Bloomberg News

Kramer Levin, MoFo, Jones Day, McDermott: Business of Law

June 13, 2012

Former Goldman Sachs Group Inc. (GS:US) director Rajat Gupta rested his defense to federal insider- trading charges without testifying or being allowed to play wiretapped recordings that his lawyer called “substantial” to his case.

Defense attorney Gary Naftalis, of Kramer Levin Naftalis & Frankel LLP, told U.S. District Judge Jed Rakoff yesterday that Gupta, 63, who ran McKinsey & Co. from 1994 to 2003, had finished offering evidence. The trial began May 21.

“Defense rests, your honor,” Naftalis said. Summations are set to begin this morning, and Rakoff said the jury may begin its deliberations today.

Gupta is accused of leaking inside information to Galleon Group LLC hedge fund co-founder Raj Rajaratnam about Goldman Sachs and Procter & Gamble Co. (PG:US), where Gupta was also a director. He’s charged with one count of conspiracy and five counts of securities fraud, which carries a maximum term of 20 years in prison.

The defense, which began June 8, was based in part on a claim that another Goldman Sachs executive, David Loeb, passed the tips that prosecutors say came from Gupta. Rakoff barred the defense from playing wiretapped recordings from August 2008 that the defense claims show Loeb tipping Rajaratnam.

Lawyers for Gupta said they have “compelling” evidence Loeb passed information about Intel Corp. and Apple Inc. to Rajaratnam, according to excerpts of two phone calls tapped by the Federal Bureau of Investigation and submitted by Gupta’s lawyers. The defense obtained the documents after Rakoff ordered the government to turn over all evidence of other Goldman Sachs tippers relied on by Rajaratnam.

David Frankel, an attorney for Gupta, told Rakoff on June 11 that the evidence about Loeb was “crucial” to the defense and proved “that another person committed an act of which the defendant stands accused.”

Loeb, a salesman whose job required him to keep in regular contact with hedge fund managers, hasn’t been accused of wrongdoing. Prosecutors have alleged in court that Loeb told Rajaratnam about Intel Corp. (INTC:US), Apple Inc. and Hewlett-Packard Co., none of which are involved in Gupta’s case.

“Loeb is still employed by Goldman Sachs,” Michael DuVally, a spokesman for the New York-based company said yesterday, declining to comment further on Loeb’s status.

“Mr. Loeb’s conduct was entirely consistent with the securities laws and regulations,” his lawyer, Frank Wohl of Lankler Siffert & Wohl LLP, said in an e-mailed statement. “He did not provide any material inside information to Mr. Rajaratnam or anyone else. Mr. Loeb had no knowledge of any of the Goldman Sachs information at issue in the case against Mr. Gupta.”

Rakoff called the recordings inadmissible “hearsay” June 11 and reiterated that ruling yesterday.

The defense said Gupta had no motive to tip Rajaratnam, pointing to his loss of a $10 million investment in a Galleon fund and Gupta’s subsequent claim that Rajaratnam cheated him. They also point to records showing Gupta in a meeting about malaria-prevention with a United Nations official around the time he allegedly tipped Rajaratnam to the Buffett deal.

Defense lawyers concluded their case by playing an Oct. 2, 2008, wiretapped call between Rajaratnam and a Galleon portfolio manager, Sanjay Santhanam, in which the two men can be heard discussing the Voyager Fund. During the call, Rajaratnam can be heard saying “I’m a big boy” and that he isn’t sure Gupta is, adding “I didn’t tell him I took the liquidity out.”

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

For more, click here.

Firm News

Morrison & Foerster Denver Office Names Fons Managing Partner

Morrison & Foerster LLP litigator Randall J. Fons was named managing partner of the firm’s Denver office.

Fons, co-chairman of the firm’s securities litigation, enforcement and white-collar defense group, has been a partner with Morrison & Foerster since 2006, when he left the Securities and Exchange Commission.

He succeeds Whitney Holmes, whose practice focuses on corporate finance, securities, and mergers and acquisitions. He was in charge of the office for the past three years.

Fons said in an interview that he plans to continue the growth that started under Holmes by further expanding the 15- lawyer office, particularly in the corporate and private equity practices.

“We’re a national firm in a smaller market, so our expansion is really based on niche areas,” Fons said.

He expects that the green and clean tech industries that are thriving in Colorado will fuel work for the firm, though he expects the office’s growth to be in “complex high-end issues that can be spread across industries.”

Under Holmes’s leadership, Hendrik Jordaan, chairman of the firm’s private equity investments and buyouts practice, was hired, as was David Strong, a federal tax and mergers and acquisitions adviser. Both came from Holme Roberts & Owen LLP, which combined with Bryan Cave LLP in December.

Jordaan was recently involved in the purchase of Health Care Partners by Davita Inc., for whom Morrison & Foerster acted as legal adviser. Of counsel Eric Knudsen, a former Kirkland & Ellis LLP partner who advises companies and investors in private equity transactions, joined in February.

Fons will continue his practice while overseeing the office. Before joining the firm, he spent 18 years with the SEC, where he led investigations and prosecution of market manipulation, insider trading, Foreign Corrupt Practices Act violations and financial fraud, as well as cases against auditors, broker-dealers, and investment advisers. Fons served as regional director of the SEC’s Central and Southeast Regional Offices, overseeing multi-state enforcement activities.

