Health-Care Law, Monsanto, Madoff, Weavering in Court News
A federal appeals court in Virginia threw out two challenges to the Obama administration’s 2010 health-care law, saying it lacked authority to decide whether the measure is constitutional.
With the decisions, the court in Richmond yesterday became the second U.S. appellate panel this year to leave the law intact after lower-court judges ruled on its constitutionality. The decisions came in separate cases challenging the statute’s requirement that individuals buy health insurance or pay a tax penalty. A third appeals court threw out that mandate.
The rulings broaden the range of opinions on the health- care law among the intermediate federal courts, a division likely to be resolved by the U.S. Supreme Court.
“I was a little surprised,” Northwestern University law professor Stephen Presser said of the court’s decision to dismiss the cases on jurisdictional grounds. “I expected them to talk about the constitutional issue.”
The judges in both decisions dismissed the cases, saying the court lacked jurisdiction. In one, the judges said a statute that generally blocks lawsuits challenging the collection or assessment of taxes barred them from ruling on the health- insurance mandate. In the other, they said the state of Virginia lacked the legal right to bring its lawsuit.
“This decision is another victory for the Affordable Care Act,” said Stephanie Cutter, assistant to the president and deputy senior adviser, in a White House blog post. Cutter pointed out that two of the judges noted in one of the decisions that they would have found the law to be constitutional.
Mathew Staver, dean of the Liberty University School of Law, called the outcome “astounding.” He said in an interview that the school will petition the U.S. Supreme Court for review.
Virginia Attorney General Ken Cuccinelli said in a statement that he plans to appeal the ruling.
The U.S. calls the insurance mandate the linchpin of the Patient Protection and Affordable Care Act, claiming in court papers that without expanding the pool of younger, healthier customers the insurance industry won’t be able to meet its obligations for coverage under the law.
The cases are Liberty University v. Geithner, 10-02347, and Commonwealth of Virginia v. Sebelius, 11-01057, U.S. Court of Appeals for the Fourth Circuit (Richmond).
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Primary Global Recruited From Public Firms, Ex-Analyst Says
A former Primary Global Research LLC analyst told a jury his firm actively recruited employees at publicly traded companies to work as consultants so they would pass detailed inside information to fund managers who were clients.
Bob Nguyen, 32, of Stockton, California, testified as a prosecution witness against James Fleishman, a former Primary Global executive on trial in Manhattan federal court for allegedly participating in an insider-trading scheme.
Nguyen supervised experts from technology companies who moonlighted at Mountain View, California-based Primary Global, which matches investors with specialists who provide insight into specific markets. He said that after the financial crisis of 2008, senior Primary Global officials urged staff to recruit from public companies. Fleishman was present for those meetings, Nguyen said.
“The financial crisis happened and we’re getting all these potential experts who aren’t working,” Nguyen said. “The message was we should be recruiting people who are at publicly trading companies,” he said. “The reason was, they said, they were ‘more insightful.’”
Assistant U.S. Attorney Antonia Apps asked Nguyen what he understood “more insightful” to mean.
“What I understood was that they’d be more useful and provide more data to clients,” he said.
Of the 15 people charged by Manhattan U.S. Attorney Preet Bharara’s office in the insider-trading probe of so-called expert networkers and fund managers, 12 have pleaded guilty. One, Winifred Jiau, a former Primary Global consultant, was convicted at trial in June of securities fraud and conspiracy. Fleishman is the second to go to trial.
The case is U.S. v. Nguyen, 11-CR-32, U.S. District Court, Southern District of New York (Manhattan).
Monsanto May Win Appeal of French GM Maize Ban, Court Says
Monsanto Co. (MON) and 10 other companies may win a challenge against a French ban on the use of a strain of genetically modified corn if the French government can’t show it followed the correct procedures, the European Union’s highest court said.
An EU nation must establish “the existence of a situation which is likely to constitute a clear and serious risk to human health,” the EU Court of Justice in Luxembourg said in a ruling yesterday. Another condition is that the country inform the European Commission and other EU countries of its measures.
