Bloomberg News

Gupta, Commerzbank, Morgan Stanley in Court News

February 02, 2012

(Adds Gupta in Lawsuits section, Stanford in Trials, Facebook in Litigation Departments and Foreign Bribe Case in Verdicts. Updates BP and EchoStar in Lawsuits, JPMorgan in New Suits and JC Flowers in Verdicts. Corrects gender of HSBC spokesman in fifth paragraph of first item under New Suits.)

Feb. 1 (Bloomberg) -- Rajat Gupta, the former Goldman Sachs Group Inc. director accused of giving inside information to fund manager Raj Rajaratnam, faces new allegations he passed tips about earnings of Goldman Sachs in 2007 and Procter & Gamble Co. in 2009.

In a superseding indictment filed yesterday in federal court in Manhattan, the U.S. broadened its description of the insider-trading scheme, saying it began in March 2007 not in 2008 as alleged in October. Prosecutors also said Gupta tipped Galleon Group LLC co-founder Rajaratnam about Goldman Sachs’s first quarter 2007 earnings and while at Galleon’s offices listened to a Goldman Sachs board meeting where earnings were disclosed.

“During that call, the audit committee discussed the company’s quarterly earnings announcement that would be made the following day,” assistant U.S. attorneys Reed Brodsky and Richard Tarlowe said in the indictment. “Gupta participated in the audit committee call from the premises of Galleon.”

Gupta, 63, who also led McKinsey & Co. and was a P&G director, was accused in October of passing inside information to Rajaratnam from 2008 to January 2009.

The U.S. said yesterday Gupta’s investments with Rajaratnam, which included $10 million invested in funds and an ownership stake in at least two other funds, were a motive for him to engage in the insider-trading scheme. Gupta made a commitment to invest about $22.5 million in a private-equity fund focusing on Asia, the U.S. said.

In an e-mailed statement, Gupta’s lawyer, Gary Naftalis, called the government’s allegations “totally baseless” and said that his client “did not trade in any securities, did not tip Mr. Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo.”

“The newly added charges -- like the ones brought last year -- are not based on any direct evidence, but rely on supposed circumstantial evidence,” Naftalis said. “The facts in this case demonstrate that Mr. Gupta is innocent of all of these charges, and that he has always acted with honesty and integrity.”

Rajaratnam, who was convicted by a jury last year, is serving an 11-year prison term.

The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

BP Must Cover Some Halliburton Gulf Spill Costs, Judge Says

BP Plc must cover some of any direct damage claims awarded against Halliburton Co. for the $40 billion in cleanup costs and economic losses caused by the 2010 oil-well blowout and Gulf of Mexico spill.

BP must indemnify Halliburton for compensatory damage claims under its drilling contract, U.S. District Judge Carl Barbier in New Orleans ruled yesterday. London-based BP sued Halliburton, which provided cementing services for the project, in April to recover a share of any damages and costs from the spill. Any punitive damages awarded against Halliburton don’t have to be paid by BP, the judge said.

“BP is required to indemnify Halliburton for third-party compensatory claims that arise from pollution or contamination that did not originate from the property or equipment of Halliburton located above the surface of the land or water, even if Halliburton’s gross negligence caused the pollution,” Barbier wrote.

Any civil penalties under the Clean Water Act against Houston-based Halliburton also won’t have to be covered by BP, Barbier said. The judge said he wouldn’t express an opinion on whether Halliburton would be held liable for punitive damages or Clean Water Act fines.

Barbier has scheduled a nonjury trial to begin Feb. 27 to determine fault for the explosion. Trials to determine damages haven’t been scheduled yet.

Yesterday’s decision follows an earlier ruling that BP must indemnify Transocean Ltd., owner of the Deepwater Horizon rig that exploded and sank. The Transocean ruling also didn’t cover fines or punitive damages.

Barbier said he wouldn’t rule yet on BP’s claim that Halliburton committed fraud by concealing material information about the cement tests it conducted. A ruling against Halliburton on this issue may put the company back on the hook for damages.

