Foreclosure Suits, Bank of America, Wisconsin-Ambac, Netschi in Court News
Alan Shadrake, the British author convicted of contempt of court for disparaging Singapore’s judiciary, was sentenced to six weeks in jail and fined S$20,000 ($15,380), a record sentence for the crime in the city-state.
Shadrake, 76, was also ordered to pay S$55,000 in costs to the prosecution by Singapore High Court Judge Quentin Loh. He was released until Nov. 24 to decide whether he wants to appeal the decision.
The writer accused Singapore’s courts of succumbing to political influences and favoring the rich over the poor in his book “Once a Jolly Hangman: Singapore’s Justice in the Dock.” The book contained “half-truths and selective facts; sometimes even outright falsehoods,” Loh said in his Nov. 3 verdict.
“I still believe in what I said,” Shadrake told reporters after the sentencing today, wearing a navy blue open-neck shirt, beige jacket and cream-colored trousers. He’s working on a second edition of the book that will correct a “misuse of the word ‘judiciary’ which was careless on my part,” he said.
The prosecution had sought a jail term of at least 12 weeks because of Shadrake’s “continued defiance” and allegations of “the worst possible kind” against the judiciary.
Shadrake had no intention of undermining the city’s judiciary and ought to be censured instead of jailed or fined, his lawyer M. Ravi said at a Nov. 9 hearing.
Loh said in sentencing Shadrake today that he had shown a “reckless disregard for the truth,” a “tendency to distort his sources for his own purposes,” and that an average reader of his book would be “likely to believe his contemptuous remarks.”
He also said Shadrake made his situation worse in an interview with the Guardian newspaper last week in which he said Singapore’s authorities had “over-reacted” and were “going to regret they ever started this.”
The case is Attorney-General vs Alan Shadrake OS720/2010 in the Singapore High Court.
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Comedian, Wrestler Hang on to House in Foreclosure Limbo
Comedian Lynn Moore and her husband, retired pro wrestler “Cougar Jay,” were on the verge of losing their St. Augustine, Florida, home when PNC Financial Services Group Inc.’s foreclosure hearing was canceled last month, Bloomberg News’ David McLaughlin reports.
Moore, who runs a comedy club under the stage name Jackie Knight, and her husband, whose real name is Dion, last made a mortgage payment in mid-2009. She said they need to stay put until at least January, when Dion, 50, expects to receive a federal education grant they can use to rent a new home.
They are among the hundreds of thousands of Americans who dwell in the limbo between homeownership and eviction as banks and courts sort through foreclosure cases. Questions over the legitimacy of mortgage documents used by banks such as Wells Fargo & Co. and Bank of America Corp. have triggered litigation nationwide. As a result, foreclosure proceedings have been delayed, buying time for homeowners in default.
“It’s a slow-moving animal and, in the case of foreclosures, there are a multiple of defenses to a foreclosure action,” said Chae duPont, a Miami attorney who defends homeowners and hosts a radio show about mortgage law.
About 1.2 million homes in the U.S. are in foreclosure, according to RealtyTrac Inc., which compiles foreclosure data. Homeowners are living in about 840,000 of those properties, the Irvine, California-based company estimates.
Home seizures in the U.S. fell 9 percent in October from the previous month, the biggest decline in a year. In the 23 states where the law calls for judicial proceedings, the average foreclosure takes 271 days, compared with 147 in 2006, before the housing bust, RealtyTrac said.
Complaints of defective documentation in foreclosure cases, including misdated and improperly notarized paperwork and faulty mortgage assignments, have prompted more homeowners to challenge seizures, according to Florida homeowner attorney Mike Wasylik of Ricardo, Wasylik & Kaniuk PL.
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No Breaks for Robo-signing Computer Stamping Mortgage Papers
Bryan Bly is a pen-wielding “robo-signer” at Nationwide Title Clearing Inc., inking his name on an average 5,000 mortgage documents a day for companies such as Citigroup Inc. and JPMorgan Chase & Co.
Those are just the ones that cross his desk.
Nationwide Title employs a computer system that automatically inserts a copy of Bly’s signature on thousands of digital files that he never sees, Bloomberg News’ Prashant Gopal reports. The system even affixes an electronic notary seal.
“The problem with the way these documents are created isn’t because a computer is used,” said Gloria Einstein, a legal aid attorney in Green Cove Springs, Florida, who deposed Bly in a case in which her client faces foreclosure by a unit of Deutsche Bank AG. “It’s because an enterprise has decided to use a computer to create a system where nobody is responsible for the information and the decisions.”
The rush to securitize more than $4 trillion of mortgages as U.S. home sales peaked in 2005 and 2006 inundated loan servicers and contractors like Palm Harbor, Florida-based Nationwide Title that help them handle paperwork. Lawsuits fighting some of the more than 4 million foreclosures since then have exposed sloppy recordkeeping and raised questions about the validity of documents used to seize properties.
