Sarbanes-Oxley, Altria, Microsoft, MAN, Janus, Kier, Kagan in Court News
BP Plc was sued by members of its employee savings plan over losses tied to company’s plunging stock price amid the oil leak disaster in the Gulf of Mexico.
BP has lost more than half of its market value since the April 20 explosion that caused the largest oil spill in U.S. history. The fire and blast aboard the Deepwater Horizon drilling rig that was working on a well for BP killed 11 members of its crew.
The lawsuit, which seeks class action, or group, status was filed in federal court in Chicago. Full-time, part-time, occasional and temporary employees are eligible to invest in the employee savings plan, or ESP, according to the lawsuit. The complaint states that regulatory filings show the plan held $2.45 billion worth of BP American depositary shares, or 29 percent its $8.27 billion of assets, at the end of the 2009.
“Defendants knew or should have known that investment in BP Plc equity was -- and continues to be -- an imprudent investment of the ESP’s assets due to serious mismanagement and improper business practices that resulted in catastrophic incidents of international significance, including, among others, the BP spill in the Gulf of Mexico,” the plaintiffs said yesterday in the lawsuit.
Attorneys in the lawsuit include W. Mark Lanier and Milberg LLP.
The case is Charis Moule vs. BP Corp. North America, 10-cv- 03990, U.S. District Court, Northern District of Illinois (Chicago).
American Italian Pasta Sued Over $1.2 Billion Bid
American Italian Pasta Co., the biggest maker of dry pasta in North America, was sued by a shareholder seeking to force a higher price for the company than its planned $1.2 billion takeover by Ralcorp Holdings Inc.
The shareholder, Andrew Klenck, contends directors of Italian American, which makes pasta in about 300 shapes and sizes, are duty-bound to get the best price for the stock and that the $53- a-share Ralcorp offer is unfair.
“The company reported strong key measurements” for the second quarter,” and “has willingly entered into the proposed transaction to the detriment of its shareholders,” Klenck said in a complaint filed yesterday in Delaware Chancery Court in Wilmington.
Kansas City, Missouri-based American Italian announced June 21 it would be bought by Ralcorp, of St. Louis, in a cash transaction expected to close by Sept. 30. Italian American’s brands include Mueller’s and Golden Grain. Ralcorp’s food brands include Ralston and Ry-Krisp.
“The company declines to comment” on the lawsuit, said Andrew Siegel, a spokesman for American Italian in New York.
The case is Klenck v. American Italian Past Co., CA5603, Delaware Chancery Court (Wilmington).
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Technip to Pay $338 Million to Settle Bribery Case
Technip SA, Europe’s second-largest oilfield-services provider, will pay $338 million to avoid U.S. prosecution and resolve civil claims that it bribed Nigerian officials to win $6 billion in construction contracts.
The Justice Department charged Technip with conspiracy and violating the Foreign Corrupt Practices Act by paying more than $182 million in bribes related to liquefied natural gas plants. Prosecutors will drop charges in two years if Technip pays a $240 million fine and makes reforms. The Paris-based firm will pay $98 million to resolve Securities and Exchange Commission civil claims.
Technip “participated in a scheme to authorize, promise, and pay tens of millions of dollars in bribes to Nigerian government officials,” the company said yesterday in federal court in Houston. The firm was in a joint venture with Kellogg Brown & Root Inc., which pleaded guilty in February 2009 and agreed with its former parent, Halliburton Co., to pay $579 million to resolve U.S. criminal and regulatory charges.
In a 17-page statement of facts entered in court yesterday, Technip admitted conspiring to pay bribes to officials of the Nigerian government’s executive branch, the state-owned Nigerian National Petroleum Corp. and Nigeria LNG Limited, which awarded contracts. Technip admitted that one payment involved $1 million in $100 bills delivered in a briefcase in a Nigerian hotel.