“Fraud could void an indemnity clause on public policy grounds, given that it necessarily includes intentional wrongdoing,” Barbier said. “There are material issues of fact that preclude summary judgment on this issue.”

The two indemnity rulings “should put an end to the attempts by Transocean and Halliburton to avoid their obligations,” BP said in a statement.

“Halliburton is, at a minimum, responsible for any punitive damages as well as civil penalties to the extent that they may apply under the Clean Water Act,” BP said. “Moreover, the court determined that if Halliburton is found to have committed fraud, then the indemnity could be void.”

“Halliburton agrees with the ruling to the extent that it requires BP to honor its contractual indemnity obligations,” Beverly Stafford, a spokeswoman for Halliburton, said in an e- mail.

The April 2010 Macondo well blowout and the explosion that followed killed 11 workers and set off the worst offshore oil spill in U.S. history. The sinking of Transocean’s Deepwater Horizon drilling rig and the spill led to hundreds of lawsuits against BP and its partners and contractors.

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.

Tainted-Well Lawsuits Mount Against Gas Frackers Led by Cabot

For 36 years, Norma Fiorentino drew water from a well near her home in Dimock, Pennsylvania. “It was the best water in town,” she says. Then on Jan. 1, 2009, she says her well blew up.

State regulators later blamed natural gas drilling by Cabot Oil & Gas Corp. for elevating methane levels in Dimock wells. Fiorentino and her neighbors sued, alleging Cabot’s activities caused contamination and, in Fiorentino’s case, an explosion that cracked a concrete cap into three pieces. Cabot has denied responsibility.

The Dimock case, in federal court in Scranton, Pennsylvania, is among a batch of claims that aim to put hydraulic fracturing, the process that injects a mix of water, sand and chemicals underground to free gas trapped there, on trial, Bloomberg News’ Jim Snyder reports. The suits could lead to payouts to plaintiffs and stricter government regulations, raising costs on an industry President Barack Obama says can boost the economy.

“The plaintiffs bar is always looking for the next big thing,” said Jennifer Quinn-Barabanov, a partner at Washington- based Steptoe & Johnson LLP, which has represented oil and gas companies. “There were a number of lawsuits filed, and now everyone is kind of waiting and seeing.”

Stuart Smith, a New Orleans-based plaintiffs’ attorney, said the number of cases will increase as fracking expands into more populated areas and complaints grow. More drilling may also create new routes for the chemicals to migrate, he said.

At least 23 cases involving fracking have been filed since August 2009 by landowners from Arkansas to New York, according to an analysis by Fulbright & Jaworski LLP, a Houston-based firm.

Besides Cabot, Chesapeake Energy Corp. and Southwestern Energy Co. have faced lawsuits claiming harm, according to the summary.

The Dimock case is Fiorentino v. Cabot Oil & Gas Corp., 09- 02284, U.S. District Court for the Middle District of Pennsylvania (Scranton).

For more, click here.

Hewlett-Packard Wins Dismissal of Oracle Fraud Claim Over Hurd

Hewlett-Packard Co. won dismissal of Oracle Corp.’s claim that it was duped into settling a dispute over its hiring of HP’s former chief executive officer, Mark Hurd,.

Oracle alleged that HP fraudulently hid that it was planning to hire Leo Apotheker as CEO and board chairman Ray Lane, who were “toxic” to any partnership with Oracle, when it forged a settlement with Oracle over its hiring of Hurd. Oracle also claimed that HP concealed that it was secretly paying Intel Corp. $88 million a year to “artificially continue” the Itanium chip’s lifespan.

A state judge in San Jose, California, said in a ruling Jan. 30 that HP’s alleged misrepresentations “did not prevent Oracle from participating in the negotiations” over the Hurd settlement “or deprive Oracle of the opportunity to negotiate.”

Judge James Kleinberg also rejected bids by both companies to seal documents in the case that they argued contain sensitive business information that that might harm them or their customers.

HP said yesterday in an e-mailed statement that the fraud claim dismissed by the court “was another attempt by Oracle to get out of the contract it entered into with HP, wherein it continued to offer its product suite on HP’s server platform.”

