Former Bear Stearns Cos. hedge-fund managers Ralph Cioffi and Matthew Tannin, acquitted in 2009 of criminal charges they misled investors, agreed to pay $1.05 million to settle a related civil case brought by the U.S. Securities and Exchange Commission.
Cioffi agreed to pay $800,000 and accept a three-year ban from the securities industry and Tannin agreed to a two-year ban and $250,000 payment, SEC attorney John Worland told U.S. District Judge Frederic Block in Brooklyn, New York, in a hearing yesterday.
In November 2009, a federal jury found Cioffi and Tannin not guilty of conspiracy and securities and wire fraud in the first criminal trial stemming from a federal probe of the collapse of the subprime-mortgage market. Cioffi, 56, was portfolio manager for the hedge funds. Tannin, 50, was their chief operating officer. The government said investors lost $1.6 billion.
“This case is being settled for, relatively speaking, chump change,” Block said at the hearing, adding that he was “inclined to sign off on it.” He asked lawyers for both sides to file more papers by next week.
The SEC’s lawsuit, alleging the two men misled investors about the funds’ deepening financial troubles and their own holdings in the investment pools, was set to go to trial yesterday.
After the hearing, Cioffi’s lawyer, Edward Little of Hughes Hubbard & Reed LLP, and Tannin’s lawyer, Nina Beattie of Brune & Richard LLP, declined to comment on the case. Cioffi and Tannin weren’t in court yesterday.
Cioffi’s payment includes having to give up $700,000 in illegal gains and pay a $100,000 penalty. Tannin’s includes disgorgement of $200,000 and a $50,000 penalty.
“On behalf of the SEC, I think this is a very good settlement,” Worland told the judge.
“These serious sanctions reflect the defendants’ misconduct, their ill-gotten gains and other considerations, which we will set forth in the written submissions requested by the court,” John Nester, an SEC spokesman, said in an e-mailed comment.
The civil case is Securities and Exchange Commission v. Cioffi, 08-cv-2457, and the criminal case is U.S. v. Cioffi, 08-CR-00415, U.S. District Court, Eastern District of New York (Brooklyn).
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Deutsche Bank Said to Settle Kirch Case for About $1 Billion
Deutsche Bank AG and the heirs of media entrepreneur Leo Kirch are close to settling a 10-year-old dispute for about 800 million euros ($1 billion), according to a person with direct knowledge of the negotiations.
The settlement will end lawsuits over whether comments made in 2002 by Rolf Breuer, Deutsche Bank’s then-chief executive officer, caused the collapse of Kirch’s media group, according to the person, who declined to be identified because the agreement hasn’t been made public. The bank last year was said to have rejected a 775 million-euro settlement proposed by a Munich court.
“The case meant negative headlines for Deutsche Bank. It wasn’t so much of a business problem as a reputational one for the company,” said Michael Seufert, an analyst with Norddeutsche Landesbank Girozentrale in Hanover who recommends investors hold the stock. “It is advantageous for Deutsche Bank to have this long-lasting legal process behind them.”
Kirch, who died in July, pursued lawsuits against Breuer and Frankfurt-based Deutsche Bank seeking at least 3.3 billion euros. The lawsuits, which continued after Kirch’s death, claim his media group failed because Breuer questioned its creditworthiness in a 2002 Bloomberg TV interview.
In the interview, Breuer said “everything that you can read and hear” is that “the financial sector isn’t prepared to provide further” loans or equity to Kirch. Within months, Kirch’s group filed the country’s biggest bankruptcy since World War II.
Another person familiar with the talks said that Deutsche Bank’s management board would discuss the potential settlement yesterday or today. Details of the agreement aren’t finalized and there may still be obstacles in that process, the person said.
Deutsche Bank spokesman Christian Streckert and a spokesman for Kirch both declined to comment. The bank has always denied Kirch’s allegations.
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Italian Asbestos Trial Conviction ‘Historic,’ Minister Says
A court ruling sentencing Eternit AG’s former owner and also the company’s biggest shareholder to 16 years in prison in connection with asbestos-related deaths is “historic,” Italy’s health minister said.
“The ruling can be defined as truly historic as far as both the social aspects and the legal aspects are concerned,” Renato Balduzzi said in an e-mailed statement yesterday. “The fight against asbestos cannot end with a ruling, although a model one, but has to continue.”
