Election Rules, Barclays, Insider Trading: Compliance
The Federal Election Commission on Friday said that it would require groups funding issue ads, such as the U.S. Chamber of Commerce and Crossroads GPS, to disclose their donors.
The FEC ruling applies only to what are known as “electioneering communications,” so-called issue ads that run before an election and mention a federal candidate without urging viewers to vote for or against the person. “Independent expenditures,” which advocate support or opposition to a candidate, aren’t affected by the FEC decision.
The commission said all groups should report donors of $1,000 or more effective March 30. That’s when a U.S. District Court judge threw out FEC rules allowing groups to hide their contributors. The case was brought by Representative Chris Van Hollen, a Maryland Democrat, who argued that the 2002 campaign-finance law required such disclosure.
That district court ruling has been appealed, and the FEC said it could reverse its policy if a higher court overturns the decision. A phone calls to the Chamber wasn’t immediately returned.
“The FEC statement is not new policy, but rather reiterates the Van Hollen decision,” said Jonathan Collegio, a Crossroads spokesman.
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McKesson Reaches $151 Million Deal With States on Drugs
The agreement resolves allegations that McKesson overbilled states by reporting inflated prices for medications, state attorneys general said Friday. The deal follows a settlement reached in April with the federal government.
“This settlement holds McKesson accountable for attempting to make millions of dollars in illegal profits,” New York Attorney General Eric Schneiderman, who helped lead negotiations, said in an e-mailed statement.
Kris Fortner, director of communications at San Francisco-based McKesson, said in an e-mailed statement that the company adhered to all applicable laws and regulations and that the claims are “without merit.”
“We did not manipulate drug prices and did not violate any laws,” Fortner said. The settlement was in the best interest of the company’s employees, customers, suppliers and shareholders, according to Fortner.
Barclays Says FSA Investigating Finance Director Over Fees
Barclays Plc (BARC) said the Financial Services Authority is investigating four current and former senior employees including Finance Director Chris Lucas over the sufficiency of disclosure of fees payable.
“The FSA is investigating the sufficiency of disclosure in relation to fees payable under certain commercial agreements and whether these may have related to Barclays capital raisings in June and November 2008,” Barclays said in a statement on Friday. “Barclays considers that it satisfied its disclosure obligations and confirms that it will cooperate fully with the FSA’s investigation.”
“We are sorry for what has happened,” Chairman Marcus Agius said in a statement. “However, our leadership continues to focus on the delivery of our financial performance targets.”
The bank is also being investigated over whether it adequately disclosed fees it agreed to pay to the Qatar Investment Authority as it sought to raise money from investors including the sovereign wealth fund, according to a person with knowledge of the situation.
“The bank entered into an agreement for the provision of advisory services by Qatar Investment Authority to Barclays in the Middle East,” the lender said in a June 2008 statement detailing the fundraising. The FSA is probing whether that disclosure was adequate, said the person, who declined to be identified because the terms of the investigation are private.
Stephen Benzikie, an external spokesman for Qatar Holding, part of the Qatar Investment Authority, and Liam Parker, an FSA spokesman, declined to comment.
Dutch Regulators Probe Libor, Euribor Submission Process
Dutch regulators are conducting a probe into potential rigging of interbank lending rates, as a global scandal triggered by the manipulation of Libor widens.
“The Dutch central bank is conducting an investigation in the broadest sense into possible manipulation of the Libor and Euribor submission process,” said Kees Verhagen, a spokesman for the Amsterdam-based central bank. The probe is being carried out jointly with financial markets regulator AFM and in cooperation with international supervisors, he said by telephone Friday.
The central bank declined to say which firms are under investigation. Dutch newspaper Het Financieele Dagblad reported on Friday that Rabobank Groep, the only Dutch bank on the Libor panel, fired four traders in 2008 and 2011 for possible involvement in manipulation of the rate. The bankers, based in London, were suspected of rigging rates to help colleagues boost profit, the paper said.