Oracle said in an e-mailed statement that it’s pleased with the judge’s refusal to seal HP documents.

The court “has rejected HP’s attempt to hide the truth about Itanium’s certain end of life from its customers, partners and own employees,” Oracle said.

Deborah Hellinger, a spokeswoman for Redwood City, California-based Oracle, declined to comment on the dismissal of the fraud claim.

The case is Hewlett-Packard Co. v. Oracle Corp., 11-cv- 203163, California Superior Court, Santa Clara County.

EchoStar Loses Appeal of Sanctions for E-Mail Destruction

A New York State appeals court affirmed a decision to impose sanctions on EchoStar Satellite LLC for destroying e-mail evidence in a Cablevision Systems Corp. contract suit.

The Manhattan court yesterday upheld a decision by the trial judge, Richard Lowe. The judge found in November 2010 that EchoStar “systematically destroyed evidence in direct violation of the law.” He said he will tell jurors that the company did so and that the jury may assume the evidence would have been helpful to the plaintiffs.

The sanction was “appropriate and proportionate,” Judge Sallie Manzanet-Daniels wrote in a unanimous appeals court opinion on the suit by Cablevision’s Voom HD Holdings unit.

“Although Voom may have other evidence to point to, the missing evidence is from a crucial time period during which EchoStar appears to have been searching for a way out of its contract,” Manzanet-Daniels wrote. “Evidence from this vital time period is not entirely duplicative of other evidence.”

Voom sued in 2008, accusing EchoStar of breaching a distribution agreement that called for Voom to provide 21 high- definition television channels to EchoStar, which at the time operated the Dish satellite-television network.

“Today’s ruling confirms that EchoStar destroyed evidence in blatant violation of the law and will now be held accountable for its misconduct,” Orin Snyder, an attorney representing Cablevision, wrote in an e-mail. “We look forward to trial.”

Roy Reardon, an attorney representing EchoStar, didn’t return a phone message left at his office seeking comment on whether the decision will be appealed to the state’s highest court.

Deepak Dutt, a spokesman for EchoStar, had no immediate comment on the ruling.

The case is Voom HD Holdings LLC v. EchoStar Satellite LLC, 600292/2008, New York State Supreme Court (Manhattan).

For the latest lawsuits news, click here.

New Suits

DZ Bank Sues JPMorgan and HSBC Over Mortgage Securities

DZ Bank AG sued JPMorgan Chase & Co. and HSBC Holdings Plc, accusing the banks of making false and misleading statements in connection with the sale of residential mortgage-backed securities.

DZ Bank, Germany’s largest cooperative lender, sued JPMorgan in New York State Supreme Court in Manhattan Jan. 30, saying it bought about $85 million of the securities based on flawed offering materials. DZ Bank filed a similar suit yesterday against HSBC, Europe’s biggest bank, in the same court, over $122 million worth of the investments.

“Plaintiff did not know the true facts regarding defendants’ misrepresentations and omissions in the offering materials, and justifiably relied on those misrepresentations and omissions,” Frankfurt-based DZ Bank said in court documents.

Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.

Tasha Pelio, a spokeswoman for New York-based JPMorgan, declined to comment on DZ Bank’s lawsuit. Neil Brazil, a spokesman for London-based HSBC, said the company doesn’t comment on pending litigation.

The JPMorgan case is Deutsche Zentral-Genossenschaftsbank AG v. JPMorgan Chase & Co, 650293/2012, New York State Supreme Court (Manhattan). The HSBC case is Deutsche Zentral- Genossenschaftsbank AG v. HSBC North America Holdings Inc., 650303/2012, New York State Supreme Court (Manhattan).

Cameron Sues Insurer Over Refusal It Says Threatened BP Deal

Cameron International Corp., facing thousands of claims from the 2010 Gulf of Mexico oil spill, sued one of its insurers for allegedly refusing to pay $50 million in coverage, a move the manufacturer says threatened a $250 million settlement with BP Plc.

