Bloomberg News

RBS, BP, JPMorgan, Cantor Fitzgerald, J&J in Court News

January 23, 2012

(Adds Megaupload in New Suits section and Chevron in Trials. Updates ‘Occupy’ in Lawsuits.)

Jan. 20 (Bloomberg) -- Royal Bank of Scotland Group Plc said it did nothing wrong when it fired a former Singapore trader because he sought to manipulate London interbank offered rates to boost his own profits.

Tan Chi Min, the former trader, sued the bank over his dismissal and is seeking to recoup $1.5 million in bonuses and 3.3 million RBS shares that he claims he’s owed.

Tan deserved to be fired because he was guilty of “gross misconduct,” RBS, Britain’s biggest government-owned lender, said in court papers filed in Singapore High Court on Jan. 18. He tried to improperly influence RBS’s rate setters from 2007 to 2011 and persuade them to submit Libor rates at particular levels to his benefit, RBS said.

RBS is cooperating with investigations by the U.S. Commodity Futures Trading Commission, U.S. Justice Department and European Commission into whether Libor had been manipulated. Since as early as 2007, investors have accused several banks on the Libor panel of distorting market prices by hiding true borrowing costs, leading to a series of lawsuits filed in 2011 that are making their way through courts in Europe and the U.S.

Tan said in his complaint dated Dec. 27 that he was in no position to influence the rate on his own. The former head of delta trading for RBS’s global banking and markets division in Singapore said the bank failed to detail the allegations against him and didn’t specify how he had improperly influenced the setting of Libor.

Suresh Nair, Tan’s lawyer, declined to comment on RBS’s filing.

The case is Tan Chi Min v. The Royal Bank of Scotland Plc S939/2011 in the Singapore High Court.

For more, click here.

Megaupload Shut Down in U.S. Criminal Conspiracy Case

Megaupload.com, a file-sharing website, was shut down while companies and individuals associated with it were charged with running a criminal enterprise that cost copyright owners more than $500 million.

Charges against seven individuals, Megaupload Ltd. and Vestor Ltd. were unsealed yesterday in federal court in Alexandria, Virginia, after four of the defendants were arrested in Auckland, New Zealand. Three of the suspects remain at large, according to a Justice Department statement.

“This action is among the largest criminal copyright cases ever brought by the United States and directly targets the misuse of a public content storage and distribution site to commit and facilitate intellectual property crime,” according to the e-mailed statement.

The Megaupload indictment was filed as the U.S. Congress considers anti-piracy legislation supported by the movie and music industries that has prompted a backlash from companies including Google Inc. and the non-profit Wikimedia Foundation Inc. as well as Web consumers. The opponents say the Stop Online Piracy Act in the House and the Protect IP Act in the Senate would promote online censorship, disrupt the Web’s architecture and harm their ability to innovate.

About an hour after the indictments were unsealed, the public websites of the Justice Department, the Motion Picture Association of America, and the Recording Industry Association of America wouldn’t load. The so-called hacker-activist group Anonymous took credit for the disruptions, citing protest against the Megaupload prosecutions, according to Twitter accounts used to publicize the group’s activities.

The case is U.S. v. Kim Dotcom, 12-00003, U.S. District Court, Eastern District of Virginia (Alexandria).

For more, click here.

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

Lawsuits/Pretrial

BP, Anadarko Should Be Held Liable Before Trial, U.S. Says

BP Plc, Transocean Ltd. and Anadarko Petroleum Corp. should be found liable before trial for violations of federal pollution laws stemming from the April 2010 Gulf of Mexico oil spill, lawyers for the U.S. argued yesterday at a hearing in federal court in New Orleans.

The Justice Department is asking U.S. District Judge Carl Barbier to find the companies violated the Clean Water Act on the basis of so-called strict liability because they were operators of the doomed project. Barbier, who’s overseeing much of the spill litigation, has scheduled a nonjury trial for Feb. 27 to determine liability and apportion fault for the disaster.

A ruling by Barbier against the companies would mean they couldn’t fight allegations of Clean Water Act violations at the trial and would allow the U.S. to seek fines of as much as $1,100 from each company per barrel of oil spilled. The government has also asked Barbier to find Anadarko and Transocean liable under the Oil Pollution Act, a separate environmental law, for cleanup costs and damages. BP already accepted responsibility for those costs.

