Goldman, BofA, Berger, Deutsche Bank in Court News
Goldman Sachs Group Inc. settled a lawsuit by a former vice president who claimed she was pushed onto the “mommy-track” and eventually fired after she chose to work part-time following her pregnancy.
The lawsuit, filed in March by Charlotte Hanna, claimed violations of the U.S. Family Medical Leave Act, and gender and pregnancy discrimination. The terms of the settlement are confidential, said Douglas Wigdor, Hanna’s attorney.
In her complaint, Hanna said she joined Goldman as an associate in 1998 and two years later was promoted to vice president for Goldman Sachs University, an in-house training program. She claimed her opportunities for advancement at Goldman Sachs disappeared when she took maternity leave with her first child in February 2005.
“When Ms. Hanna decided to take the ‘off-ramp’ provided by the firm to devote time to her children, there was no ‘on-ramp’ that enabled her to return to full-time employment,” her lawyer wrote in the complaint. “The ‘off-ramp’ was a direct path to a mommy-track that ultimately derailed Ms. Hanna’s career.”
Hanna claimed that once she began working part time for the firm, she was channeled into lower positions that made it more difficult for her to earn more money and advance to better positions. She claimed she was demoted, lost her office and then was fired in 2008, before she returned from a second maternity leave.
Goldman Sachs spokesman David Wells had no comment.
The case is Hanna v. Goldman Sachs Group Inc., 10-cv-02637, U.S. District Court, Southern District of New York (Manhattan).
BofA Wins Dismissal of Mortgage Securities Lawsuit
U.S. District Judge Mariana Pfaelzer in Los Angeles gave investors who brought the complaint 30 days to revise it. After they refile the complaint, the court “will consider further the other grounds” in the bank’s motion to dismiss it, Pfaelzer wrote in the Nov. 5 ruling.
Pfaelzer said in her ruling that investors didn’t sufficiently demonstrate they suffered an injury for the securities they bought, and that the statute of limitations had expired for some claims. Those failings must be addressed in the new complaint, she said.
Bank of America said that, because the judge’s ruling narrows the scope of claims that would be allowed to proceed in a revised complaint, it expects the securities at issue in the case would decline from 427 offerings with a face value of about $352 billion to about 22 offerings valued at about $31 billion, according to an e-mailed statement.
The suit claimed documents for mortgages originated by Countrywide and later securitized contained misrepresentations and omissions, and didn’t follow the lender’s own guidelines.
“The court’s ruling demonstrates the strict legal hurdles plaintiffs face in bringing these sorts of claims,” said Brian E. Pastuzinski, an attorney at Goodwin Procter LLP in Boston representing Bank of America.
Christina Royce, a lawyer representing the investors, declined to comment.
The case is Maine State Retirement System v. Countrywide Financial Corp., 10-cv-00302, U.S. District Court, Central District of California (Los Angeles).
Berger Group Pays $69.3 Million for Iraq Overbilling
Louis Berger Group Inc., a New Jersey engineering consulting firm, agreed to pay $69.3 million to resolve criminal and civil probes related to overbilling for reconstruction contracts in Iraq and Afghanistan and other work.
The U.S. Justice Department agreed to defer prosecution of the case against the company, which pledged to reform its practices under a monitor. Prosecutors, who filed criminal charges Nov. 5 of overbilling from 1999 to 2007, will dismiss the case in two years if the company tightens internal controls and fulfills other promises. Two former executives pleaded guilty in federal court in Newark, New Jersey.
“This fraud is about more than playing with the numbers to rip off the government,” Paul Fishman, the U.S. attorney in New Jersey, said in a phone interview. “Funds that could have raised hope from the rubble instead padded the bottom line.”
As part of its settlement, the company, based in Morristown, New Jersey, admitted submitting claims for more than $10 million in inflated overhead rates to the U.S. Agency for International Development. The company will pay an $18.7 million criminal penalty and $50.6 million to resolve civil claims, including allegations it violated the False Claims Act. The U.S. examined billings over a 17-year period.
USAID agreed not to bar the company from future contracts based on its remedial efforts, Fishman said.
Salvatore Pepe, 58, LBG’s former chief financial officer and Precy Pellettieri, 54, the former controller, pleaded guilty to conspiring to defraud USAID by inflating overhead rates. They admitted that they classified non-federal work overhead as federal overhead.
“LBG is a stronger company today as a result of this settlement as well as the company’s corporate improvement program,” Larry D. Walker, president of LBG, said in a statement. “The improvements made to our systems, policies and structures over the past four years have paved the way for a sustainable future.”
The case is U.S. v. The Louis Berger Group Inc., 10-mj- 3198, U.S. District Court, District of New Jersey (Newark). The whistleblower case is United States ex. rel. Harold Salomon v. The Louis Berger Group Inc., 06-cv-1970, U.S. District Court, District of Maryland (Baltimore).
