Bloomberg News

AT&T, JPMorgan, Madoff, Goldman, Lehman in Court News

October 25, 2011

(Updates with AT&T, Allstate, Amgen, JPMorgan and Strauss- Kahn in Lawsuits and Goldman in New Suits.)

Oct. 25 (Bloomberg) -- Sprint Nextel Corp. and the U.S. Justice Department lost their bid to share confidential documents as they seek to stop a proposed $39 billion purchase of T-Mobile USA Inc by AT&T Inc.

U.S. District Judge Ellen Segal Huvelle ruled yesterday that the government can’t give Sprint open access to data it collected from AT&T in its probe of the T-Mobile deal. Huvelle will let the department, which said Sprint’s knowledge of the wireless market could help its lawsuit, ask court permission to share material with Sprint on a case-by-case basis.

“I don’t see it as efficient or fair,” Huvelle said at the end of a two-hour hearing in Washington. “If the Justice Department has need for specific documents, that can be arranged.”

Huvelle didn’t rule on AT&T’s request to throw out lawsuits brought by Sprint and Cellular South Inc. to block the T-Mobile deal, saying she would take it “under advisement.” She set another hearing in the government’s case for Nov. 30.

John Taylor, a spokesman for Sprint, told reporters after the hearing that the proceeding was a discussion of “narrow, procedural matters that was not a reflection of the merits of the government’s case against AT&T.”

Michael Balmoris, a spokesman for AT&T, declined to comment.

The government’s case is U.S. v. AT&T Inc., 11-01560; Sprint’s case is Sprint Nextel Corp. v. AT&T Inc., 11-01600; and Cellular South’s case is Cellular South Inc. v. AT&T Inc., 11-01690, U.S. District Court, District of Columbia (Washington).

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Allstate Can’t Pursue Federal Claims Against Countrywide

Allstate Corp. can’t pursue federal securities law claims against Countrywide Financial Corp, the home lender acquired by Bank of America Corp., over $700 million in downgraded residential mortgage-backed securities

U.S. District Judge Mariana Pfaelzer in Los Angeles said the federal claims were barred because Allstate’s investments weren’t among the Countrywide securities that were bought by the plaintiffs who brought the first lawsuits over the downgraded bonds in 2007 and 2008. Only federal claims over securities bought by the earlier plaintiffs fell within the statute of repose, she said.

The judge said in her Oct. 21 decision that Allstate can pursue state-law claims that Countrywide committed fraud by not telling investors that mortgages packaged in the securities allegedly didn’t meet the home lender’s underwriting standards. Pfaelzer let Allstate restate additional state-law claims she said hadn’t been adequately argued.

“Allstate is pleased the court recognized Allstate’s allegations of fraud with respect to hundreds of millions of dollars of RMBS purchases and rejected defendants’ motions to dismiss our fraud claims,” Maryellen Thielen, a spokeswoman for Northbrook, Illinois-based Allstate, said in an e-mailed statement.

Allstate will consider all options regarding the dismissed claims, including amending the complaint and appealing the decision, Thielen said.

Shirley Norton, a spokeswoman for Charlotte, North Carolina-based Bank of America, said the bank had no comment.

Pfaelzer also granted Bank of America’s request to be dismissed from the lawsuit. In April, the judge granted the same request in another case in which Allstate was initially a plaintiff, dismissing so-called successor liability claims against Bank of America by Countrywide mortgage-backed securities investors.

Countrywide, based in Calabasas, California, was once the biggest U.S. residential lender, originating or purchasing about $1.4 trillion in mortgages from 2005 to 2007. The bulk of them were sold to investors as mortgage-backed securities. Bank of America acquired Countrywide in 2008.

The case is Allstate v. Countrywide, 11-5236, U.S. District Court, Central District of California (Los Angeles).

Amgen Set Aside $780 Million to Resolve Kickback Allegations

Amgen Inc. said it set aside $780 million to resolve civil and criminal investigations into whether the world’s largest biotechnology company engaged in improper sales of drugs, including its Aranesp anemia medicine.

Amgen said in a release yesterday it took a $780 million charge to cover the costs of settling federal and state probes of its sales and marketing practices. Amgen said it expects the accord to resolve 10 whistle-blower lawsuits, including one claiming fraudulent overbilling tied to Aranesp sales.