The bloc’s 27 nations are split over the safety of food produced from genetically modified crops. This is slowing the process of winning EU permission to grow them and has prompted complaints by the U.S. and other trade partners.
The case was triggered when St. Louis-based Monsanto in 2007 sought to renew an authorization it previously received for its MON 810 corn. The commission, the EU’s executive agency, in 1998 authorized the use of the maize.
France introduced emergency measures in 2007 that banned the use of the product by Monsanto in the country. Two more orders followed in 2008 that outlawed the planting of the maize seed. The company, with the support of 10 others, challenged these measures. France’s Conseil d’Etat, the country’s highest administrative court, last year sought the EU tribunal’s guidance on the legality of the measures.
The decision on the validity of the measure will be given by the Conseil d’Etat and until then “the French emergency measure stays valid and the prohibition to cultivate varieties of genetically modified MON 810 maize remains in place on French territory,” the French environment ministry said in an e-mailed statement.
The case concerns a strain “which hasn’t been checked according to new European requirements and for which uncertainties remain as to its potential effect on the environment,” the ministry said. agency, in 1998 authorized the use of the maize.
The safety of MON810 has been confirmed consistently during the past 15 years, Kelli Powers , a Monsanto spokeswoman, said yesterday in an e-mail statement. “French farmers should no longer be denied the choice to use it.”
The cases are: C-58/10, Monsanto SAS, Monsanto Agriculture France SAS, Monsanto International SARL, Monsanto Technology LLC v Ministre de l’Agriculture et de la Peche; C-59/10, C-60/10, C- 61/10, C-62/10, C-63/10, C-64/10, C-65/10, C-66/10, C-67/10, C- 68/10.
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SAP’s Ex-TomorrowNow Unit Charged Over Oracle Downloads
SAP AG (SAP)’s former TomorrowNow software-maintenance unit was charged by the U.S. with unauthorized computer access and criminal copyright infringement for improper downloads of Oracle Inc. programs.
SAP, which shut the Bryan, Texas-based unit in 2008, reached an agreement with the U.S. Justice Department resolving the charges, Jim Dever, a SAP spokesman, said yesterday in a telephone interview. A plea agreement was filed in court and isn’t yet public, he said, without disclosing any penalty.
“Any fine would be paid by SAP,” Dever said. “We look forward to what we believe is a fair and final resolution.”
TomorrowNow was accused in 11 counts of using login credentials from Oracle customers such as Merck & Co. and Honeywell International Inc. (HON) to gain access to the company’s software and one count of criminal copyright infringement for reproducing Oracle’s copyrighted works, according to a charging document filed yesterday in federal court in San Francisco by U.S. Attorney Melinda Haag.
Jack Gillund, a spokesman for Haag, declined to comment on whether there was a plea agreement with SAP.
SAP, based in Walldorf, Germany, and Redwood City, California-based Oracle are the two biggest makers of business software and compete for corporate customers that purchase programs to run payroll, human resources, accounting and real estate management tasks.
The criminal case is U.S. v. TomorrowNow, 11-642, U.S. District Court, Northern District of California (San Francisco).
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Milberg Founder Weiss Seeks Dismissal of Madoff Trustee Suit
Melvyn Weiss, the disbarred co-founding partner of the law firm Milberg LLP, said he will seek dismissal of a lawsuit by the trustee for Bernard L. Madoff’s defunct firm that demands the return of money withdrawn from the Ponzi scheme over 15 years.
“The trustee’s claims violate the statutory ‘look back’ periods limiting avoidance to six years prior to the filing date for state law,” Weiss said Sept. 7 in a filing in U.S. District Court in Manhattan.
Trustee Irving Picard’s lawsuit last year against Weiss and his family never alleged they had actual knowledge of the fraud, according to Weiss. That sets it apart from 19 suits in which Picard claimed defendants knew or should have known of Madoff’s conduct and sought to recoup funds withdrawn beyond the six-year limit, he said.
Weiss asked the judge to remove the case from bankruptcy court, saying it raised a “novel issue” and federal law questions that require a district judge’s ruling.
