Jefferies Group Inc. (JEF) sued
International Derivatives Clearing Group LLC, accusing the
Nasdaq OMX Group Inc. unit of fraud and breach of contract in
connection with interest-rate swap futures contracts.
Jefferies & Co., the investment bank that has been
expanding since the financial crisis, claimed in the suit that
IDCG and its International Derivatives Clearinghouse unit
induced it to enter into the contracts by saying the investment
would be “economically equivalent” to transactions in similar
instruments in the over-the-counter market. The suit was filed
Sept. 16 in New York state court.
“Clearinghouse’s own rules require that it provide
transactions that are equivalent to transactions engaged in on
the over-the-counter market,” Jefferies said in the complaint.
“Yet the transactions that Clearinghouse induced Jefferies to
enter on Clearinghouse’s new exchange were not economically
equivalent to over-the-counter transactions as Clearinghouse had
represented and as its own rules required.”
Frank DeMaria, a spokesman for Nasdaq, called the lawsuit
“without merit” and said the company will fight it. Philip C.
Korologos, an attorney for Jefferies, declined to comment on the
lawsuit in a telephone interview.
The case is Jefferies & Co. v. Nasdaq OMX Group Inc.,
652560/2011, New York State Supreme Court, New York County
(Manhattan).
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Colorado Official Sues State Pension Plan Demanding Data
Colorado’s public employee pension plan was sued by state
Treasurer Walker Stapleton, who asked for a court order
directing it to turn over data on its top beneficiaries,
according to Attorney General John Suthers.
Suthers sued the Public Employees Retirement Association
and 14 trustees yesterday in state court in Denver, a spokesman
for the attorney general, Mike Saccone, said in an e-mailed
statement. The filing could not immediately be independently
confirmed.
Stapleton -- a statutory pension plan trustee -- sued the
system after being rebuffed in efforts to learn how much money
is paid annually to the top 20 percent of beneficiaries, their
age and year of retirement, as well as their final five years of
salaries. He was not seeking their identities.
“The treasurer is entitled to a declaration that PERA and
defendant trustees have breached their fiduciary duty by
improperly and illegally denying the treasurer access to the
requested PERA records,” according to the complaint.
Katie Kaufmanis, a spokeswoman for the retirement
association, didn’t reply to a voice-mail message seeking
comment.
The case is Stapleton v. Public Employees Retirement
Association, Denver County, Colorado, District Court (Denver).
For the latest new suits news, click here. For copies of recent
civil complaints, click here.
Lawsuits/Pretrial
Michigan Agency Loses Bid to Move Court Fight With Lehman
The Michigan State Housing Development Authority failed to
persuade a federal district court to review a bankruptcy judge’s
interpretation of swap contracts in its lawsuit against Lehman
Brothers Holdings Inc. (LEHMQ) over derivatives transactions.
U.S. District Judge John Koeltl in Manhattan declined to
take the case, according to a court filing yesterday.
The Michigan agency said in May that it is “one of many”
derivatives trading partners of Lehman disputing who gets paid
first on a swap agreement as a result of a previous ruling by
U.S. Bankruptcy Judge James Peck. The Lehman bankruptcy judge’s
interpretation of swap contracts is “surpassingly broad” and
requires U.S. District Court review because it has ramifications
for international securities markets, the authority said.
The global over-the-counter derivatives market is valued at
around $600 trillion by the Bank for International Settlements.
In a now-settled case involving a Bank of New York Mellon
Corp. (BK) trustee unit, Peck ruled in Lehman’s favor, saying that a
swap agreement written to protect both parties from default by
the other party doesn’t hold under bankruptcy law. He used a
similar principle in May when he refused to dismiss a Lehman
suit against an entity known as Ballyrock ABS CDO 2007-1 Ltd.,
the Michigan agency said.
The lawsuit is Michigan State Housing Development Authority
v. Lehman Brothers Derivative Products, 09-01728, U.S.
Bankruptcy Court, Southern District of New York (Manhattan). The
bankruptcy case is In re Lehman Brothers Holdings Inc., 08-
13555, U.S. Bankruptcy Court, Southern District of New York
(Manhattan).
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For the latest lawsuits news, click here.
Trials
Rambus Says Hynix, Micron Colluded to Dominate Memory Market
Hynix Semiconductor Inc. (000660) and Micron Technology Inc. (MU)
colluded to drive computer memory chips designed by Rambus Inc. (RMBS)
out of the market, a lawyer for Rambus told a jury in closing
arguments.