“We’re fortunate to have a number of firm leaders in the Denver office,” Morrison & Foerster Chairman Keith Wetmore said in a statement.”

The firm has more than 1,000 lawyers with offices in the U.S., Europe and Asia.

News

Dewey & LeBoeuf Used $43 Million in Failed Recovery Plan

Dewey & LeBoeuf LLP used $43 million of its secured lenders’ money from April 16 to May 28 in an attempt to save the law firm before it sought bankruptcy, JPMorgan Chase & Co. (JPM:US) said in a court filing.

Dewey failed on May 28 after losing most of its partners and ousting its chairman. It had drawn $75 million of a $100 million bank credit line when the loan came due on April 16, according to people familiar with its finances.

Lenders let the firm continue using cash for payroll, rent, insurance and other expenses, and to allow key groups of Dewey lawyers to move to new firms when Dewey’s failure was imminent, JPMorgan said in a filing June 11 in U.S. Bankruptcy Court in Manhattan.

Secured lenders, “at the request of the firm’s management, continued to fund the firm outside of a court proceeding, allowing the debtor access to cash to permit key practice groups to continue to operate effectively and transition to new firms as opportunities arose,” said the bank, which is the agent for the secured lenders.

JPMorgan made the statements as part of a request to a judge to allow Dewey to use enough cash to liquidate in bankruptcy, while granting protection to secured lenders. At least six objections to the plan were filed, including by unsecured creditors.

The firm, formed by combining Dewey Ballantine LLP and LeBoeuf, Lamb, Greene & McRae LLP in 2007, had after the merger more than 1,300 attorneys in 12 countries. New York-based Dewey listed debt of $245 million and assets of $193 million in its Chapter 11 filing. It is the biggest law firm to ever file for bankruptcy, based on the number of lawyers.

It entered bankruptcy with 150 U.S. employees to help with the liquidation, restructuring officer Jonathan A. Mitchell said in court papers.

“Today, all but two of the partners are gone,” JPMorgan said. “Gone with them are millions of dollars in compensation, much of it paid with borrowed money over the past several months. Left behind, in addition to more than $225 million of secured debt, are, among other things, unfunded retirement benefits, uncollected accounts receivable, potential litigation claims, half a million boxes or more of client files, and office space in midtown that is vast, luxurious and empty.”

The case is In re Dewey & LeBoeuf LLP, 12-12321, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

For more, click here.

Moves

U.S. Attorney’s Office Major Frauds Chief Moves to Jones Day

Jones Day added Beong-Soo Kim, chief of the major frauds section in the U.S. Attorney’s office in Los Angeles for 2 1/2 years, to the firm’s issues and appeals practice as a partner in the its Los Angeles office.

“Beong is a highly accomplished trial and appellate lawyer, with substantive experience in cases involving securities law, financial institutions, health care, trade secret theft, money laundering, the Foreign Corrupt Practices Act, and a wide variety of other matters,” said Chris Lovrien, partner-in-charge of Jones Day’s Los Angeles Office.

Kim joined the U.S. Attorney’s Office in 2003. He was promoted to deputy chief of the major frauds section in 2007, and to chief of the section in early 2010, the firm said. He led the largest federal white-collar section in the country with about 36 prosecutors, directing complex and high-profile investigations and prosecutions of criminal fraud allegations.

With Kim’s arrival, Jones Day’s Los Angeles office has 91 attorneys, including 37 partners. In California, Jones Day has more than 320 lawyers in five offices: Los Angeles, San Francisco, Silicon Valley, Irvine and San Diego. The firm has more than 2,400 lawyers worldwide.

McDermott Adds DLA Piper Partner to Restructuring Practice

McDermott Will & Emery LLP appointed Erich Eisenegger as a partner in its New York office. He is the second recent hire by McDermott for its restructuring and insolvency practice from DLA Piper LLP.

Eisenegger was a partner at DLA Piper since 2002, where he counseled U.S. and foreign financial institutions, project developers and governmental authorities in restructurings and related transactions, the firm said.

Last month, McDermott named Timothy W. Walsh the international head of its restructuring and insolvency practice, after hiring him away from DLA Piper. Eisenegger will work closely with Walsh.

“As we move to capture a greater share of transactions involving U.S. and foreign projects and governmental entities, having Erich on the team will be key,” Walsh said, adding that they worked together for many years.

McDermott’s restructuring and insolvency practice, part of its corporate advisory practice group, has more than 40 lawyers worldwide. The firm has more than 1,000 lawyers in the U.S. and Europe, as well as a strategic alliance in Shanghai.

Bingham Hires Antitrust Partner Mahoney in New York

Bingham McCutchen LLP announced that Stacey Anne Mahoney will join the firm as a partner in the antitrust, competition and trade regulation practice group in New York.

She joins from Gibson, Dunn & Crutcher LLP, where she was a partner and worked in federal and state courts as well as in matters before the U.S. Justice Department’s Antitrust Division and the Federal Trade Commission.

Bingham’s antitrust group has more than 70 lawyers. The firm has about 1,000 lawyers in 14 locations in the U.S., Europe and Asia.

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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