Terra, MGA, Galleon, Goldman, JPMorgan in Court News
The judge presiding over the trial of Terra Firma Capital Partners Ltd.’s lawsuit against Citigroup Inc. said he won’t let jurors consider punitive damages in the case.
U.S. District Judge Jed Rakoff said in a hearing after yesterday’s testimony that punitive damages aren’t appropriate in the case, which he called “a cat-fight between two rich companies.”
“Punitive damages, in most jurisdictions, involve some threat to the public,” Rakoff told lawyers in the hearing. “This case doesn’t have that.”
In the trial, which is set to go to a jury this week, Guy Hands’s Terra Firma private-equity firm claims Citigroup banker David Wormsley misled Hands in a May 2007 auction of EMI Group Ltd., causing it to overbid for the London-based music company.
Rakoff, who last week barred Terra Firma from asking jurors for lost profits damages, said yesterday that he was inclined to rule against permitting jurors to consider a claim for the $112.2 million Terra Firma says it was forced to invest in June to keep EMI from breaching debt covenants. Rakoff said he will give the question one more look and rule today.
Hands claimed in testimony during the trial that Wormsley falsely told him in three telephone calls the weekend before the Monday, May 21, 2007, auction that Cerberus Capital Management LP planned to submit a competing bid for EMI.
Cerberus had decided not to bid, leaving Terra Firma without competition in the auction. 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 better price.
Citigroup claims Wormsley said nothing to mislead Hands. Citigroup said Terra Firma only claimed it was defrauded in 2009 after unsuccessful negotiations to restructure the debt.
The case is Terra Firma Investments (GP) 2 Ltd. v. Citigroup, 09-cv-10459, U.S. District Court, Southern District of New York (Manhattan).
Oracle Seeks $2.3 Billion in SAP Download Trial
Oracle Corp., in a trial that began yesterday against SAP AG, wants at least $2.3 billion in damages for what its German rival acknowledges were a now-defunct unit’s “inappropriate” downloads of Oracle materials.
The trial in federal court in Oakland, California, may feature testimony by former SAP Chief Executive Officer Leo Apotheker and Oracle CEO Larry Ellison. Apotheker, who Oracle says oversaw the TomorrowNow unit’s conduct, began his new job yesterday as CEO of another Oracle rival, Hewlett-Packard Co.
SAP, the world’s biggest maker of business-management software, says its executives were unaware of the downloading at its TomorrowNow software maintenance unit, which was closed in 2008. Oracle’s damage estimates are “grossly exaggerated” and the lawsuit is aimed at harassing competitors, SAP’s lawyers said in court filings.
“The whole goal here is humiliation,” said Joshua Greenbaum, a software industry analyst at Enterprise Applications Consulting. In saying it might call Apotheker as a witness, Oracle “has now extended that to Hewlett-Packard,” Greenbaum said.
Oracle’s attorneys said in court filings that TomorrowNow illegally copied software code needed to support customers without buying licenses to access it. TomorrowNow made thousands of duplicates of copyrighted software obtained by illegally accessing electronic materials from Oracle’s customer-support websites, the lawyers said.
Apotheker went to Hewlett-Packard after Mark Hurd resigned as CEO amid a scandal over a personal relationship with a company contractor. Ellison, 66, hired Hurd, saying in a letter to the New York Times that Hewlett-Packard’s board had made “the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago.”
Oracle is seeking damages for lost business, copyright infringement, disgorgement of SAP’s profits and payment for costs SAP avoided by not having to develop its own software.
The case is Oracle Corp. v. SAP AG, 07-01658, U.S. District Court, Northern District of California (Oakland).
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Enron’s Skilling Seeks Retrial; U.S. Asks to Uphold Verdicts
Jeffrey Skilling, the former Enron Corp. chief executive officer convicted of leading a fraud that destroyed the world’s largest energy trader, is seeking a new trial over government objections.
A three-judge panel of the New Orleans appellate court is reviewing verdicts yesterday against Skilling after the U.S. Supreme Court determined in June that prosecutors used an invalid legal theory to convict him.
Skilling is serving a 24-year sentence in a Colorado federal prison after he and former Enron Chairman Kenneth Lay were found guilty of deceiving investors about the company’s true financial condition.
“The convictions cannot stand,” Daniel Petrocelli, Skilling’s lead lawyer, said in papers filed in advance of yesterday’s hearing in Houston federal court. “Skilling must be retried before a jury not exposed to, and not invited to convict on, an invalid fraud theory.”
Prosecutors, who obtained 19 verdicts against Skilling at a 2006 jury trial in Houston federal court, told the appellate court that jurors likely convicted Skilling under an alternate legal theory presented during the trial.
