John Keker, the lawyer for Brian Stoker, the former Citigroup Inc. executive on trial in a fraud involving collateralized debt obligations, was scolded by Judge Jed S. Rakoff, who told him with the jury out of the courtroom that he was in danger of being found in contempt of court.
Stoker committed securities fraud that can’t be blamed just on the bank, U.S. Securities and Exchange Commission lawyer Jeffrey Infelise told jurors yesterday at the close of the case.
“If Citigroup stacked the deck, Mr. Stoker built the cards,” Infelise said. “He was essential. He was in the middle of this. They could not have done this without him.”
The SEC accused Stoker, a former head of the Citigroup collateralized debt obligations structuring group, of negligently violating securities law in putting together the assets in “Class V Funding III,” a $1 billion CDO. The government claims Citigroup withheld information from investors about the bank’s interest in the assets.
Keker, founding partner of Keker & Van Nest LLP, accused Infelise of acting like a “rabid dog,” saying the SEC’s case reminded him of the children’s book series “Where’s Waldo?”
When the jury was present, Keker argued that the investors were sophisticated enough to understand that sometimes the bank behind the deal also has a stake in the fund.
“I’m not suggesting for a second that you can lie to anyone, but these investors were not misled,” Keker said. “They were given everything they wanted.”
“Most of this trial had nothing to do with Brian Stoker,” Keker said. “The SEC has created a false world that simply ignores what the evidence is.”
Infelise said Citigroup hand-picked assets that the bank expected to perform poorly, and then bought protection for them to ensure the bank would make money. Stoker omitted the bank’s connection to the transaction from packages sent to potential investors, Infelise said.
“Doing nothing when you’re working on disclosures to investors in a billion-dollar CDO is not reasonable,” he said.
Rakoff, who kept the lawyers in the courtroom after jurors went to lunch, said he was “deeply concerned with the tone and manner of defense counsel’s summation.”
“You’re playing with fire,” Rakoff told Keker, saying the defense attorney began with “a personalized attack on the SEC counsel” that “was blatantly untrue in this court’s observation.”
Rakoff added, “There were a bunch of other improprieties,” and warned Keker he would be held in contempt of court if he continued to make such arguments. Rakoff cited the lawyer’s references to the jury-selection process and said he had made a “blatant appeal to prejudice against the SEC.”
The judge gave the SEC lawyers an additional 15 minutes yesterday afternoon for rebuttal partly because of the defense’s tone earlier. He commended Keker for his tone in the afternoon arguments.
The case is U.S. Securities and Exchange Commission v. Stoker, 11-cv-7388, U.S. District Court, Southern District of New York (Manhattan).
For more, click here.
CB&I to Buy Shaw Group for $3 Billion to Add Nuclear Unit
Chicago Bridge & Iron Co. agreed to buy Shaw Group Inc. for about $3 billion, expanding its nuclear building services in a portfolio of energy-related engineering and construction projects.
Shaw received legal advice from Vinson & Elkins LLP and Jones Walker Waechter Poitevent Carrere & Denegre LLP while Morgan Stanley gave financial advice. Wachtell, Lipton, Rosen & Katz acted as legal counsel to CB&I and Bank of America Corp. acted as the financial adviser.
The V&E mergers and acquisitions team was led by partners Keith Fullenweider and includes Jeff Floyd and Steve Gill. Capital Markets partner Dave Oelman advised on securities and governance matters.
V&E partners who also assisted on the transaction include: Brian Bloom, employee benefits; David Stone, debt capital markets; Suzanne Reifman and David Johnson, government contracts; Tom Wilson, labor/employment; Billy Vigdor and Dionne Lomax, antitrust; John Lynch, tax; Will Bos, finance; Michael Holmes, litigation; and Larry Nettles, environmental.
Partner Scott Chenevert was lead counsel for Jones Walker. Additional partners who assisted included: David Radlauer and Mark Cunningham, antitrust; Arnold Havens on foreign investment issues and special counsel Richard Wolfe, securities.
Wachtell’s team is led by corporate partners Daniel A. Neff and David E. Shapiro. Additional partners on the deal include: Nelson O. Fitts, antitrust; David E. Kahan, executive compensation and benefits; Eric M. Rosof, restructuring and finance; and T. Eiko Stange and Joshua M. Holmes, tax.
CB&I said the combined company will be one of the world’s largest energy-construction and engineering-contracting firms, with a work backlog of more than $28 billion.
