Bloomberg News

Goldman Sachs, Insider Trading, Facebook, BNY in Court News

February 22, 2012

(Adds Commerzbank, Vermont plant and New York City Schools in Trials/Appeals; Koss in Settlements; Harbinger in New Suits and Ernst & Young and Google in Lawsuits/Pretrial.)

Feb. 21 (Bloomberg) -- A former Goldman Sachs Group Inc. computer programmer was freed after his conviction for stealing the bank’s high-speed trading code was reversed by a U.S. appeals court.

Wearing a gray sweatsuit, white tennis shoes and a huge grin, Sergey Aleynikov, 42, left the Manhattan courthouse where he had been convicted in December 2010 and entered a waiting car with his lawyer, Kevin Marino.

“Justice occasionally works,” Aleynikov told reporters as he left. “This was such big news to me I haven’t had any time to think about what would happen.”

Aleynikov, a naturalized U.S. citizen born in Russia, said he hoped to be with his three daughters, ages 8, 6 and 3. Until Feb. 17, he had been serving an eight-year sentence at the federal prison in Fort Dix, New Jersey.

After hearing oral arguments from both prosecutors and Marino on Feb. 16, the U.S. Court of Appeals in Manhattan issued a one-page order vacating Aleynikov’s convictions for economic espionage and the interstate transportation of stolen property. The appeals court said it would issue an opinion explaining the ruling later.

The appeals court also issued a mandate that would have foreclosed any further challenge to its decision. The office of Manhattan U.S. Attorney Preet Bharara persuaded the court to set aside the mandate so it can argue for a rehearing of the appeal, either before a three-judge panel or all the court’s available judges. Ellen Davis, a spokeswoman for Bharara’s office, declined to comment on the ruling.

U.S. District Judge Denise Cote, who presided over the trial, ordered Aleynikov released from prison Feb. 17.

Aleynikov was convicted by a jury of violating the Economic Espionage Act and the Interstate Transportation of Stolen Property Act. He was sentenced last March.

On his last day of work at New York-based Goldman Sachs in June 2009, Aleynikov uploaded hundreds of thousands of lines of source code from the firm’s high-frequency trading system, prosecutors said.

He circumvented Goldman Sachs’s security, sent the code to a server in Germany, compressed and encrypted it, and took it with him to a meeting with new employers in Chicago, the U.S. said. Prosecutors argued Aleynikov wanted it as a “cheat sheet” to start a trading system at his new job.

During oral arguments on Feb. 16, the three-judge appeals panel criticized the government’s application of the espionage act to Aleynikov’s actions, asking the prosecutor how the crime occurred and how it affected commerce.

The judges -- Dennis Jacobs, 67, Guido Calabresi, 79, and Rosemary Pooler, 73 -- also asked if taking Goldman Sachs’s trading code was comparable to taking copyrighted material or bringing an employee manual to a new job.

The case is U.S. v. Aleynikov, 1:10-cr-00096, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

Trials/Appeals

Stanford CFO Allegedly Forged Boss’s Name, Refused Reforms

R. Allen Stanford was furious to learn that his finance chief, James Davis, forged his name to a 2007 employee memo abolishing a department Stanford created to “reel in” expenses, a former executive testified.

“He called me at home at 11 or 12 one evening, and he was very mad,” Linda Wingfield, Stanford’s former executive director of special projects, told jurors Feb. 17 at Stanford’s criminal fraud trial in federal court in Houston. “He said he did not sign it.”

Wingfield, who held a number of executive positions at Stanford’s companies over 10 years, testified that Davis refused to give the boss access to a corporate computer system with Stanford Financial Group Co.’s financial records. Testifying as a defense witness, she said Davis also ignored or circumvented policies Stanford instituted to clamp down on expenditures.

“He fought us from day one, a department set up by the chairman to try to control costs,” Wingfield said of Davis. “Mr. Davis was always refusing.”

Wingfield’s testimony may bolster Stanford’s claim that it was Davis, not he, who ran the financial services empire and engineered a fraud that cost investors more than $7 billion. Davis pleaded guilty and testified as a government witness earlier in the trial.

