Tuesday, December 28, 2010

Original Article by: Knoxville News Sentinel

Recent News on a new family law in Tennesse.

A Japanese widow's long legal battle to move permanently to East Tennessee with the toddler she bore with a fallen U.S. Marine is over.

President Barack Obama signed a bill into law on Wednesday that grants permanent residency status to Hotaru "Hota" Ferschke, the wife of Marine Sgt. Michael Ferschke, a Maryville Tennessee soldier who was killed in Iraq.

Tennessee Family Law Case

"What a beautiful Christmas present," said Sgt. Ferschke's mother, Robin Ferschke. "The right thing has been done."

Robin Ferschke said her daughter-in-law is ecstatic about the news.

"She was so discouraged, and now, she's like, 'Wow!' " she said. "I know she's very happy."

Hota Ferschke has been trying to fulfill her husband's wishes and raise their 22-month-old, Mikey, in East Tennessee. But a quirk in federal immigration law prevented her from moving to the United States.

Hota and Sgt. Ferschke met while he was stationed in Okinawa, Japan, and they dated for more than a year. Shortly before his death, Hota discovered she was pregnant. The couple married over the telephone - he was in Iraq, she was in Japan.

They never saw each other again. Sgt. Ferschke was killed on Aug. 10, 2008.

After his death, Hota Ferschke was not allowed to move to the United States because their marriage was not recognized under a Cold War-era immigration law. The law dictates that a marriage must be consummated after the wedding before a non-American could gain permanent residency status.

Frustrated, Hota's mother-in-law made her dilemma public, and U.S. Rep. John J. Duncan Jr., R-Knoxville TN, and others in Congress intervened. Congress last week took the extraordinary step of passing a narrow bill that granted Hota Ferschke permanent residency.

Now that Obama has signed the measure into law, Hota can begin filing her immigration paperwork and looking for a job, Robin Ferschke said.

"I know my son is very, very proud," she said. If you have questions regarding family law in the state of Tennessee contact the top Nashville divorce lawyer

© 2010, Knoxville News Sentinel Co.

Monday, December 27, 2010

Law Firms Hold Line In Setting Bonuses

Wall Street Journal

Junior attorneys at many top law firms worked harder in 2010 as the firms relied on leaner staffing, but their year-end bonuses are unlikely to budge much from last year's.

Bonus payments to associates are among the most tangible indicators of the legal industry's health. Many elite law firms are keeping those payments largely unchanged this year, at least partly because business hasn't improved much, say partners at several big firms.

The trend also reflects a reluctance to risk offending clients who worry that increasing pay to associates could translate into higher legal costs, says a partner at one major New York firm.

Regulatory practices at big New York law firms are generally strong this year, say partners and consultants. But the financial crisis slowed the pace of the mergers, acquisitions and private-equity transactions on which the elite firms thrive. Litigation revenue also has lagged as many corporate clients have grown less willing to engage in protracted lawsuits and more apt to prod law firms to charge less for handling court cases.

Bonuses at many top Wall Street law firms have ranged up to $35,000 this year, about the same as in 2009. That's substantially less than just a few years ago. Base pay for an associate at a leading firm typically starts at around $160,000, as it has since 2007, the firms say. But bonuses at many firms have fallen from as much as $65,000 since then. In addition, some firms occasionally paid "special bonuses" of as much as $50,000.

Meanwhile, average hours billed by associates at the nation's top 50 law firms by revenue rose 7% in 2010, according to Citi Private Bank Law Firm Group. The higher average, which it said was still below the peaks seen in some previous years, was largely the result of staff reductions; the number of associates at the top 50 firms fell by 6.7% through Sept. 30, after declining 1.5% in 2009.

At New York-based Milbank, Tweed, Hadley & McCloy LLP, where bonuses were only slightly above last year's payouts, hours billed by associates were up about 6%, but from "one of the lowest bases we've had in the last decade," says Mel M. Immergut, the firm's chairman. "The actual number of hours is still low compared to what it has historically been," he adds.

Revenue at Milbank Tweed will be up by about 3%, on flat expenses, Mr. Immergut says, adding that profit per partner will be up by 8% to 10%, depending on the firm's year-end collections.

Associates have long been known to grouse about long hours. Their jobs put them at the beck and call of their firm's partners, and they are often saddled with mundane legal tasks. But, after a period of years, their reward can be a partnership that entitles them to share in the firm's business. At top firms, partners can reap more than $2 million a year.

Even so, junior lawyers are increasingly discontented. A recent survey of more than 5,000 third-, fourth- and fifth-year associates by American Lawyer magazine found that job satisfaction has slipped to its lowest point in the past six years. Satisfaction ratings fell at 109 of the 124 firms participating this year and last.

"You're working your rear end off every year," says Danette Lilja, who left Morrison & Foerster LLP's Washington office in April to relocate to Colorado. "You can convince yourself that it's worth it only if there's some payback, and the payback in the law-firm world is more money," she adds..

Keith Wetmore, Morrison & Foerster's chair, says the firm's "goal is to pay competitive compensation."

"The work that used to be done by 10 associates is now being done by six," says T.J. Duane, a New York recruiter who specializes in helping associates find new jobs. Some associates are "very frustrated," he says, and are "thinking, 'The partners are doing well, and I busted my butt for them all year.'"

Few partners, however, are likely to enjoy a banner year. Partners don't get bonuses, but instead get a cut of their firm's profits. At the top 50 firms, profits are likely to show only "modest improvement," according to Citi Private Bank Law Firm Group, and will fall short of pre-recession levels at many firms.

Late last month, New York-based Cravath, Swaine & Moore LLP set the standard for other big firms by being the first to announce bonuses for the year. They ranged from $7,500 for first-years to $35,000 for senior associates. The bulk of those bonuses, which it paid Dec. 10, were little changed from last year, though senior associates got a $5,000 increase.

Willkie Farr & Gallagher LLP; Dewey & LeBoeuf LLP; Akin Gump Strauss Hauer & Feld LLP and Morrison & Foerster, among others, all matched Cravath's bonuses within weeks, and a few exceeded them. Business-litigation specialist Quinn Emanuel Urquhart & Sullivan LLP, for instance, said it would essentially pay 150% of the Cravath standard to associates who billed at least 2,100 hours, though part of the bonus won't be paid until June.

At Akin Gump, associates were counting on bigger bonuses, according to Chad Vance, who left Akin earlier this year for a Detroit firm, which he said offered a better lifestyle. "Bonuses can have a big impact on your yearly savings and how much you can apply to student loans," he said, adding: "If you get $7,500 as a first year [associate bonus], versus $15,000, that is a big chunk of money."

Despite their complaints, however, many associates are likely to stay put at their top law firms, weary of testing a tenuous job market merely because of bonus frustrations, attorneys and recruiters said.

"It is like this throughout the entire economy, where employees are working harder and devoting more hours to their work than previously, but they are fortunate to have jobs," says Joel A. Rose, a law firm consultant in Cherry Hill, N.J.

Wednesday, December 22, 2010

Confidentiality Cloaks Medicare Abuse

Wall Street Journal

Christopher G. Wayne doesn't look like a typical family-practice doctor. Known to admirers as the "Rock Doc," he wears his hair spiked, punk style, and festoons himself with chains, bangles and leather bracelets.

He uses his upscale Miami Beach home as a production studio for Playboy photo spreads, and his MySpace page shows him posing with celebrities such as Paris Hilton and Aerosmith's Steven Tyler.

There's something else about Dr. Wayne that doesn't resemble a normal family-practice doctor: his earnings from Medicare, the government insurance program for the elderly and disabled. Dr. Wayne took in more than $1.2 million from Medicare in 2008, according to a person familiar with the matter, a large portion of it from physical therapy. That's more than 24 times the Medicare income of the average family doctor, according to a Wall Street Journal analysis of Medicare-claims data.

The regimen of physical therapy Dr. Wayne said he usually provided—30 minutes each of heat packs, massage, electrical stimulation and ultrasound—is also unusual.

Stephen Levine, a former board member of the American Physical Therapy Association, said those services are usually used in conjunction with more sophisticated forms of therapy, such as neuromuscular reeducation. Used on their own, with rare exceptions, "it's a form of abuse," said Mr. Levine. "Wouldn't we all love to…have someone rub our backs and have the government pay for it—but it's just not appropriate," he added.

Dr. Wayne, a 50-year-old osteopath, denies abusing the system and hasn't been accused of wrongdoing by authorities. He says his regimen "does wonders" if used correctly. He adds that he gave physical therapy to "patients who needed it, with appropriate diagnoses, and I should get paid for it."

Medicare administrators apparently felt otherwise. In 2009 he says he was placed on heightened scrutiny and eventually sold his business. But not until he had received more than $2.6 million from Medicare between 2007 and 2009, according to the person familiar with the matter.

