Bloomberg News

Strauss-Kahn, Spitzer, Bunge, Motorola, BofA in Court News

August 23, 2011

(Updates Duane Reade, adds EMI copyright ruling in Verdicts/Settlements; adds Gunmakers in New Suits.)

Aug. 23 (Bloomberg) -- Prosecutors asked a judge to dismiss all criminal charges against Dominique Strauss-Kahn, the former International Monetary Fund chief accused of sexual assaulting a hotel maid who lied to authorities about some details of her life and the case.

“The nature and number of the complainant’s falsehoods leave us unable to credit her version of events beyond a reasonable doubt whatever the truth may be about the encounter between the complainant and the defendant,” the office of Manhattan District Attorney Cyrus Vance Jr. said in a filing yesterday in Manhattan. “If we do not believe her beyond a reasonable doubt, we cannot ask a jury to do so.”

Strauss-Kahn, 62, was arrested in May after Nafissatou Diallo told police he attacked her when she came to clean his suite at the Sofitel in midtown Manhattan. He pleaded not guilty to the charges. The accuser’s credibility came into question when prosecutors learned that she had lied about events immediately after the alleged attack, among other things.

“We have maintained from the beginning of this case that our client is innocent,” Strauss-Kahn’s lawyers, Bill Taylor and Benjamin Brafman, said in a statement. “There were many reasons to believe that Mr. Strauss-Kahn’s accuser was not credible. Mr. Strauss-Kahn and his family are grateful that the district attorney’s office took our concerns seriously.”

Vance’s office invited Diallo and her lawyers to a meeting yesterday to explain what she could expect at a status hearing scheduled for today before New York State Supreme Court Justice Michael Obus.

“Cyrus Vance has denied the right of a woman to get justice in a rape case,” Diallo’s lawyer Kenneth Thompson said after the meeting. “He has not only turned his back on this innocent victim, but he has also turned his back on the forensic, medical and other physical evidence in this case.”

Diallo’s civil case is still pending against Strauss-Kahn in New York state court in the Bronx. In the suit, which alleges “violent and deplorable acts” occurred in the suite in the Sofitel, Diallo is seeking unspecified monetary damages.

The criminal case is People v. Strauss-Kahn, 11-02526, New York State Supreme Court (New York County); the civil case is Diallo v. Strauss-Kahn, 11-307065, New York State Supreme Court (Bronx County).

New suits

Ex-Marsh & McLennan Executives Sues Spitzer, Slate Magazine

Two former Marsh & McLennan Cos. executives, who had insurance-fraud charges against them dropped, sued ex-New York Attorney General Eliot Spitzer claiming they were defamed in a Slate magazine article.

In the suit, William Gilman claimed Spitzer, in a Slate.com opinion piece written in response to a Wall Street Journal editorial critical of his investigation, indicated that Gilman, who wasn’t named in the article, had committed crimes. Gilman’s suit was filed in federal district court in Manhattan on Aug. 19. Edward McNenney, another former Marsh & McLennan executive, filed suit in New York State Supreme Court on Friday as well.

Gilman worked for Marsh & McLennan from 1976 to 2004, according to his complaint. In 2004 Spitzer announced an investigation into practices at the company, including fees paid by insurers to brokers who place business with them. Gilman was indicted in 2005 on 37 counts. He was convicted of one charge, restraint of trade and competition.

The convictions of Gilman and McNenney were thrown out by the trial judge, James Yates of state Supreme Court, who said newly discovered contradictory evidence “undermines the court’s confidence in the verdict.”

“I haven’t seen the lawsuit and so will not comment on it,” Spitzer said in a telephone interview. “The illegalities rampant at Marsh & McLennan leading to their fine of $850 million and the multiple judicial findings of illegality are clear from the public record.”

The Slate Group LLC was also sued by Gilman and McNenney. E-mails to the magazine’s press office seeking comment didn’t receive a reply.

Gilman is seeking at least $60 million in damages in the federal suit. McNenney seeks $30 million in the state case.

The federal case is Gilman v. Spitzer, 11-c-5843, U.S. District Court, Southern District of New York (Manhattan). The state case is McNenney v. Spitzer, 109628/2011, Supreme Court of the State of New York.