Cameron, in a complaint filed Jan. 30 in federal court in New Orleans, accused a Liberty Mutual Holding Co. unit of breach of contract and of acting in bad faith by holding the settlement with BP “hostage” so the insurer could negotiate a “steep discount” on the amount it owed.

“When Cameron needed it the most, Liberty refused to provide Cameron the $50 million in insurance limits it sold Cameron,” according to the complaint. “Instead, Liberty offered Cameron a choice: either continue the Gulf oil spill litigation and face potentially crippling liability, or agree to accept much less than what Liberty was contractually obligated to pay under its insurance policy.”

Cameron, which said it paid the $50 million from its own funds, seeks a court order requiring Liberty Insurance Underwriters to indemnify it for that amount.

Cameron said it has now paid $250 million to BP. The settlement proceeds are to be contributed by BP into a fund for the victims of the spill.

Cameron manufactured the blow-out preventer, the subsea device that failed to stop the BP well explosion on April 20, 2010, that killed 11 workers aboard the Deepwater Horizon oil rig. The rig burned and sank, triggering the worst offshore oil spill in U.S. history.

Adrianne Kaufmann, a Liberty spokeswoman, didn’t return a phone call after regular business hours Jan. 30 seeking comment on the lawsuit. Rhonda Barnat, a spokeswoman for Houston-based Cameron, declined to comment.

The case is Cameron International Corp. v. Liberty Insurance Underwriters, 2:12-cv-0311, U.S. District Court, Eastern District of Louisiana (New Orleans).

Micromet Investor Calls Amgen’s $1 Billion Bid Too Low

Micromet Inc. was sued by a shareholder who said Amgen Inc.’s $1 billion takeover offer for the drugmaker undervalues his stock.

Micromet’s board failed in its duty to get the best price, the investor, Bernard Passes, said in a complaint filed Jan. 30 in Delaware Chancery Court in Wilmington. Amgen, based in Thousand Oaks, California, announced a deal on Jan. 26 to buy Micromet for $11 a share to gain an experimental leukemia drug.

“Given the company’s growth prospects and potential for significant income,” the transaction is inadequate, Passes said in his complaint. He said Micromet stock is worth at least $12 a share

Jennifer Neiman, a spokeswoman for Rockville, Maryland- based Micromet, declined to comment on the lawsuit.

The case is Passes v. Micromet, CA7198, Delaware Chancery Court (Wilmington).

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

Trials/Appeals

‘Stanford World’ Built With Investors’ Funds, Prosecutor Says

A $330 million promissory note signed by R. Allen Stanford was introduced at his criminal trial as evidence that the financier secretly borrowed money from his bank to build a lavish “Stanford World in Antigua” and lure rich new clients.

“Rich people do not get impressed very easily,” Stanford said in an undated video clip shown to his jury yesterday in Houston federal court. “They have to go back literally blown away, saying ‘I have a confidence and a trust that I will do business in that part of the world.’”

Stanford, videotaped while speaking to a gathering in Antigua, said his goal in building the private airplane hangar, restaurants, cricket grounds and banking facilities on 20 acres surrounding Stanford International Bank Ltd. was to convince the “richest people in the world” it was safe to invest there.

Stanford, 61, was indicted in June 2009 on charges he led a $7 billion investment fraud based on certificates of deposit issued by the Antiguan bank. He’s accused of 14 counts including mail fraud, wire fraud and obstruction of a probe by the U.S. Securities and Exchange Commission. He denies the allegations. If convicted on the most serious charges, he could be imprisoned for 20 years.

Assistant U.S. Attorney Gregg Costa asked government witness Arnold Knoche, a former president of Stanford Development Corp., if he knew where the money came from for “Stanford World in Antigua.”

“He told me he had his personal resources, that he’d take care of it,” Knoche testified in the second week of trial. “I always wondered where the money was coming from because it was a huge amount.”

Knoche testified that Stanford never said he used depositors’ funds on real estate developments in the Caribbean or elsewhere. He also said he never suspected illegal activity during his 16 years with Stanford’s organization. Knoche said he resigned in 2003 because he was tired of the constant travel.