A court in Turin, in northern Italy, ruled yesterday that Swiss billionaire Stephan Schmidheiny and Jean-Louis Marie Ghislain de Cartier, respectively Eternit’s former owner and its top shareholder, were partially responsible for hundreds of deaths and illnesses caused by asbestos in factories the company owned in Italy. The two men were also sentenced to pay damages to be determined in a separate civil proceeding to victims’ relatives and to a number of local authorities.
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Apple Adds Patent Infringement Claims Against Samsung With Suit
Apple Inc.’s newest lawsuit against Samsung Electronics Co., set for a hearing May 2, increases the number of Samsung devices that Apple argues infringe its products.
Apple seeks a court order blocking the alleged infringement in smartphones such as Samsung’s Galaxy S II Skyrocket and Galaxy S II Epic 4G Touch, which use Google Inc.’s Android operating system, and Samsung’s Galaxy 4.0 and 5.0 media players.
In December, Apple lost a similar request for a court order blocking sales of Samsung’s 4G smartphone and Galaxy Tab 10.1 tablet computer. Trial for that case is set for July 30.
“Despite that lawsuit, Samsung has continued to flood the market with copycat products, including at least 18 new infringing products released over the last eight months,” according to the complaint filed Feb. 8 in federal court in San Jose, California.
“Samsung has systematically copied Apple’s innovative technology and products, features, and designs, and has deluged markets with infringing devices in an effort to usurp market share from Apple,” according to the complaint.
Samsung’s newer products infringe patents at issue on the previous case as well as additional patents Apple issued since the earlier case was filed, Apple said. “Apple is filing this suit to put an end to Samsung’s continued infringement,” according to the complaint.
Samsung continues to “assert our intellectual property rights and defend against Apple’s claims,” its Seoul-based spokesman Nam Ki Yung said yesterday.
The two companies have filed at least 30 lawsuits against each other, according to Samsung. The conflict began in April, when Apple filed the first San Jose lawsuit claiming the Suwon, South Korean company’s Galaxy devices copied the iPhone and iPad.
The case is Apple Inc. v. Samsung Electronics Co. Ltd., 12-cv-00630, U.S. District Court, Northern District of California (San Jose). The previous case is Apple Inc. v. Samsung Electronics Co., 11-01846, U.S. District Court, Northern District of California (San Jose).
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Wells Fargo Board Must Face Foreclosure Claims, Judge Says
Wells Fargo & Co. directors must face investors’ claims that largest U.S. mortgage lender failed to properly disclose details of its foreclosure practices to government investigators, a judge ruled.
U.S. District Judge Susan Illston in San Francisco rejected Wells Fargo’s request to dismiss shareholders’ allegations that directors wrongfully failed to disclose their opposition to a government probe of the bank’s mortgage lending and foreclosure policies.
“The fact that the company was allegedly stymieing the government regulators is certainly material to stockholders when considering whether to authorize a more serious internal investigation,” Illston said in Feb. 9 ruling.
That same day, Wells Fargo and four other banks reached a $25 billion settlement with state and federal officials to end a probe of abusive foreclosure practices stemming from the collapse of the U.S. housing bubble.
The accord included $20 billion in various forms of mortgage relief plus payments of $5 billion to state and federal governments. Wells Fargo officials said the bank’s share of the accord would total $5.3 billion. Other banks involved in the settlement included JP Morgan Chase & Co., Bank of America Corp and Ally Financial Inc.
Ancel Martinez, a spokesman for San Francisco-based Wells Fargo, declined to comment yesterday on Illston’s ruling in the investor suit.
Even after agreeing to resolve the government’s investigation into banks’ handling of foreclosures, which included “robo-signing” of mortgage documents, lenders still face years of litigation and billions of dollars in liability over their practices.
The case is Pirelli Armstrong Tire Corporation Retiree Medical Trust v. John G. Stumpf, C 11-2369-SI, U.S. District Court, Northern District of California (San Francisco).
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BP Loses Bid to Dismiss Investor Claims Spurred by Spill
BP Plc lost a court bid to dismiss fraud claims by investors who said the company lied before and after the 2010 Gulf of Mexico oil spill about its accident response capability.
U.S. District Judge Keith P. Ellison in Houston yesterday allowed holders of BP American depositary receipts to pursue claims alleging violations of U.S. securities law. He dismissed claims by investors who bought ordinary shares of London-based BP, saying his court has no jurisdiction over them.
The judge rejected the investors’ claim that BP lied about its commitment to safety, while finding the company may have exaggerated its ability to respond to a major spill.
