nedbank sold its stake.
Barclays Plc-owned Absa was obligated in 2008 to acquire stakes in Pinnacle Point and three other companies after Cortex, for which Absa was the clearing bank, defaulted on payments for the single-stock futures linked to the four stocks. Absa in 2010 agreed to sell its Pinnacle stake after taking a 931 million-rand writedown on the investment.
Nedbank, which is controlled by Old Mutual Plc, successfully argued in a hearing with the Securities Regulation Panel in May 2010 that it was an intermediary and not intent on gaining control of Acc-Ross.
“The Securities Regulation Panel looked at issues surrounding the Pinnacle single-stock futures and ruled in our favor and similarly we do not think this claim has any merit,” Nedbank Chief Executive Officer Mike Brown said in an e-mailed response to questions yesterday.
“The whole matter is fraught with negligence and recklessness, but we cannot find any indication of an intention on the part of Nedbank to gain control over Acc-Ross,” the regulator said in a statement in August 2010.
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Raj Rajaratnam Prosecutor Jonathan Streeter Joins Dechert Firm
Jonathan Streeter, one of the federal prosecutors at the U.S. attorney’s office in Manhattan who secured the conviction of hedge fund manager Raj Rajaratnam, will join Dechert LLP.
Streeter, 43, was voted into the partnership at the Philadelphia-based firm and is expected to start work in February, Beth Huffman, a spokeswoman for Dechert, said yesterday in a phone interview.
Rajaratnam, the former Galleon Group LLC hedge fund manager, was convicted last year of directing the biggest insider-trading ring in a generation. It was one of the first insider-trading cases in which the government made extensive use of wiretaps.
A federal jury in Manhattan convicted Rajaratnam on May 11 of all 14 counts of securities fraud and conspiracy against him. During the two-month trial, the panel heard evidence that he engaged in a seven-year conspiracy to trade on inside information from corporate executives, bankers, consultants, traders and directors of public companies.
Rajaratnam was sentenced to 11 years in prison.