NHL Broadcasts, Data Collection, Market Abuse: Compliance
A group of baseball and hockey fans can go forward with claims that the National Hockey League and Major League Baseball violate U.S. antitrust law in their control over television and Internet broadcast rights.
U.S. District Judge Shira Scheindlin in New York yesterday denied the leagues’ request to dismiss the suits, filed by subscribers to broadcasts of hockey and baseball games. The group sued the leagues; individual clubs; regional TV sports networks; Comcast Corp. (CMCSA), the largest U.S. cable broadcaster; and DirecTV LLC (DTV), the largest U.S. satellite television provider.
The plaintiffs, seeking to represent other MLB and NHL viewers in a class-action suit, claim the practice of dividing live game broadcasts into exclusive territories, protected by local blackouts, is anti-competitive. They also targeted the sale of “out-of-market” packages only through the leagues.
“Plaintiffs have adequately alleged harm to competition with respect to the horizontal agreements among individual hockey and baseball clubs, as part of the NHL and MLB, to divide the television market,” Scheindlin said yesterday in a written opinion.
The cases are Laumann v. National Hockey League, 1:12- cv-01817, and Garber v. Office of the Commissioner of Baseball, 12-cv-3704, U.S. District Court, Southern District of New York (Manhattan).
FTC Settlement Stops Consumer Data Collection by Advertiser
The U.S. Federal Trade Commission ordered online advertising company Epic Marketplace Inc. to stop using “history sniffing” technology that allowed it to collect data on the Internet browsing habits of millions of consumers.
In a settlement announced yesterday, the agency also ordered Epic Marketplace to destroy all the information it gathered unlawfully from consumers.
“Consumers searching the Internet shouldn’t have to worry about whether someone is going to go sniffing through the sensitive, personal details of their browsing history without their knowledge,” said FTC Chairman Jon Leibowitz in a statement. “This type of unscrupulous behavior undermines consumers’ confidence, and we won’t tolerate it.”
Ocwen Needs Monitor Under Mortgage Deal, New York Says
Ocwen Financial Corp. (OCN), which won a $3 billion auction for Residential Capital LLC’s mortgage servicing business, must hire a monitor to review operations, New York’s banking regulator said.
The monitor is required to ensure the company complies with an agreement to reform servicing practices, the state’s Department of Financial Services said in a statement yesterday. A review by the department found “indications” Ocwen violated the agreement reached with the regulator.
“To protect homeowners facing the risk of losing their homes, we must ensure that the companies are actually living up to their promises,” Benjamin Lawsky, superintendent of the department, said in the statement.
Ocwen reached an agreement with the state last year to make changes to its servicing operations, according to the department. In October, Ocwen and Walter Investment Management Corp. won the bidding for ResCap’s loan servicing and origination assets.
Katarina Wenk-Bodenmiller, a spokeswoman for Ocwen, had no immediate comment on the state’s announcement.
Big Lots CEO to Retire Amid Report of SEC Stock Sale Probe
Big Lots Inc. (BIG) said Chairman and Chief Executive Officer Steven Fishman will retire, amid a report that the U.S. Securities and Exchange Commission is investigating a $10 million sale of stock by the executive.
Fishman, 61, will step down, effective when a successor is named, as he seeks to prioritize time with his family, the Columbus, Ohio-based discount retailer said yesterday. The Wall Street Journal reported Dec. 4 that the SEC started the inquiry in March and that the probe is at an early stage, citing a person familiar with the inquiry.
Fishman, who took over in July 2005, sold the stock on March 20 at a price of about $45, the Journal said. On April 23, the company told investors its sales had slowed, and the following day the stock fell 24 percent to $34.71. Fishman’s trades were properly made at a time when they were allowed, Big Lots hasn’t been contacted by the SEC and Fishman’s stepping down is coincidental to any regulatory interest, the Journal said, citing the company.
