Galleon, Panalpina, Madoff, Oracle in Court News
The defendant called “Tipper X” in the Galleon Group insider-trading case and a co-defendant agreed to cooperate with the government’s probe after pleading guilty, U.S. prosecutors said.
Tom Hardin, the former Lanexa Global Management trader referred to in court papers as “Tipper X,” pleaded guilty Dec. 21 in federal court in New York to conspiracy and securities fraud, according to a plea agreement and criminal information unsealed yesterday.
Franz Tudor, a former Galleon trader, pleaded guilty on Oct. 29, 2009, to conspiracy and securities fraud, according to his plea agreement, which was also unsealed Nov. 12.
Both men face as long as 25 years in prison, prosecutors in the office of Manhattan U.S. Attorney Preet Bharara said in court papers. Prosecutors will submit letters to the judge who sentences the men, asking for leniency based on the level of cooperation both provided in the government’s probe, according to the plea agreements.
Larry Krantz, a lawyer for Hardin, declined to comment. Edgardo Ramos, a lawyer for Tudor, didn’t return a voice-mail message seeking comment after regular business hours yesterday.
More than 20 people have been charged in two overlapping insider trading cases involving Galleon Group founder Raj Rajaratnam. Hardin and Tudor are the 13th and 14th people to plead guilty, with most of those agreeing to cooperate with prosecutors and testify against others.
Hardin, a former managing director at hedge fund investment adviser Lanexa, also was sued yesterday by the U.S. Securities and Exchange Commission. The SEC said in an e-mailed statement that insider trading involving two takeovers and an earnings announcement produced profits at Lanexa of more than $950,000.
In separate complaints, the SEC said it sued Hardin, Lanexa and Tudor, who had also been a trader at Schottenfeld Group LLC, for insider trading involving acquisitions producing profits of about $715,000.
The criminal cases are U.S. v. Thomas Hardin, U.S. v. Franz Tudor, 09-cr-01057, and U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan). The civil case is SEC v. Galleon, 09-cv-08811, U.S. District Court, Southern District of New York (Manhattan).
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Nobel Economists Ask to Help U.S. in Health-Care Suit
A group of 35 economists, including three Nobel laureates, asked a U.S. judge for permission to file a brief backing the Obama administration’s bid to end a lawsuit challenging its health-care overhaul.
Nobel Prize-winning economists Kenneth Arrow, George Akerlof and Eric Maskin are among the scholars who filed papers Nov. 12 asking U.S. District Judge Roger Vinson in Pensacola, Florida, to allow them to submit a brief they say will give the court “insight.”
Nineteen states have joined in the lawsuit brought by Florida Attorney General Bill McCollum on March 23, which claimed the health-care legislation signed by President Barack Obama earlier that day is overbroad and unconstitutional.
“Everyone gets sick, suffers an injury at some point in their life or must address the vicissitudes of aging and seek medical care,” the economists’ lawyer, Richard Rosen, wrote in the Nov. 12 filing. “Those medical costs typically arise at unpredictable times and, when they occur, often exceed the ability to pay of all but the very wealthiest of Americans.”
The states, in court papers, have claimed the Patient Protection and Affordable Care Act, or ACA, unlawfully forces individuals to buy health insurance and compels states to participate in a “greatly expanded and fundamentally transformed Medicaid program.”
The U.S. has asked Vinson to throw out the lawsuit, arguing that it was filed prematurely because the bulk of the act doesn’t take effect until 2014. The administration has also said the states don’t identify any injury sustained by them or by individuals compelled to obtain coverage.
A parallel challenge to the legislation, filed by Virginia Attorney General Kenneth Cuccinelli, is pending in federal court in Richmond.
Joining Florida in its lawsuit are Alabama, Alaska, Arizona, Colorado, Georgia, Idaho, Indiana, Louisiana, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Pennsylvania, South Carolina, South Dakota, Texas, Utah and Washington.
Vinson has scheduled oral arguments for Dec. 16.
A spokeswoman for McCollum, Sandi Copes, said the attorney general will “wait to see whether the court grants these motions.”
The Florida 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).
Swiss Shipper Finds Resistance Futile in Bribe Probe
Swiss freight forwarder, Panalpina World Transport Holding Ltd., faced potentially crippling penalties when U.S. prosecutors began investigating the bribes it paid to government officials around the world.
The freight company could battle the probe and risk an indictment, or clean up its practices and help prosecutors unearth its wrongdoing. Panalpina, like Siemens AG., which was in a similar situation, chose cooperation. On Nov. 4, the Justice Department rewarded Panalpina, letting it avoid prosecution by paying $81.5 million, admitting “a culture of corruption,” and strengthening compliance programs.