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 more, click here.

Commerzbank CEO Testifies He Wanted Loyalty Not Bonus Demands

Commerzbank AG Chief Executive Officer Martin Blessing said bankers whose bonuses were cut after the German lender’s buyout of Dresdner Bank would have accepted it if they were motivated by loyalty rather than money.

More than 100 bankers are suing Commerzbank in the U.K. for cutting bonuses by 90 percent or more following the takeover of Dresdner in 2009. Stefan Jentzsch, then-CEO of Dresdner, had promised to set aside 400 million euros ($523 million) for the awards the previous year, the bankers claim.

In his final day of witness testimony, Blessing said he believed employees would “understand the circumstances we were in” and say to themselves, “I’m not working here only for money. I also have loyalty.”

Commerzbank argues it was reasonable to reduce discretionary pay following a record loss by Dresdner’s investment-banking unit in 2008. Blessing, who oversaw Commerzbank’s January 2009 acquisition of Dresdner and its 18.2 billion-euro bailout during the credit crunch, said during two days of testimony he had to consider the interests of other employees, shareholders and the general public.

The 104 bankers, who are seeking individual payouts of as much as 2 million euros, claim Jentzsch’s pledge is a binding legal commitment that Commerzbank must honor. Jentzsch, now a partner at Perella Weinberg Partners LP’s U.K. unit, is scheduled to appear later in the trial.

The cases include: Mr. Fahmi Anar & Others v. Dresdner Kleinwort Ltd., Commerzbank AG, High Court of Justice, Queen’s Bench Division, HQ09X05230 and Richard Attrill & 71 others v. Dresdner Kleinwort Limited, Commerzbank AG, HQ09X04007.

Ex-FrontPoint Manager Skowron Calls Morgan Stanley No Victim

Former FrontPoint Partners LLC fund manager Joseph F. “Chip” Skowron, sentenced to five years in prison for an insider-trading scheme, says that Morgan Stanley isn’t a victim of his crimes and doesn’t deserve restitution.

Skowron, 42, who began serving his term at the Federal Correctional Institution Schuylkill in Pennsylvania last month, said that Morgan Stanley shouldn’t collect any funds under the Mandatory Victims Restitution Act.

He pleaded guilty to getting illegal tips from a former adviser for Human Genome Sciences Inc. that trials of the company’s hepatitis C drug were being halted. FrontPoint sold its stock before the announcement was made public, avoiding $30 million in losses, the U.S. said.

Morgan Stanley, which acquired FrontPoint in 2006 and spun it off in February, has submitted the largest restitution request to the court, saying it should be paid $37.4 million after sustaining “very substantial damages” as a result of Skowron’s conduct.

Skowron’s lawyer, Joshua Epstein, disputed Morgan Stanley’s assertion Jan. 30 in a court filing.

“Morgan Stanley is not a victim,” he said, “because its purported losses were not directly and proximately caused by the conduct underlying the offense of conviction.”

Matt Burkhard, a spokesman for Morgan Stanley, declined to comment on the filing. Peter White, a lawyer for FrontPoint, didn’t return a call seeking comment.

The case is U.S. v. Skowron, 11-cr-699, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

For the latest trial and appeals news, click here.

Verdicts/Settlements

JC Flowers Ex-U.K. Chief Won’t Be Investigated by London Police

London police chose not to investigate JC Flowers & Co.’s former U.K. chief executive officer after regulators fined him for faking invoices to take money from a company the private equity firm invested in.

City of London Police didn’t open a formal probe after JC Flowers declined to assist an informal inquiry and told them there was no actual victim in light of its reimbursement of the company’s losses, according to two people familiar with the matter who asked not to be identified because they weren’t authorized to speak.

The U.K. finance regulator yesterday fined Ravi Shankar Sinha, JC Flowers’s former U.K. chief executive, 2.87 million pounds ($4.5 million) and banned him from working in finance in the country. Sinha defrauded a company in which New York-based JC Flowers invested 1.37 million pounds by submitting falsified invoices, lying to the company CEO and saying the firm had authorized him to charge advisory fees, the FSA said.

