Bank of America Corp. (BAC)’s Countrywide unit was sued by Sealink Funding Ltd. in New York over $1.6 billion of residential mortgage-backed securities the fund purchased between 2005 and 2007.
Sealink filed the suit against Countrywide in New York State Supreme Court Sept. 29, seeking unspecified compensatory, rescissory and punitive damages. Sealink is a fund created to manage Landesbank Sachsen AG’s riskiest assets after the German lender almost collapsed.
“Countrywide was an entity driven by only one purpose --to originate and securitize as many mortgage loans as possible into” mortgage-backed securities “to generate profits for the Countrywide defendants, without regard to the investors that relied on the critical, false information provided to them with respect to the related certificates,” lawyers for Sealink said in the lawsuit.
Sealink filed a similar suit Sept. 29 in the same court against JPMorgan Chase & Co. (JPM) over $2.4 billion worth of residential mortgage-backed securities purchased between 2005 and 2007.
Dan Frahm, a spokesman for Charlotte, North Carolina-based Bank of America, didn’t immediately return a voice-mail message seeking comment on the lawsuit. Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan, declined to comment.
The cases are Sealink Funding Ltd. vs. Countrywide Financial Corp., 652679/2011, New York State Supreme Court, New York County (Manhattan); Sealink Funding Ltd. vs. Bear Stearns & Co. Inc., 652681/2011, New York State Supreme Court, New York County, Manhattan.
For more, click here.
Oracle Sued by Pension Fund Over Purchase of Ellison Company
Oracle Corp. (ORCL) was sued by a retirement fund over its purchase of Pillar Data Systems Inc., a company controlled by Chief Executive Officer Larry Ellison.
The City of Roseville Employees’ Retirement System sued on behalf of Oracle and named among the defendants Ellison, Oracle President Mark Hurd and Chairman Jeff Henley, according to papers filed Sept. 29 in Delaware Chancery Court in Wilmington. A judge granted the pension fund’s request to file its complaint under seal.
Oracle said in June that it would buy San Jose, California- based Pillar in a deal that required no up-front payments and allowed for an “earn-out” payment that would be made by Nov. 30, 2014, according to a filing with the U.S. Securities and Exchange Commission.
Ellison owns about 55 percent of Pillar, a provider of data-storage systems, according to the SEC filing. Under terms of the deal, the outstanding amount of a $544 million loan Pillar owes to Ellison will be converted into preferred shares with a right to dividends accruing at an annual rate of 1.5 percent.
Those shares will be canceled after the transaction closes in exchange for rights to receive a portion of the earn-out, according to the SEC filing.
The pension fund’s complaint accuses the Oracle board of breaching its fiduciary duty in connection with the acquisition, according to the court filing.
Deborah Hellinger, a spokeswoman for Redwood City, California-based Oracle, declined to comment on the lawsuit.
The case is City of Roseville Employees’ Retirement System v. Ellison, CA6900, Delaware Chancery Court (Wilmington).
Blavatnik Made $1.2 Billion in Lyondell LBO, Lawsuit Says
The leveraged buyout of Lyondell Chemical Co. in 2007 benefited the company’s board as well as billionaire Len Blavatnik, who gained $1.2 billion, according to a revised lawsuit brought by the company’s creditors.
Lyondell Chairman Dan F. Smith netted more than $100 million from the $22 billion merger with a unit of Blavatnik’s Access Industries Holdings LLC, a deal that drove Lyondell into bankruptcy in 2009, according to the complaint filed Sept. 29 in U.S. Bankruptcy Court in Manhattan.
“Blavatnik was internally known at Access as the ‘King of Optionality,’” and turned to Lyondell after previously trying to buy Huntsman International LLC, a similar petrochemical company, trustee Edward Weisfelner said in the revised complaint, brought on behalf of creditors.
Blavatnik and Access took part in a private-equity boom during which companies were bought with borrowed money, then drained of cash or sold for a profit, according to the lawsuit. With interest rates low, lending standards loosened and tighter regulations on public companies following the Enron Corp. and WorldCom Inc. accounting frauds, investors and their bankers turned to companies with little debt and stable cash for highly leveraged acquisitions, and Blavatnik chose Lyondell, the trustee said.
Blavatnik profited from stock bought just before the merger, and earnings projections were “refreshed” by Smith to make them high enough to justify the acquisition price of $48 a share, according to the lawsuit.
Richard Werder, a lawyer for Blavatnik, said the claim that his client netted more than $1.2 billion from Lyondell’s merger with Access’s Basell AF SCA unit is “preposterous.”