Bly is just one of more than a dozen robo-signers deposed in the past two years by lawyers for borrowers seeking to block foreclosures. Spurred by descriptions in depositions of employees signing thousands of affidavits a week without checking their accuracy as legally required, the attorneys general in all 50 states last month opened an investigation into whether banks and loan servicers used faulty documents or improper practices to foreclose.
The issue for courts to decide is whether banks are seizing homes that they never legally acquired, visiting Harvard Law professor Katherine Porter told a Congressional Oversight Panel on Oct. 27.
The legal debate centers on whether assignments can be created to show transfers between banks that happened years earlier, Porter said.
“The largest and most complex harm that may exist with the loans in default or foreclosure today is that the paperwork for the loans was not transferred correctly,” Porter said. “I emphasize that what constitutes a correct transfer is a gray area; we need more direction from courts and legislatures on this subject.”
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Possible Future Lawsuits
Japan Said to Weigh Wider Application of Insider Trading Laws
Japan may take a tougher stance on trading before and during share sales, responding to criticism from investors who allege information leaks on financing plans are eroding confidence in the stock market.
The Financial Services Agency is studying whether Japan should apply laws on insider trading to those with second-hand or third-hand knowledge of undisclosed company news, said two people with knowledge of the matter who requested anonymity. The regulator is also considering a U.S.-style rule that limits short sales of shares in companies selling new stock, they said.
Shares in companies including Nippon Sheet Glass Co., Tokyo Electric Power Co. and Inpex Corp. plunged before stock-sale announcements this year or during the period leading up to pricing. The Tokyo Stock Exchange said last month it’s investigating suspicious trading of shares that fell before companies announced fundraising plans.
Regulators are considering whether insider trading laws should be expanded to encompass investors with indirect knowledge of a future offering, in addition to company executives, employees and underwriters, the officials said.
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Icelandic Banks Ignore Request Not to Sue Over Loans, RUV Says
Icelandic banks ignored an Economy Ministry request to give up the right to sue the state over legislation that may result in lenders having to forgive higher amounts of debt, state-owned broadcaster RUV said.
The banks’ creditors threatened to sue the lenders if they agreed to the request over a parliamentary bill proposed by the government to cut the debt burdens of households holding so- called foreign-currency-indexed loans, RUV said, citing no one.
Iceland presented the bill to lawmakers on Nov. 12 after the Supreme Court declared such loans illegal in two separate rulings. The legislation seeks to reduce the debt of households with the loans by an average 1.5 million kronur ($13,388) each, the ministry said in a statement on its website on Oct. 22. The measure would cost 40 billion to 50 billion kronur, it said.
Kaupthing Bank hf, Landsbanki Islands hf and Glitnir Bank hf collapsed in October 2008 after they were unable to secure enough short-term funds. The state took control of their local assets, placing them into newly created separate units.
The units were later taken over by creditors, who control their shares through resolution committees.
Stern’s DAL Enters Forbearance Agreement With Bank of America
A business run by David Stern, the Florida foreclosure lawyer who is under investigation by the state’s attorney general, entered a forbearance agreement with lender Bank of America NA.
The bank agreed not to take action in the period ending Nov. 26 over a default on a revolving line of credit by DAL Group LLC, a unit of Stern’s foreclosure-processing company, DJSP Enterprises Inc., according to a regulatory filing. The credit line, entered into in March, has an outstanding principal balance of about $12 million, DAL said.
Jeffrey Tew, Stern’s lawyer, said earlier this month that Stern’s law firm and DJSP cut about half of their staff after mortgage-financing companies Fannie Mae and Freddie Mac 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 400 to 500 employees, Tew said on Nov. 4. DAL received a notice of default from Bank of America on Nov. 5, according to the regulatory filing.
Apple Manager Devine Should Forfeit Cash, U.S. Says
Paul Devine, the Apple Inc. manager accused of taking kickbacks in exchange for company secrets, should forfeit all proceeds from his fraud, prosecutors said in a court filing.
Devine, let out of jail with a $440,000 lien against his mother’s home to help secure bail, must forfeit cash “derived from proceeds” of his fraud and money laundering, the U.S. argued in court documents. Prosecutors are seeking forfeiture of about $950,000 seized from as many as six different accounts, and a Porsche Cayenne, according to the Nov. 10 filing.
Devine appeared in court yesterday before U.S. District Judge James Ware in San Jose, California, where Assistant U.S. Attorney Michelle Kane said the government needs more time to review data on computers seized from Devine before returning them in a pre-trial exchange of information.
The U.S. is analyzing data in “several computers seized during the search that still need to be turned over,” Kane told Ware.
