BP, RBS, ESun, Galleon, Churchill, Total, Goldman, Dell in Court News
BP Plc may saddle potential buyers of its assets with lawsuits as Europe’s second-biggest oil company tries to raise money to pay claims that may reach $100 billion from the Gulf of Mexico spill, Bloomberg News’s Linda Sandler reports.
Apache Corp. may agree to pay $10 billion to $11 billion in cash next week for some of BP’s Alaskan assets, according to people familiar with the deal. Exxon Mobil Corp., Royal Dutch Shell Plc and Tullow Oil Plc have also said they may be interested in buying some of BP’s properties.
Laws prohibiting fraudulent transfers could allow victims to sue a buyer to recover money deemed essential to pay claims, and successor liability could leave a purchaser with BP’s obligations, if BP files for bankruptcy. A proposed change to federal bankruptcy laws could force a buyer to wait for BP to get approval from victims for the sale, or persuade a judge it will have enough assets to pay claims in full.
“Any purchaser will worry about fraudulent transfer and successor liability issues, and perhaps request part of the purchase price be kept in escrow for such a contingency,”,” said New York bankruptcy lawyer Martin Bienenstock of Dewey & LeBoeuf LLP in an e-mail.
BP said July 16 it found no sign of an oil leak after stopping the flow from its broken Macondo well July 15 for the first time since an April 20 explosion at the Deepwater Horizon drilling rig killed 11 workers. The well had dumped as much as 60,000 barrels of oil a day into the Gulf, according to a U.S. government-led panel of scientists.
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RBS Said to Weigh Legal Options After Goldman Fine
Royal Bank of Scotland Group Plc will reserve the right to file future lawsuits against Goldman Sachs Group Inc. after the Wall Street firm agreed to pay $100 million in compensation as part of a settlement with U.S. regulators, a person with knowledge of the matter said.
RBS hasn’t been asked to waive its right to file lawsuits and has a strong legal case following New York-based Goldman’s agreement with the Securities and Exchange Commission to pay a $550 million fine, said the person, who declined to be identified because the talks are private.
RBS, which was bailed out by the British taxpayer, lost about $841 million on a collateralized debt obligation arranged by Goldman Sachs. U.S. authorities sued Goldman in April, alleging that the bank created and sold CDOs linked to subprime mortgages without disclosing to buyers that hedge fund Paulson & Co. helped pick the underlying securities and bet against them.
“RBS has been monitoring the complaint closely,” the Edinburgh-based bank said in an e-mailed statement. “Following the SEC’s announcement, RBS will now carefully consider all of its options.”
Germany’s IKB Deutsche Industriebank AG will receive about $150 million payment as part of the settlement after it lost about the same amount on the Goldman Sachs CDO. KfW Group, the German development bank that bailed out IKB during the credit crisis, said it will also review the settlement.
“KfW is examining the decision from last night,” spokesman Michael Helbig said July 16, declining to comment further.
Under the terms of Goldman Sachs’s settlement with the SEC, the firm is prohibited from denying, directly or indirectly, any of the allegations in the SEC’s complaint. The complaint, which was filed on April 16, accused Goldman Sachs of intentionally misleading investors in the Abacus CDO.
The firm “is acknowledging that its marketing materials were deficient and failed to disclose material information,” Lorin Reisner, the SEC’s enforcement director, said July 15. Goldman agreed July 15 to pay $550 million and change its business practices to settle U.S. regulatory claims. The penalty is the largest levied by the Securities and Exchange Commission against a Wall Street firm.
A Goldman Sachs spokeswoman in London declined to comment.
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ESun’s $2.4 Billion Claim Against Investors Dismissed
High Court Judge A.T. Reyes ruled July 16 that East Asia Satellite Television (Holdings) Ltd.’s attempt to sue them is “untenable” under Macau and Hong Kong laws. He allowed a separate claim for $88.6 million against Oaktree and Silver Point for “inducing breach” of an agreement to proceed.
East Asia Satellite last October sued New Cotai LLC, owned by Oaktree, Silver Point and former Las Vegas Sands Corp. executive David Friedman, and its directors, accusing them of systematically hindering the development of their Macao Studio City project in order to force a renegotiation of the terms of their joint venture.
Calls to eSun executives requesting comment weren’t returned. Peter Lam, chairman of eSun parent Lai Sun Development Co., wasn’t available for comment after office hours in Hong Kong.