“The public will have difficulty understanding why it is a checkout girl who steals 10,000 pounds from her employer who should go to prison but a phenomenally wealthy individual who steals millions should not,” said Sara George, a regulatory lawyer at the London-based law firm Stephenson Harwood.

JC Flowers told the police that, given their reimbursement of the unidentified company’s losses, there was no victim that had suffered and there was no reason to prosecute when the Financial Services Authority was handling the matter, the people said. The private equity firm had reported the incident to the FSA and cooperated with the civil investigation, the regulator said.

“Had the police chosen to launch a criminal investigation, then JC Flowers would have cooperated fully, and indeed would today cooperate with any investigation should the police decide to mount an inquiry,” Michael Harrison, an outside spokesman for the firm at Brunswick Group, said in a telephone interview.

The City of London Police said in a statement that it received details of the case from the FSA and, after discussions with the affected company, decided not to prosecute Sinha. Because the police never opened a formal probe, JC Flowers didn’t obstruct an investigation, the people said.

FSA spokesman Joseph Eyre declined to comment.

Sinha committed the fraud because of his deteriorating finances, the FSA said. Between May and July 2008, Sinha borrowed around 9 million euros ($11.9 million) to invest in companies in which JC Flowers funds had invested. The funds’ performance declined, and he was left unable to pay his debt, the regulator said.

The FSA “has made it clear that it makes no criticism of JC Flowers’ systems and controls,” the firm said in a statement. The firm fired Sinha in 2009 after it discovered the fake invoices.

For more, click here.

Second Trial in Foreign Bribe Sting Case Ends With Hung Jury

The second trial in the biggest U.S. prosecution of individuals accused of foreign bribery ended with acquittals and a hung jury.

U.S. District Judge Richard Leon in Washington yesterday declared a mistrial after jurors said they couldn’t agree on charges alleging three security industry executives planned to make payments to a federal agent posing as a representative of the west African country of Gabon.

The ruling came one day after the same jury acquitted two others in the case, including a former deputy assistant director of the U.S. Secret Service.

The three remaining defendants in the trial were John Mushriqui and his sister, Jeana Mushriqui, and Marc Morales. Each was charged with two to three counts of violating the Foreign Corrupt Practices Act, which has a maximum penalty of five years in prison. They pleaded not guilty.

Laura Sweeney, a Justice Department spokeswoman, said she couldn’t immediately comment on the ruling or whether prosecutors plan to retry Morales and the Mushriquis.

Lawyers for the three defendants didn’t immediately return e-mail messages seeking comment on the case.

The trial, which opened Sept. 28, was the second in a 22- defendant kickback conspiracy case stemming from a fake $15 million weapons deal. A trial of four others arrested in the sting ended in a mistrial in July after a jury failed to agree on a verdict.

The case is U.S. v. Goncalves, 09-cr-00335, U.S. District Court, District of Columbia (Washington).

GM Reaches $23.8 Million Pollution Settlement With U.S.

General Motors Corp. agreed to pay as much as $23.8 million to settle liability for environmental cleanup costs in New Jersey, Maryland and Missouri, the U.S. said.

The agreement resolves Detroit-based GM’s pre-bankruptcy liability for U.S. claims filed under the federal Superfund statute, according to a statement yesterday by the office of U.S. Attorney Preet Bharara in Manhattan. Under the settlement, the U.S. Environmental Protection Agency will receive allowed claims of $20.9 million in GM’s bankruptcy proceeding, plus $2.89 million of cleanup work at the sites.

GM, which filed for bankruptcy in June 2009, sold assets to a new company that went public as General Motors Co. The allowed bankruptcy claim will be paid in stock and warrants of “New GM.” The cash value of the allowed claim probably will be less than $20.9 million, the U.S. said.

The three polluted sites covered by the agreement include the Diamond Alkali Superfund Site, which comprises parts of the Passaic and Hackensack Rivers, Newark Bay, the Arthur Kill and the Kill Van Kull in New Jersey. Also covered are the Kane & Lombard Superfund Site in Baltimore County, Maryland, and the Hayford Bridge Superfund Site in St. Charles, Missouri.