Blavatnik is seeking to dismiss some accusations made in the initial complaint, and has said Luxembourg law can’t be used to sue over Netherlands-based Basell. U.S. Bankruptcy Judge Robert Gerber denied a request to dismiss charges based on Luxembourg law, saying Sept. 22 that Blavatnik could later file a motion to dismiss an amended complaint.
The bankruptcy case is In re Lyondell Chemical Co., 09- 10023, and the adversary case is Official Committee of Unsecured Creditors v. Citibank NA, 09-01375, U.S. Bankruptcy 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
Morgan Stanley (MS) Wins Dismissal of Pension Fund’s CDO Suit
Morgan Stanley won dismissal of a retirement fund’s lawsuit over a collateralized debt obligation called the Libertas CDO.
The Employees’ Retirement System of the Government of the Virgin Islands claimed in the 2009 suit that New York-based Morgan Stanley defrauded investors by collaborating with ratings companies to give the CDO an undeserved AAA rating at the same time it was short-selling almost all of the assets underlying the notes. The CDO was backed by $1.2 billion in assets, according to the complaint.
U.S. District Judge Barbara Jones in Manhattan on Sept. 30 dismissed the investor complaint, which asserted claims for fraud and unjust enrichment under New York state law.
AAA is the highest rating for fixed-income instruments. The portfolio was 92 percent residential mortgage-backed securities and included exposure to more than $130 million in loans from Option One Mortgage Corp. and $100 million from New Century Mortgage Corp., both lenders to homebuyers with poor credit scores, according to the complaint.
The Libertas CDO entered into credit-default swaps that referenced specific residential mortgage-backed securities. According to the complaint, the notes collapsed in value after they were purchased by the Virgin Islands retirement fund.
The case is Employees’ Retirement System of the Government of the Virgin Islands v. Morgan Stanley & Co., 09-cv-10532, U.S. District Court, Southern District of New York (Manhattan).
Puerto Rico Joins U.S. Complaint Against AT&T, T-Mobile
The U.S. Justice Department amended its lawsuit seeking to block AT&T Inc. (T)’s $39 billion takeover of T-Mobile USA Inc., allowing Puerto Rico to join the case.
The government filed its amended complaint in federal court in Washington Sept. 30. The Commonwealth of Puerto Rico is the eighth jurisdiction to sign on to the government’s Aug. 31 complaint, following seven states that joined Sept. 17.
The government’s antitrust suit claims that the merger, which would make Dallas-based AT&T the biggest wireless carrier in the U.S. and cut the number of national competitors to three from four, is anticompetitive and will hurt consumers.
“It is not unusual for state attorneys general to participate in DOJ merger review proceedings or court filings,” Michael Balmoris, an AT&T spokesman, said in an e-mail. “At the same time, we appreciate that multiple state attorneys general and hundreds of other local, state and federal officials are publicly supportive of our merger.”
AT&T continues to work on “parallel paths -- seeking a solution that addresses the DOJ’s concerns while simultaneously preparing for trial,” Balmoris said. The company remains “confident” it will “reach a successful solution,” he said.
The case is U.S. v. AT&T Inc., 11-cv-01560, U.S. District Court, District of Columbia (Washington).
Mets Ruling Used as Weapon in Fighting Madoff Trustee Suits
A judge’s ruling that slashed a billion-dollar claim against the owners of the New York Mets last week is already being used as a weapon by other defendants in lawsuits brought by the liquidator of Bernard Madoff’s firm.
Safra National Bank of New York asked a bankruptcy judge Sept. 29 to dismiss a suit by trustee Irving Picard, citing U.S. District Judge Jed Rakoff’s Sept. 27 ruling. Rye Select Broad Market XL Portfolio Ltd., based in the Cayman Islands, separately asked a federal district judge to take its Madoff suit out of U.S. bankruptcy court, citing Rakoff’s decision in the case against Fred Wilpon and Saul Katz.
Rakoff cut Picard’s claim against the Mets owners to about $386 million, raising the standard for him to get even that much. The judge said Picard could try to reclaim only two years of withdrawals from the Ponzi scheme, while tossing nine of 11 causes of action against Wilpon and Katz.
Safra said in a filing in U.S. Bankruptcy Court in Manhattan that “at a minimum” Picard’s demand for funds it took from the Ponzi scheme beyond two years should be dismissed. Rye, in its bankruptcy court filing, said its case involving swap transactions was similar to the Mets case, and that Rakoff sided with the defendants saying settlement payments were protected by so-called safe harbor law.
Rakoff’s two-year ruling could cost Picard about $2.7 billion on all his clawback suits, the trustee said Sept. 29. Another $3.5 billion of so-called preference payments was “in question” because of another aspect of Rakoff’s ruling.