Prosecutors accuse Stanford of stealing more than $2 billion from certificates of deposit at his Antigua-based Stanford International Bank Ltd. Instead of holding investor funds in safe assets as he promised, Stanford used their money to fund an extravagant lifestyle and risky ventures including Caribbean airlines, real estate projects and cricket tournaments, prosecutors say.

Stanford, 61, has been jailed as a flight risk since being indicted in June 2009. If convicted of the most serious charges, he faces as long as 20 years in prison.

Wingfield, who also ran some of Stanford’s side ventures, testified Feb. 17 via a video link from federal court in Orlando, Florida. She said she was too ill to travel.

Robert Scardino, Stanford’s lawyer, asked Wingfield who controlled “all the financial issues, including the treasury, accounting, internal audits and investments” at Stanford’s companies.

“Mr. Davis -- and the insurance, too,” she said. “There was nobody else who handled all the books.”

Wingfield told jurors she believed Stanford’s court- appointed receiver duplicated efforts and wasted money during the “chaotic” period after the businesses were seized by the U.S. Securities and Exchange Commission in February 2009.

More than 40 Stanford investors crowded into the courtroom Feb.17 to mark the third anniversary of the SEC crackdown. Angie Shaw, leader of the Stanford Victims’ Coalition, said the group’s motto is “3 and $0,” meaning “three years and zero recovery” by defrauded investors.

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 Defends Bonus Cut After Bank Fell Off ‘Cliff’

Commerzbank AG didn’t act dishonestly in going back on a promise to pay bankers from a guaranteed bonus pool, the German lender’s attorney said in a London trial over payments to Dresdner Kleinwort staff.

Commerzbank, which took over Dresdner in 2009 and cut bonuses by 90 percent or more, is defending a lawsuit brought by 104 Dresdner bankers who want individual payouts of as much as 2 million euros ($2.7 million).

Stefan Jentzsch, Dresdner’s former chief executive officer, had promised at a 2008 company meeting to set aside 400 million euros for discretionary pay. Dresdner’s record loss that year justified changing the policy and Jentzsch’s pledge wasn’t legally binding, Commerzbank lawyer Thomas Linden said.

“It may be perfectly honorable to withdraw from a non- binding commitment in circumstances when the business has fallen off a cliff,” Linden told the judge in closing arguments yesterday. “Every banker, we say, in the U.K. knows that until you have a document which sets out the award, you don’t have an entitlement.”

European banks face pressure from governments and regulators over pay. Executives at Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc should have to give up bonuses so individuals aren’t rewarded for failure, the U.K. Treasury said, while European financial services chief Michel Barnier has called for new curbs on excessive compensation.

The case “comes at a time when the words ‘banker’s bonus’ are perhaps not the most popular in the English language,” Andrew Hochhauser, a lawyer representing some of the Dresdner claimants, said in his closing arguments.

Nonetheless, the 2008 bonus pool promise had been agreed with then-owners Allianz SE in consultation with the U.K. Financial Services Authority as a way to stop staff leaving Dresdner, he said.

Vermont Attorney General Appeals Ruling on Yankee Nuclear Plant

The state of Vermont filed an appeal of a federal court ruling allowing Entergy Corp. to keep its Vermont Yankee nuclear power plant open.

William Sorrell, the state’s attorney general, said a Jan. 19 ruling by U.S. District Judge Garvan Murtha “improperly limits” the state’s role in deciding whether the nuclear power plant stays open past March 21. The appeal was filed Feb. 17.

Murtha said in his ruling last month that Vermont lacked the authority to deny Entergy a license to operate the reactor after March.

Entergy sued Sorrell, Vermont Governor Peter Shumlin and members of its Public Service Board in April 2011. Entergy claimed that the state didn’t have the authority to overrule the U.S. Nuclear Regulatory Commission, which renewed Entergy’s license to operate the power station until 2032.