“Plaintiffs have sufficiently pleaded facts to demonstrate that BP misrepresented the size of the spill it was prepared to respond to in the Gulf and misrepresented the company’s general spill response capabilities,” Ellison said in a 129-page decision. “They have sufficiently pleaded actionable misrepresentations related to BP’s ability to respond to an oil spill in the Gulf of Mexico.”
The investors, led by Ohio and New York pension plans, said BP publicly declared a commitment to safety while cutting budgets and personnel and rejecting internal complaints. BP also initially hid the true size of the oil-well blowout to limit the impact on its stock price, the investors alleged.
“Today’s decision is a victory for the plaintiffs and I am grateful that we will be able to move forward with our claims against BP,” New York State Comptroller Thomas P. DiNapoli said in an e-mail. “We believe that BP exaggerated its ability to prevent a catastrophic spill as well as its ability to respond to one should it occur”
Scott Dean, BP spokesman, declined to comment on the ruling.
The case is In re BP Plc Securities Litigation, 4:10-md-2185, U.S. District Court, Southern District of Texas (Houston).
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Transocean Asks Judge to Force BP Manager to Testify in Trial
Transocean Ltd., owner of the rig that exploded before the worst offshore oil spill in U.S. history in 2010, sought to force a BP Plc manager to explain what occurred at the well prior to the blowout.
Transocean asked the U.S. District Court in New Orleans to compel Donald Vidrine to testify. He was BP’s well site leader on the Deepwater Horizon rig when the Macondo well in the Gulf of Mexico exploded. Vidrine has cited medical-related problems for refusing to testify, in person or in writing, Transocean’s lawyers said in a court filing Feb. 12.
Vidrine “is a key source of information regarding critical events and operations that occurred immediately prior to the blowout,” Transocean said. “Mr. Vidrine’s medical issues do not provide a legal basis for his refusal to testify.”
The April 2010 Macondo well blowout and explosion killed 11 workers. The accident spurred hundreds of lawsuits against BP and its partners, including Switzerland-based Transocean, Halliburton Co., which provided cementing services for the project, and Anadarko, the owner of 25 percent of the well.
The case is In re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).
Avon Said to Be Focus of U.S. Grand Jury Investigation
Avon Products Inc. is the subject of a U.S. grand jury investigation into whether ex-employees in China paid bribes to officials in violation of U.S. anti-corruption laws, according to a person familiar with the matter.
Jennifer Vargas, a spokeswoman for New York-based Avon, the world’s largest door-to-door cosmetics merchant, declined to comment on the probe by the Manhattan grand jury.
In regulatory filings last year, Avon said it had fired four executives suspected of paying bribes to officials in China. The company also disclosed an internal investigation into its compliance with the U.S. Foreign Corrupt Practices Act. The ex-executives included the general manager and finance chief of the China unit, which generates 2 percent of Avon’s revenue.
The internal probe is focused on entertainment and gift expenses “in connection with our business dealings, directly or indirectly, with foreign governments,” according to one of its filings.
The U.S. Securities and Exchange Commission is also investigating, Avon said in October.
The U.S. probe disclosed by the person, who declined to be identified because the matter isn’t public, was reported earlier by the Wall Street Journal.
An internal Avon audit found several hundred thousand dollars in questionable payments to Chinese officials and third-party consultants in 2005, the newspaper reported.
Avon executives who saw the audit report didn’t disclose the findings to board audit or finance committees or the full board, the newspaper said.
Jerika Richardson, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, declined to comment.
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Deripaska Claims Cherney Bribed Politicians in London Lawsuit
United Co. Rusal Chief Executive Officer Oleg Deripaska accused Michael Cherney, who is suing him for $4.3 billion, of making mysterious payments to politicians including Israel Deputy Prime Minister Avigdor Liberman.
The claims emerged at a London court hearing where Cherney’s lawyer said accusations made by Deripaska’s legal team were a “distraction.” The hearing indicates Deripaska, 44, will fight Cherney’s suit by painting him as someone who used his connections to extract protection payments from businessmen.
Claims that Cherney made “large, unexplained payments to politicians” including Liberman and a Bulgarian prime minister “don’t have any relationship to the facts of the case,” his attorney, Mark Howard said.
Cherney, now living in exile in Israel, filed a London lawsuit in 2006 claiming he was Deripaska’s partner and is owed a stake in Rusal. The trial, scheduled to begin in April, follows the three-month, $6.8 billion courtroom battle between Russian oligarchs Boris Berezovsky and Roman Abramovich.