Devine, a global-supply manager who for his bond also posted $612,407 from his and his wife’s foreign bank accounts plus the equity in his home near San Francisco, is accused of money laundering and wire fraud in a 23-count indictment unsealed Aug. 13. He has pleaded not guilty to charges that he took at least $1 million in kickbacks from Asian suppliers.
Devine gave the suppliers of iPhone and iPod accessories confidential data that helped them win better contracts from Cupertino, California-based Apple in exchange for payments, according to the indictment. Each count of wire fraud, wire- fraud conspiracy, and money laundering carries a 20-year prison sentence, prosecutors said.
Devine’s lawyer, Raphael Goldman, declined to comment after yesterday’s hearing.
Apple spokesman Steve Dowling didn’t immediately return a call or e-mail seeking comment.
The case is U.S. v. Devine, 10-cr-00603, U.S. District Court, Northern District of California (San Jose).
Vodafone Told to Set Aside $554 Million in India Tax
Vodafone Group Plc, the world’s biggest mobile-phone company by sales, was ordered by India’s Supreme Court to pay a deposit while it challenges a tax bill for the country’s largest cross-border deal.
A Supreme Court panel headed by Chief Justice S.H. Kapadia told Vodafone yesterday it has to set aside 25 billion rupees ($554 million) with the court within three weeks and submit bank guarantees for 85 billion rupees in eight weeks. India is seeking 112 billion rupees on Vodafone’s purchase of Hutchison Whampoa Ltd.’s local mobile-phone unit three years ago.
The order means the company will likely reflect the deposit in future financial statements since Vodafone didn’t set aside provisions for the payment, analysts said. A verdict against Vodafone in the trial may undermine the country’s appeal for foreign investors, said Paul Marsch, an analyst at Berenberg Bank in London.
“There’s a bigger issue regarding the clarity of the tax regime and the regulator regime that foreign companies operate under in the Indian market,” Marsch said before the announcement. “There’s no precedent for this situation.”
Vodafone said it will provide the deposit and bank guarantee, adding that it is “confident that there is no tax liability resulting from this transaction and all the tax and legal advice it has received remains consistent with this view.”
The deposit will be returned with interest if Vodafone wins the legal dispute, according to the court. The next hearing in the case will be on Feb. 24.
“It is not standard practice, especially at the Supreme Court level, although there’s nothing that prevents something like this from being done,” according to Akil Hirani, managing partner at Mumbai-based law firm Majmudar & Co. “Deposits in court are common in areas of banking, property, and so on, and now obviously you are seeing it happen in the tax space also.”
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Johnson & Johnson Hid Antibiotic’s Risk, Lawyer Says
Johnson & Johnson knew its antibiotic Levaquin increased the risk of tendon damage and failed to properly warn patients or doctors, a lawyer said yesterday at the start of a trial in Minnesota.
John Schedin, 82, who said he ruptured the Achilles tendons in both feet after taking the drug, sued the company and its Ortho-McNeil-Janssen Pharmaceutical unit in 2008. The companies downplayed the risks of Levaquin even after receiving adverse reports from Europe in 2001, Schedin’s lawyer, Mikal Watts, said in his opening statement at trial yesterday.
“The decision they made was to add a single line to the 14-page package insert somewhere on page four or five,” Watts told the Minneapolis jury. “They did not tell the doctors that the use of Levaquin concomitant with corticosteroids will cause an Achilles tendon to rupture.”
Schedin’s case is the first trial on more than 2,600 claims in U.S. courts against Johnson & Johnson that Levaquin caused tendon damage in patients taking the drug and the company failed to adequately disclose the risk. The U.S. Food and Drug Administration in 2008 required an upgraded warning on tendon damage posed by Levaquin and similar drugs.
The plaintiffs claim the warning should have been enhanced earlier and remains inadequate. They also claim Johnson & Johnson and Ortho-McNeil-Janssen boosted sales by downplaying risks.
The companies deny any failure to warn or that Levaquin caused Schedin’s tendon ruptures.
“The warning has been in the label since December 1996,” when the drug first came on the market, defense attorney John Dames said in his opening statement. “It’s not hidden. It’s right there where you would expect it to be, in the warnings section.”
Ortho-McNeil “properly warned of the risks of tendon injury” and “acted responsibly by providing appropriate and timely information about Levaquin,” company spokesman Michael Heinley said in an e-mail yesterday.
The lawsuit is Schedin v. Johnson & Johnson, 08-cv-05743, combined for trial in In Re: Levaquin Products Liability Litigation, 08-md-01943, U.S. District Court, District of Minnesota (Minneapolis).
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Wisconsin Insurance Chief Seeks Ambac Plan Approval
Wisconsin Insurance Commissioner Sean Dilweg will ask a state court judge to approve a plan to “rehabilitate” Ambac Assurance Corp.’s $50 billion portfolio of policies to insure residential mortgage-backed securities.