Rabobank spokesman Hendrik Jan Eijpe declined to comment on the employees. The bank is cooperating with the investigations by regulators, he said.
Mitsubishi UFJ Financial Group Inc., Japan’s biggest publicly traded bank, earlier this month said it suspended two London-based traders as investigators probe the suspected manipulation of benchmark interest rates. The two traders formerly worked at Rabobank, one of at least 12 banks being probed by regulators over allegations they rigged the London and euro interbank offered rates, a person with knowledge of the situation said on July 9.
The U.K. and the U.S. are criminally investigating how derivatives traders and rate submitters colluded to rig Libor, and other interest rates. Barclays was fined 290 million pounds ($456 million) in June by U.S. and U.K. regulators for submitting false rates. The lender on Friday apologized for its role in the scandal.
U.K. Insider-Trade Ring Members Sentenced to Up to 42 Months
Six men who were found guilty in the U.K.’s largest insider-trading-ring prosecution were sentenced to jail terms of as long as 42 months in prison.
The men, who traded on inside information taken from the print rooms for UBS AG (UBSN) and JPMorgan Chase & Co. (JPM), received sentences ranging from 18 months to three-and-a-half years Friday at a London criminal court. They were found guilty of making 732,044 pounds ($1.15 million) after a four-and-a-half months-long trial.
“You knew precisely what you were doing and the fraudulent trading was carefully planned,” Judge Jeffrey Pegden told the defendants. “Your offending is so serious as to only justify immediate custodial sentences.”
The arrests of the eight men came at the height of the financial crisis in 2008 as the U.K. Financial Services Authority was under criticism from lawmakers and other regulators for failing to do enough to combat market abuse. The London-based FSA, which was created in 1997, had only filed three criminal insider-trading cases before the raids in the print-room investigation.
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BofA, Wells Fargo Used Firms That Led to CFPB Accord
Bank of America Corp., Wells Fargo & Co. (WFC) and Citigroup Inc. (C) were among the largest clients of firms whose products led to a $210 million settlement between Capital One Financial Corp. (COF) and federal regulators.
Intersections Inc. (INTX) and Affinion Group Holdings Inc. both provided credit-monitoring programs that were marketed and sold by third-party vendors to Capital One cardholders, according to settlement documents dated July 17. Bank of America, Wells Fargo and Citigroup were listed in securities filings as major customers by one or both of the providers, with Bank of America accounting for more than half of annual revenue at Intersections. The vendors weren’t named, and regulators didn’t accuse Intersections or Affinion of misconduct.
Capital One settled accusations July 18 that vendors used deceptive, high-pressure practices to sell optional products such as credit monitoring and payment protection. It was the first public enforcement case brought by the year-old Consumer Financial Protection Bureau, and Director Richard Cordray said more firms that marketed similar products will face sanctions.
“We know these deceptive marketing tactics for credit-card add-on products are not unique to a single institution,” Cordray said last week. “We expect announcements about other institutions as our ongoing work continues to unfold.” He didn’t name any of the firms, and Jen Howard, a CFPB spokeswoman, declined to comment on enforcement plans.
The dispute concerns so-called payment protection, which pays credit-card bills in case of job loss or disability, and monitoring services that alert customers to changes in their credit profiles.
Bank of America, Wells Fargo and Citigroup spokesmen declined to comment on whether they received complaints or faced enforcement actions similar to those at McLean, Virginia-based Capital One, and the CFPB hasn’t accused them of wrongdoing.
Intersections is a publicly traded firm based in Chantilly, Virginia, while Affinion, based in Stamford, Connecticut, is owned by private-equity firms Apollo Global Management LLC (APO) and General Atlantic LLC.
James Hart, an Affinion spokesman, declined to comment on the company’s relationship with current clients. Affinion hasn’t worked with Capital One since 2001, when Intersections took over management of credit-protection products, Hart said. Leslie Garrett, a spokeswoman for Intersections, declined to comment on specific clients.
