Mifid, Liberty, Biovail, Lone Star, Lerach in Court News
The European Commission sued Spain,
Poland and the Czech Republic for failing to enact the law known
as Mifid, which opens up stock markets such as Bolsas y Mercados
Espanoles to competition with off-exchange trading.
Spain also was taken to court by the EUs executive arm
Jan. 31 for not implementing an overhaul of bank-capital rules
under the global accord known as Basel II. Hungary drew a
warning for the same violation, the Brussels-based commission
said in a statement.
The capital rules and Mifid, short for Markets in Financial
Instruments Directive, are two central planks of an EU campaign
to unite national markets and let banks and securities firms
operate more efficiently throughout the 27-nation area.
Mifid took effect Nov. 1 and, the commission said, “the
benefits of this regime cannot be fully realized by firms
coming from, or seeking to enter, countries that havent
implemented the law.
The commission has the power to take countries to the
European Court of Justice, where judges can order countries to
change their laws and fine states that ignore such decisions.
For more new suits news from last week, click here. For copies
of recent civil complaints, click here.
Lawsuits/Pretrial
Liberty Dispute With IAC/InterActiveCorp Heads to Trial in March
Liberty Media Corp.s billionaire Chairman John Malone will
face off with IAC/InterActiveCorp Chairman Barry Diller in a
battle to control the entertainment company at a trial in March,
a Delaware judge ruled Feb. 1.
Chancery Court Judge Stephen Lamb consolidated lawsuits
filed over IACs plans to split into five companies and set a
timeframe for trial. He postponed ruling on Libertys request to
bar the spinoffs until the suits are resolved.
Malone opposes Dillers plan to split IAC without
maintaining a stock structure that gives Liberty control.
Liberty holds 30 percent of IACs shares and 62 percent of its
voting power. Liberty claims Diller, who controls the voting
rights of Libertys IAC shares through a proxy agreement, is
contractually obligated to vote against the spinoff proposal.
“There cant be any question that he was skating close to
the edge of his authority, Lamb said of Diller. The judge said
that he wasnt interested, at this point, in hearing arguments
on the merits of the case.
Malone, who voted to approve the spinoffs, wants to
preserve Libertys current voting power in the new entities.
Diller has said he would vote in favor of the proposed
structure.
Diller, 65, and Malone, 66, have worked together since
Dillers 1995 investment in Malones Silver King Communications.
Their relationship crumbled after a Jan. 16 IAC board meeting in
which Diller proposed the single-tiered voting structure for the
spinoffs.
IAC claimed in a Jan. 23 court filing that Liberty
threatened to block the breakup unless the deal was structured
to give it control of the new companies. Liberty sued the next
day accusing IAC of attempting to wrest control of the companies
in what amounts to a “corporate coup, according to its
Jan. 24 complaint.
Liberty filed a request to halt the spinoffs and asked Lamb
to let it oust Diller and six directors from IACs board.
Liberty, owner of the QVC and Starz channels, wants to name
three directors as replacements.
Libertys case hinges on whether the spinoffs violate the
existing shareholders agreement. The company claims Diller is
obligated to vote against any action it opposes. IAC argued that
the proxy agreement is only applicable if a stockholder vote has
been scheduled.
“Mr. Diller has not threatened anything, IAC attorney
Theodore Mirvis said during the Feb. 1 hearing. “IAC has not
threatened anything.
IAC said in November that it expected the spinoffs to be
completed by the third quarter of this year.
Diller “was unequivocal in stating at the Jan. 16 meeting
that he was going to use the proxy at an upcoming shareholder
vote in favor of the spinoff, said Libertys lawyer Kevin
Abrams.
Lamb instructed lawyers for both companies to detail who
would be in charge while the lawsuits are pending. Afterward,
Abrams said the company would be governed by the Diller board
that was in place before the litigation began. Directors would
have to give a five-day notice before taking any action outside
routine operations.
“Our board remains in place, as it logically should, and
we will now proceed in litigating the merits of the core
issue, Greg Blatt, IACs general counsel, said in an e-mailed
statement.
Libertys spokesman, John Orr, said the company was
encouraged with the outcome of the hearing.
“We look forward to the case being tried in an expedited
manner, Orr said in a phone interview.
The case is LMC Silver King Inc. v. IAC/InterActiveCorp,
CA 3501, Delaware Chancery Court (Wilmington).
Biovail Targeted by U.S. Grand Jury Over Cardizem LA
Biovail Corp., Canadas largest publicly traded drugmaker,
said its the target of a U.S. grand jury investigation related
to its marketing the blood-pressure drug Cardizem LA in 2003.
The probe by the U.S. Attorneys Office in Boston is
focused on a sales and marketing program in which Biovail
introduced the drug to patients through targeted physicians, the
Mississauga, Ontario-based company said Feb. 1 in a statement.
Criminal or civil charges could be filed, the company said.
The federal investigation was first disclosed in 2003 as an
“administrative inquiry. Biovail has been cooperating and
plans to provide “evidence and arguments to the U.S. attorney
“as soon as practicable, according to the statement.
Biovail offered doctors $1,000 for writing 15 prescriptions
for Cardizem LA, then completing a report on each patient for
use in studies of the drugs effectiveness, according to a 2003
article in Barrons.
Sales of Cardizem LA, a long-acting medicine used to ease
chest pain as well as control high blood pressure, were
$14.4 million in the third quarter, 7.6 percent of Biovails
product sales. The company sold U.S. rights to the drug in 2005
to Kos Pharmaceuticals Inc., now a unit of Abbott Laboratories.
