Sun-Times, Liberty, Viacom, Wal-Mart in Court News
Sun-Times Media Group Inc., publisher
of newspapers in the Chicago area, sued former Chairman Conrad
Black and three associates to recover some of the more than
$60 million it paid in legal fees to defend them.
Sun-Times, formerly known as Hollinger International Inc.,
also asked a Delaware Chancery Court judge to award interest and
rule the company doesnt have to pay future legal fees and
expenses related to appeals in their criminal cases. A federal
court jury in July convicted Black and the three other former
executives for their role in the theft of $6.1 million from
Hollinger.
The advancements “have helped push Sun-Times to the edge
financially, forcing the company to slash scores of employees and
to take other drastic cost-reduction measures in an effort to
stay afloat, the company said in a complaint filed Feb. 1 in
Wilmington, Delaware.
Sun-Times said Jan. 29 that its trying to save about
$50 million to stem losses from declining circulation and
advertising sales. This month, the company cut 36 newsroom
positions through buyouts. The company reported a $56.6 million
net loss in 2006 on sales of $418.7 million.
Also named in the complaint were John Boultbee and Peter
Atkinson, both former Hollinger executive vice presidents, and
former General Counsel Mark Kipnis. All four defendants were
convicted in July of mail fraud. Black also was convicted of
obstruction of justice.
The complaint wont affect legal fees for civil lawsuits in
which the four are named. Sun-Times “will continue to advance
reasonable fees and expenses in connection with civil
proceedings, according to the complaint.
Edward Greenspan, a Toronto-based lawyer for Black, didnt
return messages seeking comment.
Boultbees lawyer Donald Corbett, Atkinsons lawyer Benito
Romano and Kipniss lawyer Ronald Safer didnt return calls
seeking comment after business hours.
The case is Sun-Times Media Group Inc. v. Conrad M. Black,
CA 3518, Delaware Chancery Court (Wilmington).
EU Sues Spain for Failing to Enact Mifid, Bank Capital Laws
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 of 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.
Trials
Ex-Bankers Jury Ends First Full Day of Talks Without Verdict
The jury in the trial of ex-Credit Suisse Group banker Hafiz
Muhammad Zubair Naseem ended its first full day of deliberations
without a verdict after saying it was deadlocked 11 to 1 in the
$7 million insider trading case, the first to reach a jury after
a federal crackdown began last year.
Naseem, a Pakistani citizen, was accused by federal
prosecutors of tipping off Ajaz Rahim, former head of investment
banking for Faysal Bank Ltd. in Karachi, on nine pending deals.
The judge, who after receiving the jury note Feb. 1 ordered
deliberations to continue, then sent the panel home 15 minutes
later, telling them to return today.
The Manhattan jury sent the note to U.S. District Judge
Robert Patterson, saying it was deadlocked because one holdout
juror refused to change his or her mind. Naseem faces as much as
30 years in prison if convicted of the charges, which include
conspiracy and insider trading.
Patterson told the jury to take a “fresh look at the
evidence. “Its the evidence that determines the matter. On
sending them home for the weekend, the judge told them to “keep
an open mind.
Prosecutors claimed that, after Naseem accessed confidential
deal data on Zurich-based Credit Suisses computers, he allegedly
called Rahim, who traded on the tips sometimes within 10 minutes.
Naseem wasnt assigned to any of the deals he allegedly accessed,
prosecutors claimed.
The case is U.S. v. Naseem, 07-cr-610, U.S. District Court,
Southern District of New York (Manhattan).
For more trial news from last week, click here.
Verdicts/Settlements
Viacom Wins Dismissal of Investor Suit Over Blockbuster Spinoff
Viacom Inc. persuaded a judge to throw out an investors
lawsuit against directors including Chairman Sumner Redstone over
the 2004 spinoff of the movie-rental company Blockbuster Inc.
Delaware Chancery Court Judge Stephen Lamb ruled Feb. 1 that
shareholder Beverly Pfeffer failed to show that Viacoms board
harmed investors by approving Blockbusters sale as part of a
deal featuring an exchange of the two companies stock.
Pfeffer didnt produce facts to show Viacom officials
“engaged in a breach of fiduciary duty by giving their
blessing to the deal, Lamb said in his 37-page decision.
Jeremy Zweig, a Viacom spokesman, said in an e-mailed
statement that the company wouldnt comment on Lambs ruling. Jay
Eisenhofer, a New York-based lawyer for Pfeffer, didnt return
calls for comment.
Some investors complained that Redstone and his National
Amusements Inc. holding company used the stock swap to “unload
Dallas-based Blockbuster at an artificially inflated price.
Blockbuster sales have declined as competition has grown
from discount retailers and rivals such as Netflix Inc., which
rents DVDs over the Internet for a flat monthly fee.
Viacom paid $8.4 billion to acquire control of Blockbuster
in 1994, according to Hoovers Inc., a business information
service owned by Dun %26amp; Bradstreet Corp.
In the spinoff, Viacom stockholders exchanged each of their
shares for 5.15 shares of Blockbuster. In addition, Blockbuster
declared a $5-a-share dividend. To pay for the dividend,
Blockbuster incurred more than $900 million in debt, of which
$738 million went to New York-based Viacom, court papers show.
The case is Pfeffer v. Redstone, CA2317, Delaware Chancery
Court (Wilmington).
Ex-Wal-Mart Vice Chairman Sentenced to 27 Months Home Detention
The former vice chairman of Wal-Mart Stores Inc., who
admitted embezzling funds for personal expenses including dog
care and a truck upgrade, was re-sentenced to 27 months home
detention, a term an appeals court had thrown out as too lenient.
Thomas M. Coughlin, a friend of late Wal-Mart founder Sam
Walton, also received five years probation Feb. 1 in Fort Smith,
Arkansas. U.S. District Judge Robert T. Dawson heard from
witnesses including Coughlins doctor before imposing the same
sentence he handed down in August 2006, adding only 1,500 hours
of community service.
Dawson said he decided to spare Coughlin from going to
prison partly because of his “poor medical condition, which I
believe is deteriorating as we speak. Coughlins ailments
include heart disease, diabetes and sleep apnea, cardiologist Dr.
Joel Carver testified.
Coughlin, 59, joined Bentonville, Arkansas-based Wal-Mart in
1978 as head of theft prevention and rose to become its No. 2
executive. Wal-Mart called the case “embarrassing and painful
two years ago, when Coughlin pleaded guilty to stealing from the
retailer and evading taxes on the gains.
An appeals court threw out Dawsons original sentence in
August and ordered the judge to re-sentence Coughlin. In
December, a U.S. Supreme Court decision gave judges more leeway
to depart from federal sentencing guidelines, which called for as
many as 33 months in prison for Coughlin, Dawson said Feb. 1.
Coughlin has been confined at home with electronic
monitoring since October 2006. He will receive credit for the 15
months he has served. The home detention and probation will run
together.
Prosecutors will review the decision and consider whether to
appeal, Assistant U.S. Attorney Christopher Plumlee said.
Coughlin thanked Dawson after he announced the sentence.
Coughlin and his lawyers declined to comment outside the
courthouse.
The case is U.S. v. Coughlin, 06-CR-20005-001, U.S.
District Court, Western District of Arkansas (Fort Smith).
Lone Stars Paul Yoo Jailed in Korea on Stock Manipulation
Paul Yoo, Lone Star Funds 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 Sealed; Prosecutors Opposed
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 attorney 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, are 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.