Picard will first ask Rakoff for permission to appeal to the federal appeals court in New York. The appeals court will then decide whether to review the ruling.
The Mets case is Picard v. Katz, 11-cv-03605, U.S. District Court, Southern District of New York (Manhattan).
AT&T Asks U.S. Judge to Throw Out Sprint’s Antitrust Lawsuit
AT&T Inc. asked a federal judge to throw out a lawsuit Sprint Nextel Corp. (S) brought seeking to block the company’s proposed $39 billion purchase of wireless carrier T-Mobile USA Inc.
AT&T claimed Sprint, the third-biggest U.S. wireless operator, doesn’t have the right to challenge the merger because the company is a competitor, not a consumer of wireless services. The bid to dismiss the case was filed Sept. 30 in federal court in Washington.
“Sprint knows that competition will be enhanced, not harmed, by the combination of AT&T and T-Mobile and that a post- merger AT&T -- freed of spectrum shortages that impair its ability to offer customers better services at lower prices -- will be a more formidable competitor,” AT&T said in its filing. “What is good for consumers is bad for Sprint, and that is why Sprint has filed suit.”
Sprint brought its antitrust lawsuit on Sept. 6, less than a week after the U.S. sued to block the deal, saying the proposed merger would harm consumers and weaken Sprint’s ability to compete with AT&T and Verizon Communications Inc. (VZ)
The Justice Department sued Dallas-based AT&T and Bonn- based Deutsche Telekom AG (DTE)’s T-Mobile unit on Aug. 31, arguing a combination of the two companies, which would make AT&T the biggest U.S. wireless carrier, would “substantially” reduce competition. Seven states and Puerto Rico joined the government’s case.
The case is Sprint Nextel Corp. v. AT&T Inc., 11-cv-01600, U.S. District Court, District of Columbia (Washington). The government’s case is U.S. v. AT&T Inc., 11-cv-01560, U.S. District Court, District of Columbia (Washington).
For the latest lawsuits news, click here. For the latest trial and appeals news, click here.
Verdicts/Settlements
Wells Fargo, BDO Seidman Settle Lawsuits for $130 Million
Wells Fargo & Co. (WFC)’s Wachovia Capital Markets unit and BDO Seidman LLP settled lawsuits over their roles in the collapse of Le-Nature’s Inc., a defunct water bottler, for $130 million.
U.S. Bankruptcy Judge Thomas P. Agresti approved one piece of the settlement Sept. 30 at a hearing in Pittsburgh. Under that deal, Wells Fargo and BDO would pay $50 million to a trustee for creditors of Le-Nature’s, whose chief executive officer pleaded guilty to fraud in June.
A group of Le-Nature’s lenders will receive $56 million and the California Public Employees’ Retirement System $24 million under another part of the settlement, according to court documents filed in the Le-Nature’s bankruptcy case in Pittsburgh. The lenders and Calpers sued Wachovia and New York- based auditor BDO Seidman in New York state court.
Agresti said he was skeptical of the settlement at the start of the hearing because of the high legal fees associated with the case, and changed his mind after listening to trustee Marc S. Kirschner testify.
“He convinced me, as the judge who came in here with an attitude to be honest, and he turned me around,” Agresti said in court Sept. 30.
Mary Eshet, a spokeswoman for Wells Fargo, said she couldn’t immediately comment on the settlement.
The bankruptcy case is In Re Le-Nature’s, 06-25454, U.S. Bankruptcy Court, Western District of Pennsylvania (Pittsburgh).
For the latest verdict and settlement news, click here.
On The Docket
Ecclestone Set for November Testimony in Gribkowsky’s Trial
Formula One Chief Executive Officer Bernie Ecclestone will testify in the second week of November in the trial of former Bayerische Landesbank risk manager Gerhard Gribkowsky over the sale of the lender’s stake in the racing company, Margarete Noetzel, a spokeswoman for the Munich Regional Court, said in a telephone interview Sept. 30
For more, click here.
Court Filings
Dynegy Suit Most Popular Docket on Bloomberg Last Week
Dynegy Inc. (DYN), which was sued by Avenue Investments LP over claims the Houston-based power producer stole assets from holders of $3.6 billion in notes in a restructuring, was the most-read litigation docket on the Bloomberg Law system last week.
Bondholders led by Avenue Investments seek to undo the restructuring, calling it a fraudulent conveyance that removed the company’s coal-fired power plants from the reach of bondholders and transferred them to shareholders, according to the lawsuit filed Sept. 21 in New York state Supreme Court.
The case is Avenue Investments LP v. Dynegy Inc., 652599/2011, New York state Supreme Court (Manhattan).
No comments:
Post a Comment