The company has said in court papers that Vermont Yankee, the state’s only nuclear power plant, supplies about 33 percent of Vermont’s electricity. It pays about $13 million a year in state fees and taxes. The plant is in Vernon, on the Connecticut River in the southeastern corner of the state.

New Orleans-based Entergy is the second-largest operator of U.S. nuclear plants.

The case is Entergy Nuclear Vermont Yankee v. Shumlin, 1:11-00099, U.S. District Court, District of Vermont (Brattleboro).

The appeal will be heard by the Court of Appeals for the Second Circuit in New York.

New York Can Enforce Ban Against Use of Schools for Worship

New York City can enforce a ban on the use of public schools for worship services, a U.S. appeals court said, restricting a judge’s temporary halt on the ban to only the group that brought the lawsuit.

“The district court’s finding that Bronx Household has shown likelihood of success on the merits of its case does not justify enjoining the board from enforcing its order against non-parties,” the appellate court in Manhattan said Feb. 17.

U.S. District Judge Loretta Preska on Feb. 16 granted a 10- day temporary order blocking the city’s ban. The Bronx Household of Faith had sought the order to allow its members to continue meeting in a New York City public school on Sundays, in contravention of an order that went into effect Feb. 13.

Last year, the appellate court, overturning Preska’s 2007 decision in favor of the church, ruled that the city may prohibit religious groups from using school facilities outside of regular school hours for “religious worship services.”

The legal battle dates to 1995, when the Bronx Household of Faith, an evangelical Christian church, sued the city. The church argued the city was violating the First Amendment by denying it use of a school while allowing other community groups access to campuses for their activities.

The U.S. Supreme Court in December refused to consider the appeals court’s ruling reversing Preska’s decision. Lawyers for the church returned to argue before Preska that the city’s ban violates the First Amendment’s free exercise clause, which forbids government interference in religious activities.

Jordan Lorence, a lawyer with the Alliance Defense Fund in Washington who represents the Bronx Household of Faith, said in a phone interview the appeals court’s order didn’t deal with the merits of the case.

“It’s somewhat disappointing but it’s not a major ruling,” Lorence said.

The case is The Bronx Household of Faith v. Board of Education of the City of New York, 01-cv-08598, U.S. District Court, Southern District of New York (Manhattan).

For the latest trial and appeals news, click here.

Verdicts/Settlements

Ex-SanDisk Employee Pleads Guilty in Kinnucan Insider Case

Former SanDisk Corp. executive Donald Barnetson pleaded guilty to participating in a securities fraud scheme with John Kinnucan, an expert networking consultant who was also charged.

Barnetson, 37, pleaded guilty in federal court in Manhattan Feb. 17 to one count of conspiracy to commit securities and wire fraud. He faces as long as five years in prison and was ordered released on $50,000 bond.

“I conspired with a consultant to provide confidential information with regard to my employer at the time, SanDisk Corp.,” Barnetson told U.S. Magistrate Judge Gabriel Gorenstein in the hearing.

Barnetson, a former senior director of original equipment manufacture strategy for SanDisk, passed tips to Kinnucan who shared them with his clients, which included hedge funds and money managers, according to Barnetson’s plea agreement with the government.

Prosecutors claim Barnetson tipped Kinnucan in July 2010 about SanDisk’s anticipated revenue, which wasn’t public. In September 2010, he told Kinnucan about confidential negotiations about a legal dispute between SanDisk and Apple Inc., according to the complaint.

Kinnucan paid Barnetson with a $25,000 investment in a business he was starting, as well as meals at expensive restaurants and food deliveries, according to the Kinnucan complaint. Kinnucan also gave Barnetson inside information about other companies, according to prosecutors.

Kinnucan, 54, the Broadband Research LLC founder who said he refused to secretly record a money manager in a nationwide U.S. probe of insider trading, was charged with one count of conspiracy to commit securities fraud, one count of conspiracy to commit wire fraud and two counts of securities fraud in the complaint unsealed Feb. 17 in federal court in New York.

