JPMorgan, Deutsche Bank, Citigroup in Court News
The investor, Peter Laskaris, alleges that starting in March 2008, the banks colluded to suppress silver futures so that call options, or the right to buy, would decline, and put options for the right to sell would increase, according to the complaint filed yesterday in federal court in Manhattan. The collusion was also intended to maintain prices at levels at which some options would expire as worthless, Laskaris claims.
The banks placed so-called spoof trading orders, or the “submission of a large order which is not executed but influences prices and is then withdrawn before it reasonably can be executed,” according to the complaint.
Joseph Evangelisti, a spokesman for New York-based JPMorgan, declined to comment. Juanita Gutierrez, a spokeswoman for London-based HSBC, also declined to comment.
A separate, similar complaint filed yesterday on behalf of investor Brian Beatty, and naming the same banks as defendants, claims a whistleblower contacted the CFTC last year and reported the banks’ conspiracy to suppress prices of silver futures to profit from “enormous” short positions in silver futures.
Christopher Lovell, a lawyer representing Laskaris, didn’t return a call seeking comment after business hours.
The cases are Laskaris v. JPMorgan Chase & Co., 10-8157, and Beatty v. JPMorgan Chase, 10-8146, U.S. District Court, Southern District of New York (Manhattan).
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Deutsche Bank Ordered to Pay $980,000 in Swap Suit
Deutsche Bank AG, Germany’s biggest lender, was ordered by an appeals court to pay 710,000 euros ($980,000) in damages over swaps it recommended to municipalities.
The Stuttgart Higher Regional Court issued the ruling in a suit brought by a sewer-system operator jointly owned by southern German cities including Ravensburg and Weingarten. The judges overturned a lower tribunal’s decision to reject the claim the bank didn’t properly explain the risk of the swaps.
The “swaps constitute a form of gambling,” the court said in an e-mailed statement yesterday. “The bank must disclose that it constructed the odds to the disadvantage of the customer, who bears a higher likelihood of losing.”
Deutsche Bank has been involved in more than 20 lawsuits filed by local governments, community-owned utilities and companies that claim the lender sold swaps without adequately disclosing their risks. Four other appeals courts had ruled in favor of Deutsche Bank. Germany’s highest civil court will eventually have to decide whether the bank failed to adequately advise its customers in these cases.
Deutsche Bank, based in Frankfurt, will ask the top court to overturn the ruling, its attorney Christian Duve said. The Stuttgart court said the parties are allowed to appeal yesterday’s order because of the disparate case law on the issue.
“The ruling confirms our view that such highly complex financial products require a high quality of advice from the bank,” Peter Gundermann, the attorney for the plaintiff, said in an e-mailed statement.
Deutsche Bank presented itself as an expert in municipal financing and should have known that state law prohibits cities from investing in speculative products, the court said.
The German case is OLG Stuttgart, 9 U 148/08.
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Parrett Lived in ‘Lap of Luxury’ on Lam, Marshal Says
Rebecca Parrett, a former National Century Financial Enterprises Inc. executive who fled the U.S. to avoid a 25-year prison term, was arrested in a Mexican resort town where she liked to dance, a U.S. official said.
Parrett, 62, was picked up Oct. 26 by Mexican immigration authorities in Ajijic, Jalisco, Deputy U.S. Marshal Brian Babtist said yesterday. Parrett was convicted in Columbus, Ohio, in March 2008 for her role in a $2.9 billion fraud. Days later, while out on bail, she fled her home in Carefree, Arizona. She was declared a fugitive and sentenced in absentia in March 2009.
“She was living in the lap of luxury,” Babtist said in a telephone interview from Columbus. “She was having fun, telling people that she was an American who had testified against several people in a large white-collar crime case. She was trying to stay anonymous and using an alias.”
Parrett was flown yesterday from Guadalajara to Los Angeles, where she was arrested on a warrant, he said. She will appear in federal court in Los Angeles before being moved to Columbus.
She was convicted with four other executives in 2008 of fraud, money laundering and conspiracy. The judge also ordered her to pay $2.38 billion in restitution. Parrett, a former vice chairman, secretary and treasurer, was one of 10 executives who were convicted at trial or pleaded guilty.
Babtist couldn’t say how Parrett financed her life on the run. “I don’t know where the money came from, whether she was getting outside help or she was using the stolen funds from the fraud case,” he said.
The case is U.S. v. Poulsen, 06-129, U.S. District Court, Southern District of Ohio (Columbus).
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Ex-HannStar Executive to Plead Guilty to Price Fixing
A former HannStar Display Corp. executive will plead guilty to price-fixing of liquid crystal display panels and agree to serve seven months in jail, U.S. prosecutors said in a statement.