“The proposed settlement remains subject to continuing discussions regarding the components of the agreement,” officials of Thousand Oaks, California-based Amgen said in the release.

Amgen officials said in a February regulatory filing that federal prosecutors and state attorneys general had subpoenaed marketing documents for a variety of drugs, including Aranesp. The company has been sued by at least 15 states alleging that it encouraged providers to overbill third-party payers such as Medicaid for Aranesp prescriptions and provided sham consulting agreements.

Christine Regan, an Amgen spokeswoman, declined to comment in a telephone interview on the monies set aside for the settlement beyond what was in the company’s third-quarter earnings release.

Robert Nardoza, a spokesman for U.S. Attorney Loretta Lynch in Brooklyn, declined to comment yesterday on Amgen’s announcement. Emily Langlie, spokeswoman for U.S. Attorney Jenny A. Durkan in Seattle, also declined to comment.

Aranesp, once Amgen’s best-selling product, lost sales after 2006 when high doses of the drug were linked to increased rates of heart attack and death in kidney patients. Aranesp sales fell 40 percent to $2.49 billion last year from $4.12 billion in 2006. Sales will decline to $2.23 billion 2012, the average estimate of nine analysts surveyed by Bloomberg.

Federal and state investigators are probing allegations by former Amgen employees that the company illegally marketed drugs such as Aranesp, in an effort to win market share from rival Johnson & Johnson’s Procrit anemia medication, according to court filings.

The Westmoreland case is U.S. v. Amgen Inc. Civil Action, 06-10972-WGY, U.S. District Court, District of Massachusetts (Boston).

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JPMorgan Seeks to Seal Data in $6 Billion Fight With Lehman

JPMorgan Chase & Co., fighting Lehman Brothers Holdings Inc. over $6 billion in claims it filed against the defunct firm, asked a judge to allow continued sealing of some information in court papers, saying secrecy was needed to protect entities from harm.

JPMorgan’s claims against Lehman and its brokerage are “significantly overstated,” Lehman said in August. The bank, a go-between for the brokerage’s repurchase agreements with short- term investors after the parent’s Sept. 15, 2008, bankruptcy, failed to sell collateral securing the loans in a “commercially reasonable manner,” it alleged in a filing where passages were blacked out.

Lehman asked the judge to hold a hearing on the issue and then cut the claims as he considered appropriate.

JPMorgan later agreed to let Lehman publish a mostly uncensored version of its objection to the claims, the New York- based bank said in a filing yesterday. The information that is still blacked out includes names and account numbers of JPMorgan’s trading partners, phone numbers and certain e-mail addresses, it said.

“The bankruptcy code provides courts with the power to issue orders that will protect entitles from potential harm that may result from the disclosure of certain confidential information,” it said in the filing in U.S. Bankruptcy Court in Manhattan.

In the partially uncensored objection to JPMorgan’s claim, Lehman gave details about the sale of collateral. On the morning the Lehman brokerage went into liquidation, JPMorgan started to sell the securities, calling the plan “Project Tassimo,” after a coffee maker owned by a bank employee involved in the transactions, it said.

The sale was handled “without any limits or safeguards ensuring a fair price,” Lehman alleged.

Joseph Evangelisti, a spokesman for the largest U.S. bank, declined to comment on the allegations. Kimberly Macleod, a Lehman spokeswoman, declined to comment.

Separately, JPMorgan is contesting an $8.6 billion lawsuit by Lehman, saying it was protected by so-called safe harbor law when it took collateral from the defunct firm in 2008. Congress created the law to protect banks lending to faltering companies, JPMorgan has said.

The main case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).The lawsuit is Lehman Brothers Holdings Inc. v. JPMorgan Chase Bank NA, 10-03266, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Judge Shouldn’t Aid Madoff Trustee Appeal, Mets Owners Say

U.S. District Judge Jed Rakoff shouldn’t enable the liquidator of Bernard Madoff’s firm to appeal a ruling that cut a $1 billion case against the New York Mets owners by two- thirds, the team owners said.

Trustee Irving Picard assailed Rakoff’s ruling earlier this month, saying it “arbitrarily” allowed Fred Wilpon and Saul Katz to keep fictitious profits from the Ponzi scheme. Picard asked the judge to make a final ruling so he could appeal, or to allow an appeal before trial. The Major League Baseball team’s owners urged Rakoff to reject the request in a court filing.