The judge said he wouldn’t rule yesterday.

Even if Barbier does rule for the U.S. on its bid for a pretrial decision, the question of gross negligence, which will determine whether the companies are subject to enhanced fines under the Clean Water Act, will be considered at trial.

If Barbier denies the U.S. motion, he’ll determine at trial which companies can be held liable and thus subject to fines.

The April 2010 Macondo well blowout and explosion killed 11 workers and caused the worst offshore oil spill in U.S. history. The accident spurred hundreds of lawsuits against BP and its partners, including Transocean, the Switzerland-based owner and operator of the Deepwater Horizon drilling rig that exploded, and Anadarko, which owned 25 percent of the well.

BP, Anadarko and Transocean argued that they should be able to defend themselves at trial against the federal claims.

The 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.

News Corp. ‘Startling’ E-Mails Trigger New U.K. Computer Search

News Corp.’s U.K. newspaper unit must search nine more computers for evidence ex-employees sought to cover up a scheme to hack into celebrities’ phones, a U.K. judge ruled after seeing secret e-mails he called “startling.”

The publisher’s recent “limited admission” that senior managers knew of the voice-mail interceptions and tried to conceal them from police by destroying e-mail archives isn’t sufficient reason to avoid new searches that could reveal more damaging evidence before a trial, Judge Geoffrey Vos said yesterday in London. The order applies to three laptops used by an unidentified former senior employee and six other computers.

“They are to be treated as deliberate destroyers of evidence,” Vos said of London-based News International at the hearing. “I have been shown a number of e-mails which are confidential. Suffice it to say they show a rather startling approach to the e-mail” practices at the company.

News International’s lawyer, Dinah Rose, argued the searches were a waste of time because there was little chance they contained anything relevant to the trial.

“We accept we are the villains,” Rose told Vos. “We have the horns and the tails.”

A message left at News International’s press office wasn’t immediately returned.

The Jude Law case is Jude Law v. Newsgroup Newspapers, Case No. HC11C02065, High Court of Justice Chancery Division.

For more, click here.

Chinese Issuer, M&A Claims Boost Securities Lawsuits

Securities class-action lawsuits in the U.S. increased 6.8 percent last year, led by claims against companies involved in mergers and acquisitions and Chinese companies listed on U.S. exchanges through reverse mergers, a study found.

The lawsuits include M&A claims involving Verizon Communications Inc. and Terremark Worldwide Inc., Smurfit-Stone Container Corp. and Rock-Tenn Co., and Exelon Corp. and Constellation Energy Group Inc., according to Stanford Law School’s Securities Class Action Clearinghouse, which conducted the study with Cornerstone Research.

M&A-related cases constituted almost 23 percent of the 188 total federal securities class actions filed in 2011, Cornerstone Research said. That’s unchanged from 2010, when 176 total class actions were filed, according to the study. Overall, the number of class actions filed last year was 3 percent below the annual average of 194 filings from 1997 to 2010, the report’s authors said.

“It’s only the growth of merger-related litigation, which has historically been brought in state courts, that inflates the aggregate statistics so that they even approach historic norms,” Joseph Grundfest, director of the Stanford clearinghouse, said in an e-mailed statement.

Lawsuits alleging violations of accounting rules and financial restatements by Chinese issuers comprised more than 17 percent of all federal securities class actions, according to the report. Twenty-four of the 33 lawsuits against Chinese firms were filed in the first half of 2011, which Grundfest said may mean that this type of litigation is subsiding.

“The rapid run-up and subsequent decline of litigation against Chinese issuers that entered the U.S. market through reverse mergers suggest that this form of litigation may be close to having run its course,” Grundfest said.

Lawsuits against Chinese issuers involved China MediaExpress Holdings Inc., Sino Clean Energy Inc. and Deer Consumer Products Inc., according to Stanford’s clearinghouse.

U.S. Judge Denies ‘Occupy’ Request to Allow Courthouse Rally

A group calling itself “Occupy the Courts” lost a bid to force the U.S. to issue a permit for a rally outside a New York federal courthouse today.

U.S. District Judge Lewis Kaplan yesterday denied a last- minute request by the group and by Jarret Wolfman, an organizer of the rally, for a court order compelling the U.S. General Services Administration to allow it to take place today outside the courthouse, on Pearl Street in lower Manhattan.