The company understands and complies with the rules on stock trading by individuals, Charles Haubiel, executive vice president and chief administrative officer, said on a conference call with analysts Dec. 4, in response to a request for comment on the Journal’s report.
Big Lots hasn’t received anything from the SEC on Fishman’s stock sales, Andrew Regrut, a company spokesman, said in a telephone interview. He declined to answer other questions and directed inquiries to Haubiel, who didn’t return a call.
MF Global Customers Must Wait for More Money, Trustee Says
The trustee liquidating the failed MF Global Inc. (MFGLQ) brokerage said only 200 of more than 28,000 commodities and securities customer claims filed haven’t been completed in the past six months.
“However, the size and timing of future distributions on customer claims remains dependent on the resolution of the major contingencies facing the trustee,” particularly disputes over claims with the brokerage’s U.K. affiliate and parent company, trustee James W. Giddens said Dec. 4 in a report filed in U.S. Bankruptcy Court in Manhattan.
Giddens has paid U.S. and foreign customers almost $4.9 billion since the firm failed about 13 months ago, and has $1.2 billion in hand, out of $1.4 billion in remaining assets, according to data through Oct. 31 included in the report. Most of the money in hand must be kept in reserves because of the fights with affiliates and customers, Giddens said.
Commodity customers shouldn’t expect to get paid in full, unless Giddens wins the key legal battles, he said. A U.K. trial over his $911 million in client claims against the London-based unit is set for April.
Giddens, who also is liquidating the Lehman Brothers Inc. brokerage, lost a bid to claim $463 million in collateral from MF Global’s U.K. unit. The lawyer expects to sue insurers to try to recover $141 million in wheat futures losses by a trader in 2008, unless they agree to pay, he said.
The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Wells Fargo Banker Sued by SEC in Probe of Insider-Trading Ring
A Wells Fargo & Co. (WFC) investment banker was at the heart of a 10-person insider-trading ring that reaped $11 million in profits from tips on pending mergers, U.S. regulators said.
John W. Femenia gave friends confidential information about four deals involving clients of the bank from March 2010 to July 2012, the Securities and Exchange Commission said yesterday in a complaint filed in federal court in Charlotte, North Carolina. The SEC sued nine others for participating in the ring.
“Here you have an investment banker who clearly knew better that inside information can’t form the basis of trading decisions,” William P. Hicks, associate director for enforcement in the SEC’s Atlanta office, said in a statement. “Instead he basically started a phone tree of nonpublic information.”
Femenia, an associate in Wells Fargo’s investment-banking business, was “immediately” placed on leave when the company learned of the allegations, Elise Wilkinson, a bank spokeswoman, said in an e-mailed statement.
“Wells Fargo has detailed policies and training programs on the handling of confidential information, and we have a zero- tolerance policy for the misuse of such information,” she said. “We learned about the underlying allegations yesterday and are assisting and fully cooperating with the SEC and other agencies in these proceedings.”
Femenia didn’t return calls to his office and mobile phones seeking comment on the complaint.
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SAC’s Steinberg Said to Be Unindicted Co-Conspirator at Trial
SAC Capital Advisors LP fund manager Michael Steinberg was described by a federal prosecutor as an unindicted co- conspirator in the insider-trading scheme that involved his former analyst.
Assistant U.S. Attorney Antonia Apps in Manhattan made the allegation yesterday at a hearing outside the jury’s presence at the trial of Todd Newman, a former portfolio manager at Stamford, Connecticut-based Diamondback Capital Management LLC, and Anthony Chiasson, co-founder of Level Global Investors LP. The U.S. says Newman and Chiasson made trades based on illegal tips obtained from company insiders and provided by analysts who worked for them.
Apps told U.S. District Judge Richard Sullivan the government was seeking to show jurors e-mails involving Steinberg when Newman’s lawyer objected, arguing that prosecutors failed to prove that Steinberg was a member of the conspiracy or show any evidence proving that Steinberg knew that information he had received about Dell Inc. (DELL) wasn’t public.
