Bloomberg News

Credit Suisse, JPMorgan, Barclays, Wal-Mart in Court News

February 06, 2012

(Adds Credit Suisse in top section, Wegelin in New Suits, Bank of America and MF Global in Lawsuits and Primary Global and J&J in Trials.)

Feb. 3 (Bloomberg) -- Kareem Serageldin, the ex-global head of Credit Suisse Group AG’s CDO business charged in a bonus- boosting fraud tied to a $5.35 billion trading book, was surprised by the U.S. indictment since he has been cooperating with investigators for four years, his lawyer said.

Serageldin, 38, a U.S. citizen who lives in England, was charged in Manhattan federal court for masterminding a scheme to fake collateralized debt obligation data to meet targets and protect end-of-year bonuses. Two of his former subordinates, David Higgs, 42, and Salmaan Siddiqui, 36, pleaded guilty Feb. 1 in New York to manipulating prices at Serageldin’s direction. The men were also sued by the U.S. Securities and Exchange Commission.

Manhattan U.S. Attorney Preet Bharara, whose office is prosecuting the case, urged Serageldin after the indictment was unsealed to come to the U.S. to face the charges. Serageldin’s lawyer said his client was blindsided by Bharara’s prosecution because he has been fully cooperating with U.K. and U.S. investigators, including Bharara.

“I have been in touch with the government to discuss the matter,” James McGuire, a lawyer for Serageldin in New York, said yesterday in a phone interview. “He’s studying his options.” Serageldin denied any wrongdoing.

Higgs and Siddiqui both implicated their former boss, saying Serageldin told them to overstate the value of mortgage- backed assets in a Credit Suisse trading book after the collapse of the U.S. housing market. Both men, who have plea agreements with the government, face sentences of as long as five years in prison on one count of conspiracy, the U.S. said.

Serageldin was charged with conspiracy, falsification of books and records and wire fraud. While the conspiracy charge carries a maximum five-year term, the wire fraud and falsification of books and records counts each carry a term of as long as 20 years in prison.

“We were surprised by the indictment if not the SEC complaint,” McGuire said in the interview yesterday. “We only learned of this last night for the first time. As you can imagine, my client is studying the complaint, conferring with counsel and considering his options.”

Bharara said at a Feb. 1 news conference announcing the case that his office didn’t consider Serageldin a fugitive.

If Serageldin doesn’t come to New York, Bharara said the U.S. will seek to extradite him. Ellen Davis, a spokeswoman for Bharara, declined to comment on McGuire’s statement about Serageldin’s cooperation with the U.S. attorney’s office.

The cases are U.S. v. Higgs, 12-cr-00088, and U.S. v. Siddiqui, 12-cr-00089, U.S. District Court, Southern District of New York (Manhattan). The SEC case is U.S. Securities and Exchange Commission v. Serageldin, 12-cv-00796, U.S. District Court, Southern District of New York (Manhattan).

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New Suits

Swiss Bank Wegelin Charged With Helping U.S. Clients Evade Taxes

Wegelin & Co., the 270-year-old private bank, became the first Swiss lender to face criminal charges in a broadening U.S. crackdown on offshore firms suspected of helping Americans evade taxes.

Wegelin helped Americans hide more than $1.2 billion in assets and evade U.S. taxes, according to an indictment filed yesterday in federal court in New York. The new charges expand on earlier ones filed Jan. 3 against three bankers at Wegelin’s Zurich branch accused of conspiring to help U.S. clients cheat on their taxes.

Prosecutors said that from 2002 to 2011, more than 100 U.S. taxpayers conspired with Wegelin, the three Zurich bankers -- Michael Berlinka, Urs Frei and Roger Keller -- and others. The bank held more than $1.2 billion in assets not declared to the Internal Revenue Service, according to the indictment.

“Wegelin Bank aided and abetted U.S. taxpayers who were in flagrant violation of the tax code,” Manhattan U.S. Attorney Preet Bharara said in a statement.

The U.S. and Switzerland are in talks to resolve a U.S. probe of offshore tax evasion. Wegelin was one of at least 11 banks under criminal investigation by the Justice Department’s tax division.