Syngenta Sues Bunge for Refusal to Accept Modified Corn

Syngenta AG, the world’s largest maker of agricultural chemicals, sued a unit of Bunge Ltd. over claims it is illegally refusing to accept corn produced from the company’s bioengineered seeds.

Bunge, which operates a network of grain elevators and receiving stations, posted a notice on its website and at several locations that it is “unable to accept” delivery of corn or soybeans produced by Syngenta’s Agrisure Viptera seeds and another product made by DuPont Co., according to the complaint. Bunge said in the notice that the seed products haven’t received international approval from major export destinations, according to the complaint filed in federal court in Sioux City, Iowa.

The product complies with all U.S. regulatory requirements, Syngenta said yesterday in a statement.

“When a product has been legally approved, growers should be able to use that technology without subsequently being subjected to arbitrary actions,” David Morgan, president of Syngenta Seeds Inc., said yesterday in the statement.

Viptera, which received U.S. regulatory approval last year, is genetically modified to combat damaging insects such as corn earworm and fall armyworm. The technology has been approved for cultivation in Canada, Argentina and Brazil, and for import in Australia, Brazil, Canada, Japan, Mexico, New Zealand, the Philippines, Korea and Taiwan, Syngenta said in its statement. Approval is pending in China and is expected early 2012, the company said.

Bunge spokeswoman Deb Seidel didn’t immediately return a phone call and e-mail seeking comment on the complaint.

The case is Syngenta Seeds Inc. v. Bunge North America Inc., U.S. District Court Northern District of Iowa Western Division (Sioux City).

Gunmakers’ Group Sues to Block U.S. Tracking of Border Purchases

A group representing gun dealers and manufacturers including Smith & Wesson Holding Corp. and Glock GmbH sued to block U.S. rules aimed at curbing illegal weapons-trafficking across the border into Mexico.

The National Shooting Sports Foundation Inc. asked a federal judge in Washington yesterday to block the Bureau of Alcohol, Tobacco, Firearms and Explosives from requiring dealers in Arizona, California, New Mexico and Texas to report when any customer buys two or more semi-automatic rifles in five days.

“A preliminary injunction will curtail an unlawful regulation by ATF that sets a dangerous legal precedent,” Lawrence G. Keane, the general counsel of the foundation, said in a statement. “This is the proverbial ‘slippery slope.’”

The group, based in Newton, Connecticut, said it was seeking an immediate halt to the requirement on behalf of 759 retail gun dealers in the four border states. The group on Aug. 3 asked a federal judge to throw out the new rules, which took effect Aug. 14. The request for an injunction is meant to block those rules from being enforced while the case proceeds.

On July 12, the ATF sent letters to gun sellers in U.S. states along the Mexican border requesting reports on purchases of semi-automatic rifles that are greater than .22 caliber and include a detachable magazine.

The reporting requirement, part of a one-year-pilot program, will affect about 8,500 gun sellers in those states.

The case is The National Shooting Sports Foundation v. Bureau of Alcohol, Tobacco, Firearms and Explosives, 11- cv-01401, U.S. District Court for the District of Columbia (Washington).

Trials/Appeals

Microsoft Says Motorola’s Android Phones Infringe Its Patents

Microsoft Corp., the world’s largest software maker, began arguing its U.S. trade case that Android-based smartphones made by Motorola Mobility Holdings Inc. use technology derived from Microsoft inventions.

In a trial that began yesterday before the International Trade Commission in Washington, Microsoft accused Motorola Mobility of infringing seven of its patents and requested a halt to imports of certain Motorola phones. The ITC has the power to stop imports of products that violate U.S. patent rights.

The case is the first smartphone dispute to be heard by the agency since Google Inc. said Aug. 15 it would buy Motorola Mobility for $12.5 billion to obtain patents that could be used as a bulwark against a surge of lawsuits targeting handsets and tablet computers that use Google’s Android operating system.

“We have a responsibility to our employees, customers, partners and shareholders to safeguard our intellectual property,” David Howard, Microsoft’s corporate vice president and deputy general counsel for litigation, said in an e-mail. “Motorola is infringing our patents and we are confident that the ITC will rule in our favor.”