“They say Mr. Cherney was the mastermind of the imposition of krysha payments,” on businessmen, Howard said, referring to a Russian word for protection. Cherney’s lawyers were seeking to prevent some of the claims being used in the trial.
Calls and e-mails to Liberman’s office weren’t returned. Deripaska’s spokeswoman, Idil Oyman in London, declined to immediately comment.
Judge Andrew Smith said the April trial may be delayed until the parties were better prepared.
The case is Cherney v. Deripaska, High Court of Justice, Queen’s Bench Division, Commercial Court 06-1218.
U.K. Files Extra Lawsuit Against ECB on Central Clearing Rules
The U.K. filed an additional lawsuit against the European Central Bank over its plans to block trades in some euro-denominated securities from being cleared outside of the 17 countries that share the currency.
U.K. authorities submitted a second case against the ECB at the European Union’s General Court in Luxembourg on Jan. 27, according to the court’s website.
The move follows an earlier complaint by the U.K. filed in October. The new action concerns comments made by the ECB since the original case was registered, according to the tribunal’s press service.
The Frankfurt-based ECB declined to comment on the latest lawsuit.
The case is T-45/12 pending case, United Kingdom v. ECB.
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Stanford ‘Screaming’ About Bank Run Before Seizure, Aide Says
R. Allen Stanford ordered his communications chief to send investors reassuring letters and to rebut news articles that sparked a run on his bank two days before it was seized by regulators, a former aide said.
“He was screaming and saying people were taking their money out of the bank, and the bank was in trouble because of that,” Lula Rodriguez, Stanford’s former communications chief, told jurors in the financier’s $7 billion fraud trial in federal court in Houston. “It was like a perfect storm was coming together.”
Rodriguez, 63, testified that a day later she couldn’t find any senior company officers willing to sign the requested communications, which stated that Stanford International Bank Ltd. “remained a strong institution.” After Stanford’s finance chief, compliance officer and general counsel all refused to sign the drafts, she tracked Stanford down at his suite at the InterContinental hotel in Miami, she said.
“He told me people were trying to destroy him, but that things were going to be OK,” Rodriguez, who worked in Miami, recalled. “ We just needed to get over the hump.”
Rodriguez, who has said she had no knowledge of the alleged fraud scheme, testified that the company’s finance chief, James M. Davis, who has since pleaded guilty to helping Stanford defraud investors, was at the hotel in a meeting with Stanford.
Also present were the company’s general counsel and Stanford’s fiancé, Andrea Stoelker, with the couple’s dog. Davis “looked like death warmed over” and spoke “not a word” during the meeting, Rodriguez told jurors. The dog, Ras, named for the financier’s initials, “was the happiest thing in the room,” she said.
Prosecutors accuse Stanford, 61, of secretly borrowing $2 billion from his Antigua-based Stanford International Bank to fund a lavish lifestyle and invest in scores of speculative ventures ranging from Caribbean airlines and real estate developments to cricket tournaments. Holders of certificates of deposit in Stanford’s bank were told their money was in safe, liquid investments.
Stanford, who has been in custody as a flight risk since his June 2009 indictment, denies all wrongdoing. If convicted of the most serious charges against him, he could spend as long as 20 years in prison.
The criminal case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09cv298, U.S. District Court, Northern District of Texas (Dallas).
Chaoda Chairman Denies Revealing Price Sensitive Information
Chaoda Modern Agriculture Holdings Ltd. Chairman Kwok Ho, a subject in a Hong Kong insider-trading probe, denied discussing an imminent share offering on conference calls with U.S.-based investors in 2009.
“Certainly, certainly not,” Kwok told Hong Kong’s Market Misconduct Tribunal yesterday in response to a question about whether he said on the calls that the Chinese vegetable supplier would “soon” do a placement. He also denied that he wanted to assess investor support for a share sale on the calls.
The tribunal is investigating whether material, non-public information was improperly disclosed on phone calls involving Kwok, Chaoda’s chief financial officer Andy Chan and U.S. institutional investors in 2009. George Stairs, then a portfolio manager at Fidelity Management & Research Co., took part in one of those calls and sold some of his Chaoda holdings ahead of the sale, according to Hong Kong’s government.
Stairs believed the share placement information he was given by Chaoda’s chairman and chief financial officer was public, according to a letter from Fidelity’s lawyers presented in evidence to the tribunal.
Stairs and Chan have denied any wrongdoing.
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