He was arrested at his home in Portland, Oregon, Feb. 16 the Federal Bureau of Investigation said. Elizabeth Steele, an FBI spokeswoman in Portland, said Kinnucan was in the Multnomah County Jail.

Lee Flanagin, a spokesman for Milpitas, California-based SanDisk, said Barnetson left the company in early 2011.

The criminal case is U.S. v. Kinnucan, 12-mj-00424, and the civil case is SEC v. Kinnucan, 12-cv-01230, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

SEC Submits Revised Koss Settlement After Earlier Rejection

The U.S. Securities and Exchange Commission submitted a revised settlement of a lawsuit against stereo headphone maker Koss Corp. and its chief executive officer after a judge rejected an earlier one as too vague.

The SEC sued Milwaukee-based Koss in October, claiming it had filed “materially inaccurate” financial statements from 2005 to 2009. The agency said the failure of Michael J. Koss, who was CEO and chief financial officer, to supervise his accounting staff enabled another executive to embezzle $30 million.

The SEC on Feb. 16 submitted a new settlement to U.S. District Judge Rudolph T. Randa in Milwaukee after his rejection of a prior one in December. As in the earlier one, the new agreement requires the CEO to forfeit $450,000 and 160,000 options and to cooperate with the SEC. Neither the company nor the Koss will admit or deny the SEC’s claims.

“There was no substantive difference” between the two settlements, SEC lawyer Andrea Wood said Friday in a telephone interview.

After rejecting the earlier proposal, Randa in December asked the SEC to explain how it calculated the amount that Koss would pay. SEC lawyers said the sum was equal to bonuses and incentive pay that he received for the fiscal years 2008 and 2009 and part of 2010.

Randa said on Feb. 1 that the SEC’s response “largely” satisfied his concerns.

Alan Berkeley, a partner in Pittsburgh-based K&L Gates LLP who is representing the company and the CEO, didn’t immediately respond to a voice-mail message seeking comment on the revised settlement.

Sujata Sachdeva, a former Koss finance executive, pleaded guilty in 2010 to embezzling more than $30 million. She was sentenced to 11 years in prison.

The case is U.S. Securities and Exchange Commission v. Koss Corp., 11-cv-00991, U.S. District Court, Eastern District of Wisconsin (Milwaukee). The criminal case is U.S. v. Sachdeva, 10-cr-00006, U.S. District Court, Eastern District of Wisconsin (Milwaukee).

MOEX Agrees to Pay $90 Million to Settle U.S. Spill Claims

Mitsui & Co.’s MOEX Offshore 2007 LLC will pay $90 million to the U.S. and five states for violating the Clean Water Act in the 2010 Gulf of Mexico oil spill, according to court filings.

The U.S. filed a consent order in federal court Feb. 17 outlining the settlement. The agreement requires MOEX to pay $45 million in civil penalties to the U.S. and about $25 million total to Alabama, Florida, Louisiana, Mississippi and Texas, court papers show. MOEX will also pay $20 million for land acquisition projects, the U.S. said.

MOEX held a 10 percent share of BP Plc’s Macondo well, which blew up in April 2010, setting off the largest offshore oil spill in U.S. history. The company earlier paid BP about $1 billion to settle claims. The U.S. has also sued BP and Anadarko Petroleum Corp., which held a 25 percent interest in the well, over Clean Water Act violations.

The settlement is the first of a series of expected agreements with the U.S. as lawsuits over the 2010 spill approach a trial set for Feb. 27. The U.S. Justice Department sued MOEX, BP, Anadarko and Transocean Ltd., which owned the rig that exploded, in December 2010, seeking fines for each barrel of oil discharged.

The MOEX settlement doesn’t affect claims against or potential recoveries from other companies over the spill, the Justice Department said Feb. 17. MOEX no longer owns a share of the lease, the U.S. said.

The Macondo well blowout and the explosion that followed killed 11 workers. The sinking of Transocean’s Deepwater Horizon drilling rig and subsequent spill led to hundreds of lawsuits against London-based BP and its partners and contractors.