Physical therapy, which cost Medicare almost $3.5 billion in 2008, offers a case study in how Medicare polices its payments. Even when Medicare identified providers whose physical-therapy billing raised red flags, it kept paying thousands or even millions of dollars, sometimes for years, The Wall Street Journal found. Among the cases:

•A physical therapist in Brooklyn who billed for so much therapy—more than $2.5 million in 2008 alone—that it would have been virtually impossible for him to have performed it all within state and Medicare guidelines, fraud experts say. Medicare has continued to pay him, shelling out nearly a million dollars through July of this year.

•A second doctor in Florida who pocketed more than $1.8 million from Medicare in 2007, much of it from physical therapy on patients with an extremely rare condition. Even after a Medicare antifraud contractor flagged this doctor, the agency paid him at least $6.7 million over more than two years.

•A Houston doctor whose Medicare billing under her provider number spiked from zero to more than $11.6 million in less than a year. At the time, this doctor was being investigated for misconduct in a company owned by a Nigerian with an alleged history of fraud.

There are plenty of reasons why Medicare often fails to stop questionable payments up front. To protect law-abiding doctors and hospitals—the vast majority—Medicare is required to pay nearly everybody within 30 days. Medicare says it is reluctant to suspend payments to providers who may have made honest mistakes, out of concern that beneficiaries might go without needed treatment. Law-enforcement agencies and Medicare contractors, overwhelmed by the sheer volume of Medicare fraud cases, can't investigate and prosecute them all. Sometimes, prosecutors and investigators ask Medicare to keep paying so as not to tip off targets of an investigation.

But a central problem is that Medicare hasn't fully exploited its most valuable resource: its claims database, a computerized record of every claim submitted and every dollar paid out.

"That's really the crux of the issue," said Kimberly Brandt, who led Medicare's antifraud efforts from 2004 through June of this year. She said the program is "definitely on the right path" to making better use of its database, "but it's not going to be a flip of the switch or an easy transition."

The Wall Street Journal originally identified Dr. Wayne and the other medical providers discussed in this article through a Medicare database that is much more limited than the one available to fraud investigators. The database, obtained in conjunction with the nonprofit Center for Public Integrity, contains records only through 2008, and includes the claims of just 5% of randomly selected Medicare beneficiaries.

Under a three-decade-old court decision protecting physician privacy, Medicare is prohibited from releasing to the public details of doctors' billings. The Journal agreed not to publish individual physician billing information obtained solely through the database as part of its arrangement with the Centers for Medicare and Medicaid Services, or CMS. Billing figures for doctors named in this article were obtained from the providers themselves or from others familiar with their businesses.

Some law-enforcement veterans argue that the government should release billing data to the public as a deterrent to fraud and abuse, so long as patient confidentiality isn't compromised. Kirk Ogrosky, a former assistant U.S. attorney specializing in health-care fraud and now a partner at the law firm Arnold & Porter LLP, says law enforcement can't do all the work on its own. He adds that when doctors "understand their billing information is public and people can examine it, that deters them from overbilling."

Peter Budetti, the head of CMS's new antifraud arm, says Medicare is moving away from its traditional "pay-and-chase" approach, in which it tries to recover improper payments already out the door. He says he'd like to emulate the credit-card industry, which has developed software to flag suspicious charges before paying them. "Fraud prevention is our new emphasis," he said.

The main responsibility for flagging fraudsters lies with a network of private contractors that are tasked with mining the data.

There are occasional false alarms. About two years ago, a claim for a prostate exam performed on a woman raised suspicions, according to executives at one Medicare contractor. It turned out to be a legitimate case because the patient had undergone a sex-change operation.

The final line of defense is law enforcement. The Bush and Obama administrations have expanded multiagency strike forces—called HEAT, for Health Care Fraud Prevention and Enforcement Action Teams—into new cities beyond their original base in southern Florida. In contrast to most previous efforts, these teams mine claims data to decide which cities, types of fraud, and providers to target. Since March 2007, federal health-fraud prosecutors with these strike forces have charged more than 850 defendants for alleged frauds exceeding $2 billion in billings, according to the government.

Overall, the highest-dollar schemes have involved pharmaceutical and drug-company fraud, followed by hospital scams, according to data from the Health and Human Services inspector general. Recently, physical-therapy abuse has cropped up on the federal radar screen. Law-enforcement authorities were so alarmed by the physical-therapy billing patterns in Brooklyn that they deployed a special strike force there. In Florida's Miami-Dade County, a known Medicare-fraud hot spot, 2009 per-patient expenditures on outpatient therapy were triple the national average, according to CMS.

A Journal analysis of the 5% database focused on the physicians and physical therapists in private practice who performed the most physical-therapy treatments per patient. Only 3% of providers administered 90 or more treatments per patient; the national average was about 40. That top 3% accounted for more than 14% of all Medicare physical-therapy expenditures from 2003-2008, or an estimated total of nearly $1.3 billion. While some of that billing would be legitimate, said Mr. Levine, much of it would likely be abusive or fraudulent.

One Florida physician—not Dr. Wayne—made almost all his money from physical therapy, according to the Journal's analysis of the 5% database. According to separate billing totals reviewed by The Wall Street Journal, this internal-medicine doctor took home more than $8.1 million from Medicare from 2007 through 2009.

The Journal cannot name this doctor because the paper was able to learn a crucial piece of information about his practice—the type of disorder he billed for—only from the database, not from any other source.

From 2006 through 2008, more than 40% of this doctor's patients in the database were described as suffering from brachial neuritis. That's a rare nerve-and-muscle condition estimated to occur in about three out of every 100,000 Americans. In 2008, the Florida doctor earned at least 25% more from brachial neuritis patients than any other provider, according to the Journal's database analysis.

A contractor in charge of ferreting out fraud in Florida—SafeGuard Services LLC, owned by Hewlett-Packard Co.—flagged this doctor for heightened scrutiny at least as early as June 2007. But it wasn't until September 2009 when Medicare stopped paying nearly all of his claims, according to a government official with knowledge of the matter. During that time, Medicare paid out more than $6.7 million to this doctor, according to the billing totals reviewed by the Journal.

Officials from SafeGuard and CMS declined to comment, citing the policy against discussing any particular provider.

In the 1990s, this doctor filed for bankruptcy. On a recent morning a Porsche and a late-model Mustang sat in the driveway of his spacious middle-class home. Asked about his medical practice, the doctor said, "I don't have anything to say to you," and shut his door.

The Journal's analysis suggests one center of intensive physical-therapy billing is Houston. That's where Dr. Theresa Rice works. Dr. Rice, who is in her late 70s and received her medical degree in the Philippines, has been licensed to practice medicine in Texas since 1981, public records show.

In 2004, she was convicted of shoplifting $748 in jewelry from a Foley's department store. In an interview, Dr. Rice at first denied the conviction, saying there must have been a computer error. After being told that the Journal had her booking photo, she admitted that she had shoplifted. "I lied to you," she said.

In 2007, the Texas Medical Board began probing Dr. Rice for her involvement in a business owned by a Nigerian businessman "who has a history of fraudulent activity, and is sought by authorities under several known aliases," according to a Medical Board document. Dr. Rice approved home health services based on patient assessments made by an unqualified physician assistant, and she could provide no medical records for those patients, the Board found.

Dr. Rice said she was duped in that case, an explanation the Medical Board accepted. She was fined $1,500 and required to take a course in medical ethics, according to the Medical Board document.

Dr. Rice billed Medicare nothing in 2007 for services she performed or supervised, according to a person familiar with her business. But starting in October 2008, billing under her provider number skyrocketed. In less than a year, Medicare received claims totaling over $11.6 million and paid out more than $7.1 million.

Medicare stopped paying in mid-2009, when federal investigators shut down the clinic where she worked, City Nursing. That clinic was owned by a different Nigerian businessman, Umawa Imo. At least seven people have been indicted on health-fraud charges connected to the clinic, in what a senior law-enforcement official called the largest physical-therapy fraud in Houston history. The alleged scheme involved several people of Nigerian descent as well as at least two American doctors, according to the federal indictment and law-enforcement officials. Medicare paid out about $27 million over 28 months, according to the indictment.

Dr. Rice wasn't indicted and maintains she was duped again. Mr. Imo has pleaded not guilty to health-care fraud and conspiracy charges. His lawyers said he is innocent and trusted the people running the clinic.

Short of an audit or investigation, there is often no way to tell who actually performs physical therapy. That's because doctors who "directly" supervise physical therapists—meaning the doctor is in the same office suite at the same time the therapy is being performed—don't need to state on the claim form who administered the therapy. It's billed as if the doctor performed it.

In the case of City Nursing, the clinic where Dr. Rice worked, an affidavit for a search warrant alleges there was only one physical therapist. The indictment charges that patients were paid to sign documents saying they had received physical therapy that never happened.

Dr. Rice is now working at a storefront operation called Clinica de la Familia. A CMS spokesman said she's no longer eligible to get paid by Medicare and declined to provide further details. Of her current clinic, Dr. Rice said, "We are not doing any fraudulent thing."