Surrender by companies such as Panalpina and Siemens is now the norm under the 33-year-old Foreign Corrupt Practices Act, Bloomberg News’ David Voreacos reports. No company has risked an FCPA court fight in two decades out of fear that a conviction could lead to a loss of public contracts and higher penalties, lawyers said. After resolving two or three cases a year, the U.S. settled 47 corporate cases since 2005 without trial, reaping $3.3 billion for the U.S. treasury.
“Publicly traded companies cooperate in FCPA matters because they can’t afford the potential consequences of fighting with the government,” said Kirk Ogrosky, a partner at Arnold & Porter LLP who supervised Justice Department fraud cases. “After 33 years, there is shockingly little court precedent to rely on.”
Settlements this year involved BAE Systems Plc, Europe’s largest defense company, which agreed to pay $400 million; Daimler AG, maker of Mercedes-Benz cars, which will pay $185 million; and Royal Dutch Shell Plc, Europe’s largest oil company, which agreed Nov. 4 to pay $48.1 million.
In December 2008, Siemens, Europe’s largest engineering company, agreed to pay $800 million to the U.S. and $814 million to German authorities. The company said it spent another $1 billion on lawyers and accountants and on strengthening internal controls.
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Anheuser-Busch Sues Major League Baseball Over Deal
Anheuser-Busch InBev NV, the maker of Budweiser beer, claimed in a lawsuit that Major League Baseball Properties Inc. broke an exclusive sponsorship agreement to try to get more money.
MLBP, which manages trademarks for the 30 teams in Major League Baseball, demanded that Anheuser-Busch renegotiate a renewal agreement signed in April and pay “an exponentially higher rights fee,” according to a complaint filed Nov. 12 in Manhattan federal court.
“The MLBP sponsorship is critical to Anheuser-Busch’s marketing efforts” for Budweiser and other brands, the brewer said in its complaint. “These rights enable Anheuser-Busch to reach millions of customers and prospective customers on a daily basis during baseball season.”
Anheuser-Busch, based in Leuven, Belgium, seeks a court declaration enforcing the deal and preventing MLBP from negotiating with any other brewers for sponsorship rights. The lawsuit doesn’t request money damages.
Matt Bourne, a spokesman for Major League Baseball, didn’t return a voice-mail message seeking comment on the suit.
The case is Anheuser-Busch Inc. v. Major League Baseball Properties Inc., 10-cv-8513, U.S. District Court, Southern District of New York (Manhattan).
Madoff Bankruptcy Trustee Sues Swindler’s Ex-Employees
The trustee overseeing the bankruptcy of Bernard Madoff’s investment firm sued four of the con man’s former employees, seeking to recover at least $48 million in allegedly fraudulent transfers.
The trustee, New York attorney Irving Picard, sued Enrica Cotellessa-Pitz, Madoff’s former controller; Daniel Bonventre, former head of operations; and employees Annette Bongiorno and Jo Ann Crupi.
In the suits, filed in U.S. Bankruptcy Court in Manhattan Nov. 8, Picard claims the four were paid millions of dollars to help sustain the Madoff fraud. Madoff, 72, is serving 150 years in prison after pleading guilty to orchestrating history’s biggest Ponzi scheme at New York-based Bernard L. Madoff Investment Securities LLC.
At the time of his arrest, Madoff’s account statements reflected 4,900 accounts with $65 billion in nonexistent investments. Investors lost about $20 billion in principal.
The new suits follow 19 others filed by Picard seeking to recover more than $15.5 billion from parties related to Madoff, including his friends and family, and from so-called feeder funds, which directed most or all of their clients’ money to Madoff.
The cases are Picard v. Cotellessa-Pitz, 10-4213; Picard v. Bonventre, 10-4214; Picard v. Bongiorno, 10-4215; and Picard v. Crupi, 10-4216, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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Oracle May Not Show Apotheker Testimony, Lawyer Says
Oracle Corp. may not show jurors testimony by former SAP AG Chief Executive Officer Leo Apotheker during a trial over illegal software downloads made by a now-defunct SAP unit, David Boies, Oracle’s trial lawyer, said.
A videotaped deposition of Apotheker, now CEO at Hewlett- Packard Co., is currently all Oracle has to show jurors at the trial in federal court in Oakland, California. Oracle hasn’t located Apotheker to serve him a subpoena to testify in person at the trial.
Boies said Nov. 12 in an interview at the courthouse that Oracle may not show the videotape.
“Maybe we’ll just let the jury know that they’ve hidden him,” Boies said. “I think it may be better for the jury to know that, here’s this guy who was at the center of all this” and he hasn’t been found.