Wegelin announced on Jan. 27 that it agreed to a sale to Switzerland’s Raiffeisen Group.

Federal authorities yesterday also seized $16 million in Wegelin’s correspondent bank account in the U.S. at UBS AG.

Richard Strassberg, a lawyer who represents the bank in the U.S., declined to comment.

Prosecutors said that Wegelin and the three bankers wooed U.S. clients fleeing UBS, the largest Swiss bank. UBS avoided U.S. prosecution in 2009 by admitting it aided tax evasion, paying $780 million and handing over data on 250 accounts. It later disclosed information on about 4,450 more accounts.

The case is U.S. v. Berlinka, 12-cr-00002, U.S. District Court, Southern District of New York (Manhattan).

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JPMorgan Sued by Asset Management Fund Over Securities

JPMorgan Chase & Co. was sued by Asset Management Fund over claims it gave faulty information involving $515.6 million in residential mortgage-backed securities.

The complaint, filed in New York state Supreme Court in Manhattan on Feb. 1, accuses JPMorgan of making “material representations and omissions” regarding underwriting standards used to make mortgage loans that were pooled into the securities.

Asset Management Fund, based in Chicago, said it bought the securities from May 2003 to May 2007 from the defendants, which also include Bear Stearns & Co. and Washington Mutual Inc., both of which were acquired by JPMorgan.

“Plaintiffs did not know the true facts regarding defendants’ misrepresentations and omissions in the offering materials, and justifiably relied on those misrepresentations and omissions,” lawyers for Asset Management Fund said in court documents. “Defendants’ wrongdoing has led directly to plaintiffs’ damages, which include loss of market value on the securities.”

Tasha Pelio, a spokeswoman for New York-based JPMorgan, declined to comment on the lawsuit in an e-mail.

The case is Asset Management Fund v. JPMorgan Chase & Co., 650320/2012, New York state Supreme Court (Manhattan).

Nationwide Title Clearing Sued by Illinois Over Documents

Illinois Attorney General Lisa Madigan sued Nationwide Title Clearing Inc., a Florida company she claims caused the filing of faulty documents with county clerks.

“The practices that NTC used were a key contributor to the mortgage crisis by undermining the integrity and accuracy of the mortgage servicing and foreclosure process,” Madigan said yesterday in a statement.

Nationwide Title Clearing prepares documents for mortgage servicers to use against borrowers in default, foreclosure and bankruptcy, Madigan said. Among the documents are mortgage assignments used by lenders in foreclosures.

NTC employees signed forms used in Illinois foreclosures as officers of the foreclosing financial institutions and not Nationwide, often without reading or verifying the documents they signed, Madigan said.

“NTC creates documents through an assembly-line process,” Madigan said. “NTC signers typically have little or no role in the actual creation of documents that they sign.”

The complaint, which accuses the Palm Harbor, Florida-based company of unfair and deceptive acts, was filed yesterday in state court in Chicago.

Diane Stein, a spokeswoman for Nationwide, said she couldn’t immediately comment on the allegations because company officials hadn’t yet seen the complaint.

The case is Illinois v. Nationwide Title Clearing Inc., 12CH03602, Illinois Circuit Court, Cook County, Chancery Division (Chicago).

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

Lawsuits/Pretrial

Bank of America Wins Dismissal From Allstate Countrywide Suit

Bank of America Corp. won dismissal from Allstate Corp.’s lawsuit over the insurer’s alleged losses from $700 million in mortgage-backed securities purchased from Countrywide Financial Corp.

Bank of America, as a corporate parent, isn’t responsible for the liabilities of Countrywide, the mortgage lender it acquired in 2008, U.S. District Judge Mariana Pfaelzer in Los Angeles said yesterday. The judge found that the evidence Allstate provided wasn’t sufficient to support its allegations that Bank of America set out to defraud Countrywide’s creditors.