Federal authorities say that in Brooklyn, physical-therapy abuse appears to be especially rife among Russian immigrants. A Journal analysis of the 5% database shows that eight of Medicare's 30 top-earning physical therapists work in Brooklyn. Seven of them have names that seem Russian or from neighboring nations.

Brooklyn physical therapist Aleksandr Kharkover billed Medicare for more than $2.5 million in 2008, according to a person familiar with his business, and received more than $1.8 million.

On an autumn weekday at about 9:00 in the morning, two Journal reporters arrived at Mr. Kharkover's home, a brick bungalow. He appeared in a white T-shirt emblazoned with the slogan, "Freedom isn't free." Asked if billing $2.5 million to Medicare fit with his records, he replied, "I'd say that fits."

Mr. Kharkover and two people familiar with his practice said he sees patients only in their homes. Fraud experts say this makes it virtually impossible for him to have legitimately billed such high amounts.

New York State allows a physical therapist to supervise only two assistants on home visits, and the therapist must be in the same home at the same time as his assistants, according to New York State and Medicare officials. Unless Mr. Kharkover held therapy sessions in which several patients congregated in one home, he would effectively be limited to billing little more than what he himself could perform.

Under generous assumptions, a single therapist could earn $1 million from Medicare in a year by working 12.5 hours a day, seven days a week, with no time off. Medicare paid Mr. Kharkover more than $960,000 in the first seven months of this year, according to the person familiar with his business.

CMS and its main New York antifraud contractor, SafeGuard Services, declined to comment on Mr. Kharkover.

Mr. Kharkover declined a second interview. His attorney, Montell Figgins, said his client is a "successful businessman," adding that "there is no reason to believe my client was doing anything illegal."

As for Dr. Wayne, he said he expanded physical therapy at his clinic near Miami's design district because his patients needed it. Medicare regulations require that physical therapists billing under a physician must have completed an accredited physical-therapy education program. But Dr. Wayne said he trained his "office girls" to do the work in part because hiring full-fledged physical therapists was too expensive.

Referring to Medicare's therapist-education requirement, he said, "I interpret that as, 'If I train them in physical therapy, that should be good enough.'"

Dr. Wayne acknowledged grossing $1.1 million or $1.2 million from Medicare in 2008, and estimated his take-home that year from his clinic was roughly $400,000. He said his Medicare reimbursements plummeted after March 2009, when he says Medicare tightened scrutiny of his billing. According to the person familiar with the matter, Medicare paid only about 12.5% of his claims in the second half of 2009.

Dr. Wayne said he is appealing many of the denied claims, but that the drop in Medicare reimbursements and other business issues led him to sell his practice and caused him financial distress. On a recent evening, he opened envelopes from a bank, and said they were notices of bounced checks.

Still, full-scale replicas of medieval knights' armor greet guests at his home, and hanging on the walls are what he said are two original Picassos, several Dalis and photographs by Helmut Newton. Also present recently was Eliza Carson, a Playboy model who said she's 20 years old. She barely glanced up from texting on her phone as she asked Dr. Wayne how he managed to keep his hair spiky when he sleeps. He explained that he uses an airplane pillow.

Dr. Wayne now works in a pain-management clinic in Fort Lauderdale. He said he doesn't have a board certification in pain management, and said the clinic accepts only cash. Of his patients at the clinic, Dr. Wayne said, "I write their pain prescriptions, and they're gone." If you are having any divorce or family law issues including medicare plans in any state in the USA and need expert legal consultation, we recommend this Nashville Divorce Lawyer

Thursday, November 11, 2010

Ohio prospective Juror cites Dahmer, is excused

Associated Press

An Ohio man was excused from jury service after mentioning he was a childhood friend of cannibalistic serial killer Jeffrey Dahmer.

John Backderf was among prospective jurors being screened last week by a judge in Cleveland.

When asked if he'd known anyone convicted of a crime, Backderf responded: "I had a close friend in high school who killed 17 people."

The Plain Dealer reports Monday the answer caused the judge to freeze and top lawyers to drop their pens. Backderf explained he knew Dahmer, who was raised in northeast Ohio.

Backderf is a graphic novelist about to publish "My Friend Dahmer." He was dismissed from the jury list.

Dahmer confessed to killing and dismembering men and boys in Milwaukee. An inmate killed him in a Wisconsin prison in 1994.

Lawyer for disguised Man on Flight wants Media Ban

Associated Press

The lawyer for a Chinese asylum seeker who boarded a flight from Hong Kong to Canada disguised as an elderly white man requested Monday that the media be banned from covering his client's immigration hearings to protect his identity.

Lawyer Dan McLeod told Canada's Immigration and Refugee Board that the man from mainland China is very concerned that information disclosed at the hearing might become available to Chinese authorities.

"This is an extremely unusual case in that there has been an extremely serious and potentially dangerous leak about a refugee claimant by an unknown Canada Border Services official," McLeod told the adjudicator, referring to an intelligence alert about the man that was leaked to the media last week.

The man's name has not been released and McLeod said it should remain that way because disclosure could result in persecution or retribution from China.

Authorities have not suggested any terrorist link to the man who boarded the Air Canada flight in Hong Kong on Oct. 29 wearing a remarkably detailed silicone mask disguising him as an elderly white man. The internal intelligence alert from the Canadian Border Services Agency shows before-and-after photos of the man with and without the mask, saying he removed the disguise in a washroom mid-flight.

A Hong Kong official told the AP that the imposter is a mainland Chinese citizen who was transiting through Hong Kong. The official declined to be named because she is not authorized to release the information.

The official said the Chinese man likely escaped detection because he used his own travel documents and a genuine boarding pass when clearing immigration checkpoints in Hong Kong, and then swapped travel papers with a collaborator in the transit lounge just before boarding the flight to Vancouver, British Columbia.

A Canadian official, who provided the Border Services alert to The Associated Press, said a U.S. passport was involved.

Jim Murray, one of the top lawyers for Canada Border Services Agency, said the refugee claimant identified himself as a member of an organization in China and there is concern for the safety of some of the group's members. He did not specify the group involved.

Murray said the man has given "indications of what has happened to people in China who have been members of that organization."

McLeod argued the hearings should be held in the absence of the media, specifically singling out three Chinese media outlets -- Sing Tao, Ming Pao and World Journal. He expressed concern that even if the court barred publication of his client's name, Chinese media might reveal the information to authorities.

"Many Chinese media have relinquished their professional ethics," McLeod said.

Reporters from the newspapers named denied their news outlets were controlled by Beijing.

McLeod cited Canadian human rights lawyer David Matas as saying that Sing Tao had been sued by members of Falun Gong, a meditation sect that has been banned in China where its members have been labeled as terrorists by the government and risk arrest.

"Sing Tao had published an article saying that Falun Gong had advocated the destruction of the world and identified three Falun Gong practitioners," said McLeod. When reporters asked him outside the hearing room if his client was a member of Falun Gong, he said he couldn't discuss details of the case.

DOJ Charges former Glaxo Lawyer with Obstruction

Associated Press

Federal prosecutors said Tuesday they have charged a former GlaxoSmithKline executive with obstructing justice and making false statements in an effort to conceal illegal promotion of a company drug.

The Department of Justice alleges that in 2002, Lauren Stevens of Durham, N.C., signed several letters to the Food and Drug Administration denying that her company had promoted an antidepressant drug for unapproved uses. But Stevens knew that the company had paid numerous physicians to give talks touting unapproved uses of the drug, including weight loss, according to the indictment filed Monday in the U.S. District Court of Maryland.

A spokeswoman for GlaxoSmithKline PLC confirmed Stevens worked as a vice president in the company's legal department, but has since retired. The spokeswoman also confirmed that the drug - which was not named in the indictment - is Wellbutrin, a former blockbuster-selling product.

Drug companies are prohibited from promoting drugs for uses not approved by the FDA.

In recent years, federal prosecutors have reached multibillion dollar settlements with Pfizer Inc., Eli Lilly & Co. and other drug companies over their marketing practices.

But Stevens' indictment marks a rare case of the Department of Justice targeting a specific executive, rather than an entire company. Some legal experts have stressed that companies will not curb illegal marketing tactics until executives are threatened with prison time, because fines leveled against companies are often just a fraction of their total sales.

"This indictment demonstrates that those who purposely subvert the regulatory functions of the FDA through false statements and misleading information will be held accountable for their deception," said Dara Corrigan, FDA's associate commissioner for regulatory affairs.

Stevens was charged with one count of obstructing an official proceeding, one count of falsifying documents to influence a federal agency and four counts of making false statements to the FDA. Each of the obstruction charges carries a maximum penalty of 20 years in prison. The false statements counts each carry a maximum penalty of five years in prison.

In one instance, prosecutors say Stevens withheld slides used by physicians promoting the company's drug, even though the FDA had asked specifically for the materials. Stevens claimed that the company's response to the FDA was "final" and "complete," according to the indictment.

Stevens also falsely denied that Glaxo had paid doctors to attend special sessions where medical experts discussed unapproved uses of Wellbutrin, according to the Department of Justice.