U.S. District Judge Carl Barbier in New Orleans, 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.

MOEX said in the consent decree that it wasn’t admitting any liability under the Clean Water Act. The settlement also wasn’t “an admission by the MOEX entities of any liability for civil payments or any other claim out of or relating to the Deepwater Horizon incident,” according to the filing.

The government case is U.S. v. BP Exploration & Production Inc., 2:10-cv-04536, U.S. District Court, Eastern District of Louisiana (New Orleans). The lawsuit is part of 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.

Facebook Wins Lawsuit Against Power Ventures Over Login Data

Facebook Inc., operator of the world’s largest social- networking site, won a 2008 lawsuit accusing Power Ventures Inc.’s Power.com of accessing and storing users’ login data without authorization.

The ruling Feb. 16 by U.S. District Judge James Ware paves the way for hearings on damages for Facebook.

“The undisputed facts establish that defendants circumvented technical barriers” to access Facebook’s site, Ware wrote in a 19-page opinion issued without a trial.

Facebook sued Power Ventures in December 2008 in federal court in San Jose, California, saying Power.com offered users the ability to retrieve their Facebook messages and other information from Facebook’s computer servers without permission.

Facebook, based in Menlo Park, California, accused Power.com of infringing its copyrights and trademarks and violating computer fraud and unfair competition laws. It sought a court order prohibiting further access and unspecific damages.

Power Ventures is based in the Cayman Islands, according to court papers. Power.com is up for sale on the Internet.

“We are pleased that the court ruled in our favor,” Craig Clark, lead litigation counsel for Facebook, said in an e-mailed statement. “We will continue to enforce our rights against bad actors who attempt to circumvent Facebook’s privacy and security protections and spam people.”

“Facebook has established a dangerous precedent for the future of users’ rights to own and control their data,” said Steven Vachani, chief executive officer of Power Ventures, in an e-mailed statement. “We intend to aggressively continue this fight.”

The case is Facebook Inc. v. Power Ventures Inc., 08- cv-5780, U.S. District Court, Northern District of California (San Jose).

For the latest verdict and settlement news, click here.

New Suits

BNY Accused of $1.5 Billion Fraud in Amended U.S. Complaint

Bank of New York Mellon Corp., the world’s largest custody bank, defrauded clients of more than $1.5 billion through foreign-exchange trades, according to a new complaint by the U.S. government.

The bank “repeatedly lied” about a service for foreign currency transactions and defrauded clients, including pension funds and federally insured financial institutions, of more than $1.5 billion, the U.S. Attorney’s Office in Manhattan said in an amended complaint. It was filed Feb. 16, according to the office.

The government’s lawsuit is one of several brought against the bank, including one by New York Attorney General Eric Schneiderman, alleging it defrauded clients through its so- called standing instruction foreign-exchange service.

“Standing instruction was so much more profitable to BNYM than any other foreign exchange service because it relied on a fraudulent business model,” U.S. Attorney Preet Bharara said in the filing.

In the first complaint filed in October, the U.S. Attorney’s Office said the bank defrauded clients of “hundreds of millions of dollars.” Part of the lawsuit was resolved under an agreement approved last month.

“As we have said before regarding this lawsuit, we believe it is without merit, and we will defend ourselves in court,” said Kevin Heine, a Bank of New York spokesman.

The case is U.S. v. Bank of New York Mellon Corp., 11-6969, U.S. District Court, Southern District of New York (Manhattan).

Harbinger Capital, Falcone Sued Over LightSquared Investment

Hedge fund manager Phil Falcone and his Harbinger Capital Partners were sued by a New York woman who claims she and others were misled about the fund’s decision to put most of the money they invested into LightSquared Inc.

Lili Schad, a Wallkill, New York, resident who said she invested $4 million with Harbinger, claims she wasn’t told that more than 60 percent of the partnership’s money went into LightSquared, a company attempting to build a high-speed wireless network, according to a complaint filed Feb. 17 in federal court in Manhattan.