Pfaelzer in October had granted Bank of America’s request to be dismissed from the case and gave Allstate permission to amend its claims to address the deficiencies she identified. Allstate argued in its revised complaint that Bank of America structured the Countrywide acquisition so as to strip the unit of all its valuable assets and leave a “raided” shell for creditors to sue.

“This is significant for settlement negotiations,” James Kwak, a law professor at the University of Connecticut, said in a phone interview before the ruling was filed. “It gives Bank of America a card to play in negotiations.”

Bank of America merged Countrywide with a subsidiary and subsequently transferred most of the mortgage lender’s assets from that unit, Countrywide Financial, to other Bank of America operations and retired the Countrywide brand. Allstate claimed that the asset transfers should be treated as a so-called de facto merger under Delaware law.

Pfaelzer previously said that under Delaware law an asset transfer can’t be treated as a de facto merger, which would make Bank of America liable as the successor of Countrywide, unless there was fraud involved. Allstate argued that the consideration Bank of America paid the Countrywide subsidiary for the assets was insufficient and was evidence of fraud.

Maryellen Thielen, a spokeswoman for Northbrook, Illinois- based Allstate, didn’t return a phone call seeking comment on the decision after regular business hours.

The case is Allstate v. Countrywide, 11-05236, U.S. District Court, Central District of California (Los Angeles).

MF Futures Customers Compete to Lead Lawsuit Against Corzine

MF Global Inc. futures customers are competing to lead a lawsuit against Jon Corzine, the parent company’s former chief executive officer, over the alleged theft of $1.2 billion of their assets.

Court filings show at least seven actions against Corzine by futures customers in Manhattan federal court. Plaintiffs who have nominated themselves to lead a potential group lawsuit include Sapere CTA Fund LP, which sued Corzine and other former MF Global Holdings Ltd. executives for $90 million; Seattle money manager William Fleckenstein, along with Kay P. Tee LLC, a firm with a trading account at MF Global; and, together, Davide Accomazzo and Roberto Calle Gracey, who said in court papers they filed the first action on behalf of futures customers.

Futures customers currently are trying to persuade a judge that their suits shouldn’t be consolidated with an investor suit led by the Virginia Retirement System. While investors allege that Corzine made misleading statements that inflated the prices of MF Global securities, futures customers allege that he and other executives misappropriated customer funds, according to court papers.

Even the defendants and the laws they are alleged to have violated are different, lawyers for Kay P. Tee said in a letter filed in court Feb. 1. Investors allege securities fraud, while futures customers file claims under commodity and U.S. racketeering law, they said. Exchange CME Group Inc. and JPMorgan Chase & Co., banker to MF Global, are named in futures customer suits, they said.

Andrew Levander, a lawyer for Corzine, didn’t respond to an e-mail seeking comment on the lawsuits.

The main investor case is DeAngelis v. Corzine, 11-cv-7866, U.S. District Court, Southern District of New York (Manhattan).

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Barclays, UniCredit Bankers Should Face Trial, Prosecutor Says

Former UniCredit SpA Chief Executive Officer Alessandro Profumo is among 20 UniCredit and Barclays Plc executives facing fraud charges in a tax-evasion probe led by a Milan prosecutor, according to court documents.

Prosecutor Alfredo Robledo asked a court in the city to put the 20 individuals on trial for fraudulent representation in relation to an international investment plan known as Brontos, he said in a court filing yesterday. A judge will rule on the prosecutor’s request at a later date.

UniCredit, Italy’s largest bank, used the tax vehicle to increase the bank’s “economic benefits,” Profumo said at the company’s annual meeting in April 2010. Prosecutors have been investigating Brontos since last year when they seized 246 million euros ($321 million) in bank assets.

Profumo, 54, said in a statement yesterday that he welcomes the chance to be heard in court and he is convinced he acted correctly. He stepped down as UniCredit CEO in September 2010.

A spokesman for UniCredit declined to comment, as did a spokesman for Barclays in London.

Brontos was conceived to mask interest on a deposit account into dividends earned on fictitious securities, Robledo has said in court documents. Interest earned on deposits is taxed in full while dividends are taxed at 5 percent.