"Attendees were not paid, reimbursed or otherwise compensated to attend these events," Stevens wrote in a 2003 letter to the FDA. But prosecutors say attendees received gifts, entertainment and other compensation in return for attending the events.

During 2001 and 2002, Glaxo paid two expert physicians to speak about 500 times each about Wellbutrin, including how to use the drug to treat obesity.

A top lawyer representing Stevens called her "an utterly decent and honorable woman," in a statement e-mailed to The Associated Press.

Brien O'Connor, who works with the firm Ropes & Gray, said Stevens simply followed the guidance of an outside law firm that was hired to advise Glaxo in dealing with the FDA.

"She looks forward to the day when a judge and jury can hear the true facts in this case," O'Connor said.

Wednesday, November 10, 2010

Summary Box: Feds close FDA Whistleblower Probe

Associated Press

CASE CLOSED AGAIN: For the second time this year, federal inspectors have dismissed allegations by Food and Drug Administration scientists who say they were pressured into approving medical devices.

WHISTLEBLOWERS: FDA medical device reviewers allege that agency managers improperly overruled their opinions and tried to intimidate them when they went public with their concerns.

WIDER SCOPE: Federal inspectors previously dismissed the whistleblower complaints in February, but agreed to reopen the case after lawmakers and outside groups complained about the limited scope of the investigation.

Oil, Food Groups Challenge EPA on Ethanol

The Wall Street Journal

Major oil and food industry trade groups launched an attack Tuesday on an Obama administration move to allow higher concentrations of ethanol in gasoline.

In a lawsuit filed with an appeals court, the American Petroleum Institute, the oil industry's main lobbying arm in Washington, and a coalition of food and restaurant industry trade groups challenged the Environmental Protection Agency's decision to allow up to 15% ethanol in gasoline, up from 10%.

The EPA last month said it would allow the higher ethanol blend only for vehicles manufactured in the 2007 model year or later. The agency is still considering a proposal to allow the 15% ethanol blend for older vehicles.

The API said in a statement the EPA action "puts consumers at risk" because tests of whether the higher concentrations of ethanol could damage cars aren't complete.

The food-trade groups, including the Grocery Manufacturers Association, the American Meat Institute and the National Council of Chain Restaurants, said increasing the use of ethanol in cars will increase corn prices and make food more expensive.

The lawsuit was filed in the U.S. Court of Appeals for the District of Columbia Circuit.

The EPA defended its action, saying it relied on the testing conducted on 19 cars by the U.S. Energy Department.

"This decision is sound, and the agency is confident that it will withstand legal challenge," said EPA spokeswoman Betsaida Alcantara.

It's possible that still more groups emerge in coming weeks to challenge the 15% ethanol blend.

Auto makers have opposed the decision, saying older could be damaged by the higher concentration of alcohol fuel. Auto makers produce so-called flexible-fuel vehicles capable of using up to 85% ethanol, but that technology is not available in many new cars, and comparatively few older vehicles.

"Our primary concern is still what impact this decision will have on consumers—we want to be sure they have a safe and positive experience with any new fuel," said Wade Newton, a spokesman for the Alliance of Automobile Manufacturers.

Makers of power equipment, such as lawnmowers and chain saws, meanwhile, have expressed concern over the liability they might assume if higher ethanol levels damage their equipment.

Regardless of the outcome of the lawsuits, the decision to offer the higher ethanol blend often rests ultimately with gas stations. And gas stations have balked at the cost of installing new equipment to offer it.

"We don't think many stores will decide to sell E15 based on the initial EPA announcement," said National Association of Convenience Stores spokesman Jeff Lenard.

Oregon drops Foster Kid Lawsuit against Calgary Mom

Calgary Herald

The State of Oregon has withdrawn its lawsuit to collect two years worth of foster care and medical bills against Calgary mother Lisa Kirkman, whose then 10-year-old son was apprehended in 2008.

Provincial family court Judge Ted Carruthers quashed the statement of claim on Tuesday after an Alberta government lawyer, representing the Oregon Attorney General at the hearing, made the request.

"I think it's a huge stepping stone. It goes toward some sort of closure for my family," a smiling Kirkman told reporters outside court after the ruling. "I never expected to be sued for the costs of essentially kidnapping my son and holding him."

So, when I had gotten him back, it (the lawsuit) was like a stab in the back after that point. I feel that I've been vindicated somewhat and the path has been made a little smoother for me to help my family get some closure and move forward.

Court heard the Oregon lawsuit was for $7,500, but that was nowhere near the final figure that would have been sought by the state had it gone further.

Kirkman thanked her previous lawyer Tony Merchant for helping get her son back from Oregon and current lawyer Daniel Mol for getting the latest burden off her back.

Mol said while one phase of the case has ended, he intends to file a statement of claim against Oregon on behalf of his client for her ordeal and costs.

We're glad the state of Oregon has a sense of shame. It's nice to have this obstacle behind us, Mol said outside court. Next, our intention is to continue with the lawsuit against the state of Oregon in the United States.

Finally, the purpose of that lawsuit will be compensation for . . . for Lisa and their family. But, more importantly, to send a message to foreign jurisdictions: Don't mess with Canadians. (Also) there is a network of professionals in Canada so, if you are stranded abroad, we want you to know you are not alone.

There's a network that wants to help you. So, let us know.

The case had been set to be heard on Dec. 14, but was brought forward after the state of Oregon sent Mol a letter of intention to drop its lawsuit.

Kirkman previously told a judge at a hearing on Sept. 14 that she is still legally married to the stepfather, who helped raise the boy and was with him in Oregon on a holiday when he was apprehended.

The boy was discovered riding a bicycle without a helmet and placed in foster care.

She said the now 12-year-old boy's biological father disappeared a month after the child was born and has never been located, despite extensive efforts, and has never had any legal guardian rights.

Kirkman, who got her son back in June and was caught off guard when told of the claim in July, said she was at times frustrated by the court process.

Tuesday, November 9, 2010

2nd Week of Testimony in DeLay Trial Begins

Associated Press

Testimony has resumed in the money laundering trial of former House Majority Leader Tom DeLay.

The second week of the trial in Austin began Monday with prosecutors questioning a former official with liquor distributor Bacardi-Martini USA Inc. about a $20,000 corporate donation his company made to DeLay's political action committee.

Prosecutors allege DeLay used his PAC to illegally funnel $190,000 in corporate donations into Texas legislative races eight years ago. DeLay denies any wrongdoing.

DeLay is charged with money laundering and conspiracy to commit money laundering. The former Houston-area congressman faces up to life in prison if convicted.

Attorneys on both sides remain confident things are going their way in the trial, which is expected to last at least three weeks.

Both the prosecution and defense remained confident things were going their way as testimony in the money laundering trial of former House Majority Leader Tom DeLay was to start its second week on Monday.

Prosecutors were to resume presenting their case, in which they accuse DeLay of using his political action committee to illegally funnel $190,000 in corporate donations into Texas legislative races eight years ago.

DeLay, who has denied any wrongdoing, told reporters last week that prosecutors have yet to show any evidence he broke the law.

"We will prevail," said DeLay, who is charged with money laundering and conspiracy to commit money laundering. He faces up to life in prison if convicted.

None of the 12 witnesses who have testified for prosecutors have directly tied DeLay to the alleged scheme.

Prosecutors allege DeLay and two associates - John Colyandro and Jim Ellis - illegally channeled the corporate donations collected by DeLay's Texas PAC, through the Washington-based Republican National Committee. Under Texas law, corporate money cannot be directly used for political campaigns.

Dick DeGuerin, DeLay's lead attorney, has stressed to jurors that DeLay had little involvement in running the PAC. The money swap the PAC was involved with was common and legal, and no Texas candidate got corporate money, he said.

The presentation of evidence has been methodical and driven by documents, and testimony has gone into great detail about political fundraising and the work of lobbyists.

Travis County Assistant District Attorney Gary Cobb said prosecutors are presenting many pieces of the alleged scheme that will ultimately "give the jury the big picture."

Expected to testify this week were the seven Texas legislative candidates prosecutors allege received laundered corporate donations.

The trial is expected to last at least three weeks.

Prosecutors say the money helped Republicans take control of the Texas House in 2002. That majority allowed the GOP to push through a Delay-engineered congressional redistricting plan that sent more Texas Republicans to Congress in 2004 and strengthened DeLay's political power, prosecutors said.

Prosecutors deny defense claims that the charges are politically motivated.

DeLay's defense team tried moving the trial out of Austin - the most Democratic city in one of the most Republican states.

DeLay has been pressing for a trial since he was indicted five years ago, but the case was slowed by appeals.

The criminal charges in Texas, as well as a separate federal investigation of DeLay's ties to disgraced former lobbyist Jack Abramoff, ended his 22-year political career representing suburban Houston. The Justice Department probe into DeLay's ties to Abramoff ended without any charges filed against DeLay.

Ellis and Colyandro, who face lesser charges, will be tried later.

DeLay, whose nickname was "the Hammer" for his heavy-handed style, now runs a consulting firm based in the Houston suburb of Sugar Land. In 2009, he appeared on ABC's hit television show "Dancing With the Stars."

