Rajaratnam, Goldman, AmEx, Taylor Bean, BP in Court News
Prosecutors and lawyers for Raj Rajaratnam, the Galleon Group LLC co-founder on trial for insider trading, are scheduled to give their opening statements to a Manhattan jury today.
U.S. District Judge Richard Holwell told both sides to be ready to make their presentations today after they finish selecting 12 jurors and six alternates.
Holwell yesterday read 52 items from a questionnaire to a panel of 40 potential jurors assembled from a pool of 110 called into Manhattan federal court. He solicited their views of Wall Street, hedge-fund managers and the recession, asking whether they could fairly and impartially consider Rajaratnam’s case.
“As we all know, a lot of people on Wall Street make a lot of money,” Holwell asked jurors. “Does anyone think that evidence about wealthy individuals and multimillion-dollar transactions will make it difficult for you to decide the case fairly?”
Two potential jurors were excused based on their answers to that question, including one man who said “the effect of the recession on himself and his family” would affect his ability to serve on the jury, Holwell said after excusing the jury pool yesterday.
Others were excused because of health problems, information they had heard about the case or personal stock holdings.
In many cases, people who responded “yes” to a question were called to the bench to give further explanation in private. At least 16 were dismissed based on their answers. Holwell said he expects to conclude his questioning this morning, after which lawyers for both sides will select the jury.
Rajaratnam, 53, is the central figure in the largest investigation of hedge-fund insider trading in U.S. history. The Sri Lankan-born money manager is accused of making $45 million from confidential information leaked by corporate insiders and hedge-fund traders. He may spend as long as 20 years in prison if convicted of fraud.
Rajaratnam denies wrongdoing and has argued that investment advisers routinely speak to company insiders as they do research.
The case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).
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Ex-Goldman Programmer Seeks Probation in Software Theft Case
Former Goldman Sachs Group Inc. (GS) computer programmer Sergey Aleynikov, convicted of stealing the firm’s trade secrets by appropriating its computer source code, should get probation and not prison, his lawyer said.
Aleynikov was convicted in December in federal court in New York on charges of violating the Economic Espionage Act and the Interstate Transportation of Stolen Property Act. He faces as long as 10 years in prison on the espionage charge and five years for the interstate transportation charge when he is sentenced by U.S. District Judge Denise Cote on March 18.
Aleynikov doesn’t deserve a prison term “because there was no evidence of an actual or intended loss,” or financial harm to Goldman as a result of his actions, his attorney, Kevin Marino, said in court papers filed March 7. Prosecutors have argued Aleynikov deserves a prison term of eight to 10 years, Marino said.
Assistant Manhattan U.S. Attorney Rebecca Rohr told jurors during her closing argument that Aleynikov was a “thief.” On his last day of work at New York-based Goldman in June 2009, Aleynikov uploaded hundreds of thousands of lines of source code from the firm’s trading system, she said.
He circumvented Goldman’s security system, sent the code to an outside server in Germany, and later compressed and encrypted the code, Rohr said. Aleynikov took the code with him to a meeting with his new employers in Chicago in July 2009, she said.
The case is U.S. v. Aleynikov, 1:10-cr-00096, U.S. District Court, Southern District of New York (Manhattan).
J&J Misled South Carolina Officials About Drug, Jury Told
Johnson & Johnson (JNJ) duped South Carolina officials into buying the antipsychotic drug Risperdal for Medicaid patients by making false claims about its safety and effectiveness, a lawyer for the state told jurors.
Officials of J&J, based in New Brunswick, New Jersey, made misleading claims about Risperdal’s health risks in a letter sent to South Carolina regulators and doctors to protect sales of a medicine that generated $33 billion in revenue for the drugmaker during a 13-year period, the lawyer, Donald Coggins Jr., said yesterday in state court in Spartanburg, South Carolina.
“This case is about corporate responsibility and not going out to lie to defenseless people in pursuit of the almighty dollar,” Coggins said in opening statements of the trial of the state’s lawsuit against Johnson & Johnson.