“Mr. Wolfman, go and demonstrate to your heart’s content, but not outside the Pearl Street entrance on the federal side,” Kaplan told Wolfman at the end of a hearing in the same courthouse yesterday.

The event, intended to coincide with similar protests outside 120 U.S. courthouses in 46 states, was planned to begin in the plaza outside the Daniel Patrick Moynihan U.S. Courthouse between 4 and 6 p.m. today, then move to a march and rally at nearby Foley Square. Organizers said they want to call attention to a 2010 Supreme Court decision that made it easier for corporations to spend money in election campaigns.

“The purpose of the day of action is to mark the second anniversary of the U.S. Supreme Court’s infamous Citizens United v. Federal Election Commission decision that opened the floodgates to unlimited corporate money in elections,” Occupy the Courts said in a complaint filed with the court last night.

The suit was filed against two U.S. General Services Administration officials, Wesley French and Joanna Rosato. The GSA denied the rally permit on Jan. 13, citing a conflict with the swearing in of new citizens and a ceremony to seat a new judge, Occupy the Courts said in the complaint.

Kaplan ruled that the area outside the courthouse, which he said is a potential terrorist target, isn’t a public forum. As a result, the government may impose restrictions on free speech if they are reasonable and content-neutral, he said. Kaplan said that no permit has ever been issued for a demonstration outside the courthouse. He cited the government’s security concerns in refusing to order a permit.

“We’re considering our options,” Gideon Oliver, a lawyer representing Occupy the Courts, said after the hearing. “The organizers of tomorrow’s protest will have to take the court’s decision into account and determine where and how they’ll end up protesting.”

Wolfman, asked after the hearing what he planned to do in response to Kaplan’s ruling, said “I don’t know yet.”

Ellen Davis, a spokeswoman for the Manhattan U.S. Attorney’s office, which represented the government in the case, declined to comment on the ruling.

The case is Wolfman v. French, No. 12-CV-443, U.S. District Court, Southern District of New York (Manhattan).

For the latest lawsuits news, click here.

Trials/Appeals

Chevron Loses Another Bid to Block $18 Billion Ecuador Award

Chevron Corp. lost another bid before a U.S appeals court for an order blocking enforcement of an Ecuadorean court’s $18 billion environmental damages verdict.

Chevron, the second-largest U.S. oil company, had asked a panel of judges at the U.S. Court of Appeals in New York to set aside its Sept. 19 ruling rejecting a trial judge’s decision in March that blocked collection of the Ecuadorean judgment.

In a related decision, U.S. District Judge Lewis Kaplan this month refused Chevron’s request to restrain Ecuadorean assets that could be seized as part of the Ecuadorean judgment.

Chevron was ordered on Feb. 14 to pay as much as $18 billion in compensatory and punitive damages for Texaco Inc.’s alleged dumping of toxic drilling wastes in the Ecuadorean jungle from 1964 to about 1992. The ruling came in an 18-year- old lawsuit decided by a judge in Lago Agrio, a provincial capital near the Colombian border.

On Jan. 3, an Ecuadorean appeals court upheld the February ruling “in all of its parts, including the conviction for moral reparation or its alternative and costs,” according to the decision. Chevron can appeal the decision to the next level of Ecuador’s judiciary, a company spokesman said at the time.

The racketeering case is Chevron v. Donziger, 11-00691, U.S. District Court, District of New York (Manhattan). The case in Ecuador is Maria Aquinda v. Chevron, 002-2003, Superior Court of Nueva Loja, Lago Agrio, Ecuador.

For more, click here.

Jefferson County Wins Access to JPMorgan Settlement Documents

Jefferson County, Alabama, won permission to review a settlement between JPMorgan Chase & Co. and an investor who sued the bank for fraud related to the county’s defaulted sewer bonds.

U.S. Bankruptcy Judge Thomas B. Bennett in Birmingham approved a request by the county to question the investor, James R. Crane, and to review the settlement that ended his lawsuit against JPMorgan, which underwrote the bonds. Bennett ordered Crane to appear at the Houston offices of his law firm to answer questions about the case.

The county is seeking information to use in its own lawsuit against New York-based JPMorgan. Now that Crane has settled, the county said it is concerned information he collected as part of his case may be thrown away.

“If such information is discarded, destroyed or otherwise lost, the county may be unable to obtain the documents,” the county said in its request.