Lawyers say proving Egg-Related Lawsuits Difficult

Associated Press

Thousands of people likely were sickened by salmonella-contaminated eggs from two Iowa companies last summer, but lawyers said far fewer have the proof needed for a successful lawsuit and most cases filed will be settled out of court.

So far, attorneys in Seattle, Houston, Chicago and Minneapolis have filed at least 10 cases related to recalls by Wright County Egg and Hillandale Farms of Iowa. The companies recalled 550 million eggs in August after a salmonella outbreak was traced to their farms.

The Centers for Disease Control and Prevention linked at least 1,600 illness to the eggs, and CDC spokeswoman Lola Russell said for every case reported there may be up to 30 more.

Lawyers said they know of hundreds of people who claim they became sick after eating eggs, but the challenge for victims is proving they became ill because they ate contaminated eggs.

"Without a positive culture, it's difficult to link egg consumption to the illness," said Bill Marler, a Seattle attorney who has filed six cases in Iowa. "Just because you bought eggs and got sick, it's probably not enough to prove a case."

One of Marler's clients, 30-year-old Sarah Lewis, of Freedom, Calif., said her life hasn't been the same since she ate a custard tart made with contaminated eggs last spring. Since then, she's been hospitalized twice, continues to have chronic diarrhea and vomiting and has developed ulcerative colitis.

She's lost 30 pounds and must take 10 medications a day.

"It's taken its toll," said Lewis, who has two daughters, ages 7 and 5. "You try not to be cranky and have a positive attitude, but it's hard. I just want to be me."

An inspection of the Iowa egg farms after the salmonella outbreak found dead chickens, insects, rodents and mounds of manure. The farms were restricted from selling eggs except to breaker facilities that pasteurized the eggs.

In October, the FDA allowed Hillandale Farms to resume selling eggs but told Wright County Egg it could be closed if it doesn't clean up.

Marler said his office has more than 100 other cases that "are most likely related" to the outbreak.

"Whether we file all of them or most of them, that's a tactical decision," he said.

Ron Simon, whose law firm in Houston has filed one case in Texas, said he has 150 more clients who became ill from the outbreak. He called it the largest food-borne outbreak in U.S. history, topping salmonella outbreaks that resulted in peanut butter recalls in 2007 and 2009.

Attorneys are examining claims and gathering information to verify that people who became ill had the same strain of salmonella that was found at the egg farms, Simon said. He predicted few cases would ever reach a courtroom.

"In these cases, where you have a genetic match to the egg, there is no dispute they're liable," Simon said of the egg companies. "The discussion does not focus on liability. It focuses on damages because you have a DNA match."

He said if a case can't be resolved, attorneys will file a lawsuit.

"But in large-scale litigation like this, it's not very often," Simon said.

Hinda Mitchell, a spokeswoman for Wright County Egg, declined comment.

Sarah Brew, the attorney for Hillandale, said few lawsuits are filed in most food-borne cases, with most complaints being settled out of court.

"But it's a little too early to make that call in this outbreak," Brew said.

Brew said Hillandale has filed responses to some lawsuits, asserting restaurants who used Hillandale eggs are to blame for contamination that led to customers getting sick. She declined further comment.

States generally have a one to three-year statute of limitations to file cases.

"Historically ... people get agreements with the defendants that the statute of limitations is not running on these cases to give them time to negotiate," Simon said.

Ryan Osterholm, an attorney with Minneapolis-based PritzkerOlsen, has filed one lawsuit in Minnesota and said he has received up to five calls a day from people claiming to have become sick from eating tainted eggs. But like the other attorneys, Osterholm said it can be difficult to prove.

"Not until we do more research and find out it's the same strain as what was found in the eggs can we be sure they are part of this outbreak," Osterholm said.

Pamela Sotoodeh, a Chicago attorney who filed a lawsuit in federal court in Illinois on behalf of six plaintiffs, is the only attorney seeking class-action status for the case. She said that process could take two to three years.

Monday, November 8, 2010

Regulators, Banks Grapple With Volcker Rule's Reach

The Wall Street Journal

Interpreting Paul Volcker (left): Treasury's Mary Miller, 
pictured in 2009, and James Brigagliano of the SEC.
When J.P. Morgan Chase & Co. lawyers came to Washington in September to vent about prohibitions in the Volcker rule, they didn't bother stopping at the White House or Congress.

The reason: The power to hammer out exact language in the rule aimed at preventing risky bets belongs to a small army of regulators, including some who were unknown on Wall Street before the financial-overhaul bill passed in July.

Dozens of career regulators at the Federal Reserve, the Securities and Exchange Commission and the Treasury Department are facing off against bankers, lawyers and other officials at financial firms that want to soften the impact of the rule named after former Fed Chairman Paul Volcker, which outlaws trades that aren't designed to meet near-term client demand or as a hedge. The battle could determine how much one of the most profitable businesses on Wall Street is wounded by the looming squeeze on making bets with a firm's own capital.

It isn't looking good for Wall Street, though some Republicans emboldened by last week's takeover of the House are pressing regulators to interpret the rule in a way that minimizes costs and market disruption

At some meetings, federal officials have rattled financial-industry lobbyists by saying they intend to hew closely to the 4,631 words about the Volcker rule contained in the new law. One lobbyist says a Treasury official working to craft the provisions told him: "We take a view that the rule is more inclusive." The lobbyist responded: "Are you trying to scare me?"

At another meeting attended by industry officials, a government official tapped his head and said he needed to get into Mr. Volcker's mind to know for sure how the rule should be implemented, according to one attendee.

As a result, many bank executives have abandoned their hope that trading on client desks will be untouched by the Volcker rule.

Of course, some say that Wall Street will get its way in the end, especially since some of the regulators looking at the rule used to work in finance or are reluctant to take away banks' ability to make money by serving clients.

Regulators say they are working hard to show their minds aren't made up yet. They were inundated with about 8,000 letters about the Volcker rule in a comment period that ended Friday, and the three federal agencies have stayed busy meeting with financial-industry executives and lawyers.

Already, TIAA-CREF, Citigroup Inc. and UBS AG have discussed Volcker-related concerns with Fed officials.

Goldman Sachs Group Inc., Credit Suisse Group AG and Morgan Stanley have argued in meetings with Treasury officials that they should have wide trading flexibility when clients are involved or when the trades are meant to manage risk, according to people familiar with the discussions.

"We've cast the net very widely," says Mary Miller, the Treasury Department's assistant secretary for financial markets. That includes visits to several banks in New York to hear suggestions about how the Volcker rule can be written without disrupting the ability of investors to buy and sell easily.

Ms. Miller is one of the newest officials who will translate the Dodd-Frank law into more than 200 rules touching nearly every corner of the American financial system. Before joining Treasury in February, she was a longtime municipal-bond fund manager and fixed-income executive at T. Rowe Price Group Inc.

The 55-year-old Treasury official was known at the Baltimore asset-management firm as an organized leader who kept her head in the financial markets by running a fund even after moving up the ladder to oversee other portfolio managers. She also is an amateur piano player with a master's degree in city and regional planning.

"I'm trying to use my market experience to listen to the market on this issue and to make sure that we understand the actions that need to be taken," Ms. Miller says.

People who attended a one-hour meeting in late October with Ms. Miller, Treasury's Assistant Secretary for Financial Institutions Michael Barr and the agency's deputy assistant secretary for capital markets, Matthew Kabaker, say the officials asked questions about how firms measure risk. The bank lobbyists came away somewhat relieved, feeling the government would be careful when crafting the rules.

J.P. Morgan's meeting at the Fed was led by Mark Van Der Weide, a senior associate director of banking supervision who joined the central bank in 1998 from law firm Cleary Gottlieb Steen & Hamilton LLP. The bank's big issue: keeping its ability to invest in private-equity and hedge funds under the Volcker rule.

The Sioux City, Iowa, native and runner has wrestled for years with financial regulations and bank-capital rules. Since working with lawmakers on early drafts of the Volcker rule, Mr. Van Der Weide has had discussions with banks worried about the rule's impact and consumer advocates jostling to reduce the likelihood that risky trades will lead to future taxpayer-funded bailouts.

Another Fed official involved in the rule-making process is Kieran Fallon, a 15-year veteran who works in the central bank's legal division. After his daily commute from McLean, Va., to Washington D.C. on his 2004 BMW motorcycle, he, too, attends many meetings with Wall Street representatives and public-interest groups on the Volcker rule. His department will be heavily involved next year in the drafting of the final rule's language, people familiar with the matter say.

Meanwhile, the SEC is wrestling with how to define key terms in the Volcker rule, ranging from when a Wall Street firm is allowed to invest in private equity to drawing the line between when a trade is a market-making move for a client or a naked bet by the firm.

Among the SEC officials with an influential voice is James Brigagliano, a deputy director in the agency's division of trading and markets.