“I am not aware of any evidence suggesting that Mr. Steinberg joined in his conspiracy regarding Dell or any other stocks and I don’t think there is sufficient evidence,” said Steve Fishbein, the defense attorney.
Sullivan told lawyers that he will hold a hearing today to decide whether to allow prosecutors to show jurors e-mails involving Steinberg and whether to make a legal determination that Level Global co-founder David Ganek is also an unindicted co-conspirator in the case.
Chiasson and Newman have pleaded not guilty to the charges of securities fraud and conspiracy.
Barry Berke, a lawyer for Steinberg, didn’t immediately respond to voice-mail and e-mail messages seeking comment on the government’s allegation. Jonathan Gasthalter, a spokesman for SAC, didn’t immediately return a voice-mail message left at his office seeking comment on the prosecutor’s claim.
Apps told Sullivan that the government views Ganek as an unindicted co-conspirator during a Dec. 3 hearing outside the jury’s presence, saying prosecutors seek to show jurors e-mails involving Ganek.
Steinberg and Ganek haven’t been charged with a crime by the government.
Ganek’s lawyer, John Carroll, said in a statement that there’s no evidence that Ganek knew about any inside information.
A lawyer for Chiasson said in a memo to Sullivan there’s no evidence backing prosecutors’ claim that Ganek is a co- conspirator.
The case is U.S. v. Newman, 12-00121, U.S. District Court, Southern District of New York (Manhattan).
For more, click here.
Deutsche Bank Whistle-Blowers Claim Crisis Coverup, FT Reports
Three former Deutsche Bank AG (DBK) employees told U.S. regulators that the German lender covered up paper losses during the financial crisis, the Financial Times reported. The company disputed the allegation.
The employees -- a trader and two risk managers -- told the Securities and Exchange Commission that the Frankfurt-based bank inflated the value of credit derivatives to avoid recognizing as much as $12 billion in losses, the newspaper reported, citing people it didn’t identify. The portfolio had a notional value of $130 billion, the FT said.
“The valuations and financial reporting were proper, and a significant portion of these positions were subsequently unwound in an orderly sale,” Renee Calabro, a spokeswoman for Deutsche Bank in New York, said in a statement. She said the bank will continue to cooperate with the SEC’s investigation and that it looked into the matter itself and found the claims to be false.
Matthew Simpson, the trader, settled a whistle-blower lawsuit against the bank last year for $900,000, Reuters reported in June 2011. Eric Ben-Artzi, one of the risk managers, claims he was fired after alerting the SEC to the pricing issue, according to the FT, which didn’t identify the third person.
John Nester, an SEC spokesman, declined to comment.
EU Nations Agree on Draft Market-Abuse Law With Libor Curbs
European Union nations agreed to bolster the bloc’s rules against market abuse, including sanctions for rigging interbank rates such as Libor, in a move that paves the way for a final accord on the legislation.
Nations must now reach a compromise deal on the measures with the European Parliament before the rules can take effect, according to a statement from the EU’s Council of Ministers in Brussels.
Nations also rubber stamped a November deal on tougher regulation of credit rating companies.
In the Courts
Barclays Employees Get More Time on Libor Suit Anonymity Request
Barclays Plc (BARC) staff won more time from a judge to seek anonymity in the U.K.’s first lawsuit related to manipulation of the London interbank offered rate.
Barclays is being sued by affiliates of Guardian Care Homes Ltd. over a loss-making interest rate swap tied to the benchmark, and was ordered to hand over a list of 208 people named in the bank’s disclosure to regulators over Libor-rigging allegations.
Judge Julian Flaux extended the Nov 28. deadline on applications for confidentiality until Dec. 12, following a letter from lawyers at Morrison & Foerster LLP representing some of the workers, according to a Nov. 27 court order made available yesterday.