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Hank Morris Reaches Plea Deal in N.Y. Pension Probe
Henry “Hank” Morris, the former political consultant who is at the center of New York Attorney General Andrew Cuomo’s probe of corruption at the state’s pension fund, reached a plea deal with prosecutors.
The deal follows news last month that Quadrangle Group LLC co-founder Steven Rattner, the subject of state and federal investigations of corruption at the fund, is near a settlement with the U.S. Securities and Exchange Commission, according to a person familiar with the matter.
Under the agreement, Morris would plead guilty to “a minor charge” that carries a maximum sentence of 1 1/3 to 4 years, New York State Supreme Court Justice Lewis Stone said at a hearing yesterday, according to a transcript of the proceeding.
Morris was facing more than 70 charges related to Cuomo’s probe of the retirement fund. On the top charge, he was facing as many as 25 years in prison. Ellen Biben, a prosecutor with Cuomo’s office, told Stone the proposal is for a plea to a securities fraud charge.
The proposed plea deal also calls for “certain restitution,” the judge said, according to the transcript. Morris reaped $19 million in fees for himself through 23 state pension-fund investments for which he acted as an undisclosed placement agent, or middleman, according to Cuomo.
Stone declined to consider the agreement at the Nov. 5 hearing, saying he wanted more time to review the proposal. The deal, he said, is up to the court’s discretion.
Richard Bamberger, a spokesman for Cuomo, declined to comment. Laura Birger, a lawyer for Morris, declined comment. Stone set another court date for Nov. 22.
The case is People v. Morris, 0025/2009, New York State Supreme Court, New York County (Manhattan)
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Trafigura Wins Ruling Threatening Emarat Manager With Jail
The general manager of Emarat, the United Arab Emirates’ state-owned fuel retailer, was ordered by a U.K. judge to spend a year in a jail for breaching court orders in a civil lawsuit filed by Trafigura Beheer BV.
Jamal Al Midfa, who isn’t in custody, failed to supply data about Emarat’s assets after the Dubai-based company lost a trial in January over $83 million in unpaid gasoil shipments, Judge Nigel Teare ruled in London Nov. 4. Emarat has challenged the court’s jurisdiction in the case and lawyers for the company and Al Midfa weren’t at the hearing.
Al Midfa “has been fully aware of the orders which have been made,” Teare said at yesterday’s hearing. The judge also ordered the seizure of Emarat assets.
Trafigura, an Amsterdam-based commodities trader, sued Emarat in 2009 after it refused to fully pay for two cargoes of oil shipped the previous year. Trafigura had given Emarat an extension on the payment because the company needed an infusion of cash from the government, according to a Jan. 26 ruling in the case.
Emarat didn’t respond to e-mails seeking comment, and calls to the company’s switchboard went unanswered. Trafigura spokesman Mark Eadie declined to comment as did the company’s lawyer, Kyri Evagora at the firm Reed Smith LLP in London.
Emarat now owes $90 million including interest, Teare said at the hearing Nov. 4, and a worldwide freezing order was issued by the U.K. court against the company in February.
Emarat argued the contract was invalid because it was signed improperly or contained forged signatures, according to the January ruling. The company also claimed the oil didn’t meet certain quality requirements, exempting it from full payment.
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HP Investors’ Lawyer Seeks to Disclose Letter About Hurd
A San Diego law firm representing Hewlett-Packard Co. shareholders said it is seeking to disclose to investors an ex- contractor’s letter to the HP board accusing former Chief Executive Officer Mark Hurd of sexual harassment.
Robbins Umeda LLP obtained the letter from the company through a shareholder books and records inspection request, said Davia Hayward, a spokeswoman for partner Marc Umeda. Hurd’s attorneys have said the letter is confidential and lawyers from the firm are in discussions with Hurd’s counsel, Hayward said in a telephone interview Nov. 5.
The harassment allegations made in the letter by company contractor Jody Fisher kicked off a probe of Hurd that ultimately led the board to ask for his resignation. He left the company in August, then joined Oracle Corp. as its president a month later. Palo Alto, California-based HP named Leo Apotheker as its new CEO on Sept. 30.
Gina Tyler, an HP spokeswoman, and Glen Bunting, a spokesman for Hurd, declined to comment. The law firm’s plans were reported earlier by Fortune.
On the day Hurd left, HP said he had violated its standards of business conduct by concealing a relationship with a contract employee. HP also said it found inaccurate expense reports filed by Hurd or in his name.
The company disclosed that it received a sexual-harassment complaint, saying it didn’t find that Hurd broke its harassment policy. Hurd settled with Fisher privately.
Hayward declined to say which shareholders Robbins Umeda represents. She also declined to comment on the contents of the letter. The Wall Street Journal reported yesterday that the letter claimed Hurd leaked acquisition plans.