“There is no hardship or injustice that would result from waiting another six months to raise any and all appealable issues at one time,” Wilpon and Katz said in the Oct. 21 filing in U.S. District Court in Manhattan.

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

Rakoff last month set a March 19 trial date for Picard’s remaining case against the Mets owners after dismissing nine of 11 counts. He said Picard could try to take back two years of money withdrawn from the Ponzi scheme, or about $386 million.

Withdrawals that exceeded principal could be recouped if the trustee showed the team owners didn’t give “value” back, while for other transfers he would have to prove that the investors were “willfully blind” to the Ponzi scheme, Karen Wagner, a lawyer for the Mets owners, said in the filing.

Rakoff’s decision limiting Picard to two years of withdrawals may cost the trustee about $2.7 billion on all of his clawback suits, Picard has said. Another $3.5 billion of so- called preference payments is “in question” because of another aspect of Rakoff’s ruling, he has said.

Separately, Picard is fighting with Wilpon and Katz over whether he has a right to a jury trial. They say bankruptcy claims don’t carry a right to a jury trial.

The case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan).

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MBIA Insurance, Third Avenue Trust Discontinue New York Suit

MBIA Inc. and Third Avenue Trust ended a 2009 lawsuit with each agreeing to pay their own costs and attorney fees.

Third Avenue, based in New York, sued Armonk, New York- based MBIA in December 2009 in New York state Supreme Court over $400 million in notes.

MBIA “represented to Third Avenue and other potential investors that it intended to use the funds raised to pursue the primary business of the company, insuring public finance bonds,” Third Avenue said in court papers.

Subsequently, the MBIA finance credit portfolio went “from bad, to worse than bad,” and the bond value fell 36 percent, according to the complaint, which sought unspecified damages and fees. It was dropped by agreement of both parties Oct. 20, according to a New York State Supreme Court document. The document didn’t specify a reason for ending the suit.

Scott Edelman, an attorney for Third Avenue, didn’t return an e-mailed message seeking comment on the agreement. Kevin Brown, an MBIA spokesman, declined to comment.

The case is Third Avenue Trust v. MBIA Inc., 650756/2009, New York state Supreme Court (New York County).

Washington Mutual Investors Win Class-Action Status for Suit

Three investors in Washington Mutual Bank mortgage bonds can represent all of the bonds’ buyers in a lawsuit over their losses, a judge ruled.

U.S. District Judge Marsha J. Pechman in Seattle granted class certification to part of a lawsuit filed by the Boilermakers National Annuity Trust, the Policemen’s Annuity and Benefit Fund of Chicago and Doral Bank Puerto Rico. The investors claim they were misled into buying mortgage-backed securities from units of Washington Mutual Bank.

Pechman limited the class-action status to securities the investors actually purchased. That means they will only represent themselves and other investors who bought 13 of 123 tranches of mortgage-based securities.

“While we are disappointed that the court did not uphold our standing to represent those who filed similar claims against WaMu, this is very good news for investors in the class,” Steven Toll, a lawyer for the investors, said yesterday in a statement. Toll’s law firm, Cohen Milstein Sellers & Toll PLLC of Washington, was appointed lead counsel.

The securities lawsuit is one of several filed in federal court in Seattle against affiliates, employees and business partners of Washington Mutual Bank.

The bank’s holding company, Washington Mutual Inc., filed for bankruptcy on Sept. 26, 2008, the day after the banking unit was taken over by regulators and sold to JPMorgan Chase & Co. for $1.9 billion. Washington Mutual Bank had more than 2,200 branches and $188 billion in deposits.

The investors bought bonds that were part of $47.3 billion in investment-grade securities backed by 75,608 mortgages, many of which were subprime adjustable-rate loans, according to court documents filed last year.

The price of the bonds “collapsed in value relatively soon after issuance,” according to court papers.

The case is Boilermakers National Annuity Trust Fund v. Washington Mutual Asset Acceptance Corp., 09-37, U.S. District Court, District of Washington (Seattle).

Strauss-Kahn Isn’t Entitled to Diplomatic Immunity, Maid Says

Former International Monetary Fund chief Dominique Strauss- Kahn isn’t entitled to diplomatic immunity from civil claims that he sexually assaulted a Manhattan hotel maid, the woman’s lawyers said.