Oracle, the second-largest maker of software for business applications behind SAP, sued its competitor in 2007. Oracle claims the TomorrowNow unit of Walldorf, Germany-based SAP made hundreds of thousands of downloads and several thousand copies of Oracle’s software to avoid paying licensing fees and to steal customers. Redwood City, California-based Oracle seeks $2 billion in damages for infringement.
SAP, saying Oracle’s damage estimates are grossly exaggerated, has said it owes about $40 million.
“Oracle’s heightened interest in Mr. Apotheker as a live witness came only after his appointment as HP’s CEO, a PR sideshow that has little to do with the real issues of this case -- the actual damages from the limited operations of TomorrowNow,” Bill Wohl, an SAP spokesman, said Nov. 12 in an e-mailed statement.
HP has said Apotheker had “limited knowledge of and role in the matter” of TomorrowNow’s downloads and Oracle had an opportunity to question him during his sworn deposition in October 2008. Mylene Mangalindan, a spokeswoman for Palo Alto, California-based HP, has said Oracle’s subpoena of Apotheker was “no more than an effort to harass him and interfere with his duties and responsibilities as HP’s CEO.”
The case is Oracle Corp. v. SAP AG, 07-01658, U.S. District Court, Northern District of California (Oakland).
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Oppenheimer Loses Finra Auction-Rate Securities Arbitration
Oppenheimer & Co. Inc. lost a Financial Industry Regulatory Authority arbitration case involving auction-rate securities and must repurchase $650,000 of the bonds from an investor, according to a ruling.
The claimants in the case, Jordan H. Moffett and Margot A. Trombley, were also awarded expert-witness fees but not punitive damages, according to documents making the award. The claimants alleged fraud, negligence, breach of contract, breach of fiduciary duty and selling them unsuitable investments, according to the document.
After the then-$330 billion auction-rate securities market collapsed starting in February 2008, investors across the U.S. were stuck holding instruments that had been sold as cash equivalents.
“My clients had to fight to get their money back,” said Todd Higgins, a New York attorney with Crosby & Higgins LLP, who represented Moffett and Trombley.
Oppenheimer, a unit of New York-based Oppenheimer Holdings Inc., disagrees with the decision and intends to appeal, said Brian Maddox, a spokesman for the company.
Auction-rate securities are long-term debt with interest rates that reset at periodic auctions.
Hong Kong Court Upholds Equal Assets Split in Divorce
Hong Kong’s highest court ruled that a city businessman must pay his former wife half his wealth, upholding a 2008 decision that asset splits in divorces should be based on a principle of equal division.
“To confine a non-working wife’s award to the sum needed to meet her ‘reasonable requirements’ and to permit the husband to keep the remaining assets is patently unfair and discriminatory,” Justice Roberto Ribeiro of the Court of Final Appeal wrote in a 52-page judgment upholding an award of HK$2.68 million ($346,000) to the ex-wife.
The businessman, whose identity can’t be reported, sought to reverse a 2008 Hong Kong Court of Appeal ruling that adopted the principle of equal asset splitting. Prior to the decision, judges in the former British colony had wider discretion on how to distribute assets based on individual needs. A 2001 ruling in the U.K. required judges use an equal split as a starting point.
“There is still a discretionary aspect but the 50-50 approach means judges will have to be very careful about how they depart from that,” said Sharon Ser, a partner at Facey & Co.
The case is FACV16/2008, LKW and DD, in Hong Kong Court of Final Appeal.
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SEC Suit Against Human Genome Sciences Doctor Most Popular The SEC lawsuit against a Human Genome Sciences Inc. consultant who allegedly tipped hedge fund FrontPoint Partners LLC employees on the results of trials involving the hepatitis-C drug Albuferon, was the most-read litigation docket on the Bloomberg Law system last week.
Dr. Yves Benhamou, 50, of France, was charged Nov. 2 by U.S. prosecutors with insider-trading. Benhamou, whose expertise is hepatitis and liver diseases, was arrested in Boston on two charges filed in federal court in Manhattan.
Benhamou held dual roles, acting as a paid consultant to at least six hedge funds while working as an adviser to Human Genome, a developer of gene-based drugs, and serving on its steering committee for Albuferon trials, the U.S. Securities and Exchange Commission alleged in a lawsuit filed Nov. 2. Benhamou is no longer a Human Genome consultant and the company has “cooperated fully” with the SEC, Jerry Parrot, a company spokesman, said.
The SEC case is SEC v. Benhamou, 10-CV-8266, U.S. District Court, Southern District of New York (Manhattan). The criminal case is U.S. v. Benhamou, 10-MAG-2424, U.S. District Court, Southern District of New York (Manhattan).
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