Mr. Brigagliano was a force in the SEC's controversial regulation in recent years of traders who bet against stocks. The Volcker rule, he says, will be "coordinated rule making…among banking, commodities and securities regulators."

The SEC's investment-management division is also scrutinizing the law, as is the new risk division, which includes Richard Bookstaber, a former risk official at Morgan Stanley, Salomon Brothers and several hedge funds.

As part of the rule-making process, 25 to 30 regulators participate in a weekly conference call organized by the Treasury Department, discussing topics such as how trading volatility, volume and overall market patterns affect the Volcker rule.

Treasury officials also are interviewing market participants for a study of the Volker rules being written by the Financial Stability Oversight Council, an umbrella group that includes most major regulators. The study, due in late January, will include recommendations for rules that the SEC and the Fed will take the lead in publishing.

One person involved with the process says SEC and Fed officials are staking out their turf and might disagree about how to interpret the terms. The process has given some Wall Street officials hope that parts of the Volcker rule might be watered down.

On Friday, the Securities Industry and Financial Markets Association asked regulators for a second study of the Volcker rule after the January study is completed. Even if the rule is delayed, though, Wall Street officials don't expect it to be overturned.

Sunday, November 7, 2010

9/11 Workers face Deadline for Health Settlement

Associated Press

Thousands of laborers, police officers and firefighters suing New York City over their exposure to toxic World Trade Center dust have until Monday to decide whether to join a legal settlement that could ultimately pay them as much as $815 million.

More than 10,000 people have sued the city and a long list of companies that handled the massive cleanup of lower Manhattan after the 9/11 attacks.

Many claim to be suffering from illnesses caused by inhaling the pulverized remnants of the twin towers. Their lawsuits blame the government and its contractors for failing to provide proper equipment to protect their lungs.

The vast bulk of the litigation could be over on Monday.

Paul Napoli, a leader of the legal team representing most of the plaintiffs, told The Associated Press on Friday that with Monday's deadline looming on the largest and most important of several related settlements, 90 percent of those eligible had said "yes" to the deal.

An all-out effort was being made to get the rest to join on, he said. He said he and other lawyers in the firm were being besieged with questions from clients still trying to chose between taking the money, or rejecting it and taking their case to trial.

"A lot of people appear to be making a last minute decision," he said. "It's like tax day ... there is going to be a lot of last minute wrangling."

Under the terms of the deal, at least 95 percent of the plaintiffs must opt to participate for the settlement to become effective. Napoli said he was feeling good about hitting the target, although he added that getting the paperwork finished for each claim by midnight on the deadline will be no small feat.

"I'm hopeful there will be a little leeway," he said.

The Monday deadline technically applies only to a settlement negotiated between Napoli's legal team and the city's attorneys in the spring. That deal would distribute as much as $712 million among the workers, based on the severity of their illnesses and the likelihood they could be linked to the 9/11 attacks.

But since that deal was inked, the firm has worked out similar agreements with other defendants in the case, including the agency that owns the World Trade Center site, that will add to the total value of the pot.

An insurance company that represented the operators of barges that carried rubble from Manhattan to Staten Island after the attacks has agreed to settle for $28 million, Napoli said. Other entities, including those involved in the debris-sorting operation at the city's Fresh Kills landfill, have agreed in principle on settlements that will add another $100 million, he said.

Some rescue and recovery workers who had been outspoken critics of the deal early on have decided in the end to sign.

Retired Fire Department Lt. Kenny Specht, who now leads a fraternal group for New York firefighters, was among them.

Like others, he said the payments responders will receive under the deal will never be enough to compensate for their illnesses. But he called the settlement, "the best we were going to do."

Fighting for more money in court, he said, seemed like it could wind up a losing battle, in part because "the shelf life" of sympathy for 9/11 responders is running out.

"I felt in my bones that it was expiring," he said.

He added that he was also concerned about the difficulty of trying to prove that common illnesses like cancer were caused by trade center dust. So far, scientists studying the issue has yet to find any such link.

"We are nine years outside of Sept. 11, and we live in a very technologically advanced time," he said. "If nine years after the fact, they have still not attributed the cancers that are killing us to 9/11, either they have that information, and there is no way they are going to publish it, or there just isn't a correlation."

Friday, November 5, 2010

Google, Facebook, Rivals Face Stricter Data-Privacy Rules in EU


Google Inc., Facebook Inc. and other online companies face stricter privacy-protection rules as the European Union seeks to change a 15-year-old law following the emergence of online advertising and social-networking sites.

The rules would make it easier for people to get personal data corrected, deleted or blocked, the European Commission said in a document on possible changes to data protection law in the 27-nation EU. Stricter sanctions, such as criminal penalties, and the possibility for consumer rights groups to sue are part of the plans, according to the document obtained by Bloomberg News.

“Rapid technological developments and globalization have profoundly changed the world around us, and brought new challenges for the protection of personal data,” the Brussels- based commission, the EU’s executive agency, said in the document, scheduled to be published tomorrow. Online social- networking “presents significant challenges to the individual’s effective control” over personal data.

Google and Facebook, the top social-networking service, are among several Internet companies under scrutiny in the EU for possible privacy-rule breaches over the way they use personal data. Data protection officials from 30 European countries have pushed Google, Microsoft Corp. and Yahoo! Inc. to limit the amount of time they store search records. The same group criticized Facebook in May for policy changes that could have harmed users’ privacy rights.

‘Golden Opportunity’

“Much criticism has been laid at the door of the data protection regime over the years for imposing rules but little assurance that privacy is actually being achieved in practice,” said Nick Graham, head of the information and privacy group at law firm SNR Denton. “The commission now has a golden opportunity to remedy this.”

Ways of collecting data have increased, while at the same time they have become “less easily detectable,” the commission said in the document. Under current rules, the way in which people can access, change, delete or block their data “is not harmonized.”

The planned changes are part of a “shift of focus” triggered by the appearance of social networking sites, Internet-connected mobile phones and targeted online-advertising since the existing data protection law came into being 15 years ago, Viviane Reding, the EU’s justice commissioner, has said.

This week’s document will form the basis or further discussion before draft legislation will be proposed in 2011 which will then need the approval of EU nations and lawmakers.

“We are confident that an effective modern privacy protection framework can support growth in the internet economy and can enable the free services that consumers value,” said Justin B. Weiss, Yahoo’s international director of privacy.

Google spokesman Al Verney said the Mountain View, California-based company had no comment. Microsoft spokesman Jesse Verstraete in Brussels said the company will comment once the EU plans are released. Facebook spokespeople didn’t immediately return an e-mail seeking comment.

Thursday, November 4, 2010

Dick Grasso Says Election May Bring Regulators, Business Closer


Yesterday’s elections may mean the U.S. Securities and Exchange Commission will collaborate more with the financial industry to increase transparency and prevent another financial meltdown, according to Dick Grasso.

Regulators "have to have a real-world sense of how the markets are evolving,’’ Grasso, the former chief executive officer of the New York Stock Exchange, said in an interview on Bloomberg Television’s "In the Loop." “The election says, ‘Enough of the partisanship that we’ve seen. Let’s come to the middle. Let’s get together with the business community.’”

Republicans seized control of the U.S. House and narrowed the Senate’s Democratic majority yesterday, capitalizing on concerns about government spending and delivering a rebuke to the domestic agenda of President Barack Obama. U.S. stocks fell as investors awaited the Federal Reserve’s decision on how it will stimulate the economy.

He said regulators need to consider replacing outdated laws that may no longer suit the changing marketplace, not just making incremental changes to those that already exist.

The country needs “intelligent regulation of derivatives,” Grasso said. Derivatives should be included "into the standardized process of clearing and settlement," he said, "bringing the tools of risk management to a transparency level that investors can understand.’’

In July, the Dodd-Frank financial overhaul was signed into law, which gave the Commodity Futures Trading Commission a year to establish rules governing the $615 trillion over-the-counter derivatives market, including which companies will be categorized as swap dealers or major swap participants. The law aims to stem systemic risk by requiring most interest-rate, credit-default and other swaps be processed by clearinghouses after being traded on exchanges or swap-execution facilities.

“There is so much that you can point to as the cause of the financial meltdown in 2008 that wasn’t subject to regulation -- products that didn’t exist when the regulations were written,” he said.

Republican Election Gains May Stall Business’s Immigration Push


Intel Corp., Hilton Worldwide Inc. and other companies seeking a larger number of legal foreign workers through changes to immigration law likely will find their push thwarted by the Republicans’ sweeping election gains.

Lawmakers who will lead the debate in the new Republican- controlled U.S. House say they want to focus on securing the border and cracking down on illegal immigration, rather than other matters. Only after it is shown that fewer illegal immigrants are coming across the U.S.-Mexico border will they consider the revisions to immigration law sought by businesses, they say.

Representative Steve King, an Iowa Republican slated to head the House Judiciary Committee’s immigration policy subcommittee, said in an interview that he opposes lifting visa caps for lower-skilled foreign workers because doing so would depress U.S. workers’ wages. He said he would support increasing the number of visas for higher-skilled workers only if the potential employees meet criteria to boost the U.S. economy.