The deal is the biggest of 79 construction and engineering acquisitions announced in the U.S. this year, according to data compiled by Bloomberg. The average premium of the deals was 10.6 percent.
For more, click here.
Avon’s Jung Sought for Interview Amid Bribery Probe
Federal prosecutors looking into possible bribery of foreign officials by Avon Products Inc. have asked to interview Andrea Jung, the company’s chairman and former CEO, the Wall Street Journal reported, citing people familiar.
Prosecutors contacted Jung’s attorney, Theodore Wells Jr., at Paul, Weiss, Rifkind, Wharton & Garrison LLP, the paper said.
The world’s largest door-to-door cosmetics seller is investigating potential violations of the Foreign Corrupt Practices Act, which outlaws bribing foreign officials.
Jung hasn’t been accused of any wrongdoing
Avon representatives declined comment when contacted by Bloomberg News.
On July 20, Avon general counsel Kim Rucker announced plans to leave the company for another post. Rucker, who will leave after Aug. 17 to become executive vice president of corporate and legal affairs in Kraft Foods Inc.’s North America unit. She will be based in Chicago, where she’s from, New York-based Avon said in a statement.
Libor Rigging Can Be Prosecuted Under U.K. Law, SFO Says
U.K. fraud prosecutors will investigate the manipulation of Libor and other interest rates after deciding that existing British criminal law covers the conduct involved.
U.K. law provides the basis to bring charges, David Green, the director of the Serious Fraud Office, said yesterday in a statement. The U.K. joins the U.S. in criminally investigating how derivatives traders and rate submitters colluded to rig the London Interbank Offered Rate, or Libor.
Green said on July 2 that the agency was considering whether it was possible to bring a prosecution after U.K. Chancellor of the Exchequer George Osborne and Ed Miliband, leader of the opposition Labour Party, called for a criminal probe. The agency, which declined to get involved for more than a year under its previous director, hired Mukul Chawla to be its lead external lawyer on the issue.
The SFO probe began after Barclays Plc was fined a record 290 million pounds ($455 million) by U.K. and U.S. authorities, and British politicians called for a criminal investigation. The U.K. Financial Services Authority, which levied the fine along with the U.S. Commodity Futures Trading Commission and the Justice Department, didn’t have the power to file criminal interest-rate manipulation charges.
The SFO won’t be starting the case from scratch. The agency has received regular briefings from the FSA on its civil investigation and a compilation of findings from the U.S. The SFO was told by the U.K. Treasury it would be given additional funds to take on the case after Barclays admitted its employees tried to manipulate rates for profit.
At least a dozen banks are being probed by regulators worldwide. In the U.S., the Justice Department is preparing to file charges this fall against traders from several banks in its investigation.
For more, click here.
Dewey Team Gets $700,000 in Bonuses Approved
The team winding down bankrupt law firm Dewey & LeBoeuf LLP, got approval for $700,000 in bonuses from a bankruptcy judge, the Wall Street Journal reported.
Judge Martin Glenn said it was reasonable in order to stop more employees from leaving, despite a Justice Department objection to the proposal, the paper reported.
Loeb & Loeb LLP announced that Nathan J. Muyskens has joined as a partner in the firm’s white-collar criminal defense, corporate compliance and investigations practice in Washington. He was previously at Shook, Hardy & Bacon LLP.
Muyskens’s practice focuses on criminal antitrust, anticorruption, and securities and commodities enforcement matters. His practice also includes defending companies in corruption investigations and other matters related to the Foreign Corrupt Practices Act. In addition to his white-collar and antitrust practice, Muyskens has conducted internal investigations into cyber breaches, phishing schemes, denial-of-service attacks, and other cyber crimes, the firm said.
Prior to his private practice, Muyskens was a trial attorney with the Federal Trade Commission’s Bureau of Competition, where he led investigations into the retail and energy sectors. Prior to his work at the commission, he was an Associate Independent Counsel with the Office of Independent Counsel in the matter of In re A. Michael Espy, as part of a team that investigated and prosecuted several high-ranking officials of the U.S. Department of Agriculture. Muyskens also served as counsel to U.S. Senator Robert J. Dole from 1995 to 1996, the firm said.
With the addition of Muyskens in Washington, Loeb & Loeb’s white-collar defense team now has 23 attorneys firm wide. The firm has more than 300 attorneys at five domestic offices, as well as a representative office in Beijing.