The state’s case centers on drug safety claims that J&J and its Ortho-McNeil-Janssen Pharmaceuticals unit made in November 2003 correspondence to 700,000 doctors across the U.S., including 7,200 in South Carolina. The U.S. Food and Drug Administration responded with a warning letter saying J&J made false and misleading claims that minimized the potentially fatal risks of diabetes and overstated the drug’s superiority to competitors.
A J&J attorney, Steven J. Pugh, urged jurors in his opening statement to reject claims by state Attorney General Alan Wilson that the drugmaker duped doctors and state regulators into approving the drug for Medicaid patients.
“The state is not going to bring in a single South Carolina doctor to say they were deceived,” Pugh told the jury yesterday.
The case is State of South Carolina v. Janssen Pharmaceuticals, 2007-CP-4201438, Circuit Court for Spartanburg County, South Carolina (Spartanburg).
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Bankers’ London Bonus Suit Against Commerzbank Can Proceed
Commerzbank AG (CBK) lost a bid to dismiss a lawsuit by 104 current and former bankers at its Dresdner Kleinwort unit in the largest U.K. bonus dispute stemming from the financial crisis.
The Court of Appeal in London made the ruling yesterday and also said the bankers, who are seeking as much as 50 million euros ($70 million), can use evidence dating from before a December 2008 letter to staff of the investment bank regarding their bonuses.
“I see no reason why a promise of a guaranteed minimum bonus pool cannot be contractually binding even though the individual employees cannot at that time point to an entitlement of a specific bonus payable out of it,” Andrew Morritt, chancellor of London’s High Court, said in the ruling. “At the very least, each of them would be entitled to nominal damages.”
Lawyers for Commerzbank have said the collapse of Lehman Brothers Holdings Inc. (LEHMQ), and its effect on the financial markets, made it impractical for the bank to pay what it calls discretionary bonuses. The bankers say they were paid no more than a 10th of what they were owed in a contract with Dresdner before it was acquired by Commerzbank. Some received nothing.
“While we are disappointed with the court’s resolution to require more evidence for a decision on this matter, Commerzbank as the new owner of Dresdner Bank intends to defend these claims vigorously,” the Frankfurt-based bank said in an e-mailed statement. “We are confident that we will demonstrate at a full trial that Dresdner Bank was entitled to reduce its employees’ 2008 discretionary bonuses.”
“It is a very firm judgment from the Court of Appeal,” said Clive Zietman, a lawyer representing 83 of the claimants. “It rejects the arguments that the bank put forward that there was no contract.”
Mark Levine and Daniel Naftalin, the lawyers at Mishcon de Reya who are representing the other 21 claimants, said they were “pleased” with “the decision to fully reinstate our original claim.”
The case is The Parties Named in Schedule A v. Dresdner Kleinwort Ltd., U.K. Court of Appeal, A2/2010/1599.
AmEx Can’t Bar Merchants’ Class Actions, Appeals Court Says
American Express Co. (AXP) can’t force merchants to resolve disputes with the company individually rather than in class- action lawsuits, a federal appeals court said yesterday, confirming an earlier ruling.
Retailers aren’t bound by an arbitration agreement requiring them to press any complaints against American Express singly, the New York-based court ruled. The ruling and a previous order void a clause in American Express’s contract with merchants.
In the lawsuit, New York and California merchants contend that American Express is illegally bundling its products through its “honor all cards” policy. American Express argued that merchants were barred from joining class-action, or group, lawsuits, against the company.
The U.S. Supreme Court last year sent the case back to the appeals court. The appeals panel confirmed its prior decision and, in turn, yesterday sent the case to U.S. District Judge George B. Daniels in New York for further proceedings.
Christine Elliot, a spokeswoman for New York-based American Express, couldn’t be immediately reached for comment. Gary Friedman, a lawyer for the plaintiffs, declined to comment immediately, saying he was reviewing the decision.
The original lawsuit is Italian Colors Restaurant v. American Express Travel Related Services Co., 3:03-cv-03719, U.S. District Court, Northern District of California (San Francisco). The appeal is In Re American Express Merchants’ Litigation, 06-cv-1871, U.S. Court of Appeals for the Second Circuit (New York).