Jefferson County filed for bankruptcy in November after the county, state officials and bondholders failed to implement a tentative agreement to reduce its $3 billion in sewer debt by about $1 billion, raise rates and win financial support from the Alabama state legislature.

The case is In re Jefferson County, 11-05736-9, U.S. Bankruptcy Court, Northern District of Alabama (Birmingham).

Ex-Cantor Hong Kong Managers Say Resignations Were Independent

Jason Boyer, the former head of Cantor Fitzgerald LP’s Hong Kong business, denied coordinating his resignation last year with other employees of the New York brokerage or helping to poach them.

“I wasn’t 100 percent sure they were leaving until after I left,” he told Hong Kong’s Court of First Instance yesterday. Boyer and three other former managing directors are defending a lawsuit from Cantor’s Europe and Hong Kong units accusing them of breaching their employment contracts.

Boyer, Brett McGonegal and Bradford Ainslie -- formerly of Cantor’s Asian cash equities desk -- and Uwe Parpart, Cantor’s former Asia chief economist and strategist, resigned last May to join Reorient Financial Markets Ltd., a boutique investment bank backed by an asset manager under China’s State-owned Assets Supervision and Administration Commission.

Ainslie, who also testified yesterday, said that his decision to leave was “at all times” his own.

Nicholas Cooney, Cantor’s lawyer, said the defendants’ resignation on the same day and their joint meeting with Johnson Ko, an executive director of the Hong Kong-listed company that owns Reorient Financial, show they were working in concert.

At least three of them used the same lawyer to review their employment contracts and Boyer’s draft contract showed edits that were incorporated into those of his co-defendants, Cooney said while questioning Boyer.

Thomas Chan, Cantor’s chief financial officer in Hong Kong, testified Jan. 18 that the departures resulted in a 29 percent decline in average monthly revenue for the Hong Kong cash equities business. At least three other staff left Cantor on the same day in July to join Reorient, Cooney said.

The case is Cantor Fitzgerald Europe, Cantor Fitzgerald (Hong Kong) Capital Markets Ltd. and Jason Boyer, Bradford Ainslie, Brett McGonegal, Uwe Henke von Parpart, HCA1160/2011 in Hong Kong’s Court of First Instance.

For the latest trial and appeals news, click here.

Verdicts/Settlements

News Corp. Settles With Jude Law, Other Phone-Hack Victims

News Corp.’s British newspaper unit settled 36 lawsuits by phone-hacking victims including actor Jude Law and soccer player Ashley Cole, with compensation set on the basis that senior managers at the company knew of the practice and tried to conceal it.

The settlements by London-based News International resolve more than half of the 60 lawsuits filed by victims of voice-mail interceptions at its now-defunct News of the World tabloid. News International agreed to a range of cash payments to victims and provided details about hacking, including the number of journalists involved, three lawyers representing victims said in a statement ahead of a hearing yesterday before Judge Geoffrey Vos in London.

News International “is ready, willing and able to settle” all the claims and a trial shouldn’t be necessary, company lawyer Michael Silverleaf said at the hearing. The compensation is “generous.”

The settlement amounts are larger than those normally paid in privacy-violation cases, according to yesterday’s statement. They range from 5,000 pounds ($7,700) for less-serious phone- hacking instances to about 100,000 pounds for the most-offensive cases, a person familiar with the matter said. Of the 18 settlements outlined in court yesterday, total payouts will be at least 642,000 pounds plus legal fees.

The agreements come about a month before the first civil trial in the matter is scheduled to begin. Vos said a trial is still important for resolving various issues stemming from phone hacking to help settle future cases.

There are 10 cases prepared to go to trial, including those by sports agent Sky Andrew, comedian Steve Coogan and pop star Charlotte Church, who sang at News Corp. Chairman and Chief Executive Officer Rupert Murdoch’s wedding in 1999 when she was 13 years old, lawyer Hugh Tomlinson said.

“The claimants themselves now know much more about what private messages were listened to, who intercepted their messages and who authorized it,” according to the statement from the victims’ attorneys. The information provided by News International also covers “who was paid and how much.”

News International, which previously denied phone hacking was widespread, apologized to victims in court yesterday.

For more, click here.

J&J to Pay $158 Million to Settle Texas Risperdal Drug Case

Johnson & Johnson agreed to pay $158 million to settle Texas officials’ claims that the drugmaker fraudulently marketed its Risperdal anti-psychotic drug, ending a trial over the allegations.