Strauss-Kahn’s motion to dismiss the case based on immunity is a “transparent attempt to delay these proceedings and should be denied in its entirety as utterly meritless and frivolous,” the woman, Nafissatou Diallo, said in a document provided by one of Diallo’s attorneys, Kenneth Thompson. The papers were sent to Strauss-Kahn’s lawyers yesterday and will be filed with New York state Supreme Court in the Bronx on Nov. 9, Thompson said.

Strauss-Kahn’s argument that he is entitled to diplomatic immunity is based on the Convention on the Privileges and Immunities of the Specialized Agencies, a 1947 treaty that the U.S. isn’t party to, Diallo’s lawyers said in the documents.

When New York prosecutors accused Strauss-Kahn in a criminal case of trying to rape Diallo, neither Strauss-Kahn nor the IMF claimed immunity, “because he knew he had no entitlement to such immunity,” Diallo’s attorneys said in the documents. The criminal charges were later dropped for other reasons.

“Realizing that the laws of the United States flatly reject any theory of diplomatic immunity that would absolve defendant DSK from liability for sexually assaulting Ms. Diallo, defendant relies on a conflicting treaty to which the United States is not even a party, and which only arguably provides greater immunity than that provided under the laws of the United States,” Diallo’s lawyers said.

Strauss-Kahn was pulled off an Air France flight at John F. Kennedy International Airport on May 14, arrested and charged with trying to rape Diallo, a housekeeper at the Sofitel in midtown Manhattan. He resigned as head of the IMF four days later to fight the charges.

Diallo, 33, sued Strauss-Kahn on Aug. 8, seeking unspecified damages for what her lawyer called “violent and deplorable acts.” Attorneys for Strauss-Kahn on Sept. 27 asked New York State Supreme Judge Douglas McKeon to dismiss the lawsuit, saying that Strauss-Kahn, as managing director of the IMF, was subject to diplomatic immunity at the time of his arrest.

New York State Supreme Court Judge Michael Obus on Aug. 23 granted Manhattan District Attorney Cyrus Vance Jr.’s request to dismiss the criminal charges against Strauss-Kahn. Vance’s office had concluded that Diallo had lied about events surrounding the alleged attack.

William Taylor III, an attorney representing Strauss-Kahn, didn’t respond to a telephone message left at his office in Washington seeking comment on Diallo’s response papers.

The case is Diallo v. Strauss-Kahn, 11-307065, New York state Supreme Court (Bronx County).

For the latest lawsuits news, click here.

Trials

F-1 Bribe Trial May Shed Light on Ecclestone’s CVC Deal Role

The trial of a former Bayerische Landesbank manager over what prosecutors say were $44 million in bribes to facilitate the sale of the bank’s stake in Formula One racing may shed light on business practices at the world’s most-watched racing series.

Gerhard Gribkowsky, 53, was charged in July with accepting bribes, breach of trust and tax evasion. Prosecutors claim he received the bribes as part of the 2005 sale of BayernLB’s 47 percent stake in Formula One to CVC Capital Partners Ltd.

The trial began yesterday in Munich and is scheduled to feature testimony from Formula One Chief Executive Officer Bernie Ecclestone, who is also being investigated, and CVC managing partner Donald Mackenzie.

BayernLB acquired the Formula One stake after the 2002 bankruptcy of Leo Kirch’s media group. Gribkowsky, BayernLB’s chief risk officer at the time, clashed with the Formula One chief and sued him in a London court over corporate-governance rules Ecclestone changed to limit the lender’s influence.

Ecclestone wanted to push BayernLB out and saw a chance when CVC showed interest, prosecutors said in the indictment. Gribkowsky demanded $50 million from Ecclestone as a reward for consenting to the deal and threatened to disclose possible tax violations by a trust run by Ecclestone’s wife at the time, prosecutors said.

Both men agreed on a plan that funneled $44 million to Gribkowsky through sham contracts and off-shore companies, according to prosecutors. Gribkowsky then single-handedly negotiated the purchase without seeking other bids, prosecutors said. BayernLB’s share was sold for 840 million euros ($1.16 billion).