“Skilling and his co-conspirators engaged in a conspiracy to manipulate Enron’s earnings to satisfy Wall Street’s expectations,” Paul Pelletier, Principal Deputy Chief of the Justice Department’s criminal fraud section, said in court papers. “No rational jury could have failed to find that Skilling conspired to commit securities fraud.”
More than 5,000 jobs and $1 billion in employee retirement funds were wiped out when Enron plunged into bankruptcy in December 2001 after widespread accounting fraud was uncovered. Investors sued to recover more than $60 billion in market losses.
Skilling and Lay were convicted of using off-balance sheet entities to hide billions in debt and losses, which prosecutors claimed allowed Enron to report falsely inflated earnings. Lay died before he had a chance to appeal, and his conviction was erased.
Skilling’s lawyers have consistently argued that he didn’t commit any crimes and relied upon the advice of his accountants and lawyers, who approved Enron’s accounting and shareholder disclosures.
The case is U.S. v. Skilling, 06-20885, U.S. District Court, U.S. Court of Appeals for the Fifth Circuit (New Orleans).
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MGA Wins New Trial, Mattel’s $100 Million Award Voided
MGA Entertainment Inc. said it won a new trial on all issues decided in a 2008 trial that gave Mattel Inc. rights to most of MGA’s Bratz dolls products.
Judge David Carter in Santa Ana, California, on Oct. 29 granted MGA’s request for the new trial, and invalidated the $100 million damages verdict awarded to Mattel in the case, MGA said in an e-mailed statement.
In July, a three-member appeals court panel overturned a December 2008 order that gave Mattel rights to most of MGA’s Bratz products. A jury in the case found that the designer who created the dolls was working at Mattel when he conceived of the idea and the name and made the initial drawings for the pouty and multiethnic dolls.
The U.S. Court of Appeals in San Francisco last month denied Mattel’s petition for rehearing and review by a larger panel of judges.
“MGA is gratified that the prior erroneous rulings and jury instructions have been corrected,” the company said in the statement.
Jules Andres, a spokeswoman for El Segundo, California- based Mattel, didn’t immediately return a call seeking comment after regular business hours.
The district court case is Bryant v. Mattel, 04-09049, U.S. District Court, Central District of California (Riverside).
Kissel Seeks to Halt Retrial for Murdering Husband
Nancy Kissel, who claimed she killed her Merrill Lynch & Co. banker husband in self-defense in 2003, asked a Hong Kong court to stop her retrial for murder.
The 46-year-old mother of three, who remains in custody after having been sentenced to life in prison, would be freed immediately if the application for a permanent stay of proceedings is successful.
Judge Andrew Macrae yesterday ordered the media not to report on the details of the hearing, which is expected to last five days. The retrial is scheduled to begin on Jan. 10 if Kissel’s lawyers fail to win a halt.
Hong Kong’s top court in February overturned Kissel’s 2005 conviction, ruling the judge wrongly allowed hearsay evidence and prosecutors improperly questioned her during the trial. Jurors heard in the three-month trial that she drugged her husband with a milkshake, bludgeoned him to death and hid his body in a carpet.
Robert Kissel moved to Hong Kong from New York in 1998 with his wife and worked as co-head of Asian special situations for Goldman Sachs Group Inc. Merrill hired him in 2000 to head its distressed-assets business in Asia.
Nancy Kissel testified in her original trial that her husband was a cocaine addict and that she suffered years of abusive sex. She admitted to killing him and said it was in self-defense.
Prosecutors said that the banker had intended to divorce his Michigan-born wife after discovering she was having an affair with an electrical technician in Vermont.
Kissel’s lawyers had said a manslaughter charge, which would carry a sentence of eight to 12 years, was more justified, before prosecutors indicted her again for murder.
The case is Nancy Ann Kissel and HKSAR, HCCC55/2010, Hong Kong Court of First Instance.
PPL May Get U.S. High Court Review of $50 Million Award
The U.S. Supreme Court signaled it may review a decision that would require a PPL Corp. unit to pay more than $50 million to Montana for the use of riverbeds under the company’s hydropower facilities.
The justices yesterday sought advice on PPL’s appeal from acting U.S. Solicitor General Neal Katyal, the Obama administration’s top courtroom lawyer. The high court usually takes the solicitor general’s recommendations on pending petitions for review.
PPL Montana is appealing a Montana Supreme Court ruling that said the state owns the riverbeds and is entitled to demand rent payments. The company argues that the riverbeds are owned either by private parties or the federal government.
A Montana state trial court ordered the company to pay $40 million in past rent, plus an unspecified amount for rent starting in 2008. PPL Montana earlier this year recorded a pretax charge of $56 million to cover estimated payments through the first quarter of this year.