Schad, who seeks to represent all the limited partners in Harbinger Capital Partners Fund I LP, also claims she wasn’t informed that LightSquared’s plan to build the network faced obstacles from U.S. regulators. The suit seeks unspecified damages.

“Had plaintiff known that defendants would concentrate the fund’s investments in LightSquared or known of the regulatory obstacles the company faced, she would have refrained from investing in the fund or immediately sought to withdraw her investment from the fund,” Schad said in the complaint.

Schad alleged that Harbinger allowed some “favored investors,” including Goldman Sachs Group Inc., to redeem their investments on terms unavailable to others. She said that in 2009 Harbinger let Goldman Sachs redeem a $50 million investment in the fund.

Lew Phelps, an outside spokesman for Harbinger Capital, didn’t immediately return a phone message seeking comment on the suit.

The case is Schad v. Harbinger Capital Partners LLC, 12- CV-1244, U.S. District Court, Southern District of New York (Manhattan).

For more, click here.

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

Lawsuits/Pretrial

Geithner Should Testify in JPMorgan Suit, Lehman Says

U.S. Treasury Secretary Timothy Geithner should to be ordered to give a deposition in Lehman Brothers Holdings Inc.’s lawsuit against JPMorgan Chase & Co., which alleged the bank siphoned $8.6 billion out of Lehman in the 2008 credit crisis, helping to cause its collapse, the defunct firm and its creditors said.

Lehman has a March 16 deadline for completing its fact finding in the case, after interviewing more than 200 witnesses, creditors said in a filing in U.S. District Court in Washington. Lehman is asking a federal judge to order Geithner to be interviewed by lawyers for the firm and its creditors. The Treasury Department “has for many months delayed and ultimately refused to allow the testimony of Secretary Timothy F. Geithner,” which is key to the case, they said.

The filing, e-mailed to Bloomberg, was confirmed by a Lehman official who declined to be named. The filing was made in person, the official said. It couldn’t be immediately confirmed in court records.

Geithner, at the time president of the Federal Reserve Bank of New York, discussed the collateral JPMorgan was demanding for its loans with Richard Fuld and James Dimon, Lehman’s and JPMorgan’s chief executive officers, in the week before Lehman’s bankruptcy, according to the filing. He also met with Dimon and Henry Paulson, then Treasury Secretary, to discuss “concerns” that Dimon was using the crisis to strengthen his bank at Lehman’s expense, they said.

The Treasury also has refused to let Paulson testify, creditors said. They would address the refusal separately, they said. Lehman’s official committee of creditors works closely with the defunct firm on its plans and lawsuits, it has said.

Anthony Coley, a Treasury Department spokesman, didn’t immediately return a phone call and e-mail message seeking comment on the filing. Joseph Evangelisti, a JPMorgan spokesman, didn’t immediately respond to an e-mail seeking comment on Lehman creditors’ account of Dimon’s conversations with officials.

Lehman filed the biggest bankruptcy in U.S. history in 2008, listing $613 billion in debt.

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).

For more, click here.

New York Seeks to Pursue Ernst & Young Lehman Fee Suit

Ernst & Young LLP, bankrupt Lehman Brothers Holdings Inc.’s former auditor, should “disgorge” $125 million in fees earned in an alleged fraud involving so-called Repo 105 transactions that concealed tens of billions of dollars in debt, the New York attorney general said.

Attorney General Eric Schneiderman asked a judge Feb. 17 to let him pursue the suit after the auditing firm tried to get it dismissed. The state is limited by law from recovering the fees for itself or for Lehman’s former shareholders, Ernst & Young said.

“E&Y is wrong on every count,” Schneiderman said in a court filing in U.S. District Court in Manhattan. “It is well- settled that the state can, and frequently does, obtain disgorgement of ill-gotten gains under public enforcement statutes.”