“The trustee and his counsel are confident in their claims and look forward to arguing this matter in whichever court the case is eventually heard,” Amanda Remus, a Picard spokeswoman, said in an e-mail.
Weiss and ex-partners William Lerach, David Bershad and Steven Schulman all pleaded guilty to criminal charges in connection with paying firm clients to file securities fraud suits against companies. The four, who were partners in the former firm Milberg Weiss Bershad Hynes & Lerach LLP, were disbarred and served prison sentences.
Madoff, 73, is in a federal prison in North Carolina, serving a 150-year sentence for the fraud.
The case is Picard v. M&B Weiss Family Limited Partnership, 10-04241, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Weavering Capital Criminal Probe Dropped by U.K. Prosecutors
U.K. fraud prosecutors dropped a criminal investigation into the collapse of hedge-fund firm Weavering Capital (UK) Ltd. and its founder Magnus Peterson.
The Serious Fraud Office decided not to bring charges because it didn’t think it could win a conviction, the agency said yesterday. Weavering Capital collapsed in March 2009 with losses of more than $500 million after discovering the counterparty for its biggest trading position was controlled by the fund’s manager.
“There is a devastating weight of evidence against Mr. Peterson,” Barnaby Stueck, a partner with Jones Day in London who is pursuing a civil cases against the executive, said in an interview. “I don’t understand how the SFO could reach the conclusion that they did.”
The agency was investigating interest-rate swaps between the Weavering Macro Fixed Income Fund Ltd. and another Weavering fund in the British Virgin Islands that were valued at more than $600 million. The swaps, which had little or no actual value, inflated the value of the fund and covered up Peterson’s losses on options trades, according to Jones Day, which is advising the fund’s administrator.
The SFO arrested Peterson and Edward Platt, a senior employee at the fund, after it collapsed in 2009. A civil case against Peterson for fraud and breach of duty filed by MCR, the turnaround firm appointed as Weavering’s administrator, is scheduled to go to trial in October.
“The SFO’s decision to discontinue its investigation into the actions of Magnus Peterson and Edward Platt comes as a shock and is deeply disappointing to Weavering’s investors and creditors,” MCR liquidator Geoffrey Bouchier said in an e- mailed statement from Jones Day.
After considering the evidence, there wasn’t a reasonable prospect of getting a conviction, SFO spokesman David Jones said in an e-mail.
Monty Raphael, Peterson’s attorney, didn’t return a phone call and e-mail seeking comment on the SFO’s decision.
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Pisa Has Right to Annul Swaps, Italy’s Highest Court Rules
Pisa’s provincial government has the right to annul swaps contracts with Dexia Crediop SpA and Depfa Bank Plc, Italy’s highest administrative court ruled.
Italy’s Council of State ruled that Italy’s administrative courts have jurisdiction on the cases and that the agreements may be annulled, according to Pasquale Vulcano, Pisa’s lawyer.
Pisa, known for its leaning tower, had stopped making payments on the swaps, claiming that 95 million euros ($133 million) of bonds and derivatives sold by the banks in 2007 didn’t provide an economic advantage to the city. The city said that the bank hid so-called implicit costs on the swaps that made the new financing by Dexia, a unit of Brussels-based Dexia SA (DEXB), and Depfa more expensive than existing debt.
Dexia Crediop is considering appealing the ruling in Italy and the European Union, the company said in an e-mailed statement. Officials for Depfa didn’t have an immediate comment.
The court will appoint an expert to assess whether the contracts were economically convenient, the ruling said.
Siemens, Toshiba Czech Fines Were Legal, EU Court Aide Says
Siemens AG (SIE), Hitachi Ltd. (6501), Toshiba Corp. (6502) and other electric- equipment makers should have more than 900 million koruna ($52 million) in Czech fines upheld, an adviser to the European Union’s highest court said.
“The Czech competition authority was entitled to impose penalties under national law,” even though EU antitrust authorities had also punished the cartel members, Advocate General Juliane Kokott, of the EU Court of Justice, said in a non-binding opinion yesterday. The Luxembourg-based EU court follows such legal advice most of the time.