Wisconsin Circuit Court Judge William D. Johnston is slated to hear five days of testimony and evidence that began yesterday before ruling on Dilweg’s plan to repay claimants 25 percent of their money now, and the balance in nine years at 5.1 percent interest.
“Our decision to adopt a 25/75 cash-surplus note split was guided by the need to retain sufficient cash to pay all permitted policy claims during the rehabilitation process,” Dilweg said in an online presentation of his proposal.
The hearing comes as Ambac Financial Group Inc. the New York-based holding company for the Wisconsin insurer, seeks to reorganize in a Chapter 11 bankruptcy filed in Manhattan on Nov. 8. The parent company has $1.68 billion in liabilities.
Ambac Assurance was the second-largest bond insurer before the onset of the credit crisis in 2008. Dilweg’s office in March ordered the carrier to turn over control of its subprime assets to isolate them from the balance of the insurer’s business as defaults accelerated the pace of policy claims, threatening to deplete the company’s reserves.
Payment of claims on the segregated policies has halted pending approval of the rehabilitation proposal. Johnston is hearing the case at Wisconsin’s Lafayette County Courthouse, about 66 miles southwest of the state’s capital, Madison.
Peter Poillon, a spokesman for Ambac Financial, declined to comment on the hearing or its significance to the companies, referring questions to Dilweg. The commissioner, through outside spokesman Tom Becker, declined to be interviewed for this article.
Dilweg faces opposition to his plan from policy holders including the Federal Home Loan Mortgage Corp., better known as Freddie Mac, its government-subsidized sibling, the Federal National Mortgage Association or Fannie Mae, the biggest U.S. lender, Bank of America Corp., and a group of hedge funds including Aurelius Capital Management LP, King Street Capital LP and Stonehill Capital Management LLC.
“The plan is flawed on many grounds,” the hedge funds, calling themselves the RMBS Policy Holders Group, said in a Nov. 10 statement reacting to the tax controversy and stating that Dilweg failed to fulfill his mandate to protect policyholders.
The case is In re The Rehabilitation of Segregated Account of Ambac Assurance Corp., 2010cv001576, Dane County, Wisconsin, Circuit Court (Madison).
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Dow Jones Settles Content-Theft Suit With Briefing.com
News Corp.’s Dow Jones & Co. settled a civil suit claiming that Briefing.com violated copyright laws by republishing headlines and articles from its newswire without permission.
Briefing.com, a fee-based website, agreed to pay an undisclosed “substantial amount” of money and admitted that it infringed Dow Jones copyrights as part of the settlement, Dow Jones said in a statement.
“Dow Jones is committed to aggressively pursuing legal action to prevent the unauthorized use of our content,” Mark H. Jackson, Dow Jones general counsel, said in a statement yesterday.
At the request of the parties, U.S. District Judge Victor Marrero in Manhattan signed a consent order permanently blocking Briefing.com from using Dow Jones articles without authorization. The order, which was publicly filed yesterday, ends a lawsuit filed by Dow Jones in April and gives Marrero authority to enforce the provisions of the settlement.
Besides the copyright violations, Chicago-based Briefing.com admitted to misappropriating news headlines from Dow Jones under a legal doctrine that prevents publishers from reselling time-sensitive information produced at a cost by their competitors.
In addition to publishing material on its website, Briefing.com delivers content through third parties including New York-based Bloomberg LP’s Bloomberg News. Bloomberg News competes with Dow Jones and New York-based News Corp. in providing financial news and data.
John Lovi, a lawyer for Briefing.com, didn’t return a voice-mail message seeking comment after regular business hours.
The case is: Dow Jones & Co. v. Briefing.com Inc., 10- cv-03321, U.S. District Court, Southern District of New York (Manhattan).
Netschi Convicted in $80 Million ATM Ponzi Scheme
Walter Netschi, one of two men charged with running an $80 million Ponzi scheme involving phony investments in automatic teller machines, was convicted of all 10 criminal counts against him.
A federal jury in Manhattan convicted Netschi on Nov. 12 of one count of conspiracy to commit wire fraud and nine counts of wire fraud at the end of a three-week trial, according to court records.
Netschi’s co-defendant, Vance Moore II, pleaded guilty to all 10 counts on Oct. 18. The two men were charged with stealing money from investors between 2005 to January 2008, falsely telling them their money was being used to purchase automatic teller machines throughout the U.S. Instead, they used money from new investors to pay off earlier investors in the scheme, prosecutors said.
U.S. District Judge Thomas Griesa set a sentencing hearing for Netschi on March 2. Moore is scheduled to be sentenced Jan. 20. They face a maximum 20 years in prison on each of the counts.
Netschi’s attorney, Beth Farber, didn’t immediately return a message seeking comment on the verdict.
The case is U.S. v. Netschi, 09-CR-881, U.S. District Court, Southern District of New York (Manhattan).
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