Motorola Mobility is “vigorously defending” itself “against Microsoft’s patent attack business strategy,” Jennifer Erickson, a Motorola Mobility spokeswoman, said in an e-mail. “We have also brought legal actions of our own in the U.S. and in Europe to address Microsoft’s large scale of infringement of Motorola Mobility’s patents.”

Microsoft’s claim against Libertyville, Illinois-based Motorola Mobility is one of more than a dozen smartphone cases before the ITC, as companies seek to use patents to gain a bigger share of a market projected by researcher IHS Inc. to reach $206.6 billion this year. Redmond, Washington-based Microsoft makes its own mobile operating system, Windows Phone 7, which competes with Android and Apple Inc.’s iPhone.

Testimony in yesterday’s Motorola Mobility trial focused on details about functions that Microsoft calls “essential to the smartphone user experience,” including ways to synchronize e- mail, calendars and contacts; schedule meetings; and notify applications of changes in signal strength and battery power.

The ITC case is In the Matter of Certain Mobile Devices, Associated Software and Components Thereof, 337-744, U.S. International Trade Commission (Washington).

For the latest trial and appeals news, click here.

Verdicts/Settlements

Bank of America Unit Pays $5 Million in San Francisco Accord

Bank of America Corp.’s credit card unit agreed to pay $5 million and suspend arbitrations of consumer debt collections in California for two years to settle San Francisco’s lawsuit over its collection practices.

The agreement, filed yesterday in state court in San Francisco, resolved a 2008 lawsuit alleging that Bank of America’s FIA Card Services unit used an arbitration service that was biased in favor of the bank and against consumers. The National Arbitration Forum Inc., based in Minneapolis, employed unfair business practices while administering arbitrations for consumer who owed credit-card debt to the unit, according to the lawsuit.

FIA agreed not to use the mediation service in arbitrations for five years or enforce unconfirmed arbitration awards obtained through the company, said San Francisco City Attorney Dennis Herrera in an e-mailed statement. FIA is prohibited from barring consumers from suing the company as a group, according to the statement.

“Both sides agreed to the settlement to avoid the costs and uncertainty of further legal action,” Shirley Norton, a Bank of America spokeswoman, said in an e-mail.

Bank of America denies any wrongdoing, Norton said. The Charlotte, North Carolina-based company discontinued mandatory arbitration for consumer credit card disputes in August 2009 and hasn’t used National Arbitration Forum since then, she said.

The bank, the largest U.S. lender, also eliminated mandatory arbitration and requirements barring group lawsuits from consumer and small business credit card agreements, Norton said.

Mark Fellows, a spokesman for National Arbitration Forum, didn’t immediately return a voice-mail message seeking comment.

The case is People of State of California v. National Arbitration Forum, 473569, California Superior Court, County of San Francisco.

3M Agrees to Pay $3 Million to Settle Age Discrimination Suit

3M Co., the maker of Post-It notes and Scotch tape, will pay $3 million to former employees, ending a federal age- discrimination lawsuit, the U.S. Equal Employment Opportunity Commission said.

The EEOC charged that 3M unlawfully dismissed hundreds of employees over age 45 in a series of job cuts from July 2003 through the end of 2006, according to an agency statement yesterday. 3M shed many “highly paid older employees, among others, apparently to save money,” according to the statement.

Pending a judge’s approval, 3M will pay about 290 former employees as part of the settlement, which also requires the company to announce openings for positions that it hadn’t advertised previously.

3M, based in St. Paul, Minnesota, is among the 30 companies in the benchmark Dow Jones Industrial Average stock index. Donna Runyon, a spokeswoman for the company said the settlement is a “compromise and allows the company to avoid ongoing investments in time and legal fees. It is not an admission of any liability.”

Runyon added that there was a separate lawsuit involving employees in Minnesota that was settled earlier in the year and is awaiting court approval.

Ex-Duane Reade Chief Cuti Gets Three-Year Prison Sentence

Former Duane Reade Inc. Chief Executive Officer Anthony Cuti was sentenced to three years in prison for falsely inflating income and misleading investors.

