Bloomberg News

Banks, AT&T, BP-Halliburton, DuPont, Clemens in Court News

September 06, 2011

(Updates Clemens, adds Allen Stanford ruling in Lawsuits.)

Sept. 6 (Bloomberg) -- The Federal Housing Finance Agency has sued Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Barclays Plc over residential mortgage-backed securities.

In lawsuits filed Sept. 2 in Manhattan federal court, the agency, representing Fannie Mae and Freddie Mac, also named as defendants Nomura Holdings Ltd., HSBC Holdings Plc and Credit Suisse Group AG.

The FHFA has been demanding refunds from banks for loans sold to Fannie Mae and Freddie Mac that were based on false or missing information about borrowers and properties. The two government-backed mortgage finance firms had to be rescued by taxpayers as defaults on home loans soared toward record levels.

The agency said in its filings on Sept. 2 that Fannie Mae and Freddie Mac bought $6 billion in securities from Bank of America; $24.8 billion from Merrill, which Bank of America bought, and $3.5 billion from Citigroup.

The FHFA sued UBS AG, Switzerland’s biggest bank, in July over $4.5 billion in residential mortgage-backed securities sold to Fannie Mae and Freddie Mac, claiming they misstated the risks of the investments. The suit seeks unspecified damages.

Fannie Mae and Freddie Mac have operated under U.S. conservatorship since 2008, when they were seized amid subprime mortgage losses that pushed them toward insolvency.

Danielle Romero-Apsilos, a spokeswoman for New York-based Citigroup, declined to comment on the lawsuit as did Kerrie Cohen, a spokeswoman for Barclays, and Kristin Lemkau, a spokeswoman for JPMorgan.

For more, click here.

Lawsuits/Pretrial

Clemens Will Be Retried on Perjury Charges, U.S. Judge Rules

Former Major League Baseball pitcher Roger Clemens will face another trial on charges that he lied to Congress about using steroids and performance-enhancing drugs, a federal judge in Washington said.

In his ruling from the bench on Sept. 2, U.S. District Judge Reggie Walton said Clemens can be tried again because he couldn’t determine, based on the record, that prosecutors intentionally caused a mistrial in July by showing jurors barred evidence. The government was two days into presenting its case at the time. Walton, ruling from the bench, set jury selection for April 17.

Clemens’ lawyer, Rusty Hardin, said they would decide within days whether to seek an immediate appeal of Walton’s ruling.

For more, click here.

AT&T May Have Misread The U.S. Justice Department’s Signals

On the morning of Aug. 31, AT&T Inc. Chief Executive Officer Randall Stephenson said in a television interview that he expected his company’s bid for T-Mobile USA to get government approval by the first quarter of 2012.

An hour later, his lawyers received a call from the U.S. Justice Department; the lawyers learned that the government was suing to block the $39 billion transaction, a person familiar with the matter said. The suit halted the biggest deal of the year.

The sudden turnaround occurred because the Justice Department came to a meeting on Aug. 30 looking for AT&T to describe how it would eliminate perceived anticompetitive defects in the proposed merger. That didn’t happen, said another person involved in the meeting; AT&T was under the impression that it would have more time to present ideas that would assuage the government’s reservations about the deal, another person involved in the discussions said.

The Justice Department concluded the companies on the other side of the table weren’t responding to concerns that the deal would hurt competition and raise consumer prices in the wireless phone market, a person familiar with the decision said.

Skepticism in the antitrust division had been building for weeks as a technical review of national and local markets showed the merger to be highly anticompetitive, said the person, who asked not to be identified, as did all others quoted anonymously, because the talks were confidential.

Jessica Smith, a Justice Department spokeswoman, declined to comment on the details of the meeting or the decision as did Brad Burns, an AT&T spokesman in Dallas and T-Mobile spokeswoman Anna Friedges.

The case is U.S. v. AT&T Inc., 11-01560, U.S. District Court, District of Columbia (Washington).

For more, click here.