In a state court trial in San Francisco that began in June,
Rambus argued that Hynix, the world’s second-largest maker of
computer memory, and Boise, Idaho-based Micron conspired to
lower the prices of their own memory chips and deserted their
commitment to produce Rambus-designed dynamic random access
memory, or RDRAM, relegating it to a niche role.
Hynix and Micron “cheated” and “rigged the race,” Sean
Eskovitz, a lawyer for Rambus, said yesterday. The two chip
manufacturers first fixed their prices below market value and
“when they thought they had pushed RDRAM off to the side, they
jacked up the prices.”
“Why did they do this? Power and money,” Eskovitz said.
“They knew RDRAM was a threat. They knew they needed to shoot
it over and over and over again,” and “they used every
possible tactic available to them.”
Rambus, which doesn’t manufacture the chips it designs,
argued it would have earned $3.95 billion in royalties without
the alleged conspiracy. Under California law, a jury finding of
damages in that amount would be automatically tripled to $11.9
billion.
The chip manufacturers deny the claims, relying in part on
testimony from managers at Intel Corp. (INTC), which in the 1990s
selected RDRAM as a solution to a computer-memory bottleneck.
The collaboration ultimately failed because, Intel managers told
jurors, RDRAM was flawed and because of a contract provision
potentially allowing Rambus to block Intel from shipping
processors relying on the chip designer’s technology if certain
conditions requiring Intel to promote RDRAM weren’t met.
The case is Rambus Inc. v. Micron Technology Inc., 04-
0431105, California Superior Court (San Francisco).
For more, click here.
Expert Networker Conspired to Pass Secrets, U.S. Says
A former Primary Global Research LLC executive accused of
joining an insider-trading scheme knowingly helped public-
company employees pass confidential information to fund
managers, the U.S. said.
James Fleishman, of Santa Clara, California, is on trial in
Manhattan federal court, charged with two counts of conspiracy.
He pleaded not guilty to the charges and faces as long as 25
years in prison if convicted.
“He knew confidential information was being passed
repeatedly to members of the investment community,” Assistant
U.S. Attorney David Leibowitz told jurors in closing arguments
yesterday. “He not only knew it, he helped make it happen.”
Leibowitz cited dozens of e-mails Fleishman sent and phone
conversations he had with cooperating witnesses that were
secretly recorded by the Federal Bureau of Investigation. The
prosecutors also cited the testimony of three employees of
public technology companies who cooperated with the U.S. and
testified during the trial, which lasted two and a half weeks.
Primary Global, based in Mountain View, California, matches
investors with specialists who provide insight into specific
markets.
In his closing argument yesterday, Ethan Balogh, a lawyer
for Fleishman, said there was no evidence his client knew that
consultants were violating compliance agreements with their
employers.
Balogh said Fleishman had relied on representations that
the consultants made. He cited an agreement that consultants
signed and submitted to Primary Global confirming they had
permission to do outside consulting.
The case is U.S. v. Nguyen, 11-CR-32, U.S. District Court,
Southern District of New York (Manhattan).
For more, click here.
Oracle Asked to Revise Request for SAP Verdict Review
Oracle Corp. (ORCL) was asked by a federal judge to consider
revising its request to seek review of a court order overturning
a $1.3 billion damage award against SAP AG (SAP), according to court
records.
U.S. District Judge Phyllis Hamilton in Oakland,
California, on Sept. 1 granted SAP’s motion to throw out the
copyright-infringement verdict against it. She ruled that SAP
should get a new trial for damages if Oracle rejects her
decision to reduce the amount to $272 million, which she said
should be the maximum in damages based on the evidence at trial.
The jury award in November was a record for copyright
infringement. In the 11-day trial, Oracle accused SAP’s
TomorrowNow software-maintenance unit of making hundreds of
thousands of illegal downloads and several thousand copies of
Oracle’s software. Oracle said SAP’s aim was allegedly to avoid
paying licensing fees and to steal customers.
The case is Oracle Corp. v. SAP AG, 07-01658, U.S. District
Court, Northern District of California (Oakland).
Verdicts/Settlements
Kaupthing Settles $2.4 Billion Lawsuit on Loan Losses
Kaupthing Bank hf agreed to settle a 1.5 billion-pound
($2.4 billion) claim brought by the Tchenguiz Family Trust over
losses caused by the Icelandic bank’s collapse.