Ex Taylor Bean President Named Defendant in Criminal Case
Raymond E. Bowman, the former president of Taylor, Bean & Whitaker Mortgage Corp., is the target of a criminal case opened by U.S. prosecutors in Virginia, according to a court docket.
Prosecutors filed the case March 7 in Alexandria before U.S. District Judge Leonie Brinkema, who has presided over criminal and civil securities cases resulting from what the Justice Department said was a $1.9 billion fraud scheme.
Two other Taylor Bean executives, including former Chairman Lee Farkas, already have been charged in the alleged scheme, which the U.S. said sought to defraud the government’s Troubled Asset Relief Program and contributed to the failure of Montgomery, Alabama-based Colonial Bank.
Prosecutors also opened a criminal case against Teresa A. Kelly, whom court papers identify as an employee of Colonial Bank in 2008. No charges or other information related to Bowman or Kelly were filed on the public docket.
Peter Carr, a spokesman for U.S. Attorney Neil MacBride, declined to comment. Bowman couldn’t immediately be located for comment. Kelly’s lawyer, Alan Yamamoto in Alexandria, didn’t immediately return a telephone call and e-mail message seeking comment.
Prosecutors said officials at Taylor Bean conspired with officials at Colonial Bank to transfer more than $400 million between the bank and the mortgage lender to hide Taylor Bean overdrafts.
The cases are U.S. v. Bowman, 11-cr-00118, and U.S. v. Kelly, 11-cr-00119, U.S. District Court, Eastern District of Virginia (Alexandria).
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Louisiana Sues BP, Partners for $1 Million a Day Over Spill
BP Plc (BP/) and its partners in the Gulf of Mexico well that blew up should pay the state of Louisiana at least $1 million a day for damages caused by the worst oil spill in U.S. history, state Attorney General Buddy Caldwell said in a lawsuit against the oil company.
“Louisiana has been, and will continue to be, profoundly impacted by the Deepwater Horizon disaster and has incurred, and will continue to incur, significant costs and damages,” Caldwell said in the complaint, filed March 3 in federal court in New Orleans. BP and its partners are responsible for fines and damages under state and federal law, he said.
Anadarko Petroleum Corp. (APC) and Mitsui & Co.’s MOEX Offshore 2007 LLC, which co-owned the well with BP, were named in the suit. Also sued were Transocean Holdings LLC and Triton Asset Leasing GmbH, which owned the Deepwater Horizon rig.
The well leaked more than 4.1 million barrels of crude after the Deepwater Horizon drilling rig exploded and sank 50 miles (80 kilometers) off the Louisiana coast in April.
Louisiana seeks at least $1 million in penalties for “each day of violation” as well as full reimbursement for all cleanup and remediation costs. The well leaked for 87 days. Large amounts of oil remain in the Gulf’s waters and marshes, Caldwell said.
Daren Beaudo, BP’s spokesman, and John Christiansen, Anadarko’s spokesman, didn’t immediately respond to e-mails seeking comment on Louisiana’s suit. A spokesman for Mitsui couldn’t be immediately reached.
The case is State of Louisiana v. BP Exploration & Production Inc., 2:11-cv-9516, U.S. District Court, Eastern District of Louisiana (New Orleans).
Norex Sues Blavatnik, Access in New York Over Yugraneft
Norex Petroleum Ltd. sued billionaire Leonard Blavatnik and his Access Industries Inc. over allegations they schemed to strip its controlling interest in a Russian oil company valued at an estimated $500 million.
The suit by Norex, filed March 7 in New York state Supreme Court in Manhattan, follows dismissal of a federal racketeering suit based on the same transaction. Thirteen other defendants, including TNK-BP Ltd., a joint venture with BP Plc, were named in the suit.
Norex, a Cypriot company with an office in Calgary, claimed that New York-based Access and other defendants illegally took control of ZAO Yugraneft Corp. through illegal means, including corrupting Russian court proceedings and sending militiamen armed with AK-47s to storm Yugraneft’s offices and production field. Norex is seeking damages of at least $500 million.