That means they should be young, well-educated and be able to speak English, King said. “That’s the indicator of whether they can assimilate into the broader society,” he said.

The business agenda calls for increases in worker visas for skilled and unskilled labor, along with more employment-based “green cards” -- proof of permanent residency in the U.S.

Political Change

Corporate officials and lobbyists must deal with midterm election results, in which the Republicans have won a majority of seats in the House, according to network projections.

“We’re as anxious as anyone else to see how it shakes out and whether this will be on the agenda next year,” said Peter Muller, director of government relations at Intel Corp.

Technology companies such as EBay Inc. and Cognizant Technology Solutions Corp. want Congress to lift the cap on H-1B visas for skilled workers. Since the start of the 2004 fiscal year, when a three-year temporary increase in the cap to 195,000 expired, the annual limit has been at 65,000. In fiscal 2010, the cap was reached in nine months.

Companies also want to lift the limit on employment-based green cards, now set at 140,000.

At Intel, about 6.5 percent of the company’s 40,000 U.S.- based employees hold temporary visas granted foreign workers, and the company helps those workers apply immediately to get green cards. “We want to keep them ideally for their entire career,” Muller said.

Still, the wait often is eight to 10 years, causing uncertainty both for the workers and for their employers.

Lower-Skilled Workers

The agenda for restaurant and hotel industries is focused on seasonal, lower-skilled workers. Jonas Neihardt, a lobbyist for McLean, Virginia-based Hilton, is pushing for a simpler system to verify the legal status of workers and a boost in the number of H-2B visas for non-farm seasonal employees, now capped at 66,000. Neihardt is urging that changes be made before the economy improves.

“We’re anticipating when things get better we’ll need more of those types of workers,” he said.

Senate Democrats in April outlined a rewrite of immigration law that, along with proposing a crackdown on drug trafficking and illegal immigration at the U.S.-Mexico border, sought changes that included a pathway to permanent legal residency for some of the estimated 11 million undocumented people in the U.S. It also called for a new three-year visa for temporary, low- skilled workers with an annual limit that adjusts with the economy, as well as immediate green cards for foreign students who get advanced degrees in engineering or math from a U.S. university.

The effort was hamstrung when Senator Lindsey Graham, a South Carolina Republican, stopped working with Democrats on a compromise, urging them to wait until 2011.

Latino Vote

Corporations are holding out hope that the importance of the Latino vote in the 2012 presidential elections will cause congressional Republican leaders to support a broad bill next year.

“It will be an uphill battle, but it could be that the Republicans would see that it’s to their advantage to get this issue behind them,” said Randy Johnson, vice president for labor policy at the U.S. Chamber of Commerce.

That hope belies the views of some of the Republicans ascending to power.

In the House, King is in line to replace Representative Zoe Lofgren as immigration subcommittee chairman. Lofgren, a California Democrat and one-time immigration lawyer, supports the comprehensive approach to rewriting policy.

King, 61, said he favors a piecemeal approach, with the initial spotlight on border security. He also wants to help draft legislation that would revoke birthright U.S. citizenship for so-called anchor babies of illegal immigrants.

Business Deductions

His priorities for business include a measure that would boost taxes on employers found by the Internal Revenue Service to have hired illegal immigrants. Those companies wouldn’t be able to treat the illegal workers’ wages and benefits as a deductible business expense, and they would also pay a penalty.

“It takes a $10-an-hour illegal and turns them into a $16- an-hour illegal,” King said.

Representative Lamar Smith, a Texas Republican expected to become chairman of the Judiciary Committee, said in an interview that while he would favor holding hearings about foreign worker visas and other immigration issues, next year he wants to draft legislation dealing only with border security.

“I’m still of the mind we have to secure the border first,” he said in an interview.

In 2007 Senator Jon Kyl of Arizona, the chamber’s No. 2 Republican, worked with Democrats on a comprehensive immigration bill that failed. He said in an interview that he won’t support anything beyond border security until the fight against illegal immigration improves in parts of his state.

“There has to be more of an effort to actually secure the border -- not just to spend money, not just to say we have more resources than ever before,” he said.

Kyl also said companies must realize that the recession -- which became the nation’s worst since the Great Depression -- changed the immigration debate.

He said labor unions are more opposed to expanding the pool of foreign labor now than before. “The temporary-worker program has gone backwards in terms of a consensus,” Kyl said.

Wednesday, November 3, 2010

Former Agape World, Inc. President and Owner Pleads Guilty to Mail and Wire Fraud in Ponzi Scheme


Earlier today, Nicholas Cosmo, the former president and owner of Agape World, Inc. (“Agape”) and Agape Merchant Advance, LLC (“AMA”), pleaded guilty to federal mail fraud and wire fraud charges for his role in running a Ponzi scheme that resulted in losses in excess of $195 million dollars. The guilty plea proceeding was held before United States District Judge Denis R. Hurley, at the U.S. Courthouse in Central Islip, New York. When sentenced, Cosmo faces a maximum sentence of 40 years’ imprisonment.

The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, Peter Zegarac, Inspector-in-Charge, New York Division, U.S. Postal Inspection Service, and Janice K. Fedarcyk, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office.

Between October 2003 to January 2009, Cosmo executed a scheme to defraud investors of Agape by representing that their money would be used to fund short-term bridge loans to commercial borrowers and loans to other businesses, specifically, commercial business entities that accepted credit cards. He promised the investors unusually high rates of return. Initially, Cosmo paid partial returns to early investors, which were falsely represented to be profits generated from loans, and thereafter persuaded those investors and new victims to invest additional funds in the two companies. In fact, Cosmo lost in excess of $100 million of investor money through unauthorized futures and commodities trading activity and other unauthorized activity. As a result, the government estimates that approximately 3,000 victims suffered losses totaling in excess of $195 million.

“The defendant devised and orchestrated a scheme that highlights the need for vigilance and vigorous enforcement of our laws to prevent this kind criminal activity in the future,” stated United States Attorney Lynch. Ms. Lynch extended her grateful appreciation to the U.S. Postal Inspection Service and the Federal Bureau of Investigation, the agencies that led the government’s investigation.

As part of his guilty plea agreement with the government, Cosmo agreed to forfeit his right in assets seized by the government and to the entry of a restitution order of no less than $195 million to be paid to his victims.

The government’s case is being prosecuted by Assistant United States Attorneys Demetri M. Jones, Grace M. Cucchissi, and Vincent Lipari.

Iowa Real Estate Broker Charged with Fraud, Identity Theft, and Money Laundering


Jean Teresa Hoffert, age 59, from Emmetsburg, Iowa, has been charged with 13 counts of mail fraud, six counts of bank fraud, three counts of aggravated identity theft, and three counts of money laundering. The charges are contained in an Indictment unsealed today in United States District Court in Sioux City.

The Indictment alleges that, between about the spring of 2005 and the summer of 2008, while acting as a real estate settlement agent, Hoffert fraudulently kept portions of sale or mortgage loan proceeds. Rather than using the proceeds to pay off existing mortgage loans on the properties as she was required to do, Hoffert allegedly used the money for her own purposes. In one instance, Hoffert allegedly used over $18,000 in loan proceeds to pay off an automobile loan.

The Indictment alleges that, in order to conceal her fraud, Hoffert caused original mortgage lenders to send statements and other bank correspondence to a post office box under her control. The Indictment also alleges Hoffert attempted to conceal her fraud by making payments on existing mortgage loans. Hoffert allegedly used the account numbers and names of other persons without authority to do so.

If convicted on all charges, Hoffert faces a mandatory minimum sentence of two years’ imprisonment and a possible maximum sentence of 476 years’ imprisonment, a $6,250,000 fine, $2,500 in special assessments, and 81 years of supervised release following any imprisonment.

Hoffert appeared with her lawyers today in federal court in Sioux City and was released on bond. Hoffert’s next appearance for trial is set for January 3, 2011.

As with any criminal case, a charge is merely an accusation and a defendant is presumed innocent until and unless proven guilty.

The case is being prosecuted by Assistant United States Attorney Peter Deegan and was investigated by the Spencer, Iowa Police Department, the Emmetsburg, Iowa Police Department, the Iowa Division of Criminal Investigation, the United States Postal Inspection Service, and the Federal Bureau of Investigation.

Tuesday, November 2, 2010

Wilbur Ross’s Mortgage Company Faces Servicing Suits


Billionaire Wilbur Ross’s American Home Mortgage Servicing Inc., facing lawsuits by attorneys general in two states, was sued by a homeowner who accused the firm of using tactics that lead to improper foreclosures.

The lawsuit, filed Oct. 25 in federal court in Dallas, seeks class-action status on behalf of homeowners with mortgages serviced by American Home going back to 2006. American Home’s “illegal, unfair and deceptive business practices victimize borrowers” across the U.S., according to the complaint.

American Home “routinely and systematically assesses unwarranted fees against consumers, resulting in premature default that often gives rise to unfair and improper foreclosure proceedings,” according to the complaint.