UniCredit in a November appeal won the return of the assets that were seized as part of the probe, according to court documents. UniCredit “remains convinced that both it and its employees acted correctly,” the Milan-based lender said in an October statement.

Vittorio Ogliengo, UniCredit’s co-head of financing and advisory, and Barclays bankers Rupak Chandra and Stefano Filippi are among those who may go to trial, court documents show. Ogliengo, Chandra and Filippi didn’t return e-mails seeking comment.

Group of 500 Female Wal-Mart Workers File U.S. Bias Claims

More than 500 former and current female Wal-Mart Stores Inc. employees filed sex-discrimination claims with the U.S. Equal Employment Opportunity Commission, their attorneys said.

The filings were made to preserve the women’s claims over pay and promotions against the world’s largest retailer after the U.S. Supreme Court last year said their cases couldn’t be litigated in a nationwide class-action, or group, lawsuit.

“The fight continues to seek justice for the women employees of Wal-Mart,” two of their lawyers, Joseph M. Sellers and Brad Seligman, said in a statement announcing the number of EEOC claims filed through Jan. 27.

The Supreme Court, in a 5-4 decision June 20, said the women failed to show a common corporate policy that led to discrimination against workers at thousands of Wal-Mart and Sam’s Club stores across the U.S.

The workers “provide no convincing proof of a company-wide discriminatory pay and promotion policy,” said Justice Antonin Scalia in the court’s majority opinion. Such a policy would help justify allowing the claims to proceed as one lawsuit.

While the justices voted to reverse a lower-court ruling allowing the women to sue as a group, four members of the high court said they’d have ordered further proceedings.

“Anyone with a legitimate claim should have their day in court,” Greg Rossiter, a spokesman for Bentonville, Arkansas- based Wal-Mart, said yesterday in a telephone interview. “These claims have never been heard on their merits.”

The Supreme Court case was Wal-Mart Stores Inc. v. Dukes, 10-277, U.S. Supreme Court (Washington).

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Stryker President’s Criminal Charges Dropped by Prosecutors

A former president at Stryker Corp. won’t be prosecuted on charges of marketing an unapproved mixture of two products for strengthening human bone growth, U.S. lawyers told a judge.

The government will abandon its 2009 indictment of Mark Philip, who ran Stryker Biotech LLC, prosecutors said yesterday in federal court in Boston. The move follows the government’s decision last month to drop charges during the trial of three former Stryker sales representatives. During that trial, Stryker pleaded guilty to a misdemeanor and paid a $15 million fine in connection with the unapproved marketing of the drugs.

“Earlier today, the government had an opportunity to review some documents that had previously been withheld as privileged,” Assistant U.S. Attorney Jeremy M. Sternberg told U.S. District Judge George O’Toole Jr. yesterday at a pre-trial hearing. “After reviewing the documents, it’s the government’s plan to file a motion to dismiss in the case against Mr. Philip.”

The decision to drop charges against the fourth and final defendant in the case marks a setback for the U.S. attorney’s office in Massachusetts, which has led the nation in health-care prosecutions in recent years. Philip, the president from 2004 to 2008, was charged with wire fraud and conspiracy. He faced as long as 20 years in prison if convicted.

“We were able to give the government documents they had not seen before that showed Mark acted in good faith,” said Philip’s attorney, Stephen G. Huggard of Edwards Wildman Palmer LLP. “We showed some of our defense.”

Huggard wouldn’t specify what the documents were. He said the government hadn’t agreed to drop the case until an hour before the hearing.

The case is U.S. v. Stryker Biotech LLC, 09-cr-10330, U.S. District Court, District of Massachusetts (Boston).

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Macy’s Seeks Injunction in Martha Stewart Contract Suit

Macy’s Inc. asked a New York state Supreme Court justice to issue a preliminary injunction against Martha Stewart Living Omnimedia Inc. in a filing Feb. 1 in Manhattan.

The retailer sued in New York state Supreme Court on Jan. 23 seeking to stop New York-based Martha Stewart Living from executing a new sales agreement with J.C. Penney Co. Macy’s, based in Cincinnati, said it renewed a 2006 agreement for Martha Stewart-branded products that expires in 2018.