Friedman, New Cotai’s chief executive, said in a statement he was pleased the High Court dismissed “so many” of East Asia’s claims.
“We will vigorously defend the remaining claims and are confident that when the Court has the opportunity to consider the remaining claims, our position will be vindicated,” he said.
The case is East Asia Satellite Television (Holdings) Ltd. and New Cotai LLC, HCA 2189/2009 in the Hong Kong Court of First Instance.
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Plate Pleads Guilty in Galleon Insider-Trading Case
David Plate, who is charged in the Galleon Group LLC insider-trading case, pleaded guilty to two criminal counts and is cooperating with the government.
The plea came in a hearing July 16 before U.S. District Judge Richard Sullivan in New York.
Plate, who pleaded guilty to securities fraud and conspiracy to commit securities fraud, told Sullivan that he bought 50,000 shares of Axcan Pharma Inc. in November 2007, based on insider information that originated with two lawyers at the law firm Ropes & Gray.
Plate was charged with six others in one of two overlapping insider trading cases involving Galleon Group founder Raj Rajaratnam. Rajaratnam, who has pleaded not guilty, was arrested in October. A total of 21 have been charged in the two cases.
The case is: U.S. v. Goffer, 10-cr-56, U.S. District Court, Southern District of New York (Manhattan).
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Churchill Ends Trade Secrets Suit Against Ex-Analysts at Aviate
Churchill Capital Ltd., a hedge fund adviser and brokerage, ended a lawsuit filed against two of its former equity analysts in Singapore accusing them of passing confidential client data to rival Aviate Global LLP.
A notice to discontinue the lawsuit was filed with the Singapore High Court July 15.
Churchill had accused Jonathan Foster and Charles Nave of breaching their employment contract, which prohibited them from poaching clients and employees for a year, according to the April 29 suit. Bermuda-based Churchill said in the suit it found evidence that the two, who quit at the end of 2009 to join Aviate, conspired to download several files from the company’s system.
“The matter has now been amicably resolved,” a founding partner Patrick Churchill said in a telephone interview from Monaco. He declined to disclose settlement terms. Foster and Nave declined to comment. Aviate wasn’t a party to the suit.
The case is Churchill Singapore Pte. v Jonathan Foster and Charles Nave S298/2010 in the Singapore High Court.
Total Must Pay $9.5 Million Over 2005 U.K. Explosion
Five companies must pay a total of 9.43 million pounds in fines and costs, Judge David Calvert-Smith said in the criminal case at St. Albans Crown Court, near London, July 16.
The depot, 25 miles (40 kilometers) north of London, blew up Dec. 11, 2005, in what the British government described as a blast “of massive proportions.” More than 20 tanks of jet fuel and gasoline exploded, injuring 40 people and causing widespread damage to buildings in the surrounding area.
“The failures which led in particular to the explosion were failures which could have combined to produce these consequences at almost any hour of any day,” Calvert-Smith said. The fact that the accident occurred at “one minute past 6 on a Sunday morning was little short of miraculous.”
Hertfordshire Oil Storage Ltd., a joint venture of Total and Chevron Corp. that ran the facility, was also fined 1.45 million pounds and must pay an additional 1 million pounds in legal costs.
Paris-based Total said in a statement that it fully accepts responsibility “for the events that took place at Buncefield in 2005.”
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Goldman Sachs ‘Victory’ Ushers Change for Wall Street
Goldman Sachs Group Inc.’s $550 million settlement with U.S. regulators July 15 will benefit the firm by ending three months of uncertainty at an affordable price. Now the rest of Wall Street begins calculating the cost.
Investors welcomed the deal with the Securities and Exchange Commission, saying the company won key points: The cost was below some analysts’ estimates of at least $1 billion; no management changes were required; and Goldman Sachs said the SEC indicated it doesn’t plan claims related to other mortgage- linked securities it examined. The stock’s late surge on anticipation of a settlement July 15 added more than $3 billion to the company’s market value, and it climbed further after New York trading closed.
“You’d have to look at it as a victory for Goldman,” said Peter Sorrentino, senior portfolio manager at Huntington Asset Advisors in Cincinnati, which manages $13.3 billion including Goldman Sachs shares. “This takes a cloud off the stock.”
In the settlement, unveiled less than two hours after the Senate passed legislation to reform the financial system and avert future crises, Goldman Sachs acknowledged that marketing materials for the 2007 deal at the center of the case contained “incomplete information.” In its April 16 suit, the SEC accused the firm of defrauding investors in a mortgage-backed collateralized debt obligation by failing to tell them that hedge fund Paulson & Co., which was planning to bet against the deal, had helped to design it.