Repo 105 transactions are a form of short-term financing that Lehman used to move as much as $50 billion off its balance sheet temporarily to show investors it wasn’t carrying too much debt, according to a bankruptcy examiner’s report. The report was used as a basis for many suits, including one that Ernst & Young is fighting by investors including the Alameda County Employees’ Retirement Association, which alleges the firm made misleading statements about Lehman’s finances before its 2008 bankruptcy.

Charlie Perkins, an Ernst & Young spokesman, didn’t immediately respond to a call and e-mail after regular business hours seeking comment on the attorney general’s filing. The auditing firm has said its work for Lehman met all applicable professional standards and applied rules that existed at the time.

Schneiderman said New York wasn’t suing on behalf of Lehman’s shareholders and could distribute money obtained from the suit “in any manner that serves justice, including to the state.”

Lehman filed the biggest U.S. bankruptcy in history in September 2008 with $639 billion in assets. It has said it will spend the next few years completing a liquidation to pay unsecured creditors less than 18 cents on the dollar.

The case is People of the State of New York v. Ernst & Young LLP, 11-cv-00384, U.S. District Court, Southern District of New York (Manhattan).

Legal Challenge to Google Privacy Policy Is Baseless, U.S. Says

A privacy group should lose its bid for a court order forcing the Federal Trade Commission to challenge Google Inc.’s changes to its privacy policy, the U.S. Justice Department said.

The Electronic Privacy Information Center has no basis in the law to compel the FTC to take enforcement action against Google, said Drake Cutini, a Justice Department lawyer, in a filing Feb. 17 in federal court in Washington. The privacy group sued Feb. 8, claiming Google’s planned changes to its privacy policy violate a consent order requiring the search engine company to protect consumer data.

The group said in its complaint that the FTC should sue Google. The consent order stems from a lawsuit that the group, known as EPIC, filed against Google.

“We are asking the court to dismiss the case because parties such as EPIC are barred by law from interfering with the proper investigation and enforcement of FTC orders,” Claudia Farrell, an FTC spokeswoman, said in an e-mail.

“There can be no question that the Federal Trade Commission has a duty to enforce its final order in the Google matter,” Marc Rotenberg, EPIC’s executive director, said in an e-mail.

Google, the world’s most-popular search engine, announced plans on Jan. 24 to unify privacy policies for 60 services and products including YouTube videos and Android software for mobile phones. The move, set to take effect March 1, would simplify conditions for user agreements, the Mountain View, California-based company said.

EPIC said the plan would allow Google to combine more information about users, reduce users’ control of their own data and give more personal information to advertisers.

The FTC’s 2011 settlement with Google over privacy, which barred sharing user data outside the company without clear permission, stemmed from a complaint filed by the advocacy group in 2010.

The case is Electronic Privacy Information Center v. Federal Trade Commission, 12-00206, U.S. District Court, District of Columbia (Washington).

For the latest lawsuits news, click here.

Court Filings

Credit Suisse Trader Case Was Most Popular Docket on Bloomberg

The U.S. Securities and Exchange Commission’s suit against Kareem Serageldin, Credit Suisse Group AG’s former global head of structured credit trading, was the most-read docket on the Bloomberg Law system last week for the second week in a row.

Serageldin was charged in a scheme to falsify prices tied to collateralized debt obligations to meet targets and boost year-end bonuses for his $5.35 billion trading book.

Serageldin, 38, who lives in the U.K. and led the securities department of Credit Suisse’s investment banking division, was named in an indictment on Feb. 1 in New York. Two of his former subordinates, David Higgs, 42, and Salmaan Siddiqui, 36, pleaded guilty in federal court in New York on Feb. 1 and said they’re cooperating with the U.S. in the probe.

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).

--With assistance from Bob Van Voris, Linda Sandler, David McLaughlin, Patricia Hurtado and Don Jeffrey in New York; Phil Milford in Wilmington, Delaware; Laurel Brubaker Calkins in Houston; Margaret Cronin Fisk in Southfield, Michigan; Andrew Harris in Chicago; Dan Hart in Washington; Karen Gullo in San Francisco; Edvard Pettersson in Los Angeles; Kit Chellel in London. Editor: Andrew Dunn

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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