In court documents filed Feb. 1, lawyers for Macy’s asked Justice Jeffery K. Oing to issue the injunction, saying that the agreement grants the retailer an exclusive right to make and sell Martha Stewart products in certain categories and the right to refuse to make and sell other products that are within Macy’s product line.

An injunction is necessary to prevent Macy’s from “suffering immediate, continuing and incalculable harm as a result of the unexplained and unlawful breach by defendant Martha Stewart Living Omnimedia Inc. of its exclusive license to Macy’s,” lawyers for Macy’s said in the court documents.

“We value our relationship with Macy’s and are confident that we are not breaching the terms of our agreement, Jeanne Meyer, a spokeswoman for Martha Stewart Living, said in an e- mail. ‘‘MSLO believes it’s good for our partners, our consumers and our brand to have a wide range of Martha Stewart products available in a variety of top retailers and we structure all of our commercial agreements with this strategy in mind.”

The case is Macy’s Inc. v. Martha Stewart Living Omnimedia Inc., 650197/2012, New York State Supreme Court (Manhattan).

For the latest lawsuits news, click here.

Trials/Appeals

Primary Global’s Fleishman Asks to Stay Free During Appeal

Former Primary Global Research LLC executive James Fleishman, sentenced to 2 1/2 years in prison for his role in an insider-trading scheme, is asking a federal appeals court in New York to allow him to remain free on appeal.

Fleishman was convicted in September of two separate conspiracy charges for what the U.S. said was a scheme to obtain and pass along confidential information from technology company employees who moonlighted as consultants for Mountain View, California-based Primary Global, a so-called expert-networking firm. The tips were given to fund managers who paid Primary Global for consultation calls, prosecutors said.

In December, U.S. District Judge Jed Rakoff in Manhattan denied Fleishman’s request to dismiss his conviction or grant him a new trial. Rakoff ordered Fleishman to surrender to U.S. Bureau of Prisons officials by Feb.7.

“Mr. Fleishman will present substantial questions on appeal, and therefore this court should order bail pending appeal,” his lawyer, Ethan Balogh, said in court papers filed Jan. 31 with the U.S. Court of Appeals in New York.

Balogh said prosecutors failed to establish that any acts committed to further the conspiracy occurred in New York. He also said Fleishman, of Santa Clara, California, was improperly barred from testifying in his own defense after he was directed to turn over his personal diaries to prosecutors.

“This appeal will present a novel question, and the government’s analysis reveals the weakness of its position,” Balogh said in court papers. He didn’t return a voice-mail message seeking comment on the filing.

The case is U.S. v. Nguyen, 11-cr-32, U.S. District Court, Southern District of New York (Manhattan).

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J&J Hid Risperdal Studies to Boost Drug Sales, Lawyer Says

Johnson & Johnson hid studies showing its Risperdal anti- psychotic drug caused diabetes to protect billions of dollars in sales, a lawyer said in the first personal-injury claim over the medication to go to trial.

Researchers at J&J’s Janssen unit knew as early as 1999 that a study found Risperdal caused diabetes at a higher rate than a competing drug and failed to hand over the results to regulators probing links between the disease and anti-psychotic medicines, Fletch Trammell, a lawyer for a former Risperdal user, told a New Jersey jury yesterday in opening statements.

“The evidence will show Janssen buried studies for a competitive advantage,” Trammell told jurors in state court in New Brunswick, New Jersey. J&J, the world’s second-largest health-products maker, is based in the city.

The trial of Gary Skala’s claims that his 14 years’ worth of Risperdal use caused his diabetes began two weeks after J&J agreed to pay $158 million to settle Texas officials’ claims that it fraudulently marketed the drug.

While J&J has faced four states’ claims that it defrauded Medicaid programs by misleading doctors and regulators about Risperdal’s diabetes risks, Skala’s case is the first brought by an individual patient to be presented to a jury.