The settlement requires the New York-based company to increase training for employees who structure or market mortgage securities, and to bolster the vetting and approval process. Those changes will probably lead to a new industry standard for disclosures in private sales of securities, even to the most sophisticated investors, analysts said.
Goldman Sachs said in a statement that the SEC doesn’t plan to target the firm over any other products that the agency has reviewed.
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Dell Proposes Settlement to SEC Staff Over Intel Case
The SEC’s staff will recommend the commission approve the proposal, Round Rock, Texas-based Dell said July 16 in a statement. The proposal’s terms are the same Dell disclosed in June, when it said it was in discussions with the SEC. Under those, Dell would be subject to a fine, and Michael Dell would be allowed to continue as chief executive officer.
Dell, under investigation since 2005, is being probed for accounting and financial reporting issues related to its partnership with the chipmaker. The company has said it may face penalties related to alleged violations of fraud laws and failure to disclose the extent of the relationship. Dell has set aside $100 million for the settlement.
SEC spokesman John Nester declined to comment. Any settlement would be subject to approval by the SEC and a U.S. District Court, Dell said.
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Obama Appointees May Solidify ‘Worrisome’ Partisan Court Split
The U.S. Supreme Court has long had ideological divisions. Senate confirmation of Elena Kagan may give it a partisan split as well.
Kagan’s arrival could create an unprecedented party-based alignment, with five Republican appointees often outvoting their four Democratic colleagues. She would succeed the retired Justice John Paul Stevens, a Republican appointee who defied party labels by aligning with the court’s liberals on abortion, the death penalty, terrorism, campaign finance and gun rights.
A partisan divide would punctuate a decades-long trend fueled by the increasingly contentious appointment and confirmation process. It would be a new dynamic for a court that has traditionally sought to keep its distance from the partisanship that pervades the other two branches of government.
“To an astonishing extent, a Republican appointment versus a Democratic appointment is going to explain a lot about their votes,” said Christopher L. Eisgruber, the provost of Princeton University in New Jersey and the author of a book on the Supreme Court appointment process. “And that’s worrisome when the court becomes an extension of partisan politics.”
Confirmation of Kagan, President Barack Obama’s second high court nominee, would put four Democrats on the court for the first time since 1971. It would come a year after Obama nominee Sonia Sotomayor succeeded David Souter, another Republican appointee who often voted with his Democratic colleagues.
Kagan would join a court that divided almost along party lines this year in 5-4 rulings that struck down limits on corporate campaign spending -- prompting criticism from Obama in his State of the Union address -- and required states and cities to respect gun rights.
In each case, the majority consisted of five Republicans -- Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas, Samuel Alito and Anthony Kennedy -- with Stevens and Democratic appointees Sotomayor, Stephen Breyer and Ruth Bader Ginsburg in the minority. Barring illness, that five-vote majority is likely to hold sway for some time given that no Republican has voiced interest in retiring.
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Drilling Ban Lawsuit Most Popular Docket on Bloomberg
A lawsuit by Hornbeck Offshore Services Inc. and other oil service companies challenging the six-month Gulf of Mexico deep water drilling moratorium was the most-read litigation docket on the Bloomberg Law system last week.
On July 13, two New Orleans courts were asked by Interior Secretary Kenneth Salazar to dismiss the lawsuit challenging the moratorium after the government issued a new temporary ban.
The revised ban that may allow new wells if the industry shows it has raised safety standards. The new policy replaces the earlier ban and renders the challenge to it moot, U.S. Justice Department lawyers said in filings with both courts.
Hornbeck Offshore Services Inc. and other oil service companies had sued U.S. regulators, including Salazar, arguing the drilling suspension would cause them irreparable economic harm.
U.S. District Judge Martin Feldman ruled June 22 that the measure was overly broad and two days later denied a U.S. request to put his order on hold while regulators appealed. The U.S. filed notice of appeal June 23. On June 25, the government asked the U.S. Court of Appeals in New Orleans to stay the order.
The case is Hornbeck Offshore Services LLC v. Salazar, 2:10- cv-01663, U.S. District Court, Eastern District of Louisiana (New Orleans). The appeal case is 10-30585, 5th U.S. Circuit Court of Appeals (New Orleans).
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