The dispute centers on dams on the upper Missouri, Madison and Clark Fork rivers. PPL is based in Allentown, Pennsylvania.
The case is PPL Montana v. Montana, 10-218, U.S. Supreme Court (Washington).
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Judge Rejects Move by Goldman’s Tourre to Toss Suit
Goldman Sachs Group Inc. trader Fabrice Tourre’s request to throw out the U.S. Securities and Exchange Commission’s lawsuit against him was rejected by a federal judge in New York.
U.S. District Judge Barbara S. Jones yesterday dismissed Tourre’s motion seeking a judgment in the case. He had argued that the SEC can’t sue him over a Goldman Sachs deal involving collateralized debt obligations because the transaction didn’t take place in the U.S.
In the same order, Jones said the SEC can file an amended complaint by Nov. 22.
“Defendant Tourre’s motion for judgment on the pleadings is dismissed without prejudice and with leave to renew after plaintiff has filed its amended complaint,” Jones wrote.
Pamela Chepiga, a lawyer for Tourre, didn’t return a call seeking comment. SEC spokesman John Heine declined to comment.
The U.S. Supreme Court ruled in June that U.S. securities laws don’t apply to claims of foreign buyers of non-U.S. securities on foreign exchanges, lawyers for the Goldman executive director said in a court filing in September. The collateralized debt obligations, known as Abacus, at issue in the SEC’s complaint weren’t listed on any exchange and the sole investor in the notes was a foreign bank that bought them overseas, according to the filing.
Jones said that, because the SEC sued before the Supreme Court decision came out in June, the agency can file an amended complaint.
The case is SEC v. Goldman Sachs, 10-CV-3229, U.S. District Court, Southern District of New York (Manhattan).
Wells Fargo ‘Robo-Signer’ Draws Dismissal Motion in Maryland
A Maryland homeowner asked a court to dismiss any Wells Fargo & Co. foreclosure actions in the state that involve affidavits given by a bank employee who said she signed documents without completely checking their accuracy.
Susan Saidman asked a Montgomery County court to recognize as a class all defendants in Maryland cases with foreclosure papers signed by Xee Moua for Wells Fargo. In a March deposition in a Florida case, Moua said she didn’t verify all the information in filings she signed, sometimes processing as many as 500 in two hours.
To permit “foreclosure actions to proceed based upon these false and fraudulent papers would be to accept dishonest and bogus behavior in Maryland courts,” Saidman said in a motion filed Oct. 29. “Such a result would be an assault on the rule of law.”
Saidman raised the defense against members of Shapiro & Burson LLP, a law firm that she said brings foreclosure actions on behalf of Wells Fargo and other secured lenders. The law firm couldn’t be reached by telephone yesterday after regular business hours.
Wells Fargo, the biggest U.S. home lender, said last week that it will file supplemental foreclosure affidavits to courts in about 55,000 proceedings after finding some statements “did not strictly adhere to the required procedures.” The San Francisco-based bank has said it chose to resubmit the documents out of “an abundance of caution” and that none of “these instances led to foreclosures which should not have otherwise occurred.”
The Maryland case is Burson v. Saidman, 323096V, Circuit Court, Montgomery County (Rockville); the Ohio case is Piwinski v. Wells Fargo Bank, 2010-CV-1373, Fairfield County Court of Common Pleas (Lancaster).
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Cohmad, Principals Settle SEC’s Madoff-Related Suit
Cohmad Securities Corp. and three of its principals have settled a U.S. Securities and Exchange Commission lawsuit over what the firm told and didn’t tell investors whom they referred to Bernard L. Madoff.
The firm, Chairman Maurice J. Cohn, daughter and Chief Operating Officer Marcia B. Cohn and Vice President Robert M. Jaffe agreed to an order barring them from violating securities laws governing material misrepresentations and omissions, resolving a case filed in June 2009. The agreement requires the approval of U.S. District Judge Louis Stanton in Manhattan.
The SEC said New York-based Cohmad -- which shared offices with Madoff’s firm -- and the individual defendants fed investor funds to Madoff.
Theirs is the only firm to face U.S. regulator claims that it solicited money for him.
“The Cohns have decided that resolving this matter with the SEC and avoiding lengthy litigation is in the best interest of their family,” defense attorney Steven Paradise said in an e-mailed statement.
They neither admitted nor denied the claims, Paradise and the SEC said separately.
The Cohmad defendants “referred hundreds of investors and billions of dollars to Madoff, according to a revised complaint filed by the SEC yesterday at the U.S. courthouse in Manhattan.