The case is United States of America v. Technip SA, 10-cr- 431, U.S. District Court, Southern District of Texas (Houston). The Tesler and Chodan indictment is USA v. Jeffrey Tesler and Wojiech J. Chodan, 09-cr-98, U.S. District Court, Southern District of Texas (Houston). The Stanley case is USA v. Albert Jackson Stanley, 08-cr-597, U.S. District Court, Southern District of Texas (Houston).
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Ex-Boston Provident Trader Levy Gets 67 Months in Prison
Ezra Levy, a former trader and chief financial officer of Boston Provident Partners LP, was sentenced yesterday to 67 months in prison for stealing about $3 million from the Manhattan-based hedge fund.
Levy, 33, pleaded guilty in Manhattan federal court in March to two schemes to defraud Boston Provident, run by Orin Kramer, the chairman of the New Jersey State Investment Council. He admitted committing securities fraud and wire fraud.
In his guilty plea, Levy admitted that he transferred $2.45 million from Boston Provident to his own account. He also said he had the fund buy shares of Atlas Energy Inc. and another stock at inflated prices from an account he controlled, generating a $537,000 profit.
U.S. District Judge Kevin Castel yesterday ordered Levy to pay $2.99 million in restitution, fined him $12,500 and ordered him to surrender to federal prison by Sept. 7.
“Levy brazenly stole $3 million from the hedge fund where he worked as a trader and thereby breached his fiduciary duty and professional responsibilities,” assistant U.S. attorneys William Stellmach and David Miller said in court papers.
Levy used the proceeds for personal expenses, including credit card payments, to purchase real estate and to buy an Aston Martin, said prosecutors in the office of Manhattan U.S. Attorney Preet Bharara.
Katya Jestin, a lawyer for Levy, asked for leniency for her client, saying he suffered from Lyme disease, a “depressive disorder and alcoholism that may have impaired his ability to distinguish right from wrong at the time he committed fraud.
The case is U.S. v. Levy, 09-mj-2473, U.S. District Court, Southern District of New York (Manhattan).
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High Court Leaves Sarbanes-Oxley Audit Board Intact
The U.S. Supreme Court left intact the centerpiece of the Sarbanes-Oxley Act while ruling that the executive branch should have more authority over members of the Public Company Accounting Oversight Board.
The 5-4 decision released yesterday said the 2002 law passed in response to accounting frauds at Enron Corp. and WorldCom Inc. didn’t give the president enough say over the board created by the act. The Securities and Exchange Commission must have unfettered power to fire the board’s chairman and members in order for it to adhere to separation of powers provisions in the Constitution, the high court ruled.
Concern that the Supreme Court would issue a more sweeping ruling had prompted the SEC to put together contingency plans to take over some of the accounting board’s duties if it was dissolved. The decision gives the SEC broader authority to remove members without requiring any further action by regulators or lawmakers, said Christopher Bartolomucci, a partner at Hogan Lovells in Washington.
“The effect of the court’s decision is quite limited,” he said. “The board will continue to exist and its regulatory powers will be the same.”
The Obama administration defended the accounting board, saying the SEC exercised comprehensive control over the board’s activities, including the auditing standards it issues and the enforcement actions it takes. U.S. Solicitor General Elena Kagan, now a Supreme Court nominee, argued the case for the government.
In dissent, Justice Stephen Breyer said the majority’s reasoning raised constitutional questions about a myriad of other government entities.
The decision “will create an obstacle, indeed pose a serious threat, to the proper functioning of that workable government that the Constitution seeks to create,” Breyer wrote.
The case is Free Enterprise Fund v. Public Company Accounting Oversight Board, 08-861, U.S. Supreme Court (Washington).
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U.S. Bid for Tobacco Damages Rejected by High Court
The U.S. Supreme Court rejected the Justice Department’s bid for as much as $280 billion in tobacco company profits, refusing to hear an Obama administration appeal. Altria Group Inc. and Reynolds American Inc., the largest cigarette makers, surged on the news.
The rebuff all but ensures that the racketeering suit first pressed by former President Bill Clinton’s administration won’t result in financial penalties against Altria’s Philip Morris USA and R.J. Reynolds Tobacco Co. It’s the second time the high court has refused to hear government arguments in the case.