A U.S. appeals court in September upheld a lower court’s dismissal of the federal racketeering case, citing a ruling by the Supreme Court that limits the reach of civil claims for acts occurring outside the country.
Michael Sitrick, a spokesman for Access Industries, said the company hadn’t been served with a copy of the complaint.
“In 2002, Access was named by Norex as a defendant, along with a dozen other putative defendants from around the world, in a federal court lawsuit that was dismissed twice by the federal court in New York,” he said in e-mailed statement. “Access has always maintained that Norex’s claims were meritless. It does not expect that Norex will have any better success in the state court than it did in its unsuccessful eight-year battle in the federal court.”
David Nicholas, a spokesman for London-based BP, and Thomas Kiehn, a spokesman for TNK-BP, declined to comment.
The case is Norex Petroleum Ltd. v. Access Industries Inc., 650591/2011, New York state Supreme Court (Manhattan).
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Amcor Agrees to Settle Australia Antitrust Suit, Lawyer Says
Amcor Ltd., Australia’s biggest packaging company, and Visy, a closely held packager, agreed in principle to settle a price-fixing lawsuit, said a lawyer for customers who sued the companies.
Details of the settlement, negotiated yesterday while opening statements in a scheduled trial were put on hold, will be submitted in federal court March 10, Tony Bannon, lawyer for more than 4,500 customers who sued the companies, told Federal Court Judge Peter Jacobson yesterday.
The customers, led by Jarra Creek Central Packing Shed Ltd., sought to recoup overpayments accrued from July 2000 to June 2009. They initially sought more than A$1 billion ($1.01 billion) in damages, a sum that was reduced by an undisclosed amount in January following a revised estimate by an economist hired by Maurice Blackburn Lawyers, the plaintiffs’ law firm.
The Federal Court fined Visy A$36 million in November 2007 after its late owner Richard Pratt and his companies admitted to 69 counts of breaching Australia’s Trade and Practices Act.
Amcor was granted immunity from prosecution for cooperating with the Australian Competition and Consumer Commission in the agency’s suit against Visy and didn’t admit any wrongdoing.
Jarra sued on behalf of itself and other customers in April 2006.
The case is Jarra Creek Central Packing Shed Ltd. v. Amcor Ltd., NSD 702/2006, Federal Court of Australia (Sydney).
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Lawyer Said Ready to Plead Guilty in U.S. in KBR Bribes Case
British lawyer Jeffrey Tesler will plead guilty to U.S. charges he conspired to bribe Nigerian government officials to help KBR Inc. (KBR) win contracts for a $6 billion natural gas project, according to a person with knowledge of the case.
Tesler stopped fighting his extradition from the U.K. last month, after the London Court of Appeals ruled he should face charges in the U.S. He is set to appear March 11 before U.S. District Judge Keith P. Ellison in Houston, according to the court’s online docket. Ellison previously accepted guilty pleas from KBR, its former chief executive officer and a consultant with KBR’s London subsidiary over charges they violated the U.S. Foreign Corrupt Practices Act in the Nigerian project.
Indicted in Houston in February 2009 on 11 counts related to the U.S. anti-bribery law, Tesler will plead guilty to two counts, said the person, who noted that the plea deal isn’t yet public information. Terms of the agreement weren’t available.
Tesler was accused of helping a KBR-run joint venture negotiate and pay $180 million in bribes to high-level Nigerian government officials so the venture partners could win contracts to build the Bonny Island liquefied natural gas project between 1994 and 2004. The conspirators used a Gibraltar-based company controlled by Tesler to funnel more than $130 million of the bribery payments to Nigerians, according to his indictment.
Bradley Simon, Tesler’s U.S. lawyer, declined to comment when reached by telephone yesterday. Laura Sweeney, a Justice Department spokeswoman, didn’t immediately respond to voice messages or e-mails requesting confirmation that Tesler will enter a guilty plea.
The case is United States v. Tesler, 4:09-cr-00098, U.S. District Court, Southern District of Texas (Houston).
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