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Travelport Sues to Stop American From Dropping Orbitz
Travelport LP, the travel-reservation systems provider, sued to block American Airlines Inc. from terminating online travel agency Orbitz Worldwide Inc.’s ability to sell tickets on American’s flights.
Travelport, whose affiliate owns 48 percent of Orbitz’s stock, would suffer substantial harm if American stops providing fare data to Orbitz, a possibility that Orbitz disclosed in a regulatory filing Nov. 4, according to the complaint filed in chancery court in Chicago Nov. 5. The termination would be a breach of American’s contract with Travelport, the company said in its complaint.
Orbitz stock fell Nov. 4 the most since March 2009 after American, the third-biggest U.S. airline, said it would stop providing fare data. American is pushing online travel agencies to obtain flight and fare information directly from it instead of through global distribution systems such as Travelport’s Galileo and Worldspan, Orbitz Chief Executive Officer Barney Harford said Nov. 4 in a conference call with analysts.
Travelport said in the complaint that it lost $50 million in share value when Orbitz fell. The company has a 2006 agreement with American Airlines to obtain “full and complete” access to information about its flights, air fares and other information. The airline hasn’t honored Travelport’s request to withdraw its termination notice, according to the complaint.
Travelport is seeking a court order stopping American from terminating Orbitz ticket sales until the case can be decided by a judge.
“We received a letter threatening various claims, which are groundless in our view, over the contract action we had taken and we are seeking a declaratory judgment to protect our existing rights,” Mary Sanderson, a spokeswoman for Fort Worth, Texas-based American, said in an e-mail.
The case is Travelport v. American Airlines, 10CH4808, Circuit Court of Cook County, Chancery Division (Chicago).
Deutsche Bank Sued Over Postbank Takeover-Offer Share Price
Deutsche Bank AG, Germany’s biggest lender, was sued by an investor who said the share price the bank set in a mandatory takeover offer for Postbank AG was too low.
Effecten-Spiegel AG filed a lawsuit in Frankfurt Regional Court seeking 3.6 million euros ($5.1 million) in compensation over the price offered for the stock, the company said in a statement Nov. 5. Deutsche Bank should pay 49.52 euros a share instead of the 25 euros it offered, Effecten-Spiegel said. Meinrad Woesthoff, a spokesman for the Frankfurt court, said he couldn’t immediately confirm the suit.
“Deutsche Bank deliberately circumvented the mandatory takeover rules and so deprived Postbank shareholders of 1.6 billion euros,” Effecten-Spiegel said.
Deutsche Bank on Oct. 7 made the mandatory takeover offer required under German law if an investor acquires 30 percent in a company. The Frankfurt-based lender agreed to buy a stake in Postbank in September 2008 from Deutsche Post AG and renegotiated the transaction in January 2009 after the collapse of Lehman Brothers Holdings Inc. roiled financial markets.
Effecten-Spiegel claims the bank should have made the offer in the first half of 2009 and paid the higher price. Deutsche Bank used “a complex construction” including derivatives and convertible bonds to evade applicable rules, according to Effecten-Spiegel.
Deutsche Bank spokesman Ronald Weichert declined to comment on the case.
Art Technology Sued Over $1 Billion Oracle Takeover
Art Technology Group Inc., a maker of software for online marketing, was sued by a shareholder who claims the company is worth more than Oracle Corp.’s $1 billion takeover offer.
Oracle said Nov. 2 that it would pay $6 a share for Cambridge, Massachusetts-based Art Technology, 46 percent more than the Nov. 1 closing price on the Nasdaq Stock Market. Terms of the agreement, including a no-solicitation provision, may dissuade other potential suitors, Art Technology shareholder Gary Cronenwett said in his complaint, filed yesterday in Delaware Chancery Court in Wilmington.
Art Technology’s directors also amended the company’s “poison-pill” takeover defense to exclude Oracle and the proposed transaction, Cronenwett said. Any potential acquirer would remain subject to the poison pill.
“The proposed transaction does not adequately value ATG shares,” Cronenwett said in the complaint. “Instead, as a direct result of the board’s breach of duty, the proposed transaction will benefit Oracle at the expense of ATG’s public shareholders.”
Kim Maxwell, a spokeswoman for Art Technology, declined to comment.
The case is Cronenwett v. Art Technology Group Inc., CA5955, Delaware Court of Chancery (Wilmington).
Man Charged in Philadelphia With $17 Million Fraud
U.S. prosecutors in Philadelphia charged Robert Stinson Jr., who allegedly posed as a graduate of the Massachusetts Institute of Technology, with running a $17 million Ponzi scheme tied to real estate hedge funds.