The drugmaker contends that the study evaluating Risperdal’s diabetes risk against that posed by Eli Lilly & Co.’s Zyprexa anti-psychotic medication was flawed and that’s why it wasn’t made public, one of the company’s lawyers told jurors yesterday.

“Nothing was buried, nothing was hidden and no one was tricked,” Jeffrey Peck, a lawyer for J&J, said in his opening statement.

The New Jersey case is Skala v. Johnson & Johnson, MID- L-6820-06 (MT), Superior Court of New Jersey, Law Division, Middlesex County (New Brunswick).

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Stanford Financial’s Davis Says Founder Conspired in Fraud

Former Stanford Financial Group Co. finance chief James Davis, testifying as a U.S. government witness, said company founder R. Allen Stanford conspired with him in an investment fraud.

Davis, who pleaded guilty to three felony charges in August 2009 and agreed to cooperate with prosecutors, began testifying yesterday against his former boss and Baylor University roommate at Stanford’s criminal trial in federal court in Houston.

Asked by Assistant U.S. Attorney William Stellmach if he committed any crimes at Houston-based Stanford Financial Group, Davis replied, “Yes sir, I did.”

Davis told the court he lied about the truthfulness of the statements of Stanford International Bank Ltd., the Antigua- based financial institution prosecutors say sold fraudulent certificates of deposit to investors.

“I lied about the nature of these investments,” Davis said.

Stellmach then asked, “Who conspired with you to commit those crimes?” Davis replied, “Mr. Allen Stanford and others.”

Stanford, 61, is accused of leading a $7 billion investment fraud scheme. Charged with 14 criminal counts including mail fraud, wire fraud and obstruction of a U.S. Securities and Exchange Commission probe, the financier maintains he isn’t guilty.

The criminal case is U.S. v. Stanford, 09-cr-342, U.S. District Court, Southern District of Texas (Houston).

For the latest trial and appeals news, click here.

Verdicts/Settlements

Deutsche Bank Told to Pay $19.7 Million Over Currency Option

Deutsche Bank AG, Germany’s biggest bank, was ordered to pay 15 million euros ($19.7 million) in a lawsuit over a currency option product it sold to a client.

The Frankfurt Regional Court yesterday ruled partly in favor of German travel company Schauinsland-Reisen GmbH, which had sought 30 million euros. The judges ruled the company was experienced in using options to hedge currency risks, so it was partly responsible for its losses, court spokesman Arne Hasse said.

“When Deutsche Bank first sold the product it didn’t have to warn about risks, as the structure of the option could be easily understood,” Hasse said. “But when additional options were bought after first losses and the risks increased, the bank at some point should have warned its customer about the risk accumulation.”

Germany’s highest civil court last year said the Frankfurt- based lender had to cover losses caused by a product it called a “CMS Spread Ladder Swap” because the bank didn’t disclose the product had an initial negative market value. The judges yesterday didn’t adopt the top court’s reasoning because the currency derivatives weren’t as complicated as the CMS swaps, Hasse said.

Deutsche Bank failed to prove that it properly warned Schauinsland-Reisen as the risks increased, Hasse said. About 60 follow-up derivatives were sold, he said.

Deutsche Bank spokesman Christian Streckert said the lender will only comment when it’s received the written judgment. It will then decide whether to appeal, he said.

Yesterday’s case is LG Frankfurt am Main, 3-04 O 50/10.

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India’s Supreme Court Scraps Mobile Licenses Amid 2G Probe

India’s Supreme Court canceled 122 mobile-phone permits whose sale in 2008 sparked the nation’s biggest corruption investigation and led to the jailing of a former minister.

Shares of Unitech Ltd., part of the group that bought licenses used by Norway’s Telenor ASA for its operations in India, slumped in Mumbai as the court scrapped the permits and ordered operators to pay as much as 50 million rupees ($1 million) as penalty, according to the ruling by judges G.S. Singhvi and A.K. Ganguly.

India’s auditor said in a 2010 report the sale of the airwaves lacked transparency and ineligible bidders bought them at “unbelievably low” prices, denying the treasury of as much as $31 billion. Bharti Airtel Ltd., India’s largest wireless operator, surged the most in 19 months on speculation the carrier may win more spectrum when the government reallocates the frequencies released by the cancellations.