Prosecutors conducted the probe “one-sidedly” and “tendentiously,” Gribkowsky’s lawyer, Rainer Bruessow, said in a statement to the court on the charges, because they were fixed on finding an explanation for the payments that would make them look criminal.

The investigators didn’t look at exculpatory evidence and didn’t question important witnesses, including former Formula One president Max Mosley and Flavio Briatore, the former manager of Benetton’s and Renault’s racing teams. The men would have testified that huge payments were the norm in the Formula One world, Bruessow said.

“There was a witch hunt waged against my client in part of the media right from the start of the probe,” Bruessow said. That was supported “by the indictment being leaked to the press very early in the case.” Gribkowsky declined to comment directly on the charges when asked by the court yesterday.

CVC had no knowledge of any payment to Gribkowsky, the company said in an e-mailed statement last week.

Ecclestone, who has denied any wrongdoing, is scheduled to testify Nov. 9 and 10. His attorney Sven Thomas didn’t reply to an e-mail seeking comment.

Gribkowsky has been in custody since Jan. 5. The court has scheduled 26 days of trial and about 40 witnesses have been called to testify.

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Verdicts/Settlements

Banco Espirito Santo to Pay $7 Million to Resolve SEC Claims

Banco Espirito Santo SA, Portugal’s biggest publicly traded bank by market value, will pay $7 million to resolve U.S. claims that it violated U.S. securities law in selling brokerage services and investment advice.

The Lisbon-based bank served about 3,800 U.S.-based customers and clients from 2004 to 2009 without registering as a broker-dealer or qualifying for an exemption, the Securities and Exchange Commission said yesterday in a statement. Banco Espirito Santo agreed to pay disgorgement, interest and fines without admitting or denying wrongdoing, the SEC said.

“Foreign entities seeking to provide financial or securities-related services in the U.S. must familiarize themselves with the statutory and regulatory framework in this arena,” Sanjay Wadhwa, associate director of the SEC’s New York Regional Office, said in the agency’s statement. “A failure to do so, as was the case here, can be a costly misstep.”

Separately, New York Attorney General Eric Schneiderman’s office said the Portuguese bank will pay $975,000 to resolve a state probe. Schneiderman’s office had also accused the bank of soliciting and selling securities to U.S.-based customers without registering itself or its affiliates, as required under the state’s Martin Act.

Under the agreement with New York, the bank will cease and desist from further violations of the Martin Act, disgorge all profits derived from the alleged conduct and offer to make its customers whole for all the securities it sold unlawfully, Schneiderman’s office said in a statement.

Banco Espirito Santo spokesman Paulo Tome declined to comment.

Ex-McKinsey Consultant Banki’s Conviction Reversed in Part

Former McKinsey & Co. consultant Mahmoud Reza Banki’s convictions for violating the Iran trade embargo and running an unlicensed money-transfer business were thrown out on appeal.

A federal appeals court in New York yesterday reversed Banki’s June 2010 conviction on three counts that charged he violated U.S. regulations barring trade with Iran and ran a type of informal transfer business called a hawala.

The appeals court upheld Banki’s convictions on two counts of lying in response to a subpoena from the U.S. Treasury Department about the matter.

Banki, who was sentenced to 30 months in prison, is serving his time in Taft, California, according to the U.S. Bureau of Prisons. The decision means he’s entitled to a new trial on two of the three counts.

Ellen Davis, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, said his office was reviewing the opinion and had no further comment.

The case is U.S. v. Banki, 1:10-CR-00008, U.S. District Court, Southern District of New York (Manhattan).

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Madoff Feeder-Fund Investor Seeks to Confirm Arbitration

An investor in a fund that channeled money into Bernard Madoff’s Ponzi scheme asked a New York court to confirm a $7.01 million arbitration award.

The investor, Moshael J. Straus, filed a petition in New York State Supreme Court in Manhattan on Oct. 22 seeking to confirm the award by the American Arbitration Association, according to court documents.

The arbitration relates in part to $5.1 million worth of investments Straus made in 1999 and 2002 as a limited partner in Ascot Partners LP, a hedge fund whose managing partner and general manager was J. Ezra Merkin, Straus said in the court documents.

“Unbeknownst to petitioner, and in breach of his duties, respondent did not manage these investments for petitioner but simply transmitted substantially all of Ascot over the years to Bernard L. Madoff Investment Securities LLC, thereby greatly facilitating Madoff’s Ponzi scheme,” Straus said in the petition.