The case is In re Motors Liquidation Co., 09-50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

For the latest verdict and settlement news, click here.

Litigation Departments

Facebook Lawyers Want ‘Stratospheric’ Fee, Ceglia Claims

Paul Ceglia, who was fined for failing to turn over evidence in his ownership suit against Facebook Inc., said he shouldn’t also have to reimburse the company for “stratospheric” legal fees of as much as $716 an hour.

U.S. Magistrate Judge Leslie Foschio on Jan. 10 fined Ceglia $5,000 after ruling the New York man had ignored a court order requiring him to give Facebook access to his e-mail accounts. The judge also ordered Ceglia to reimburse the company for the legal fees it incurred in pursuing the issue.

Ceglia’s lawyer, Dean Boland of Lakewood, Ohio, objected to the size of the fees in court papers filed in federal court in Buffalo, New York, Jan. 30, saying they’re not justified by the “garden-variety” issues presented by the case.

In the suit, Ceglia claims he has a 2003 contract signed by Facebook co-founder Mark Zuckerberg that gave him half-ownership of the company, now worth an estimated $74.3 billion, according to Sharespost.com, which tracks nonpublic companies. Facebook, based in Menlo Park, California, operates the most popular social-networking site in the world.

Boland also argued that Facebook’s lawyers, from Gibson, Dunn & Crutcher LLP, shouldn’t charge New York City prices for Buffalo work.

Orin Snyder, the lead Gibson Dunn partner on the case, had a billing rate of $955 an hour in 2011, according to papers filed by Facebook. Two other Gibson Dunn partners cost their clients $850 and $825 an hour. They were assisted by two associates, at $670 and $450 an hour.

Snyder declined to comment on the firm’s fee request.

The case is Ceglia v. Zuckerberg, 1:10-cv-00569, U.S. District Court, Western District of New York (Buffalo).

For more, click here.

WikiLeaks’s Assange Sued on Eve of U.K. Extradition Appeal

WikiLeaks founder Julian Assange, who will ask the U.K. Supreme Court today to block his extradition to Sweden in a rape case, was sued by the British law firm he hired after his 2010 arrest.

Finers Stephens Innocent LLP, which specializes in commercial litigation, sued the 40-year-old Australian yesterday in London over legal fees, according to court records. Assange replaced the firm last year after a U.K. judge rejected his defense and upheld the Swedish arrest warrant.

“It’s always regrettable when we find ourselves in a dispute with a former client about fees,” Tim Bignell, a lawyer at the firm, said in a phone interview. “We tried to resolve this amicably with Mr. Assange and we still hope to be able to.” He didn’t say how much the firm is owed.

Assange, now represented by human-rights lawyer Gareth Peirce, denies the rape claims by two supporters of the anti- secrecy website who let him stay at their homes in 2010. Assange argues Sweden’s arrest warrant is invalid because the prosecutor who issued it isn’t a “judicial authority,” as required under European Union law.

Peirce didn’t immediately respond to a message seeking comment about the lawsuit over fees.

Assange, who hasn’t been charged with a crime, is accused of failing to use a condom with one of the Swedish women and having sex with the other while she was asleep. The claims became public around the same time Assange was condemned by U.S. officials for posting classified military and diplomatic cables on the WikiLeaks website and he claimed the case was politically motivated.

The Finers Stephens case is: Finers Stephens Innocent v. Julian Assange, HQ12X00359, High Court of Justice Queens Bench Division.

For more, click here.

For the latest litigation department news, click here.

--With assistance from Chris Dolmetsch, Patricia Hurtado and Bob Van Voris in New York, Joel Rosenblatt in San Francisco, Kit Chellel, Erik Larson and Lindsay Fortado in London, Margaret Cronin Fisk in Detroit, Jim Snyder, Tom Schoenberg and Michael Riley in Washington, Sophia Pearson in Philadelphia, Phil Milford in Wilmington, Delaware and Ben Moshinsky in Brussels. 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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