The Czech antitrust regulator fined at least 10 companies a record 979 million koruna in 2007, a month after the EU regulator levied a 750.7 million-euro penalty ($1.05 billion) on them for colluding on prices of electric equipment. The companies, also including Areva SA (CEI) and Alstom SA (ALO), are challenging the legality of the Czech fine, which was later cut to 942 million koruna.
“We’re disappointed with the conclusion that’s been reached and we’ll now wait for the court’s decision,” said Anthony Dawes, a lawyer in the Brussels office of law firm White & Case LLP, who represented Toshiba.
Siemens spokesman Alexander Becker declined to comment on the EU adviser’s opinion, as did Mitsubishi. Spokespeople for Areva and Alstom didn’t respond to e-mails seeking comment. Toshiba, Hitachi and Fuji Electric didn’t respond to e-mails seeking comment outside normal office hours.
The case is C-17/10, Toshiba Corporation v. Urad pro ochranu hospodarske souteze.
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France Telecom May Lose Appeal Over $1.55 Billion in Aid
France Telecom SA (FTE), France’s largest phone company, should lose an appeal over an order by the European Union to pay as much as 1.1 billion euros ($1.55 billion) in back taxes to the French government, an adviser to the EU’s top court said.
Niilo Jaeaeskinen, an advocate general for the EU Court of Justice, said in a non-binding opinion yesterday that the EU court should dismiss the appeal. The Luxembourg-based tribunal follows such advice in a majority of cases.
The European Commission had probed France’s support for the phone company when it was close to bankruptcy in 2002, deciding that France Telecom had received improper tax benefits from 1994 through 2004. The Paris-based company is appealing a lower EU court’s decision that sided with the regulator in 2009.
The Brussels-based commission won a separate case at the EU high court in 2007 over France’s failure to recoup the tax breaks. The tribunal rejected France’s arguments that the commission should have given a more precise figure when it ruled in 2004 that France Telecom must pay back as much as 1.1 billion euros, plus interest.
Rulings by the EU’s top court take about six months from the time of the opinion. France Telecom said the company has set aside the funds in an escrow provision.
“If the court follows this opinion there will be no financial impact on France Telecom due to the fact that the sum claimed has already been paid to the French authorities in 2010,” Tom Wright, a spokesman for France Telecom, said yesterday in an e-mailed statement.
The case is: C-81/10 P, France Telecom v. European Commission.
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On The Docket
Lone Star Verdict Due in October as Prosecutors Seek Prison
South Korean prosecutors asked the Seoul High Court to sentence Lone Star Funds’ former local chief Paul Yoo to 10 years in prison when it delivers its verdict in the stock- manipulation retrial of Yoo and the U.S. fund next month.
The Seoul High Court will rule on the case on Oct. 6, Judge Cho Kyung Ran said at a closing hearing yesterday. The proceedings have been a hurdle to the Dallas-based fund’s sale of Korea Exchange Bank (004940), which is also a defendant. The prosecutors sought fines of about 35 billion won ($33 million) for Lone Star, 45 billion won for Korea Exchange Bank and 4 billion won for Yoo.
An end to the case may pave the way for Hana Financial Group Inc. (086790)’s planned purchase of Korea Exchange Bank from Lone Star after the Financial Services Commission delayed approval of the deal in May because of the retrial. Hana, set to buy a 51 percent stake in KEB, and Lone Star extended a deadline to complete the transaction until the end of November.
“Even in my dreams, I never thought that I was involved in illegal activities,” Yoo said yesterday in his last remarks to the court.
Lone Star is innocent of the stock price manipulation charge as Yoo didn’t represent Lone Star’s LSF-KEB Holdings SCA unit, which owns Korea Exchange Bank, the fund’s attorney said. Korea Exchange Bank’s lawyers also claimed the lender can’t be penalized with Yoo because he didn’t represent the bank. Both Lone Star and Korea Exchange Bank are charged by prosecutors as de-facto employers of Yoo.
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To contact the editor responsible for this story: Michael Hytha at email@example.com.