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Halliburton Says Has Started Internal Investigation on Iraq Work
Halliburton Co. (HAL), the world’s second-largest oilfield services provider, has begun internal investigations into its operations in Angola and Iraq.
The probes are looking at payments made to third-party agents related to customs matters in Angola and Iraq, as well as visa issues in Iraq, Houston-based Halliburton said Friday in a federal filing.
Halliburton alerted U.S. Justice Department and Securities and Exchange officials during the second quarter that it had begun the inquiry after meeting with them about another internal investigation the company has under way about possible violations of the Foreign Corrupt Practices Act, or FCPA.
Halliburton has previously said it received an anonymous e-mail in December 2010 alleging that current and former employees violated Halliburton’s own business-conduct codes and the FCPA, mainly through its dealings with an Angolan vendor. The e-mail has alleged “conflicts of interest, self-dealing and the failure to act on alleged violations,” Halliburton has said in federal filings.
Two Duke Energy Directors Resign, Call for CEO Replacement
Duke Energy Corp. (DUK) directors Theresa M. Stone and John D. Baker II, who joined the board when the company took over Progress Energy Inc., resigned and called on Duke to begin the process to replace its chief executive officer.
Stone and Baker, who previously served on the Progress board, announced their resignations in separate letters filed Friday with the North Carolina Utilities Commission. The state agency is investigating Duke’s decision to fire Bill Johnson, the former Progress CEO, within hours of completing its $17.8 billion takeover on July 2.
Johnson, who was supposed to become CEO of the new company, was replaced by Duke CEO Jim Rogers. Two other former Progress board members, E. Marie McKee and James B. Hyler, told the commission on July 19 they were considering resigning over the executive change. The board of the combined company had voted 10-5 to replace Johnson, with all former Progress members opposed.
“The board should immediately identify and adopt a process for selecting a new CEO and institute that process as soon as possible,” Baker wrote in a letter to Rogers and Ann Maynard Gray, the company’s lead director. “Only after taking these immediate steps will the board be able to work together for the best interests of Duke’s shareholders.”
SEC Freezes Trader Assets in Probe of Cnooc’s Nexen Purchase
The U.S. Securities and Exchange Commission obtained a court order to freeze assets of traders who allegedly reaped more than $13 million by trading illegally ahead of Cnooc Ltd. (883)’s announcement that it would buy Nexen Inc.
Hong Kong-based Well Advantage Ltd., controlled by Zhang Zhi Rong, and other unidentified traders stockpiled shares of Nexen based on confidential information about the deal, the SEC said in a July 27 statement announcing a complaint filed in federal court in Manhattan. The court order froze about $38 million in assets, the SEC said.
Nexen’s stock rose more than 50 percent on July 23 after Cnooc, China’s largest offshore oil and gas explorer, said it would pay $15.1 billion in cash to acquire the Calgary-based company. Well Advantage’s owner Zhang, a billionaire, is the controlling shareholder of China Rongsheng Heavy Industries Group Holdings Ltd. (1101), a Hong Kong-based company that engages in significant business activities with Cnooc, the SEC said.
“This may be the tip of an iceberg suggesting that the government in China has to be more careful about their business and business partners,” said Joseph Fan, co-director of the Institute of Economics and Finance at the Chinese University of Hong Kong.
Many individuals doing business with state-owned enterprises are well connected and there are complicated relationships and transactions between them, Fan said.
Zhang wasn’t available for comment, Glorious Property’s public relations manager Doris Chung said.
China Rongsheng Heavy Industries said in a statement that Zhang doesn’t have any executive role, and business operations won’t be affected. The shipbuilder won an order from state-owned Cnooc to build a deepwater pipe-laying vessel in 2007 and Cnooc was one of the cornerstone investors in its initial public offering in Hong Kong in November 2010.
Hong Kong’s Securities and Futures Commission and Cnooc declined to comment on the case.
