Price-Fixing Charges, UPS’s TNT Bid, Libor: Compliance
LG Electronics Inc. (066570), Panasonic Corp. (6752) and Royal Philips Electronics NV (PHIA) may be fined by European Union antitrust regulators within weeks over price-fixing agreements for cathode-ray tubes used in televisions, four people said.
Technicolor SA (TCH) is also among companies earmarked for possible European Commission fines as soon as Nov. 28, one of the people said. Other manufacturers including Toshiba Corp. have been asked to meet with EU officials before a preliminary decision on fines by a panel of EU and national competition authorities, another person said. The people spoke on condition of anonymity because the process isn’t public.
Sales of cathode-ray tubes used in televisions and computer monitors fell after customers switched to slimmer liquid-crystal and plasma display sets. Philips and Technicolor, previously known as Thomson SA, received objections in the EU probe in 2009. Antitrust watchdogs in the EU, Japan and South Korea raided companies in 2007 over concerns they colluded to fix prices for tubes in computer monitors and color televisions.
The commission can fine cartel members as much as 10 percent of their annual sales. Antoine Colombani, a spokesman for the Brussels-based authority, declined to comment on the matter.
Joost Akkermans, a spokesman for Amsterdam-based Philips, declined to comment because the investigation is ongoing. Thibault Peulen, a spokesman for Technicolor in Paris, declined to comment. Tokyo-based Toshiba declined to immediately comment. LG and Panasonic didn’t immediately respond to calls and e-mails seeking comment.
UPS Seeks Antitrust Hearing With EU to Defend TNT Express Bid
United Parcel Service Inc. (UPS), the world’s largest package-delivery company, will defend its 5.16 billion-euro ($6.6 billion) bid for TNT Express NV (TNTE) at a hearing with European Union antitrust regulators next week.
UPS will meet with the European Commission on Nov. 12, the regulator said in a filing on its website. UPS needs to offer “substantial remedies” to eliminate concerns over the deal that will double its size in Europe, EU Competition Commissioner Joaquin Almunia said last week.
UPS received antitrust objections from regulators last month listing possible problems with the bid. Regulators told the company that buying TNT would remove one of its few serious competitors in the European delivery services market, a person familiar with the regulators’ complaint said earlier this week. TNT and Deutsche Post AG (DPW)’s DHL, the market-share leader, are seen by the EU as UPS’s main competitors for next-day express deliveries within Europe, the person said.
“Our preliminary view is that serious competition concerns would arise in both cases, and substantial remedies are needed,” Almunia said on Nov. 2.
Peggy Gardner, a spokeswoman for UPS in Atlanta, yesterday declined to comment on what UPS would say at the hearing. UPS is committed to the transaction and would address the EU’s concerns in confidential talks with regulators, she said last week in response to Almunia’s comments.
Ernst Moeksis, a spokesman for TNT in Hoofddorp, the Netherlands, said requests for comment should go to UPS.
The Brussels-based commission must rule on the transaction by Jan. 15.
RBS Japan Unit Faces Probe Including Libor, Official Says
A Japanese inspection of Royal Bank of Scotland Group Plc’s brokerage in Tokyo will include a probe into whether it was involved in possible attempts to manipulate interbank interest rates, according to a government official with knowledge of the matter.
The Securities and Exchange Surveillance Commission’s routine onsite inspection will begin as soon as Nov. 12, encompassing internal controls for Libor and Tibor, the official said, asking not to be named because the matter is confidential.
RBS (RBS) is one of more than a dozen banks worldwide facing regulatory probes into allegations that they manipulated the London interbank offered rate, the benchmark for more than $300 trillion of securities. Chief Executive Officer Stephen Hester said last week that he expects the Edinburgh-based bank will be fined in coming months to settle investigations.
Hiroshi Okada, a spokesman for Japan’s Financial Services Agency, which oversees the SESC, declined to comment, saying it doesn’t talk about probes of specific companies. Atsuko Yoshitsugu, a Tokyo-based spokeswoman for RBS Securities Japan Ltd., declined to comment.
RBS hasn’t been accused of any wrongdoing by Japanese regulators, which conduct regular inspections of financial companies to ensure markets are fair and transparent. Tokai Tokyo Securities Co. and SBI Securities Co. are among firms currently being examined by the SESC, according to its website.
RBS continues to cooperate fully with investigations by authorities into its submissions, communications and procedures relating to the setting of Libor and other rates, the bank said in its earnings report on Nov. 2.
Obama May Levy Carbon Tax to Cut U.S. Deficit, HSBC Says
A tax starting at $20 a metric ton of carbon dioxide equivalent and rising at about 6 percent a year could raise $154 billion by 2021, Nick Robins, an analyst at the bank in London, said yesterday in an e-mailed research note, citing Congressional Research Service estimates. “Applied to the Congressional Budget Office’s 2012 baseline, this would halve the fiscal deficit by 2022,” Robins said.