Kaupthing reached an agreement with the trust, Vincent
Tchenguiz and other companies connected to the family, known for
its U.K. real estate investments, for an undisclosed sum,
according to a statement. Sean Bellew, a spokesman for Tchenguiz
declined to comment on the settlement’s value because the terms
are confidential.
“I am delighted that we have been able to bring this
complex matter to a satisfactory conclusion and to have
dispensed with all the uncertainties which have proved so
restricting,” Tchenguiz said in the statement yesterday.
The family had close ties with Kaupthing and suffered what
Vincent Tchenguiz described as “massive losses” when the bank
failed in October 2008. U.K. regulators are investigating loan
deals struck between Kaupthing and Vincent Tchenguiz and his
brother Robert. The settlement will help Kaupthing’s creditors,
Vincent Tchenguiz said in the statement.
Kaupthing, based in Reykjavik, confirmed a settlement had
been reached and the Tchenguiz Family Trust had withdrawn its
claims in a statement on its website.
In a separate claim, a trust controlled by Robert is suing
Kaupthing to recoup losses of 330.7 million pounds from a failed
loan deal. His spokeswoman, Julia Fea, didn’t immediately
respond to calls and e-mails seeking comment on the status of
that case.
The U.K. Serious Fraud Office arrested the brothers in
March as part of an investigation into why investors took large
loans from Kaupthing days before it collapsed. Four of Vincent’s
companies were forced into administration because of the probe,
he said in March. The family is seeking a judicial review into
whether the SFO’s actions were legal.
News Corp. (NWSA) Said to Pay $4.7 Million to Dowler Family
News Corp.’s U.K. unit will pay 3 million pounds ($4.7
million) to settle claims that the News of the World tabloid
hacked the mobile phone of murdered schoolgirl Milly Dowler, a
person with knowledge of the matter said.
The settlement includes a 2 million-pound payment to the
Dowler family and a 1 million-pound donation to charity, said
the person, who declined to be identified because the talks are
private. News Corp. Chairman Rupert Murdoch was personally
involved in the negotiations, the person said.
Reports in July that Dowler’s voice mails had been
intercepted triggered a public outcry that forced News Corp. to
close the 168-year-old tabloid and drop its 7.8 billion-pound
bid for full control of British Sky Broadcasting Group Plc. (BSY) The
Parliament’s Culture Committee decided last week to recall News
Corp. Deputy Chief Operating Officer James Murdoch after former
employees questioned statements he made about his knowledge of
the extent of hacking at the News of the World.
News Corp. is trying to “be seen to be generous as it’s
much more than would be awarded by a court,” said Niri Shan,
the head of media law at Taylor Wessing LLP in London. “The
only downside is if it potentially sets an unrealistic
expectation for others.”
Mark Lewis, the lawyer for Dowler’s parents and sister,
declined to comment when reached yesterday by Bloomberg News.
News Corp. said in an e-mailed statement that it was in
“advanced negotiations” with the family.
For more, click here.
For the latest verdict and settlement news, click here.
Litigation Departments
Debevoise & Plimpton Adds Lawyers in Asia to Target Disputes
Debevoise & Plimpton LLP, the New York-based law firm with
about 650 lawyers, said it will move five to Hong Kong to work
with Asia-based clients on disputes and U.S. and U.K. regulatory
matters.
Partner Christopher Tahbaz said he and former U.K. attorney
general Peter Goldsmith will spend part of their time in Hong
Kong, while three other lawyers will relocate to the Chinese
city from New York next month.
The eighty-year-old law firm, whose other Asia office is in
Shanghai, isn’t planning to practice Hong Kong law even as other
Wall Street firms such as Davis Polk & Wardwell LLP and Milbank
Tweed Hadley & McCloy LLP have been setting up Hong Kong law
practices in the past year.
“We prefer to work with the experts in local law,” said
Tahbaz, referring to homegrown firms in Hong Kong and other
jurisdictions.
Debevoise currently has 15 lawyers in Shanghai and Hong
Kong. The firm’s clients in the region include Bank of China
Ltd., ArcelorMittal, Alibaba Group Holding Ltd. and TPG Capital.
The firm’s Asia-based disputes practice will focus on
commercial arbitration and litigation, including product
liability and intellectual property lawsuits outside of Asia, as
well as white collar defense and advice related to the U.S.
Foreign Corrupt Practices Act and the U.K. Bribery Act.
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