Jui Hung Wu was charged in San Francisco with conspiring from September 2001 to January 2006 to eliminate competition in the display industry, the Justice Department said. Wu is a resident of Taiwan and a former director of global sales and marketing for Taipei-based HannStar.
Under an agreement, which needs court approval, Wu will pay a $20,000 fine, according to the government. Wu met with other executives in the flat-screen industry and agreed to charge prices at predetermined levels, the U.S. said.
Wu’s lawyer Gail Shifman didn’t return a call for comment.
The case is U.S. v Wu, 10-00781, U.S. District Court, Northern District of California (San Francisco).
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Cablevision Systems Sued by Customers Over Fox Network Block
Cablevision Systems Corp., which provides television programming in the New York City area, was sued by three customers seeking damages for the company’s failure to firm up a contract with News Corp.’s Fox network.
Cablevision has been embroiled in a dispute with Fox over fees, and customers faced blank screens yesterday for the U.S. baseball World Series opener pitting the Texas Rangers against the San Francisco Giants.
The suit “seeks restitution for Cablevision’s 3 million customers who have been deprived of Fox channels, which have been replaced by Cablevision’s annoying and self-serving loop, which whines about News Corp.’s supposed failure to negotiate in good faith.”
The complaint, filed Oct. 26 in federal court in White Plains, New York, by subscribers in Yorktown Heights, New York, Mountain Lakes, New Jersey, and Stamford, Connecticut, seeks at least $450 million in compensation, as well as punitive damages.
Fox, based in New York, cut its electronic feed to Cablevision, of Bethpage, New York, two weeks ago, after the companies couldn’t agree on fees to be paid by Cablevision.
“News Corp. is the company that deserves a lawsuit, for blacking out the World Series in three million New York-area homes,” said Jim Maiella, a spokesman for Cablevision, in an e- mailed message. “The FCC has all the facts and our customers are demanding that the FCC act to end the FOX blackout.”
The case is Gallo v. Cablevision Systems Corp., 10-CV8125, U.S. District Court, Southern District of New York (White Plains).
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Wells Fargo Finds Foreclosure Lapses, Will File Affidavits
Wells Fargo & Co., conceding that some foreclosure affidavits “did not strictly adhere to the required procedures,” said it will file supplemental statements to courts in about 55,000 proceedings.
The bank, which has proceeded with home seizures while rivals including Bank of America Corp. and JPMorgan Chase & Co. delayed theirs, said yesterday in a statement that it found some lapses during a review of its processes. The bank will begin filings in 23 states immediately and aims to complete them by mid-November, subject to local laws, according to the statement.
“The issues the company has identified do not relate in any way to the quality of the customer and loan data,” the San Francisco-based lender said in the statement. “Nor does the company believe that any of these instances led to foreclosures which should not have otherwise occurred.”
Attorneys general in all 50 states started a probe into foreclosure practices after court documents surfaced showing employees signed papers without ensuring their accuracy. Bank of America, JPMorgan and Ally Financial Inc. temporarily suspended some foreclosure sales or evictions, pending reviews. Wells Fargo reiterated yesterday that it doesn’t intend to stop foreclosure sales.
“The company has identified instances where a final step in its processes relating to the execution of the foreclosure affidavits (including a final review of the affidavit, as well as some aspects of the notarization process) did not strictly adhere to the required procedures,” it said in the statement.
Wells Fargo has assigned 160 employees in four offices to be part of the review, said Teri Schrettenbrunner, a spokeswoman for the company, in a phone interview.
U.S. Asks to Close Ex-Societe Generale Trader’s Trial
The trial of ex-Societe Generale trader Samarth Agrawal, accused of stealing the bank’s computer code for high-frequency trading, should be held in part behind closed doors to protect trade secrets, the U.S. said.
Agrawal, arrested in April, was charged by federal prosecutors in with theft of trade secrets. The government said Agrawal, hired by Societe Generale in New York in March 2007 to work as a quantitative analyst in the high-frequency trading group, made copies of one part of the code he’d been given access to and another part he wasn’t allowed to have.
Prosecutors in New York asked U.S. District Judge Jed Rakoff to close portions of the trial to the public when high- frequency trading is discussed and to seal the transcript about such testimony, because Agrawal claims the data wasn’t secret.
“In short, the nature of the trade secrets is likely to be contested at trial,” said prosecutors in the office of Manhattan U.S. Attorney Preet Bharara.
Agrawal has pleaded not guilty to the charges. His lawyer, Ivan Fisher, didn’t return a voice-mail message left at his office after business hours.
Agrawal was promoted to trader in April 2009, according to the complaint against him. Before he resigned in November, he deleted a computer folder on his personal network drive that contained the code, prosecutors said.