Andrew Levander, an attorney who has represented Merkin in other Madoff cases, didn’t return a phone message left at his office seeking comment on the petition.

Merkin, 58, who associated with Madoff in business and socially from at least the 1990s, “secretly” placed investors’ money with the confidence man in return for hundreds of millions of dollars in fees, according to lawsuits by investors and regulators.

The arbitrators found that Merkin “intentionally breached” his duties and that Straus didn’t know Ascot was a Madoff feeder fund even though many investors did, according to the court documents.

Straus is a New Jersey businessman and former attorney who serves as trustee at Yeshiva University in New York, according to the court documents.

Madoff, 73, is serving a 150-year term in federal prison in Butner, North Carolina, after pleading guilty to orchestrating history’s biggest Ponzi scheme. His investors lost about $20 billion in principal.

The case is Straus v. Merkin, 652910/2011, New York State Supreme Court (Manhattan).

Wang Fortune Goes to Charity; Feng Shui Adviser Denied Appeal

Deceased property tycoon Nina Wang’s estimated $12 billion fortune will go to her charity foundation after Hong Kong’s top court refused to hear a final bid for the estate from Tony Chan, her former feng shui adviser.

The Court of Final Appeal rejected arguments yesterday from Chan’s lawyer John Katz that the case involves issues of great public importance and that new facts in the case might have affected the outcome of the trial had they been available. Justice Patrick Chan said the three judges would hand down their reasons at a later date.

The ruling brings to an end a five-year battle after Wang, once Asia’s richest women, died from uterine cancer in 2007. Wang herself fought her father-in-law, the late Wang Din Shin, for six years before the Court of Final Appeal awarded her the fortune, valued last year at $12 billion by lawyers for the estate’s administrators, in 2005.

Chan had argued that Nina Wang left him the money through a 2006 will in part because they had been lovers for 15 years. Two lower courts awarded the fortune to Chinachem Charitable Foundation Ltd., founded by Wang and her late husband Teddy in 1988. Chan faces criminal charges including forgery and is scheduled to appear at a hearing next month.

“We are very happy with the result because they can now proceed with their charitable work,” Keith Ho, a lawyer for the foundation, said after the ruling.

The case is between Chinachem Charitable Foundation Ltd. and Chan Chun Chuen and the Secretary for Justice, FAMV20/2011 in the Hong Kong Court of Final Appeal.

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New Suits

Goldman Sachs Sued by Capmark to Recover $147 Million

Units of Goldman Sachs Group Inc. were sued by Capmark Financial Group Inc., which accused them of wrongly collecting $147 million five months before Capmark went bankrupt.

While they were co-owners of Capmark in May 2009, a group of Goldman units used their influence to help convince Capmark to refinance $1.5 billion in unsecured debt owed to Goldman, according to the lawsuit filed yesterday in Manhattan federal court. The refinancing allowed Goldman to collect $147 million, including $7 million in cash, based on the new secured loan, according to the lawsuit.

“Despite these conflicts and close connections -- indeed, as a result of the influence and insider status that its multiple simultaneous roles created -- Goldman Sachs actively and directly participated in internal meetings and discussions that led to the secured credit facility, which gave it preferential treatment as a creditor,” Capmark claimed in the lawsuit.

Capmark, the commercial lender once a part of the former General Motors Corp., exited bankruptcy in September, co-owned by lower-ranking creditors, some of whom had fought with Goldman over the refinancing and the payments in bankruptcy court in Delaware.

Michael Duvally, a spokesman for Goldman, declined comment on the lawsuit.

Capmark filed bankruptcy on Oct. 25, 2009, blaming falling property values and a drop in lending.

The case is Capmark Financial Group Inc. v. Goldman Sachs, 11-CV-7511, Southern District of New York (Manhattan).

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Bill Clinton Donor Arrested in U.K., Charged in Bribe Case

Victor Dahdaleh, a British investor who is among donors who gave as much as $5 million to former President Bill Clinton’s charitable foundation, was arrested and charged with paying bribes on behalf of Alcoa Inc.

Dahdaleh, 68, allegedly paid bribes to officials of a smelting company in Bahrain to win contracts for Alcoa to supply alumina, the U.K.’s Serious Fraud Office, which prosecutes corruption, said in a statement yesterday.