Kevin Roberts, a lawyer at Morrison & Foerster, didn’t immediately return a phone call seeking comment.
Citigroup Sues Developer Casden Over Corporate Jet Loan
Citigroup Inc. (C) sued Alan Casden, a Beverly Hills, California, real-estate developer, for $43.4 million, claiming his company defaulted on the financing of a Gulfstream 550 corporate jet.
A unit of Casden Co. took out a $37.5 million loan in 2005 to finance the aircraft, engines and related equipment, Citigroup said in a complaint filed yesterday in Manhattan federal court. The loan was later increased to $45.9 million and was guaranteed by Casden personally and by Casden Co., according to the New York-based bank.
Citigroup said it declared the loan in default and demanded full payment in a letter Dec. 3.
The developer’s Casden Properties LLC has built more than $10 billion in residential real-estate projects over 45 years, according to its website.
A phone message seeking comment from Casden Co. on the lawsuit wasn’t immediately returned.
The case is Citicorp USA v. Casden, 12-CV-8820, U.S. District Court, Southern District of New York (Manhattan).
UPS Said to Propose Concessions in 13 Countries to Save TNT Deal
United Parcel Service Inc. (UPS) proposed concessions in 13 of the European Union’s 27 countries as it tries to push through its 5.16 billion-euro ($6.75 billion) bid for TNT Express NV (TNTE), two people familiar with the matter said.
UPS is primarily offering to sell TNT businesses in smaller European markets, said the people, who asked not to be identified because the negotiations are private.
UPS, based in Atlanta, submitted an offer to regulators last week that included the sale of some business units and granting access to its air network. UPS has twice pushed back the target date to complete the biggest acquisition in its 105- year history, which will double its size in Europe, as the merger review continues. European regulators’ official deadline for a ruling is now Feb. 5.
UPS’s rivals and customers are being asked to comment on the company’s proposal and their feedback will be used by the EU to determine whether the offer is sufficient to resolve competition problems. Regulators sent formal objections to UPS in October, saying the acquisition would remove one of its few serious rivals in the European delivery-services market, according to a person familiar with the regulators’ complaint.
“We have carried out a market test of the remedies proposal,” EU Competition Commissioner Joaquin Almunia told reporters in Brussels yesterday. He said he’d come back to the two companies “informing them of some of our concerns given the results.” The market test process hasn’t yet been completed, Almunia’s spokesman Antoine Colombani said in an e-mail.
Peggy Gardner, a spokeswoman for UPS, yesterday declined to give details of any proposals.
Interviews and Speeches
Murky Laws Complicate Insider Cases, Rajaratnam Prosecutor Says
Insider-trading laws are “a little bit murky” and confusing to investment professionals, the lead prosecutor on the Raj Rajaratnam case said during a panel discussion in New York.
“There’s incredible confusion on what is or is not illegal, and it’s a real problem,” Jonathan Streeter, a former Manhattan assistant U.S. attorney now with Dechert LLP, said yesterday at the Bloomberg Hedge Funds Summit. “The law is very complicated and the lines are a little bit murky.”
New York defense lawyers Gerald Shargel and Ira Sorkin joined Streeter on the panel to discuss the government’s insider-trading investigations, which have centered largely on hedge funds since Galleon Group LLC co-founder Rajaratnam was arrested in 2009.
To see the video of the panel, click here.
Comings and Goings
The U.S. Securities and Exchange Commission yesterday announced two departures. Mark Cahn, the agency’s general counsel, and Robert Cook, the director of the SEC’s Division of Trading and Markets, are both leaving the agency.
Cahn, who was a partner at Wilmer Cutler Pickering Hale & Dorr LLP before joining the SEC, will leave by the end of the year and return to the private sector. Cook, who was previously a partner at Cleary Gottlieb Steen & Hamilton LLP will stay through a transitional period, according to the statement from the agency.
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