Prosecutors have said the code Agrawal is accused of stealing cost millions of dollars to develop and generated millions of dollars in revenue for Societe Generale.
The case is U.S. v. Agrawal, 10-CR-417, U.S. District Court, Southern District of New York (Manhattan).
Rajaratnam Wiretaps Are Legal, U.S. Prosecutors Say
Galleon Group co-founder Raj Rajaratnam’s bid to exclude wiretap evidence from his hedge fund insider trading trial should be denied, prosecutors argued in court papers.
U.S. District Judge Richard Holwell in New York held a four-day hearing earlier this month over defense claims that the government misled a different federal judge, Gerald Lynch, into authorizing the wiretaps in March 2008.
Rajaratnam’s lawyers are seeking to show that U.S. agents lied or misled Lynch and then illegally recorded Rajaratnam’s communications. The recordings are the centerpiece of the biggest insider-trading prosecution in history. Defense lawyers argue the recordings shouldn’t be used in his criminal insider- trading trial.
“It was Rajaratnam’s burden to prove first, that the government, with intent to deceive Judge Lynch, or with reckless disregard for the truth, falsified or omitted facts from its wiretap affidavit,” Assistant U.S. Attorneys Jonathan Streeter and Avi Weitzman wrote.
“Rajaratnam failed to prove that any Government representative deliberately deceived Judge Lynch or had reckless disregard for whether they were deceiving the judge,” they wrote.
Prosecutors said the government secretly recorded about 2,400 conversations that the hedge fund executive had with more than 130 friends, business associates and alleged accomplices.
In addition to the wiretaps, prosecutors said, the evidence against Rajaratnam, 53, will include testimony from people who participated in the conversations.
Lawyers for Rajaratnam said in court papers filed Oct. 18 the wiretaps should be suppressed. The defense cited testimony from the hearing earlier this month which they say proves their argument that government statements to Lynch in obtaining the wiretap were false and misleading.
“It was much easier for the FBI and the U.S. Attorney’s Office to decide for themselves what he should hear about and what should be hidden,” John Dowd, a lawyer for Rajaratnam, wrote.
“Falsehoods and critical omissions pervade this affidavit” for a wiretap, he wrote.
The case is U.S. v. Rajaratnam, 09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).
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Oracle Says It Will Show Proof of Apotheker Wrongdoing
Oracle Corp. Chief Executive Officer Larry Ellison said his company plans to produce evidence that Hewlett-Packard Co.’s incoming CEO was involved in an effort to steal Oracle software while at former employer SAP AG.
“A few weeks ago I accused HP’s new CEO, Leo Apotheker, of overseeing an industrial espionage scheme centering on the repeated theft of massive amounts of Oracle’s software,” Ellison said in a statement Oct. 26. Oracle intends to present evidence at a trial that starts Nov. 1, Ellison said.
HP said in response that Oracle is attempting to harass its new CEO, who had limited knowledge of the case. SAP, which is fighting the amount of damages Oracle is seeking in a 2007 lawsuit, said yesterday that Ellison is using the trial as part of his personal crusade against HP. Ellison hired former HP CEO Mark Hurd as a president last month and chided HP’s board for how it handled Hurd’s departure.
“Oracle had ample opportunity to question Leo during his sworn deposition in October 2008 and chose not to include him as a trial witness until he was named CEO of HP,” HP said in a statement.
“Given Leo’s limited knowledge of and role in the matter, Oracle’s last-minute effort to require him to appear live at trial is no more than an effort to harass him and interfere with his duties and responsibilities as HP’s CEO,” HP said.
SAP expects to have to pay “tens of millions” of dollars in damages, SAP Co-President Bill McDermott said in an interview yesterday. McDermott said he expects to be in court on Nov. 2.
A jury and judge will decide any amount that SAP has to pay. SAP has said there was inappropriate downloading of Oracle’s support documents.
“This is more evidence of Oracle’s true motivation to use the trial as part of Ellison’s personal crusade against HP,” Christoph Liedtke, a spokesman at SAP, said in a telephone interview yesterday. “SAP remains focused on the core issue of determining reasonable levels of compensation in this case for Oracle.”
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McDonald’s Obesity Case Can’t Proceed as Group Suit
McDonald’s Corp., the world’s largest restaurant chain, convinced a U.S. judge that consumers’ claims that its food contributed to childhood obesity were too distinct to be gathered in a single group lawsuit.
“Plaintiffs’ claims will necessitate extensive individualized inquiries,” Judge Donald Pogue in Manhattan said yesterday in a 43-page decision in a lawsuit filed in 2002 by teenagers Ashley Pelman and Jazlen Bradley.