Hurricane Sandy sparked discussion on climate protection in the election after presidential candidates focused on other debates, HSBC said. A continued Republican majority in the U.S. House of Representatives means Obama’s scope for action will be limited, Robins said. Cap-and-trade legislation stalled in the U.S. Senate after narrowly passing the house in 2009.
North American discharges fell 1.3 percent last year amid slowing economic growth. In China, the world’s biggest emitter, greenhouse gases from fuel use rose more than 9 percent in 2011, according to BP Plc statistics published on June 13.
“Cap-and-trade has been demonized” and Obama probably won’t seek to install such a program in his second term, Richard Sandor, founder of the world’s biggest carbon trading exchange in Europe, said yesterday in London.
In the Courts
Level Global Co-Founder Faces Jury as FBI Raids Yield Trial
Almost two years ago, Level Global Investors LP and Diamondback Capital Management LLC were among four hedge funds raided by the Federal Bureau of Investigation as part of a nationwide crackdown on insider trading.
This week, the first two defendants from those firms are on trial in Manhattan federal court, as the U.S. continues its unprecedented five-year-old investigation of market corruption at hedge funds, technology companies and consulting firms.
Level Global co-founder Anthony Chiasson and Todd Newman, a former portfolio manager for Stamford, Connecticut-based Diamondback, are accused of making more than $67 million in illicit profits by trading on inside information in Dell Inc. and Nvidia Corp. (NVDA) U.S. District Judge Richard Sullivan is presiding over the trial of both men, who have pleaded not guilty. Jury selection began yesterday.
The case is the latest chapter in a series of probes that last month yielded a two-year prison sentence for their highest-profile target, former Goldman Sachs Group Inc. (GS) Director Rajat Gupta. Gupta, convicted of insider trading, conspired with Galleon Group LLC co-founder Raj Rajaratnam. Rajaratnam, who is serving an 11-year term, has asked an appeals court to throw out his conviction, arguing wiretaps used in his case were illegal.
Prosecutors in the office of Manhattan U.S. Attorney Preet Bharara have said Chiasson and Newman were part of a group of fund managers, analysts and technology company employees who traded stock tips in a conspiracy that operated from 2007 to 2009.
The trial, which had been scheduled to start Oct. 29, was delayed by the courthouse’s closing after Hurricane Sandy.
Stephen Fishbein and John Nathanson, Newman’s lawyers, and Greg Morvillo and Reid Weingarten, lawyers for Chiasson, declined to comment on the trial.
Diamondback agreed to pay more than $9 million to resolve a Securities and Exchange Commission lawsuit over trades made in 2008 and 2009.
In January, Diamondback and Bharara’s office entered into a non-prosecution agreement related to the actions of the two men. Prosecutors said the alleged misconduct “was not known by” others at Diamondback.
The case is U.S. v. Newman, 12-00121, U.S. District Court, Southern District of New York (Manhattan).
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United Technologies Directors Sued Over China Export Fines
United Technologies Corp. (UTX), the maker of Pratt & Whitney jet engines and Sikorsky helicopters, was sued by a shareholder alleging mismanagement and seeking to replace the company’s board.
Directors of the Hartford, Connecticut-based industrial conglomerate should have exercised better oversight to avoid U.S. fines for supplying China with software used in developing attack helicopters, the Harold Grill 2 IRA contends in a lawsuit filed Nov. 5 in Delaware Chancery Court in Wilmington.
Board members violated their duties “by abdicating their responsibilities of supervision and oversight” and as a result “sullied United Technologies’ reputation as a defense contractor, undermined its claims to good governance, and exposed it to criminal charges,” the investor claimed.
In June, United Technologies units pleaded guilty to violating the Arms Export Control Act and making false statements in connection with exports of software used to develop its Z-10 helicopter, supplied to the Chinese army beginning in 2009, U.S. federal authorities said.
The company’s Pratt & Whitney Canada unit and its U.S.- based Hamilton Sundstrand unit agreed to pay more than $75 million as part of a settlement with the U.S. Justice Department and State Department, according to prosecutors.
Congress imposed a ban on licenses or approvals of defense articles to China in February 1990, specifically including helicopters.
“The allegations in this lawsuit are entirely without merit,” John Moran, a United Technologies spokesman, said in an e-mailed message. He said the company “is committed to conducting business in full compliance with all export control regulations and achieving its goal of best-in-class performance.”
The case is Grill v. United Technologies, CA7999, Delaware Chancery Court (Wilmington).
UBS Denies Claim Employees Can’t Testify in Adoboli’s Defense
UBS AG (UBSN)’s top employment lawyer in Europe denied claims by former trader Kweku Adoboli that bank workers are barred from testifying in his defense at a trial over a $2.3 billion trading loss.