Banks and loan servicers are under scrutiny for their foreclosure practices following accusations they relied on faulty documentation to foreclose on people’s homes. Attorneys general in all 50 states have launched a coordinated investigation into the issue.

The complaint in Dallas, filed by Kay VanHauen of Sanger, Texas, follows lawsuits by Greg Abbott, the state’s attorney general, and Ohio Attorney General Richard Cordray. They separately sued American Home, based in Coppell, Texas, for alleged violations of consumer protection laws.

‘Without Merit’

“While a lawsuit on occasion may identify a legitimate servicing error, most of which are isolated and none of which to our knowledge indicate any systematic process flaws or patterns or unlawful behavior, we believe the majority of them are without merit,” Philippa Brown, a spokeswoman for American Home, said today in a phone interview.

Ross, 72, is chief executive officer of WL Ross & Co., a company that specializes in reorganizing distressed companies. He founded the New York-based company in 2000 after overseeing the bankruptcy practice at Rothschild Inc.

WL Ross bought American Home from its bankrupt lender parent in 2008, and later added operations and servicing contracts from H&R Block Inc., Citigroup Inc. and Taylor, Bean & Whitaker Mortgage Corp. Servicers collect payments from homeowners, negotiate loan modifications and foreclose on properties when borrowers default.

In an Oct. 23, 2008, interview with Bloomberg Radio, Ross said American Home was the second-largest servicer of subprime mortgages in the U.S. and was “eager” to continue expanding. The company has servicing operations in Irvine, California, Jacksonville, Florida, and Pune, India, according to its website.

‘Unconscionably One-Sided’

In his lawsuit, the Ohio Attorney General said American Home required borrowers to sign loan modifications, forbearance agreements and security-retention agreements that contain “illegal and unfair provisions and are unconscionably one- sided” in the company’s favor. American Home also provided “incompetent, inadequate and inefficient customer service,” lost documents and failed to respond to requests by borrowers for assistance, according to the complaint.

“The acts of some mortgage servicers have gone beyond the point of being negligent -- they have become predatory financial practices and in Ohio, they won’t be tolerated,” Cordray said in a statement on Nov. 5, when the lawsuit was filed.

Default Increase

The Texas Attorney General said in his lawsuit that American Home fails to properly credit homeowners for payments made on their mortgages; falsely claims borrowers didn’t make payments in order to justify late fees; and refuses to accept payments allegedly because a borrower is in default, thereby adding more late charges. The result, Abbott said, is to render homeowners in default on their mortgages.

“The cumulative effect of the foregoing acts and practices was to place more homes into foreclosure than there should have been,” Abbott said in the Aug. 30 lawsuit.

American Home is among 30 banks and mortgage companies that Abbott wrote to on Oct. 4, demanding they halt foreclosures in the state until they ensure that foreclosures that relied on faulty documents “will be rectified” and that future foreclosures are done with “legally correct documentation.”

American Home has been reviewing its procedures and is placing “tighter controls” on document signing and notarization, according to the attorney general’s office. The company found “a very limited number of cases” in which a person signing a document may not have done so in the presence of a notary, according to the attorney general.

Misapplied Payments

The lawsuit by VanHauen, the Texas homeowner, mirrors allegations made by the attorney general. American Home, she said, misapplied mortgage payments on two loans in September 2008 and improperly assessed fees and other charges. After notifying American Home about the problem, the company refused to correctly apply the payments. It treated the loan as being in default and initiated foreclosure proceedings, according to the complaint.

American Home also charged her for a homeowner insurance policy she didn’t need and charged her for property taxes she was paying to the county, according to the complaint. VanHauen proposed that her lawsuit cover homeowners who have similar complaints against American Home.

American Home has faced similar allegations in other lawsuits. In an April lawsuit filed in federal court in Baltimore, Michael and Ingrid Landi of Frederick, Maryland, accused American Home of falsely claiming in October 2009 that they had not made mortgage payments. American Home has asked the court to dismiss the complaint.

San Diego Suit

In a complaint filed in May in federal court in San Diego, American Home was accused of foreclosing on a home while it was discussing a loan modification with the owner, Kenneth Coplin. Coplin said in his complaint that American Home assured him it didn’t intend to foreclose or sell the property “in an effort to conceal” its intention to “mislead” him and “steal” the property.

Brown, the American Home spokeswoman, said the lawsuit was dismissed. The most recent entry on the court docket shows the case would be dismissed if Coplin failed by Oct. 25 to file certain documents related to serving the complaint. Coplin couldn’t be reached for comment.

Credit Suisse’s Lead in Consumer M&A Propels Advisory Rebound


Credit Suisse Group AG jumped to No. 1 advising on consumer mergers and acquisitions this year, putting it on pace to return to the top five dealmakers for the first time in eight years.

The Zurich-based bank has advised on 37 consumer transactions in 2010 valued at about $45 billion to become fourth in all M&A this year, according to data compiled by Bloomberg. Those takeovers include Coca-Cola Co.’s $12.3 billion purchase of the North American operations of bottler Coca-Cola Enterprises Inc., the biggest consumer deal of the year.

Consumer companies are making acquisitions to boost earnings growth as they amass cash. Switzerland’s second-largest bank benefited from retailers and consumer-goods makers expanding into new product lines and faster-growing regions. Buyout firms are also beginning to do more deals, such as Apax Partners LLP’s $3 billion sale of Tommy Hilfiger BV.

“We expect the bulk of M&A activity in the consumer sector in 2010 to continue to be dominated by bolt-ons and private equity as well as transactions involving emerging markets,” said Jens Welter, who heads Credit Suisse’s consumer and retail investment banking group for Europe, the Middle East and Africa. Robin Rankin runs the group in the Americas.

Credit Suisse advised Heineken NV on its $7.7 billion purchase of Fomento Economico Mexicano SAB’s beer unit in January, the year’s second-biggest consumer deal, and SSL International Plc on its $3.89 billion takeover by Reckitt Benckiser Group Plc in July. The bank also advised Apax on the sale of Tommy Hilfiger to Phillips-Van Heusen Corp. in March.

Advisory Fees

Those deals helped Credit Suisse earn $116.8 million in consumer M&A fees in the first nine months of 2010, trailing Goldman Sachs Group Inc. by $32 million and Bank of America Corp. by $9 million, according to Freeman & Co., which researches investment banking. The Swiss bank earned $58.6 million on consumer deals for all of 2009 and ranked sixth, according to Freeman.

“Credit Suisse has certainly risen overall,” said Jeffrey Nassof, an associate at New York-based Freeman. “They’ve advanced in the fee-based table in the first three quarters for overall global investment banking and consumer appears to be a key.”

Credit Suisse’s global M&A group is led by Boon Sim, who was appointed to the role in December after a shake-up following a decline in advisory revenue. Andrew Lipsky took over U.S. M&A, and Giuseppe Monarchi became head of European M&A. Credit Suisse ranked eighth in global mergers in 2009.

Recent hires contributed to the bank’s advance this year, Credit Suisse Chief Financial Officer David Mathers said.

New Recruits

Moving to fourth globally “has been a question of some good recruits,” Mathers told journalists on an Oct. 21 conference call. “A lot of people actually wanted to join our franchise and I think that provided us some opportunity.”

The last time Credit Suisse made the top five advisers was 2002, when it finished fifth, data show. In 2004, Credit Suisse was 11th in global M&A following a period when about a third of the investment bank’s workforce was cut.

Chris Young became head of takeover defense in June and Lewis Steinberg later became head of strategic advisory. Vedika Bhandarkar was named head of the investment banking department and Global Markets Solutions Group in India in April. Carl-Georg Bauer-Schlichtegroll was hired as co-head of the investment bank’s financial institutions group for Europe, the Middle East and Africa in May.

The total value of deals in the consumer industry this year rose to $167 billion from about $128 billion through the same period of 2009, according to Bloomberg data. Bloomberg defined the industry as transactions in clothing, appliances, beverages, home and personal care, toys, tobacco, food, sporting goods, home furnishings, housewares, travel and leisure and retail.

Nestle, Mead Johnson

Nestle SA, the world’s largest food company, has disclosed the most acquisitions in the consumer industry, announcing the purchases of seven companies this year, according to Bloomberg data. The biggest was its purchase of Kraft Foods Inc.’s North American frozen pizza business for $3.7 billion in January. Vevey, Switzerland-based Nestle, PepsiCo Inc., Kraft and other top food makers have been stockpiling cash since 2006, setting the stage for more deals.

Mead Johnson Nutrition Co. and juice company Hansen Natural Corp. are top candidates to be acquired, said Goldman Sachs analysts including Judy Hong in an Oct. 19 report. They cited the buyouts of companies including Alberto-Culver Co. and American Safety Razor Co. as evidence that “deal activity in consumer staples has picked up.”

“There really aren’t that many companies left to be acquired, so if any of these companies find the right gem, they’ll buy it,” said David Winters, chief executive officer of Wintergreen Advisers LLC, which held Nestle as one of its top 10 positions at the end of June.