Bloomberg News

King & Spalding, Winston & Strawn, Latham: Business of Law

August 29, 2013

Emory University will pay $1.5 million to settle federal civil charges that it violated the False Claims Act through clinical trial billing practices at its Winship Cancer Institute.

Yesterday’s agreement settles U.S. Justice Department allegations that the institute billed Medicare and Medicaid for services the clinical trial sponsor agreed to pay, according to a statement from the U.S. Attorney’s office in Atlanta. The government claimed that in some instances the trial sponsor had paid the cancer institute as well, resulting in double payment to Emory.

Richard Shackelford, Phyllis Sumner and Michael Paulhus of King & Spalding LLP represented Emory. Shackelford declined to comment on the settlement.

The university acknowledged billing errors over a 10-year period, but said in a statement that the settlement is “in no way an agreement or admission that the university has any liability under the False Claims Act.”

Emory spokeswoman Nancy Seideman said in a telephone interview that “the quality of care and the research conducted was never in question. This is about a complicated billing process.”

The settlement doesn’t include what’s known as a corporate integrity agreement, under which long-term monitoring of the process is required, Seideman said.

The action was brought under the whistle-blower provisions of the False Claims Act. That law permits the individual bringing the action to share in the recovery. The amount the whistle-blower will receive wasn’t disclosed.

T. Reed Stephens, a partner at McDermott Will & Emery LLP who specializes in health care and life sciences, said that settlement was on the low end. Stephens, who worked in the civil fraud section of the Civil Division of the Justice Department prosecuting these types of cases, explained that the government usually likes to settle for at least double the amount of damages. The Emory settlement could be double what the government claims it lost.

The “cost of defense could have played a significant role in the university’s decision to resolve it,” he said. “If it’s a lengthy investigation, the legal costs can be in the millions of dollars.”

“But for the whistle-blower, the government probably wouldn’t have known about it,” Stephens said.

Legal Fees

U.S. Banks’ Legal Tab Tops $100 Billion Amid Crisis Cleanup

The six biggest U.S. banks, led by JPMorgan Chase & Co. (JPM:US) and Bank of America Corp. (BAC:US), have piled up $103 billion in legal costs since the financial crisis, more than all dividends paid to shareholders in the past five years.

That’s the amount allotted to lawyers and litigation, as well as for settling claims about shoddy mortgages and foreclosures, according to data compiled by Bloomberg. The sum, equivalent to spending $51 million a day, is enough to erase everything the banks earned for 2012.

The mounting bills have vexed bankers who are counting on expense cuts to make up for slow revenue growth and make room for higher payouts. About 40 percent of the legal and litigation outlays arose since January 2012, and banks are warning the tally may surge as regulators, prosecutors and investors press new claims. The prospect is clouding outlooks for stock prices, and by some estimates the damage could last another decade.

JPMorgan and Bank of America bore about 75 percent of the total costs, according to the figures compiled from company reports. JPMorgan devoted $21.3 billion to legal fees and litigation since the start of 2008, more than any other lender, and added $8.1 billion to reserves for mortgage buybacks, filings show.

Five years after the financial crisis shook global markets, banks are facing accusations that they misled buyers of mortgage-backed securities, rigged interest rates used to price loans worldwide and manipulated markets for credit derivatives and commodities.

The data were compiled from quarterly reports to the Federal Reserve, the SEC and investors covering January 2008 through June 2013. The reports from Bank of America, JPMorgan, Citigroup Inc. (C:US), Wells Fargo & Co. (WFC:US), Goldman Sachs Group Inc. and Morgan Stanley (MS:US) included Y-9C forms that bank holding companies with more than $500 million of assets must file with the Fed. The forms disclose specific costs, such as legal fees, that exceed 3 percent of total non-interest expenses.

Some of the banks distinguished between litigation costs and legal fees, which could include routine expenses of running a business, such as drawing up contracts, rather than lawsuits. Still, most outlays at JPMorgan, Bank of America and Citigroup were tied specifically to litigation, the filings show.

Spokesmen for the six banks declined to comment about their legal costs.

The totals would be billions of dollars higher if U.S. cases involving the biggest European banks were counted. HSBC Holdings Plc, Europe’s largest lender, agreed last year to pay $1.92 billion to settle U.S. money-laundering probes. UBS AG, the largest lender in Switzerland, said in July it would pay $885 million to Fannie Mae and Freddie Mac on claims that it improperly sold them mortgage-backed securities.

Barclays Plc, UBS and Royal Bank of Scotland Group Plc (RBS) were fined a combined $2.5 billion to settle allegations by regulators in the U.S. and elsewhere that that they helped rig the benchmark London interbank offered rate.

For more, click here.

In the Courts

Credit Union Agency Wins Appeals Court Ruling on Big Bank Suits

The National Credit Union Administration won an appeals court ruling letting it pursue claims against big banks for allegedly making misleading statements to market mortgage-backed securities.

The U.S. Court of Appeals in Denver unanimously affirmed a lower-court ruling that the NCUA can rely on an “extender statute” giving it more time to file the lawsuits lenders said were filed too late.

That “serves the statute’s purpose by providing NCUA sufficient time to investigate and file all potential claims once it assumes control of a failed credit union,” the three-judge panel said.

The ruling on Tuesday resolves an appeal by RBS Securities Inc. that prompted a Kansas City, Kansas, trial court judge this year to halt most progress on several related cases until the issue was decided.

NCUA has filed similar lawsuits against units of Goldman Sachs Group Inc. (GS:US), JPMorgan Chase & Co. and other banks. RBS Securities is a unit of Royal Bank of Scotland Group Plc.

Ed Canaday, a spokesman for RBS Securities, declined to comment on the ruling.

“We’re pleased with the court’s decision,” NCUA Board Chairwoman Debbie Matz said in a statement. “We will continue to pursue our claims against firms that sold faulty mortgage-backed securities to corporate credit unions.”

The Alexandria, Virginia-based agency has reached $335 million in settlements with Bank of America Corp. (BAC:US), Citigroup Inc., Deutsche Bank AG and HSBC Plc, according to the statement.

The case is National Credit Union Administration Board v. Nomura Home Equity Loan Inc., 12-3295 and 12-3298, U.S. Court of Appeals for the 10th Circuit (Denver).

Law Firm News

Winston & Strawn to Open Office in Silicon Valley in September

Winston & Strawn LLP will open an office in Palo Alto, California, next month. The new office is the seventeenth worldwide, the firm said in a statement and reflects its efforts to expand its intellectual property litigation practice.

More than 200 attorneys practice in multiple areas of IP-related law at Winston & Strawn, including more than 20 partners who have first-chaired IP trials in various courts throughout the U.S. and in Europe.

“This new office will be an important anchor in serving our growing number of local Valley clients,” Thomas Fitzgerald, the managing partner of the firm, said in the statement.

The office will be led by partner David Enzminger.

Interviews

Omnicom’s Lawyer: Inside the Publicis-Omnicom Merger: Video

Mark Gerstein, global chairman of the mergers & acquisitions practice at Latham & Watkins LLP, spoke with Bloomberg Law about his representation of Omnicom Group Inc. in its merger with Publicis Groupe SA, a combination that will create the world’s biggest advertising company.

Gerstein, in this “Rainmakers” episode, also explains the unique challenges of this “merger of equals.”

To see the interview, click here.

To contact the reporter on this story: Ellen Rosen in New York at erosen14@bloomberg.net

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


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