Foreign Funds, Banks Claim Picard Cannot Use U.S. Law Abroad

Foreign companies sued for billions of dollars by the liquidator of Bernard L. Madoff’s firm are asking judges to dismiss the cases, saying trustee Irving H. Picard is breaking U.S. law in trying to apply it abroad.

Tensyr Ltd., a Channel Islands company that invested $450 million in a so-called feeder fund to the confidence man, said in a filing Sept. 1 in U.S. Bankruptcy Court in New York that Picard ignored a ruling by the U.S. Supreme Court when he demanded return of $30 million redeemed from the feeder, Fairfield Sentry Ltd.

Italy’s UniCredit SpA asked the New York court to dismiss a racketeering suit seeking $59 billion from it and defendants including Bank Medici AG founder Sonja Kohn.

“The trustee’s extreme positions are irreconcilable with recent decisions of the United States Supreme Court,” Tensyr said. “The Supreme Court recently overruled prior case law and held that United States statutes do not apply extraterritorially.”

The tack taken by Picard’s foreign targets is another challenge to the trustee, who is fighting a July ruling by U.S. District Judge Jed Rakoff in Manhattan that tossed out almost $9 billion of the trustee’s common law claims against HSBC Holdings Plc and feeder funds.

Rakoff said Picard can’t sue parties that allegedly had a duty to detect Madoff’s fraud.

Amanda Remus, a Picard spokeswoman, didn’t immediately respond to an e-mail seeking comment.

The Tensyr case is Picard v. Natixis, 10-05353, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

For more, click here.

Madoff Trustee Defends $19 Billion Suit Against JPMorgan

Separately, Picard defended a $19 billion lawsuit against JPMorgan Chase & Co., saying he was empowered by law to sue the bank on behalf of innocent creditors of the Ponzi scheme operator.

The second-biggest U.S. bank asked a judge last month to dismiss trustee Irving Picard’s suit, citing U.S. District Judge Jed Rakoff’s July ruling that he can’t sue on behalf of Madoff customers using common-law claims against parties who failed to detect the fraud. Picard, who appealed the ruling, said bankruptcy law gives him the powers necessary to bring his suit.

“The bankruptcy code allows the trustee to stand in the shoes of a judgment creditor and assert common-law claims against JPMC,” he said in a court filing Sept. 1. JPMorgan, as Madoff’s primary banker, was central to the fraud and “complicit” in it, he said.

Picard, in his fight with Rakoff and JPMorgan, is defending his right to demand most of the $100 billion he is seeking from banks and Madoff investors. Rakoff tossed almost $9 billion in damages Picard sought from HSBC Holdings Plc and feeder funds, leaving $2 billion in bankruptcy claims. If forced to give up common-law claims against JPMorgan, Picard would lose his right to seek $19 billion and be left to pursue $1 billion in bankruptcy and other claims.

JPMorgan, which accuses the trustee of mounting a “back door” class-action suit on behalf of Madoff clients, said last month that Picard’s suit never shows how JPMorgan was complicit in Madoff’s crimes.

“The trustee never alleges facts showing that anyone at JPMorgan had actual knowledge of Madoff’s crimes,” it said, asking Judge Colleen McMahon, who is handling the case, to toss it out.

The case is Picard v. JPMorgan Chase & Co., 1:11-cv-00913, U.S. District Court, Southern District of New York (Manhattan).

Allen Stanford to Get Financial Records for Ponzi Defense

Indicted financier R. Allen Stanford will get copies of his seized personal and corporate tax returns and financial records to defend himself against criminal charges he swindled investors of $7 billion, a judge ruled.

U.S. District Judge David Hittner in Houston on Sept. 2 denied Stanford’s additional request for copies of analytical reports the accounting firm Ernst & Young prepared for Ralph Janvey, the financier’s court-appointed receiver.

Kevin Sadler, Janvey’s lawyer, argued that Stanford was entitled only to his basic tax and accounting records, not the receiver’s analyses.

The government claims Stanford defrauded investors by deceiving them about the liquidity and oversight of more than $7 billion in certificates of deposit issued by his Antigua-based Stanford International Bank Ltd. Stanford denies all wrongdoing.