“Finally, some action is being taken on the scam,” said Deepti Chaturvedi, executive director of equity research at CLSA India Ltd. in Mumbai. “I wouldn’t jump to the conclusion” the cancellations would help incumbents like Bharti, since the spectrum would likely be auctioned, she said.

Former telecommunications minister Andimuthu Raja, who has denied all wrongdoing, is in jail in New Delhi facing trial, while former officials in his ministry and a lawmaker got bail.

Uninor, the Indian venture between Telenor and Unitech Group, said it had been “unfairly treated,” according to an e- mailed statement yesterday. It will continue operations for the time being and “exercise all options available to ensure that Uninor continues to operate in India.”

Tata Teleservices Ltd., Unitech Wireless, and DB Realty Ltd. have each been ordered to pay 50 million rupees in penalties, while Loop Telecom and Sistema Shyam Teleservices have been ordered to pay 20 million rupees each.

The government will abide by the court’s verdict and prepare rules for auctioning the airwaves, Kapil Sibal, minister of communications and information technology, told reporters in New Delhi yesterday. The ministry will “delink” the spectrum it provides to carriers from the permits, he said.

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Dow, DuPont, Denki Lose EU Appeal to Cut Rubber Cartel Fines

DuPont Co., Dow Chemical Co., and Denki Kagaku Kogyo KK lost bids to overturn antitrust fines by the European Union for claims they colluded to fix prices in the rubber chemical industry.

The European Commission was right in the findings and fines it imposed for the cartel, the EU’s General Court said in three separate rulings for the companies.

The EU’s antitrust regulator has “wide discretion as regards the methods of calculating fines” and didn’t err in the amounts or the fines themselves, the Luxembourg-based tribunal said yesterday.

Five companies were fined a total of 247.6 million euros ($325 million) in 2007 by the commission, the European Union’s antitrust regulator, for colluding on prices for chloroprene rubber, used to make latex rubber, from at least 1993 to 2002, the commission said. Bayer AG, Germany’s largest drugmaker and another repeat offender, escaped a 201 million euro fine, as it had told the regulator about the cartel. An appeal by Eni SpA, which received the heaviest fine, is pending.

“DuPont is disappointed with the decision” and is considering whether to appeal, Eduardo Menchaca, a spokesman for the company, said yesterday.

Dow will appeal the ruling “as we continue to remain convinced of the correctness of our position,” the company said in an e-mailed statement.

Naoshi Fukawa, a spokesman for Denki Kagaku in Tokyo, said the company can’t comment until it has read the ruling.

DuPont received a 15 million-euro fine and Dow was fined 4.4 million euros individually. The commission fined their former joint venture 44.3 million euros, to be shared by the two companies. Dow transferred its stake in the joint venture to Wilmington, Delaware-based DuPont in 2005 and it was renamed DuPont Performance Elastomers LLC.

Eni, Italy’s largest oil company, got a 60 percent fine increase to 132.2 million euros for being a repeat offender. Its appeal is being reviewed separately.

Tosoh Corp., a Japan petrochemical maker, didn’t fight the decision after receiving a 50 percent cut in its fine for cooperating with the investigation.

The cases are T-76/08 Pending Case, E.I. du Pont de Nemours and others v Commission; T-77/08 Pending Case, Dow Chemical v Commission; T-83/08 Pending Case, Denki Kagaku Kogyo and Denka Chemicals v Commission.

For the latest verdict and settlement news, click here.

--With assistance from Chris Dolmetsch, Linda Sandler and Patricia Hurtado in New York, Andrew Harris in Chicago, Karin Matussek in Frankfurt, Sonia Sirletti and Elisa Martinuzzi in Milan, Laurel Brubaker Calkins in Houston, Ketaki Gokhale in Mumbai, Jef Feeley in Wilmington, Delaware, Edvard Pettersson in Los Angeles and David Voreacos in Newark, New Jersey. Editor: Stephen Farr

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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