The court also rejected a group of industry appeals aimed at overturning a trial judge’s finding that the cigarette makers defrauded the public about the dangers of smoking for more than 50 years.
Matthew Myers, president of the Campaign for Tobacco-Free Kids, said yesterday, “It is now critical that the trial court move forward with strongly enforcing the remedies that it did order.”
A federal appeals court in Washington said in 2005 that RICO allows only “forward-looking remedies” and doesn’t let the government recoup ill-gotten gains.
Philip Morris, maker of Marlboros and the largest U.S. tobacco company, called the 1999 lawsuit “an unprecedented effort to use litigation to obtain extensive regulatory authority over the tobacco industry that, until recently, it had been unable to secure through the legislative process.”
The government’s appeal is United States v. Philip Morris, 09-978. The industry’s appeals include Philip Morris USA v. United States, 09-976; R.J. Reynolds Tobacco v. United States, 09-977; Altria Group v. United States, 09-979; and Lorillard v. United States, 09-1012.
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Business Method Patents Limited by U.S. Supreme Court
The U.S. Supreme Court ruled against two men who sought to patent a system for hedging energy trades, while leaving the door open to allowing limited legal protections for registering business methods.
The ruling in the so-called Bilski case was the first time in 29 years that the court voted on what types of innovations qualify for legal protection. While the decision was unanimous, the justices divided 5-4 in their reasoning, with the majority declining to bar all patents on methods of conducting business.
“This is a victory for people in favor of broader patents generally, including software,” said patent lawyer Edward Reines of Weil Gotshal in California, who was watching the case. “The stakes are high, the technology is evolving rapidly and it’s really difficult to make all-purpose rules in this area.”
The justices voting in the majority said there needs to be a flexible test for emerging technologies. The case drew record interest for a business dispute before the highest U.S. court, with Microsoft Corp. and Morgan Stanley among dozens of companies filing briefs. The fight split industries, dividing companies that rely on their own intellectual property from those aiming to head off expensive infringement lawsuits.
The dispute involved Bernard L. Bilski and Rand A. Warsaw, founders of a Pittsburgh company that sells customized consumer energy products. The Supreme Court was reviewing a decision by the U.S. Court of Appeals for the Federal Circuit against Bilski that said methods can be patented only if they have some physical component, through either a connection to a machine or their power to transform an item into a different state.
The case is Bilski v. Kappos, 08-964, U.S. Supreme Court (Washington).
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Ex-MAN Turbo Chief Convicted of Bribery Gets Suspended Sentence
The former top executive at a MAN SE unit was convicted of bribery, receiving a two-year suspended prison sentence and an order to pay 100,000 euros ($123,350) to charities.
The former chief executive of MAN Turbo AG, identified only as Heinz Juergen M., authorized more than 9 million euros in bribes to win orders tied to a gas pipeline in Kazakhstan, the Munich Regional Court said in an e-mailed statement yesterday. The sentence was part of an agreement between court, defense and prosecution, according to the statement.
“The court took into account the full cooperation of the accused right from the beginning,” the judges said. “It warrants particular notice that he took full responsibility and didn’t try to put the blame on his subordinates.”
MAN SE, Europe’s third-largest truckmaker which is 29.9 percent owned by Volkswagen AG, last year agreed to pay 150.6 million euros in fines to resolve an investigation into alleged bribes paid by its truck and turbo units.
Thomas Elsner, attorney for Heinz Juergen M., 66, didn’t return a call seeking comment.
The bribes were paid between October 2005 and May 2008. The former executive was convicted of bribing employees of a private company and not of bribing a government official, according to the court. Bribes to government officials carry a sentence of as many as five years under German law.
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Securities Fraud Appeal by Janus Gets U.S. Supreme Court Review
The justices will review a federal appeals court decision letting shareholders sue Janus and a subsidiary for helping produce allegedly misleading prospectuses for Janus mutual funds. Janus contends that the funds are separate legal entities and that neither the parent company nor the subsidiary were responsible for the prospectuses.