A British and Canadian national who lives in the Belgravia area of London, Dahdaleh is the owner of Dadco Group, according to his lawyers. He “interrupted his busy scheduled business commitments to voluntarily attend an appointment” at a London police station yesterday, his law firm Allen & Overy LLP said in a statement.

“Dahdaleh believes the investigation into his affairs was flawed and that he has done absolutely nothing wrong,” the law firm said. “He will be vigorously contesting these charges.”

Dahdaleh was charged with corruption and transferring criminal property over a four-year period until 2005. He allegedly bribed officials of Aluminium Bahrain BSC, which is majority-owned by the state, for alumina supplies shipped to Bahrain from Australia on behalf of New York-based Alcoa, the SFO said. He is also accused of paying bribes to supply goods and services to the Bahraini company.

Dahdaleh is a board trustee of the William J. Clinton Presidential Foundation and runs the Victor Phillip Dahdaleh Charitable Foundation, which grants scholarships to needy students, according to his website. He was released on bail until an Oct. 31 hearing at a London criminal court.

“Alcoa has a strong commitment to compliance with the laws of the jurisdictions in which we operate and does not tolerate improper conduct by any of our employees or the parties with which we contract,” Alcoa spokesman Michael Belwood said. He declined to comment on the charges against Dahdaleh.

For the latest new suits news, click here. For copies of recent civil complaints, click here.

Litigation Departments

Lehman Brokerage Has Spent $642 Million to Liquidate

Lehman Brothers Holdings Inc.’s brokerage has spent $642 million on its liquidation, with most of the money going for professional and consulting fees.

Trustee James Giddens and his law firm, Hughes Hubbard & Reed LLP, have earned about $169 million since the brokerage’s parent company filed the biggest bankruptcy in U.S. history in 2008, according to a filing in U.S. Bankruptcy Court in Manhattan. Deloitte LLP collected almost twice as much, or $328 million. Total fees of $544 million are in addition to the $1.4 billion spent by the Lehman parent on its own liquidation.

Lehman Brothers Inc., or what was left of the brokerage after Barclays Plc bought its best assets, has gathered $20 billion to pay claims from settlements, litigation and negotiations, Giddens said in the Oct. 21 filing. He will report later this year on how he plans to allocate the money, which won’t be distributed until the court rules on the plan and some big claims are sorted out, the trustee said.

“The timing and extent of an interim distribution will be impacted by resolution of pending contingencies,” he said in the filing.

Jake Sargent, a Giddens spokesman, didn’t respond to an e- mail seeking comment on the fees.

Lehman Brothers Holdings filed for bankruptcy on Sept. 15, 2008. The brokerage went into liquidation four days later.

The brokerage bankruptcy case is Securities Investor Protection Corp. v. Lehman Brothers Inc., 08-01420, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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Baker Donelson Acquires Houston Firm Spain Chambers

Baker, Donelson, Bearman, Caldwell & Berkowitz PC, a 620- lawyer firm with 17 offices in the southern U.S. and Washington, D.C., acquired the seven-attorney Houston firm Spain Chambers.

The acquisition, announced yesterday in a statement on the Baker Donelson website, gives the Memphis, Tennessee-based firm its first office in Texas and marks a “major step” in the firm’s growth strategy, the statement said.

Spain Chambers is a litigation practice with clients in energy and oil-field services, manufacturing, engineering, real estate, construction, health care and information, Baker Donelson said.

In addition to Texas, Baker Donelson has offices in Alabama, Georgia, Louisiana, Mississippi, Tennessee, Washington and London. For the latest litigation department news, click here.

--With assistance from Linda Sandler, Bob Van Voris, Patricia Hurtado, Chris Dolmetsch and Cullen Wheatley in New York; Lindsay Fortado in London; Debra Mao in Hong Kong; Karin Matussek and Oliver Suess in Munich; Gregory Mott, Tom Schoenberg and Sara Forden in Washington; Jef Feeley, Steven Church and Phil Milford in Wilmington, Delaware; Edvard Pettersson in Los Angeles; and David Voreacos in Newark, New Jersey. Editors: Stephen Farr, Glenn Holdcraft.

To contact the reporter on this story: Elizabeth Amon in Brooklyn, New York, at eamon2@bloomberg.net.

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


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