Madoff, 72, is serving a 150-year federal prison term after pleading guilty to running the biggest Ponzi scheme in history through his Bernard L. Madoff Investment Securities LLC.
The case is Securities and Exchange Commission v. Cohmad Securities Corp., 09-cv-5680, U.S. District Court, Southern District of New York (Manhattan).
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Rajaratnam Renews Wiretap Objections in Insider Case
Galleon Group hedge-fund firm co-founder Raj Rajaratnam renewed his objections to the use of government wiretaps in his insider-trading prosecution.
In a brief filed in Manhattan federal court yesterday, Rajaratnam called papers filed by the prosecution on the subject last week ‘‘a model of misdirection.’’
Rajaratnam claims the judge who authorized the wiretaps, U.S. District Judge Gerald Lynch, wouldn’t have done so if he had been told that investigators had been gathering evidence for a year before asking for a wiretap warrant.
The wiretaps are a key part of the evidence against Rajaratnam, 53, who’s accused of using tips from company executives, hedge-fund employees and others in a multimillion- dollar insider-trading scheme. He’s the central figure in an investigation in which 21 were charged.
The case is U.S. v. Rajaratnam, 09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).
Madoff Aide Bongiorno, Husband Fight U.S. to Keep Homes, Cash
Former Bernard Madoff aide Annette Bongiorno and her husband asked a federal judge to halt the U.S. government from seizing homes in Florida and New York and more than $2 million in cash.
Bongiorno, who worked for Madoff for 40 years, and her husband Rudy, a former electrician with the New York City Department of Transportation, filed papers yesterday in Manhattan federal court contesting the government’s seizure attempt.
‘‘This is simply procedurally the first step to challenge the government’s forfeiture action,” Roland Riopelle, a lawyer for the couple, said in an interview.
In their court filing, the couple asserts ownership to cash held in several bank accounts, homes in Boca Raton, Florida, and Manhasset, New York, two Mercedes Benzes, and a Bentley.
Government lawyers sued in June seeking to seize assets allegedly tied to Madoff’s fraud. She hasn’t been criminally charged in the case.
Annette Bongiorno knowingly aided Madoff’s fraud by communicating with clients, answering questions about their investments and overseeing the preparation of phony account statements, trade confirmations and other records, prosecutors said in a complaint.
Madoff, 72, is serving a 150-year federal prison term in North Carolina after pleading guilty to running the biggest Ponzi scheme in history from his firm, Bernard L. Madoff Investment Securities LLC.
The case is U.S. v. $304,041.01 on Deposit at Citibank N.A., 10-cv-04858, U.S. District Court, Southern District of New York (Manhattan).
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Lions Gate Deal to Boost Rachesky’s Stake Is Upheld
Lions Gate Entertainment Corp.’s deal to increase the number of shares held by board member Mark Rachesky, a move challenged by hostile suitor Carl Icahn, was upheld by a Canadian court.
Icahn’s petition to undo the deal was dismissed, the British Columbia Supreme Court said in a ruling yesterday provided by Lions Gate’s attorneys. Icahn, who is attempting to buy the independent film and TV studio for $7.50 a share, argued management conspired with large shareholders to thwart his bid.
Icahn, 74, was seeking to reverse an equity-for-debt swap that hindered his hostile bid for the studio by putting more shares in the hands of Rachesky, who has backed management in the takeover fight.
“In my view, the Icahn Group complains of conduct which affects it not as a shareholder but as a bitter bidder,” Judge John Savage wrote in the 70-page judgment. “I have found that the Lions Gate Board did not act in a manner that was oppressive or unfairly prejudicial to the petitioners’ interests.”
JPMorgan Wins U.K. Appeal Over Russian Securities Investments
JPMorgan Chase & Co., the third-biggest U.S. bank, won a London lawsuit brought by a private banking client seeking hundreds of millions of dollars over investments in Russian securities.
The Court of Appeal in London rejected a suit filed by the Polemis family, one of Greece’s oldest shipping clans. A lower court was right to dismiss allegations of professional impropriety made against the bank, the three-judge panel ruled yesterday.
The Polemis family had sued the bank for more than $700 million over claims JPMorgan steered them into “poor quality” corporate bonds and notes linked to Russian government securities. They claim they lost about half their portfolio in August 1998, when Russia devalued the ruble and defaulted on its debts.
Reynolds Porter Chamberlain, the London law firm that represented the Polemis family business that filed the lawsuit, declined to immediately comment. JPMorgan’s law firm, Clifford Chance, also declined to comment.
The case is JPMorgan Chase & Co. v. Springwell Navigation Corp., A3/2009/0702, Court of Appeal, Civil Division (London).
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