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Anglo Irish Debt Exchange Was ‘Negative Inducement,’ Judge Says
The measures the Irish government used to persuade bondholders to take losses as it restructured Anglo Irish Bank Corp. were unfair to the minority of investors who didn’t want to take part, a U.K. court ruled.
Judge Michael Briggs on July 27 called the mechanism a “negative inducement” to force bondholders to accept the offer. The case was brought by Anglo Irish bondholder Assenagon Asset Management SA.
The ruling focuses on the legality of so-called exit consent measures under which the nationalized lender offered holders of the bonds a choice between receiving a smaller amount in exchange for their notes or being effectively wiped out. Other countries, including Greece, used similar methods to restructure their debt.
The exchange offer was “fair, transparent” and all note holders were provided with comprehensive notice in advance, Irish Bank Resolution Corp., the successor to Anglo Irish, said in a statement. “IBRC is firmly of the view that these securities would have been valueless without the recapitalization of the bank by the Irish State.”
The IBRC said it was given permission to appeal and is “considering its options.”
The case is Assenagon Asset Management SA v. Anglo Irish Bank Corp., High Court of Justice Chancery Division, HC11C01320.
In the Courts
ABP Suit Against Ace Securities Can Proceed, Judge Says
A lawsuit brought by Stichting Pensioenfonds ABP, Europe’s second-biggest pension fund, against a Deutsche Bank AG (DBK) affiliate over residential mortgage-backed securities can proceed, a New York judge ruled.
Ace Securities Corp. must face two claims in the suit, for common-law fraud and fraudulent inducement, New York State Supreme Court Justice Jeffrey Oing in Manhattan said Friday. The judge dismissed claims of aiding and abetting fraud and negligent misrepresentation. The plaintiffs could refile the aiding-and-abetting claim, he said.
ABP, based in Heerlen, Netherlands, sued Ace Securities, Deutsche Bank and four other bank affiliates in state court in Manhattan in September, saying it bought residential mortgage-backed securities while relying on allegedly false and misleading statements.
ABP has sued other banks in the same court over similar allegations, including Credit Suisse Group AG, JPMorgan Chase & Co. and Goldman Sachs Group Inc. (GS)
Ace Securities, based in Charlotte, North Carolina, was formed by Deutsche Bank Securities Inc. to facilitate the sale of residential mortgage loans through securitizations, ABP said in the complaint.
Oing dismissed Deutsche Bank, Deutsche Bank Home Lending LLC and DB Structured Products Inc. from the case, leaving Ace Securities, Deutsche Bank Securities and another Deutsche Bank affiliate as defendants.
“We are encouraged that the judge dismissed several claims and defendants and is still considering whether to dismiss the entire case on statute of limitations grounds,” Duncan King, a New York-based spokesman for Deutsche Bank, said in a statement.
The ruling “shows that investors will be able to get to discovery on these claims,” Geoffrey C. Jarvis, an attorney with Grant & Eisenhofer who is representing ABP, said after Friday’s hearing. The fraud allegation is the “key claim” in the suit, he said.
The case is Stichting Pensioenfonds ABP v. Ace Securities Corp., 652460/2011, New York state Supreme Court (Manhattan).
Iceland’s Kaupthing Sues to Rescind $1.5 Billion of Transactions
The caretakers of failed Icelandic lender Kaupthing Bank hf have filed about 50 lawsuits in order to rescind transactions that were executed in the last months prior to the bank’s collapse.
“The aggregate nominal amount claimed by Kaupthing in these cases is equivalent to approximately 180 billion Icelandic” kronur ($1.5 billion), the bank said in an e-mailed statement from Reykjavik.
Kaupthing and two other Icelandic lenders defaulted on $85 billion in 2008, triggering an economic collapse in the north Atlantic island and an International Monetary Fund-led bailout.
The bank is now aiming to complete the winding-up proceedings by seeking an agreement with creditors which would give them a stake in the future value of the bank’s assets. Kaupthing has 5.2 billion euros ($6.4 billion) in assets and 17 billion euros in claims.
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