Cuti, 65, of Saddle River, New Jersey, was convicted in June 2010 of conspiracy and securities fraud after a federal jury trial in U.S. District Court in Manhattan. U.S. District Judge Deborah Batts also yesterday ordered Cuti to pay a $5 million fine.

Cuti was “a gifted, arrogant, driven, entitled individual,” Batts said, adding that he had “bullied people into committing fraudulent acts to make the company look better than it actually was” to increase his executive compensation.

Batts said Cuti was also guilty of “the height of hubris” for re-writing his employee compensation plan.

Cuti didn’t admit any wrongdoing when he spoke in court before the sentence was imposed. “I’ve always led my life with integrity,” Cuti said as his wife, adult daughter and brother sat in the courtroom. “The conviction is so at odds with what I’ve tried to be,” he also said.

Cuti’s lawyer, Reid Weingarten, yesterday asked Batts to impose no jail time and allow his client to remain free to perform public service.

“He was not a guy motivated by greed and driven to line his pockets,” said Weingarten. Investors weren’t harmed, he argued, and said they had profited from Cuti’s transformation of Duane Reade from “a sleepy nearly bankrupt drug store on a Manhattan street corner to being a force to be reckoned with.”

Former Duane Reade Chief Financial Officer William Tennant, who was tried with Cuti and convicted of one count of securities fraud, is scheduled to be sentenced Aug. 29. The U.S. said both men engaged in a scheme to falsely increase revenue and lower expenses from 2000 to 2005.

Batts yesterday directed Cuti to surrender to U.S. Bureau of Prisons officials on Jan. 31.

The case is U.S. v. Cuti, 08-cr-00972, U.S. District Court, Southern District of New York (Manhattan).

EMI Wins Partial Victory in Copyright Suit Against MP3tunes

EMI Group Ltd. won a partial victory in a copyright lawsuit against the online music storage site MP3tunes LLC.

U.S. District Judge William Pauley in Manhattan ruled yesterday that MP3tunes contributed to infringement when it failed to remove unauthorized songs from its website after being informed about them.

“Users of MP3tunes unlawfully copied songs from unauthorized third-party websites,” Pauley wrote in his order. Pauley also ruled that Michael Robertson, MP3tunes’s founder and chief executive officer, was liable for direct infringement for personally transferring songs digitally from websites that weren’t authorized to provide them.

EMI and other music companies have taken websites to court in attempts to reduce losses caused by people sharing songs online without paying for them. In May, the music industry reached a $105 million settlement with Lime Wire LLC for copyright infringement, while the case was on trial in federal court in New York.

Pauley, agreeing with MP3tunes that the safe harbor provision of the Digital Millennium Copyright Act protected it, ruled against EMI on some claims. The safe harbor protection doesn’t apply to instances in which MP3tunes users got songs from unauthorized sites and stored them on the San Diego-based company’s website, the judge said.

The judge also rejected EMI’s request for a ruling that MP3tunes employees were liable for infringement by downloading 171 songs.

“The court’s decision confirms that businesses cannot simply pay lip service to the law while undermining the rights of the musicians, artists and writers that create popular music,” Dylan Jones, a spokesman for London-based EMI, said in an e-mail. “The decision also proves that company executives that personally contribute to and commit copyright infringement will be held accountable for their actions.”

Jones said the company is evaluating its options for seeking review of the decision that that MP3tunes was protected by the so-called safe harbor defense.

Robertson didn’t have an immediate comment on the ruling.

EMI is owned by New York-based Citigroup Inc., which is trying to sell it.

The case is Capitol Records v. MP3tunes LLC, 07-09931, U.S. District Court, Southern District of New York (Manhattan).

For the latest verdict and settlement news, click here.

--With assistance from Chris Dolmetsch, David McLaughlin, Don Jeffrey and Patricia Hurtado in New York; Karen Gullo in San Francisco; Susan Decker, Mark Drajem and Holly Rosenkrantz in Washington; and Sophia Pearson in Wilmington, Delaware. Editors: Mary Romano, Glenn Holdcraft.

To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net.

To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net.


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