Stinson is accused of cheating more than 260 investors by promising returns of 10 percent to 16 percent from real estate funds, U.S. Attorney Zane David Memeger said Nov. 5 in an e- mailed statement. Stinson is charged with 26 counts of wire fraud, mail fraud, money laundering, bank fraud, obstruction of justice, filing false tax returns and making false statements. He was arrested this morning, according to the statement.
Stinson, 55, formed Life’s Good Inc. and Keystone State Corp. to operate the funds, according to a 21-page indictment. He allegedly told investors the funds made short-term commercial mortgage loans, prosecutors said.
The lawsuit is SEC v. Stinson, 2:10-cv-3130, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).
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U.S., States Clash Over Obama Health-Care Overhaul Law
Both sides in a constitutional challenge to President Barack Obama’s health-care overhaul asked a federal judge to rule in their favor.
Twenty states, led by Florida, claimed Nov. 4 in court papers that the Patient Protection and Affordable Care Act, or ACA, is unconstitutional because it forces individuals to buy health insurance and forces states to participate in a “greatly expanded and fundamentally transformed Medicaid program.”
The states are asking U.S. District Judge Roger Vinson in Pensacola, Florida, to strike down the law.
“The ACA constitutes an unprecedented intrusion on the sovereignty of the states and the freedom of their citizens,” the states argued in their filing.
The federal government asked Vinson to reject the states’ arguments and rule that the law is consistent with the Constitution. The individual mandates are justified by the Commerce Clause, which permits Congress to regulate interstate trade, the government said. No court has invalidated a federal spending program on the ground that it is too coercive, it said.
“Plaintiffs bear the heavy burden of showing that there are no possible circumstances in which the challenged provisions could be constitutionally applied,” the U.S. said in its brief. “They cannot meet this burden.”
Vinson has scheduled oral arguments for Dec. 16.
Joining Florida in the suit are Alabama, Alaska, Arizona, Colorado, Georgia, Idaho, Indiana, Louisiana, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Pennsylvania, South Carolina, South Dakota, Texas, Utah and Washington. The National Federation of Independent Business, a small-business lobbying group, also joined.
The case is State of Florida v. U.S. Department of Health and Human Services, 3:10-cv-00091, U.S. District Court, Northern District of Florida (Pensacola).
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Stern Cuts Staff After Losing Fannie, Freddie Work
David Stern, the Florida foreclosure lawyer who is under investigation by the state’s attorney general, made “a substantial layoff” after Fannie Mae and Freddie Mac cut ties with his firm.
The layoffs occurred Nov. 4, Jeffrey Tew, Stern’s lawyer, said in an interview. Stern’s law firm and the foreclosure- processing business he runs, DJSP Enterprises Inc., have cut about half their staff during the past two weeks, Tew said.
“It’s the cumulative effects of clients not referring business,” Tew said. He said he couldn’t comment on whether there would be further staff reductions.
Freddie Mac and Fannie Mae, the mortgage-finance companies operating under U.S. conservatorship, said this week they ended ties with Stern. Florida Attorney General Bill McCollum said he is investigating Stern’s law firm because it appears to be submitting “false and misleading” documents in foreclosure cases.
Stern’s businesses continue to operate and have a total of between 400 to 500 employees, Tew said. DJSP, whose chief executive officer is Stern, said in an Oct. 22 statement that it was cutting 198 employees, bringing total layoffs at the time to about 300.
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Lions Gate Suit Against Icahn Most Popular Docket on Bloomberg
A lawsuit against billionaire Carl Icahn over the Metro- Goldwyn-Mayer Inc. studio deal by Lions Gate Entertainment Corp., which alleged the financier is “secretly plotting” to merge the studios, was the most-read litigation docket on the Bloomberg Law system last week.
In the Oct. 29 lawsuit, Vancouver-based Lions Gate alleged that Icahn realized by June that Lions Gate was in advanced negotiations with two unidentified studios. Aware that the deals might dilute his stake in Lions Gate, Icahn “took drastic and improper action,” the studio said.
MGM filed for bankruptcy on Nov. 3 in Manhattan after rejecting the takeover bid by Lions Gate and Icahn.
The case is Lions Gate Entertainment Corp., v. Carl Icahn, 10-CV-8169, filed in the Southern District of New York (Manhattan).
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German Lawmakers Pick Three Candidates for Top Court
German Lawmakers agreed on three candidates for the country’s top constitutional court, Sueddeutsche Zeitung reported without saying where it got the information.
Berlin law professor Susanne Baer will replace Brun-Otto Bryde at the Karlsruhe-based court, according to the newspaper. Peter Michael Huber, now interior minister in the state of Thuringia, will take Siegfried Bross’s seat and Monika Hermanns, currently at the Federal Court of Justice, will replace Lerke Osterloh.
The three will be formally nominated on Nov. 11 by the parliamentary committee that elects federal judges, the newspaper said.
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