While UBS contracts may prevent current or former employees from disparaging the Zurich-based bank or sharing intellectual property, there’s nothing stopping them from answering questions in litigation, Jamie Howard, the bank’s head of employment law for Europe, the Middle East and Africa, said yesterday in London.
Regardless of the “implied duty of fidelity” in such contracts, employees may testify against the bank “if required by law,” Howard said.
Adoboli, originally from Ghana, is on trial for fraud and false accounting over the loss caused from unauthorized trades. Prosecutors asked Howard to testify after Adoboli’s lawyer suggested workers were being prevented or discouraged from helping bolster the former trader’s defense.
HSBC Liable for Ignoring Madoff-Linked Fund Loss, Investors Say
HSBC Holdings Plc failed to keep millions in clients’ assets invested with Bernard Madoff safe “under lock and key,” investors in an Irish fund said.
Kalix Fund Ltd. invested in Thema International Fund Plc, which in turn invested with Madoff. London-based HSBC, as Thema’s custodian, didn’t act in time to protect investors’ money from fraud, even though it knew of the risks of dealing with Madoff, a lawyer for Kalix told Judge Peter Charleton in a Dublin court yesterday. The lender also handed over custodian duties to Madoff and then tried to conceal it, the lawyer said.
HSBC, Europe’s largest lender by market value, faces more than 50 complaints in Ireland -- including from Thema, Kalix, AA (Alternative Advantage) Plc investors, and Unione di Banche Italiane ScpA (UBI) -- for allegedly failing in its duties as custodian for Thema. That fund is trying to recover about 1 billion euros ($1.3 billion) in assets lost after Madoff’s arrest. The Kalix complaint is the first of them to reach trial.
HSBC said in an e-mailed statement it has good defenses to the claims made against it, wasn’t aware of the fraud prior to Madoff’s confession and also lost $1 billion of its own assets.
Madoff, 74, pleaded guilty in 2009 to orchestrating what prosecutors called the biggest Ponzi scheme in history and is serving a 150-year sentence in U.S. federal prison.
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Citigroup Sued by Sealink Over Mortgage-Backed Securities
Citigroup Inc. (C), the third-biggest U.S. bank by assets, was sued by Sealink Funding Ltd. for damages tied to an investment in $513 million worth of residential mortgage-backed securities.
Sealink, in a suit filed yesterday in New York State Supreme Court in Manhattan, accused Citigroup of misrepresenting and omitting information on the underwriting standards used to issue loans pooled to create the securities. Sealink is seeking more than the principal amount of the securities in damages.
Citigroup, based in New York, has been fending off litigation tied to mortgage-backed securities since the financial crisis, when U.S. taxpayers had to rescue the lender with a $45 billion bailout. The bank is cooperating in response to subpoenas and requests for information from regulators concerning its “mortgage-related conduct,” according to a quarterly regulatory filing.
Danielle Romero-Apsilos, a Citigroup spokeswoman, declined to comment on the suit.
Sealink was created to manage Landesbank Sachsen AG’s riskiest assets after the German lender almost collapsed. It has filed lawsuits in New York over investments in mortgage bonds against banks including UBS AG, Goldman Sachs Group Inc., Deutsche Bank AG, Bank of America Corp. (BAC) and JPMorgan Chase & Co.
The case is Sealink Funding Ltd. v. Citigroup Inc., 653844/2012, New York State Supreme Court, New York County (Manhattan).
Interviews and Speeches
Deceit Behind Danish Bank Bust Impossible to Catch, FSA Says
Denmark’s financial watchdog defended its failure to prevent alleged accounting fraud at the nation’s latest bank insolvency after lawmakers called for a probe into the regulator’s practices.
Toender Bank A/S, which declared bankruptcy on Nov. 2 after an inspection by the Financial Supervisory Authority revealed impairments big enough to wipe out the regional lender’s equity, was guilty of a “massive misrepresentation” of its financial health that more rigorous scrutiny wouldn’t have uncovered earlier, FSA Director General Ulrik Noedgaard said.
“It’s massive non-compliance with the laws and regulations, and we can never be 100 percent sure that this won’t happen again,” Noedgaard, whose office is based in Copenhagen, said in an interview Nov. 6. After going over the accounts of 90 of Denmark’s roughly 105 banks, “we haven’t seen anything like this before,” he said.
More than a dozen regional lenders have collapsed since Denmark’s housing bubble burst in 2008, threatening to push the nation into its second recession in less than a year. The International Monetary Fund said Nov. 5 that the FSA should broaden its oversight of Denmark’s regional lenders and even consider enforcing risk-based deposit insurance.
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To contact the editor responsible for this story: Michael Hytha at email@example.com