The criminal case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09-cv-298, U.S. District Court, Northern District of Texas (Dallas).

For the latest lawsuits news, click here.

New Suits

DuPont Sues Heraeus Over Patent for Solar-Cell Technology

DuPont Co., the largest U.S. chemical company by market value, sued Germany’s Heraeus Holding GmbH, alleging infringement of a U.S. patent for material used in building solar cells.

Heraeus, of Hanau, Germany, owes DuPont damages for using the technology, which includes a conductive paste of silver, glass and resin, lawyers said in a complaint filed in federal court in Wilmington, Delaware, Sept. 2.

The infringement “will continue to cause DuPont irreparable injury and damage” unless stopped by the court, according to court papers. The Wilmington-based company also seeks a jury trial.

“DuPont invests significant resources and millions of dollars in research,” said David B. Miller, president of DuPont Electronics & Communications, in a statement. “We will continue to take appropriate actions to protect our patent estate.”

“We do not have any information on this case at the moment. No lawsuit has been officially served,” Martina Rauch, a Heraeus spokeswoman, said in an e-mailed statement.

The case is DuPont v. Heraeus Holding, 11CV773, U.S. District Court, District of Delaware (Wilmington).

To see the patent, click: 7,767,254.

BP Concealed Information Before Blowout, Halliburton Claims

BP Plc gave inaccurate information about the location of hydrocarbon zones, a risk factor, in the Macondo oil well to avoid stalling the project before the well blew out in April 2010, Halliburton Co. said in a lawsuit.

Halliburton Energy Services Inc., the unit that provided cementing services for the well, sued BP in state court in Houston Sept. 1, alleging slander and business disparagement. A BP report on the incident in the Gulf of Mexico called the cementing job “a root cause of the blowout,” Halliburton said in its complaint.

The report “intentionally and deliberately omits the critical fact that BP knew or should have known about an additional hydrocarbon zone in the well that BP failed to disclose” before Halliburton designed the cement program for the well, according to the complaint. Halliburton said it wouldn’t have pumped cement had it known of the zone.

BP, in a statement on Sept. 2, said, “This lawsuit is the latest attempt by Halliburton to divert attention from its role in the Deepwater Horizon incident and its failure to meet its responsibilities, and to deflect all blame to BP.”

The Houston case is Halliburton Energy Services Inc. v. BP Exploration & Production Inc., 2011-525809, District Court, Harris County, Texas. The federal case is In Re Oil Spill by the Oil Rig Deepwater Horizon in the Gulf of Mexico on April 20, 2010, MDL-2179, U.S. District Court, Eastern District of Louisiana (New Orleans).

For more, click here.

Court Filings

Schwab Suit Over Libor Rates Most Popular Docket on Bloomberg

Charles Schwab Corp.’s lawsuit accusing Bank of America Corp., Citigroup Inc. and other banks of manipulating the London interbank offered rate, or Libor was the most-read litigation docket on the Bloomberg Law system last week.

Schwab, the largest independent brokerage by client assets, claims that the banks, starting in 2007, conspired to depress Libor rates by understating their borrowing costs. The lawsuit was filed Aug. 23 in federal court in San Francisco, where Schwab is based.

The banks “reaped hundreds of millions, if not billions, of dollars in ill-gotten gains,” Schwab wrote.

“We believe the suit is without merit,” Danielle Romero- Apsilos, a spokeswoman for New York-based Citigroup, said in an e-mail.

Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, declined to comment.

The case is Schwab Money Market Fund v. Bank of America Corp., 11-cv-4186, U.S. District Court, Northern District of California (San Francisco).

--With assistance from Dawn Kopecki, Laura Marcine, Linda Sandler, Bob Van Voris and Thom Weidlich in New York; Margaret Cronin Fisk in Southfield, Michigan; Phil Milford in Wilmington, Delaware; Sara Forden, Jeff Bliss and Tom Schoenberg in Washington; and Laurel Brubaker Calkins in Houston. Editors: Fred Strasser, 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 story: Michael Hytha at mhytha@bloomberg.net.


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