The case will be a follow-up to a 2008 Supreme Court decision that restricted securities suits against a company’s banks and business partners.
The latest fight stems from allegations that the Janus funds allowed preferred clients to engage in “market timing,” a practice of making frequent, short-term trades at the expense of other investors. Denver-based Janus agreed in 2004 to pay $326 million to settle claims by state and federal regulators.
The prospectuses said the funds had taken steps to deter market timing. In the lawsuit, Janus shareholders say those assurances were revealed to be false in 2003 when New York officials filed a complaint against the company, causing its share price to fall.
The justices agreed to take up the case against the advice of the Obama administration, which urged rejection of the Janus appeal. The court will hear arguments and rule during the nine- month term that starts in October.
The case is Janus Capital Group v. First Derivative Traders, 09-525, U.S. Supreme Court (Washington).
Kier Challenges Fine in U.K.’s Biggest Cartel Probe
Kier Group Plc, the builder fined 17.9 million pounds ($27 million) last year following the biggest cartel investigation by a U.K. antitrust regulator, told an appeals court that the penalty was “discriminatory.”
Britain’s Office of Fair Trading should be made to reduce the fine because it didn’t account for Kier’s low profit margin or the builder’s early admission that it rigged bids, lawyers for the company said yesterday at a hearing at the Competition Appeal Tribunal in London.
“The fine was inflicted above levels necessary for deterrence,” Mark Brealey, Kier’s lawyer with the firm Brick Court Chambers in London, said at the hearing. He compared the penalty with a motorist getting their hand chopped off as a punishment for breaking the speed limit.
The fines, the most levied by the watchdog in an antitrust probe, capped a five-year inquiry into efforts to stamp out low bids and inflate costs. Many of the appeals claim the OFT’s process of raising fines to deter would-be infringers is calculated wrongfully using a percentage of a company’s global revenue instead of U.K. sales alone.
“This appeal, if successful, could have a major impact on the OFT’s fining policy and, in particular, on the application of the minimum deterrence threshold,” said Ros Kellaway, who leads the competition group at the law firm Eversheds LLP in London. The challenge “could impact on other cases currently under appeal as well as future infringement decisions.”
Jonathan Marciano, a spokesman for the OFT, said yesterday that the agency would “vigorously” defend the fines.
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Kagan Vows Impartiality as Senators Start Hearings
U.S. Supreme Court nominee Elena Kagan said she will do her best to “consider every case impartially, modestly,” as senators began confirmation hearings amid partisan disagreement over her qualifications.
The court’s motto of “equal justice under law” promises that the justices will provide “a fair shake for every American,” Kagan said in excerpts from the opening statement she planned to deliver yesterday to the Senate Judiciary Committee. The high court must be “properly deferential to the decisions of the American people and their elected representatives,” Kagan said.
The Democratic-controlled panel quickly established the battle lines over Kagan’s appointment by President Barack Obama, his second to the high court. Democrats said Kagan has had an outstanding and varied career; Republicans accused her of political activism and a lack of judicial experience.
Judiciary Committee Chairman Patrick Leahy, a Vermont Democrat, said Kagan’s “legal qualifications are unassailable,” and she has “excelled during every part” of her career. He said Americans will find Kagan’s views “well within the legal mainstream.”
Senator Jeff Sessions of Alabama, the ranking Republican on the committee, said “there are serious concerns about this nomination.” Kagan has “less real legal experience” of any nominee in at least 50 years and has “barely practiced law,” he said. He said most of Kagan’s background is in policy and politics.
Her confirmation by the full Senate would place three women on the Supreme Court at once for the first time in its 221-year history. Kagan is solicitor general at the Justice Department, the Obama administration’s chief courtroom lawyer and the first woman in that position.
She is a heavy favorite to become the court’s 112th justice, with lawmakers predicting confirmation barring a major gaffe during this week’s hearings. Kagan will make her opening statement after the 12 Democrats and seven Republicans on the committee have an opportunity to speak.
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