They accused McDonald’s of deceptively marketing its Chicken McNuggets, fish sandwiches, hamburgers and French fries from 1985 to 2002, harming their health and violating New York law.
Pogue, a U.S. Court of International Trade judge sitting by special designation in district court, said the consumers hadn’t shown that other people of a similar age suffered the same medical injuries after being exposed to the same marketing and eating the same food.
Lawyers for Pelman and Bradley estimated that the class size could number in the thousands, according to the ruling.
“We are extremely pleased with the court’s decision yesterday,” Heidi Barker, a spokeswoman for McDonald’s, said in an e-mailed statement. “As we have maintained throughout these proceedings, it is unfair to blame McDonald’s for this complex societal problem.”
Samuel Hirsch, the lead lawyer for the plaintiffs, didn’t immediately respond to a call and e-mail seeking comment on yesterday’s decision.
The case is Pelman v. McDonald’s Corp., 02-cv-07821, U.S. District Court, Southern District of New York (Manhattan).
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Citigroup’s Wormsley Denies Suggesting Bid to Hands
Citigroup Inc. banker David Wormsley denied giving bid information about an auction of EMI Group Ltd. to Terra Firma Capital Partners Ltd. founder Guy Hands, who claims Wormsley misled him about the deal.
Wormsley also testified yesterday that he didn’t remember many specifics of the sale because he had been sidelined -- “kicked to the curb,” in the words of Citigroup lawyer Ted Wells -- as an adviser on the deal by EMI in favor of Greenhill & Co.
“I played a very junior role in this transaction,” Wormsley told jurors at the start of a second full day of testimony in federal court in New York.
Wormsley, 50, who was called as a hostile witness by Terra Firma, testified under questioning by Wells that he played only a minor role in the deal, confined to working on the financing. He said he never told Hands to bid 2.65 pounds ($4.17) a share for EMI, or that Cerberus Capital Management LP planned to make a competing offer of 2.62 pounds a share, as Hands claims.
Hands, who testified over four days, claims Terra Firma was forced to overpay for EMI, which has lost money since the deal, because Wormsley misled him about the bidding in three telephone calls during the weekend before the auction on Monday, May 21, 2007.
Cerberus didn’t bid, leaving Terra Firma without competition in the auction for the 113-year-old music publishing and recording company based in London. Terra Firma claims that if it had known the truth, it would have sought more information about EMI’s business and finances and negotiated a lower price.
Wormsley testified Oct. 27 that he and Hands discussed only Citigroup’s financing of the deal, denying, under questioning by Terra Firma lawyer David Boies, that they discussed details of the Terra Firma bid.
Wormsley completed his testimony yesterday after spending two days on the stand.
The case is Terra Firma Investments (GP) 2 Ltd. v. Citigroup, 09-cv-10459, U.S. District Court, Southern District of New York (Manhattan).
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Lehman Brokerage Trustee’s Firm Gets $107.8 Million
The law firm advising the trustee of Lehman Brothers Holdings Inc.’s brokerage was paid $107.8 million for two years’ work liquidating the remains of the broker dealer, according to a bankruptcy court filing.
Trustee James Giddens and his law firm Hughes Hubbard & Reed LLP have been returning assets to customers of the brokerage, Lehman Brothers Inc., since its parent filed the biggest bankruptcy in U.S. history in September 2008 in New York. Total charges for lawyers, accountants, services and rent through Sept. 30 were about $420 million, the trustee said in the Oct. 26 filing.
Giddens had to set up “protocols and processes for returning property to customers, and incurred substantial expenses in administering the largest broker dealer insolvency in history,” Kent Jarrell, a spokesman for Giddens, said in an e-mail yesterday.
The main bankruptcy case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The brokerage case is In re Securities Investor Protection Corp. v. Lehman Brothers Inc., 08-1420, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Stanford Attorney Bennett Removed as Trial Lawyer
R. Allen Stanford’s attorney, Robert S. Bennett, was removed from his criminal-defense trial team by a federal judge after the indicted financier was found indigent.
U.S. District Judge David Hittner, who will preside over Stanford’s criminal trial, relieved Bennett of his trial duties yesterday at a hearing in Houston federal court. The judge rejected three lawyers proffered by Stanford and appointed two others.
“Indigent defendants do not have the right to select their own attorneys,” Hittner said. The judge didn’t postpone the financier’s trial scheduled for Jan. 24. New attorneys Robert Scardino and Ali Fazel told him they would be ready.
Stanford, 60, is accused of leading a $7 billion investment fraud scheme centered on the sale of certificates of deposit by his Antigua-based Stanford International Bank Ltd. He has maintained he is innocent.
The case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston).
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