J&J’s settlement will resolve claims it defrauded the state’s Medicaid program by promoting Risperdal for uses not approved by U.S. regulators, including for children with psychiatric disorders, the company said yesterday. The state also claimed the New Brunswick, New Jersey-based drugmaker downplayed the health risk of Risperdal. The settlement was about one-quarter of the $579 million the state was seeking.

“Under the terms of the settlement, Janssen will pay $158 million in full resolution of all claims in Texas,” Teresa Mueller, a company spokeswoman, said in an e-mail. “This settlement represents a resolution to claims brought by the state in 2004 for alleged Medicaid overpayment during the years 1994-2008, and will circumvent potentially lengthy and costly appellate activities.”

The Texas settlement is the first time J&J and Janssen have agreed to resolve a state’s claims over Risperdal, Mueller said.

J&J, the world’s largest health-care products company, and its Janssen unit agreed to the accord in the middle of a four- week trial of the state’s lawsuit.

“Today’s agreement sends a strong message that the state will pursue those who defraud Texas taxpayers,” Greg Abbott, Texas attorney general, said in a statement. “Johnson & Johnson’s scheme to profit from the Medicaid program by overstating the safety and effectiveness of an expensive drug and improperly influencing officials ended up costing taxpayers millions of dollars.”

Texas joined a lawsuit filed in 2004 by a whistle-blower, Allen Jones, an ex-investigator for the Pennsylvania Office of Inspector General. Jones said he was fired after probing company payments to a top pharmacist in Pennsylvania’s government who hid the money.

“We’re not disappointed at all” by the size of the settlement, Tom Melsheimer, Jones’s lawyer, said in an interview yesterday. The settlement is “the largest in a Texas Medicaid fraud case brought by the state,” he said.

The settlement will be split between the state, the federal government, Jones and his attorneys, Mueller said.

“I’ve no idea what the distribution of the settlement will be,” Jones said in an interview yesterday. He said his first reaction to the settlement was, “Damn, I wanted another two days of testimony.”

The trial showed that Janssen “subverted science and induced others to betray the people they were supposed to take care of,” Jones said. “To me, that’s reprehensible.”

The Texas case is Texas v. Janssen LP, D-1GV-04-001288, District Court, Travis County, Texas (Austin).

For more, click here.

For the latest verdict and settlement news, click here.

Litigation Departments

London Lawyer Pay Increases 10% as Firms Compete for Talent

Pay for London lawyers rose 10 percent last year to 146,500 pounds ($225,800) as firms competed for a limited supply of attorneys, a legal recruiter said.

Average base pay for salaried lawyers in the British capital rose 4 percent to 111,000 pounds and bonuses increased to 35,500 pounds, recruiter Laurence Simons said in a statement. In comparison, base pay rose 2.1 percent in 2011 for accountants, and 1.2 percent for all U.K. professionals, the recruiter said.

Pay and bonuses for lawyers have “been pushed up by the limited supply of talent in their market, making retention the name of the game,” said Lucinda Moule, managing director at Laurence Simons. “A tough 2010 means employers have focused primarily on boosting salaries rather than increasing headcount.”

At least three top London-based law firms raised salaries for lawyers last year after freezing or cutting pay by as much as 11 percent. Clifford Chance LLP, Freshfields Bruckhaus Deringer LLP and Slaughter and May raised salaries and said they would pay bonuses last June. More experienced lawyers that have partnership interests in a firm are paid based on the firm’s financial performance rather than receiving a set salary.

Top U.S. firms still offer higher salaries in London, with Bingham McCutchen LLP and others paying 100,000 pounds to start, to match New York levels. London legal salaries are comparable to entry-level pay at a financial company, without the promise of a large bonus.

For the latest litigation department news, click here.

--With assistance from Bob Van Voris, Patricia Hurtado and Ian Thomas in New York, Erik Larson and Lindsay Fortado in London, Andrea Tan in Singapore, Debra Mao in Hong Kong, Margaret Cronin Fisk in Detroit, Jef Feeley in Wilmington, Delaware, Steven Church in Wilmington, David Voreacos in Newark, Karen Gullo in San Francisco, Joe Schneider in Sydney and Tom Schoenberg in Washington. Editor: Stephen Farr

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

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


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