Christina DiIorio-Sterling, a spokeswoman for U.S. Attorney
Michael J. Sullivan in Boston, didnt return a call seeking
comment. Biovail said in its statement that it wouldnt comment
further.
For more lawsuits news from last week, click here. For more
trial news from last week, click here.
Verdicts/Settlements
Lone Stars Paul Yoo Jailed in Korea on Stock Manipulation
Paul Yoo, Lone Star Fundss top executive in South Korea,
was sentenced to five years in prison for stock manipulation in
a ruling that may accelerate the retreat of foreign investors
from Asias fourth-biggest economy.
The Seoul Central District Court on Feb. 1 delivered the
verdict against Yoo, who was accused of driving down the price
of shares in a unit of Korea Exchange Bank to buy it cheaply.
Yoo, 57, said he will appeal the verdict. Korea Exchange Bank
fell 5 percent after the ruling was announced.
“The court decision is likely to discourage foreign
investments in Korea, where unpredictability about the legal
system is raising investment uncertainties for foreigners,
said Kim Sang Jo, a professor of international trade at Hansung
University in Seoul.
Foreign direct investment in South Korea fell 6.5 percent
in 2007, declining for a third straight year, according to the
Commerce Ministry. Investors including U.S. billionaire Carl
Icahn and Dubais Sovereign Global Investment Ltd. have been
thwarted in South Korea amid hostility to foreign funds and
criticism in local media of the “eat and flee strategy of
overseas buyers.
Loan Star and Korea Exchange Bank were also found guilty of
stock manipulation and each was fined 25 billion won
($26 million).
“We put top priority on holding a fair trial, said
presiding Judge Lee Kyung Choon at the end of the case, which
began in March last year. “During the 30 sessions Im sure the
defendants had opportunities to fully defend themselves.
The Feb. 1 ruling may imperil the Dallas-based buyout
firms legitimacy as the owner of Korea Exchange Bank. If the
fund is found to be an unlawful owner, financial regulators can
order it to reduce its stake in the lender to 10 percent or less
within six months, Kim said.
Regulators have withheld final approval of Lone Stars
planned sale of its 51 percent stake in Korea Exchange Bank to
HSBC Holdings Plc for about $6.45 billion until legal disputes
including Yoos case are resolved.
Kim Ji Ho, a spokeswoman at Lone Star in Seoul, wasnt
immediately available to comment. Lee Nahm Yeon, a spokeswoman
at Korea Exchange Bank, declined to comment.
Lone Star Funds Chairman John Grayken on Jan. 11 denied any
wrongdoing by Yoo when he testified in court as a defense
witness. Grayken, 51, was questioned by South Korean prosecutors
during his two-week stay in Seoul. He wasnt charged.
HSBC and Lone Star set an April deadline to conclude the
deal for Korea Exchange Bank, South Koreas fifth-largest bank
by market value. The bank has 5.4 million customers, more than
350 branches and operations in 18 countries.
For more verdict and settlement news from last week, click here.
Litigation Departments
Lerach Wants Sentencing Papers to Be Sealed, Prosecutors Oppose
Securities lawyer Bill Lerach, who faces as much as two
years in jail for secretly paying clients of his former firm to
file shareholder lawsuits, wants to keep documents in his
sentencing secret, The National Law Journal reported Feb. 1.
Lerach, 61, who helped recover $7.2 billion for Enron Corp.
investors, is the third former senior partner of New York-based
Milberg Weiss to plead guilty in the eight-year investigation.
Prosecutors accused the partners and the firm, which recovered
more than $45 billion for investors, of secretly paying
10 percent of their attorneys fees to plaintiffs in shareholder
class actions. The firm and cofounder Melvyn Weiss have denied
the charges.
Lerach asked in court filings that his sentencing papers be
sealed because they are “largely devoted to a discussion of his
character, life, and work as reflected in the more than 150
letters of support submitted to the Court, according to The
National Law Journal.
Prosecutors have argued that almost all of the papers
should be made public. Lerach is scheduled to be sentenced on
Feb. 11.
The case is U.S. v. Lerach, CR07-964, U.S. District Court,
Central District of California (Los Angeles).
For more litigation department news from last week, click here.
On The Docket
Five Former National Century Executives Trial Begins Today
Jury selection begins today in the securities-fraud trial
of five former executives of bankrupt National Century Financial
Enterprises Inc.
The executives, accused of lying to investors, diverting
funds and conspiring to launder money, include: former Chief
Operating Officer Donald Ayers, ex-Chief Financial Officer
Randolph Speer, Roger Faulkenberry, former director of
securitizations, James Dierker, former vice president for client
development and Rebecca Parrett, a former vice chairman, who
oversaw accounts receivable.
National Century filed for bankruptcy in November 2002, two
days after the FBI raided its offices in Dublin, Ohio. On
Dec. 2, 2002, the company failed to pay investors $8.3 million
in interest due on its bonds. The U.S. Securities and Exchange
Commission sued four executives in December 2006, accusing them
of defrauding investors of $2.6 billion.
Former Chairman Lance K. Poulsen, pleaded not guilty to
federal charges of plotting to defraud investors of the bankrupt
health-care finance company. Poulsen, whose trial was postponed
until August, also was charged in October of offering to pay a
witness to change her testimony in the case.
The case is U.S. v. Poulsen, No. 06-129, U.S. District
Court, Southern District of Ohio (Columbus).
For Bloomberg articles by lawyers on litigation topics, click
here.
For news about bankruptcy litigation, click here. For news about
intellectual property litigation click here.
